A closer look at the Volcker Rule and Direct TV
May 29, 2012 11:16PM
Updated: July 1, 2012 12:58PM
D ear Mr. Berko: I have followed your column for more than 30 years and don’t know of any columnist, financial or otherwise, who has lasted so long. My father-in-law, who now lives with us, remembers your column in the Clearwater, Fla., newspaper in 1978. I have two questions. I’m 58 and have contributed the maximum amount to my IRA every year, and today it’s worth $222,000. I think I’ve done well (statement enclosed) managing this myself. I would like your opinion on buying 200 shares of Direct TV. I have looked closely at it and think it’s undervalued and might be a good long-term investment. Next, a good friend who is an executive at one of the large banks here is very upset about the Volcker Rule and has asked me as well as several of our friends to write our congressman and object to it. What is your opinion? Thank you in advance.
: I remember your father-in-law who retired from the Clearwater Police Department. He was a classy gentleman and eschewed the “bully tactics” enjoyed by too many of his corpulent colleagues. He was also a superb marksman who taught me how to shoot a pistol.
I like Direct TV (DTV — $49), which provides digital quality video and CD quality audio to homes and businesses under the Direct TV and SKY brands. DTV’s satellite dishes serve 20 million subscribers in the U.S., plus 8 million subscribers in South America, and those numbers should continue growing.
Since 2002, revenues have grown from $9 billion to $30 billion this year. Earnings have been consistently strong, and the share price has tripled in that time frame. This looks like a no-brainer, so hop on the bandwagon with Warren Buffett, Vanguard, Invesco, Growth Fund of America and other big names who agree with you.
Paul Volcker preceded Alan “The Mumbler” Greenspan, who preceded Ben Bernanke as chairman of the FED.
Volcker, all 6 feet 8 inches of him, is a straight-shooting son-of-a-biscuit, who knew when he was right and would stick to his guns. The Volcker Rule, a righteous rule, is a section of the ill-conceived Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed by the House in July of 2010 and is to be in force this July. The Rule prohibits banks and their affiliates from using depositor’s money to trade and profit for their own accounts and restricts a bank’s ownership of hedge and private equity funds. The reasoning behind the Rule is that banksters must not use federally insured public funds to engage in their for profit transactions.
The loudest objectors to the Volcker Rule are the banks that lost hundreds of billions of our money and would have gone belly up if not for TARP (our money, too) funds. The political heat to overturn this Rule is scorching the halls of Congress, and the line is 70/30 that it will be rescinded.
Address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at