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Self Insurance-Boost to Cash Flow but Risk (Cost Of Capital) As Well
Oct 28th, 2010 by hackel

The province of insurance is often a misunderstood and lightly inspected area of security analysis. It is, however, becoming increasingly important in cash flow and risk analysis in light of rising health care costs, growth in corporate assets, a seemingly higher incidence of natural disasters and lawsuits, and other specialized needs for which insurance is required. This has resulted in the rising use of self-insurance as a cash savings technique.

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Death, Taxes, and Health Care Costs
Oct 25th, 2010 by hackel

Ken Hackel, president of institutional equity manager, CT Capital, and author of Security Valuation and Risk Analysis (McGraw-Hill, 2010), warned about six months ago, of the impending pension liability. Now, as expected, firms with large defined benefit plans are fessing up to the power of the discount rate on the ultimate liability, which is now resulting in stepped-up contributions. Hackel estimates that for many firms, with 10-year Treasury bonds at 2.5%, a further 1% reduction in current yields could very well have the same impact as a 20% reduction in the estimated long-term investment return assumption. When Kenneth first started writing of the liability, a 1% reduction was roughly equivalent to a 15% decline.

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It’s Here!-After All, It Only Took 40 Years
Oct 22nd, 2010 by hackel

Tell us what your new book is about?

Rarely does a does a book on finance and investments “break important new ground.”  I believe Security Valuation and Risk Analysis, encompassing my four decades covering about every facet of security analysis and corporate finance, does so.

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Credit and Cost of Capital As Superior Predictors of Recession, Expansion and Stock Prices
Oct 18th, 2010 by hackel

Kenneth Hackel, president of institutional investment advisor, CT Capital LLC, submits that the lessons related to the crisis of the credit markets during 2007-2009, including effects on the economic and financial markets, have been well constructed. What he believes is not as well-known, is  the equity market, as measured by the S&P 500, has lost much of its prowess as a forecaster of pending economic change, and therefore as a forecasting tool of pending recession and expansion.

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Do You Really Understand Cash Flow Analysis?
Oct 8th, 2010 by hackel

Given the rise in financial valuations the past 7 weeks without any obvious increase in economic strength also present in the “Main Street” economy, detailed security analysis is now taking on increased gravity. This is especially so with another earnings “season” upon us, and with it, an avalanche of references to cash flow and free cash flow. If only investors and financial reporters had greater clarity regarding cash flow analysis, stock volatility would be much reduced and investors’ financial results improved.

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Are Security Analysts Over-Promising Again?
Oct 6th, 2010 by hackel

I see the head economist at Goldman Sachs (GS) is now forecasting the US economy will either be “fairly bad” or “very bad.” If his forecast proves accurate, what does that say about equity investors in general, who have carried valuations and equity benchmarks to new yearly highs? Does it also tell you Goldman’s economists and research teams are not on speaking terms?

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Credit Ratings Are Still Important In Determining Stock Valuation
Oct 4th, 2010 by hackel

During the height of the credit crises a short two years ago, the hint of a credit downgrade was sure to result in an outsized drop in the underlying stock.  On the other hand, a confirmation of a rating pushed the impacted stock higher.  Now, due to the considerable balance sheet re-liquefaction and built-up capital, the fear of a credit rating is not near as worrisome.

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