Freddie and Fannie…These stocks dipped to historic lows after everyone learned of their financial issues. Yet, days later their prices had doubled. No new information, at least good information, had come out suggesting strength in these securities. Now, the bad news is confirmed again, despite the overall outlook on the stocks staying the same, and they go right back to where they were to begin this whole cycle. I understand that stocks are cyclical in nature, but this should not include a run up of 100% and a crash of 50% over the course of a month.

The market is showing ridiculous amounts of volatility due to uninformed investors making terrible decisions. I don’t know how this could be rectified while allowing educated individuals without licenses to continue to make trades.

Even, now, people are forced into buying stocks that they know are no good because of the lure of profit. There is profit to be made off other people’s continued poor decisions, but this seems to encourage buying with no rationale, replacing research with “this might go up” mentalities.

All I ask is that someone at least know the P/E ratio of the stock they are about to buy instead of buying it because the symbol is their child’s initials.

Submitted by Chris Bailey

Merrill Lynch…They are certainly to be applauded for being the first to open their books and show how deeply invested the financial sector is in subprime mortgages. A 30.6 billion portfolio was sold for 22 cents on the dollar, but the real killer is that Merrill financed 75% of the purchase and will be taking any losses over the 1.7 billion dollar payment. This looks like a scramble to raise any capital that it can get its hands on. This is in addition to selling new stock and selling its stake in Bloomberg. Merrill must be hurting to put itself in such a bad position and dilute shareholders value so badly.

However, the question becomes; when do the other financials begin to look for an exit strategy of their own? Will there be any buyers for their distressed mortgages or will they have to continue to take losses every quarter? The result of this move by Merrill Lynch makes the financial sector a time bomb. The banks should start coming clean and stop trying to massage their write downs to be more appealing, its time to face the music and take the fall. I think its time for the banks to start preparing because now everyone can see just how deep this hole really is.

Submitted by Chris Bailey

Crude Oil is finally dropping, futures are in a virtual free fall.

Some of this was caused by the demand supply from the US plummeting. Catching up to world gas prices has obviously not smiled on the average consumer. However, this is another reason behind crude oil falling and it should be of greater concern.

Oil futures are traded in dollars. As the value of the dollar continues to plummet, due to rampant inflation, oil becomes cheaper to the rest of the world. I do feel it is necessary to say that inflation is out of control globally.

Check the six month chart to see the rise and fall of oil, while I do not believe the bubble has popped and will still be artificially inflated further I do believe it is releasing pressure.

There is one other huge reason that I think oil sank, the failing of IndyMac. This failure brings about a large influx of dollars as the FDIC is now responsible for all deposits up to 100,000 dollars. I do not know the exact figure, but billions seems appropriate.

We are printing money and consumers are bleeding it, but at least oil is getting cheaper?

Submitted by Chris Bailey

So, the Fed has finally come around to the fact that they will ruin the dollar if they cut the rate any more. I expect the Fed to wait until after the election to begin raising rates, but honestly the sooner they begin doing so the better.

I feel that there is an aspect of oil prices that many people are overlooking. The dollar is currently the currency that oil trades under. The dollar is being weakened by rampant inflation, although nothing compared to that currently being experienced by Zimbabwe, brought on by excessive rate cuts. As the dollar continues to deteriorate the price of oil will continue to rise. My question becomes, what happens when the fed begins to raise rates and strengthen the dollar?

There are still massive repercussions to be had by raising the rates as this will destroy the housing market, make it nearly impossible to get money from banks due to the tightening of access to money, and possibly burst the oil bubble.

The oil bubble can be demonstrated by one security, USO. Look at the USO Stock Chart and tell me that it is not primed for a boom bust cycle. Almost a 50% increase in 2 months! This is ludicrous and this type of growth cannot continue and will not continue once the dollar begins regaining strength.

Submitted by Chris Bailey

The NBA playoffs are FINALLY over. All the “experts” predicted the Western Conference champion Los Angeles Lakers would beat the Boston Celtics. This was a series of the top offense in the Lakers going up against the top defense Celtics. The dominant defensive team from the East won. The Boston Celtics beat the Los Angeles Lakers 4-2.

In Phil Jackson’s dream world, he was going to beat the Celtics to win his 10^th championship and pass Red Auerbach, former coach of the Celtics. Instead, Phil Jackson lost his second straight NBA finals.

Paul Pierce was phenomenal in the finals. Ray Allen proved to be the great shooter that he is. Ray Allen set an NBA record for 3 pointers in a series. Kevin Garnett finally won a championship. KG gets the credit for turning the Celtics around which he deserves, but Paul Pierce made the big shots to win the championship. The Celtics proved with defense, self-sacrifice and teamwork you can win a championship.

Doc Rivers did a fine job coaching the Celtics to his first NBA championship.

After watching this series, I’m beginning to think coaches get far too much credit for their team’s success. Phil Jackson is the greatest coach – why? Because he went to teams with Michael Jordan and Shaquille O’Neal, two of the greatest players in NBA History. Doc Rivers had never even won a playoff series in his career. The Celtics bring in Kevin Garnett and Ray Allen to go along with Paul Pierce and guess what – the Celtics win a championship. Coaches deserve credit, but I think they get too much. Players win championships.

Congratulations to Wayne Snelson for winning his 2^nd NBA Pick ‘Em!

Posted by Tom Waller, CPA

Gainer, Donnelly & Desroches recently received two awards recognizing their outstanding achievements in the areas of accounting marketing and communications.

