Will Endless Bank Charges and Settlements Kill the Economy?

Bankers are still not very well thought of after the financial meltdown, even if they might not have ben that well thought of before the meltdown. Still, at some point the public needs to understand that the endless fining, settlements, and then new attacks on the banks is not helping things along in the economy. A report was put out in recent days by SNL Financial showing that big banks have settled for over $65 billion in fines so far. The report is also calling for more big settlements to come and we have seen even worse figures elsewhere.

Bank of America Corp. (NYSE: BAC) was in 2012 where J.P. Morgan Chase & Co. (NYSE: JPM) finds itself now. BofA took on endless liabilities with Countrywide and Jamie Dimon did not get the preferential post-meltdown treatment he expected for scooping up Bear Stearns to keep the system running. The largest banks have paid this amount in the last three and a half years and these settlements have involved the likes of Wells Fargo & Co. (NYSE: WFC) and Citigroup Inc. (NYSE: C) as well.

What gets hard to imagine is where the charges and the settlements end, as well as how long the fines have to keep coming. SNL predicted that these huge charges, fines, and settlements would continue. We agree and think that the government agencies are in domino-attack mode. One major charge and settlement only begets another, likely from another rival agency or group. A settlement with the Department of Justice triggers the Securities and Exchange Commission to go after the banks from a securities and investor angle. A federal settlement triggers similar moves by states. It can be endless.

Now there is something else to consider. There were reports even back in August that the six largest banks in America have paid out a whopping $103 billion just in legal costs since the meltdown. Bloomberg said that this applied to charges from lawyers and litigation, and from settling mortgage and foreclosure claims.

We do not expect America to become fond of bankers any time soon. Those “Have You Hugged Your Banker Today?” tee-shirts have not started appearing in stores just quite yet. What the public (and regulators) need to understand is that these claims have risen and risen, and still seem to keep rising. This is at the same time that capital reserves have been forced significantly higher as well.

When banks settle with any branch of the government and when they have to put more and more cash aside just to be held in reserves, take a guess what it does for their desire to make new loans. Now consider how eager you would be to take on the risk of a loan when the Federal Reserve is artificially keeping interest rates lower than they should be.

Now go one step further. If your credit score is bad, or if you have a blemish from your past, what are your chances of ever getting a bank loan over a solid credit profile when reserves are going up and when settlement payments are eating at that cash?

The end game is that loan demand is low on its own, but banks are frequently accused of only lending money to people or companies that do not really need the money. That may be more and more true by the day if these settlements and legal bills keep piling up.

These banks paid back the TARP bailout, for a net profit to the taxpayer. We would also like to remind readers that most of the mergers that banks are still getting to pay fines from were in mergers that were often mandated by regulators at the peak of the meltdown.

It is hard to know when normal a normalized business climate will be allowed to return. What is known is simply “Not Yet.” Even if the endless attack on banks does not manage to kill the economic recovery it should be easy enough to see that extending the same charges and settlements endlessly will start to do more harm than good.

Here is the chart from SNL showing the major settlements:

Source: snl.com

Should You Take A Gamble On Zynga?

Zynga's (NASDAQ:ZNGA) stock price plummeted earlier this month, and it lost 16 percent of its market cap after the company revealed plans to cut 18 percent of its workforce. Can the company rebound from this massive layoff? Let's use our Cheat Sheet investing framework to decide whether Zynga is an OUTPERFORM, WAIT AND SEE, or STAY AWAY.

C = Catalysts for the Stock's Movement

Clearly, the most recent catalyst for the fall in Zynga's share price has been the large-scale layoff announced at the beginning of the month. CEO Mark Pincus said that by closing three U.S. offices, the online game developer would cut costs by $70 million to $80 million annually. The reduction in costs will free up capital for Zynga to focus on its mobile gaming strategy. The news is especially disheartening as Zynga had to close its OMGPOP Studios branch — makers of Draw Something — one year after acquiring the company for $200 million. This bleak news has spooked investors and initiated a large sell-off.

