After a nine-week stock market rally it is time to tally up the winners and losers. In a market where almost everything gained, there must eventually be separation between those that went with the flow and those that had something to show.

The financial stocks, with the help of the government, were able to show some positive earnings. The banks do raise the suspicion that this is a case of "managing the numbers".
The government has helped them along by "reshaping" some accounting rules and giving them advance warning (and leaking to the public) of the results of its stress testing. Until now, they have gone with the flow as the hardest hit stocks and rallied the most.

A few days ago I posted Chasing Value: Valero -- when is a downgrade an upgrade? and since then I have become even more disturbed with our government and the stock analysts, as well as the companies they represent. Eitan Bernstein, an analyst with Friedman, Billings, Ramsey & Co downgraded his expectations for the major oil refiners Wednesday and lowered his price target for Valero Energy (NYSE: VLO) from $77 to $65.

How can this be? The stock was trading around $40 per share and closed Friday at $39.96. As a shareholder who has watched this stock go down, any signs of optimism have to be welcome I suppose, but what in the world is this guy saying. He is saying he has concerns about the sector, but believes VLO will be 61.5% higher this time next year any way!

This makes no sense. He can't be too concerned, can he? If you believed him you would buy all the VLO shares you could get hold of -- and so would he! Maybe he did? Or maybe he is trying to pump up the stock to help a big client? Or maybe he is clueless and does not know what he is talking about? What might his e-mails reveal?

Anyone can predict anything, and they have a right to be an idiot, but what responsibility does he have to eat his own cooking? VLO started the year near a high that is between Bernstein's old and new projections, and I for one have hopes of it rebounding, but I do not have the level of certainty to broadcast such an exact figure. What is the purpose?

The change in his projections of 15.5% is indicative of the silliness of this analysis. We have seen this before and will see it again ... so buyer beware.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: I currently own shares of VLO.

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This week I received a long rant from Dan, one our very astute readers. I extracted the following from what he wrote:

Yesterday I received an offer to "Cut My Indebtedness" by shifting over to a bi-weekly mortgage payment, tied to my paydays. The "offer" goes on to show how much I will save over the term of the loan by enrolling in their plan. The kicker is (& here is a reference to an old Country song I remember from years ago, "The Large Print Giveth, What the Small Print Taketh Away") the small print. There is a $9.00 per month "participation fee". A fee to participate? ...my rant. THEY CAN"T STOP YOU FROM MAKING ADDITIONAL PRINCIPAL PAYMENTS.

This has happened to me as well, and if you have lived in your home for a few years or more, it is likely you received a similar offer. Dan raised many valid points in his longer version, but the three main points are that you should focus on the small print, there should not be a fee for paying down your loan, and finally if you have a loan that allows prepayments of the principal amount you can make interim principal payments any time you want.

One feature of bi-weekly payments that Dan overlooks or fails to distinguish, and that homeowners should recognize, is that they reduce the amount of interest you pay over the life of the loan without additional "monthly" principal contributions. That is a real savings, and the bank feels the service of processing this has a cost to them and a value to you. On most loans, the savings of many thousands of dollars would greatly exceed the fee, and the fee does not increase on larger loan amounts. Perhaps it is their presentation of the offer that appears deceitful.

Here is a detailed explanation of bi-weekly payments. The example they give you indicates a savings of almost $58,000 interest on a $75,000 loan. Fees or no fees it provides substantial benefit tothe borrower.

Happy Mothers Day

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.

During the course of 2007, I read on many occasions that we were in a "Goldilocks" stock market, meaning that while some stocks might be too hot and some too cold, most in the overall market were just right. The overall market had a great run from early winter to mid-summer before it took a big dive.

We saw some recovery from those low points until the credit markets tightened up and billions of dollars in losses and write-downs occurred, bringing down any stocks related to banking, lending, housing, construction and the like. Now consumer debt and consumer spending are frightening the market in the midst of the holiday shopping season.

I started to think about all the fear and doubt forming like dark clouds, speculating on a possible recession in 2008, though I am not convinced of that outcome. I happen to believe that even in the worst markets there are good stocks to buy, maybe even more of them. So I offer up a new metaphor for our current market --- the "fluff & fold" market, when almost nothing is just right.

My newest portfolio is my worst portfolio and the only one that is negative. How did this happen? The poison financials and my bad timing, that's how! It is embarrassing, to say the least, and I take no joy in reporting my blunders. I hope readers will appreciate the fact that I am willing to discuss everything and not just the bright spots.

Furthermore when I put my foot in my mouth I do it with style and grandeur. Take note of the story titles because they would be hysterical except for the fact that I really did buy these stocks and I still own them with one exception; so I'm not laughing too loud. I sold Washington Mutual in all but one portfolio at $36 a share. The following indicates the date of the original story. The closing prices are from Monday, November 26, 2007.

