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Brigham Young University
Marriott School Management
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    Thursday, May 25, 2006

    Enron - The final step - Big lesson for everybody

    The book is now largely closed on one of the most scandalous chapters in the history of American business, as former superstar executives Kenneth Lay and Jeffrey Skilling were found guilty of conspiracy and a host of other charges in the ruinous collapse of energy giant Enron. The years-long saga came to an end as a jury of eight women and four men on Enron's home turf in Houston determined after a bit more than five days of deliberations that Mr. Lay was guilty of all six charges against him, and that Mr. Skilling was guilty of 18 counts of fraud and conspiracy. He was acquitted on nine counts of insider trading and found guilty on one insider-trading count. Mr. Lay was also found guilty of four counts of bank fraud and making false statements in a separate trial decided without a jury. For the workers and investors who lost so much in the company's slide into the void, the outcome offered closure, even though most will never recover their losses. It was also vindication for those skeptical analysts, investors and journalists who raised questions about Enron's finances long before what was once the seventh largest company in the country crashed and burned. And finally, it was a sharp rebuke to the deluded corporate arrogance that allowed Enron's bad-acting executives to believe that they could fool whomever they chose, and fool them forever. As it turns out, the Enron brass may have been the smartest guys in the boardroom, but beyond those walls other considerable minds challenged them, and prevailed. Of course, Mr. Lay and Mr. Skilling are but the most widely recognized players in the sorry tale of an era's excesses. They are joined by figures like Bernard Ebbers, the former WorldCom chairman and chief executive, who like Mr. Lay offered a clinic on how not to behave when testifying in one's own defense, and then was sentenced to 25 years in prison for orchestrating the U.S.'s largest-ever accounting fraud. There is also L. Dennis Kozlowski, the former Tyco International chief executive who also took the stand in his own defense and who, along with former Tyco finance chief Mark H. Swartz, was then sentenced to at least seven years for looting the company. Beyond that, there's John Rigas of Adelphia Communications, who with his son, Timothy Rigas, was found guilty of looting the cable company of more than $100 million and lying to the public about Adelphia's health. Enron's collapse shook the business world to its foundations. The company's bankruptcy was the second largest in U.S. history -- behind only WorldCom's wipeout, as it happens. Billions of dollars in market value were lost in Enron's demise, as were thousands of jobs and billions of dollars in pension savings. One of the nation's largest accounting firms, Arthur Andersen, was ground to dust under the wheels of the case. Enron reawakened campaigns for corporate-governance reform, and for investors who lost their shirts during the bursting of the tech bubble, the company became synonymous with both the excesses of the 1990s boom and the turmoil of the start of this decade (in a macabre bit of symmetry, the executives will be sentenced on Sept. 11, five years after the terrorist attacks). With the guilty verdicts, it will remain so. But as with so many things, corporate misbehavior is cyclical, and like a stubborn weed, scandal is certain to emerge from the soil again.

