So that is going to be the focal point of this conversation just demystifying the global jargon and more importantly making that defining line between what impacts our market and what may not.
Mark Matthews, Equity Research at Macquarie Capital Securities and Shane Oliver, Head Investment Strategy & Chief Economist at AMP Capital Investors will demystify the global jargon and more importantly make that defining line between what impacts our market and what may not.
Here is a verbatim transcript of their comments. Also watch the accompanying videos.
Q: The two crucial terms that we hear very often, EMs and DMs, what kind of universe do both these terms straddle and why is it important for someone who is investing in the Indian market to understand what an EM or DM is?
Matthews: Both of them are indices that have about anywhere from 25 to 35 countries in them and they are indices that are managed by several different companies. So I am sure these names are familiar to our viewers, S&P, Dow Jones, FTSE but the biggest one is MSCI. MSCI was the first company to create a global index over 40 years ago and then they created various sub-global indices including emerging and developed markets and very simply the difference between emerging and developed is one of maturity and both income, developed markets.
One prerequisite is that they should have high incomes per capita and also in terms of the maturity of the market itself. So the foreign exchange market should be open, short selling should be allowed, minority shareholders rights should be enforced and protected in developed markets. In emerging markets ' it is not to say that some emerging markets don't possess this attribute ofcourse some do but a lot of countries do end up in emerging markets because short selling is not permitted or the foreign exchange market is not open or fully convertible. But the general rule for an emerging market should be that it is a high growth low income economy. In other words, it is a polite term for third world and infact less developed country. It was a term that was more popular until around the 1980s and then that was seen as maybe a little bit politically incorrect.
So emerging markets was termed by a World Bank economist named Antoine van Agtmael.
Q: India would fall under that category you would say, India is an emerging market?
Matthews: Yes, in all four of the indices, as I said, there is S&P, FTSE, Dow Jones but the big one for the most institutional fund managers is MSCI than four of those India is represented.
Q: There is a sub-representation then within the emerging market region which is called the BRIC universe, what countries does that involve and why was this bracket made of just the BRIC universe within the EM context?
Matthews: That was invented by one individual named Jim O'Neill, economist at Goldman Sachs and I think it was ten years ago in 2001 he wrote a report where he created this acronym. So it stands for Brazil, Russia, India, China and it is curiously not an acronym that has developed into a full asset class of itself in terms of fund management. There are a few BRIC funds but it never took off as much as emerging markets did but what is interesting is politically, there seems to be an evolution on this concept.
Q: Aside from the technical qualifications between these markets, are there other ballpark generalisations that people tend to make? For example, the opinion is or the observation is that emerging markets tend to be more volatile, more high beta than a developed market, can those assumptions also be drawn when you are looking at the two clusters?
Matthews: Yes, generally speaking they are. Why is that? One very simple reason is because they are less developed countries therefore they have ' their middle class as a percentage of a total population is smaller and therefore the amount of domestic individuals investing in the stock market is lower in percentage terms than it is in developed marekts because there isn't as much of a middle class yet. So in the absence of a large domestic investor base or atleast I should say a fairly sophisticated one, there are big domestic investor basis obviously in places like China and India but they tend not to be very sophisticated, they tend to be momentum followers and speculative as opposed to investing in stocks for the long-term.
What I wanted to say is in the absence of that, foreign institutional investors assume a much greater directional influence on the market and India would be probably the best example I think in the emerging market space.
Q: We have talked about emerging markets, developed markets, the BRIC universe but the one which has suddenly become on top of mind is the MENA region, what region of the world does that capture and why has it become so important especially when we are talking about crude oil and the implications on the equity market?
Oliver: The MENA region is essentially the Middle East (ME) and North Africa so it is countries like Libya, Egypt, Nigeria, Tunisia, that part of North Africa and ofcourse the Middle East, which includes Saudi Arabia and the Gulf states. Obviously that part of the world has always been very important because it is a key supplier of global oil but in recent months, it has hit the headlines because several countries in that region have seen political unrest starting in Tunisia, which has been led to problems in Egypt and then ofcourse more recently in Libya and although Tunisia and Egypt aren't that significant in terms of world oil supply, Libya certainly is and Libya has broken at a civil war which has affected supply world oil that ofcourse has pushed up oil prices.
There has also been tensions in some other gulf states into a less degree in Saudi Arabia so as a consequence, investment markets have been looking at that part of the world recently as to gauge to how far oil prices might rise and whether that in turn might adversely impact global economic growth.
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Texas-based ConocoPhillips (COP) has validated that it is on the receiving end of a formal notification by the Kazakhstan Ministry of Oil and Gas. The Ministry is exercising its right under the Subsoil Law of Kazakhstan to pre-empt ConocoPhillips' proposed sale of its 8.4% interest in the North Caspian Sea Production Sharing Agreement (Kashagan) to ONGC Videsh Limited. As part of such notice, the Ministry of Oil and Gas has nominated KazMunayGas (KMG) as the body that will obtain ConocoPhillips' interest in Kashagan. The asset is located in the Kazakhstan sector of the Caspian Sea. Under the pre-emption, the proceeds received by ConocoPhillips will remain unchanged at about $5 billion, including customary adjustments. Subsequently, KMG will proceed on finalizing all essential approvals, which will include a consent from the Kazakhstan Anti-Monopoly Agency. The transaction is likely to conclude in the fourth quarter of 2013. The latest sale of the company's interest in Kashagan forms part of ConocoPhillips' strategy to enhance shareholder value through portfolio optimization as well as focused capital investments. These will likely lead to growth in production and cash margins, superior returns on capital and a compelling dividend. ConocoPhillips remains on track with its divestment program, with a total of over $12 billion completed. The company has generated $1.1 billion in proceeds from asset sales during the quarter and expects to raise an additional $8.5 billion from the disposition program by the end of 2013. In this regard, ConocoPhillips is trying to shed part of the Surmont and APLNG projects this year. This would enable ConocoPhillips to generate a healthy cash surplus in 2013. ConocoPhillips carries a Zacks Rank #3 (Hold). However, Zacks Ranked #1 (Strong Buy) stocks – PetroQuest Energy Inc. (PQ), Ocean Rig UDW Inc. (ORIG) and Hornbech Offshore Services, Inc. (HOS) – are expected to perform impressively over the short term.
As Federal Reserve officials pursue the most aggressive monetary policy stimulus campaign in their institution’s history, they are mindful of the unintended consequences their actions can have on financial markets.  Getty Images But as it now stands, most remain confident that huge injections of money into the economy haven’t created any bubbles big enough to threaten the overall course of the recovery. That has allowed them to press forward with their aggressive agenda of bond buying, which is aimed at pushing up asset prices in a bid to boost growth and lower unemployment. Against that confidence, an equities strategist is warning of a major bubble in global stock prices. In a research note, Nomura Securities strategist Bob Janjuah is warning that over the final three quarters of next year and into 2015, there “could be a 25% to 50% sell off in global stock markets.” Mr. Janjuah, who is co-head of macro strategy research at Nomura, sees a lot to worry about, and he sees central banks, including the Fed, at the center of the factors that eventually will bring woe to stocks. “The major themes are unchanged–anaemic global growth/mediocre fundamentals, what I consider to be extraordinarily and dangerously loose monetary policy settings, very poor global demographics, excessive debt, an enormous misallocation of capital driven by the state sponsored mispricing of money/capital, and excessive financial market/asset price speculation at the expense of any benefit to the real economy,” the analyst says. Mr. Janjuah says markets are now priced entirely for good news, leaving them vulnerable to adverse developments. But the main driver of the coming bursting of the stock market bubble, as the Nomura analyst sees it, is a much delayed rebalancing of the global economy as central banks pull back from all of their aggressive stimulus activities. “The next five years has to be about a rebalancing towards the ‘real economy’ and the bottom 90%, at the expense of the top 10%,” Mr. Janjuah writes. “This shift in policy emphasis will not be a happy time for financial markets and speculators while the transition happens,” he says. Fed officials don’t offer predictions of future equity price movements. But they do believe that rising asset prices boost the so-called wealth effect. As consumers feel richer, they feel emboldened to spend more, which lifts the broader economy. To that end, they have been pursuing very aggressive bond-buying policies while offering guidance on short-term rates that suggest monetary policy will be very easy for years to come. Over the course of this year, speculation about the Fed easing back on its bond buying generated considerable market volatility. Some officials welcomed this because they said it helped correct market complacency about future Fed policy while flushing out some pockets of excess in some corners of the bond market. But Fed officials also came to lament the move as they saw higher borrowing costs creating fresh headwinds for an economy that wasn’t growing fast enough to begin with. In an interview Monday, Federal Reserve Bank of St. Louis President James Bullard said when it comes to market levels, “I think we are at a good place right now.” He put himself in the camp of those who see some value in the rise in bond yields, saying the levels seen at the start of the year were so low that they were a bit worrisome. That said, the veteran central banker said the bubble issue remains challenging for Fed officials. “I don’t think we’ve come up with a really great answer” when it comes to dealing with markets that have gone out of line with fundamentals, Mr. Bullard said.