The Association for Accounting Marketing distributed 40 Marketing Achievement Awards (AAM-MAAs) at the organization’s 19th Annual Conference, AAM Summit 2008, Wild on Marketing in San Diego, Calif. on June 5, 2008.

A panel of judges, including professionals in advertising, consulting, professional services and marketing, judged nearly 250 entries submitted by accounting firms from all over the United States and Canada in 19 different categories.

Receiving the award for the “Series Ad” and “Printed Brochure” categories, GD&D earned top honors for their 2007/2008 Big & Small advertising campaign and their 2008 Amazing Mix of Characters recruiting brochure.

About AAM:
The Association for Accounting Marketing is the only association in the country formed specifically to address the growing marketing needs of public accounting firms. The members are comprised of marketing professionals, CPAs and consultants, vendors, educators and students who seek to expand the business of public accounting. Since 1989, AAM has provided members with the information, resources and market intelligence needed to excel and grow in their careers.

Posted by Stacy Soefer

One of the foremost experts in business management Edgar Schien said it best when he stated “the people make the place”. Gainer, Donnelly & Desroches is certainly an excellent example – we all believe the people at GD&D truly “make the place”. This month we will be formalizing our GD&D Mentorship Program.

I feel fortunate to have had two very different, but equally valuable, mentors during my career. Whether I knew at the time all that I was learning from my mentors, looking back, I can certainly see what a positive impact they had on my career and how without them, my career could have been different. My first mentor helped me develop my intrinsic auditing skills which I still use today. He taught me the importance of listening to my clients and to learn from each one of them. By listening and asking questions I was able to pass along “best practices” to my other clients.

My second mentor taught me how to be a better business person. One thing she taught me was the concept of saying “no”. I had a tendency to say yes to everything, trying to satisfy everyone at the expense of myself. When we over-extend ourselves we end up doing things in a less than conscientious manner. We have to learn not to make promises that our schedule and to-do list won’t let us keep.

I have learned the importance of mentors. We are all already part of a mentoring program by asking for or providing advice at some point in our careers. As discussed by Jeffrey S. Sears CMA, CFM in his article, Coaching and Empowerment Skills for Accountants, the benefits of a formal mentoring program are worth the effort.

Sears attests that a firm wide program will have a positive impact on three key areas of organizational success:

1. Productivity
2. Client service
3. Relations with employees

Employees can be more productive because they can make decisions without taking time to consult supervisors on every detail. Supervisors can make better use of their time by having more time to address higher-level strategic and tactical issues. Overall productivity gains can translate directly into higher efficiency and effectiveness.

Client service can be improved because employees on the front line can take care of customers in a timelier manner and often with greater client satisfaction. Who knows better than front-line auditor or tax preparer what’s important to the clients they serve? In an era when many have complained about declining customer service, improved customer service can give the firm a competitive edge.

The most important benefit of a mentoring program may be improved relations with employees. With the independence of today’s employees, attracting and retaining well-qualified employees is an ongoing challenge. The increased employee control over decisions and rewards that a mentoring program gives may be the difference between a well-staffed organization and an organization struggling to remain viable.

Posted by Leslie Berardo, CPA

The Fed must stop here.  The bottom has been struck, at least in terms of rate cuts.  After the latest round of cuts I feel that the market is going to have to make an upward turn without further outside interference.  All the downward corrections that can be made have been made.   On the plus side, the jobs report was much better than anticipated and gave aide to the theory that the economy may be stabilizing.  This also resulted in a brief run for the market, but has since settled.  It will be interesting to see that as the Fed takes a more “hands-off” approach and holds the rate steady whether or not stocks will follow rank.  We are also beginning to see a rise in manufactured goods being sold.  I have a strong suspicion that this is due to the weak currency and increase in exports.  

All of this information leads the belief that the economy could be stabilizing and that volatility in the market shouldn’t be far behind. 

Posted by Chris Bailey

With the market on a recent run the Federal Reserve is faced with one of their most daunting decisions. Do they continue to let the market run its course via no action? Do they try to help an extremely damaged housing and financial sector by cutting the rates again? Or could they even bring themselves to take some money off the table through a rate increase?

I believe that there will be little action with the rates in the coming months. The Fed has already cut too deeply to continue doing so, the dollar is devalued to frightening lows. The Pound is at 2:1, the Euro is creeping towards 1.75:1 and the Canadian Dollar is basically 1:1. Taking all of these facts into consideration there is absolutely no way the rate can continue to fall without doing even more damage to an already weak dollar. I would like to see a rate increase as that would go leaps and bounds towards sending this economy back to safer levels of inflation. However, with American businesses hurting maybe a weaker dollar will encourage spending from foreign countries.

I don’t know what the Fed plans on doing, but I do expect a bumpy ride from whatever choices they make.

Submitted by Chris Bailey

In the Thursday, March 27th issue of the Houston Chronicle, Gainer Donnelly & Desroches was recognized for providing healthy menu options for their employees in an age where the corporate calorie count is on the rise.

Some days it’s a birthday cake. On others it’s a box of thank-you doughnuts from a customer. Or leftovers from co-workers trying to clean out pantries and refrigerators. From the biggest office to the smallest shop floor, food is a part of our work lives. And we gobble it up.

Click here to read the full article and see pictures from GD&D’s own Biggest Loser challenge weigh-in.

Posted by Stacy Soefer