Fraud & Bankruptcy

One sector that has been notably wound during this crisis establishment has been financials. Within the financial sector, the weakest of the weak has been regional banks, which will see little in the way of benefits from TARP 2.0 and stand to lose a great deal if the consumer credit crisis continues to deepen, as almost everyone now expects will be the most likely scenario.

However, risk aversion still a threat for markets and forex investing, which shows that the rescue plan that FED presented, might not be enough relief to avoid the current crisis. Alongside, a study from Deloitte Financial Advisory Services LLP DLTE.UL showed that fraud incidents were much more likely in a company in bankruptcy court. Bankrupt companies are three times more likely to have been cited for fraud by U.S. regulators, according to the study released on Monday.

Fraud-linked bankruptcies like Enron, WorldCom and Adelphia have kept U.S. courts busy for years, and the study revealed that companies that are cited for financial-statement fraud were twice as likely to file for bankruptcy as those that were not cited.

It was not clear whether employees at bankrupt companies are more likely to commit fraud or whether the microscope of bankruptcy makes it easier for regulators to detect it. The most common type of fraud detected at both bankrupt and nonbankrupt companies was improper revenue recognition.

The study tracked companies with annual revenues of more than $100 million, comparing 519 bankrupt companies to a group of 2,919 non-bankrupt companies from about 2000 through 2007. About 9 percent of the bankrupt companies were the subject of enforcement actions reported by the U.S. Securities and Exchange Commission, compared with 3 percent of the nonbankrupt companies.

This does not mean that regional banks are doing some sort of fraud. The point is that there is evidence about the motivation that companies in bankruptcy have had to cheat on governments. In order to recover the health of our economy we must recover the strength of our banks –even when they deserve their fate. However, there is a need to identify those who can jeopardize the health of our economy with their action and we must encourage for more control and regulations over them. If we let them do what they want – once again- they are going to do what is best for them and not for our economy.

Technical Analysis

The methods used to analyze and predict the performance of a company’s stock fall into two broad categories: fundamental and technical analysis. Those who use technical analysis look for peaks, bottoms, trends, patterns and other factors affecting a stock’s price movement and then make buy/sell decisions based on those factors. It is a technique many people attempt, but few are truly successful at it. The world of technical analysis is huge today. There are literally hundreds of different patterns and forex indicators that investors claim to have success with. We have tried to keep this tutorial as short as possible. Our goal is to introduce you to the different types of stock charts and the various technical analysis tools available to investors.

Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic value; instead they look at stock charts for patterns and indicators that will determine a stock’s future performance. Technical analysis has become increasingly popular over the past several years, as more and more people believe that the historical performance of a stock is a strong indication of future performance.

The use of past performance should come as no surprise. People using fundamental analysis have always looked at the past performance of companies by comparing fiscal data from previous quarters and years to determine future growth. The difference lies in the technical analyst’s belief that securities move according to very predictable trends and patterns. These trends continue until something happens to change the trend, and until this change occurs, price levels are predictable. There are many instances of investors successfully trading a security using only their knowledge of the security’s chart, without even understanding what the company does. However, although technical analysis is a terrific tool, most agree it is much more effective when used in combination with fundamental analysis.