Eneryg Stocks To Invest In 2013, Best Energy Stocks For 2013: May 2015

Sunday, May 31, 2015

Hereâ€™s More on Appleâ€™s Long-Awaited Gadget

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.

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Thursday, May 28, 2015

Sterne Agee Group in deal to acquire midsize independent broker-dealer WRP Investments

sterne agee, mergers and acquisitions, wrp investments, registered representative, independent broker-dealer, ibd

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.”

Wednesday, May 27, 2015

Feds appeal sentence of Beanie Babies creator

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

Monday, May 25, 2015

Can Bank of America Continue to Outperform?

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.

BAC

(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.

Sunday, May 24, 2015

Rieder: Benghazi report helps clear the smoke

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.

Wednesday, May 20, 2015

Retail Stocks to Buy (or Not) in 2014

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.

Tuesday, May 19, 2015

A Tale of Two Charge Cards: Europe Boosts MasterCard, U.S. Slows Visa

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.

Wednesday, May 13, 2015

Goldman Sachs Selectively Starts Seeing Coal Stocks to Buy

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.

Tuesday, May 12, 2015

Winning Returns From Short-Term Junk Bonds

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.

Sunday, May 10, 2015

The Irrational Retirement Choices We Make

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.