Best House Insurance 2013: January 2015

Thursday, January 29, 2015

Dec. home prices see 11% annual rise

Home prices were up 11% in December year over year as 2013 marked the strongest year for home price gains since 2005, market watcher CoreLogic says.

Ten states and the District of Columbia reached new all-time price peaks, mostly in the second half of the year, CoreLogic says.

Home price gains this year are not expected to be as robust. Rising prices will attract more sellers, leading to an increased supply of homes on the market, and that will have a "moderating effect on prices," says Mark Fleming, CoreLogic chief economist.

The 10 states hitting all-time price peaks tend to be ones with strong energy economies or places where the home price bubble didn't inflate as much so prices fell less during the downturn.

The states are Texas, North Dakota, Nebraska, Vermont, South Dakota, Iowa, Colorado, Alaska, Oklahoma and Wyoming, CoreLogic's data shows.

It's hardly surprising that 2013 was the strongest year for home price gains since 2005. The historic housing bust took off in earnest in 2006 and it wasn't until 2011 before prices started to recover in the first major markets.

Most economists see price growth slowing a lot this year, but the nagging question remains how much inventory will come on the market.

As of December, housing inventories were still tight at a 4.6-month supply, down from a 5.1-month supply in November, the National Association of Realtors says.

Typically, Realtors consider a six-month supply to be a balanced market. Disappointing job growth and limited supply caused the housing market to lose some momentum at the end of the year, NAR says.

12 High-Yield Managed Distribution Policy Funds

Exchange traded funds (ETFs) and closed-end funds (CEFs) are composed of many different individual securities. This usually results in uneven dividend distributions. Some funds have tried to address this with a managed distribution policy. In short, a managed distribution policy is management's commitment to make a fixed periodic dividend payment.

How Managed Distribution Policies Work

Since many funds distribute most of their income to shareholders in order to avoid taxation, funds with a managed distribution policy sometimes have cash left over at year-end that needs to be distributed. This is is normally done as a "special" one-time dividend. However, if the fund generates insufficient cash to cover the dividend, the fund is forced to sell some investments to cover the cash short-fall. In turn, this portion of the short-fall is treated as a return of capital and the fund now has lower assets to generate future income.

Advantages of Managed Distribution Policies

According to a Gabelli Funds report, managed distribution policies offer several advantages, including:1. Lower difference between the fund's market price and its NAV per share.2. Provides support during periods when the stock market is in a decline.3. Provides a measurable performance target for the investment adviser.Below are several high-yield funds from CEFA that have a managed distribution policy (yields as of December 16):Aberdeen Australia Eqty (IAF)- Distribution Yield: 10.4%- Income Yield: 3.46%Bexil Advisers LLC (DNI)- Distribution Yield: 11.1%- Income Yield: 3.56%BlackRock En Capital&Inc (CII)- Distribution Yield: 8.78%- Income Yield: 2.34%Cornerstone Strat Value (CLM)- Distribution Yield: 18.77%- Income Yield: 1.83%Cornerstone Total Return (CRF)- Distribution Yield: 19.10%- Income Yield: 0.85%Delaware Inv Div & Inc (DDF)- Distribution Yield: 6.70%- Income Yield: 5.26%Gabelli Equity Trust (GAB)- Distribution Yield: 7.58%- Income Yield: 1.54%Gabelli Utility Trust (GUT)- Distribution Yield: 9.45%- Income! Yield: 2.84%MFS Special Value Trust (MFV)- Distribution Yield: 9.60%- Income Yield: 5.73%Nuveen Tx-Adv TR Strat (JTA)- Distribution Yield: 6.70%- Income Yield: 3.12%TCW Strategic Income (TSI)- Distribution Yield: 10.54%- Income Yield: 7.88%Zweig Total Return (ZTR)- Distribution Yield: 7.27%- Income Yield: 1.95%As noted in the Gabelli report, a managed distribution policy may create confusion regarding the true current yield since the reported yield includes the return of capital portion. You can see the disparity above between the income yield and the distribution (reported) yield.If you are looking for a sustainable and growing dividend, you may want to consider some blue-chip dividend stocks such as these with a Free Cash Flow Payout less than 50%, 50+ years of consecutive dividend increases and a 2%+ yield:3M Co. (MMM) is a diversified global company provides enhanced product functionality in electronics, health care, industrial, consumer, office, telecommunications, safety & security and other markets via coatings, sealants, adhesives, and other chemical additives. Yield: 2.0%Illinois Tool Works Inc. (ITW) is a diversified manufacturer operates a portfolio of 60 business units that serve industrial and consumer markets globally. Yield: 2.1%Colgate-Palmolive Company (CL) is a major consumer products company that markets oral, personal and household care and pet nutrition products in more than 200 countries and territories. Yield: 2.1%Emerson Electric Co. (EMR) designs and supplies product technology, and delivers engineering services and solutions to a wide range of industrial, commercial and consumer markets around the world. Yield: 2.5%Genuine Parts Co. (GPC) is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products. Yield: 2.6%Cincinnati Financial Corp. (CINF) is an insurance holding company that primarily markets property and casualty coverage. It also conducts life insurance and asset management operations. Yield: 3.2%When investi! ng in a f! und with a managed distribution policy, it is important not to confuse predictable cash flows with assured cash flows. A managed distribution policy means that the funds management is making an attempt to smooth out cash flows, but there is no guarantee they will be successful. Yield:Full Disclosure: Long ITW, EMR, GPC, CINF in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.Related Articles- 8 Higher-Yielding Consumer Stocks With A History of Rising Dividends- 10 Dividend Stocks For The Ultimate In Deferred Gratification- 6 Healthcare Stocks With Growing Dividends Yeilding In Excess of 2%- Why We Are Dividend Growth Investors- 6 Dividend Growth Stocks With Very Little Debt

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Wednesday, January 28, 2015

What to Watch on Wall Street This Week

AP, Rockstar GamesGrand Theft Auto V has been a big winner for Take-Two Interactive. When it releases its earnings this week, we'll find out just how big. You can never know in advance all the news that will move the market in a given week, but some things you can see coming. From earnings reports out of Apple to a deal on burritos on Halloween, here are some of the items that will help shape the week that lies ahead on Wall Street. Monday -- An Apple a Day: Last Tuesday Apple (AAPL) had the ear of consumers as it introduced new iPads, iMacs, and an updated operating system. Monday afternoon it will be time to sway investors with its fiscal fourth quarter report. Apple is still the top dog in consumer electronics, but iPad, iPod, and Mac sales have been slipping lately. Apple's iPhone is the only product category growing, and the end result is that analysts see flat revenue growth at Apple on declining profitability. Apple's quarter ended with the welcome news that it had sold 9 million iPhone 5s and iPhone 5c devices in their initial weekend of availability. Now it's time to see if it was enough to save Apple's quarter. Tuesday -- Game On: After years of sluggish sales the video game console industry showed signs of life last month. Take-Two Interactive's (TTWO) Grand Theft Auto V was a smashing success, helping push the industry to a rare monthly gain. Things will get even more interesting next month when the Xbox One and PlayStation 4 hit the market. The market will get a good read on the state of the industry on Tuesday as Take-Two Interactive and the larger Electronic Arts (EA) report fresh earnings. It may be too early for either company to have reliable projections on how the new consoles will fare, but any insight would be incremental at this point. Wednesday -- Face to Facebook: One of last year's most prolific IPOs was Facebook (FB). The leading social networking website operator went public at $38, but a few months later the stock was -- like the site's original core audience -- trading in the teens. Facebook has clawed its way back. It's no longer a broken IPO, and Facebook's success in busting through that $38 IPO ceiling this summer probably played a major part in Twitter's decision to go through with an offering of its own. Facebook reports on Wednesday, letting the market know how it's doing in monetizing mobile. More and more users are interacting with the site through smartphones and tablets, and while that was at first interpreted as a detriment, we've seen Facebook come up with new ways to make mobile usage pay off. Thursday -- Scaring Up Some Grub: It's Halloween, and while kids and kids at heart will tell you that it's all about the free candy, there's at least one way to score a pretty healthy discount on dinner after a night of collecting Hershey bars and candy corn. Chipotle Mexican Grill (CMG) is once again hosting what it calls Boorito. From 4 p.m. to close on Thursday, anyone walking into a Chipotle in a costume will be able to order a burrito, bowl, salad, or taco order for just $3. That's nearly half off the going rate for the "food with integrity" chain that now has more than 1,500 locations worldwide. All proceeds -- up $1 million -- benefit the Chipotle Cultivate Foundation. The treat is no trick. Friday -- Bringing a Steak Knife to a Gunfight: Restaurants have been struggling lately, but upscale steakhouses have actually held up fairly well. Well-to-do consumers hungry for a good steak and wedge salad have been heading out to fancy chophouses lately. We'll get a decent snapshot of the upscale market when Ruth's Hospitality (RUTH) reports. This is the parent company of the Ruth's Chris chain of high-end steakhouses. The stock has nearly doubled over the past year, and it's going to need to keep serving up "well done" reports to keep it that way.