    Monday, May 22, 2006

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    Monday, May 08, 2006

    Stock Market Predictions are the Key to Successful Investing

    One of the greatest popular myths about investing in stocks is that in order to be successful, you must be able to predict the stock market's movements. Why do people assume this? For some, it is because they do not understand that stocks give a positive and substantial return over time - they falsely assume that stocks bounce around in the same range forever, and they therefore conclude they must predict movements in order to be able to sell at the top of the range and buy at the bottom of the range. For others, the desire to predict is borne out of human nature, which puts a premium on certainty. We love to know what will happen in advance. Hence, it is usually assumed by the beginning investor that to be successful, one must first become an expert at forecasting future market trends. Experienced investors know, in fact, that nothing could be further from the truth. Some icons of Wall Street love to advance the cause of market predicting, because they are paid to predict these movements. Others simply humor their clients who are looking for market projections because they know that it is easier to give them a projection than to try to correct the clients' thinking. For instance, nearly every retail brokerage firm has a chief economist or market strategist whose main responsibility is to predict the climate for stocks. A large number of books, advisory services, and such that are sold focus themselves almost exclusively on prediction of how the stock market in general will perform in the future. But in truth, the best way to make money in the stock market is to avoid approaches that rely on market predictions. This will most likely seem an odd or even a absurd statement to some, perhaps most. Yet, any serious review of the results of market gurus over a long period of time reveals a track record that is no better (usually worse than) a simple buy-and-hold strategy. Don't misunderstand me: There is no doubt that if a person could accurately predict the short-term fluctuations of the stock market, that person could far exceed the return of someone who simply bought a basket of stocks and sat on them. However, the one fatal problem with this is that there has never been a single person who has figured out how to do it. Nearly all market advisors claim to be able to call the market's every turn, but in fact every credible study ever done on the subject has proven that these claims are invariably false. By far, most market prognosticators significantly underperform the market, despite their universal claims to the contrary. Given the large number of market gurus that now exist, the laws of statistics dictate that some of them must beat the market, out of pure luck if nothing else. However, they lack the ability to repeat this performance from one time period to another, and the group of market beaters will usually be a different group every time period that is sampled. If you could predict which guru would be right for the next year, you would be in good shape. But, of course, it's just as hard to predict which guru (or which dart board) will be right for the coming year as it is to accurately predict market conditions. Finally, even if we are generous and assume that there is some market forecaster out there who has the holy grail of market prediction, our chances of being able to sort him out from those who simply got lucky are pretty slim. As of this writing, the market prognosticators who are most successful over the past ten to fifteen years are those who have been perpetually bullish. Although we all get bearish once in a while, we do best when we keep our bearish feelings from affecting our actions. Therefore, I recommend that you feel free to have your opinions about where the market is heading, but always invest as though the market is going higher. Over the long run, you will be better off than if you had jumped in and out of the market. Of course, you have to exercise some caution in having an optimistic viewpoint; the best policy is to only invest money that you can afford to be patient with if the market stalls or backtracks. If you take out a huge mortgage on your home with the expectation of investing it for a quick payoff, you are tempting fate and your emotions of fear will almost certainly cause you to fail. If results are any indication, the conclusion must be that market forecasting is prone to failure. One of the purposes of this book is to free you from the compulsion we all seem to have to predict future market trends. An alternative mindset to the prediction game If we are not going to spend our energies wondering where the market is going, then how can we succeed in the stock market? The key is to develop a method which will react to events as they occur, and will ensure that our returns are as good or better than the returns on the general market, whatever those market returns may be in the future. We can essentially ignore what "the market" is doing - or especially what it is forecasted to do in the future. We own our particular set of stocks, not "the market." What we really need is a method which concentrates on how our stocks are actually doing, as opposed to how they will do in the future. We own our portfolio of stocks. The Reverse Scale Strategy is such a method and will be developed later in this book once its theoretical underpinnings are explained. If you just can't help yourself... As most investors eventually learn, market prognosticators are notoriously inaccurate. If you already know the futility of market forecasting but feel that you simply must predict the market, I will reveal at this time how you can be as good as the best market gurus in predicting the market: When you get up each and every morning for the rest of your life, make this astonishing prediction: "The market will be up today." If you make that your prediction every single day you will be as accurate as some of the best people in the field of economics, having achieved a long-run accuracy of about 60%. Despite people's fears of bear markets, the market spends most of its time advancing, not declining. In the long run, a good investment strategy that doesn't rely on prediction will beat a market forecasting strategy.

