Will Intel Revolutionize Physical Retail?

NEW YORK (TheStreet) --

On Wednesday, in Sell Best Buy, It Has No Pulse, I discussed why Best Buy (BBY) will, without profound change, die out over the long-term. But the more important part of that conversation might have involved Intel's (INTC) holiday plans for pop-up "retail" outlets.

I can't wait to see one of these stores because they have the potential to be exciting written all over them. If Best Buy brass is smart and forward-looking -- highly doubtful on both counts -- it will personally visit these Intel shops. Give Intel credit for doing little and big things to change its image from a stodgy old chipmaker to something more relevant. Earlier this year it ran an interesting advertising campaign with Pandora (P). Even if Intel Media fails, it was a gutsy move the company deserves points for even attempting. And this retail thing; it might actually be what flips the switch. Intel's not playing around. They're locating these stores in the hippest neighborhoods in New York City, Chicago and Los Angeles. In LA, where I live, they're locating on Abbot Kinney Boulevard in Venice. Venice borders Santa Monica on LA's Westside. And Abbot Kinney might be the trendiest neighborhood in all of Southern California right now. But don't expect Best Buy -- the company that scoffed at the notion of partnering with Amazon.com (AMZN) -- or any of its equally-as-impotent physical retail peers to take what Intel is doing seriously, let alone utilize pages from its playbook. At the point where companies such as BBY should be tired and bored with themselves, they hang their hats on allegedly positive short-term results. Bad move. They should be hyper-focused on tearing it all apart and putting it back together again. These companies require nothing short of wholesale transformation. The notion of a retail location that changes its appearance several times a day and doesn't actually execute sales on-premises might be crazy enough to work as, if nothing else, a serious starting point for a strategy. Or maybe it ends up being the strategy. I don't know. But I do know that copying Apple's (AAPL) design and product placement or repackaging failed retail gimmicks will not work. Amazon eliminated the need for a physical location. Who, more than a decade ago, would have thought something that turned convention and consumer habit on its ear would morph into a multi-billion dollar powerhouse that would send some of retail's biggest players scurrying like rats? As many people who will take the idea of not selling anything in your store seriously. Of course, the number of people who will scoff at the premise will likely equal the number of folks who predicted Amazon wouldn't be around much past 1999. In other words, free your mind and the rest will follow. Unless you have what Apple has going for it, the experience of walking into a store, browsing and buying something has been nothing short of soul-sucking. If it, as we know it, went away tomorrow we would all be better off for it. Follow @rocco_thestreet --Written by Rocco Pendola in Santa Monica, Calif.

Madoff victims may share in $2.35B federal fund

NEW YORK — Victims of Bernard Madoff's infamous Ponzi scheme have a chance to make claims for a share of a $2.35 billion federal recovery fund, Manhattan U.S. Attorney Preet Bharara said Monday.

The fund is open to applications from burned customers who invested with Madoff indirectly through financial feeder funds, investment groups and other pooled investment vehicles, said Bharara.

The federal fund is separate from the recovery and repayment process being pursued on victims' behalf by Irving Picard, a court-appointed trustee. Courts have ruled that indirect Madoff investors are not allowed to seek recovery from the trustee, who so far has recovered more than $9.5 billion of the estimated $20 billion investors lost in the fraud.

"The process we have put in place opens the door for thousands of defrauded victims who otherwise might never have recovered anything," said Bharara. "We have made eligibility to recover far more inclusive, and more equitable, than ever before."

Madoff's decades-long scam collapsed in Dec. 2008 when he confessed that he had been using money from some customers to pay others. The 75-year-old disgraced financier pleaded guilty without standing trial and is now serving a 150-year federal prison term.

Five of Madoff's former employees are now standing trial in New York on charges that they knowingly facilitated the fraud and received millions of dollars from Madoff. All have said they were victims of the scam architect.

Since the scam collapsed, federal prosecutors and Picard have independently pursued efforts to recover funds from Madoff, his relatives and a variety of others, including investors who benefited financially before the scam collapsed.

Approximately $2.2 billion of the new victim fund announced by prosecutors came via a Dec. 2010 civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower, said Bharara. The remaining funds were collected via civil forfeiture actions against investor Carol Shapiro and! separate actions against Madoff, his brother, Peter and accused co-conspirators.

According to the Monday's announcement by prosecutors, nearly anyone who lost funds invested with Madoff and who can document their net loss will be eligible to seek recovery from the new victim fund. Claims must be received by Feb. 28, 2014.

Detailed information about the fund, including eligibility criteria and instructions for filing claims can be found at www.madoffvictimfund.com.

Additional questions about eligibility or filing procedures may be directed to the office of a special master overseeing the fund at 866-624-3670 or at info@madoffvictimfund.com. Richard Breeden, a former chairman of the Securities and Exchange Commission, is serving as the special master under a Department of Justice appointment.

Sector Watch: US Asset Management Stocks, High-Yield ARCC and BKCC

The U.S. asset management sector currently lists 25 stocks out of 132 on a 52-week low, and the sector low ratio is 0.19. GuruFocus research shows that billionaires are avoiding most of these 25 companies on a low, but here are three companies held by billionaires and insiders.

Check out these sector highlights, screened for billionaire investors, high yield, and recent insider trading.

U.S. Asset Management Sector

Highlight: Ares Capital Corporation (ARCC)

The share price is currently around $17.57 or 5.9% off the 52-week high of $18.67. Its yield is 8.60%.

Up 1% over 12 months, Ares Capital Corporation has a market cap of $4.73 billion and is traded at a P/E of 8.30.

Founded in 2004, Ares Capital Corporation is a closed-end, non-diversified management investment company that primarily invests in non-syndicated senior debt, mezzanine debt and non-control equity. The company invests in U.S. middle-market companies, defined as businesses with annual EBITDA between $10 million and $250 million.

Guru Action: Four gurus hold ARCC shares as of June 30, 2013, and there is recent insider buying.

As of Sept. 30, 2013, Scott Black holds 425,346 shares or 0.16% of shares outstanding. He increased his position by 0.4% in the third quarter of 2013, buying 1,711 shares at an average price of $17.51 per share, for a gain of 0.6%.