Facebook playing with fire by policing beheading videos

Rather than set a bright-line policy on violent images, Facebook must now decide what is the right context for clips of people being decapitated.

NEW YORK (CNNMoney) Facebook has enacted a murky, case-by-case policy on violent content, setting the company on a precarious path.

Facebook (FB, Fortune 500)temporarily banned graphic, violent content from its site back in May, when clips including a particular video of a woman being beheaded were spreading across the site. That video resurfaced recently after Facebook quietly lifted the ban on graphic videos, and it once again caused a stir.

Facebook defended its decision on Monday after a BBC article publicized the lifting of the ban, but just 24 hours later, Facebook once again decided to take the video down.

But rather than set a bright-line policy on violent images, Facebook instead backed itself into a gray area. The site removed the specific beheading video that caused the flap -- but going forward, the site said it will make a determination about each post individually.

Facebook said it will allow the videos to stay up as long as posters "condemn" the violence and warn viewers of the graphic nature of the content. But the content will be removed if it is deemed to be shared for "sadistic pleasure or to celebrate violence."

Related story: Facebook kills search privacy setting

In doing so, Facebook has created yet another murky policy -- and thrust itself into making difficult decisions around controversial content on a case-by-case basis.

Instead of determining whether or not this content is allowed on Facebook, the site will now play the jury for each violent post that makes the rounds. If context is truly the key, why did Facebook remove this specific beheading post from the site entirely? Surely some of the users posting it were condemning the horrific act.

In explaining the new policy, Facebook said its philosophy is that people use the site to raise awareness of important issues -- and that sometimes involves violent images.

That may be true, but by getting into the context game, Facebook is making itself an easy target for the ongoing debate over what is censored on the site. Facebook has already gotten flak over controversial policy decisions involving issues like images of breastfeeding mothers -- which are sometimes banned and sometimes not.

With over 1.1 billion Facebook users, it's only a matter of time before another shocking bit of violence goes viral on the site. And now Facebook has put itself in the position of moral compass for all of those s! candals going forward.

Monday, January 26, 2015

Ray Dalio - Radical Truths of the Financial Universe

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You've spoken about individuals who shape the world we live in and the particular qualities they share. What is the process these people, "the shapers," go through that perhaps the rest of us do not?

Ray Dalio: I think for everybody, in order to be successful, there are five steps that you go through essentially. But everybody has their goals. What is their goal and passion? So you have goals. And then what happens is you're going after your goals and you encounter your problems. So encountering problems, and then the big difference between people is how they approach those problems. People who get bummed out by the problems don't learn from it. Who learns from them? So those who recognized the problems are excited that they get into those problems or mistakes. Mistakes are learning experiences. The pain that comes for that mistake, every time you have pain it's an indication that something is at odds. So the people who have the pain are the people then who will go into that and realize that if they solve that pain, solve that problem, understand what that is representative of -- not just the one problem -- but that problem is a certain type of problem that will happen over and over and over again in your life, and if you can solve, "How do I deal with that kind of problem?" The third thing that everybody needs to do is, if they have problems on the way to their goals, that they diagnose those problems and they get to the root cause -- the real root cause. The real root is often -- is typically -- what people are like. Can you go to what you're like? Can you go to your mistakes? Can you go to your weaknesses? Right. Can you go to other people's mistakes and weakness? Some people, because of ego barrier, can't do that, so if they don't recognize their own mistakes, their own weaknesses, or other's mistakes and weaknesses -- what the root ca! use may be and what they're like because of ego barriers -- if they can't go there, they're going to repeat those mistakes. They're going to have them over and over again. So it's the process essentially of saying, at that stage, "What am I like?" Everybody has strengths and everybody has weaknesses. The weaknesses are the other side of the strengths. So let's say if you're a right brain/creative person, you may not be reliable. Because just the way you think necessitates you to think a certain way, that means you can't think in another way. That means you're going to keep bumping into that thing that's standing in your way. But unless you can embrace, "I'm not reliable," right, and deal with it, you won't get around it. It's still going to continue to be a barrier. Right. So the diagnosis to the root cause is important. So then if you diagnose, then you have to design what you are going to do about it that works. So let's say you are very creative but not reliable. Okay, you have to find the means of first of all embracing that, and then saying, "If I'm not reliable, what do I? Do I work with a reliable person? Do I learn reliability? Do I have some compensating mechanism?" Because I can't let that lack of reliability stand in the way of my goal. As long as I keep doing that I'm going to keep running into problems.

So you have to design what you do about the problems. And then when you're designing what to do about the problems, you have to follow it through. You have to follow through, or do the thing you design. Doing the thing you design requires self-discipline and so on. People have to do those things in order to be successful. Right. They have to know what their goals are. They have to diagnose their problems down to the root cause, the real root cause. They have to design ways to get around them, and then they have to have the self-discipline to follow that. It's a continuous iterative process. So that's what we keep doing. I would say that all of the shapers are doing that. So they don't ! mind the ! problems. That's their adventure. A wonderful book is Einstein's Mistakes. You hear his struggles. He wouldn't have been cutting-edge, he wouldn't have been inventive if he didn't go through that. So when you're looking at the personality characteristics, the personality characteristics lend themselves to doing that five-step process well.

In his book The Outliers, Malcolm Gladwell says it takes something like 10,000 hours of working at something to become remarkable, to become extraordinary. I think you're also describing a person who is very driven, who has great tenacity and doesn't let things get in the way of the goal.

Ray Dalio: Yes, of course. It's an element, but... It's the mixture of the elements that matter. You could have a tremendous tenacity, but you're studying, you're learning, you're trying to memorize and remember everything that you're being taught and you're really trying hard. You could have great tenacity. You need the making sense of something, you need to embrace reality. You need these other dimensions. Right. So I think the things that we started to talk about just before, the things that these people have a need for is: First, they need to -- most fundamentally - make sense of things, which is a very different kind of learning process. It's a very internalized learning process. It's not a memory-based process. So none of these people -- unlike the population as a whole -- none of these people have a desire to follow instructions.

Continue reading here.

Sunday, January 25, 2015

Morning Briefing: 10 Things You Should Know

NEW YORK (TheStreet) -- Here are 10 things you should know for Wednesday, Sept. 18:

1. -- U.S. stock futures were rising following modest gains across the globe as investors await an announcement from the Federal Reserve on its plans to taper economic stimulus.

European stocks were higher. Asian shares finished the session mixed. Japan's Nikkei 225 index rose 1.4%.

2. -- The economic calendar in the U.S. Wednesday includes housing starts and building permits for August at 8:30 a.m. EDT, and the rates decision from the Federal Open Market Committee in the afternoon. 3. -- U.S. stocks on Tuesday rose as investors await guidance from the Fed about the future of its sweeping economic stimulus program. The S&P 500 rose 0.42% to close at 1,704.76 while the Dow Jones Industrial Average added 0.29% to finish at 15,539.63. The Nasdaq gained 0.75% to 3,745.70. 4. -- Walgreen (WAG) is set to become one of the largest employers to make sweeping changes to company-backed health programs. The drugstore giant is expected to disclose on Wednesday a plan to provide payments to eligible employees for the subsidized purchase of insurance starting in 2014, according to The Wall Street Journal. The plan would affect roughly 160,000 employees, and will require them to shop for coverage on a private health-insurance marketplace. Walgreen joins a list of companies making changes to their benefits. IBM and Time Warner said recently they will move thousands of retirees from their own company-administered plans to private exchanges. 5. -- Starbucks (SBUX) said guns are no longer welcome in its cafes, though the coffee chain stopped short of an outright ban on firearms. The request is being made in part because more people have been bringing guns into Starbucks over the last six months, prompting confusion and dismay among some patrons and employees, CEO Howard Schultz told Reuters in an interview. In an open letter to customers issued late Tuesday, Schultz said: "Our stores exist to give every customer a safe and comfortable respite from the concerns of daily life." Starbucks' long-standing policy had been to default to local gun laws, including "open carry" regulations that allow people to bring guns into stores, Reuters noted. Schultz said he hopes people will honor the request not to bring in guns but said the company will nevertheless serve those who do. "We will not ask you to leave," he said. Starbucks has almost 7,000 company-operated U.S. stores. 6. -- Adobe Systems (ADBE), the maker of creative-suite products like Photoshop and InDesign, said fiscal third-quarter earnings on an adjusted basis fell to 32 cents a share from 58 cents a share a year earlier. Revenue fell 8% in the quarter to $995.1 million. Wall Street expected Adobe to report earnings of 34 cents a share on revenue of $1.01 billion. Adobe has been shifting its business to a subscription-based model. The company said subscription revenue rose 73% to $299.4 million. The company said its Creative Cloud service gained 331,000 paying subscribers during the quarter, surpassing 1 million. 7. -- FedEx (FDX) is expected by Wall Street on Wednesday to report fiscal first-quarter earnings of $1.50 a share on revenue of $10.97 billion.