• April 11, 2007: Chasing Value: Washington Mutual - WaMu (NYSE: WM) closed at $16.81 down from $39.00: A loss of -56.9%
• April 17, 2007: Chasing Value: Bear Stearns - cheap and growing (NYSE: BSC) closed at $91.04 down from $148.00: A loss of -38.5%
• May 1, 2007: Chasing Value: IndyMac Bancorp - once in a lifetime (NYSE: IMB) closed at $7.82 down from $30.09: A loss of -74%
• June 19, 2007: Chasing Value: Bank Popular (BPOP) should be very popular (NYSE: BPOP) closed at $9.10 down from $17.00: A loss of -46.5%

No title could be more ironic and more wrong than the IMB story, unless of course your objective was to lose money. One of my older and wiser friends (A.L.) who manages money for high net worth individuals raised his eyebrows as he repeated the story title to me the day the story was posted. Now I hear his words every time I think about IMB. Had you followed my lead into the fog your average loss would be about 54%!

So what did you expect after the Federal Reserve lowered the prime rate by 0.5% today: certainly not lower commodity prices! Gold and Oil were both up BIG today because the beloved dollar will be going down further, no doubt.

This is the stuff of Hollywood movies with all the glitz you can fathom. I first bought precious metals in the mid- seventies prior to the crazy rise and following twenty-five year malaise. Then again I was buying in at about $410 a couple of years ago, but now who knows where the limit is? Is it $1000, $2000 or more? Start writing you scripts because this no longer is out of the question given American spending habits, both personally and by government.

This is sure to affect the Christmas shopping season as prices on your favorite trinkets go up at the wholesale and retail levels. It will not affect Hollywood spending because everyone on the "left coast" is working as the studios make preparations for a possible writers' strike in June 2008. So they want to get as much product "in the can" as possible prior to that time just on the possibility of a strike...and you may want to do the same thing with your gift shopping while there is still merchandise on the shelves at the old prices.

To find potential opportunities and verify my track record read Chasing Value or Serious Money.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

The stock market has taken some big hits lately with the Dow down 387 - still preaching calm and change certainly being the most notable sign of fear amid many down days. But why? Why the selling? Why the fear? The reason is so simple and cannot be stated more clearly than reminding you all of your childhood, playing with your friends, when all of a sudden someone yelled "Last one out is a rotten egg!"

Yes the story line is clear enough; we have all heard about sub-prime loans, Alt-A loans, falling home values, falling housing starts, shrinking liquidity, Federal deficits, higher oil prices, unsustainable foreign market growth, consumer demand coming to an end, and you can contribute a few more of your own boogie men to round out the list. These are all real issues our economy will have to contend with and I do not scoff at any of them. However, our economy has sustained itself though much worse and it bothers me when I see hyper market activity putting more money in the hands of brokers who make money when people are trading, whether it be up or down, they just like a higher volume of activity.

As the market reached ever new highs, we started hearing that things may have heated up too much. Sure they heated up to much, but volume started to slow also as people became more cautious and volume also slows down during summer vacation months. Slowing volume (less trading) is no good for Wall Street. So if we are not trading up then we should be trading down and that is exactly what we are hearing now and sure enough volume is back up and fees are being collected.

I do most of my transactions online on my own, but I put a little money in an account with a full service broker friend of mine, because he is a friend, and a good sounding board for some of my ideas. Sure enough he calls the other day to discuss what is happening in the market, specifically some great 'put' opportunities. After going through the numbers I asked him if he was doing anything now -- what was he investing in? He said he was not, he was keeping his cash for now waiting for an even better buying opportunity later.

This bothered me! Here he was suggesting his client (me) buy when he personally thought it was better to wait! I hate this, yet it is so common. I know my friend felt awkward when I confronted him about this, but, I let it be, and he gets it, because we have discussed this before. In his defense, he was bringing to my attention something I might want to know about, and would do, that most investors would not -- naked puts. The majority of the time my friend is not so much a broker as he is a financial adviser, and helps less knowledgeable folks set up diversified investment plans. For this I would recommend him.

For stock picking, I would not recommend anyone that is not a household name and those are few and far between but my "pals" Warren and Carl are not too bad. If you are afraid of being the rotten egg, or more importantly, have invested in questionable stocks, than by all means adjust your portfolio so that you can sleep better at night. There are plenty of good buys right now. It is not important if the market is up or down it is important to invest for the long term. The last one out is not the rotten egg, the short term thinkers are the rotten eggs. It is also worth re-reading Who says the stock market is too cheap? for some market perspective.

Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well - INCLUDING ANY BAD CALLS.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

Would it make any sense for Berkshire Hathaway (NYSE: BRK.A) to acquire The Home Depot (NYSE: HD)? The Home Depot has been stuck in a very tight range for the last six to eight months, hovering around $38 per share and closing Friday June 8, at $37.95; while most of the market has been reaching new highs. The Home Depot has been the subject of many stories from the January departure of its CEO to the questions about customer service, poor store atmosphere, competition from Lowe's Co (NYSE: LOW), deteriorating employee morale and the effects of a downturn in the housing market.