Stock markets tumbled today as investors sold Federal Reserve Chairman Ben Bernanke's talk of tapering bond-buying. The Dow Jones Industrial Average (DJINDICES: ^DJI ) crashed at the open of trading and is down a full 351 points, or 2.32%, as of 3:25 p.m. EDT. The S&P 500 (SNPINDEX: ^GSPC ) has lost 2.5% of its value. Tapering is the code word investors are using for the Fed's slowing-down of its $85 billion-per-month bond-buying program intended to keep interest rates low and goose the economy. Bernanke didn't give a timetable for this tapering, but he said the Fed could slow buying later this year, and there's speculation that the program could end entirely next year. Before you go selling every stock you own to buy rations for your economic bomb shelter, remember why the Fed would slow bond purchases. The Fed started the program to keep long-term interest rates low and encourage investors to bid up stocks and prompt businesses to borrow money to expand. The ultimate goal was that the money would trickle down into the economy in the form of lower unemployment. It's the Fed's view that unemployment is slowly falling and that it will soon be time to take off the training wheels and allow the economy to operate with fewer stimuli. So the Fed would taper bond-buying because the economy is doing well -- not the opposite. For long-term investors, that's great news, although we'll likely see more daily fits and starts on Wall Street. Look at these as buying opportunities, because the Fed is actually bullish on the state of the economy, and you should be, too. The market freak-out has sent all 30 Dow components lower today, but two stocks have been hit particularly hard. Intel (NASDAQ: INTC ) is down 3% today, but it's just beginning to gain traction in the mobile market, and with 14 nanometer chips due out next year, it could be a big winner in smartphones as well. The stock trades at just 12 times trailing earnings, and a 3.6% dividend yield is better than 10-year Treasuries and provides great upside for investors. The other stock to take note of is Disney (NYSE: DIS ) , which is down 3.5% today. If the Fed is right and the economy is improving, that's great news for Disney, because more people will shell out to see its movies and attend its theme parks. Yesterday, I highlighted why I think Disney is still in prime position to grow despite a changing media environment, and that thesis only gets better if the economy improves. It's easy to forget that Walt Disney is more than just the House of Mouse. True, Disney amusement parks around the world hosted more than 121 million guests in 2011. But from its vast catalog of characters to its monster collection of media networks, much of Disney's allure for investors lies in its diversity, and The Motley Fool's premium research report lays out the case for investing in Disney today. This report includes the key items investors must watch, as well as the opportunities and threats the company faces going forward. So don't miss out -- simply click here now to claim your copy today. The market can go crazy on a daily basis, and keeping a cool head is critical on days like this. The sell-off was caused by the Fed, but the Fed is bullish on the economy. For investors, that's great news -- no matter what Mr. Market says today.
Today's economic data certainly didn't seem to indicate the broad-based S&P 500 (SNPINDEX: ^GSPC ) would end the day higher, but further commentary from the Federal Reserve outweighed all that news to push us higher yet again. The "will they or won't they" debate is really starting to weigh on investors. Ever since the Fed commented that it would consider paring back its bond-buying program of Treasuries and mortgage-backed securities, we've been whipsawed up and down. Leading that volatility are investors' interpretations of Fed Chairman Ben Bernanke's comments, and the comments of his Fed governors, which are getting blown out of proportion in both directions. Today, the comments leaned toward keeping QE3 in place, which seemed to please the markets. On the flipside, economic data wasn't horrific, but it wasn't good, either. First-quarter GDP was revised down 0.1% from its previous estimate of 2.5% to 2.4% and weekly jobless claims rose nearly 3% to a seasonally adjusted 354,000. Both figures would suggest that a slower recovery than wanted is occurring in the U.S. economy. As I mentioned, when all was said and done, the Fed more than outweighed today's negative economic data and pushed the S&P 500 higher by 6.05 points (0.37%) to finish at 1,654.41. Powering the S&P 500 higher were shares of solar-panel producer First Solar (NASDAQ: FSLR ) , which rose 6.6% after receiving an upgrade from Goldman Sachs to "buy" from "hold" with a price target of $64. U.S.-based solar producers like First Solar are starting to realize the advantages of their higher-efficiency panels, with import tariffs being placed on cheaper Chinese solar panels and a combination of oversupply and huge debt levels crushing China-based manufacturers. As long as subsidies remain in place for solar conversion in the U.S., you can expect alternative energies like solar to thrive. Heading notably higher as well, up 5.5%, was medical-products supplier CareFusion (NYSE: CFN ) which is said to be in talks as a possible acquirer of Britain-based Smiths Group's medical division. Although neither company would comment on a potential sale it would clearly be a positive for CareFusion since its revenue growth has stagnated in recent years. We should hopefully know more about these developments over the coming weeks. Finally, storage-equipment maker EMC (NYSE: EMC ) advanced 5.4% after expanding its share repurchase program from $1 billion to $6 billion by the end of 2015. The company commented that it plans to repurchase $3.5 billion worth of shares by the end of the second quarter of 2014. Furthermore, EMC also initiated a quarterly dividend of $0.10 to give the company a projected yield of 1.6%. While great news for shareholders and certainly a testament to EMC's amazing cash flow, it also signals to investors that its high growth days may be over. Can this stock continue to shine?
Investors and bystanders alike have been shocked by First Solar's precipitous drop over the past two years. The stakes have never been higher for the company: Is it done for good, or ready for a rebound? If you're looking for continuing updates and guidance on the company whenever news breaks, The Motley Fool has created a brand-new report that details every must know side of this stock. To get started, simply click here now.
MAKO Surgical's (NASDAQ: MAKO ) legal wins just keep stacking up. Just last month, the company not only settled a trade secrets lawsuit on its own terms with competitor Blue Belt Technologies, but also resolved a patent infringement complaint it brought against U.K.-based Stanmore Implants for uncanny similarities between its own RIO System and Stanmore's Sculptor RGA. Curiously enough, the resolution of the latter complaint ended with MAKO acquiring Stanmore's robotics technology for less than $1 million. Meanwhile, Stanmore agreed to withdraw itself from the surgical robotics market completely. Then again, these cases were offensive moves by MAKO designed to make sure their competition would play fair. Even so, I'm sure most shareholders would agree that it would be a lot less stressful if the company hadn't needed to get involved in these legal matters in the first place. As I noted earlier this month, however, management was also facing a courtroom challenge from other shareholders who alleged they were misled by last year's over-inflated RIO System sales projections. Of course, anyone who kept track of MAKO in 2012 remembers what happened after they missed their own lofty expectations: MAKO Total Return Price data by YCharts "Forward-looking statements"
Last week, however, according to a report from the South Florida Business Journal, the courts reminded shareholders the importance of owning their investing decisions. More specifically, a Southern Florida District Court judge dismissed one of the aforementioned class action lawsuits after pointing out MAKO's "2012 sales projections were accompanied by meaningful language that cautioned investors that these 'forward-looking statements' may not be on target." Going further, the judge elaborated by writing: The warnings in the defendants' press releases and the referenced SEC filings warned investors of precisely what happened here: that projected system sales and procedures might be lower than projected due to the economic downturn, variable sales and a reluctance on the part of orthopedic surgeons to adopt the new technology. What's more, the judge also ruled that comments made by management during investor conference calls were also protected as "forward-looking statements," and there exists no evidence at the time they were aware they wouldn't be able to meet their goals. Foolish final thoughts
Of course, management's seeming ignorance was one of the very reasons fellow Fool Brian Stoffel told us last December that MAKO wouldn't remain in his 2013 portfolio, but I personally remain encouraged that the company seems to have finally adjusted investors' expectations with reality -- especially on the heels of two consecutive decent quarters. However, regardless of how effective any given company is at selling you on its prospects, remember these businesses are run by imperfect people who may not always be able to deliver on their promises. In the end, then, don't take those monotonous Safe Harbor Statements as a time to zone out until the real conversation begins. Instead use them as a reminder that your investing decisions -- both good and bad -- are your own responsibility. Zero to hero?