Zynga has become reliant on Facebook (NASDAQ:FB) games for personal computers and has recently seen a sharp decline in its daily average users, a standard metric measuring online game usage. While titles like Farmville achieved massive success in 2009 and 2010, generating more than $1 billion in revenue for Zynga, the popularity of these types of titles has diminished. Zynga needs to adapt to current market trends or face obscurity.

H = High-Quality Products in the Pipeline? 

The company hopes to get back on track by pivoting to a strategy focused on mobile gaming. But Zynga might be too late to the party: its most popular game, Farmville, has been overtaken on mobile devices by newer releases. Pincus's track record has not exactly been stellar — investors and employees alike question his foresight and ability to capitalize on new trends in gaming.

Zynga has talked about rolling the dice and entering the online real-money gambling sector. It plans to use new capital to develop online card and slot games, recently acquiring Spooky Cool Labs, an online slot game designer. While the economics of online gambling is certainly more profitable than that of Zynga's “freemium” business model, the industry is surrounded by uncertainty. Currently, online gambling is illegal in most states. And even if more states legalize online gambling, the company would be facing online gambling titans such as Caesar's Entertainment (NASDAQ:CZR), who have much more resources than Zynga as well as exposure in the gambling industry.

T = Technicals are Weak

Zynga is currently trading around $2.75, below both its 50-day moving average of $3.12 and 200-day moving average of $3.05. The company is experiencing a strong downtrend, and is down more than 55 percent since its 52-week high one year ago of $6.35. Zynga currently has a relative strength index of less than 30, suggesting that the stock is oversold and could be poised for a rally. However, if Zynga continues to report bad news and earnings, this is a remote possibility.

Conclusion 

The future for Zynga is uncertain. Its stock price may currently be undervalued, as indicated by its low RSI after the layoff announcement on June 4 triggered a large sell-off. The stock has posted two consecutive quarters of declining revenue growth and expects to report a net loss next quarter of between $28.5 million and $39 million. But the company is not yet in dire straits: It still has $1.4 billion in cash and a $2.18 billion market cap as of Tuesday.

If you feel like taking a chance on the government's decision to allow online gambling, Zynga might have some upside. And if the company can produce another hit equivalent to Farmville for mobile devices, it could rapidly expand its user base and, consequentially, its share price. These events are just speculation at this point. While Zynga is not a worthless company, there is too much uncertainty in its transitioning business model and the economics of its industry to warrant an OUTPERFORM rating. For now, Zynga is a WAIT AND SEE.

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Fiery Tesla crash torpedoes stock price

Skittish investors in high-flying Tesla, maker of expensive electric cars, bid down the company's stock price 4% Monday after reports that a Tesla model S burned after slamming into a concrete barrier and a tree in Mexico.

Tesla noted that the driver was unhurt in the Oct. 18 wreck near Merida, Mexico, which the automaker says should be viewed as a demonstration of the car's high level of crashworthiness rather than any inclination to catch fire.

It was the second high-profile Tesla fire.

An accident Oct. 1 in Washington state caused a Tesla Model S to catch fire after debris punched into the car's lithium-ion battery pack.

That driver was unhurt. The National Highway Traffic Safety Adminstration has said it found no evidence of a defect or violation of safety regulations in that incident.

Tesla says both drivers have told the company they want to buy replacement Model S cars.

As well as being vulnerable to crash damage -- just as many ordinary auto components would be -- the lithium-ion batteries that power electric cars are especially sensitive to temperature. If improperly cooled, they could ignite.

Non-crash fires have been reported in two Mitsubishi electrics. Chevrolet's Volt caught fire after being stored following a government crash test. Chevrolet says the vehicle was improperly stored and handled, and that the crash itself didn't directly result in the fire.

Recent, infamous cases involve Boeing 787 Dreamliners, which use lithium-ion packs. Those planes were grounded in January after fires. The battery systems were modified and the planes are flying again.

A 2006 recall of millions of Sony laptop computer batteries because of fire risk triggered modern concern about lithium-ion battery fires. The car and airliner events have kept the nervousness bubbling.