Across a five-year trading history, he averaged a gain of 7% on 428,571 shares bought at an average price of $16.52 per share. He gained 5% selling 3,225 shares at an average price of $16.84 per share.

Tracking share price, revenue and net income:

[ Enlarge Image ]

Highlight: BlackRock Kelso Capital Corporation (BKCC)

The share price is currently $9.62 or 11.1% off the 52-week high of $10.82. Its yield is 10.80%.

Down 4% over 12 month! s, BlackRock Kelso Capital Corporation has a market cap of $713.5 million and is traded at a P/E of 12.50.

Incorporated in 2005, BlackRock Kelso Capital Corporation provides middle-market companies with flexible financing solutions, including senior and junior secured, unsecured and subordinated debt securities and loans, and equity securities. The company is organized as an externally-managed, non-diversified closed-end management investment company.

Guru Action: One guru holds BKCC shares as of June 30, 2013, and there is recent insider selling.

Jeremy Grantham is the sole guru stakeholder, holding 32,000 shares or 0.04% of shares outstanding. He reduced increased his position by 5.88% in the second quarter of 2013, selling 2,000 shares at an average price of $9.77, for a loss of 1.6%.

In five losing quarters, Jeremy Grantham averaged a loss of 4% on 34,000 shares bought at an average price of $10.05 per share. He also lost 2% selling 2,000 shares at an average price of $9.77 per share.

Tracking share price, revenue and net income:

[ Enlarge Image ]

Highlight: Harris & Harris Group Inc. (TINY)

The TINY share price is currently $3.07 or 22.1% off the 52-week high of $3.94. The company does not pay a dividend.

Down 10% over 12 months, Harris & Harris Group Inc. has a market cap of $95.7 million and is traded at a P/B of 0.70.

Incorporated in 1981, Harris & Harris Group Inc. is an early-stage venture capitalist investing in transformative nanotechnology companies. Its portfolio is comprised of companies in the life science, energy and electronics sectors.

Guru Action: Chuck Royce is the sole guru shareholder, as of June 30, 2013, and there is recent insider buying.

Chuck Royce currently holds 1,293,086 shares or 4.15% of shares outstanding. Royce increased his position by 5.9% in the second quarter of 2013, buying 72,084 shares at an average price of $3.27 per ! share, fo! r a loss of 6.1%.

Royce's five-year trading history shows all losing quarters. He averaged a loss of 26% on 1,421,586 shares bought at an average price of $4.15 per share. He also lost 41% selling 128,500 shares at an average price of $5.23 per share.

Tracking share price, revenue and net income:

[ Enlarge Image ]

If you are not a Premium Member, we invite you for a 7-day Free Trial.

Check out the GuruFocus 52-week low screener to find not only US stocks with deep value but also thousands of others around the world.

Panera CEO Will Spend This Week Living on a Food Stamp Budget

Michael L Abramson/Getty Images For the next week, Ron Shaich will live well below his means: The Panera Bread (PNRA) CEO embarked on a quest Saturday to spend a week living on food stamps. "As part of Hunger Action Month, I decided to take the SNAP Challenge," Shaich announced on LinkedIn last week. "For one week, beginning Saturday, September 14, 2013, I will live on just $4.50 a day, the average daily benefit per person provided by the Supplemental Nutrition Assistance Program (SNAP; formerly known as Food Stamps)." A number of liberal politicians, including Newark Mayor Cory Booker have taken the SNAP Challenge, publicly documenting their quest to eat on less than $5 a day (the weekly allowance is $31.50). The challenge has become a popular way to see how the other half lives, call attention to hunger issues and protest budget cuts.

Joy Global, Caterpillar: Is There Life in Markets for Heavy Machinery?

When Caterpillar Inc. (NYSE: CAT) reported earnings in July, the company took the opportunity to cut its revenue and earnings guidance for the full fiscal year. Mining equipment maker Joy Global Inc. (NYSE: JOY) reported third fiscal quarter results Wednesday morning and reaffirmed the lowered guidance it gave at the end of the second quarter.

On the surface, Joy Global did not perform too badly. Adjusted earnings per share (EPS) came in at $1.70, well above the consensus estimate of $1.37. Revenues totaled $1.3 billion, again above estimates, but both numbers were below year-ago results.

Both companies face the same issue: inventory turnover. Caterpillar's dealer inventories are historically low, and those dealers are restocking from the company's distribution centers, lowering inventory even more. This translates into lower demand and a reduction in order backlog.

Joy Global has a similar problem. The company's CEO noted it this morning:

The market has become even more challenging, with declines in order rates for both original equipment and aftermarket. The supply surplus that was centered in the U.S. coal market last year has migrated to the international markets, and they are now going through similar aftermarket corrections to that in the U.S. Based on the U.S. experience, we expect this to create headwinds for most of the next year. Although original equipment orders have always been lumpy, the uncertainty around their timing has increased. A select number of projects are continuing to move forward, but at a measured pace so they do not get ahead of the market. As a result, we expect the order rate to take a step down from our previous outlook until both demand and commodity pricing improve, but at the same time we expect the run rate to be above that of the current quarter.

Total bookings at Joy Global are down about 36% year-over-year in the third quarter, and orders for new equipment fell a whopping 76%. And the company's assessment of the coal-mining business is not pretty:

[M]ost coal mines in the U.S. and many coal mines in Australia are operating above cash costs but below total costs. In addition, the long term expectation for commodity prices has been lowered and it limits the number of mine expansion projects that can meet updated risk-adjusted return criteria. This combination has significantly reduced customer capex spending. Our analysis indicates that customer capex spend on mining equipment is down 40 to 50 percent.

Joy Global, like Caterpillar, can only keep trying to lower its costs as the companies weather the downturn in demand for construction and mining equipment. To keep investors happy, Joy Global said it would repurchase $1 billion in stock over the next three years.

Shares of Joy Global are trading down 3.4% in Wednesday's premarket, at $49.55 in a 52-week range of $47.83 to $69.19.

The S&P 500's 5 Most Hated Stocks

All good things must come to an end, or at least that's what investing skeptics would like to think.

The broad-based S&P 500 (SNPINDEX: ^GSPC  ) has been on an absolute tear since the year began, up 14.4% through Friday's close. It recently logged the strongest start to the first-half of the year in 15 years and has the combination of an improving housing market and ongoing monetary easing to thank for a string of market-topping economic data.

