The critical questions in value investing are:

1. At what rate will earnings (and dividends) grow over the investment period?

2. What is the risk? Are we certain to receive our required minimum return (equivalent to a risk-free investment)?

3. Can management be trusted to perform?

Neither of these factors can be answered with certainty, we have to make our best estimate after considering a number of factors.


Growth

Past Performance

1. Do historic earnings (per share) show a strong upward trend?

LOS ANGELES (AP) -- Struggling mortgage lender Countrywide Financial Corp. will cut as many as 12,000 jobs in a bid to slash costs and cope with soaring foreclosures and defaults, the company said Friday.

The cuts, amounting to as much as 20 percent of its work force, are needed because the company expects new mortgages to fall about 25 percent in 2008 from this year's levels, Countrywide said.

In a letter distributed to employees, Countrywide Chief Executive Angelo Mozilo called the current market cycle "the most severe in the contemporary history of our industry."

"During the past two years the growth in home price appreciation has stopped dead in its tracks and in many areas of the country it has turned in the wrong direction," Mozilo said in the letter.

In recent weeks, Countrywide borrowed $11.5 billion and sold a $2 billion stake to Bank of America so it could keep operating its retail

The Euro has finally broken out on the back of sharply weaker US economic data. Next week, we fully expect the EUR/USD to make a run towards its all time high of 1.3850, which is less than 100 pips away.

With the ECB likely to keep interest rates on hold for the remainder of the year, the EUR/USD will once again become the anti-dollar. This means that weak US data will drive the EUR/USD higher while strong US data will drive the currency pair lower. This has not been the case over the past few weeks because weak US data would lead to a flight to safety into US dollars and US treasuries. We have yet to see a material slowdown in Eurozone economic data and even though the central bank will probably not be able to raise interest rates again this year because of problems in the US, they still remain hawkish which is a sharp contrast to the Federal Reserves expected monetary policy