The Tesla Model S earned 99 out of a possible 100 points in Consumer Reports tests,prompting the publication to say, "The Tesla Model S...is not only the best electric car we've te! sted, it's now our top-rated model overall."

The Tesla fire reports, published Monday, could have been the last straw for some Tesla investors. The stock closed at $162.86, down $6,80, or 4%.

Tesla CEO Elon Musk said in a Bloomberg TV interview last week in London, where he opened a showroom, "The stock price that we have is more than we have any right to deserve." He had issued a similar warning in a summer TV interview.

The stock trades at around 100 times projected 2014 earnings, a huge ratio that means investors expect fat, fast growth. More typical would be a forward P.E. of 10 to 20 times projected earnings, though the ratio varies considerably depending on industry.

Minimum Wage, Maximum Frustration

Wal-Mart (NYSE: WMT  ) is the largest private employer in the world. More people receive a paycheck from the company than live in Latvia, Qatar, Slovenia, or 96 other countries.

Wal-Mart has gotten as big as it has -- it will likely do half a trillion in sales this year -- because it's very efficient at what it does. Part of that efficiency means keeping wages low. According to market research group IBSWorld, the average Wal-Mart sales associate earns $8.81 per hour.

The heat over Wal-Mart's low wages turned up this month when Washington D.C.'s city council passed a bill requiring all new stores of at least 75,000 square feet and $1 billion in annual revenue to pay a "superminimum" wage of $12.50 per hour, up from the city's standard $8.25 per-hour minimum wage. Existing employers are exempt for four years. Wal-Mart currently has no stores within D.C. city limits, so the bill effectively forces any D.C.-based Wal-Mart stores built in the next four years to pay a minimum wage 50% above its competitors.

Wal-Mart, which had plans to open six stores in D.C., balked. "We will not pursue Skyland, Capitol Gateway and New York Avenue and will start to review the financial and legal implications on the three stores already under construction," spokesman Steven Restivo said. "This was a difficult decision for us -- and unfortunate news for most D.C. residents -- but the Council has forced our hand."

Now the awkward moment: D.C.'s city council proposed the bill to help provide its residents with a living wage. But Wal-Mart -- which said its six planned D.C. stores could have created 1,800 jobs -- will now be providing no wages to D.C. residents.

The winner: nobody. Minimum wage, maximum frustration.

We still don't know how this story will end. Wal-Mart could change its mind, or Mayor Vincent Gray could veto the bill. But this seems like a good time to discuss the merits of the minimum wage.

There are two sides to the minimum-wage debate. One says it prices low-skill workers out of the jobs market. That's what Econ 101 tells us should happen, and it explains Wal-Mart's experience in D.C.

The other side says these stories are anecdotal, that there's little evidence of employment falling when minimum wages are increased. Wal-Mart very likely can pay a $12.50 minimum wage while covering its cost of capital, and retailers like Costco (NASDAQ: COST  ) have shown that marginally higher wages can pay for themselves through lower employee turnover.

Each side has evidence to back up its arguments.

Economists Alan Krueger of Princeton and David Card of U.C. Berkeley looked at minimum-wage hikes in California in 1988 and New Jersey in 1992, and compared them to regions that didn't raise wages. The pair found that "increases in the minimum wage lead to increases in pay, but no loss in jobs."

Two economists from the London School of Economics looked at different data and used a different statistical technique to show that, indeed, raising the minimum wage does reduce employment, particularly among teenagers.

Andrajit Dube, then at U.C. Berkeley, looked at yet another set of data and found "strong earnings effects and no employment effects of minimum wage increases."

Three separate economists asked fast-food restaurants in Georgia and Alabama how they would react to minimum-wage increases implemented between 2007 and 2009. Fifty-three percent said increasing employee performance standards was very important to deal with the wage hikes. Twenty-nine percent said they'd cut weekly hours of some employees. Eight percent said they'd reduce headcounts.

Bottom line: It's a more complicated issue than we make it out to be.

Here's what we do know. Adjusted for inflation, the federal minimum wage (currently $7.25 per hour) has declined sharply over the last forty years:

Source: Bureau of Labor Statistics, Federal Reserve, author's calculations.