Sitting near all-time lows, has MAKO Surgical's robotic surgery growth story rusted over? To help investors answer this question, Fool.com analyst and MAKO expert David Meier has authored a premium research report covering all of the must-know details on the company, including key areas to watch and risks looming in the future for the medical robotics company. Claim your copy by clicking here now.
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On Wednesday morning, Bank of America (NYSE: BAC ) will report first-quarter earnings. It is the last of the four biggest U.S. banks to report. Last week, investors were not overly impressed with the earnings from Wells Fargo and JPMorgan Chase as mortgage revenue fell. On the other hand, the market reacted quite positively to results reported by Citigroup (NYSE: C ) . So, the question is: Where does this leave B of A investors? In this video, Motley Fool banking analyst David Hanson tells investors one major factor that the market will be watching when the megabank reports earnings. Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank's operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.
 Skynesher Students in high school and college, along with their parents, do a lot of soul-searching to decide if college is worth the cost -- $200,000 at some private schools, which has propelled college debt in America to more than $1 trillion. Experts who analyze long-term employment trends are nearly unanimous: Despite the sticker shock, a degree beyond high school is definitely worth it. Americans with a four-year degree made nearly double the hourly pay last year compared to those without a degree, according to a recent Labor Department analysis of data supplied by the Economic Policy Institute. And the pay gap for those with a college diploma has widened over the years. For the most part, college graduates agree. A survey of more than 2,000 people conducted online by Harris Interactive for job services company Glassdoor finds that 82 percent of U.S. college grads believe their college degree has helped their careers. But once they have that first job after college, 63 percent rank new skills learned or special training received after leaving school as the most important factor in advancing their careers. "The job itself contains a lot more stuff than you get in college," said Rusty Rueff, a career and workplace expert at Glassdoor, which released the survey results on Tuesday. He said employers are looking for more than a college degree can provide. "The need to gain relevant skills has been exacerbated since we've come out of the Great Recession." What About Your Major or Your GPA? Nearly half of those surveyed say their specific degree is not particularly relevant to their job. And 80 percent say potential employers have never asked about their grade point average. Still, two-thirds say the level of the education they have already achieved has helped their careers, while 56 percent believe a higher level of education would make them more successful.
The global tech giant Apple (AAPL) is about to launch the most awaited smartphone of the season, the iPhone 6, and the long wait of the gizmo geeks shall end by this September. The upcoming iPhone is expected to have much more new and interesting features, thus attracting the attention of gadget addicts. Reality or Rumor? The new iPhone is predicted to have a larger display, in the range of 4.8 inches to 5.5 inches, with 1136x640 pixel resolution. In fact, there is lot of buzz that this year too Apple might launch more than one iPhone just like it did last year in the case of iPhone 5S and iPhone 5C. The price range of the device is not yet confirmed but it is guessed that the contract-free version might cost around $549 for the 16GB, and $649 for 32GB. Rumors have it that the iPhone will have iOS8 which the Cupertino company is expected to release at the Worldwide Developer Conference scheduled in June. The latest feature in iPhone 6 will be the NFC chip which is a big attraction point for several buyers that will help make things such as mobile payments or making phone calls much easier. Apple has always provided good storage internal capacity in the iPhones which till now has had a maximum limit of up to 64GB. But this time it has broken all records and set the limit up to 128GB expandable memory, just like that for iPad Air. This new limit for the storage is a boon for music and video addicts who may download and capture more than before. What's New? The introduction of sapphire screen in the new iPhone 6 is till now the best feature used. The screen is manufactured by melting aluminum oxide in specialized furnaces. When liquid aluminum oxide is allowed to cool slowly, it forms a large crystal. The sapphire crystal is cut out to form screens. Apple has signed a contract of $578 million with GT Advanced, the sapphire screen company. Rumor goes around that solar charging screens might be used in iPhone 6, but this looks far-fetched as the technology is yet to be released. Apple is integrating heart rate and blood pressure monitors in the earpods of the headphone. Biggest rival Samsung (SSNLF) had released heart beat monitors at the back of their new smartphone Galaxy S5. It might also provide a slot for expandable storage. Flexible screen and wireless charging are the new features which the rival companies have already adopted but we are not sure yet that these feature will be found in the iPhone 6 or not. Conclusion The new iPhone will definitely have new and exciting features that will surely grab the attention of people worldwide and Apple loyalists are eagerly waiting for the launch of this new phone. With distinctive features such as the sapphire screen and the 128 GB memory it is sure to beat the records of all the other smartphones. Analysts are even predicting that the launch of the device will have a positive effect on the share price. | Currently 0.00/512345 Rating: 0.0/5 (0 votes) | |
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 Broker-dealer mergers and acquisitions continue to sizzle as Sterne Agee Group Inc. Thursday is expected to announce the purchase of a midsize independent broker-dealer, WRP Investments Inc. David Pintaric, president and second-generation owner of WRP, confirmed the firm's sale, terms of which haven't been released, he said. “This is a marriage made in heaven,” Mr. Pintaric said. “Companies have been calling me for 11 years” to inquire about buying the firm, he said, but he waited until now. WRP has 350 affiliated registered representatives and advisers, and produced $48 million in gross revenue last year, Mr. Pintaric said. It is based in Youngstown, Ohio. Sterne Agee is based in Birmingham, Ala. “We are a family-oriented company,” Mr. Pintaric said. “Sterne Agee is just like us — with Southern accents.” Sterne Agee is a large, privately held regional brokerage firm in the Southeast and manages $17 billion in client assets, according to its website. Sterne Agee & Leach Inc. is its brokerage and clearing division. Sterne Agee is interested in expanding its independent-contractor broker-dealer operations, Mr. Pintaric said. Sterne Agee Financial Services Inc. now has about 270 independent contract reps, so the addition of WRP will more than double its number of independent reps, said Jay Carter, the CEO of Sterne Age Financial Services. “We’re a wonderful alternative to the mega shops, for reps who want a smaller firm with the traditional resources of a full service broker-dealer,” Mr. Carter said. “We’re one of the few independent firms that are self-clearing, but the reps aren’t going to get lost or just be a number.” “This sale will help Sterne Agee gain some needed scale,” said Jon Henschen, an industry recruiter. “For the WRP reps, they will see an improvement in technology and services.” WRP currently clears brokers' transactions with National Financial Inc., Fidelity's clearing arm. The brokers' client accounts will move in the coming weeks to Sterne Agee's clearing platform, Mr. Pintaric said. Reps often get nervous during acquisitions because changing clearing firms means a potential disruption to their business. Mr. Pintaric said that will not be an issue for WRP reps and advisers. “There will be no disruption in the process,! ” he said. “Any paperwork to be done will be done” at the WRP home office, he said. Company employees will also have opportunities to work at Sterne Agee elsewhere, he said. Broker-dealer M&A started this year with a bang. On consecutive days in January, nontraded-REIT czar Nicholas Schorsch said that he was buying Cetera Financial Group for $1.15 billion and J.P. Turner & Co. for $27 million. After a couple of quiet months, M&A resumed at the start of April when Hilltop Holdings Inc. and SWS Group Inc., the parent company of Southwest Securities Inc., said that they had entered into a definitive merger agreement. Sterne Agee Financial Services Inc. has about 270 independent-contract reps, so the addition of WRP will more than double its number of independent reps, said Jay Carter, chief executive of Sterne Age Financial Services. “We're a wonderful alternative to the mega shops, for reps who want a smaller firm with the traditional resources of a full service broker-dealer. We're one of the few independent firms that are self-clearing, but the reps aren't going to get lost or just be a number," Mr. Carter said. “This sale will help Sterne Agee gain some needed scale,” said Jon Henschen, an industry recruiter. “For the WRP reps, they will see an improvement in technology and services.”
