Tool for calculating the "fair price" of shares using the Graham Number Calculator

The Graham number is a formula that estimates the fair value of a stock based on its earnings and book value. It was developed by Benjamin Graham, who is widely regarded as the father of value investing and the mentor of Warren Buffett.

Graham was a defensive investor, meaning he preferred to invest in stable and undervalued stocks that required minimal management and provided consistent returns. He devised the Graham number as a general test to identify stocks that were selling for a good price.

The Graham number is calculated as follows:

Can't count? Don't worry, we have prepared a calculator to help you calculate it. We put this tool at the end of the article.

Earnings per share (EPS) is the net profit of a company divided by the number of outstanding shares of its common stock. Book value per share (BVPS) is the equity available to common shareholders divided by the number of outstanding shares. This figure represents the minimum value of a company’s assets and measures the book value of a firm on a per-share basis.

The 22.5 factor in the formula is derived from Graham’s belief that the price-to-earnings (P/E) ratio should not be more than 15 and the price-to-book (P/B) ratio should not be more than 1.5 for a stock to be considered undervalued. Therefore, 15 x 1.5 = 22.5.

According to the theory, any stock price below the Graham number is considered undervalued and worth investing in.

What is the history of the Graham number?

The Graham number was introduced by Benjamin Graham in his influential book “The Intelligent Investor”, which was first published in 1949 and revised several times until 1973. The book is considered one of the best books on investing ever written and has influenced many successful investors, including Buffett, who called it “by far the best book on investing ever written”.

In the book, Graham explained his philosophy and principles of value investing, which focused on finding stocks that were trading below their intrinsic value and had a margin of safety. He also provided various criteria and methods for screening and analyzing stocks, such as the Graham number.

The Graham number was one of the simplest and most widely used formulas that Graham proposed. It was meant to be a quick and easy way to estimate the fair value of a stock without requiring too much information or calculation.

What is the use of the Graham number?

The Graham number is still used today by many value investors as a tool to find undervalued stocks. It can help investors to compare different stocks based on their earnings and book value, and to filter out stocks that are overpriced or have poor fundamentals.

However, the Graham number also has some limitations and drawbacks that investors should be aware of. For example:

• The Graham number does not take into account other factors that may affect the value of a stock, such as growth potential, competitive advantage, industry trends, dividend payments, debt levels, etc.
• The Graham number may not be applicable to some types of companies, such as asset-light businesses, high-growth companies, or companies with negative earnings.
• The Graham number may not reflect the current market conditions or expectations, as it is based on historical data and fixed assumptions.
• The Graham number may not be accurate or reliable if the earnings or book value of a company are manipulated or distorted by accounting practices or irregularities.

Therefore, investors should not rely solely on the Graham number to make investment decisions. They should also perform a more comprehensive and detailed analysis of a company’s financial statements, business model, competitive position, future prospects, and risks before buying or selling its stock.

The Graham number is a useful but not sufficient indicator of a stock’s value. It is best used as a starting point or a screening tool, rather than an end point or a definitive answer.

Stock Calculator | Reasonable Price | Cheap or Expensive

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Earning Per Share (EPS):

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Disclaimer:

The application we created is not intended to recommend or tell you to buy certain shares. Any losses that may arise from purchasing shares are entirely your responsibility.

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3 Large United States Banks with Low Loan Interest Rates

Wells Fargo

Wells Fargo is a bank that has been in operation for almost 170 years and is the fourth-largest bank in the United States. The bank has been working to rehabilitate its image and regain trust by focusing on customer service and technological innovations after several high-profile scandals in the mid-2010s. In this article, we will discuss the interest rates, advantages, and disadvantages of Wells Fargo.

Interest Rates

Wells Fargo offers very lackluster rates (currently 7.49%) on all of its savings options. This means that account APYs tend to skew lower at traditional brick-and-mortar banks than at their online counterparts.

Advantages

Wells Fargo is one of the more easily accessible large banks in the United States, with approximately 4,900 branches and over 12,000 ATMs across 37 states and the District of Columbia. The bank does provide a number of methods for avoiding maintenance fees on many of its deposit accounts, and most clients can easily qualify for one of the many waivers.

In addition, Wells Fargo partnered with Intuit to provide a seamless and completely secure connection for customers who use Mint, QuickBooks online, and TurboTax online. This pioneering move allows Wells Fargo customers to easily share data with these Intuit products so they can handle their financial chores without risking their accounts’ security.

Disadvantages

Wells Fargo charges a $35 overdraft fee for its Debit Card Overdraft Service every time you overdraw your account. Unfortunately, the bank’s policies allow up to three overdrafts per day, meaning you could be staring down $105 in overdraft fees from a single day’s mistakes. Every savings account also carries a monthly fee, meaning your account may essentially earn a negative amount if you are unable to avoid the charge—if your account dips below the minimum daily balance, for example.

Wells Fargo offers many financial products plus thousands of branches and ATMs. However, interest rates on its savings options are low, and fees can add up. It is highly accessible with numerous locations across the United States. The bank does provide a number of methods for avoiding maintenance fees on many of its deposit accounts. However, it charges a high overdraft fee for its Debit Card Overdraft Service every time you overdraw your account. Therefore, it is important to be aware of these advantages and disadvantages before opening an account with Wells Fargo.