    The stock market is a form of gambling

    Perhaps at the heart of many other stock market myths is the idea that investing in stocks is a form of gambling. Remarkably, I recently heard someone who was introduced as an "economist" say as much on a national radio news broadcast! As of this writing (1995), some of this myth has been dispelled by the relatively steady returns enjoyed by investors is recent years, versus the up and down markets experienced during the 1970s. Still, many folks consider stock investing to be fundamentally different than investing in bonds, certificates of deposit, and other more-predictable investments. To understand why stock investing is inherently different than gambling, first we need to review what common stocks are. In the most basic terms, a share of common stock entitles the owner of that share to a fraction of what is left over after all other stakeholders in a business have been paid. So, the firm takes in revenue from customers in return for the firm's product, and with that revenue pays for raw materials, employee wages, energy, supplies, and pays interest on borrowed funds. Whatever is left over, if anything, belongs to the holders of the firm's stock, who are essentially the owners of the firm. Depending on business conditions and how well the company is managed, the amount left over for the shareholders can be very large, very small, or even negative. It is obvious that the common shareholders see more variability (risk) in what they take home than bondholders, raw material suppliers, employees or anyone else involved in the operation of the firm. The common shareholder stands last in line to be paid, and because of this additional risk the shareholder demands a higher expected return than does the bondholder. In the stock market, investors are constantly trying to assess what will be left over for the shareholders both now and in the future. This is why stock prices fluctuate - because the outlook for business conditions are always changing, and what will be left over for the owners of a particular firm is always changing too. But, one thing is for sure: common shareholders expect their returns to be volatile, but they also expect them to be positive and permanent over the long run - and higher than the return on bonds, treasury bills, or other less risky investments. That is, the shareholders don't expect to give up all their gains - despite the fluctuations in value, the returns at some point become permanent. For as long as common stocks have existed (hundreds of years), this expectation has been met: Stocks have had their ups and downs, but have trended steadily higher in value over the years. And, they have increased in value at a faster pace, on average, than dollars invested in more predictable vehicles such as bonds or treasury bills. It is this steady upward progression in the value of stocks that sets them apart from gambling in a major way. You could buy a set of stocks, and hold them for the rest of your life. Although they would fluctuate in value over your lifetime, chances are they would greatly increase in value during that period of time. However, no other person would have lost money simply because your portfolio of stocks gained in value. This is not true with gambling. In gambling, every dollar won is a dollar lost by someone else. It must be this way because gambling produces nothing, creates nothing, and therefore can only return to a winner what it took from a loser. The value of common stocks increases without taking wealth away from anyone; in fact when the stock prices increase, the amount of aggregate wealth increases for society as a whole. This is because common stockholders do produce something: They postpone the consumption of goods (ie, they save some portion of their income ) in order to supply the seed capital needed to buy production equipment and produce goods. They get the ball rolling, so to speak, for firms wishing to produce goods. Here is another fact which highlights the vast differences between gambling and stock investing: When gambling, the longer you stay at the gaming tables, the more likely you are to walk away a loser. In the stock market, the longer you stay at it the better chance you have of coming away a winner. In fact, if you buy and hold a well-diversified portfolio of stocks, you are virtually assured of making money eventually. Of course, many people do lose money in stocks, but only because they fritter their capital away with excessive or ill-founded trading strategies. Every stock investor needs to know why investing and gambling are two totally different pursuits. Once you realize this, it will give you confidence in pursuing a long-term plan for investing and will make you less prone to the destructive forces of fear and greed. So, the two facts to retain regarding myth #1 are as follows: Gambling transfers wealth from a winner to a loser because it produces nothing. Investing increases overall wealth because the capital invested in stocks provides the initial funding for firms which exist for the purpose to producing goods and services. The value of stocks trends steadily upward over time. They do not seesaw back and forth in the same range forever. In the aggregate, stock investors demand and receive a return that is substantial and permanent.

