There’s more than one way to deal with almost any problem – take the disposal of toxic chemicals, for example: If a chemical company needs to rid itself of toxic chemicals, they’re going to have to choose between treating those chemicals to reduce their toxicity, or something more creative… like bury them!

But burying toxic chemicals brings with it its own set of risks and drawbacks. For starters, chances are those buries 55 gallon drums of dioxin are going to seep back to the surface eventually, just as they did in the Love Canal Disaster of the 1970s in Niagra Falls. In that particular instance, 21,000 tons of toxic waste buried beneath a residential area had horrific effects on the residents who lived there.

Indeed, just throwing a tarp over a problem can certainly disguise it; at the very least it’ll keep it out of sight and out of mind for a while… but ultimately, that problem’s still there.

That’s what’s so funny about the Troubled Assets Relief Program (TARP). We’re throwing a TARP over trillions of dollars worth of toxic assets to “get rid” of it. Apparently the irony was lost on whoever’s responsible for naming the program.

In turn, millions of Americans are becoming increasingly concerned about the future of our economy. Not only are we facing a serious “toxic spill” financially, lawmakers have been content to throw money at the problem since October 2008.

Eventually, that toxicity is going to seep into our financial back yards and basements.

Elizabeth Warren is the chair of the Congressional Oversight Panel assigned to be the watchdog over TARP and other recovery initiatives. I first saw her in MaxedOut, a documentary aimed at informing Americans about the mountains of debt that we’re amassing at breakneck speed. In the film, she warned about the dangers of subprime debt long before most Americans knew what it was.

According to Warren, despite Goldman Sachs CEO cum-Treasury Secretary Paulson’s assuranced that taxpayers would be making an investment through TARP that would be repayed dollar-for-dollar, the Congressional Oversight Committee determined that Americans were only getting $66 of value for every $100 check written in our names. Yikes…

Warren appeared on the Daily Show with Jon Stewart on April 15 to discuss what the bailouts really mean for Americans. The interview can be watched below:

What do the changes mean for investors?

Well, probably not much – the change is really more of a clarification that will give auditors a bit more leeway in valuing assets. Reuters claims that the rule won’t have a big effect on next quarter’s results for financial stocks. Want the lowdown on mark to market accounting? Check out this article I wrote for Investopedia last year:

In the accounting world, the numbers on a company’s books are rarely indicative of market values. According to generally accepted accounting principles (GAAP), companies are supposed to record the value of assets at their cost in order to err on the side of caution. In other words, if a bakery buys an oven for $10,000, the purchase is recorded as an asset on the company’s balance sheet for $10,000 – even if it could be sold for more in the marketplace.

Companies normally jump at the chance to repurchase shares they see as undervalued. But the wretched economy makes for much-tougher choices, says Jonas Elmerraji, editor of the Rhino Stock Report, a monthly investment newsletter.

“Clearly the biggest downside is letting go of your cash,” he said. “Right now, cash is king. If companies part with liquidity on their balance sheet, they could be put in a very precarious position.”

Ultimately, I think that share buyback programs can be effective for companies looking to increase their share price, but they’re not an end all be all. True, I’ll definitely mention a material share buyback when a company I like has an initiative in place, but the chances of a buyback alone changing my tune on a stock are pretty much nill.

Seeing a flaky company stage a buyback when they don’t have a mountain of cash to sit on is a bad idea in this environment, and it’s actually one situation where I’d say a buyback program can hurt a company’s share price.

What do you think about buyback programs? Feel free to hit up our new comments on our sprarkly new website.

Ran across this interesting article on Yahoo Finance – The 15 Companies that Might Not Survive 2009.

