Taiwan Semiconductor Manufacturing Co.

UPDATE 2-TSMC April sales up 44 pct y/y, sees better 2006
Wed May 10, 2006 5:03 AM ET

(Recasts with TSMC April sales, more details)

By Kirby Chien and Baker Li

BEIJING/TAIPEI, May 10 (Reuters) - TSMC <2330.TW>, the world's top contract chip maker, on Wednesday posted a 44 percent jump in April sales amid growing demand for new consumer devices that could help boost 2006 revenue up 22 percent from last year.

At a conference in Beijing, TSMC Chairman Morris Chang said his company expected 2006 net profit of US$4 billion on revenue of $10 billion -- both figures slightly below analysts' expectations.

"We should see $10 billion in sales this year," he said.

"For net profit, $4 billion." Chang did not elaborate.

A company spokesman later told Reuters that Chang's comments did not constitute an official forecast, saying the company does not issue annual financial forecasts.

Forecasts from 19 analysts surveyed by Reuters Estimates put TSMC's 2006 net profit at an average T$131.9 billion ($4.2 billion). TSMC earned a net profit of $2.91 billion in 2005.

Analysts expected the company to garner revenue of T$327.3 billion ($10.42 billion) this year, compared with last year's $8.23 billion.

"TSMC definitely can reach the target," said KGI Securities analyst Tiffany Chen. TSMC's 2006 sales and earnings forecasts were 2.5 percent and 5 percent lower than Chen's own estimates.

The rare forecasts came after TSMC reported a near doubling in first-quarter profit last month as it recovered from last year's chip glut. Analysts have widely expected the company's profit to grow quarter by quarter this year.

Later in the same day, TSMC reported sales of T$27.162 billion for last month, up from T$18.903 billion in April last year and slightly higher than March's T$27.107 billion.

While demand slowed after the year-end shopping season, new generation mobile phones, game machines and flat-screen televisions are gaining popularity, boosting demand for chips.

TSMC has forecast second-quarter sales to rise 2.2 to 4.8 percent from the first quarter, with gross margin up as much as 1.6 percentage points -- a guidance that was more conservative than its rival United Microelectronics Corp. (UMC) <2303.TW>.

UMC , which posted a 33 percent year-on-year gain in April sales on Tuesday, expected second-quarter shipments to rise 5-6 percent from the first quarter, while TSMC saw a smaller 3 percent growth in shipments in the current quarter.

Hurt by losses in U.S. peers, TSMC's ordinary shares slid 2.21 percent to end at T$66.50 on Wednesday, worse than the benchmark TAIEX's <.TWII> 0.87 percent drop. UMC shares lost 4.7 percent to T$21.30.

But so far this year, TSMC has risen 6 percent and UMC was up 15 percent as investors bought into their solid fundamentals.

Output of chips below 130 nanometre circuits would make up 50-55 percent of TSMC's total revenues in the second half of this year, compared with 49 percent in the first quarter. UMC also expected output using advanced technology to grow this year.

Both TSMC and UMC count Texas Instruments Inc. (TI) , the world's top supplier of mobile phone chips, as major clients. (US$=8.007 yuan=T$31.4)

References:

Global Test Website

Kim Eng - Global Test

Results Announcement :: China Sun BioChem

Another set of expected good results announced from China Sun Biochem. The challenge now is to utilise its expanded production capacity and gain more market share from its competition. The highlight regarding the issuance of the ethanol should be regarded as a potential growth driver however exercise against over excitement.

For corn starch production, the major competitors are:-
1. Changchun Dacheng Corn Development Company Limited;
2. Yellow Dragon Food Industry Company Limited;
3. Shandong Zhucheng Xingmao Corn Developing Company Limited; and
4. Jiliang Cerestar Corn Industry Company Limited

For modified starch production, the major competitors are:-
1. Cargill, Incorporated;
2. National Starch and Chemical Company; and
3. Changchun Dacheng Corn Development Company Limited;

For other corn-based products, the competitors are:-
1. Yellow Dragon Food Industry Company Limited; and
2. Shandong Zhucheng Xingmao Corn Developing Company Limited





Highlights:-

* Group revenue jumped 45% on increased sales volume and enhancement of sales mix.