CHICAGO (AP) — The U.S. attorney's office in Chicago said Thursday that it's appealing a sentence that included no prison time for the billionaire creator of Beanie Babies for hiding at least $25 million from U.S. tax authorities in Swiss bank accounts. At H. Ty Warner's sentencing last month, Judge Charles Kocoras heaped praise on the toymaker for his charitable giving, declaring society was better served by letting him go free and giving him two years' probation instead of sending him to prison. Warner had faced up to five years in prison. Warner, 69, of Oak Brook, Ill., was one of the highest profile figures snared in a long-running investigation of Americans concealing funds in Swiss bank accounts. Others convicted of squirreling away less money in Switzerland than Warner have done prison time. Warner, who grew up poor, created the animal-shaped Beanie Babies in the mid-'90s, triggering a craze that made Warner spectacularly rich. Forbes recently estimated his net worth at $2.6 billion. A one-page notice of appeal signed by U.S. Attorney Zachary Fardon was filed with the U.S. 7th Circuit Court of Appeals, and a full brief will be submitted later. Justice officials in Washington still must OK the appeal, but that's usually considered a formality. At a Jan. 14 sentencing hearing, Kocoras spent most of his 20-minute explanation of the sentence expressing admiration for Warner. He also said the businessman had already paid a price in "public humiliation." In addition to probation, Kocoras ordered Warner to do 500 hours of community service at Chicago high schools. Earlier, Warner agreed to pay $27 million in back taxes and interest, and a civil penalty of more than $53 million. A two-sentence statement released Thursday by a Warner spokesman didn't mention the government appeal. It said only, "We're working out the details of Mr. Warner's community service" and he's "looking forward to beginning his work" at the schools. During sentencing, assistant gover! nment attorney Michelle Petersen urged Kocoras to put Warner behind bars for at least a year. "(Without prison time), tax evasion becomes little more than a bad investment," she told him. "The perception cannot be that a wealthy felon can just write a check and not face further punishment." Follow Michael Tarm at https://twitter.com/mtarm
With shares of Bank of America (NYSE:BAC) trading around $16, is BAC an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework: T = Trends for a Stock’s Movement Bank of America is a financial institution serving individual consumers, small- and middle-market businesses, corporations, and governments with a range of banking, investing, asset management, and other financial and risk management products and services. With its banking and various non-banking subsidiaries throughout the United States and international markets, the company provides a range of banking and non-banking financial services and products through several business segments: consumer and business banking, consumer real estate services, global banking, global markets, global wealth, investment management, and other. The U.S. government has raised the amount it is seeking in penalties from Bank of America Corp. to $2.1 billion after a jury found the bank was liable for fraud over defective mortgages sold by its Countrywide unit. The request in a court filing late on Wednesday for $2.1 billion was based on gross revenue generated by the fraud, the government said. The Justice Department had previously asked for $863.6 million. The initial request was based on gross losses it said government-sponsored mortgage finance companies Fannie Mae and Freddie Mac incurred on loans purchased from Countrywide Financial Corp in 2007 and 2008. T = Technicals on the Stock Chart Are Strong Bank of America stock has been flying higher in recent quarters. The stock is currently trading near highs for the year and looks set to continue this path. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Bank of America is trading above its rising key averages, which signal neutral to bullish price action in the near-term. 
(Source: Thinkorswim) Taking a look at the implied volatility (red) and implied volatility skew levels of Bank of America options may help determine if investors are bullish, neutral, or bearish. | Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | | Bank of America options | 25.77% | 43% | 41% | What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days. | Put IV Skew | Call IV Skew | | February Options | Flat | Average | | March Options | Flat | Average | As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months. On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion. E = Earnings Are Increasing Quarter-Over-Quarter Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Bank of America’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Bank of America look like and more importantly, how did the markets like these numbers? | 2013 Q4 | 2013 Q3 | 2013 Q2 | 2013 Q1 | | Earnings Growth (Y-O-Y) | 866.67% | 20.00% | 68.42% | 233.30% | | Revenue Growth (Y-O-Y) | 364.48% | -1.52% | 3.46% | 4.13% | | Earnings Reaction | 2.26% | 2.24% | 2.80% | -4.72% | Bank of America has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Bank of America’s recent earnings announcements. P = Excellent Relative Performance Versus Peers and Sector How has Bank of America stock done relative to its peers, JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), and sector? | Bank of America | JPMorgan Chase | Wells Fargo | Citigroup | Sector | | Year-to-Date Return | 8.32% | -4.04% | 1.34% | -8.03% | -1.60% | Bank of America has been a relative performance leader, year-to-date. Conclusion Bank of America is a bank and financial services giant that operates in a recovering financial industry, the backbone of the United States economy. The U.S. government has raised the amount it is seeking in penalties from Bank of America to $2.1 billion. The stock has been exploding to the upside in recent quarters and is currently trading near highs for the year. Over the last four quarters, earnings and revenue figures have been have been increasing. However, investors have had conflicting feelings about recent earnings announcements. Relative to its peers and sector, Bank of America has been a year-to-date performance leader. Look for Bank of America to OUTPERFORM.
Props to The New York Times. Its ambitious, extensive examination of what really happened in Benghazi is a welcome infusion of factual reporting on a subject that has been dominated by talking points and sloganeering. Republicans have tried valiantly, but without much apparent payoff, to use the deadly attack on the U.S. mission there as a cudgel with which to beat President Obama and former secretary of State and prospective Democratic presidential candidate Hillary Rodham Clinton. That Benghazi was a tragedy is unarguable. Ambassador Christopher Stevens and three other Americans died there. Perhaps more could have been done to protect the U.S. diplomatic presence, and that is a legitimate subject for debate. But the GOP has brandished "Benghazi" as a code word to suggest something far more sinister, although precisely what that is is hard to determine. Whitewater, anyone? Two of the major areas in dispute are whether outrage over an American-made, anti-Muslim video played a major role in fueling the attack, and whether al-Qaeda was behind the assault Susan Rice, at the time the U.S. ambassador to the United Nations, payed a price for taking to the Sunday morning talkfests to blame the video. That narrative was widely ridiculed, and her vigorous embrace of it cost Rice, now Obama's national security adviser, a chance to succeed Clinton as secretary of State. Instead, Republicans have argued, the raid was the handiwork of al-Qaeda, undercutting the president's assertion that U.S. efforts had marginalized the terrorist outfit. Then over the weekend, the Times' David D. Kirkpatrick weighed in with a massive and massively detailed reconstruction of what took place on Sept. 11, 2012. And Kirkpatrick's meticulous reporting portrayed a complex, nuanced reality far more Robert Stone novel than simplistic cable cacophony. The money paragraph: "Months of investigation by The New York Times, centered on extensive interviews with Libyans in Benghazi who h! ad direct knowledge of the attack there and its context, turned up no evidence that Al Qaeda or other international terrorist groups had any role in the assault. The attack was led, instead, by fighters who had benefited directly from NATO's extensive air power and logistics support during the uprising against Colonel Qaddafi. And contrary to claims by some members of Congress, it was fueled in large part by anger at an American-made video denigrating Islam." This was foreign reporting at its finest, street-level, shoe-leather, on-the-scene detective work aimed at elucidating a very murky situation. The Times went all out on this one.The print version jumped to three inside pages packed with graphics and photos and info boxes as well as words. Digitally, it broke up the lengthy narrative into bite-size chapters accompanied by helpful bells and whistles. Foreign reporting has been one of the major casualties of the disruption that has bedeviled traditional media outlets in the digital age. Like investigative reporting, it is expensive. As news organizations slashed their budgets in the face of plummeting ad revenue, overseas outposts became exceedingly vulnerable. A 2011 American Journalism Review report found that 18 newspapers and two chains had closed down all of their foreign bureaus since the magazine's initial census in 1998. The Times, hardly immune from challenging financial pressures, deserves enormous credit for maintaining its commitment to international reporting. And while an exciting array of new digital outlets are focusing heavily on political developments, investigative reporting and local news, there's hardly a surfeit of equivalent operations featuring large rosters of foreign correspondents. (The outlier is GlobalPost, which relies on a mix of its own reporters and stringers and has a joint reporting arrangement with NBC News.) To the surprise of absolutely no one, the Times story rapidly became grist for the endless political combat that suffuses Wash! ington th! ese days. Rather than deal with the substance of the reporting, some Republicans and conservative commentators chose to focus their attention on the messenger. Asked by Fox News' Chris Wallace if the story was designed to "clear the deck" for Clinton, Rep. Mike Rogers, R-Mich., replied that he found the timing "odd." Rep. Lynn Westmoreland, R-Ga., said the Times was "already laying the groundwork" for Team Hillary. Warming to the theme, columnist Charles Krauthammer said on Fox Monday, "The reason that the Times invested all the effort and time in this and put it on the front page is precisely a way to protect the Democrats, to deflect the issue, to protect Hillary." For his part, Editorial Page Editor Andrew Rosenthal says the Times hasn't anointed anyone yet and that he found out about the Benghazi piece when he read it in the paper Sunday. So don't expect the sniping to stop anytime soon. But congratulations to Kirkpatrick and the Times for an impressive piece of journalism.