    Vietnamese Brokerage Firms List

    1. Vietcombank Securities Co. (VCBS) Chartered Capital: VND60 billion Add: Vietcombank Building, 198 Tran Quang Khai Str., Hanoi Tel: 84.4.8255503; Fax: 84.4.8255548 Business: Brokerage, portfolio management, underwriting, consultancy 2. Bank for Agriculture and Rural Development Securities Co. (Agriseco) Chartered Capital: VND60 billion Add: 4 Pham Ngoc Thach Str., Dong Da Dist., Hanoi Business: Brokerage, dealing, portfolio management, underwriting, consultancy 3. Industrial & Commercial Bank Securities Co. (IBS) Chartered Capital: VND55 billion Add: 306 Ba Trieu Str. Hanoi Tel: 84.4.9741054/9741055; Fax: 84.4.9433700; Email: ibs-ho@hn.vnn.vn Branch: 153 Ham Nghi, Dist. I, HCM City Tel: 84.8.9140200; Fax: 84.8.9140201 4. Saigon Securities Incorporate (SSI) Chartered Capital: VND20 billion Add: 12 Nam Ky Khoi Nghia Str., HCM City Tel: 84.8.8218567; Fax: 84.8.8294123; Email: ssi@saigonsecurities.com Business: Brokerage, portfolio management, underwriting, consultancy. 5. Bao Viet Securities Co. (BVSC) Chartered Capital: VND43 billion Add: 94 Ba Trieu Str., Hanoi Tel: 84.4.9433016; Fax: 84.4.9433012 Branch: 1 Nam Ky Khoi Nghia Str., Dist. I, HCM City Tel: 84.8.8218565; Fax: 84.8.8218566 6. Bank for Investment and Development of Vietnam Securities Co. (BSC) Chartered Capital: VND50 billion Add: Tungshing Building, 2 Ngo Quyen Str., Hoan Kiem Dist., Hanoi Tel: 84.4.8262959; Fax: 84.4.8262188 Branch: 146 Nguyen Cong Tru Str., Dist. I, HCM City Tel: 84.8.8218508; Fax: 84.8.8218510; Website: http://www.bsc.com.vn 7. Asia Commercial Bank Securities Co. (ACBS) Chartered Capital: VND43 billion Add: 442 Nguyen Thi Minh Khai Str., Dist. 3, HCM City Tel: 84.8.8334085/8395179; Fax: 84.8.8399885/839988 Business: Brokerage, dealing, portfolio management, underwriting, consultancy 8. Thang Long Securities Co. (TSC) Chartered Capital: VND9 billion Add: 14 Ly Nam De Str., Hanoi Tel: 84.4.7331349; Fax: 84.4.7233335; Business: Brokerage, portfolio management, consultancy 9. First Securities Co. (FSC) Chartered Capital: VND43 billion Add: 99 National Road No. 13, Thu Dau Mot Town, Binh Duong Province Tel: 84.650.832614/832615; Fax: 84.650.832616; Email: fschcm@hcm.vnn.vn 10. Mekong Securities Co. (MSC) Chartered Capital: VND6 billion Add: 2 Phan Chu Trinh Str., Hoan Kiem Dist., Hanoi Tel: 84.4.9361389/90/91; Fax: 84.4.9361393; Email: hn.msc@mekongsecurities.com.vn, Website: http://www.mekongsecurities.com.vn 11. Haiphong Securities Co. (HSC) Add: 24 Cu Chinh Lan, Hong Bang, Haiphong Tel: 84.031.821405 12. Ho Chi Minh City Securities Co. (HSC) Chartered Capital: VND50 billion Add: 22-39 Pasteur, Commune Nguyen Thai Binh, District 1, Ho Chi Minh City Tel: 84.8.9142121; Fax: 84.8.9144755; Email: Ho Chi Minh City@hsc.com.vn Business: Brokerage, portfolio management, consultancy, dealing, underwriting 13. Dong A Securities Co. (AESC) Chartered Capital: VND21 billion Business: Brokerage, portfolio management, consultancy, securities dealing

    Vietnam Securities Companies

    As of February 2004, thirteen companies have been licensed by both the State Securities Commission and Ho Chi Minh City Stock Trading Center. Of these, nine have capital of VND43bn (US$2.73m) or more and have been licensed to conduct a full range of securities business including brokerage, advisory, fund management, proprietary trading and underwriting. Saigon Securities Incorporation, Hai Phong Securities Joint Stock Company and EAB Securities Company have chartered capital ranging from VND20-22bn (US$1.27m-US$1.4m) while Mekong Securities Joint Stock Company are capitalized at VND6bn (US$0.38m). Neither company is licensed to conduct proprietary trading or underwriting. Six of Vietnam’s securities companies were licensed ahead of Ho Chi Minh City Stock Trading Center’s opening in July 2000. All 4 state-owned commercial banks and Vietnam’s largest State-owned Insurance Company established their wholly owned subsidiaries, consisting of Bank for Investment & Development of Vietnam, Industry and Commerce Bank of Vietnam, Bank for Agriculture and Rural Development, Bank for Foreign Trade of Vietnam and Bao Viet Insurance Company. The securities arm of the Bank for Investment and Development of Vietnam and the Bank for Agriculture and Rural Development are the largest ones with chartered capital of VND100bn (US$6.3m) each. Asia Commercial Bank Securities Company and Thang Long Securities Company are wholly–owned subsidiaries of joint stock banks - Asia Commercial Bank (which is the largest and considered to be amongst the most progressive of Vietnam’s 33 joint stock banks) and Military Bank (which is majority controlled by the army). First Securities Company is a joint stock company whose major shareholders include Becamex - an enterprise co-owned by the People’s Committee of Binh Duong Province and several business partners. (Binh Duong Province, some 40km from Ho Chi Minh City, is home to Vietnam’s largest concentration of industrial and manufacturing enterprises). Saigon Securities Incorporation is a privately owned joint stock company founded by Vietnam’s Pan Pacific and Saigon Business Consultancy and is considered the most ‘internationally minded’ of the licensed securities companies. At the end of 2003, SSI’s reported share of order-matching turnover on the Ho Chi Minh City Stock Trading Center was just over 23%; a couple of percentage points ahead of Bao Viet. During 2003, there were 4 more companies entered the market, including Ho Chi Minh Securities Company (‘HSC’) which is largely controlled by Ho Chi Minh Investment Fund for Urban Development (HIFU), Eastern Asia Bank Securities Company Eastern Asia Bank - a joint stock bank where HCMC Communist Party Economic Committee has major shares and influence and two other companies in the north, Hanoi-based Mekong Securities Company and Hai Phong Securities Company whose headquarter bases in Hai Phong - the second largest city in the north. Vietnam has thirteen registered securities firms but only four of them - SSI, BVSC, ACBS and BSC - dominate brokerage business, accounting for 71% of all trade.

