Ken Skarbeck

Pension and endowment funds across the country, including some in Indiana, are stepping up to the alternative-investment craps table holding a pair of dice. Should you care? Well, if you are a taxpayer, a pension beneficiary or a charitable contributor, your attention is required. The outcome of this massive reallocation of investment dollars may determine your future tax burden and the retirement security of millions of Americans. Fiduciaries are in the process of executing an enormous shift of money away…

Business schools use case studies to teach students realworld business decision-making. Likewise, investors can study the historical Securities and Exchange Commission filings of public companies, see how past business decisions played out in the stock market, and perhaps learn a few lessons. I came across an interesting case the other day, a small company called Intervideo Inc. that had just announced it was being acquired. The more I looked at the Fremont, Calif.-based company, the more it struck me as…

Should you rely on buy and sell recommendations issued by Wall Street analysts to assist you in your investment decisionmaking? My answer would be no. To use analyst ratings, the first hurdle you must overcome is deciphering the lingo that often is used in place of three simple words: buy, sell or hold. For example, you need to know what market-neutral, underweight or-my personal favorite-sector outperform means. You also would need to distinguish between moderate buy vs. strong buy. But…

A new report by the CFA Centre for Financial Market Integrity and the Business Roundtable Institute for Corporate Ethics calls on various constituents in business and investing to break their focus on “shorttermism.” A key recommendation in the report, titled “Breaking the Short-term Cycle,” urges corporate leaders, asset managers, institutional investors and analysts to end the practice of quarterly earnings guidance. This Wall Street ritual is counterproductive on a number of fronts. By itself, the term “guidance” exposes the hypocrisy…

For my midyear column, I’ve decided to run Warren Buffett’s discussion of Benjamin Graham’s classic allegory on the stock market called “Mr. Market.” Note that Buffett wrote the words below soon after the 1987 market crash. “Whenever Charlie [Munger] and I buy common stocks … we approach the transaction as if we were buying into a private business. We look at the economic prospects of the business, the people in charge of running it, and the price we must pay….

Last week brought news of both triumph and despair from the field of corporate governance. In the win column: Justice was served in the Enron trial, with convictions of two leaders who presided over one of the largest corporate frauds in history. The trial exposed a company where arrogance guided a series of reckless business judgments. Enron marked an era when the focus was on marketing a company’s image and turning executives into stars who were rewarded with lavish pay…

This is the time of year for investors when a trip to the mailbox yields an armload of financial reports. Corporate annual reports come in all shapes, sizes and colors. Their purpose is to provide the investor with a view of the businesses’ performance over the past year, though some still tend to resemble marketing brochures as opposed to a candid compilation of the year’s results. An important-but often overlooked-document is included with the annual report: the proxy statement. The…

Have you dreamed of creating your own business empire? Well, if you have an investment portfolio that contains a group of stocks, congratulations. You and Jeffrey Immelt at General Electric Corp. have a lot in common. GE is a company composed of a diverse group of separate businesses. And since stocks represent a fractional ownership of a business, the separate holdings in your portfolio, when combined, are analogous to running your own mini-conglomerate. One technique you can use to track…

Let me introduce you to the hottest thing going in institutional investing (pension plans)-it’s called “portable alpha.” One salesman for a large money management firm hails this as a new era in investing: “The new paradigm rejects total return as the measure of a strategy’s worth. It instead holds steadfast to the principle that any strategy’s total return can be divided into a market return and (ideally) a net excess return. “The market return component is quantified as beta and…