Buying a retail stock is often a pretty risky venture and it won't get any less risky in 2014. The stocks can bounce around a lot, especially for those stores that report monthly same-store sales numbers. And retailers are also at the mercy of the overall economy: if gasoline prices rise, for example, customers put off discretionary purchases and delay necessary ones for as long as they can. The analysts at Sterne Agee have issued some predictions for next year that add some color to the firm's ratings and price targets. We've selected 5 of the 13 retailers in Sterne Agee's universe to look at in more depth. J.C. Penney Co. Inc. (NYSE: JCP) is the investment firm's choice to be the biggest stock percentage mover in 2014. Volatility continues to be name of the game here with sales growth still an issue, tight liquidity, a possible CEO change, and valuation challenges. Sterne Agee has Penney as a Buy-rated stock with an upside potential of 13% and a price target of $9.00. The stock's P/E ratio for 2014 is negative and the earnings per share (EPS) estimate is expected to be down by 62% after rising 70% in 2013. As the analysts say, "Buckle Up!" Macy's Inc. (NYSE: M) is another Buy-rated stock, and Sterne Agee has a price target on the shares of $57.00 yielding an upside potential of 9%. EPS growth for 2014 is expected to be 14% and the stock's forward multiple is 11.9. Sterne Agee thinks that Macy's is a likely candidate to offer a free-shipping program on its online platform next year as a better way to engage customers, offer value, and increase loyalty while maintaining market share. Costco Wholesale Corp. (NASDAQ: COST) has a price target of $143 for an upside potential of 21%. EPS growth is set at 12% and the forward multiple is 23.4. Costco recently upgraded its membership database and Sterne Agee thinks the company will put that upgrade to good use in its multi-vendor-mailing program by mining years of buying habits by its 70 million members. Kohl's Corp. (NYSE: KSS) added two national brands to its merchandise lineup this past fall, Juicy Couture and Izod, and Sterne Agee doesn't think the company has mined out that field yet and expects it to add three or four new names in 2014 likely in the men's and athletic wear. Buy-rated Kohl's has a price target of $51 and the stock is already overvalued by about 7%. EPS growth in 2014 is tagged at 6% and the store's forward multiple is still just 12.4. Family Dollar Stores Inc. (NYSE: FDO) is rated Underperform by Sterne Agee primarily because it believes the store will slow down its new store openings starting in 2015. The analysts point out that same-store sales have been under pressure and there is some question about the strength of the store's brand. The Sterne Agee price target on the stock is $56.00 and, like Kohl's, the shares are overvalued, but by a larger percentage — 12%. Estimated EPS for next year is down 2% and the forward multiple is 17.1.
Two credit-card companies, two different responses to their earnings. While disappointed investors have sold off shares of Visa (V), MasterCard (MA) is relatively unchanged.  Bloomberg MasterCard reported a profit of $7.27 a share, beating forecasts for a profit of $6.94, while Visa said it earned $1.85 a share, in line with analyst forecasts. The big difference between the two: Europe. MasterCard has it, Visa not really. Bloomberg explains: Europe accounted for 28 percent of MasterCard purchases in the three months through June 30, company data show. Visa generates about 2 percent of its revenue on the Continent as domestic transactions are handled by Visa Europe Ltd., a separate firm owned by banks that pays royalties to its U.S.-based namesake. Raymond James analysts Wayne Johnson and Brandon Pickett tell investors not to worry about Visa: We are reiterating our Strong Buy investment rating on shares of V after a solid F4Q13 highlighted by healthy transaction volumes in all geographies and significant share repurchase activity. However, a stronger U.S. dollar is negatively impacting top-line growth and domestic payment volume is beginning to modestly slow due to a mix of lower gas prices and stagnant economic growth. That said, rest of world trends remain healthy and the company remains committed to returning capital to shareholders, as evidenced by the announcement of a large new buyback program yesterday and a significant quarterly dividend raise last week. We continue to think Visa is one of the most attractive growth investments in our space and expect the company to push through any near-term headwinds. Sterne Agee’s Greg Smith and Jennifer Dugan are not so sure: Visa noted some slowing in spending and more FX pressure and consequently lowered its revenue guidance for FY14 while maintaining its EPS guidance. Visa continues to manage expectations and execute well, but we still do not see a favorable risk/reward here in light of competitive threats and potential regulatory-related pressures. Jefferies’ Jason Kupferberg and team call MasterCard’s earnings “a nice Halloween treat.” They write: MA’s overall 3Q print was impressive, highlighted by better than expected volume and processed transaction growth, including acceleration in Europe and an upside surprise in US credit, both of which we think are important positives. Net revs beat JEFe/Street by 1.7%/4.0% on lower rebates, and even excluding the benefit from lower tax, EPS beat JEFe/Street by 1.0%/2.5%. Shares of MasterCard have dropped 0.1% to $724.75 at 2:03 p.m. Visa, meanwhile, has fallen 2.8% to $198.16. American Express (AXP) has dropped 1.3% to $82.02 and Discover Financial Services (DFS) is off 0.7% at $52.12.
How does upgrading the coal sector sound for a gutsy analyst call? That is exactly what we are seeing on Friday from Goldman Sachs, although the upgrades are not exactly universal in the sector. We have seen some very positive outlooks from Goldman Sachs for the battered coal sector, followed by some cautions takes. Alpha Natural Resources Inc. (NYSE: ANR) was raised to Neutral from Sell, and its price target was raised to $6 from $4 in the call. Unfortunately, this steam and metallurgical coal player’s closing bell price of $6.27 is above the Neutral-zone target. Thomson Reuters has a consensus price target of $7.17 here. CONSOL Energy Inc. (NYSE: CNX) was raised to Buy from Neutral, and its price target was raised to $43 from $35. Shares closed at $33.77 on Thursday, and the 52-week range is $26.25 to $37.39. The consensus price target was $42.33 before this upgrade. SunCoke Energy Inc. (NYSE: SXC) was started with a Buy rating and given a $22 price target (versus a $16.77 close). SunCoke mines and produces coke and offers metallurgical and thermal coal for steel making. Walter Energy Inc. (NYSE: WLT) has been battered and is into metallurgical coal for the steel industry, as well as thermal and industrial coal and other coal products. It also just raised $450 million in senior secured notes, which originally was going to be a $350 million offering. Goldman Sachs raised its rating to Neutral from Sell and raised its target to $15 from $10. This new target offers only modest upside from the $14.55 closing price, but note that the consensus analyst price target was $18 before this upgrade and raised target price. Before you think the call was all positive, it is not. Arch Coal Inc. (NYSE: ACI) was downgraded to Sell from Neutral. Industry-leading Peabody Energy Corp. (NYSE: BTU) was given a mere Neutral rating, but it does have a $20 target, versus a $17.85 close. Cloud Peak Energy Inc. (NYSE: CLD) was downgraded to Neutral from Buy and given a $15 price target, versus a $15.20 closing price. The coal sector remains shaky, but maybe the share prices have become so weak in many of these names that the negative bias and business pressures are priced in.