But, could this fairy tale soon come to a screeching halt? Short-sellers certainly think so and have been piling into some of the largest companies in the S&P 500 in anticipation of a slide. As we've done in previous months, I propose we examine the five most hated stocks within the S&P 500, see why the pessimism is so strong in these companies, and decipher whether the high short interest in these stocks is deserved.

Company

Short Interest As a % of Shares Outstanding

Cliffs Natural Resources (NYSE: CLF  )	31.66%
U.S. Steel (NYSE: X  )	30.37%
GameStop (NYSE: GME  )	29.89%
Pitney Bowes (NYSE: PBI  )	27.97%
Frontier Communications	23.40%

Source: S&P Capital IQ.

Cliffs Natural Resources
Why are investors shorting Cliffs Natural Resources?

With a nearly 5-percentage-point rise in short interest month over month, iron ore producer Cliffs Natural has ascended to the top of this dubious list. As in previous months, the primary culprit for the pessimism relates to falling iron ore prices. Between February and May, iron ore prices fell from around $155 per metric ton to just $124 per metric ton, putting Cliffs profitability into question. In response, Cliffs has put some of its exploratory mining activities on hold for the time being.

Source: Peter Craven, Flickr.

Is this short interest warranted?

It's certainly hard to argue against short-sellers who've been dead right thus far with Cliffs ending at a new 52-week low on Friday. However, I continue to see the bright side of a company that supplies iron ore used in steel making and other heavy construction. Concerns about growth in China are Cliffs latest worry, but even then shareholders' reaction to continue selling may be a bit overblown. Cliffs is still healthfully profitable, trading for less than half its book value, and pays out a yield closing in on 4%. I have it firmly attached to my Watchlist as a possible buy.

US Steel
Why are investors shorting US Steel?

Just like Cliffs Natural, U.S. Steel's story has to do with weak steel prices making it practically impossible for it to turn a profit, and an endless sea of supply that never wants to reduce enough to give the steel producers any pricing power. U.S. Steel has done its best to reduce its own supply, but that hasn't helped much with even China's growth slowing and a credit crunch in the country threatening to further depress economic activity.

Is this short interest warranted?

Even though I wholeheartedly agree that short-sellers have every right to be skeptical of U.S. Steel, the pessimists have been burnt badly over the past week with multiple steel pipe producers, including U.S. Steel, signing petitions against nine countries for anti-dumping practices. If US Steel gets its way, it may soon have a level playing field in Asia and its sales could come roaring back. I'd still suggest calmer heads prevail here as it's really U.S. Steel's $3.2 billion in net debt that has me most concerned.

GameStop
Why are investors shorting GameStop?

Short-sellers have piled into GameStop in anticipation of the launch of Microsoft and Sony's next-generation gaming consoles. We'd been hearing for months that licensing aspects of the new systems were going to be much more stringent than in previous models which are a cause for concern for GameStop since it makes most of its profit from the sale of used games. In addition, as a bricks-and-mortar store, there is an ongoing worry that it's falling behind its peers in digital gaming.

Is this short interest warranted?

As an addendum to the above, probably not! Microsoft and Sony have predominantly changed their tune and will allow used games to be sold through authorized channels, including GameStop. That's a big relief for GameStop and its shareholders since used game sales are single-handedly its biggest margin booster. GameStop certainly isn't out of the woods as we've seen it can take years in between developing new consoles. Once the allure of the new systems fades in a year, GameStop may find its year-over-year comparisons to be impossible to top.

Pitney Bowes
Why are investors shorting Pitney Bowes?

Pitney Bowes may have fallen from its perch as the S&P 500's most short-sold stock, but short-sellers have hardly relinquished their stranglehold on the supplier mail hardware and software solutions. With nearly everything now in digital platform and mail volume slowly dwindling, Pitney Bowes is needing to reinvent itself quickly in order to try and reverse a four-year ongoing downtrend in revenue. Tack on a recent 50% cut to its dividend, and you have all the fodder needed to attract pessimists.

Is this short interest warranted?

This may not be a case of "how bad could it get" so much as a case of "what would make things good again?" There just aren't any catalysts I see that would dramatically turnaround Pitney Bowes' fortune anytime soon. Its double-digit yield had been the one defining factor that kept investors coming back, but its current yield near 5% isn't nearly as enticing when you consider its down-sloping revenue forecast. I'd strongly suggest not being lured in by this dividend and steering clear of Pitney Bowes until you see well-defined progress in the top line.

Source: Anna Langova, PublicDomainPictures.net.

Frontier Communications
Why are investors shorting Frontier Communications?

Despite bringing in ample and somewhat predictable cash flow that's resulted in a delectable 10% yield, short-sellers have piled into Frontier Communications because it's been bleeding rural landline customers. Frontier made quite the gamble by picking up Verizon's landline assets a few years back which hasn't panned out as expected due to the expansion of 4G-capable wireless networks.

Is this short interest warranted?

If your investment thesis involves having Frontier stay profitable, then short-sellers are playing with fire. If Frontier is able to maintain its dividend, by simply reinvesting the payout investors could double their original investment in a tad over seven years. Frontier's cash flow looks consistent enough at the moment to merit the 10% yield, although I'd keep your eye on its rural landline attrition rate for clues about where it's heading next.

Which of the S&P 500's most hated stocks has the best chance of heading higher from here? Share your thoughts in the comments section below.

With the American markets reaching new highs, investors and pundits alike are skeptical about future growth. One need only look at the above five companies for confirmation of this. But, they shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!

CEOs Are Overpaid? Tell That to a Lululemon Shareholder

By now, you've probably heard that lululemon athletica (NASDAQ: LULU  ) CEO Christine Day will be leaving the company, as she announced in last week's earnings report. Despite the recent debacle over see-through yoga pants, the decision to leave was hers, as she called it "personal" on the call and added that "plans have been laid for the next five years and a vision set for the next 10."

Despite Day's optimism about her company's future, shareholders didn't take the news too well. The stock fell 17.5%, and that was with an earnings beat and a guidance lift, meaning shares would presumably have gone up without Day's announcement. The news sliced more than $2 billion off the company's market value; clearly, investors view their CEO as precious.