* Gross profit increased 27% and profit before tax increased by 24% despite rising material prices and administrative overheads.

* Positive outlook well-supported by increasing utilisation of Group’s expanded corn starch facilities.

* New ethanol plant to be completed within this year will be one of Group’s key performance drivers.


SGX Announcement - Financial Statement
SGX Announcement - Press Release





Cheers
Niversphere.

Ace Achieve SOLD !

Probably inspired by Steve Chia, "..unless there are enough people who hates PAP, i will not return to politics ..." In my case, unless there is enough genuine investors in Ace achieve, i would not buy back Ace achieve.

Is the investor relations in existence for Ace achieve? Communications company not communicating with shareholders. The email address that was given on SGX does not exist. Undeterred, i send in another email to the email published on their website. Waited patiently for the reply but not even a single reply from them and not even a single acknowledgement reply from them. If they do not respect us minority shareholders, i do not want myself involved in this company, frustrated! A good IR is important for any listed companies. Lose your IR, lose your shareholders.

For its highly visible low price earnings multiple and higher book order from customers, Ace achieve is now lower than its own IPO price of 0.20 and is at the same price a year ago.

However fellow investors whom are already vested in Ace achieve or interested in Ace achieve should look forward that results announcement is "expected" to be released soon. Make your decision based on facts.

For me, i am done with Ace achieve. Emotions are never good friends with investing in stocks.





Regards
Niversphere.

Please read the prospectus and perform your analysis before making any investment decision. The above does not constitute a recommendation to apply for this company. I will not be liable for any losses incurred by anyone who invests based solely on the above-mentioned information

Global Testing :: 1Q2006 RESULTS SNAPSHOT

GLOBAL TESTING’S 1Q2006 NET PROFIT SOARS 125 TIMES TO US$5.03 MILLION

- Revenue surges 110.0% from US$8.29 million in 1Q2005 to US$17.40 million in 1Q2006

- Surpasses prior sequential guidance for revenues for 1Q2006

- Maintains a strong operation margin level

- 2Q2006 set to see sequential growth in revenue of approximately 5% to 10%

- Target revenue growth of more than 40% in 2006 with further upside from recent new projects

- Gearing improved from a gross ratio of 64% in 4Q2005 to 54% in 1Q2006 and a net ratio of 48% in 4Q2005 to 39% in 1Q2006


Article excerpted from Announcement on SGX

OSIM

Documentary - History of Stock Market - Modern Marvel

Part 1: Brief Introduction to the Stock Market History dating back to ancient Greece period


Part 2: How the stock market became exclusive to brokers and the bull and bear story, hear what the richest person then had to say and good things never changed a bit, and who was the first shortist



Part 3:Milestones: Telegram, DJIA Legend of Mergers: JP Morgan


Part 4: The Boom, extreme optimism and inflow of "uneducated" investors, margin calls => Panic and Run!!! => The Great Depression


Part 5: The reformation and Merril Lynch's contributions, Concept of diversification coined and earned the Noble



Part 6: Modernization



Cheers
Niversphere.

Just to share some light hearteners with ya readers

Received this from an email.

In Singapore, the majority of us live in Highly Dangerous Buildings (HDB), And most people have already got used to Paying and Paying (PAP).


Not only do you have to pay, you Pay Until Bankrupt (PUB).

If that's not enough, somebody still Purposely Wants to Dig (PWD) and get more from you.


So what more can you do when you are in the Money Only Environment (MOE)?


With the current Mad Accounting System (MAS), you are forced to Pay the Sum Ahead (PSA), Which will leave some people Permanently Owing Some Banks (POSB).

And forced to live on the Loan Techniques Always (LTA) system. When you fall sick and happen to be admitted to a Money Operating Hospital (MOH),


You might be able to use your Cash Prior to Funeral (CPF) fund.

If you are out of luck, you may meet doctors who Never Use Heart (NUH) to treat you, And you will be Sure to Give up Hope (SGH).

To help ease the traffic, motorists have to pay Cash On Expressway (COE).

If that doesn't help, they can always Eternally Raise Prices (ERP) on the roads.


