You might have heard that President Obama recently signed signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. And you might have heard that car loans were specifically written out of the new legislation. Is it not like spit in our faces that recently bankrupted and bailed out GM announced plans to buy Americredit Corp (ACF) the very next day after Obama signed the bill?  The financial firm the auto-maker aims to buy has shown steadily declining sales revenues while we have watched its earnings stumble in recent years. I suppose the company has some intrinsic value and might indeed be very viable, so maybe another company might be wise to acquire it and extract that value.  Something seems terribly wrong, however, when the highest and only bidder is GM, a company which arguably has the money to blow only because it was borrowed from taxpayers who have not yet been repaid.

PICTURED: Americredit Corp (ACF) - Annual earnings growth fell off drastically in FY '08 and turned to losses in FY '09 while sales revenues comparisons in the past 8 consecutive quarters were negative versus the year ago period. Meanwhile GM is aiming to buy the firm and soon complete a new IPO. So, what the hell are the policy-makers reforming and who are they protecting?

I had an opportunity to attend an online webinar as the new 2,300 pages of legislation were being passed.  Former SEC Chairmen Harvey Pitt (2000-2003) and David Ruder (1987-1989) were the legal experts explaining the new rules and taking questions.  I submitted my question framed up as follows - "The former director of the SEC's SERO (Miami, FL) Frederick M. Lehrer spoke at the time of the Sarbanes-Oxley legislation of 2002, during the term of Chairman Pitt, as 'using a nuclear bomb instead of a fly-swatter.'  Congressman Ron Paul and others such as former Arkansas governor Mike Huckabee have contended that SOX was an unnecessary and costly government intrusion into corporate management that places U.S. corporations at a competitive disadvantage with foreign firms. Are any of you willing to come up with an analogy which would be fitting to describe the Dodd-Frank Bill?"  They cut off the first part of my comment/question, probably because it would be viewed as a swipe at Pitt's approval of Sarbanes-Oxley. If you would like to hear the responses from the 2 former SEC Chairmen click here.

RECENT PERFORMANCE UPDATE
The January 2010 INM "Underperformance Appears Linked To Common Factors" discussed what our ability to generate above average returns depends upon, and concluded -"Investors often tend to believe that greatness is going to require lots of fancy dancing, moving in and out of many various stocks.  However, the firsthand examples we have seen of greatness usually required just the opposite.  One or two critical decisions may be all that it takes to make a dramatic difference in your portfolio's value.  That is not to over-simplify matters, but to remind you how simple it really is!  The truth of the matter is that investors we have seen land the biggest winners got there by persistence with the investment system along with great patience and exceptional selectivity."

Now more than halfway through 2010, the Dow, Nasdaq, and S&P 500 are collectively hovering near the flat line. Clients of Source Capital with actively managed accounts are doing better than unchanged for the year in many cases, without having been exposed to the risk of being fully invested the entire time. Many of our customers made only 3 stock purchases this year at our direction, and 2 of them were sold for small losses after initially getting off to good starts.  The one stock that is still working, however, has worked out well enough to make up for the small losses in the other 2 and pull the total portfolio values up for a year-to-date performance in close range of the major averages.  While we would like to be substantially outperforming the major averages, it would not be totally fair to say that we are doing that.  However, over time, the concentration of assets we employ with prudent decision-making effectively reduces the overall risk profile while increasing the chances we can get the above average gains our clients are seeking.