And while the event has brewed plenty a commentary and concern about where the company is headed and who will take the reins, Day's departure also offers a reminder about the value and importance of a CEO.

Her record during her five years at the helm is nearly impeccable by any conventional standard. The retailer's share price rose nearly 500% during her tenure, compared with her predecessor, Robert Meers, who saw shares fall during his one year leading the retailer as a publicly traded company. Other results under Day were equally impressive. Trailing-12-month revenue grew by 333% over the past five years on superb same-store sales, an aggressive store expansion plan, and a new e-commerce platform. Earnings per share were up 516% as more of those sales flowed to the bottom line. Other traditional metrics were also strong, such as return on assets and return on equity, which hovered around 30% and 35%, respectively. And let's not forget that Lululemon has been so successful that it's spawned its own legion of imitators, including traditional apparel heavyweights such as Gap, Nordstrom, and Nike.

And what did Lululemon pay Day for this market-crushing value creation? According to proxy statements, her total compensation topped out at $4.28 million in 20120. Seems like a bargain for someone whose leadership the market values at more than $2 billion.

Not all CEOs are created equal
According to polls, most Americans think CEOs are overpaid, but Lululemon's share price drop following Day's exit is a reminder that often, the talent and direction occupying the executive chair is a bargain for these companies. The problem with CEO compensation is that terrible leaders are often paid as much as the great ones. Take J.C. Penney (NYSE: JCP  ) , for example, which is coming off one of the worst years in the history of retail. In 2011, the company paid more than $150 million, including stock awards, to beckon Ron Johnson and three of his henchmen into the executive suite. All four are now gone, and that awards package is proof that the board of directors may deserve just as much blame as Johnson and his team does for last year's debacle.

CEO compensation is difficult to get right, as a number of factors outside the chief's control affect performance and share price. In Christine Day's case, shareholders will get an even clearer sense of her value after her successor is named and they have time to assess the new leader's performance.

Who will be Lululemon's next CEO? No one knows for sure, but some have rumored that founder Chip Wilson will return to the executive chair. Or it could be an outside hire. Find out who's on Lululemon's bench, where the company stands following Day's resignation, and everything else you ever wanted to about the yoga sensation in our new premium research report. Just click right here to get started today. 

Why ROIC Is Poised to Bounce Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, shopping center REIT Retail Opportunity Investments Corp. (NASDAQ: ROIC  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at ROIC and see what CAPS investors are saying about the stock right now.

ROIC facts

Headquarters	San Diego, Calif.
Market Cap	$933.4 million
Industry	Retail REIT
Trailing-12-Month Revenue	$84.2 million
Management	President/CEO Stuart Tanz CFO Michael Haines
Return on Equity (average, past 3 years)	1.6%
Cash / Debt	$6.9 million / $316.4 million
Dividend Yield	4%
Competitors	Kimco Realty  Macerich Vornado Realty Trust

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 97% of the 501 members who have rated ROIC believe the stock will outperform the S&P 500 going forward.

Earlier this week, one of those Fools, TMFTailwind, tapped ROIC as a particularly timely bargain opportunity: "Good place to start another long-term bet on stellar management (real estate mogul Stuart Tanz). Expecting boring, steady growth complemented by a nice yield. 10+ year time frame on this one."   

If you want market-thumping returns, you need to put together the best portfolio you can. Of course, despite a perfect five-star rating, ROIC may not be your top choice. If that's the case, we've compiled a special free report for investors called "The 3 Dow Stocks Dividend Investors Need," which uncovers a few other juicy income opportunities. The report is 100% free, but it won't be around forever, so click here to access it now.

How Badly Will Falling Oil Prices Hurt Core Laboratories N.V. Earnings?

Oil prices have taken a beating over the past few months, dragging Core Laboratories N.V. (NYSE: CLB  ) stock down along with them.

CLB data by YCharts

Needless to say, the bear market in oil will likely have an impact when Core Labs reports third quarter results after the market closes on October 22. Here is where the drop in oil prices might have had an impact on Core Labs' business.

Oil prices and guidance
Along with its second quarter results Core Labs provided investors with guidance for the third and fourth quarters. However, among the factors leading to that guidance was stable oil prices. The company noted that "in response to very supportive Brent crude prices, the company projects modest growth through the end of 2014." Those very supportive oil prices of more than $100 per barrel are no longer part of the equation, suggesting that the company might have trouble meeting its guidance for modest growth for the balance of this year. 

In the third quarter the company expects revenue of $280-$290 million and earnings of $1.49-$1.52 per share. That would represent an increase in earnings of about 11% from last quarter. Meanwhile, in the fourth quarter the company expected revenue to be $285-$295 million with earnings of $1.56-$1.61 per share. While it's possible that the company might be able to meet its third quarter guidance given that oil prices were stable until after the quarter began, the continual drop in oil will almost assuredly have an impact on fourth quarter guidance. A deep cut in fourth quarter guidance would likely cut into Core Labs' stock price too.

Where oil prices might impact Core Labs
One area where falling oil prices could have had an impact on the company's results is in its Revenue Description operations. Even before oil prices started to fall, oil producers had noticeably slowed down investments in deepwater areas. Core Labs noted this last quarter as the company pointed out that while its Reservoir Description segment established a new second quarter record for revenue it experienced lower amounts of higher-margin revenue from deepwater sources. So, if Core Labs misses expectations this quarter it could have stemmed from falling oil prices causing an even bigger drop off in deepwater revenue.

Specifically, the company noted last quarter that several major coring programs, especially in the Gulf of Mexico, had been deferred but were now scheduled for the second half of this year. The company has nine coring programs in the Gulf of Mexico as part of this deferral, but because it adjusted for risk the company only included revenue of five of these projects in its second half revenue and earnings guidance. That being said, given that these are some of the company's highest revenue and margin opportunities in Revenue Description, which is the company's largest business segment, if these projects faced further delays due to the fall in oil prices it could have a big impact on quarterly results for both this quarter and the fourth quarter. 

Investor takeaway
Core Labs had expected to have a solid third quarter as it delivered modest growth in the second half of the year. But, those projections were based on supportive oil prices, and oil prices haven't been that supportive in the second half of the year. Because of that investors should realize that there is a very distinct possibility that Core Labs might miss expectations as well as reduce its guidance for the fourth quarter. Given the sell-off in shares it would appear that investors are already bracing for this to happen.