LightStream

LightStream is a consumer lender that offers unsecured personal loans for a number of uses. The lender boasts no origination, late payment or prepayment fees, and offers rate discounts for borrowers who sign up for autopay. Loans are available between $5,000 and $100,000 for terms ranging from two to 12 years depending on your loan purpose.

Interest Rates

LightStream’s lowest APR is (currently 7.99%). For borrowers with good credit, this could make LightStream a very affordable option for funding.

Advantages

LightStream doesn’t charge any fees, not even an origination fee. Borrowers may receive funds as soon as the same day they apply with LightStream, which is great for time-sensitive needs.

Disadvantages

LightStream’s minimum loan amount is $5,000, which may be too high for some borrowers. To qualify for a loan with LightStream, you’ll need several years of credit history with a variety of account types (major credit cards, installment loans, vehicle loans and mortgage debt if applicable).

LightStream doesn’t provide a complete picture of what it takes to qualify. However, you will likely need good to excellent credit. When evaluating your loan application, LightStream considers your credit history, requested loan amount, requested loan purpose, repayment term, available assets and payment record on all loans and credit cards.

US Bank

US Bank is a financial institution that offers a range of banking services to its customers.

Interest Rates

This traditional bank offers personal loans with APRs ranging from 8.24% to 21.49% (with autopay) for loan amounts from $1,000 to $50,000 (up to $25,000 for non-customers) and loan terms from one to seven years for customers (one to five years for non-customers).

Advantages

US Bank offers a high yield savings account with an annual percentage yield (APY) of up to 0.25%. This is higher than the national average of 0.05% APY.

US Bank has a mobile app that allows customers to manage their accounts, deposit checks, and transfer funds from their mobile devices.

US Bank offers a variety of credit cards with different rewards programs and benefits.

Disadvantages

US Bank has fewer branches than some other banks, which may make it difficult for customers who prefer to do their banking in person.

US Bank charges fees for certain services, such as overdraft protection and wire transfers.

As for the interest rates, it’s worth noting that the Federal Reserve raised its benchmark interest rate by 0.75 percentage point on Wednesday — the biggest hike since 1994 — to try to curtail today’s record-high inflation.

While the Fed is expected to continue raising rates throughout the rest of 2022, the larger conundrum still remains: continue raising rates, potentially causing an economic slowdown and recession, or don’t raise rates and therefore don’t prevent taming rampant inflation. Interest rates affect our bigger macroeconomic picture, but they also have a tangible effect on our personal finances, including student loans, car loans, mortgages, savings accounts and more.

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Silicon Valley Bank (SVB) Bankruptcy Chronology, The Largest Bank in the United States

Silicon Valley Bank (SVB) was once one of the most successful and influential banks in the US, serving as a major lender and partner to the tech sector. Founded in 1983, the bank grew to become the 16th-largest in the US, with $210 billion in assets. Over the years, its client list included some of the biggest names in consumer tech, such as Airbnb, Cisco, Fitbit, Pinterest and Square.

However, in March 2023, SVB collapsed with astounding speed, becoming the second-largest bank failure in US history, behind the collapse of Washington Mutual in September 2008. The bank was shut down by the California Department of Financial Protection and Innovation (DFPI), which appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver. The DFPI said that it took over and closed the distressed bank to protect deposits.

Silicon Valley Bank - Image by Google

What caused SVB downfall? According to reports, there were several factors that contributed to the bank’s demise. One of them was the broader slowdown in the tech sector, which reduced the demand and profitability of SVB loans and investments. Another factor was the increase in interest rates, which eroded the value of SVB securities portfolio. A third factor was the loss of confidence among SVB depositors, who withdrew large amounts of money from the bank amid rumors of its financial troubles.

The crisis unfolded rapidly in the first week of March 2023. On Wednesday evening, March 8, SVB announced that it was planning to raise $2 billion to “strengthen its financial position” after suffering losses. It also indicated that it had seen an increase in startup clients pulling out their deposits. At the same time, the bank signaled that its securities had lost value as a result of higher interest rates.

By Thursday morning, March 9, SVB shares began to see a massive sell-off. Later that day, SVB CEO Gary Becker pleaded with tech investors to “stay calm”. He said that the only danger posed to SVB was if "everybody is telling each other that SVB is in trouble". However, his words failed to reassure the market. In fact, some tech titans, including Peter Thiel, reportedly warned startup founders to reduce their exposure to SVB. By the end of the day, SVB shares had fallen by 60%.

On Friday morning, March 10, CNBC reported that SVB had been unable to raise the cash it had been hoping to assemble, and was looking for a buyer as deposit outflows continued to accelerate. The bank even called the New York Police Department on Friday morning as customers began lining up outside its Park Avenue offices to get their money, but officers who arrived on the scene left after determining “there was nothing criminal” happening. By noon Friday, March 10, California state and federal banking regulators had seen enough and announced they were taking over SVB deposits and putting the bank into receivership.