If you don't own a car, you can always make a Mad Rush to the Train (MRT), OR get squashed in a bus Side By Side (SBS).


Lastly, under all these pressures, there are not many places we can relax, not even the good old place we used to go because it has become So Expensive and Nothing To See Actually (SENTOSA)!!!

Quotes For The Day

"Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."

~ Warren Buffet
(1930 Founder, Berkshire Hathaway)


"It is not how right or how wrong you are that matters, but how much money you make when right and how much you do not lose when wrong."


~ George Soros
(Founder, Soros Fund Management)

UTAC - Really Good Times Ahead

As per my previous posts on UTAC below:


United Test And Assembly - Good Times Ahead

Previous posts


UTAC just announced expected good news. UTAC 1Q net profits grew more than 5 fold to $20.7 Million.

• 1Q06 revenue grew 63.4% over 1Q05 to $103.2 million
• Record performance marks 11th consecutive quarter of sequential revenue growth and profit
• Guidance of 3-8% sequential revenue growth in 2Q06 vs 1Q06
• Target organic revenue growth of 40% for FY06


Announcement on SGXNet 1

Announcement on SGXNet 2



The fundanmentals of the company improved after the acquistion of NSE.




Based on DCF discount model and management guidance, I derived that the fair value of UTAC is around S$1.40 which is probably 30% undervalued.


Nothing really much to add except to say Well Done UTAC!



Cheers
Niversphere.

Please read the prospectus and perform your analysis before making any investment decision. The above does not constitute a recommendation to apply for this company. I will not be liable for any losses incurred by anyone who invests based solely on the above-mentioned information

Ethanol

Bill Gates invested in Pacific Ethanol since 2005 and recently pumped in more capital into it.


Below is a useful link I found while surfing information for ethanol uses. It provides up to date news specifically on ethanol.

http://www.ethanol360.com/






Cheers
Niversphere.

UTAC Launches 2nd Singapore Facility; To Invest Additional S$500 Million in Singapore To Support Thriving Demand

Media Release
(all figures in US$ unless otherwise stated)

• Minister Mr Lim Swee Say opens 376,000 square foot plant in Ang Mo Kio to
augment current 400,000 square foot facility, alleviating floor space constraints
on growth

• To invest additional S$500 million over the next 5 years in Singapore, potentially
generating more than 1,000 additional jobs

• Expanded capacity driven by broad-based customer demand
SINGAPORE, 20 April 2006 –

United Test and Assembly Center Ltd (“UTAC” – SGX:
UTAC), a leading independent global provider of semiconductor assembly and test
services, opened today its second production facility in Singapore, and announced it
would invest about S$500 million in the next 5 years in the country to meet increased
demand for test and assembly services for semiconductors.

The opening ceremony was officiated by Mr Lim Swee Say, Minister in the Prime Minister’s Office of the Republic of Singapore.

The new plant in Ang Mo Kio will add to the test and assembly capacity and capabilities of homegrown UTAC. With a built-up area of more than 376,000 square feet, the addition of the new plant will give UTAC Singapore a combined floor space of more than 770,000 square feet. In addition to Singapore, UTAC’s manufacturing footprint includes production facilities in Shanghai, China and Hsinchu, Taiwan.
UTAC plans to consolidate all test and total backend services for mixed-signal and logic processing (“MSLP”) products at the new facility. The new facility will also house the combined logistics center for all products shipping out of Singapore. The existing facility in the Serangoon North industrial area, in addition to housing UTAC’s corporate headquarters, will focus on high value-added memory test and packaging activities.

Renovation and refurbishment of the new plant began in January 2006, and has since
been qualified by and commenced production for several customers. Full renovations
and refurbishment of the entire facility is targeted to be complete by early 2007.
The investment, when fully utilised, will add potentially more than a 1,000 workers to its current workforce of 2,400 in Singapore and 3,500 regionally. About half of new personnel hired are expected to be operators with the remaining half as engineers and support staff.It will also boost the maximum capacity of MSLP machines across the Group to 360 MSLP testers, 255 memory testers and 1,000 wirebonders, up from the current 168,185 and 319, respectively. UTAC’s Singapore operations currently account for about two-thirds of the Group’s total revenues.

