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The Wall Street Journal reported Sunday night that Goldman Sachs (GS) and Morgan Stanley (MS) must abandon their independent brokerage status and become traditional bank holding companies. When the two most profitable and renowned investment banks on Wall Street are forced to abandon their business model, you know the Golden Age of Wall Street is over.

The independent brokerages have enjoyed exorbitant profits over the past couple decades by employing huge amounts of leverage and little deposits to show for it. They will now have to answer to the Federal Reserve, meet their requirements, and accept that they might never make the same type of profits that they enjoyed for so many years.

Although it is sad to see icons of American capitalism fall to their knees, this is all a part of the risk-return game that the markets are all about. They took too much risk on top of too much debt, and they are now paying dearly for the risks they took.

Bear Stearns collapsed, Lehman went bankrupt, and Merrill Lynch was bought by Bank of America all within the past year. With Goldman Sachs and Morgan Stanley leaving their brokerage model, there is no big independent left for Wall Street.

Whatever happened to risk management? Whatever happened to liquidity and solvency?

Surely these firms employed some of the most intelligent people in the US; some of them knew that their companies were walking a tight rope that may have been frayed. What will happen to New York (the financial capital of the world?)? And will there be a Wall Street comeback in the future, or was this truly the end of a Golden Age?





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Samsung has recently made a cash offer of $5.8 billion to buy SanDisk Corp. (SNDK). SanDisk is a flash memory design, manufacturing, and marketing company. Their devices are used in many consumer electronics.

Samsung offered a $26 a share offer, which The Wall Street Journal reported as a 96% premium over SanDisk's September 4 closing price.

SanDisk rejected the offer saying it "undervalues" the company. Their reason for saying $26 is too low is because SanDisk's price has dropped over 75% since last October, and they believe Samsung is trying to take advantage of SanDisk's depressed price.

As of 1:33PM on Wednesday, September 17, SanDisk's shares stand at $21.00 as investors wait to see if negotiations continue. There is still a $5.00 premium on Samsung's original offer if that was the accepted price.

Samsung can do one of three things at this point:

1. Make a tender offer to SanDisk shareholders at their $26 or more offer. This allows shareholders to make the decision rather than management. This situation would give investors a profit by the premium amount (say the $5 more than if you buy at $21 now).
2. Increase their offer to buy. If SanDisk gets a higher than $26/share offer, they could accept. Investors would also profit from the premium, which would be higher than the premium $26 would provide.
3. Samsung could also just walk away. Typically, when a buyer walks away, the target/seller's share price drops dramatically. This is the potential downside.

As far as Investing Advice goes, I would structure this situation as follows:

• Buy SanDisk at the near $20-$22 price per share.
• Protect my losses by setting a stop at $18.50-$19.50 depending on your risk tolerance.
• Wait for more word on the deal. If another offer or hostile offer is presented, set a limit price closely below the offer price to ensure profit is kept regardless of any deal complications. (ex: $28/share offer- set limit at $27.50)

Keep a watch on this deal very closely, it could provide you with easy investment gains. If the deal goes south, you have a protective stop to keep your losses to a minimum. Keep your eyes open to any opportunities in the stock market, most great investors know that a few great investments can account for almost all of your gains.




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With emergency meetings happening with the Federal Reserve and major Wall Street banks over the Sept. 12-14 weekend, much has gone down.

Lehman Brothers, the over a century old investment bank, has filed for bankruptcy. Bank of America (BAC) was seen to be a potential buyer, but they went after the bigger fish. Bank of America made an offer to buy Merrill Lynch for $29 a share.

Both Lehman and Bear Stearns have fallen in the past year. Merrill is no longer Merrill. This signals a major change for Wall Street; who will survive in the 21st Century?

Almost all of the big investment banks forgot about risk management when they realized that they could get away with borrowing more than they could handle, and make obscene profits out of it. The market will not allow them to hold that type of liability during these troubled times. Many of their bets counted on real estate which have taken huge price discounts, essentially eating away the value of their holdings.

Goldman Sachs and Morgan Stanley are the only big stand-alone investment banks to survive. Both banks have handled the credit and real estate crisis considerably well, but the market is waiting to see what their earnings announcements reveal. Goldman Sachs is to announce earnings on Tuesday Sept. 16th and Morgan Stanley is to announce earnings on Wednesday Sept. 17th.

This is an opportune time for either these two banks to be the shining light of Wall Street (as if they aren't already), or the slimming can allow room for smaller banks to come out on top in the next couple years.