What happens to SVB customers now? According to the FDIC, all depositors of SVB will have access to their insured deposits. The FDIC said that it will pay out up to $250,000 per depositor through checks or wire transfers within a few days. Customers who have more than $250,000 in their accounts will become creditors of the failed bank’s estate and may receive some or all of their money back depending on how much is recovered from SVB assets.

As for SVB borrowers, they will still have to repay their loans according to their original terms. The FDIC said that it will continue to service SVB loans until they are sold or transferred to another lender. Customers who have questions about their loans can contact the FDIC at 1-800-823-2514 or visit www.fdic.gov/svb.

The FDIC also said that it is working with other banks to provide assistance and options for SVB customers who may need new banking services. The FDIC said that it will announce any arrangements with other banks on its website and through local media outlets.

The FDIC estimates that the cost of resolving SVB will be $12 billion, which will be covered by its deposit insurance fund. The FDIC said that no taxpayer money will be used for this purpose.

The collapse of SVB has sent shockwaves across the global financial markets and raised questions about the stability and regulation of the banking sector. US President Joe Biden told Americans on Monday, March 13, that they “can rest assured that our banking system is safe”, adding: "We will do whatever is needed on top of all this". However, some analysts and experts have warned that SVB failure could be a sign of more trouble ahead for the tech and financial industries.

Source

We got this information and we have summarized it from several sources. If you need additional information, you can visit any or all of the sources we have listed below:

• cnn
• nbcnews, nbcnews
• investopedia
• cbsnews

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Federal Reserve System (the Fed) - Central Bank of the United States

Federal Reserve System - Image from Google

The Federal Reserve System, or simply the Fed, is the central bank of the United States. It was established in 1913 by the Federal Reserve Act, which was passed by Congress in response to a series of financial crises and bank failures that occurred in the late 19th and early 20th centuries. The main purpose of the Fed is to provide the nation with a safe, flexible, and stable monetary and financial system

The Fed has evolved over time to meet the changing needs and challenges of the U.S. economy. It has three key objectives for monetary policy: maximizing employment, stabilizing prices, and moderating long-term interest rates. These are sometimes referred to as the Fed’s dual mandate The Fed also performs other functions, such as supervising and regulating banks, maintaining the stability of the financial system, providing financial services to depository institutions, the U.S. government, and foreign official institutions, and conducting research and analysis on economic issues

The Fed is composed of several components. The Board of Governors, or Federal Reserve Board, is the governing body of the Fed. It consists of seven members who are appointed by the President and confirmed by the Senate for 14-year terms. The Board sets general policies for the Fed and oversees its operations. The Chair and Vice Chair of the Board are also appointed by the President and serve four-year terms. The current Chair is Jerome H. Powell, who took office in February 2018.

The Federal Open Market Committee, or FOMC, is the main policy-making body of the Fed. It consists of 12 members: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four presidents of other regional Federal Reserve Banks who serve on a rotating basis. The FOMC meets eight times a year to review economic and financial conditions and decide on monetary policy actions.

The most important tool of monetary policy is the federal funds rate, which is the interest rate that banks charge each other for overnight loans of reserves. The FOMC sets a target range for this rate and uses open market operations to influence it. By changing the federal funds rate, the FOMC affects other interest rates in the economy and ultimately influences economic activity and inflation.

The 12 regional Federal Reserve Banks are located in major cities across the nation. They operate as independent corporations within the Fed system and are owned by their member banks, which are nationally chartered or state-chartered banks that meet certain requirements and hold stock in their respective Reserve Banks.

The Reserve Banks perform various functions for their districts, such as processing checks and electronic payments, distributing currency and coins, supervising and examining banks, conducting economic research and education, and serving as a lender of last resort to banks in times of emergency. Each Reserve Bank has a board of directors that oversees its administration and a president who is appointed by its board with approval from the Board of Governors.

The Fed also has several advisory councils that provide input and feedback on various aspects of its operations and policies. These include the Federal Advisory Council, which consists of 12 representatives from the banking industry; the Community Depository Institutions Advisory Council, which consists of 12 representatives from smaller banks, credit unions, and thrift institutions; the Community Advisory Council, which consists of 15 representatives from consumer, labor, community development, and other groups; and the Model Validation Council, which consists of five experts in econometrics and statistics who advise on the validation of models used by the Fed for stress testing banks.

The Fed operates independently from political influence but is accountable to Congress and the public for its actions. It reports regularly to Congress on its monetary policy decisions and objectives, its supervision and regulation activities, its financial stability efforts, its balance sheet and income statements, its audits and reviews, and other matters. It also publishes various reports and data on its website (www.federalreserve.gov) that are accessible to anyone interested in learning more about its operations and policies.

The Fed plays a vital role in maintaining the health and stability of the U.S. economy. It faces many challenges in fulfilling its mission in a complex and dynamic environment. Some of these challenges include managing inflation expectations, balancing short-term and long-term goals, dealing with uncertainty and risks, communicating effectively with various audiences, fostering financial innovation while mitigating potential threats, promoting diversity and inclusion within its workforce and leadership, and adapting to changing technologies and global developments.

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