So, who do they think will hit the chopping block in the next 10 months? The list includes companies like troubled automaker Chrysler as well as Trump Entertainment Resorts (TRMP) and Six Flags (SIX). One company that I sincerely hope won’t go bust is Sirius Satellite Radio (SIRI). Says the article:

The music rocks, but satellite radio has yet to be profitable, and huge contracts for performers like Howard Stern are looking unsustainable. Sirius is one of two satellite-radio services owned by parent company Sirius XM, which was formed when Sirius and XM merged last year. So far, the merger hasn’t generated the savings needed to make the company profitable, and Moody’s thinks there’s a “high likelihood” that Sirius will fail to repay or refinance its debt in 2009. One outcome could be a takeover, at distressed prices, by other firms active in the satellite business.

The music certainly does rock, and I’m not about to give it up just yet. Are there any other companies you think won’t make it through 2009? Light up the comments…

P.S. Interested in 10 Companies that will thrive in 2009? Join our FREE BETA and you’ll get that special report when I release it next month! Sign up here…

We’re increasingly becoming a wire-free society. Since the Blackberry became a cult phenomenon in the early 2000s, business-class mobile applications have been coming out in a big way. After all, you can get your Bloomberg terminal ported over to your Blackberry these days. You can even make trades from your Blackberry. For better or worse enterprise-level business software helps busy professionals stay connected when they’re not at the office.

Here’s the problem – I traded in my Blackberry a year and a half ago for an iPhone, and until now I haven’t looked back. But when you’re responsible for keeping an eye on a portfolio of stocks for a couple hundred BETA subscribers, it becomes helpful to have a half-decent investment platform on the iPhone. The problem is that it doesn’t exist right now.

If you’re after stock information on the iPhone and the standard “Stocks” program just won’t cut it, the stable of Apps available today consist of:

1. Bloomberg – free, but doesn’t do a whole lot beyond delayed stock quotes and news. Certainly not the same as the Bloomberg Anywhere service you can get on your Blackberry.
2. StockWatch – a portfolio tracker for the iPhone. Like Bloomberg, limited feature set.
3. StockCharts – while I was initially excited at the prospect of interactive stock charts for the iPhone, reviews suggest that the timeframe is locked in at 1 year. Great.
4. TickerPicker Lite – this (and its full featured cousin) offer the technicians a possible (but not yet passable?) solution for the iPhone. In addition to advanced charting features, this one offers real time quotes.

Notably left off this list are the premium Apps that offer real-time quotes for a small fee… right, because I wouldn’t just go to Google Finance, Yahoo! Finance, or one of the other free sites that have real-time data now. Unbelievable.

If you’re an iPhone developer and want to make a halfway decent investing utility for anyone who needs a feature set beyond what’s available now, consider including portfolio monitoring, news, level II quotes, and halfway decent charts. Yes, it’s easy to throw together a crappy iPhone App and sell it for a couple bucks if you know what you’re doing. If you spend the time to make a good one, you might actually build a following and make some money too.

Are the attributes of a good company universal?

There’s no question that the difference between the goals of venture capital investors (who invest money in private startup companies) and individual investors (who invest in public companies on the stock market) is huge.

But when it comes down to it, we’re both investing in businesses. We’re both investing in management teams. We’re both investing in ideas. The results, though, are far from the same. The vast majority of VC investments result in successful exits… that means that the companies they invested in were either bought by bigger companies or went public through an IPO – either way, the VC investors make money the vast majority of the time (think Google for instance).

Is the same true of your portfolio? If not, is it because you’re not looking for the right stuff? On the American Express OPEN blog, Venture Capitalist Guy Kawasaki (a cool guy who I interviewed here) outlines what he looks for in investments for Garage Ventures, his VC firm. The verdict – look for realness, traction, cleanliness, forthrightness, and enemies. For the rundown on what that all means, visit the post here or his blog here.

Is there such a thing as recession-proof?

Now that we’re in the midst of recession and approaching 2009 with breakneck speed, there’s no way to draw readers more surely than for investing publications to tout the merits of their “recession-proof” picks.