8. -- Software maker Oracle (ORCL) is expected by analysts to post fiscal first-quarter earnings of 56 cents a share on revenue of $8.48 billion.

9. -- A report by the 9to5Mac blog said Apple's (AAPL) iPhone 5s could be in short supply. Customers in China and Hong Kong could reserve the iPhone 5s starting Tuesday. But just minutes after the phone became available, most models and colors sold out across the country, the blog reported. The rate at which the 5s sold out in China doesn't bode well for the rest of the world, as it suggests that overall supply in general of the 5s is low, according to 9to5Mac. Apple begins selling the iPhone 5s in retail stores on Friday. 10. -- Employees from US Airways (LCC) and American Airlines (AAMRQ) are in Washington, lobbying members of Congress to support a planned merger of the two carriers, despite opposition from the Justice Department. The employees, including leaders of unions at the two carriers, will hold individual meetings with members of Congress on Wednesday, and they will gather for a noon rally near the Capitol building, The Dallas Morning News reported. -- Written by Joseph Woelfel >To contact the writer of this article, click here: Joseph Woelfel >To submit a news tip, send an email to: tips@thestreet.com.

Home Prices Climbed 12.4 Percent in July

Handing Over the Keys to A New Home with Sold Home For Sale Sign. Alamy U.S. home prices jumped 12.4 percent in July from a year earlier, reflecting a housing market that's increasingly favoring sellers amid a tight supply of available homes for sale. Real estate data provider CoreLogic said Tuesday that home prices in every state but Delaware climbed on annual basis in July. Also, 99 of the 100 largest cities reported annual price gains. Home prices grew 27 percent in Nevada, to lead all states. CoreLogic also says prices rose 1.8 percent from June, the 17th straight month-over-month increase. Consistent job gains and mortgage rates that are still historically low despite recent upticks are spurring more people to buy homes. That's helped drive prices higher. CoreLogic says U.S. home prices are now within 18 percent of their peak levels reached in April of 2006.

Thursday, January 22, 2015

Is ARC Document Solutions's Cash Flow Just For Show?

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on ARC Document Solutions (NYSE: ARC ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, ARC Document Solutions generated $14.9 million cash while it booked a net loss of $26.6 million. That means it turned 3.7% of its revenue into FCF. That sounds OK.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at ARC Document Solutions look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 68.3% of operating cash flow coming from questionable sources, ARC Document Solutions investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 9.8% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 59.8% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

Looking for alternatives to ARC Document Solutions? It takes more than great companies to build a fortune for the future. Learn the basic financial habits of millionaires next door and get focused stock ideas in our free report, "3 Stocks That Will Help You Retire Rich." Click here for instant access to this free report.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

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Gold, and Why So Many Investors Fall for Bubbles

Gold, the asset investors bought to protect their wealth, is down 36% in the last two years. The popular SPDR Gold Trust ETF (NYSEMKT: GLD ) is down 21% in the last three months alone. What happened?

Business Insider obtained a letter to investors from a fund manager whose fund lost almost 70% in the second quarter -- ostensibly because of heavy exposure to the metal. The manager explained why he missed the plunge:

Here is the problem. The oldest daily gold stock index started in December 1983. If you look at the older, weekly gold stock data, which starts in December 1938, there were plenty of instances when the 1-month RSI readings went lower than February 20 and gold stocks continued to go lower.

While one may think that 29 years would produce enough data to make for a robust indicator, the problem is commodities have 30 year cycles. The last major commodity top was in 1980. So the 1983 data does not even cover a full commodity cycle. While this seems obvious in retrospect, it did not become glaring obvious that something was amiss until the precious metals complex crashed in mid-April ...

In summary, there were many indicators based on 1983 data in February, March and early April that were at all-time extremes. This made the risk look negligible. However, the 1938 data does not give up "all-time" extremes so easily. The next time around the oldest available data will be utilized.

Simple stuff, really. The manager relied on a truncated set of historical data that left out the last bear market to convince him that, historically, gold does really well. Now he's looking at a longer set of historical data and realizing otherwise.

Haven't we seen this before?

Yes. Relying on incomplete data to influence long-term views is also what took down stock investors in 2000, real estate investors in 2006, and Wall Street traders in 2008. Every bubble, basically.

Take this quote from Maggie Mahar's book "Bull!", describing stock investors' perception of market history in the 1990s:

Sometimes a magazine would print what looked like a lengthy timeline unfolding across the bottom of two pages. But closer inspection would reveal that it tracked the market for, perhaps, three years. Occasionally, a story included a chart that looked back to the sixties, but for the most part, a timeline meant to show the market's history went no further back than 1982 -- leaving the bull market in splendid isolation.

Or this, from former Fed chairman Alan Greenspan on what took Wall Street down:

The data input into the risk-management models generally covered only the past two decades, a period of euphoria. Had instead the models been fitted more appropriately to historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment.

Or this explanation of why a Wall Street risk metric called value at risk (VAR) missed the financial crisis:

All the triple-A-rated mortgage-backed securities churned out by Wall Street firms and that turned out to be little more than junk? VaR didn't see the risk because it generally relied on a two-year data history.

Or this, from testimony by Deven Sharma of Standard & Poor's explaining to Congress why the rating agencies missed the housing bubble:

While we performed analysis in good faith, events have shown that the historical data we used in our analysis significantly underestimated the severity of what subsequently occurred.

During every bubble, investors truncate historical data to build a model that shows them exactly what they want to see: low risk and big returns. You can't blame them. As Nate Silver once wrote, "Human beings have an extraordinary capacity to ignore risks that threaten their livelihood, as though this will make them go away." When you want to believe something, you'll do what is necessary to convince yourself that it's true. Like ignoring historical data that gets in the way.

There's a simpler explanation for what's going on in gold. For years, we had 2% inflation and 20%-plus surges in the price of gold. Now those figures are reverting back toward each other. Which is what a long look at history tells us they were bound to do.

To paraphrase Mark Twain's saying: History doesn't repeat itself, but it rhymes.

Wednesday, January 21, 2015

Does This Justify Google's Motorola Mobility Acquisition?

Looking back, it was really just a matter of time. Last year's acquisition of Motorola Mobility, for $40 a share, totaling a cool $12.5 billion, was a watershed moment for Google (NASDAQ: GOOG ) . Ostensibly, Google's largest acquisition to date was completed to secure Motorola Mobility's 17,000 patents, along with another 7,500 that were pending approval. The idea was the patents would ward off potential patent-related lawsuits.

But Google CEO Larry Page wasn't fooling anyone; buying Motorola Mobility was a direct means to go after Apple (NASDAQ: AAPL ) and Samsung in the lucrative U.S. smartphone OEM market. Google's partnership with LG has already produced a Nexus smartphone, and Motorola has some, too, but that's so un-Google. If we've learned anything over the past couple of years, it's that Google isn't afraid to aggressively enter new markets with guns blazing: Google Fiber, the use of white space for wireless connectivity, self-driving cars, Glass -- the list goes on and on.

So, when is Google -- via its Motorola Mobility unit -- going to get to work manufacturing its own high-end smartphone, and get serious about taking on Apple? Turns out, that time is nearly here.