Of the investments in the new facility, the majority will be used to purchase MSLP
testers, with the rest used for renovation, refurbishment works and the purchase of the land lease from the previous tenant. The investment will be funded from internal
resources.Buoyed by strong orders for semiconductors used in digital consumer electronics,wireless products and even cars, UTAC’s net profit trebled to $41.8 million on the back of a near-doubling in revenue to $325.5 million for the financial year ended 31 December 2005. The new plant is expected to contribute to the Group’s performance in 2006.

“Our expansion in Singapore is driven by higher customer demand for our industry-
leading services and is part of a larger effort to alleviate current capacity constraints across the Group,” said Mr Lee Joon Chung, Group President and CEO of UTAC.“Our expansion in Singapore will be the first in a line of subsequent expansions of our other regional production facilities.” Mr Ko Kheng Hwa, Managing Director of the Singapore Economic Development Boardwelcomed the opening of UTAC's second manufacturing plant in Singapore. He said, “UTAC's second plant reinforces its key role in growing Singapore's semiconductor industry by providing critical assembly and test services. It also demonstrates that Singapore will continue to be competitive in attracting major investments and creating good jobs in the manufacturing industry.”


“Even as UTAC expands regionally and globally, Singapore remains our home base
and an excellent location for high value-added manufacturing. The highly skilled and
flexible workforce in Singapore has allowed us to grow and prosper. This expansion
demonstrates UTAC’s commitment to Singapore,” added Mr Lee.

UTAC’s investment is being supported by the Singapore Economic Development Board through extension of its tax incentives and employee training benefits.

Mr Lee Hoong Leong, UTAC’s President of Singapore Operations said, “The new Singapore facility is necessary to enhance UTAC’s leadership in semiconductor test and assembly services for the Asia-Pacific region, one of the fastest growing semiconductor, markets in the world. With the increased capacity and improved capabilities, we believe that we will be able to better respond to market changes and support our customers with services that offer them faster time-to-market."

Support for Charities by UTAC and Partners
As a token of appreciation and gratitude to the society and community that has allowed UTAC to prosper, the company has proposed diverting the costs of congratulatory advertisements, gifts and flowers by its partners to designated charities. The designated charities are Children’s Cancer Foundation and Students Care Service.

“We are deeply appreciative that our partners have responded enthusiastically, and
have collectively raised S$49,088. UTAC will match the amount of money raised, which
will bring the total quantum to almost S$100,000,” said UTAC’s Chairman Mr Charles
Chen.
.

The list of donors is listed in the Appendix.
~ End of Release ~

Appendix
UTAC raises almost S$100,000 for
Children’s Cancer Foundation and Students Care Services
Premium Donors
1. ABN AMRO BANK NV
2. ADVANTEST CORPORATION
3. ASAHI ENGINEERING CO., LTD
4. DBS BANK LTD
5. DELTA DESIGN SINGAPORE PTE LTD
6. LS CABLE LTD
7. MANUFACTURING INTEGRATION TECHNOLOGY LTD
8. RABOBANK INTERNATIONAL SINGAPORE
9. SUMITOMOMETAL MINING ASIA PACIFIC PTE LTD
10. TERADYNE (ASIA) PTE LTD
Donors
1. ACCRETECH (MALAYSIA) SDN BHD
2. BANK OF AMERICA N.A.
3. CITIBANK N.A., SINGAPORE BRANCH
4. EO TECHNICS SINGAPORE PTE LTD
5. HANMI SEMICONDUCTOR
6. JARDINE LLOYD THOMPSON PTE LTD
7. LTX ASIA INTERNATIONAL, INC
8. OVERSEA-CHINESE BANKING CORPORATION LIMITED
9. POWER TEAM TECHNOLOGIES (S) PTE LTD
10. PRICEWATERHOUSECOOPERS
11. ROKKO SYSTEMS PTE LTD
12. SHINKAWA SINGAPORE PTE LTD
13. SHINKO ELECTRONICS (S) PTE LTD
14. SITEL SEMICONDUCTOR
15. UNITED OVERSEAS BANK LTD
16. ZMC TECHNOLOGIES (SINGAPORE) PTE LTD

About United Test and Assembly Center Ltd (UTAC)
United Test and Assembly Center Ltd ("UTAC", SGX-ST: UTAC) is a leading independent provider of semiconductor assembly and testing services for a broad range of integrated circuits including memory, mixed-signal, logic and radio-frequency ICs.