“Recession-proof stocks: Consumers may be skittish in this weak economy but they haven’t completely closed their wallets. Here’s which companies will benefit,” reads a headline on CNN Money.

“9 Recession Proof Stocks,” promises the Motley Fool to its readers. I’ll admit it – I too have become an investment writer who has thrown about the words “recession proof” to describe a stock I’ve liked this year… but those days have passed.

The truth is (and I’m sorry to say it) that the recession-proof investment is a myth.

What stocks have analysts been bandying about with recession-proof claims? CNN Money’s Paul La Monica talked about Apple (AAPL), Toyota (TM), and – are you ready for this one – Coach (COH) in an April article. Since then, the best performer of the three has been Toyota, only down 36%… not even the browbeaten S&P 500 has fallen so hard.

At the Fool, Joe Magyer took a more conservative approach, talking up the virtues of ampersand-riddled consumer non-cyclicals like Johnson & Johnson (JNJ) and Proctor & Gable (PG). Still, both companies are eating red ink since his article went to print.

What gives? If the best minds in the investment world can’t pick out recession-proof plays, what chance is there for the rest of us?

I hate to say it, but a “recession-proof” stock doesn’t exist. So I’m done using that word.

I mean, a stock immune to recession? That’s crazy; especially in the wake of the stomach churning volatility this market has shown us in the last couple of months. Now that’s not to say that there aren’t plays that can handle recessions better than others… PG and JNJ are actually great examples of stocks that have performed less horribly than the rest of the market.

Recession-resistant is what we should be talking about here. The issue isn’t a matter of semantics either… more on that in a second.

With the market anything but sane right now, less experienced investors are looking for safe places to put there money, and sage advice on how to do so. They turn to the advisors and investment writers of the world for guidance. And the fact is that “recession-proof” is a term that’s been used way too generously in 2008. After all, this is the year the game changed, a fact that even Variety had to point out in a column about slumping DVD sales in the once “recession-proof” adult entertainment industry.

For good or bad, “recession-proof” elicits a mental image among investors – that of a stock that keeps on chugging, maybe even flourishes, in a recession. The problem is that many pundits have ignored the fact that a real recession-proof stock should do well in the good times too.

Companies that clean up foreclosures have done great this year – after all, there’s been no shortage of work… but in a healthy economy, that business dries up.

Switching asset classes can be a good defensive move, but don’t think that it’ll shield you from the effects of a recession either. Even if you’re lucky enough to not lose money, you’ll still get smaller returns from investments like bonds or money market accounts.

Not even your savings account is immune – as interest rates keep getting slashed, so do the piddly returns you can expect from your stash of cash. Sorry, this one’s not recession-proof either.

That said, all is not lost…

When the going gets tough, the tough get defensive. Recession-resistant stocks (like those consumer non-cyclicals) may take a hit in a bad economy, but they’ll still do a good job of insulating your investments from the full force of things.

For medieval military strategists, a castle was one of the best ways to defend against an enemy onslaught that was too much to handle… it wasn’t enemy-proof, but it was a way to hold out while they waited for reinforcements. The same is true of your defensive investments… they’re a way to wait it out in relative safety until the tide changes, not a way to get on the offensive.

Even though recession-proof and recession-resistant sound a lot alike, there’s a very good reason to differentiate between the two. It’s a matter of offense versus defense. Simply put, as long as people think that their investments are immune to a bad economy (recession-proof), instead of resistant to it, people are going to get burned when things turn bad. Recession-proof investments aren’t a way to take an offensive position in tough times (not that there aren’t ways to do that, mind you), they’re a way to put your portfolio on the defensive and avoid matching the S&P’s less than admirable losses.

All of this doesn’t mean that you can’t make money in this market – in fact, many people have. What it does mean is that we need to rethink how we describe investments and how we approach stocks during downturns.

I’m done using the word “recession-proof” to describe stocks… from now on, it’s time to get defensive. Have any good defensive ideas for your portfolio? Feel free to share in the comments…