Get ready for Moto X
Motorola has a suite of smartphone alternatives, of course; its RAZR phone was once a cutting-edge mobile device. But as Apple's iPhone and Samsung's Galaxy line of phones hit the streets, Motorola's share of the domestic smartphone pie continued to shrink -- down to an 8.5% market share in March of this year, from 9.1% the end of 2012. Google doesn't take losing lightly. The answer? Step up to the plate with its own premium Motorola Mobility phone, manufactured right here in the U.S.

As we learned through an interview with Motorola Mobility CEO Dennis Woodside at the All Things Digital conference, the manufacturing of the Moto X phone -- which will sport a new design, using two batteries to save power, and possibly incorporate sensors to predict users' needs -- will be outsourced, but it's Google-backed Motorola Mobility, through and through. As Woodside put it, "We're trying to bring Motorola back to its roots." And maximize the $12.5 billion purchase price, while at the same time going after Apple's share of the domestic smartphone market? You can bet on that.

The target date for rolling out the Moto X is this October and, like Apple and its iMacs, Moto X will be made in the USA -- just outside Fort Worth, Texas, to be precise. Moto X will generate about 2,000 local jobs, too.

Google is also exploring ways to incorporate cutting-edge technologies into its Moto X smartphone, including electronic tattoos and wearable devices to confirm a Moto X user's identity. As Google continues to push the envelope, and combines its drive for innovation with taking ownership of its own OEM devices, who knows where its smartphone will end and an all-in-one mobile device begin? A lack of innovation has been mentioned time and again as one reason Apple's share price has declined so dramatically lately. That's not likely to be a problem for a Google-driven Motorola Mobility device.

Unseating Apple in the U.S. isn't going to happen overnight, if it happens at all. With 39% of the domestic smartphone market as of Q1 of 2013, Apple actually stretched its lead over Samsung (at least in the U.S.). Not surprisingly, Google's Android continues to rule the OS roost, running 52% of all Americans' smartphones in Q1. Google's OS market domination, along with its willingness to push technology to new heights, bode well for Google's latest foray. Maybe Page knew what he was doing when he plopped down $12.5 billion for Motorola Mobility, after all.

It's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.

Monday, January 19, 2015

The One Word That Explains Market Volatility

Oil prices dropping Gabe Souza/Portland Press Herald/Getty Images Many investors are looking for an explanation for why the markets have fallen recently. There's no shortage of investment "pros" eager to provide their insights. Regrettably, most "gurus" are overconfident of their ability to forecast what will happen. Investors relying on them are likely to make costly mistakes. Jim Cramer, host of CNBC's "Mad Money," is typical of investment "gurus" who show little understanding about what actually moves the market. According to Cramer, "Events drive the market now. That means when there is a negative headline, the market tanks. And when there is an absence of negative news, the market bounces." Here's why he (and many other financial pundits) are fundamentally mistaken. A Different Perspective on News and the Market I interviewed my colleague Larry Swedroe and asked him what causes markets to fall. Swedroe is director of research at The BAM Alliance, with which I am also affiliated. He holds an MBA in finance and investment from New York University and has authored or co-authored 13 books on investing. His latest is "Reducing the Risk of Black Swans: Using the Science of Investing to Capture Returns With Less Volatility." As he explains in his book "Think, Act and Invest Like Warren Buffett," whether the news is good or bad has no effect on stock prices. Stock prices already incorporate all knowable information. They went down because news has been bad. The fact there was bad news in the past does not mean stock prices will continue to fall in the future. It's not current bad news that will drive stock prices. Rather, it's whether the news is better or worse than already expected. If the news is no worse than expected, investors will earn the higher returns that are a result of lower valuations. If the future news is better than expected, but still not good, stock prices should rise. So here's what actually moves markets: Surprises. By definition, surprises can't be forecast. The likelihood of positive surprises is about the same as negative ones. That's why changes in market valuations are random and unpredictable. Keep this in mind the next time a financial "guru" confidently predicts the future direction of the markets. A Different Perspective on Bear Markets No one should be surprised by a bear market, defined as a period where the market goes down 20 percent or more from its high. They have occurred 32 times from 1900 to 2013, or approximately one out of every 3.5 years. The average length of a bear market is 367 days. I am aware of no credible evidence indicating that anyone has the expertise to time bear markets successfully. I asked Swedroe how investors should deal with bear markets. In his view, "the key to success is to stay disciplined." He noted the best way to avoid panic selling is to make sure your asset allocation doesn't include assuming more risk than you have the ability, willingness or need to take. If you don't have a plan and are exposed to excessive stock market risk, you may be in the unenviable position of having to reduce your allocation to equities by selling in a down market. If so, consider your situation to be a wake-up call. It should prompt you to retain an investment adviser who understands basic principles of finance and who will prepare you with a plan to withstand future bear markets. Follow Buffett's Advice Ask yourself if Buffett is reacting and following the predictions of the talking heads. Clearly, he isn't. His advice to investors is to "be fearful when others are greedy and greedy only when others are fearful." Why would you ignore his advice and succumb to fear? Much of the financial media acts irresponsibly when the markets drop. They do so by emphasizing bad news and ignoring good news. The Ebola outbreak in West Africa is a prime example. The few cases of Ebola in this country currently involve individuals who contracted it in West Africa and two health-care workers who were treating one of those people. The possibility of a widespread Ebola epidemic in this country is remote. You would never get that perspective from listening to the news, which highlights the negative and omits positive developments in containing this deadly virus. Good News Is Out There There is positive economic news. The U.S. economy is growing at a faster pace than many expected. The September jobs report was also stronger than expected. And the unemployment rate has fallen to 5.9 percent. Oil prices are down more than 20 percent since June, which should stimulate consumer spending. Interest rates remain at historic lows, providing industry with more opportunities to refinance debt and increase profits. Low interest rates also will encourage refinancing, lower housing payments and permit more people to buy homes. Swedroe cautions that the global stock markets can continue to fall even in the absence of more bad news. He notes that "markets tend to exhibit momentum, both positive and negative. And right now the momentum is clearly negative." With that said, he offers this advice for investors: Stick to your plan. Avoid panic selling. Engage in disciplined rebalancing. To which I would add: Ignore most of the financial news, which is calculated to create panic and anxiety and encourage you to act emotionally. More from Daniel Solin
•Stop Researching Stocks, Part 2: Why Warren Buffett Agrees •Investors: Researching Stocks Is a Total Waste of Your Time •CNBC Is Hurting Investors With All That Squawking

Saturday, January 17, 2015

Must-See Charts: How to Trade Toyota, Caterpillar, PetroChina, Discover, Thermo Fisher

BALTIMORE (Stockpickr) -- "Don't make me pull this car over," scolded Fed Chair Janet Yellen, warning of rate hikes and stimulus cuts on the horizon (but this time for real).

Read More: Warren Buffett's Top 10 Dividend Stocks

No, the Fed meeting yesterday afternoon didn't come with any bombshells. After a little squirt of intraday volatility after the press conference, all three big indices ended Wednesday's session within a few basis points of where they were just before 2 p.m., when the meeting began. But if more of the same rhetoric from the Fed means more of the same in the equity markets, that's a good problem to have. Recall that stocks have been on a tear in the last few years -- and a very tradable one at that.

So to take advantage of a "more of the same" market, we're taking a technical look at five big-name stocks to trade for gains this week.

If you're new to technical analysis, here's the executive summary.

Technicals are a study of the market itself. Since the market is ultimately the only mechanism that determines a stock's price, technical analysis is a valuable tool even in the roughest of trading conditions. Technical charts are used every day by proprietary trading floors, Wall Street's biggest financial firms, and individual investors to get an edge on the market. And research shows that skilled technical traders can bank gains as much as 90% of the time.

Every week, I take an in-depth look at big names that are telling important technical stories. Here's this week's look at five high-volume stocks to trade this week.

Read More: 5 Hated Earnings Stocks You Should Love

Thermo Fisher Scientific

There's no two ways about it: Thermo Fisher Scientific (TMO) has made an impressive run in the last year. Since September 2013, this laboratory supply house has rallied more than 35%, climbing almost twice as far as the S&P 500 over that same 12-month stretch. And while shares have been trading sideways for most of 2014, the real moves could just be about to happen. TMO looks ready to kick off a second rally leg here.

That's because Thermo Fisher is currently forming an ascending triangle pattern, a bullish price setup that's formed by horizontal resistance above shares (in this case at $126) and uptrending support to the downside. Basically, as TMO bounces in between those two technically important price levels, it's getting squeezed closer to a breakout above that $126 price ceiling. When that happens, we've got a buy signal.