"As significant as the discovery of oil itself!"
Recent research by the U.S. Energy Information Administration has already tabbed this "Oil Boom 2.0" with a downright staggering current value of $5.8 trillion. The Motley Fool just completed a brand-new investigative report on this significant investment topic and a single, under-the-radar company that has its hands tightly wrapped around the driving force that has allowed this boom to take off in the first place. Simply click here for access.

How To Determine Intrinsic Value Of A Nadex Binary Option

Options are different creatures than plain old markets. They move closely to, but do not exactly follow, the market their price is derived from. If their price or premium is not exactly like their underlying markets, how can traders understand their value? There is a term for it. It’s called "moneyness", which is the intrinsic value.

By determining the moneyness of an option, one can form a conceptual value of an option, thereby helping decision making while trading. Moneyness can also be used when conceptualizing the value of Nadex binary options and spread options. To determine the moneyness of a Nadex binary, traders look at the price of the binary.

There are three forms or expressions of moneyness. Each of the expressions has a price level associated with it. There is “in the money”, ITM or I for short. That means if the binary expired now, it would make money. There is also “at the money”, ATM or A for short, which means the strike price is at or around the underlying market price. Finally, there is “out of the money”, OTM or O for short, which means if the binary expired now, it would not make money.  

Related Link: Using Nadex Spreads To Do Premium Collection Trades Everyday In Downward Markets

How do traders know when looking at the price, which form of moneyness a binary is in? To find the answer to this question, one can look at an example of a Nadex binary. A Nadex binary, in brief, is a simple true or false question with a yes or no answer. For example:

Gold (Aug) > 1260 (1:30PM) 43.00/48.00

The question is: Will gold be greater than 1260 at 1:30PM? If a trader thinks no, or this statement is false, and they sell the binary, then the bid price is 43.00 (the price above on the left). If a trader thinks yes, or this statement is true, and they buy the binary, then the ask price is 48.00 (the price above on the right).

The price will fluctuate up and down and then settle at 1:30PM. If, at settlement the price of Gold is >1260, the statement is true and the price settles at $100. If the market is at or below 1260, the statement is false and the price settles at 0. Profit or loss is then the difference between the settlement amount of $100 less the entry price for profit, or the difference between the settlement of 0 less the entry price for loss.

For a Nadex Binary Option, the price of the binary can also be a percentage expression of how likely the binary statement is to actually occur.

In the Money When Buying and Selling

If the ask price of a binary to buy it is $80, how likely might it be that the indicative market (Nadex derived market of the underlying) will expire greater than the binary strike price? It’s fairly close to $100, not considering time, one could say it currently has an 80 percent chance of expiring greater than the strike. Therefore, one could also say the ask price is currently “in the money”.

Now, consider the bid price of the same binary to sell it is $30? So, it is very far away from $100, not considering time, one could say the indicative market currently has only a 30 percent chance of expiring greater than the strike. In this case however, the binary can also be sold. If a trader sold the binary, they are saying the binary statement is false, that the indicative market will not be greater than the strike price, but it will be equal to or lower than the strike price! Therefore, in this case it is also “in the money”.

To view image click HERE

At the Money

Recall the gold binary example from above. The ask price to buy it was $48. There is an approximately 48 percent chance that the Nadex Gold will settle greater than the strike of 1260 or >1260. Turning it around, one could also say there is an approximately 52 percent chance it will not expire above the strike. In this case, it’s almost 50/50 that it could win or lose. When the underlying market price is right at or near the strike price, that is called “at the money” The market is at the strike price so it could go either way.

To view image click HERE

Out of the Money

What if the ask price of the binary to buy it was only $30, but a trader really thought the market was going to move up and stay past the strike, so they bought the binary? When they entered the trade, there was only an approximate 30 percent chance that would happen? Unfortunately, it didn’t go up and stay above the strike and it expired as a loss. What would the moneyness be then? When the trader entered or opened the trade it was “out of the money”, and when it expired it was also “out of the money.”

To view image click HERE

Of course, traders can exit the binary at any time. Traders can exit before expiration for a profit, if the price has moved favorably. Traders can also exit for a loss, if they believe the trade will expire against the position. In this case, the profit loss calculation would be as follows:

To view image click HERE

Here is the complete chart of moneyness for Nadex binary options.

To view image click HERE

For more information on Nadex binaries and spreads and how to trade them and get access to the free binary and spread scanners, go to www.apexinvesting.com. To practice trading binaries and spreads on a free demo account, go to www.nadex.com and click on trading demo, trading account. Apex Investing Institute offers free education, effective tools and a room community of seasoned as well as up-and-coming traders. Together in a supportive environment, along with tools to trade with ease and convenience, traders of all levels can learn how to trade Nadex binaries and sprea

What Happens When Markets Diverge

In my last column, I explained why, when you're considering investment ideas, you should always keep the bond market in mind. That's because stocks and bonds are inextricably interconnected.

They're inextricably interconnected because interest rates matter.

When expected relationships between stocks and bonds (interest rates) diverge, therefore, it's important to take notice, try to understand what is happening, and consider what the divergences could portend for both stocks and bonds.

Markets are experiencing a divergence now, and a lot of analysts are getting worried.

Stocks have been moving higher as the yield on the 10-year U.S. Treasury note has been falling ("bills" have a maturity of one year or less, "notes" go up to 10 years, and "bonds" have maturities of more than 10 years).

The 10-year Treasury note is now the "benchmark" interest rate that's widely watched and viewed as a proxy for the general direction of interest rates. It's currently yielding 2.53%. That means you give the Treasury your cash, and it gives you a note that pays you 2.53% annually for 10 years, and then you get your principal back.

When the U.S. Federal Reserve, which has been manipulating interest rates down to historic lows, said it was going to begin "tapering" its massive purchases of Treasury bills, notes and bonds, and mortgage-backed securities, the bond market got nervous. The Fed had managed rates down by exercising its quantitative easing (QE) program and announced it was paring back QE purchases because it saw the economy picking up.

(In its QE program, the Fed buys bonds from banks to flood those banks with cash in the hope that all that cash would trickle down into the economy.)

The yield on the 10-year note moved from about 2.25% to 3% in short order.