The company offers a full range of package and test development, engineering and
manufacturing services and solutions to a worldwide customer base, comprising leading
integrated device manufacturers (“IDMs”), fabless companies and wafer foundries.
UTAC operates manufacturing facilities in Singapore, Taiwan and China, in addition to
its global network of sales offices in the United States, Europe, Japan, Korea, China
and Singapore. More information on the company can be found at
www.utacgroup.com.
***************************
For further information, please contact:
UTAC
Josephine Lim
Manager, Corporate Communications
Email: media@sg.utacgroup.com
Tel: (65) 6551-1511
Fax: (65) 6483-8172
Issued on behalf of the Company by
WeR1 Consultants Pte Ltd
Stephen Chen
Senior Associate Consultant
Email: stephenchen@wer1.net
Tel: (65) 6737-4844
Fax: (65) 6737-4944
Address: 29 Scotts Road, Singapore 228224



Article Excerpted here Article

Technical Side For Ace Achieve

Not a TA kind of investor. Just sharing some links i found on Ace Achieve.


Ace Achieve from Gallen



Cheers
Niversphere.

China Sun Bio Chem Valuation

DBS Vickers had a TP of $0.95 with a potential upside if $0.25-$0.50 cents if CSBT were to secure the fuel ethanol licence. Meaning a possible new TP of $1.2 - $1.45


Based on my conservative calculations, I had two evaluations based on whether CSBT obtains the ethanol license or not.

With ethanol license,

Today's share price of $0.98 is approximately 93.8% undervalued from the rough estimate of intrinsic business value.








Without ethanol license,

Today's share price of $0.98 is approximately 22% undervalued from the rough estimate of intrinsic business value.













Cheers
Niversphere.


Please read the prospectus and perform your analysis before making any investment decision. The above does not constitute a recommendation to apply for this company. I will not be liable for any losses incurred by anyone who invests based solely on the above-mentioned information

Time and Sales for Ace Achieve

Rarely,I watch at price movements, but just for this time.








Cheers
Niversphere.

Quote of the Day.

Each night, when I go to bed, I die. And the next morning, when I wake up, I am reborn."

- Mahatma Gandhi

Company Update : Noble Group Develops Ethanol Plants in USA

Noble Group (NOBL: SGX), a global supply chain manager of agricultural, industrial and energy products, has announced that the first ethanol plant under construction by MABE, a Nebraska based holding company specializes in the development of ethanol plants. The 44 million gallon plant located in Madrid, Nebraska is expected to reach mechanical completion by December 2006. Senior lenders to the Madrid plant are lead by Societe Generale, for whom this project represents the first ethanol transaction in the USA.
Noble, a shareholder of MABE, is the assigned marketer of all ethanol output produced by the Madrid plant as well as any new projects including the development of a new ethanol plant to be based in Cambridge, Nebraska. Noble's investment in MABE is US$6.5 million “We have been building this business for several years and are well placed to capitalize on the emergence of alternative energies such as ethanol which has been positively affected by the passing of the US Government Energy Bill last year and the transformation of agricultural products such as corn, wheat, barley and sugar to fuel,” says Fabrizio Zichichi, Noble’s US based Executive Vice President of Clean Oil Products.
In concert with its CBOT market maker status for the ethanol futures contract, Noble is integrating a global ethanol expansion - sourcing and merchandising in the World markets including Brazil and China.
As early as January 2007 Noble will be distributing in the US ethanol market, volumes in excess of 200 million gallons per year. The Group has over one billion gallons in off-take agreements signed for plants under development and is actively seeking to finalize additional contracts.
This transaction is not material for the purposes of the Singapore Exchange Securities Trading Limited Listing Rules.