Why all of that significance at that level? It all comes down to buyers and sellers. Price patterns like the ascending triangle are a good quick way to identify what's going on in the price action, but they're not the actual reason a stock is tradable. Instead, the "why" comes down to basic supply and demand for TMO's stock.

The $126 resistance level is a price where there has been an excess of supply of shares; in other words, it's a spot where sellers have previously been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above $126 so significant: The move means that buyers are finally strong enough to absorb all of the excess supply above that price level. It makes sense to sit on the sidelines until the breakout is confirmed with a close above that $126 mark.

Caterpillar

Heavy equipment maker Caterpillar (CAT) is another name that's been consolidating sideways after a hard rally in the past year. After rallying more than 20% since last September, CAT has been effectively flat since the middle of May. But that sideways slump is setting things up for a meaningful move. Here's how to trade it.

The sideways action in Caterpillar is forming a rectangle pattern, a consolidation setup formed by a pair of horizontal resistance and support levels that basically "box in" shares between $100 and $110. Consolidations like the one in CAT are common after big moves (like the one that started in last fall); they give the stock a chance to bleed off momentum as buyers and sellers figure out their next move.

Rectangles are "if/then patterns." Put a different way, if Caterpillar breaks out through resistance at $110, then traders have a buy signal. Otherwise, if the stock violates support at $100, then the high-probability trade is a sell. Since this stock's price action leading up to the rectangle was an uptrend, it favors breaking out above $110.

Toyota Motor

Japanese auto giant Toyota Motor (TM), on the other hand, hasn't had a particularly good run in the last year. In fact, it's been downright toxic for your portfolio's health: shares are down 7.5% since last September, underperforming the S&P 500 by more than 25%. But we're coming up on a big buying opportunity in Toyota this week, and you don't need to be an expert technical trader to figure out why...

Toyota broke its downtrend at the end of May, and it's been bouncing its way higher in a well-defined uptrending channel ever since. So, as Toyota tests that key support line for a fourth time here, we're coming up on what looks like another great opportunity to get into shares. Every test of support this summer has been a low-risk, high-reward entry-point in TM, and there's no reason to think that this time it's different.

Momentum adds some extra confidence in Toyota's upside potential right now: 14-day RSI has been in a shallow uptrend since just before the trend changed in TM's price, and that uptrend is still intact now. That's a good indication that buyers have been getting more aggressive in this stock as we head deeper into September.

PetroChina

We're seeing the same setup in shares of Chinese national oil and gas company PetroChina (PTR). Like Toyota, PTR has been bouncing its way higher in a well-defined uptrend since the beginning of the summer – the big difference in PetroChina is that this stock only transitioned from one uptrend to another one at that point. But with shares testing support for a fourth time this week, it makes sense to buy the bounce.

Waiting for this week's bounce is important for two key reasons: it's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong). Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, you're ensuring PTR can actually still catch a bid along that line before you put your money on shares.

Finally, relative strength is the side indicator that's adding confidence to upside in PetroChina here: relative strength line has been in an uptrend of its own since mid-March, indicating that PTR is outperforming the S&P 500 in good times and bad ones. As long as that uptrend remains intact, PetroChina should keep doing better than the broad market.

Discover Financial Services

Last up is Discover Financial Services (DFS). Discover is in breakout mode right now – shares pushed above $64 resistance after forming a classic inverse head and shoulders pattern since the start of July. That means now's the time to be a buyer in DFS.

The inverse head and shoulders pattern in Discover is a bullish setup that indicates exhaustion among sellers. You can spot the inverse head and shoulders by looking for two swing lows that bottom out around the same level (the shoulders), separated by a bigger trough called the head; the buy signal comes on the breakout above the pattern's "neckline" level (that's our $64 price level in DFS).

Looking longer-term, Discover in in a multiyear uptrend that's propelled this stock more than 339% in the past five years. So while "breakout mode" is nothing new for long-time owners in DFS, this week's breakout makes it a high reward-to-risk scenario. For new entrants to this stock, I'd recommend parking a protective stop on the other side of the 50-day moving average -- that level is acting as a proxy for support this month.

To see this week's trades in action, check out the Must-See Charts portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in the names mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to

TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

Thursday, January 15, 2015

WTI Crude Oil on the Move $112 Next Stop

The energy sector has surged during the last two months which can be seen by looking at the XLE Energy Select Sector Fund. If crude oil continues to climb to the $112 level, XLE will likely continue to rally for another few days or possibly week as energy stocks are considered a leveraged way to play energy price movements.

Another way to look at this info is through the USO United States Oil Fund. This tracks much closer to the price of oil. The only issue is that many ETFs that "try to track" an underlying commodity is in how the funds are built. They own multiple contracts further into the future which does not exactly provide us with the short term news/event driven price movements in the current front month contract as they should.

What does this mumbo jumbo mean? Well, it means funds like USO and the highly respected UNG, and VIX ETFs… (just joking about the highly respected part), fail to track the underlying commodity or index very well when it comes to short term price movements. This means, you can nail the timing of a trade, and the commodity or index will move in your favor, yet your fund loses money, or goes nowhere…

Let's Focus on the Technicals Now…

WTI crude oil has formed a bullish ascending triangle pattern from March to May of this year. The breakout to the upside is bullish and should be traded that way until the chart says otherwise. This breakout and first pullback must hold, or I will consider it a failed breakout. So if price dips and closes 2 days below the breakout level, it will be a major negative for oil in my opinion.

The range of the ascending triangle provides us with a measured move to the upside which is $112. Typically the first pullback after a breakout can be bought. The first short term target to scalp some gains would be $109, and at that point moving your stop to breakeven is a wise decision. Trading is all about managing capital and risk, if you don't, then the market will take advantage of your lack in discipline.

Looking further back on the chart, you can see the double bottom formation also known as a "W" formation. Once the high of the "W" formation is broken the trend should be considered neural or up.

Also note that the RSI (relative strength) has been trending higher for some time now. This means money is rotating into this commodity. This is in line with my interview this week with Kerry Lutz and my recent article talking about the next bull market in commodities and the TSX (Toronto Stock Exchange).

clfutures

WTI Crude Oil Trading Conclusion:

In short, oil has some extra risk around it. The recent move has been partly fueled by news overseas. So at any time oil could get a lift or take a hit by news that hits the wires. I tent to trade news related events with much less capital than I normally do because of this risk.

Happy Trading!

WANT MORE TRADE IDEAS?
GET THEM HERE: WWW.THEGOLDANDOILGUY.COM

Chris Vermeulen
CEO & Founder
AlgoTrades.net
TheGoldAndOilGuy.com

European Stocks Mixed Ahead of U.S. GDP

LONDON (The Deal) -- European stock indices were mixed on Thursday ahead of news from the U.S. that is expected to show the economy contracted in the first quarter.

Some European stock markets were closed for Ascension Day, and much of the continent, including France and Germany, has a public holiday.

Revised U.S. GDP data and the weekly jobless numbers are due out at 8.30 a.m. EDT. Analysts expect the economy to have contracted by as much as 0.6% quarter-on-quarter in the first quarter, partly because of the harsh winter, compared with the government's initial estimate for growth of 0.1%.

In London the FTSE 100 was up 0.22% at 6,866.09. In Frankfurt the DAX slipped 0.10% to 9,929.43 and in Paris the CAC 40 fell 0.21% to 4,521.90. In London, medical devices maker Smith & Nephew made further gains after closing up 4.3% on Wednesday following a Financial Times report of bid interest from Stryker (SYK). The Kalamazoo, Mich., company issued a statement on Wednesday declaring it didn't intend to make a bid but the FT on Thursday cited Stryker's CEO confirming he had been evaluating making an offer. The announcement on Wednesday ties Stryker's hands for six months under most circumstances, under the U.K. Takeover Code, but Stryker was careful to reserve the right to use the limited leeway it has during that period to "announce or participate in an offer." Hedge fund manager Man Group was up more than 4% after confirming it is in talks about buying Boston-based Numeric Holdings. But home-improvement retailer Kingfisher plunged after first-quarter operating profit fell short of expectations. Sales figures, which included a 6.1% rise in same-store sales, were strong. Saga, the provider of travel, financial and other services for the over-50s, edged higher after full dealing in the stock began following last week's IPO, which was priced at a bottom-of-the-range 185 pence per share. The stock was trading at 187.11 pence by mid-morning. Australian e-tailer MySale Group, which is 25% owned by the Shelton Capital Ltd. vehicle of the family of Top Shop owner Philip Green, became the latest of a long line of companies to announce plans for an IPO in London. In Paris cable company Numericable Group, which is buying Vivendi's wireless services provider, rose after Citigroup Inc. lifted its recommendation to buy from neutral. In Japan the Nikkei 225 closed up 0.07% at 14,681.72. SoftBank edged higher after its CEO and founder talked up the prospects for 34%-owned Chinese e-commerce company Alibaba Group, which is planning a New York IPO that is expected to value the business at well over $100 billion. Government data showed Japan's retail sales dropped 13.7% month-on-month in April after the first increase in the country's sales tax in 14 years. In Hong Kong the Hang Seng closed down 0.30% at 23,010.14.