NEW YORK ( TheStreet ) -- Concerned about rocky markets, investors have been dumping intermediate-term bonds and shifting to short-term issues. Short-term bonds tend to be more resilient when interest rates rise. The flows have been particularly notable among high-yield funds, which hold bonds that are rated below-investment grade. While investors have withdrawn $3.3 billion from the intermediate-term SPDR Barclays High Yield Bond (JNK) this year, SPDR Barclays Short Term High Yield Bond (SJNK) recorded inflows of $1.6 billion, and Pimco 0-5 Year High Yield Corporate Bond (HYS) attracted $2.1 billion, according to IndexUniverse.com. Strong returns have attracted the cash. For the year, SPDR Barclays Short Term returned 3.5%, compared to 1.8% for SPDR's intermediate term exchange-traded fund, according to Morningstar. In comparison, the Barclays Capital U.S. Aggregate index lost 3.2%. For investors seeking to diversify fixed-income portfolios, the short-term high-yield funds can be intriguing choices. "The short-term ETF gives you an attractive yield with less volatility than you get with longer bonds," says David Mazza, head of ETF investment strategy for State Street Global Advisors, which operates the SPDR funds. SPDR Barclays Short Term currently yields 4.5%, compared to a yield of 5.9% for the intermediate-term SPDR high-yield ETF. In comparison, iShares Core Total US Bond Market (AGG), which tracks the Barclays Aggregate, yields 2.5%. Make no mistake, high-yield bonds of all kinds can suffer sizable losses in downturns. During the turmoil of 2008, the average high-yield mutual fund lost 26.4%, and short-term issues also suffered big losses. But below-investment grade bonds can be appealing because they can deliver solid long-term returns. During the past five years, the SPDR intermediate high-yield ETF returned 10.7% annually, compared to 4.6% for the Barclays Aggregate. The most important reason to consider high-yield funds is they can help to diversify portfolios, sometimes rising when most bonds are falling. When rates climb, Treasuries and other high-grade bonds tend to fall as investors bid down existing bonds and search for new issues with higher yields. Rising yields can also hurt high-yield bonds somewhat because their income becomes less competitive. But high-yield bonds can appreciate during times when a growing economy is pushing up rates. In such periods, investors tend to bid up high yield prices because default risks are lower. To limit risks in difficult periods, some investors may prefer holding a short-term high yield fund. But over the long term, funds with greater average maturities and higher yields are likely to outperform. One solution is to hold a short-term fund and a longer portfolio. David Mazza of State Street Global Advisors argues his two high-yield ETFs can complement each other. While the short-term funds has securities with maturities of 0 to five years, the intermediate choice has most of its assets in maturities of five to 10 years. To hold short-term high-yield securities in an actively managed mutual fund, consider Osterweis Strategic Income (OSTIX). This year the fund returned 4.5%. Portfolio manager Carl Kaufman has the flexibility to buy a variety of kinds of bonds, but in recent years he has focused on short-term high yield issues. He says that the short bonds provide relatively attractive yields. "You are not getting paid a whole lot more to buy an eight-year bond than you are to buy a two-year bond," he says. While many bond funds hold hundreds of issues, Kaufman runs a more concentrated portfolio, owning about 100 names. He shops carefully, looking for undervalued names. When he can't find bargains, Kaufman holds cash. At the end of the second quarter, the fund had 14% of assets in cash. That helped to cushion the fund when interest rates rose in June and many high-yield bonds sank. Kaufman often puts his cash stake to work when high-yield bonds suffer one of their periodic corrections. During the downturn of 2008, he scooped up bonds at depressed prices. He figures that another buying opportunity will appear soon enough. "The market is very nervous right now," he says. "If there are surprises from the Federal Reserve or the economy, bonds will fall, and that will be a good time to buy." Follow @StanLuxenberg This article was written by an independent contributor, separate from TheStreet's regular news coverage. Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
Funny thing about the way we make key decisions on when and how to retire: Often, we're not very rational. And a few new, fascinating studies just presented at the annualRetirement Research Consortium meeting in Washington, D.C., prove it. By "not very rational," I don't mean that our choices are nutty. We're just not doing what economists say we should be doing. Janet Novack of Forbes recently wrote a smart piece about annuities along these lines, noting that economists typically say retirees should convert their savings into these monthly-income-for-life products — but most people don't. (MORE: How to Take Your Pension: Lump Sum or Annuity?) There's actually a good reason why economists characterize retirees and pre-retirees as irrational about such things as when to claim Social Security and stop working full-time: These choices are as much psychological as they are financial. "Is a good decision one that gives you the best economic outcome or what makes you the happiest or most comfortable? That's hard to say," said Suzanne Shu, an assistant professor at UCLA Anderson Graduate School of Management, and a co-author of one of the new studies. " Here's how four of the studies say Americans in their 50s, 60s and 70s make retirement choices today – irrationally in the first three cases, but rationally in the last one: Why So Many Claim Social Security So Early Economists, financial planners and, yes, Next Avenue writers typically recommend delaying Social Security benefits until age 70, rather than grabbing them as soon as allowed, at 62. That's because, as Kerry Hannon just wrote in "5 Cures for Women's Retirement-Spending Paralysis," the size of your checks will be larger. Social Security benefits grow by 8% annually for every year you delay claiming between your "full retirement age" (66 to 67 for people born after 1943) and age 70; your benefits are cut if you start taking Social Security between age 62 and your full retirement age. (MORE: 4 Costly Social Security Mistakes to Avoid) James Mahaney, a vice president at Prudential, says you could potentially double your initial Social Security payments by waiting until age 70 to start collecting. And yet, a paper by Shu and John Payne of Duke University's Fuqua School of Business reports that 50% of Americans start collecting Social Security at 62 or within two months of leaving the labor force; 80% or more claim benefits before their full retirement age. How come? To find out, Shu and Payne surveyed 3,000 adults 35 to 65 and found that many people said they intend to claim early due to what you might call the "It's my money!" rationale. "There's a feeling of 'I contributed to Social Security all these years and I want to be sure I get some of my money out before I die, so if I'm hit by a bus tomorrow, I'll know I got something,'" Shu told me.
The Yackman Focused Fund and the Yacktman Fund appreciated 7.41% and 7.3% in a 2011, while the S&P 500 closed up 2.11%, and, according to the Wall Street Journal, the average diversified U.S. stock fund declined 2.9%. Donald Yacktman anchored his fund in solid, large-cap companies that helped it to withstand the market's extreme volatility. The return was a decent addition to his track record, which has a five-year cumulative return of 47.2% compared to the S&P's negative 3.1%, and a ten-year cumulative of 174.5% compared the S&P's 32.1. While Yacktman may have entered the financial scene, he is still doing it differently than, for instance, Bruce Berkowitz, by taking smaller positions, cautious of the continuing uncertainty. On Consuelo Mack in January he said, "The outcomes can be much wider. The array of outcomes. In other words, you could have a real disaster or you could have a spectacular upside. So as the array is wider, you end up attaching a probabilities to those outcomes, come up with a centrist rate of return, and then you want that to be quite a bit higher that what a normal rate of return would be based on the risk." Yacktman released his fourth-quarter buys and sells on Wednesday, according to GuruFocus' Real Time Picks. His three largest buys are Goldman Sachs Group Inc. (GS), Bank of America Corp. (BAC) and State Street Corp. (STT). Goldman Sachs Group Inc. (GS) Goldman Sachs is a global investment banking and securities firm, providing a full range of investing, advisory and financing services worldwide to a substantial and diversified client base, which includes corporations, financial institutions, governments, and high net worth individuals. The Goldman Sachs Group Inc. has a market cap of $54.88 billion; its shares were traded at around $111.47 with a P/E ratio of 25.3 and P/S ratio of 1.9. The dividend yield of The Goldman Sachs Group Inc. stocks is 1.3%. The Goldman Sachs Group Inc. had an annual average earnings growth of 9.8% over the pa! st 10 years. Yacktman bought 647,000 shares of Goldman Sachs in the fourth quarter at an average price of $97.50. Yactkman has said that his firm makes their top conviction ideas their largest positions, and buys smaller amounts of stocks they feel are of lesser quality. This one makes up 0.5% of his 64-stock portfolio. Goldman Sachs stock price declined more than 31% in the last year, but year to date has already advanced 25.5%. Yacktman got the stock at a major discount. Its 52-week low was $84.27 per