Money Buzz 05/03 Why single-use credit card numbers could stop credit card fraud, what the Dow and dogs have in common, and more

A Real Steal
It's every consumer's nightmare. You open a credit cardbill to find a total that takes your breath away--not to mention adizzying list of unfamiliar charges. With an increasing number ofonline transactions, more cardholders are experiencing thatscenario firsthand. In fact, 1 in 20 online consumers were victimsof credit fraud in 2001, according to market research firm GartnerInc.

But now, with single-use credit card numbers, you no longer haveto forego the convenience of shopping online to guard againsthaving your credit card number-or worse, your identity-swiped fromonline merchants' databanks by hackers.

"Cardholders register on our Web site and then, each timethey want to make a purchase, a click-through generates a uniqueaccount number," explains Judy Tenzer at American Express."You use that number rather than your card number when youmake a purchase on a merchant's site."

The single-use systems from issuers like AmericanExpress won't prevent all types of credit cardfraud-thieves may still dig through your garbage for old chargebills, adds Tenzer. "But there's an added layer ofprotection."

Dog Days
Think the stock market's gone to the dogs? You may be moreright than you know. Investment pros are howling with glee over howthe Bush administration's proposal to eliminate taxes on mostdividend income will boost a stock-picking strategy commonly knownas the Dogs of the Dow method. The strategy holds that the 10highest yielding Dow Jones stocks-known as "Dogs" becausetheir prices tend to be beaten down-often fare better than thebroader market.

How much better? Following the Dogs strategy would have yieldeda 17.7 percent average annual return since 1973, as compared to theDow Jones industrial average overall return of 11.9 percent duringthat same period, according to Dogsofthedow.com.

The dividend tax proposal will add to the strategy's appeal,says Neil Hennessy, president of Novato, California-based HennessyFunds, which runs two funds that employ the strategy. "If youtake that story and add in the elimination of double taxation ofdividends, you get a huge upside potential."

To get in on the action, investors need only buy the 10top-yielding Dow stocks at equal dollar amounts and then updatetheir portfolios to the new roster each year, says Hennessy.Dogsofthedow.com will even identify each year's picks foryou.

Reforming ProForma
Last year, the SEC warned investors to view company-issued proforma financial reports with skepticism. This year, the agency iscracking down on companies that use them. Pro forma reporting wasoriginally intended to enable companies to issue financial releasesthat exclude "one-time expenses" from earnings to enableinvestors to better compare quarter-to-quarter or year-to-yearperformance.

"The bias was to remove things that made the earnings looklower, and it got out of control," explains Peter H. Knutson,associate professor emeritus of accounting at the University ofPennsylvania's Wharton School, who says some companies used proforma figures to mislead investors.

To bring pro forma reporting back under control, the SECrecently prohibited companies from making misleading statements andomissions in pro forma reports. It also ruled that companies mustclearly delineate what transactions have been excluded or included,detailing how pro forma statements differ from Generally AcceptedAccounting Principles (GAAP).

While critics charge that corporate lobbying efforts have beeneffective in softening some of the recent SEC regulatory reformefforts, the regulations on pro forma reporting are clear andenforceable. However, says Knutson, because companies have toadhere to GAAP in preparing financials anyway, the ruling will poseno hardship to ethical firms. "All they're doing isflipping a light switch in a dark room," he says."It's a matter of revealing what they've alreadydone."

Jennifer Pellet is aNew York City-based freelance writer specializing in business andfinance.