Monday, January 12, 2015

Rieder: BuzzFeed's investigative unit gels

BuzzFeed's investigative reporting unit is coming together.

The site best known for its offbeat lists and dead-on sense of the digitally viral hired Mark Schoofs away from the highly regarded investigative site ProPublica to launch its unit. And Schoofs, who started work at the beginning of the year, has signed up three investigative reporters.

BuzzFeed on Monday announced the hiring of the third one, Aram Roston, who won a couple of Emmys when he worked for NBC News. Roston, whose specialty is national security, also worked for CNN and ABC and is the author of a book on the controversial Iraqi political figure Ahmad Chalabi. He most recently worked for Vocativ, which bills itself as a global social news network.

The site had previously lined up Ken Bensinger, who had been at the Los Angeles Times, and Alex Campbell, formerly of The Indianapolis Star. Bensinger and Times colleague Ralph Vartabedian spearheaded coverage of the Toyotas that accelerated for no reason. The episode ultimately led to the recall of 10 million vehicles.

BuzzFeed's decision to meld heavy-duty journalism with its enthusiastic embrace of the zany has been both an improbable and welcome development. The site began to evolve in late 2011 when it hired former Politico blogger Ben Smith and decided to cover the 2012 presidential election in earnest. It has since added foreign correspondents, business reporting and long-form, magazine-style articles to its unusual mix.

REM RIEDER: An encouraging flurry of news initiatives

Schoofs, who spent 11 years at The Wall Street Journal before joining ProPublica, is still building his roster. He's looking for three more investigative reporters. He also is in the market for a "data visionary," as well as a couple of people to work with said visionary.

BuzzFeed's foray into accountability journalism is particularly encouraging at a time when so many traditional news outlets have cut back on the deeply valuable but expensive endeavor.

Schoofs, who can ! barely contain his enthusiasm when he talks about his new reporters, says in one sense the unit's role will be "completely classic" That means pursuing "stories that need to be told. Betrayal of trust. Abuse of power." Going after misfeasance and malfeasance by big government and big business.

His first three recruits, he says, are all "relentless diggers." But they have something else in common, he adds. They "find interesting, oblique angles that other miss, and they can write."

And that's a bigger deal than it might seem on the surface. After a lifetime of editing, I can assure you that the ability to unearth powerful information and the facility for presenting it in an engaging manner do not always coexist in the same human being.

It was always important to try make investigative reporting arresting, or at least fathomable. But it's more critical than ever today. In the digital era, as Schoofs says, "million of other options are a click away."

Today's investigative reporters, he adds, "have to be able to get the goods. They also have to be able to get the narrative goods. Writing does have to be better today than it was before."

Schoofs, whose BuzzFeed debut was complicated by a month-long stint on a grand jury, has spent time at two prestigious journalism institutions. "I was really lucky to work in those remarkable newsrooms," he says. "I love them."

But he's clearly turned on by the energy and excitement of his unorthodox and fast-changing new employer.

"The place is growing and reinventing. We'll continue to do things that surprise people," he says. "Every day at BuzzFeed, it feels more like this decision was the right decision."

And then there's all of that BuzzFeed traffic. The site says it has about 100 million unique visitors a month.

"Sometimes it seems as if you are shooting your stories out of a BB gun," Schoofs says. At BuzzFeed, "you're shooting out of a cannon."

On Second Thought, Wells Fargo Is a Buy

On Tuesday, Wells Fargo (WFC) reported fourth-quarter earnings of $1 per share. That beat Wall Street's consensus by two cents per share. Strangely, the shares initially dropped after the earnings report (yep, we know how melodramatic traders can be).

Then on Wednesday, it was as if rationality and math suddenly dawned on everyone, and the nervous traders got squeezed out. Before the closing bell, WFC had rallied to a new 52-week high.

Lesson: Don't trust the market's first reaction. Actually, keep a wary eye on the second and third ones as well.

Now that I've had a chance to look at the earnings from Wells, I can say that I'm impressed. Net income for Q4 rose 10% over last year's Q4. For the entire year, Wells's net income rose 16% to $21.9 billion. This was their fifth straight record year. Last year, Wells made more money than JPMorgan (JPM) (sorry, Jamie).

I was particularly impressed with the efforts of CEO John Stumpf and his team to trim overhead. (Notice how good companies don't wait to cut costs; they're always looking for excess fat they can cut.) Quarterly revenue dropped 6% to $20.7 billion. For banks, you want to see where their "efficiency ratio" is. That's a good measure of how well they're managing their operations. For Wells, their efficiency ratio actually ticked up a bit last quarter. That's not bad, coming in the wake of lower revenue.

Wells's mortgage-originations business got shellacked last quarter, but there wasn't much they could do about that. In that sector, you're at the mercy of the Mortgage Rate Gods. On the plus side, Wells's wealth and brokerage business did very well. One big benefit for Wells is that they don't have the legal bills that many of the other big banks have.

I like Wells Fargo a lot. The bank is going for less than 11 times this year's earnings estimate. I expect another dividend increase this spring.

Saturday, January 10, 2015

Top 10 Shocking Money Facts of 2014

Photo: John Bunting

With the curtain now drawn on 2014, it's time to reveal my annual list of most-shocking money facts I discovered in the last year. Here are the 10 most fascinating financial factoids I stumbled across in 2014 that pertain to your money, not all of which originated in 2014.

10. $558,328.83: The cost of every item advertised during the 2014 Super Bowl
This staggering calculation comes from writer and former "The Price Is Right" contestant Alex Zeldin on Guff.com. Just for the record, the vast majority of that expenditure would be on automobiles advertised during the game — you'd get about a dozen and a half vehicles for a total of almost $557,000. And if you're wondering, all cost figures are before taxes.

9. 73% of parents ages 40 to 59 support a boomerang child
A 2013 survey by the Pew Research Center found that a staggering 73 percent of parents ages 40 to 59 have helped to financially support an adult child in the last year. Where did that financial support go? A 2013 survey by Bank of America Merrill Lynch found that, of parents who supported their grown children over the last five years, about 10 percent helped with credit card debit, student loans, and insurance, while 15 to 20 percent said that their help went toward health care costs, car loans, cell phone bills, and rent or mortgage expenses. The biggest shocker? In 36 percent of cases, parents forking over dough to their adult kids weren't sure how their money was being used.

8. Men are more likely to make tipsy purchases
Two booze-related spending studies caught my attention in 2014. First, a 2014 study by CreditCards.com reported that 13 percent of men admitted to buying items they hadn't intended to buy while they were under the influence of alcohol; that's compared to only about 5 percent of women. This is supported by a 2012 Nielsen study, which showed that 31 percent of all purchases in liquor stores are impulse buys, with the most being shelled out on fancy, premixed bottled cocktails. So, I guess if you're a guy who's already been drinking and you stumble into a liquor store, you should just throw in the towel, load a couple of bottles of kumquat-flavored schnapps daiquiris in your shopping cart and head for checkout.

7. Millennials believe losing a phone is worse than auto theft
A 2013 Zipcar study found that many millennials value their phones more than their cars. Nearly 40 percent of millennials believe losing their phones would be a bigger hardship than losing their automobiles, while only 16 percent of people age 35 and up felt the same way.

Millennials also said their phone use allows them to cut back on driving, as 47 percent of them said they substitute texting, email, and video chats for meeting with friends in person. At the same time, a 2013 Kent State University research study found that cell phone use was linked to anxiety, lower grades and reduced happiness in students.

6. Credit reports reveal errors 25% of the time
According to a 2013 study from the Federal Trade Commission, more than 25 percent of consumers who took the time to check their credit reports identified errors that might affect their credit scores. This might partially explain why, according to an article in Time magazine, a whopping 56 percent of Americans have subprime credit. Looks like more people should be taking advantage of their free yearly credit reports. The Fair Credit Reporting Act requires each of the three nationwide credit reporting companies — Equifax, Experian and TransUnion — to provide a free copy of your credit report once every 12 months, upon your request.