share, slightly higher than its recession low around $53 per share in 2008. Even after the recession it has recovered to around $190, with a 52-week high of $169.90. For the last four years, Goldman Sachs' revenue has been declining. It was at $88 billion in 2007, with earnings of $11.6 billion, but ended 2011 with revenues of $28.81 billion, and earnings of $4.4 billion. Its financial results for the year showed declines in many areas of its business, including a return on average common shareholders' equity that slipped to 3.7% from 10.8% in 2010. The firm attributed the decline in results to global macro-economic concerns which "significantly affected our clients' risk tolerance and willingness to transact," according to Lloyd Blankfein, chairman and CEO. Meanwhile, it did keep some industry-leading positions. It continued to rank first in worldwide announced mergers and acquisitions for the calendar year; ranked first in worldwide equity and equity-related offerings, common stock offerings and initial public offerings; achieved global core excess liquidity of $172 billion; and achieved a Tier 1 capital ratio under Basel I of 13.8%, unchanged from the previous quarter. During the year, it also repurchased 47 million shares of its stock at an average cost per share of $128, at a total cost of $6.04 billion, and will pay a dividend of $0.35 per share on March 1, 2012. Bank of America Corp. (BAC) Bank of America Corp. is one of the world's financia! l service! s companies. Bank Of America Corp. has a market cap of $72.26 billion; its shares were traded at around $7.13 with and P/S ratio of 0.6. The dividend yield of Bank Of America Corp. stocks is 0.6%. Bank of America is also a relatively small holding of Yacktman, comprising 0.25% of his portfolio. He sold out of his previous position in the bank just before its stock plunged in 2011. In the fourth quarter, he bought 5,565,000 shares at an average of $6 per share, already realizing a 20% return. The last several years were challenging for Bank of America. Their revenue has been declining for the last three years, from $150.5 billion in 2009 to $115 billion in 2011. Net income, however, increased to $1.5 billion in 2011 from a loss of $2.2 billion in 2010, though still its lowest profit in the last 10 years. On Wednesday, Bloomberg reported that the bank lost about three-quarters of its market share in U.S. home mortgages since 2007, due largely to defective loans. Its share of originations dropped to 5.6% in the fourth quarter, from 10 percent in the third quarter, and 24.7% in 2007. State Street Corp. (STT) State Street Corporation is the world's specialist in providing sophisticated global investors with investment servicing, investment management, investment research and trading services. State Street Corp. has a market cap of $19.27 billion; its shares were traded at around $39.18 with a P/E ratio of 10.3 and P/S ratio of 2. The dividend yield of State Street Corp. stocks is 1.9%. State Street Corp. had an annual average earnings growth of 6.9% over the past 10 years. Yacktman bought 563,000 shares of State Street Corp. in the fourth quarter at an average price of $38, representing 0.19% of his portfolio. In many ways, State Street Corp. is faring better than Yacktman's other financials. It has been increasing revenue each year for the past three years, from $9.4 billion in 2009 to $10.2 billion in 2011. Net income in 2011 increased to almost $2 billion, a! record. ! It also reinstated a dividend of $0.72 per share in 2011, after cutting it to $0.04 per share in 2009 and 2010. Prior to the cut, in 2008, the dividend was $0.95 per share. The company recorded $120 million in restructuring charges for severance-related costs for reducing its workforce, withdrawing from its fixed-income trading initiative, and for expanding its IT infrastructure. State Street is also planning to start actively managed exchange-traded funds, in partnership with other asset managers, such as Blackstone. CEO Joseph Hooley has also predicted weak capital markets continuing into 2012. "I'm not trying to give necessarily a negative outlook, just a realistic outlook," Hooley said during a conference call with investors. "I don't think anybody's ready to predict that the most recent markets are going to sustain themselves." Banks are difficult to understand, not least when they are trying to rebuild after a recession. Yacktman may believe the industry is nearing a bottom, however, and will lose far less than Bruce Berkowitz, who got in too early. For more of Donald Yacktman's buys and sells, go here. Also check out the Undervalued Stocks, Top Growth Companies, and High Yield stocks of Donald Yacktman.
Argentina's largest farmland owner, owning more than 2.4 million acres, is a rare value, says Ian Wyatt of High Yield Wealth. Cresud SA (CRESY) has 66% of those acres in Argentina; the rest are scattered through Brazil, Paraguay and Bolivia. In addition, it has extensive commercial property holdings in Buenos Aires. Cresud CRESY is an exceptional value thanks to its depressed share price. For this, we can thank Argentina's dysfunctional government, led by President Christina Kirchner, who has overseen capital controls, foreign-owned asset seizures, and trade restrictions. Investors, not surprisingly, are leery about investing in such a hostile political climate. But where other investors see fear, I see opportunity. I believe Ms. Kirchner has handed investors a gift. Keep in mind-she won't be around forever. In fact, she may not be around past the October elections, as a backlash has set-in among her own supporters. In the meantime, I suggest investors focus on the value proposition. You know, see the forest through the trees. The company has a proven record of growing revenue, cash flow and assets. Revenue over the past five years has soared to $665 million from $41 million, EBITDA per share has grown to $2.88 from $0.25 and book value per share has more than doubled to $11.70 from $5. The value proposition is that Cresud offers the opportunity to invest in one of world's larger farmland owners at a 35% discount to book value. The shares have historically traded at a premium to book value-frequently three to four times book value. Throw in the annual dividend, which yields 6%, and you have a unique value proposition in a popular asset class. Keep in mind that Cresud has been around for more than 70 years, so the company has plenty of experience stepping around political minefields. I fully expect that long after Ms. Kirchner has withdrawn from the political landscape, Cresud will still be plowing fields and raising cattle on Argentina's high plains. Subscribe to Daily Profit here… More from MoneyShow.com: Brazilian Bets Copa Holdings: Panama Profits Finding the World's Best Growth Stocks
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis. What: Shares of FLIR Systems (NASDAQ: FLIR ) have steadily risen throughout the day, and are now sitting on gains of nearly 11% as of this writing, after reporting earnings this morning that primarily showed strength on the top line. So what: FLIR's second-quarter revenue came in 15% higher year over year with a final result of $389.3 million, which was a fair bit ahead of the analyst consensus of $364.9 million. However, earnings of $0.35 per share were underwhelming, as Wall Street sought $0.37 per share for the quarter. The company's full-year guidance, which projects $1.5 billion-$1.6 billion on the top line and $1.56-$1.66 in EPS, doesn't exactly smash through consensus top- and bottom-line expectations of $1.5 billion and $1.64, respectively. Now what: Investors may simply be breathing a sigh of relief over FLIR's ability to withstand the impact of the government sequester that was widely feared to hit many government contractors. The company's government systems backlog grew 5% year over year, which indicates some remaining strength where many might have not seen it. However, after the recent bounce, FLIR is nearing highs last reached in 2011, and the report was only good enough for S&P to raise its price target to $32 per share -- slightly lower than where shares traded as of this writing. A patent infringement suit that was filed today also puts a few clouds on FLIR's horizon. Step lightly into this stock, if you decide to step in at all. Want more news and updates? Add FLIR to your Watchlist now.
The Motley Fool's health care show "Market Checkup" focuses this week on diabetes, one of America's growing health care concerns. There are 2 versions of this chonic disease -- the more prevalent being type 2 diabetes, which makes up about 95% of all cases. Because of that overwhelming patient population, type 2 diabetes receives the majority of attention from big pharma companies. Diabetes is no small problem. In 2010, one in 10 adults has diabetes, and more troubling, more than one in four senior citizens, making it the seventh leading cause of death. There are 2 million new cases in America per year, leading analysts to project spending on diabetes to approach $60 billion in just five years. And this isn't just an American problem; 370 million suffer from diabetes around the world. In this video, health care analysts David Williamson and Max Macaluso discuss one of the prominent diabetes drug classes, highlighting both the major players and whether a new drug from Eli Lilly (NYSE: LLY ) will disrupt the current standard of care. Rising health care costs continue to be a hotly debated topic, and even legendary investor Warren Buffett called this trend "the tapeworm that's eating at American competitiveness." To learn more about what's happening to the health care system -- and how to potentially profit from this trend -- click here for free, immediate access. Follow David on Twitter: @MotleyDavid.