    Vietnam Stock Exchange

    The Stock Trading Center of Vietnam (‘STC’), located in Ho Chi Minh City, was officially inaugurated on July 20, 2000, and trading commenced on July 28, 2000. Initially, two equity issues were listed, Refrigeration Electrical Engineering Joint Stock Corporation (‘REE’) and Saigon Cable and Telecommunication Material Joint Stock Company (‘SACOM’). As of this date, an additional 20 issues are also listed with a current market capitalization of US$239m. The Stock Trading Center of Vietnam is also the official mechanism through which new government bonds are issued, and it functions as the secondary market for a number of existing bond issues. As of this date there are 120 listed bonds with a total market capitalization of US$866m. All securities traded on the Stock Trading Center of Vietnam are denominated in Vietnamese Dong. Par valued is standardized at VND10,000 for equities and VND100,000 for bonds. Trading is conducted daily with two matchings in a morning session, from 9A.M. to 11A.M. The State Securities Commission (‘SSC’), a body established formally in 1996, is responsible for capital markets development, licensing of participants, and the issue and enforcement of regulations. A wide range of regulations, with significant input from multilateral bodies such as the International Finance Corporation, have been promulgated, including those dealing with such issues as insider trading, take-over trigger points and margin lending. In order to be listed, a company must have been profitable for at least 2 years, have a minimum capitalization of VND5b (approximately US$318,000), and have at least 50 shareholders who are not employees of the company, holding at least 20% of stake. Foreign invested joint venture companies are technically qualified to list, but in order to do so, they must be reorganized into joint stock company status. Companies intending to list must also submit to audit by an approved, independent auditing company. At the beginning, an overall foreign ownership limit of 20% for equities and 40% for bonds were implemented. In July 2003, in a bid to improve liquidity, the government raised the foreign ownership limit for equities to 30% and totally removed foreign ownership limit of a particular issuer’s bonds. Foreign participants on the Stock Trading Center of Vietnam must register through a custodian licensed to hold securities on behalf of foreigners. Once registered, a securities transaction code is issued to the foreign investor that will permit securities trading. The mechanism of trading on the Stock Trading Center of Vietnam is via an automated order-matching system. The capacity of the system is 300,000 orders per day. Currently, trading limits of 5% (for bonds and equities) either side of the previous close apply. No price restrictions have been set for newly listed securities but price caps were applied in the case of the very first day of the market’s operations. Settlement is centralized through the Stock Trading Center of Vietnam using the Bank of Investment and Development of Vietnam (BIDV), a state-owned commercial bank. Several other domestic banks and securities companies have been authorized to accept custody of securities, with HSBC’s and Deutsche bank’s Ho Chi Minh City branches currently the only banks providing custody services for foreign investors. Custody is based on a central depository, central registry book entry system. Presently, there are thirteen licensed securities companies. Of these, nine have been licensed to conduct a full range of securities services including underwriting, brokerage, custody, research, portfolio management and trading. The minimum capital required to operate effectively as an investment bank is VND43b (c. US$2.7m). The current market capitalization is now US$239m for equities and US$866m for government bonds. With the World Bank estimating domestic savings of some US$5b outside the official economy, considerable liquidity could flow into the securities markets in time. The SSC in conjunction with the Asian Development bank have formulated a development plan for Vietnam’s Capital markets which if successfully implemented would result in 100 listed companies on the Ho Chi Minh Exchange and a similar number on the Hanoi exchange by the end of 2005 with an associated total market capitalization of between 2 and 3 percent of GDP.