5. Cyberattacks cost the global economy $500 billion annually
It seems like nearly everyone was a victim of cyberattacks in 2014, or at least became worried due to the sheer number of them and their scope. According to a 2013 report by McAfee, cyberattacks on companies are costing the global economy an estimated $500 billion per year. In case you're curious, that's roughly the size of Norway's GDP.

4. Women hit the glass ceiling sooner (and by $35K less)
According to a 2012 study by PayScale, the average ages at which pay peaks -- and stops growing significantly faster than inflation for U.S. workers with a college degree or higher -- is age 39 for women and 48 for men. The typical pay for such a male worker at age 48 is $95,000 per year, and the average pay for his female counterpart is only $60,000 per year when it peaks at age 39. So not only do men earn more than women, but men earn higher wages sooner and for a longer period of time.

3. People buy more Harry Potter books, Corollas, and Lay's Chips than you realize
The folks at FinancesOnline.com are obviously as enamored with whacky financial facts as I am, having compiled their own comparison of "10 Best-Selling Products in the World." Among their fascinating findings:

450 million copies of Harry Potter books have been sold since 1997, which is equivalent to 90 percent of all books sold in the world in 2013. 40.7 million Toyota Corollas have been sold since 1966, which if put bumper-to-bumper would stretched from New York City to Los Angeles 48 times over. 633 million bags of Lay's potato chips are sold each year in the U.S. alone; in total, weighing more than an aircraft carrier.

2. Forget the 1%, it's more about the top 85 people
In my opinion, the rapidly growing wealth gap in the U.S. and around the world is one of the most critical issues facing civilization today. Over the last few years, we've heard a lot about the "top 1 percent," and the wealth they control is indeed staggering: In 2014, Oxfam reported that just 1 percent of the world's population controls nearly half of the planet's wealth.

But now, even within that top 1 percent, the relative divides are growing: Oxfam said that the world's 85 richest people now own as much as the poorest 50 percent of humanity. Eighty-five people is roughly the capacity of a public bus, which is something I'm guessing you don't know if you're among that busload of super wealthy folks.

1. Less is more (and longer) when it comes to marriage
This from researchers at Emory University: The more money spent on an engagement ring, the greater the chance that the marriage will end in divorce. For example, couples who spent $2,000 to $4,000 on an engagement ring were 1.3 times more likely to get divorced than those who spent $500 to $2,000 on a ring. And the same research showed that weddings costing $20,000 or more were 3.5 times more likely to end up in divorce that weddings costing $5,000 to $10,000. With the average U.S. wedding now costing more than $30,000, I guess today's weddings vows should be, "For richer, for poorer, until debt do us part."

This article originally appeared on gobankingrates.com.

How one Seattle couple secured a $60K Social Security bonus -- and you can too
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Why the future of Starbucks is in tea

In 1987 Starbucks (ticker: SBUX ) had a mere 17 stores. The business was one of the earliest coffee shop chains, and it was testing new waters. As it turned out, the water was just about the perfect temperature. Now, Starbucks operates more than 17,650 locations across the globe, and its brand is universally recognized. In the beginning, CEO Howard Schultz had to bet on the future of coffee and convince customers that paying real money for real coffee was something worth doing. Yesterday, Schultz and Starbucks made the same leap of faith with tea.

Starbucks sells more tea

While Starbucks has long served tea, the company took its relationship with the dried leaves to a new level last year when it purchased Teavana for $620 million. That brand is now the face of Starbucks' first stand-alone tea bar, located in New York City. Teavana is also going to be used as a rebranding for Starbucks' other tea brand, Tazo.

The drive to revolutionize tea consumption is based in Schultz's belief that Starbucks can take a huge share in a relatively untapped market. The company has forecast the global tea category at more than $40 billion, while other observers have pushed that even higher.

The Teavana concept isn't meant to simply be a Starbucks spinoff, either. The stores are much more minimal in appearance, no coffee is served, and the locations will focus more on selling bagged products for home consumption.

International possibilities

One of Starbucks' biggest hopes has to be the possibility of selling tea in countries that have eschewed coffee. British consumers, for instance, drink about six times as much tea as Americans. The other side of that coin is that Brits consume about two-thirds as much coffee. That means that Starbucks is leaving money on the table by not addressing the tea-consuming public.

Tea consumption is also much higher in the Middle East and Asia, where Starbucks is still looking for big growth. Last quarter, the business earned slightly less than 7% of i! ts total revenue in its Europe, Middle East, and Africa division. Revenue also rose at an anemic pace, up just 2% year over year compared to global revenue growth of 8%.

In short, the tea push from Starbucks looks like a fantastic move. The combination of domestic and international opportunities should help this already large brand expand even further. I've loved most of the moves that Starbucks has made over the last few years, and this new venture is one of the best. I'm looking forward to big things in the next five years from Teavana, and investors should also expect good news to come along.

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Friday, January 9, 2015

Weekly CEO Sells Highlight

According to GuruFocus Insider Data, these are the largest CEO sales during the past week: RF Micro Devices Inc., TE Connectivity Ltd., SanDisk Corp. and Wesco Aircraft Holdings Inc.

RF Micro Devices Inc. (RFMD): President and CEO Robert A. Bruggeworth Sold 50,000 Shares

President and CEO of RF Micro Devices, Inc. (RFMD) Robert A. Bruggeworth sold 50,000 shares on 10/10/2013 at an average price of $6. RF Micro Devices Inc. has a market cap of $1.68 billion; its shares were traded at around $5.97 with and P/S ratio of 1.60.

RF Micro Devices Inc. reported its 2014 first quarter fiscal results. The company announced revenues of $293 million and net income of $1.6 million.

President and CEO Robert A. Bruggeworth sold 236,466 shares of RFMD stock in August, September, and October. VP Administration and CFO William A. Priddy sold 79,272 shares of RFMD stock in July, August, and October. VP and President Cellular Products Steven E. Creviston, VP and Corporate Controller Barry D. Church, VP and Corp. Treasurer Suzanne B. Rudy and VP Operations James D. Stilson sold 56,178 shares of RFMD stock from August to October.

TE Connectivity Ltd. (TEL): Chairman and CEO Thomas J. Lynch Sold 49,021 Shares

Chairman and CEO of TE Connectivity Ltd. (TEL) Thomas J. Lynch sold 49,021 shares on 10/07/2013 at an average price of $51.6. Te Connectivity Ltd. has a market cap of $21.44 billion; its shares were traded at around $51.85 with a P/E ratio of 17.20 and P/S ratio of 1.70. The dividend yield of TE Connectivity Ltd. stocks is 1.80%.

TE Connectivity Ltd. announced their 2013 fiscal third quarter results with net income of $335 million and net sales of $3.4 billion.

Chairman and CEO Thomas J. Lynch sold 277,544 shares of TEL stock from June to October. EVP, COO and President Network Solutions Joseph B. Donahue' EVP and General Counsel John S. Jenkins' Senior Vice President and Treasurer Mario Calastri EVP and President Industrial Solutions Terrence R. Curtin; and EVP and ! Chief Technology Officer Robert N. Shaddock sold 60,223 shares of TEL stock from May to August.

SanDisk Corp (SNDK): President/CEO Sanjay Mehrotra Sold 45,000 Shares

President/CEO of SanDisk Corp (SNDK) Sanjay Mehrotra sold 45,000 shares on 10/09/2013 at an average price of $61.07. Sandisk Corp has a market cap of $15.02 billion; its shares were traded at around $62.50 with a P/E ratio of 21.30 and P/S ratio of 2.70. The dividend yield of Sandisk Corp stocks is 0.40%.

SanDisk Corp announced their 2013 second quarter results with revenues of $1.5 billion and GAAP net income of $262 million.

President/CEO Sanjay Mehrotra sold 170,000 shares of SNDK stock from June to October. Executive VP Administration and CFO Judy Bruner sold 175,000 shares of SNDK stock in May and August. Director Catherine P. Lego sold 32,000 shares of SNDK stock from August to October.

Wesco Aircraft Holdings Inc. (WAIR): Chairman, President and CEO Randy J. Snyder Sold 70,000 Shares

Chairman, President and CEO of Wesco Aircraft Holdings Inc. (WAIR) Randy J. Snyder sold 70,000 shares during the past week at an average price of $19.77. Wesco Aircraft Holdings Inc. has a market cap of $1.86 billion; its shares were traded at around $19.71 with a P/E ratio of 18.50 and P/S ratio of 2.10.

