Ken Skarbeck

The accuracy of a key global interest rate has been under scrutiny since the credit market crisis surfaced last summer. The London-interbank-offered rate, known as Libor, is used to determine interest rates on more than $350 trillion in financial instruments around the world-note that was “t” for trillion. Many mortgages, fixed-income securities, consumer and corporate loans, and derivatives use Libor as a base rate when setting their interest rates. Libor is administered by the British Bankers Association, which once a…

This is the time of year when the vast majority of publicly traded companies issue financial reports and make public presentations to their shareholders. From March to May, companies fill mailboxes with annual reports and proxy statements. The proxy statement announces the date, time, location and agenda for the company’s annual meeting. For people who enjoy learning about businesses, reading the annual report and proxy materials and then attending the company’s annual meeting is an excellent way to increase your…

Berkshire Hathaway Inc. released Warren Buffett’s annual letter to shareholders recently. As always, Buffett provided a detailed update of the many businesses and investment positions the company owns. And Buffett added some entertaining commentary on a few topics that are relevant to investors. Under the heading “Fanciful Figures-How Public Companies Juice Earnings,” he comments on two corporate accounting problems: one finally solved, and one that continues to obscure earnings reports. The first accounting injustice was about to be corrected in…

JP Morgan’s unprecedented, purchase of Bear Stearns for $236 million raises more questions than it answers. In a stunning series of events, Bear Stearns went from trading for $65 a share on Wednesday, March 12, to an announcement the following Monday that, with the assistance of the Federal Reserve, it was being sold to JP Morgan for $2 a share. The collapse of Bear Stearns began the prior week with investors who had entered into securities transactions with the firm…

Deciphering a company’s quarterly earnings report often can be a challenge for an investor. Many companies, but not all, choose to announce their quarterly earnings either before the stock market opens or after it closes. The idea is that this gives investors time to digest the provided information and may be less disruptive to the stock’s price than an intra-day announcement. Many companies will “guide” investors during the three months leading up to their quarterly earnings release so there are…

It is certainly not welcome news for corporate executives to be informed that an “activist investor” has established a position in their company’s stock. Activist investors practice a confrontational style of investing, and the target of their criticism is usually the operational performance of the company’s management. An activist’s agenda usually is detailed in a list of brash demands communicated via press releases, Securities and Exchange Commission filings and on public conference calls, often sprinkled with colorful language to express…

The business of rating debt securities is dominated by three firms: Moody’s, Standard & Poor’s, and Fitch. Their practices now are under fire with the subprime meltdown. Two weeks ago, we discussed securitization, a process whereby mortgages are pooled together, sliced up into securities, and sold to investors. The job of the rating agencies is to attach a rating to these securities that is based on their analysis of the risk of the underlying mortgages. Many investors, including pension plans,…