    Vietnam's stock market is booming

    Since Dec. 30 the Vietnam Stock Index is up 60%, and it's the second-best-performing exchange in the world this year (behind only Zimbabwe's). Three decades after the end of the Vietnam war, corks are popping in Ho Chi Minh City. The reason might make the man for whom this town was named spin in his grave: Vietnam's stock market is the second-best-performing exchange in the world this year (behind only Zimbabwe's). Since Dec. 30 the Vietnam Stock Index is up 60%. And from a market capitalization of $144 million for 22 listed companies two years ago, it has increased more than tenfold, to $1.5 billion for 35 companies today. That's not bad for an exchange that only started trading in July 2000. Expectations are for the total market cap to double again by the end of this year. "It's starting from a very low base, so you have nowhere to go but up for the next three to five years," says Don Lam, who runs VinaCapital in Ho Chi Minh City and operates the largest fund through which foreigners can invest in Vietnamese stocks, the $300 million Vietnam Opportunity Fund, traded on the London Stock Exchange. Vietnamese companies are undervalued by global standards, says Tran Dac Sinh, CEO of the Vietnam Stock Exchange, who cites an average price-to-earnings ratio of 11.9 for Vietnamese companies, compared with 18 for Chinese.

    Wachovia to pay $26B for Golden West

    NEW YORK (MarketWatch) -- Wachovia Corp., making its first foray into the California market, agreed Monday to acquire Westcorp for $3.42 billion in stock in a bid to give its auto-financing operations a national presence. Charlotte, N.C.-based Wachovia (WB : Wachovia Corp News , chart, profile, more Last: 55.42-3.97-6.68% 8:16pm 05/08/2006 Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: WB55.42, -3.97, -6.7% ) also inked a related transaction, buying the 16% of WFS Financial (WFSI : WFS Financial Inc News , chart, profile, more Last: 12:00am 12/30/1899 Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: WFSI0.00, 0.00, 0.0% ) not held by Irvine, Calif.-based Westcorp (WES : WES News , chart, profile, more Last: 12:00am 12/30/1899 Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: WES0.00, 0.00, 0.0% ) for $490 million. The deal comes after Wachovia fell out of the bidding for MBNA Corp., the credit card issuer sold to cross-town rival Bank of America (BAC : bank of america corporation com News , chart, profile, more Last: 50.11-0.36-0.71% 8:04pm 05/08/2006 Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: BAC50.11, -0.36, -0.7% ) in June for $35 billion in cash and stock. Terms call for Westcorp shareholders to receive 1.2749 shares of Wachovia common stock for each share held, while WFS Financial shareholders are to receive 1.4661 shares of Wachovia common for each of their shares. Wachovia said the acquisition will give its auto-finance group offices in 47 states and add about 8,500 dealer clients as well as some 920,000 individual customers. Wachovia gains 19 branches in California. "This transaction moves our auto finance business to a new level and gives us access to a new set of customers who can benefit from Wachovia's broad offering of financial services," said Ben Jenkins, president of Wachovia's General Bank. Jenkins continued: "Westcorp and WFS Financial have demonstrated a strong track record of growing revenue and earnings through all economic cycles. Our companies share the same strong commitment to customer service and delivering superior products to auto finance customers." Wachovia said the combined auto-finance business will be run by Thomas Wolfe, currently president and chief executive of WFS Financial. The parties expect to complete the deal in the first quarter. 'Reasonable price' Analysts said the deal will give added heft to Wachovia's auto-finance business. The combined portfolio will total about $19 billion in loans, 22% of which will be high-yielding and high-risk subprime loans. But Jon Balkind, an analyst with Fox-Pitt Kelton, said the deal may contain too much sub-prime lending. "We question management's desire to add this significantly to auto, with a sub-prime component at that," Balkind said. Debt-rating company Moody's Investor Service, however, reaffirmed Wachovia's ratings saying the sub-prime portfolio was "manageable when related to the total company's resources." In addition, the deal should offer few intergration challenges and comes at a "reasonable" price, said Jennifer Thompson, an analyst with Oppenheimer. Westcorp also will likely put to rest speculation about the next big deal for Wachovia. "The deal gives management more credibility as a rational, measured acquirer; and we think the deal significantly reduces the potential for a large deal very near term as they focus on the task at hand," Thompson wrote in a research note Monday. Wachovia's shares fell 80 cents to close at $49.58, while Westcorp's stock added 23 cents to finish at $61.58, and WFS Financial's shares rose $5.08, or 7.8%, to $70. End of Story