Announcement excerpted from:
http://info.sgx.com/webcorannc.nsf
/e876e9cf6461aa6b48256fc800090876/
e7c52e405c03ebf44825713a000355a3?OpenDocument

Is Canon Fully Developed? - By Nathan Parmelee

With earnings season still a few weeks away, and most companies relatively quiet on the news front, it's a good time to check up on existing holdings and make sure that competitive positions and valuation still make sense. Up for review in my portfolio today is Canon (NYSE: CAJ).

Canon, which is well-known for all things imaging, continually innovates with new products and manages its financial health quite well. However, the stock has been sitting at its highs lately, and today it's hitting another 52-week high. That doesn't make it automatically overvalued, but when I originally purchased the shares, I had valued the company around the current price of $66 per share.

Competitively, I like how the company is positioned in its printer, copying, and digital camera businesses. I also believe that Canon will continue to gradually improve its bubblejet printing offerings and gain share. However, these are all very competitive industries, and rivals Hewlett-Packard (NYSE: HPQ), Sony (NYSE: SNE), and Lexmark (NYSE: LXK) are working toward improving their offerings as well. Given the rapid change of technology, it's always possible that Canon could be leapfrogged.

The largest concern is one of valuation. Over the past five years, Canon has generated 224.6 billion yen ($1.9 billion) in average annual free cash flow. In comparison, the company generated 384 billion yen ($3.3 billion) in net income last year, and wants to generate 550 billion yen in net income within five years, which is 7.4% compound annual growth. That level of growth is not too shabby, but assuming free cash flow grows at a similar 7.4% rate for the next five years, and using a discount rate of 10%, I see a company that is fairly valued to slightly overvalued right now.

It's not all that simple. From 2002 to 2004, the company generated more in free cash flow each year than in 2005, and 2001 is abnormally low -- only 98 billion yen ($845 million) in free cash flow. Throwing out the 2001 data, and using the average rate of free cash flow for the last four years -- 256.3 billion yen ($2.2 billion) -- shows that the company may still be slightly undervalued. This level is probably more appropriate, but I believe that Canon will see higher-than-normal capital expenditures for the next few years as it moves to further automate its manufacturing. Automation is a smart move for the long term, given the demographic shift that is occurring in Japan's population, but not one that comes for free.

Canon is a healthy company, and certainly not fully developed. It should still have several years of growth ahead. At least some of that growth is priced in; my more conservative valuations now show that the company is either fully valued or fairly close at $66 per share. This exercise just goes to show how "flexible" valuations are. The calculations are concrete, but the inputs and the accuracy of the assumptions behind them can make a huge difference in the final result. With that said, I have some work to do on double-checking my assumptions for Canon over the next week -- and deciding whether to sell or hold.

China blocks VOIP calls for two years: FT

China has moved to protect its fixed telephone line business by banning free Internet telephone services for at least two years, the Financial Times reports.

Wang Leilei, chief executive of Chinese internet portal group Tom Online, which has a joint venture with Luxembourg-based telephony provider Skype, said China would not issue any licenses for computer-to-telephone calls until 2008.


The government "is not going to issue VoIP (Voice over Internet Protocol) licences until 2008," Wang told the newspaper.

The move would likely be major setback to Skype, which was reportedly in talks last year with Chinese telecom operators to launch its computer-to-telephone service, SkypeOut.

Wang, whose company is controlled by Hong Kong's wealthiest businessman Li Ka-shing, played down the decision.

For Tom Online, "our strategy is to grow our user base. With a big user base, there is a lot you can do. Revenue (from SkypeOut) is not important to us because we have not put in a lot of cost," he said.

Skype is a leader in VoIP and provides a subscriber service that enables web users to make ultra-cheap or free phone calls using an Internet connection on their computers.

Skype's computer-to-computer calls are free while computer-to-telephone calls are charged at rates often much less than with fixed line services.

China Telecom has described Skype's services as illegal and the newspaper said last year that China was experimenting with software in Beijing, Shanghai, Guangzhou and Shenzhen to block them.

Fixed-line operators are concerned that SkypeOut could undermine their core business.

Last September US technology group Verso Technologies admitted that it had sold software to an unnamed major Chinese telecoms firm that would allow China to block such telephony services.