Given all the problems, The Home Depot has remained a hot topic related to its continued strong cash flow, low stock valuation and book value and low debt that all makes it seem ripe for a takeover or leveraged buyout. The under-valued real estate by itself gets my imagination going because I think it is the most under-valued of all HD's assets and offer the potential for substantial development. While a hedge fund or private equity buyout might make sense to some, I see greater value to Warren Buffett.

There has been a lot of speculation about what BRK might do next. Warren Buffett himself has said a large acquisition is in the cards, not surprising given Berkshire's huge cash reserves. Could it be that Buffett would make this large an acquisition?

If he bought The Home Depot, he would not need much leverage and he might need only buy controlling interest, not the whole company. His association by itself might add 20% to the stock value immediately because it would answer a lot of questions about what direction HD is going in. It would also rectify many of the company's image problems. For Berkshire, it would mean a direct outlet for many of its products like Shaw Carpet, USG Drywall, Acme Brick and Benjamin Moore paint. Berkshire could extend brands further by putting mini Dairy Queens in each Home Depot, maybe an H&R block, and push Geico insurance as well. The Home Depot could be a platform for many of BRK's enterprises.

While the Home depot would be a huge company to swallow for some, it would be a mere snack for Buffett. It could also be the next major catalyst for growth. BRK.A has a market capitalization of $119 billion (approx. 30% cash) and HD's is about $74 billion. Together this could be a $250 billion enterprise. While it might present a huge opportunity, I recognize it might also present to large a risk of upsetting Buffett's apple cart -- but it is an intriguing proposition.

Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well. Disclosure: I own shares in BRK.B, as of this writing.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

The war is off budget but we are finding the money somewhere. There are only two possible somewheres -- either we (the federal government) are printing it, or we are borrowing it. Probably some of each, but more borrowing than printing. So if we are borrowing the money, who is lending it to us?

The rest of the world, of course, through their purchase of U.S. treasuries. And who is doing the most buying? The Chinese, of course. They have the largest imbalance of trade with the U.S. Interestingly, so are the Gulf states in the Middle East because of the petro dollars that get recycled into U.S. equities but also into treasuries. How ironic that "our war" is being financed by the indifferent Chinese and the very effected Gulf states, who have a direct interest in us protecting theirs.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

We are starting to hear noise that investors have low expectations for corporate earnings in the first quarter. That is a load of crap and misses the point entirely.

Everyone should stop jumping all over quarterly reports and look at traditional value points for the long haul. Sure there may be companies that miss earnings estimates by a penny and see share prices move down. That's often more crap.

Why do they call them "estimates" and then whine when they are off by a penny?

I can think of a dozen companies that should have smashing earnings to report. My expectations are that the overall news will be mild as everyone has taken a deep breadth after a strong 2006, but we should all be looking long term, and in the long term corporate America is strong. The energy sector, railroads, insurance, metals, the Internet, media are all strong and getting stronger. I do not expect them to report mediocre earnings. The housing market is way down, but will not have the detrimental effect that the bears are growling about because other construction sectors are very much alive and well, and are also expanding into international markets.

USA Today reported that we might see 7% appreciation in stock prices this year instead of the 14% last year did. That is fine with me. I forcast DOW 14,000 here we come! last September and that fits in with my expectations. If you buy stocks at discount you can beat the averages, see our Chasing Value section for some ideas.

So while there will be some disappointments in the earnings reports of many companies, you should not even be investing in any companies who's fortunes depend on one quarter. Invest for the long term.

Sheldon Liber is the CEO of a small private investment company and the vice president for de.sign and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

After a huge year for buyouts in the United States, private equity firms are looking to Asia for value. In the first nine months of 2006, the value of buyouts in Asia increased 78% year over year. While firms like Kohlberg, Kravis, and Roberts and the Carlyle Group are earmarking large sums for investment in Asia, they are not being met without resistance. Cultural differences, including the tendency of many Asian firms to employ very conservative management policies, language barriers, and overall distrust of foreigners may be hurting the efforts of private equity investors in Asia.

These developments remind me of one of my beefs with America's educational system. At school, I was required to study two years of French and four years of Latin, and I can tell you that neither of those skills has helped me at all in my life. I'm reminded of an old joke where Rip Van Winkle finally wakes up after years of slumber and walks around the United States, deeply confused. He sees cars and airplanes and computers and has no idea what to make of it. Finally, he walks into a classroom and says "Aha! A school! At least some things haven't changed."

Schools have a tremendous opportunity to serve as a positive catalyst for globalization and modernization, and unfortunately they really don't contribute to the that in any meaningful way. The news about buyouts in Asia is just further evidence that schools are not responding to globalization at all. And I have to wonder: if kids in school learned the languages that some of the cultures America has the greatest conflict with speak (like Arabic), could we possibly avoid a lot of the problems we're running into now?