The thinking goes that if the economy is picking up it doesn't need the Federal Reserve to keep a lid on rates. That's because accelerating growth will increase demand for money and loans, which puts upward pressure on interest rates.

And letting the economy stand on its own two feet and letting interest rates rise modestly wouldn't be bad for the economy, right?

Furthermore, if interest rates rise gently, investors and businesses will take that as a sign that the economy is indeed picking up, and that will be reflected in the demand for loans and money, which ultimately shows up in rising interest rates. So, if rates are rising, things are getting better.

However, things don't look like they're working out that way. And now I'm going to tell you what actually happened and what this means for your portfolio.

Interest Rates... and a Divergence from the Expected

At the first mention of tapering, the stock market turned sour. If the Fed was cutting back its QE buying and was going to let rates rise gently, a few considerations came to light.

First, the stock market has risen because interest rates have been artificially low. Cheap money, which allows investors and speculators to borrow at low rates to leverage up their positions, moves stocks higher, because more shares can be bought.

And when interest rates are inordinately low, stocks become a more viable investment alternative, on account of cheap money coming in to buy shares and because dividend yields on a lot of stocks pay considerably more than bills, notes, and bonds. Their yields are being held down.

With the beginning of the end of the Fed's interest-rate manipulation on the horizon, stocks sold off. After all, if the economy was getting better, rates were going to rise, and stocks were at all-time highs, how much further might they go if the boost they had gotten for years was being tapered back?

Then the divergence showed up.

The 10-year yield began to fall, while stocks regained ground and made another run higher.

As far as divergences go, and there are many relationships that sometimes diverge, this one grabbed a lot of attention.

Why was the yield on the 10-year going down and not up if the Fed was tapering, if the economy was getting better? And why were stocks going up?

Here's what's worrisome.

The 10-year yield goes down because investors are buying the notes. Why are investors rushing into government notes and bonds?

One theory is that there's a "flight to quality" going on. Big institutional investors are nervous because they think there's something wrong somewhere and they want to get into the safest trades.

Maybe there are macro fears, like fear that Russia will start a war, or that Iran will stir up trouble, or Syria will implode further, or Thailand will foster regional nervousness. Any number of worrisome global macro events might cause investors to run to safe investments.

Maybe Europe is heading into its third recession in the past five years? Maybe China's credit bubble will pop and cause a global panic?

Or, maybe the U.S. economy isn't getting better, and there won't be demand for loans and money. Maybe, after a miserable first-quarter GDP number, we're looking at another recession, more disinflation, and maybe deflation. Maybe investors are afraid of that and are buying notes and bonds now before their yields fall further.

Maybe investors are concerned that stocks have risen too far and if the economy isn't picking up their high prices won't be justified?

This divergence - yields dipping when they were expected to rise and stocks rising when they were expected to dip - is what has analysts and investors nervous.

Of course, I'm watching this divergence, and you should be, too.

No one knows for sure what this divergence is signaling, or whether it will self-correct, and what that correction will mean for stocks and bonds. But one thing's for sure: We all better keep a close eye on the stock market and the bond market.

Today's Top Investing Story: Many investors believe that with our presence in Iraq largely gone, defense tech firms will offer mediocre returns at best. But they couldn't be more wrong. This defense tech play is scorching the market...

Why are Ford's sales slipping?

Ford (F) said on Thursday that its U.S. sales were essentially flat April, down 0.7%.

That was below analyst estimates, which called for a gain of about 3%. And it came as most of Ford's rivals posted modest gains for the month.

Not all of Ford's products had sluggish sales. For Ford at least, trucks sold well in April, up 8% -- but its car sales were down 9%. What's going on?

Why were Ford's car sales down?

On a conference call for analysts and media on Thursday, Ford sales analyst Erich Merkle attributed the decline to a couple of different factors.

First, the whole industry is seeing a consumer shift away from cars and toward crossovers and SUVs, he said. Ford's overall SUV sales were flat in April, but its family friendly Explorer saw a 17% year-over-year sales increase.

This isn't just Ford: A similar trend played out at rival General Motors' (GM) Chevrolet brand, where sales of the Cruze compact and Malibu sedan both fell, but sales of the Traverse crossover and Tahoe SUV were both up.

Second, Ford is deliberately decreasing its sales to rental-car fleets -- they were down 24% in April. Why would it do that?

Why Ford is happy about declining rental-car sales

While Ford considers some fleet business -- sales to commercial and government fleets -- to be good business, rental-car sales are seen as less good.

Rental-car sales aren't entirely bad. They can be good marketing: Someone who hasn't driven a Ford in years, but rents one while traveling, might be impressed enough to stop by a dealer after they get home.

But they're seen as less desirable than other kinds of fleet business for two reasons: First, the deep discounts required when selling cars in bulk to daily rental companies erode Ford's profit margins. Simply put, Ford can make more money selling the same cars to retail customers.

Ford will probably always have some rental-fleet sales. But when its factories are busy, as they have been lately, trying to boost rental-fleet ! sales doesn't make a lot of sense.

Second, rental-cars hit the used-car market after a couple of years, where their sheer numbers erode resale values. Automakers use those resale values to set leasing terms; they can offer you a lower, more competitive lease deal on a new model if they know that its resale value at the end of the lease will be higher.

Ford's increasing reluctance to sell to rental-car fleets were the main driver of its year-over-year declines on some models, Merkle said. For instance, sales of the compact Focus were down 18.6% overall -- but retail sales of the Focus were down just 4%, which he characterized as roughly in line with industry trends.

Of course, there's probably another factor at work when it comes to the Focus: Toyota (TM) has an all-new Corolla, and its sales were up 20% in April. Strong new products generally steal sales from less-new rivals, and the Focus has been essentially unchanged since 2011. Ford will release a refreshed version later this year.

Meanwhile, steady strength for Ford's high-profit F-Series pickups

Ford's car sales may have been sluggish in April, but its trucks did well. That's good news: Ford's F-Series pickups are its most profitable product line, and strong U.S. pickup sales have been key to Ford's good results in recent quarters. That strength continued in April, with sales up 7%.

It's also encouraging because Ford's mainstay F-150 pickup is set for replacement later this year. As a dated model competing against recently refreshed entries from both GM and Fiat Chrysler (FIATY) , it would seem to be at a disadvantage -- at least on paper.