 Shutterstock At some point during each of our professional lives, we wake up to the fact that we really need to be saving for retirement. We're all going to retire, and that means we're all going to need some money put aside for retirement. The problem is that when we think broadly about saving for retirement, it seems impossible. A million dollars? More? How are we going to possibly come up with that kind of money? Here's the catch: None of those retirement articles out there -- the ones that talk about having to save millions -- are writing about your situation. Instead, they're writing about someone else, often someone earning a lot more than you. What you need is a plan that works for you, and that starts with having a good target number for retirement savings. To calculate your retirement number all you need is your most recent Social Security statement along with how much you made in the past year as well as the number of years between now and when you plan to retire. You'll also need a web browser with Google ready to go and a piece of scratch paper. Ready? Step 1. The first thing you need to figure out is what your current salary will look like when you retire because this whole plan is based on the idea that you'll live on your current income when you retire. If you plan on living on 80 percent of your salary or another percentage, head to Google right now and type in "80 percent of $40,000" or whatever your current salary is. I usually suggest people use 80 percent of their salary for their retirement number because they will no longer have work-related expenses. Step 2. Expect that long-term inflation will be 3 percent, which is based on a high-end estimate from the Federal Reserve. So, you should go to Google and type in "1.03^" followed immediately by the number of years between now and when you expect to retire. So, if you expect to retire in 18 years, you'd type in 1.03^18. Now, take that number and multiply it by your salary (or whatever you decide to use above). If you're using Google, a calculator should appear with the first number already entered for you. If you were using $32,000 per year (80 percent of $40,000) and you're retiring in 18 years, for example, it will give you $54,477, which is what your salary will look like in 18 years with normal inflation. Step 3. From that number, you need to subtract what you'll receive annually from Social Security, so pull out your Social Security statement and look for your annual benefit. Subtract that from your salary above. In this example, a person might have an annual benefit of $15,000 from Social Security, so his or her new number would be $39,477. Step 4. Now, that annual amount is going to have to last you for awhile. I usually assume people will spend an average of 25 years in retirement, but their investments will continue to earn a return while they're retired. So, I tell people to multiply that salary number by 20, which is your final step. Therefore, a person who makes $40,000 per year and is 18 years from retirement needs to save $789,540 for retirement. This is a quick calculation, of course, but saving enough to hit your number isn't as scary as you might think, particularly if you're far from retirement. This person, who receives a 1:1 employer match on his or her 401(k) up to 6 percent, and hits all of that while also fully funding a Roth individual retirement account each year, would be close to on pace for that number. Someone starting to save earlier might not even have to push that hard. Someone starting later might have to save even more or consider waiting a year or two longer to retire. The lesson of this story is simple: Start saving now. You're going to need quite a bit of money to retire, and every year you put it off the harder you make your savings journey.
The standard cliché is that, relatively speaking, men are financial daredevils who like risk and that women are cautious and want security. Alternatively expressed, men are more risk friendly than women. Or to rephrase the title of a bestseller, "men buy shares from Mars and women have a savings account on Venus." Articles published in the Swiss Neue Zürcher Zeitung (NZZ) and in various other sources, shed new light on the combination of myth and reality captured in the above paragraph. There Are Differences
In an interview with the NZZ, Christine Schmid of Credit Suisse explains that the sub-discipline of gender finance deals with the social differences between men and women. Anja Peter, of Bank Coop in Switzerland concurs that "naturally, there are differences between men and women, biologically and socially, and this is reflected in investment behavior." For instance, women are generally more interested in such issues as ecology, ethics and microcredits. However, when it comes to the crunch, this interest does not always impact on the actual investment decision.
A study conducted at the Centre for Financial Research at the University of Cologne found that female fund managers switch around their portfolios less than their male colleagues. Furthermore, women's strategies and the subsequent performance tend to be more stable.
Historically, women have had less to do with financial decisions than men and their investment volume has also been lower. However, that is changing. Find out about one lady that bucked historical trends in Hetty Green: The Witch Of Wall Street. Female Risk Aversion?
Recent studies shed new light on the typical investment behavior of women. The German Institute for Economic Research (DIW) recently evaluated data from more than 8,000 men and women.
At first glance, the study seems to confirm the standard view, but not all that strongly, as 38% of women have risky financial products such as stocks, whereas it is 45% for men.
However, the DIW does not believe this confirms an inherent risk aversion on the part of women. A regression analysis reveals that women would take more risk if they had more money. Women generally still have only have about half as much to invest as men, which inevitably compels them to be more cautious; that may be the real reason for the apparent risk aversion.
Career Barriers and the Glass Ceiling
In the same vein, there are still few women applying for jobs or working as financial researchers or brokers. Schmid believes that women continue to gravitate to where there are other women, but hopes that these barriers will break down over time. Clearly, there is a link between the career side of the gender equation and investment behavior. Lower Self Confidence, but Higher Performance
Interestingly, studies by the German Comdirect Bank and the DAB reveal that, while women have less confidence in their financial knowledge than men, this is not matched by poorer investment choices and management. The study revealed that 58% of men rated their financial understanding as good or very good, but only 47% of women. Furthermore, a large sample of almost half a million private portfolios demonstrates that in 2007 and the crisis year of 2008, women did 4 to 6% better than men. The Road Ahead
Over time, these differences are likely to decline, but not disappear altogether. After all, there are centuries of entrenched gender roles, and elements still remain and are likely do so to some extent for the foreseeable future. Furthermore, given that women are genetically the child bearers, some aspects of the male-female roles are intrinsically fixed by nature. Thus, more women than men will still find it harder to invest in the true sense of the word.
Nonetheless, we can certainly expect the behavioral trends to diminish. After all, never before have there been so many highly qualified women who earn well, have money to invest and want do so securely and appropriately. Furthermore, many observers (and studies) state that women often invest remarkably well.
This in turn will lead to more programs that focus on female investors. The Swiss Bank Coop, with its Project Eva, is a classic example, and is sure to be followed by many others over time. The presence of female investment clubs, on the Internet and beyond, constitutes another sign of the times.
Barbara Aigner, of Emotion Banking in Austria, believes in a specifically female customer segmentation, which looks like yet another way ahead. She divides the female customer segment into three groups of "self-conscious, pleasure oriented" younger women, an "interested and open-minded active group" of women who are more interested in what the bank offers and the "traditional conservatives" who are loyal and risk averse. The Bottom Line
It is really only in the 20th century that women have managed to break down many of the barriers in a male-dominated world. The role to which women have been relegated has constrained both their financial knowledge and activities. This situation is changing constantly. Nonetheless, some of the clichés are entrenched in the mind and some elements of the old role inevitably remain intact in practice. In any event, understanding gender differences and how they are changing over time - and catering effectively for them - is fundamental to understanding and managing the world of investment.
According to an LA Times article in 2011: "Some 75% of respondents said they were following the [California] budget debate, yet only 16% were aware that state spending has shrunk by billions of dollars over the last three years." There may be something similar happening now at the federal level. Poll after poll will confirm that Americans are worried about the budget deficit. But how many of them know it's shrinking fast? The Treasury Department issues reports on monthly spending and tax receipts -- a version of the government's income statement. Tally up the last four years, and you get this:  Source: Treasury Department. Many have pleaded with the government to cut spending. Far fewer, I think, know that the government spent less over the last 12 months than it did during the same period two years ago. Adjusted for inflation, the government spent the exact same amount over the past 12 months as it did during the same period five years ago, before the current administration came into office. If you just look at the first three months of the year, which is guided by the most recent deficit-reduction policies, the numbers are even better for deficit hawks. Compared with the first three months last year, federal spending is down 9%, tax receipts are up 14%, and the deficit is down 32%. Goldman Sachs analyst Alex Phillips recently wrote: The federal deficit continues to shrink. Through the first six months of the fiscal year, revenues have come in higher than expected, while spending has come in lower than expected. As a result we are lowering our deficit forecast for the current and next two fiscal years. Earlier this year we lowered our FY2013 deficit forecast from $900bn (5.6% of GDP) to $850bn (5.3%). In light of recent trends, we are lowering it again to $775bn (4.8%) ... We expect the improvement to continue for the next few years. Although we had already expected additional cyclical improvement and residual fiscal policy tightening to reduce the deficit further in 2014 and 2015, we have reduced our estimates a bit further, to $600bn (3.5% of GDP) and $475bn (2.7%). The most important figure here is the deficit as a share of GDP, because as long as a government's deficit is lower than annual economic growth, it can run in the red forever while actually lowering its debt burden (people overlook this because it doesn't apply to households). Since 1930, the government has run an average deficit equal to 3.2% of GDP each year. Goldman now estimates the deficit as a share of GDP will total 4.8% this fiscal year, and 3.5% next year. Over the last year, GDP grew by 4%. If growth stays pat and Goldman's estimates are right, the nation's debt-to-GDP ratio will stop rising as soon as next fiscal year (which begins this October).
Long term, the largest budget issue is the cost of health care its impact on Medicare. It will be a mammoth problem if not addressed. But the short- and medium-term budget outlook is likely far tamer than most imagine. Just like California in 2011, there is a gulf between perception and progress.
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