Bank of America just gained one of the most important assets they may ever get: Merrill Lynch's investment bank. BofA has had a struggle making a name for itself in investment banking, and now they own the largest broker in the world.

Keep an eye on who may be coming out on top and in better shape. This could be a huge investment opportunity!




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Just this afternoon Dow Jones News, parent company of The Wall Street Journal , reported that Chairman and CEO of Dell Inc. (DELL) Michael Dell bought 4.88 million shares of his company at an average price of $20.49 last week. A total price tag of nearly $100 million!

This is a large insider buy, which usually signals that the inside buyer of the stock believes that the stock is either undervalued or going up in the near future. It could also mean both scenarios are the case. Regardless, following insider transactions (or insider trading) have been a trading strategy that many investors use.

Another indicator that Dell might be a good investment is that on September 3, 2008 Dow Jones News quoted Michael Dell saying that we will most likely see a "rapid" turnaround for Dell in Western Europe. He admitted that no one was happy with Dell's performance in Europe recently and is ready for a change.

Two key things happened in this announcement:

- The CEO, Michael Dell, admitted that they were doing something that wasn't working.
- There is a plan in place to improve conditions.

Warren Buffett is known for admitting the mistakes he's made throughout the year in his annual shareholder letter. He also provides that a plan is in place to improve the conditions of the problem, thus improving performance. Mr. Buffett says that a CEO that can admit mistakes of himself or the company and then provide a plan for improvement is a CEO worth keeping. CEOs that deny there are problems or that they were caused in any part by them run the company (and its investors) into trouble.

The single most important aspect about insider trading is that executives that have more of their money invested in their company are more likely to run the company better. It sounds like simple common sense, but you would be surprised at how many investors forget that and how many minimally invested execs perform poorly.

If you put all of the pieces together about the Dell story, it is painting a picture of a rebound in Dell stock. My investing advice on this trade would be if you are going to buy this stock based on this recent news, put a stop to limit your losses should something go wrong with the tech industry or the stock market as a whole.




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As you may or may not know, The Wall Street Journal reports on stocks that have major investment inflows and outflows based on weakness and strength, respectively. After scouring through all of the numbers, I developed a list of stocks that could provide a decent return.

Money flows of block trades (10,000 shares) are usually generated by large institutions: banks, mutual funds, and hedge funds.

Although they try to invest at a slower rate than an independent investor so they don't pump up the price quickly and cause unrest in the market, their investment ultimately means that the price will go up.

The price may go up for two reasons:

1. Their high capital inflows to these stocks causes a chain reaction; other investors will begin to see the inflows and start to buy it themselves.

2. These institutions have a strong conviction that the price of these particular stocks will go up in the near future.

Money flows are a great way to derive stock investing advice for one large reason, "If you can't beat 'em join 'em." The money flows are calculated by the dollar value of composite uptick trades minus the dollar value of downtick trades, which in lay terms translates to net asset flows. The best bets for stocks that will do well and had high money flows on Tuesday (September 2nd), and Wednesday (September 3rd) are the following:

• Exxon Mobil (XOM)- had highest single-company stock flow on Tuesday. Over $40 million flowed into Exxon on the recent weakness. Exxon will continue to report record profits for the next couple years because of high oil prices and a turn to dwindling production and supply. The oil sector still has yet to see the high stock prices it deserves.
• Google (GOOG)- [UPDATE: Money flows into Google on Thursday hit $148 million. This shows further interest in Google, and that the stock is most likely overdue for a bounce to the upside.] as of 1:00PM on Wednesday, Google has had net asset flows of $30.4 million due to block trades (most likely institutions). Google has a lot of room still to grow. They just released Google Chrome, the new web browser by Google. At a price of $461.80 a share, there is a lot of upside back up to its 52-week high of $747.
• Chesapeake Energy Corp. (CHK)- had Wednesday net flows of block trades of $23.5 million. Energy companies have not performed well even with high energy prices, but that leaves room for value realization.
• Coca-Cola (KO)- with $13.8 million net big trade flows. Coke can avoid downturns of the US Economy because so much of their business is abroad. Although Coke is a discretionary item, people act like it is a staple. People will always drink their Coke products. Investor can share in Coke's profits.

This is a different perspective on investing. Many investors make money by following where the money is flowing. Riding the coattails of large institutions allows you to emulate the gains they realize on particular trades. My only warning is to make sure you don't wear out your welcome and stay invested after the institutions sell off their share.

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