Some analysts expected that Ford would have to crank up its discounts to keep pace in the current F-150's last year, eroding its strong profit margins. But so far, that hasn't happened: Ford said on Thursday that its incentives on the F-Series pickups (which includes the F-150 and its Super Duty siblings) were actually down about $210 per truck in April from what Ford s! pent in M! arch, to around $3,700 -- and down about $380 from a year ago.

Chrysler has been aggressive with incentives on its Ram pickups, and GM has been using carefully targeted incentives to try to keep pace.

But Ford says it didn't feel the need to boost its pickup discounts last month, and that bodes well for profits as the second quarter unfolds.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

<SCRIPT language='JavaScript1.1'SRC="http://ad.doubleclick.net/adj/N4538.USAToday/B2304017.8;abr=!ie;sz=550x300;ord=[timestamp]?"></SCRIPT><NOSCRIPT><AHREF="http://ad.doubleclick.net/jump/N4538.USAToday/B2304017.8;abr=!ie4;abr=!ie5;sz=550x300;ord=[timestamp]?"><IMGSRC="http://ad.doubleclick.net/ad/N4538.USAToday/B2304017.8;abr=!ie4;abr=!ie5;sz=550x300;ord=[timestamp]?" BORDER=0 WIDTH=550 HEIGHT=300ALT="Advertisement"></A></NOSCRIPT>

Google Will Be Better Off Minus Google+

Google+ as we know it appears to be finished. Vic Gundotra, the executive in charge, is leaving the company, and TechCrunch says big changes are afoot. The three-year-old social network is being redefined — demoted? — from a product to a platform, and Google Google will stop trying to infuse it into all its other products and services.

This is great news. It's great for consumers, who shouldn't have to sign up for a service they never asked for just to be able to use the ones they actually care about. It's great for those of us who depend on Google search for traffic or new business, and for whom maintaining a G+ profile that satisfied Google's ever more demanding specifications was an unwanted burden.

And, ultimately, once the sting of embarrassment fades, it will be great for Google. The failure of Google+ wasn't just a matter of botched execution; it was a result of misguided strategic thinking. Plus has been mostly a cul-de-sac for Google, and it will be better off for having emerged from it. Here's why.

G+ (Photo credit: clasesdeperiodismo)

1. Google's attempts to push Plus on users were a standing invitation for antitrust lawsuits. Forcing consumers to accept a product they don't want in order to get access to one they do want is called tying, and under some circumstances it's illegal. It's debatable whether Google's heavy-handed integrations of Plus crossed that line; the Federal Trade Commission looked into the matter but didn't take action. Still, Google finds itself in front of antitrust regulators often enough as it is without waving a big red cape in front of their noses.

2. There was no need to force Plus on users in the first place. The argument for it was Plus would make users of every Google product and service immensely more valuable to advertisers by allowing the company to track and profile them across the entire suite, and to follow them to every page with a "+1″ button on it. But why do you need a whole new social network for that? Rather than forge Google+ as the One Ring To Rule Them All, why not just do it with Gmail, which has more than 500 million users it acquired organically, not through coercion? (Indeed, Recode reports the sign-in component of Plus may become its own separate product.)

There was also the argument that Google search would suffer if it didn't have access to users' social graphs as a data set. But even Facebook has yet to figure out how to turn social data into a worthwhile search product.

3. Building a bunch of independent products is a better approach than building one uber-product with a ton of different features. That's what Facebook has concluded lately, anyway. After years of trying to do everything under the same umbrella, Mark Zuckerberg is now focused on "unbundling" Facebook's offerings into a number of " single-purpose, first-class experiences," like Messenger, Paper, Instagram and WhatsApp.

Not only does the unbundled approach lower the threshold for potential new users to sign up, it just results in better products on their own terms. That's what former Google+ team member Danny Crichton took away from the experience of working there:

One of the key lessons I learned from the experience that I have drilled into every founder I have worked with is that focus is absolutely everything. As soon as you have two goals, even one that is minor, you start heading toward the center of the convex set of solutions, and your product deeply suffers.

Cyber cops: Target hackers may take years to find

WASHINGTON (AP) — Secret Service investigators say they are close to gaining a full understanding of the methods hackers used to breach retailer Target's computer systems last December.

But the agency says it could take years to identify the criminals who stole some 40,000 debit and credit card numbers of Target shoppers and other personal information from as many as 70 million people in the pre-Christmas breach.

And it may take even longer to bring the offenders to justice. The federal investigation is complicated by the international nature of high-profile digital heists. The perpetrators are likely located overseas, which makes extradition and prosecution difficult. As a result, the Secret Service is focused on monitoring the online activities of its suspects, in hopes that they'll be able to arrest them at an opportune moment, says Ari Baranoff, an assistant special agent in charge with the Secret Service's criminal investigative division.

"We take a lot of pride in having a lot of patience," Baranoff said during a rare sit-down interview with the Associated Press at the agency's headquarters in Washington. "There are individuals we've apprehended that we've known about for 10 years and we're very comfortable indicting these individuals, sitting back and waiting patiently until the opportunity arrives that we can apprehend them."

STORY: arget breach helps usher in new world of data security

TIPS: How to protect yourself from credit card fraud

Target says it can't yet estimate what the breach will cost the company, but some analysts put it at close to half a billion dollars. The total cost of the breach —which also would include losses incurred by banks, consumers and others— could easily reach into the billions of dollars.

Target, which is in the midst of its own investigation, has said very little about how the breach happened, except that it believes the thieves gained entry to its systems by infiltrating computers owned by one of its vendors, thought! to be a Pittsburgh-area heating and refrigeration business.

Baranoff couldn't speak specifically about the federal investigation into the Target breach, since the case is ongoing, but he talked candidly about the growing threat of large-scale, financially motivated cybercrimes and the Secret Service's efforts to stop them.

Behind every major breach, there's usually a team of highly specialized cybercriminals who mainly know each other through online nicknames and reputations. Most aren't motivated by politics, just greed, Baranoff says.

If the hackers do invest in anything, it's their own operations. An increasing number are building their own server farms, sometimes leasing space to other criminals, making it harder for law enforcement to track them down.

Further complicating matters, Baranoff says the vast majority of high-level cybercriminals tend to be Russian speakers based in former Soviet and Eastern European countries, which largely puts them out of the reach of U.S. authorities.