Risk or Safe?

In 1929, John Raskob had a sexy wife, smart kids and a great job. He was the chief financial officer at the world's largest company, General Motors.

Then he did a silly thing. He offered this advice to anyone who would listen: Invest just US$15(S$24) per month in stocks. In 20 years, it will grow to US$80,000.

That translates to a super high annual return of 24 percent. But in the booming 1920s. It was believable.

On 3 Sep 1929, just days just after his comments were published, the Dow Jones stock index hit an all-time high of 381(Today it is over 11,000)

Two months later, US markets crashed. Then over the next two years, shares lost 80 percent of their value. Millions lost their life savings and Mr Raskob's advice was ridiculed. How can you be so wrong?

Today, if you had stuck with Mr Raskob's advice, you would have done all right. Your US$15 per month would have grown to US$17,000 in 20 years and US$65,000 after 30 years.

That's a return of 13 percent per year, which is less than the 24 percent Mr Raskob forecasted. But it is respectable and far exceeds "safe" investments like bonds which earned just 3 percent over the same period.

The lesson from this amazing story is that risky investments are not risky in the long-run. To prove it, we need data from the US. Since 1926, US stocks have out-performed bonds 80, 90 and 100 percent over periods of 10, 20 and 30 years.

In fact, there has never been a 30-year period when stocks have lost money or even earned less than bonds. Returns to stocks averaged 10 percent against 5 percent for bonds.

We think of bonds, savings accounts and fixed deposits as safe. It turns out, however that the safest way to preserve your wealth is to buy and hold a diversified portfolio of stocks.

What's a Bond? - By Motley Fool Staff

Most of us have heard of bonds, but many of us don't understand just what a bond is. It's essentially a long-term loan. If a company issues bonds, it's borrowing cash and promising to pay it back at a certain rate of interest.

Bonds sold by the U.S. government's Treasury Department are called "Treasuries." State and local governments issue "municipal bonds," while businesses issue "corporate bonds" (sometimes called corporate "paper"). Companies that may be perceived as low-quality are forced to offer high-interest-rate "junk" bonds to attract buyers. There's a higher risk that someday they won't have the cash to cover interest payments and the bonds will default.

Bond investors receive regular interest payments from the issuer at what is called the "coupon rate." For example, a $1,000 bond with a coupon rate of 10% generates payments of $100 per year. When the bond matures -- after perhaps five, 10, or 30 years -- investors get back their initial loan, called "par value." Most corporate bonds have a par value of $1,000, while government bonds can run much higher.

Sometimes a company will "call" its bond, paying back the principal early. All bonds specify whether and how soon they can be called. Federal government bonds are never called.

To calculate a bond's yield, divide the amount of interest it will pay over the course of a year by its current price. If a $1,000 bond pays $75 a year in interest, its current yield is $75 divided by $1,000, or 7.5%.

Once issued, bonds can be traded among investors, with their prices rising and falling in reaction to changing interest rates. For example, when rates fall, people bid up bond prices. If banks are offering 6%, an 8% bond starts looking good.

In the long run, stocks have outperformed bonds handily. According to Jeremy Siegel's Stocks for the Long Run, from 1802 to 1997 (yes, you read that right -- 195 years), the stock market offered an average nominal annual return of 8.4% per year, compared with 4.8% for long-term government bonds.

Stocks outperform bonds even when you eliminate the 19th-century data. According to Ibbotson & Associates, from 1926 to 2000 (notice that includes the Great Depression years), U.S. Treasury bills returned an average of 3.8% per year, compared with 5.3% for long-term corporate bonds and 11% for stocks. If you had invested $5,000 in T-bills 50 years ago, it would now be worth $33,272. Growing at 11% in stocks, it would be worth $922,824. (From 1926 to 2000, inflation grew at an average rate of 3.1% annually.)

For long-term investors, stocks offer the best potential for growth. Still, it's smart to understand how bonds work before you dismiss them. And also to understand that although stocks may average 11% growth over a long period, over the next five or 10 or even 20 years, the average return may be different.

Article Excerpted from:
http://www.fool.com/News/mft/2006/mft06031603.htm