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Why Preferred Stock?

I’ve noticed that some are wondering why Warren Buffett and UK Prime Minister Gordon Brown back buying preferred stock [preference shares, in the UK] rather than common stock which has voting privileges.  Safety is the primary reason, as the “preferred” refers to the order of pay out of any profits.  Holders of preferred stock have the first call on assets, while the common stock is last in the queque to get paid.  In addition, the holders of common stock, with their voting privileges, are part of the problem.

By buying preferred stock, usually with warrants for common stock at a set price as part of the deal, the companies get the capital they need to continue in business, but it comes not just with strings, but chains attached – the holders of the preferred stock get paid first, so management had better toe the line and generate real profits, not just mess around to make the stock price higher.

A huge part of the part of the problem are the “paper profits”, actions that make the company look profitable, when in fact they aren’t.  The increases are accounting tricks, not real capital movement.  A lot of the money that is being “lost” never really existed outside of “creative” sets of accounting ledgers.  People were buying stock at heavily inflated prices, not knowing that the real value of the companies hadn’t actually increased.

October 13, 2008   Comments Off on Why Preferred Stock?

The “Shrill One” Wins Nobel

The BBC reports Krugman wins Nobel for economics

American academic Paul Krugman has won this year’s Nobel economics prize, it has been announced.

The Royal Swedish Academy of Sciences said the award recognised his analysis of trade patterns and where economic activity takes place.

It said Prof Krugman, 55, who teaches at Princeton University, had formulated new theories that answered questions about free trade and globalisation.

You think they might listen to him now?  Of course not, he doesn’t agree with their prejudices.

What will he invest the $1.4 million in?

Congratulations, Dr. Krugman.

October 13, 2008   9 Comments

Tropical Depression 15

Tropical Depression 15Position: 14.6 N 69.4 W [10 PM CDT 0300 UTC].
Movement Nearly Stationary.
Maximum sustained winds: 35 mph [55 kph].
Wind Gusts: 45 mph.
Minimum central pressure: 1001 mb ↓.

It is 340 miles [550 km] Southwest of San Juan, Puerto Rico.

At 5 PM AST [2100 UTC] a tropical storm watch has been issued for Puerto Rico and the U.S. Virgin Islands; the government of the Dominican Republic has issued a tropical storm watch for the extreme eastern portion of Hispaniola from Isla Saona to Cabo Engano; amd the government of the British Virgin Islands has issued a tropical storm watch for the British Virgin Islands.

This will likely become Omar today or tomorrow.

Here’s the link for NOAA’s latest satellite images.

[For the latest information click on the storm symbol, or go to the CATEGORIES drop-down box below the CALENDAR and select “Hurricanes” for all of the posts related to storms on this site.]

October 13, 2008   Comments Off on Tropical Depression 15

Tropical Depression Nana

Tropical Depression NanaPosition: 17.7 N 41.8 W [10 PM CDT 0300 UTC].
Movement West-Northwest [295°] near 12 mph.
Maximum sustained winds: 35 mph [55 kph].
Wind Gusts: 45 mph.
Minimum central pressure: 1007 mb.

It is 1180 miles [1905 km] West of the Cape Verde Islands.

As expected the wind shear from the westerlies are tearing it apart.

Here’s the link for NOAA’s latest satellite images.

[For the latest information click on the storm symbol, or go to the CATEGORIES drop-down box below the CALENDAR and select “Hurricanes” for all of the posts related to storms on this site.]

October 13, 2008   Comments Off on Tropical Depression Nana

Happy Thanksgiving

To all of the Canadians who drop by.

You get to sit around the table eating turkey and contemplating what turkey you will vote for tomorrow.

One of the things you can be really thankful for is that you don’t mess about like the US, where elections drag on for years, and you don’t have to choose from the candidates US voters get stuck with.

Enjoy.

October 13, 2008   3 Comments