But the Secret Service has strong ties with cybercrime agencies in many countries — including The Netherlands, Germany and the United Kingdom — and has found others to be helpful as well, even if they don't have extradition treaties with the United States.

While best known for protecting the president of the United States, the U.S. Secret Service was originally formed in 1865 to investigate crimes related to counterfeit currency. The passage of the Patriot Act following the Sept. 11 terrorist attacks expanded its role in investigating computer-related crimes.

From the agency's unassuming headquarters a few blocks from the bustle of the National Mall, special agents infiltrate online forums frequented by hackers, monitoring their activities, and creating online undercover identities in hopes of infiltrating criminal networks.

The same kinds of activities take place at the Secret Service's other electronic crimes task forces in the U.S. and overseas. The tactics the inv! estigator! s use are surprisingly similar to the law enforcement methods used by traditional beat cops everywhere. But digital investigations come with their own challenges. And based on the growing volume of stolen data now up for sale, hackers are becoming more sophisticated and more successful at evading justice.

Chester Wisniewski, senior security adviser for the computer security firm Sophos, says it's the Secret Service's ability to coordinate with law enforcement agencies around the world that make it effective in fighting cybercrime and help speed things up.

"With electronic crime, criminals move extremely fast and they're dependent on the police being tied up in red tape," Wisniewski says.

But challenges remain. After years of work, agents might be able to shut down a message board where stolen credit card numbers are bought and sold, but there's nothing to stop another from replacing it the next day, he says.

Meanwhile, political and economic pressure on countries known to harbor cybercriminals can also help, Wisniewski says, noting that U.S. promises of a better trade status helped eliminate much of the cybercrime that previously originated in Romania.

Despite all of that, many countries, including Russia, follow an unwritten rule: they won't pursue cybercriminals as long as they don't commit crimes in their own countries, Wisniewski says.

Baranoff says criminals could evade U.S. capture indefinitely if they stay hunkered down in their homes, but they're generally not happy staying put and like to spend their ill-gotten gains on trips to countries friendly to the U.S.

That's when authorities can make their move.

"These actors are making a lot of money and they want to travel," Baranoff says. "Some have suggested that there's no greater punishment actually than forcing them to stay where they are."

Bank branches vanishing in small towns

DES MOINES, Iowa -- Empty bank branches are starting to litter small-town business districts across the nation as the financial institutions that own them focus their resources on larger communities.

Ron Tate, the mayor of Runnells, Iowa, has been trying to get a new bank to open shop in his town, population 506, ever since Great Western left in September. The rural community east of Des Moines hasn't been without a bank for more than a month or two in his time there, he said, and it's hard for the town to function without a local place for businesses and older residents to do their banking.

"Without a bank branch, we're missing a big part of our community," said Tate. "I can't find anyone that wants to open a new branch here."

Banking industry experts say a similar trend is beginning to play out nationwide as banks respond to new regulations cutting into the revenue they previously derived from overdraft fees, credit card transactions and mortgage lending. U.S. bank earnings are up, but cost-cutting is responsible for most of that growth.

The number of Iowa bank offices and branches fell nearly 3 percent from 2009 to 2013, and was down a little over 3 percent nationally, according to the Federal Deposit Insurance Corp.

FDIC statistics don't tell the whole story though, according to Jim Chessen, chief economist for the American Bankers Association. That's because they reflect not only the closings of small-town branches, but also new branches opening in high-traffic areas.

The data also are impacted by the transition to online banking.

Chessen said he's confident the situation in Runnells is not an outlier but is typical of what's going on across the nation. The disproportionately large regulatory burden on community banks is partly to blame, he added.

"Cost pressures have led to greater consolidation of the industry and much more focus on cost containment," Chessen said. "The American Bankers Association has continually pressed the regulatory agencies to ! have regulations commensurate with business structure and true risk. If the regulators continue to put requirements on small banks that are designed for large complex institutions, we will see fewer and fewer community banks."

Doug Bass, Great Western's regional president for Iowa, Missouri and Kansas, said its branch count has increased to 180 from 125 since 2009. That includes 50 branches acquired in 2012 as part of its $41.5 million purchase of First Federal Savings Bank of Iowa.

Great Western, based in Watertown, S.D., had $9.3 billion in assets and 1,466 employees as of Dec. 31. Its annual earnings grew 31 percent to $106.6 million in 2013.

"The trend in banking is toward fewer 'in-branch' transactions and narrower profit margins," Bass said. "Great Western Bank is investing significant money into enhanced online and mobile banking products, which are being demanded by consumers. To offset this cost, a reduction in physical locations has and will continue to occur across the industry."

Patrick Jury, head of the Iowa Credit Union League, said its 116 members are facing similar pressures. "There's a big debate within credit unions right now because there's so much more demand for electronic banking," Jury said.

The pressures aren't just causing banks to abandon small rural communities. They're leaving some poor urban communities, too.

John Rigler, president and chief executive officer of State Bank, says branch closings are happening in many locations. He blamed his decision to close a branch in New Hartford on new federal regulations that halved the $76,000 that State Bank was taking in each year from debit fees.

The New Hartford branch was located quite literally on Main Street USA, and the building has been empty since it was shuttered on Nov. 15, 2012. It was a "money loser," according to Rigler, but the community banker said he appreciated how important it was to New Hartford and tried to keep it open anyway.

"The New Hartford bank was closed as a ! result of! the geniuses in the U.S. Congress who think these onerous regulations make sense," Rigler said. "We conducted a review of our operations and had to pick where we could cut costs to handle the additional costs and lost revenue from the federal government's actions. Unfortunately the folks living in New Hartford suffered as we decided to close their bank."

State Bank is based in New Hampton and has about $360 million in assets. It had 70 employees as of Dec. 31 and earnings of $4.6 million in 2013.

Like Runnells, New Hartford has about 500 people and is located less about 19 miles from downtown Des Moines. But that's still too far for many older residents, according to Tate, the Runnells mayor. Many of them also built their weekly schedules around regular visits to the bank.

"Now I can't find anyone that wants to open a new branch here," Tate said. "They're all looking at the bottom line. They're not thinking of the people in town, particularly the older people who don't know how to bank online."