With revenues of $230.2 million and net income of $27.0 million, Wesco Aircraft Holdings Inc. announced their 2013 fiscal third quarter results.

Chairman, President and CEO Randy J. Snyder sold 150,000 shares of WAIR stock in September and October. Executive VP and CFO Gregory A. Hann sold 35,104 shares of WAIR stock in August and September. Executive VP Sales and Marketing Hal Weinstein sold 104,867 shares of WAIR stock in August and October.

For the complete list of stocks that were bought by their CEOs, go to: Insider Buys.

Related links:GuruFocus Insider DataRobert A Bruggeworth

Bernanke Not Taking Any Chances After Wednesday's Fed Decision

Ben Bernanke's Fed surprised the vast majority of investors Wednesday when the FOMC decided not to begin tapering the stimulus being provided to the economy via the monthly purchase of $85 billion in bonds and mortgage-backed securities.

The move came as a surprise because "Gentle Ben" has been "talking taper" since May. And since May, both the bond and stock markets have spent the vast majority of their days trying to come to grips with what "the taper" would mean.

But at the end of the day Wednesday, all the consternation associated with "the taper" had gone for naught. Sure, Bernanke made it clear that his Fed (well, until January that is) could begin cutting back on the QE program at any time. However, at this point in time, Bernanke said that the FOMC did not feel the economic data was in line with what the FOMC needed to see in order to justify a reduction in their quantitative easing efforts.

Apparently the key to the decision was the "tightening of financial conditions seen in recent months." In English, this refers to the dramatic rise in interest rates that has occurred since the Fed chairman first broached the idea of tapering the expenditures on QE. The chart below of the yield on the 10-year makes this point pretty clear.

This Is What "Tightening Financial Conditions" Look Like

[ Enlarge Image ]

What is ironic here is the simple fact that the move up in bond yields was in direct response to Bernanke "talking taper." While the Fed has been adamant that tapering isn't the same as tightening, bond traders didn't buy into the argument. When asked about this issue at the press conference following the FOMC announcement, Mr. Bernanke said that the Fed tried to communicate its outlook for monetary policy as clearly as possible. However, the chart of the 10-year would seem to suggest that the Bernanke gang has failed miserably on this count.

While ra! tes were artificially low in early May and thus had plenty of room to move up without impacting the economy, the fact that the yield on the 10-year nearly doubled after talk of tapering began hasn't gone unnoticed in the mortgage market. The NAHB Homebuilder Confidence report confirmed this on Tuesday as NAHB Chairman Rick Judson wrote, "Many [builders] are reporting some hesitancy on the part of buyers due to the sharp increase in interest rates." Therefore, it is a safe bet that at least a portion of the decision to not start tapering the QE program was out of concern over what higher rates might do to the housing market.

Erring on the Side of Caution - Still

According to the surveys, the majority of economists expected the Fed to begin tapering their $85 billion per month bond buying program. Yet, if one had been paying attention to the economic data of late, this wasn't exactly a layup call.

While the Fed has told us that they are targeting an unemployment rate of 6.5% before they would take action on rates, a great many economic reports have come in on the punk side recently. As such, it wasn't exactly a surprise to see Mr. Bernanke decide to err on the side of caution [size=11.0pt;line-height:115%; font-family:"Calibri","sans-serif";mso-ascii-theme-font:minor-latin;mso-fareast-font-family: Calibri;mso-fareast-theme-font:minor-latin;mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman";mso-bidi-theme-font:minor-bidi; mso-ansi-language:EN-US;mso-fareast-language:EN-US;mso-bidi-language:AR-SA">——

Thursday, January 8, 2015

HUDCO tax free bonds issue to open on January 27

The minimum application size is ten (10) bonds and in multiples of one (1) bond thereafter. The issue will open on January 27, 2012, and will close on February 6, 2012, or earlier, or may be extended by such period, upto a period of 30 days from the date of opening of the issue, as may be decided by the board of the company or by a duly constituted committee.

The bonds carry a coupon rate of 8.10% for Tranche-I Series 1 Bonds and 8.20% for Tranche-I Series 2 Bonds on per annum basis. Additional coupon rate of 0.12% per annum for Tranche-I Series 1 Bonds and 0.15% per annum for Tranche-I Series 2 Bonds shall be payable to the allottees under Category III which will aggregate to coupon rates of 8.22% and 8.35% respectively. However, the aforesaid additional interest of 0.12% p.a. and 0.15% p.a. shall only be available to the original allottees of the bonds under Category III, and shall not be available to the bondholders of such bonds under certain instances. The bonds are proposed to be listed on NSE and BSE.

The Tranche-I Bonds have been rated 'CARE AA+' by CARE indicating high degree of safety for timely servicing of financial obligations & carry very low credit risk and �FITCH AA+ (ind)� by FITCH indicating Outlook on National long-term rating is stable.

The Tranche-I Series 1 bonds and Tranche-I Series 2 bonds can be redeemed after ten (10) years and fifteen (15) years respectively from the deemed date of allotment. The bonds can be issued in both dematerialized and physical form but trading can happen only in dematerialized form. The issue price for both the series is Rs 1,000 per bond.

There are 3 categories of investors who can apply to the issue � Category I, Category II and Category III. Category I includes public financial institutions, statutory corporations, scheduled commercial banks, co-operative banks, regional rural banks, provident funds, pension funds, superannuation funds, gratuity funds, insurance companies, national investment funds, mutual funds, companies, bodies corporate, societies, public, private charitable/religious trusts, scientific organizations, industrial research organizations, partnership firms and limited liability partnerships.

Category II includes resident Indian individuals and Hindu Undivided Families applying for an amount aggregating to above Rs 5 lakh across all series in the tranche. Category III will include resident Indian individuals and HUFs applying for an amount aggregating to upto and including Rs 5 lakh across all series in the tranche.

The lead managers to the issue are Enam Securities Private Limited and SBI Capital Markets Limited. The debenture trustee to the issue is SBICAP Trustee Company Limited.

Wednesday, January 7, 2015

Chesapeake Has a New Chief: Is It Time to Buy?

Anadarko Petroleum (NYSE: APC ) executive Robert Lawler has agreed to take the vacant CEO post at Chesapeake Energy (NYSE: CHK ) , and investors want to know how he will fit into the Chesapeake mold. In some ways, he may be just what the company needs. Working his way up from engineering to senior vice president of international and offshore operations, Lawler is an operations guy at heart that could help Chesapeake start making the most of its massive asset holdings.

Chesapeake is still in the middle of a massive asset sale to pay down debt. Fool.com contributor Tyler Crowe wants to see improvements in operational performance and more clarity with the asset sale before he is ready to make an investment decision. Should you do the same?

With Lawler in charge and the company on its way back to profitability, Chesapeake certainly is in much better shape than it was a year ago, but the market still has this company trading at a big discount. To learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy.

Tuesday, January 6, 2015

Pier 1 Imports Hits Estimates, But GAAP Results Lag Last Year's

Pier 1 Imports (NYSE: PIR ) reported earnings on April 11. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 2 (Q4), Pier 1 Imports met expectations on revenues and met expectations on earnings per share.

Compared to the prior-year quarter, revenue grew significantly. Non-GAAP earnings per share increased significantly. GAAP earnings per share shrank significantly.

Gross margins grew, operating margins grew, net margins dropped.

Revenue details
Pier 1 Imports logged revenue of $552.0 million. The 12 analysts polled by S&P Capital IQ predicted a top line of $547.1 million on the same basis. GAAP reported sales were 16% higher than the prior-year quarter's $476.8 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.60. The 14 earnings estimates compiled by S&P Capital IQ predicted $0.60 per share. Non-GAAP EPS of $0.60 for Q4 were 25% higher than the prior-year quarter's $0.48 per share. GAAP EPS of $0.58 for Q4 were 44% lower than the prior-year quarter's $1.04 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 46.2%, much better than the prior-year quarter. Operating margin was 18.2%, 140 basis points better than the prior-year quarter. Net margin was 11.2%, much worse than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $393.7 million. On the bottom line, the average EPS estimate is $0.20.

Next year's average estimate for revenue is $1.83 billion. The average EPS estimate is $1.37.

Investor sentiment

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Pier 1 Imports is outperform, with an average price target of $24.36.

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