But the problem with a chart like this is that it masks differences in cost of living throughout the country. Some states and cities have their own minimum wages, but differences in pay are often swallowed by differences in costs. The Bureau of Labor Statistics' Cost of Living Index shows that it costs an average of 87% more to live in Honolulu than it does Cedar City, Utah, but minimum wages in the two cities are the same. Whether a worker finds a wage "fair," or how likely he or she is to find a minimum wage worth working for, varies wildly by location.

In the end, the problem with economists looking at the minimum-wage debate is that the issue is far more political than it is economic. And alas, politics being what they are, there are few agreements, and the only constants are frustration and disagreement. 

For more big picture content, check out my new report, "Everything You Need to Know About the National Debt. It walks you through step-by-step explanations about how the government spends your money, where it gets tax revenue from, the future of spending, and what a $16 trillion debt means for our future. Click here to read it. 

Can Best Buy Win Where J.C. Penney Failed?

The concept of a store-within-a-store has been around for years. It just hasn't been called store-within-a-store -- it's been called a mall. But as brands have become more important to retail than the retailer itself, the stores have gotten smaller, even choosing to be within larger stores.

This concept was supposed to be the savior for J.C. Penney (NYSE: JCP  ) , with boutique-style shops lining the store's corridors. But that concept was an abysmal failure for the retailer, and the mastermind behind it -- Ron Johnson -- is now out as CEO. Now, Best Buy (NYSE: BBY  ) is expanding its store-within-a-store concept with the Samsung Experience Shop and Windows Stores, another risky bet for another floundering retailer. 

A whole new ballgame
The big difference between JC Penney's efforts and Best Buy's comes down to the draw of the brands. JC Penney was betting on Levi's, Liz Claiborne, and Joe Fresh as brands to draw in customers, and Best Buy is betting on Samsung, Microsoft, and Apple.

The draw of those three brands, which dominate electronics, will be bigger than any of the brands JC Penney offered. Best Buy is also one of the only major retailers remaining that can carry full product lines where customers can touch, test, and compare electronics products.

For brands, the draw of Best Buy will keep this partnership alive. Samsung and Microsoft see Best Buy as a way to expand in retail without building their own stores. Plus, they can train employees to be knowledgeable in their products, improving the sales experience for consumers. Apple also has a footprint in Best Buy, and that only expands the company's reach into more retail locations beyond its own stores.

Can Best Buy win?
JC Penney showed how risky the store-within-a-store concept can be, but I think Best Buy has a much better chance at success. The company's brand draw is much stronger than JC Penney's, and consumers will get a better, more in-depth experience from Microsoft, Apple, and Samsung-specific sections than they did under the old model.

The success of this model may determine whether Best Buy is a good investment and, potentially, its very survival. Revenue and earnings have dropped dramatically over the past year, so investors have to hope that stores-within-the-store will kick-start sales.

BBY Revenue TTM data by YCharts

The risk Best Buy is taking shows just how much of a paradigm shift we've seen in retail. Even the best retailers have struggled against online competition and only those most forward-looking and capable companies will survive. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

At the Close: Stocks Rise Because They Can; Career Education Rises 50% on Asset Sale

Stocks went up today. Why? Heck if I know.

The S&P 500 gained 0.3% to 1,752.07, while the Dow Jones Industrials rose 0.6% to 15,509.21.

The wires trotted out the usual explanations: Earnings, strong China manufacturing indicators, hope that the Federal Reserve will maintain the status quo for longer. Take your pick, your guess is as good as mine.

Which isn’t to downplay those factors, which are clearly in play. It’s just that citing them as a reason for a relatively small move is one of the silliest things about markets reporting. I say that as a former currency reporter at Bloomberg, where I would write that the dollar was falling because commodities were strong, while my counterpart on the commodities desk was writing that commodities rose because of the weak dollar.

Silvercrest Asset Managment Group’s Patrick Chovanec explains why U.S. stocks look attractive:

…from an investor's point of view, U.S. corporations look attractive. Earnings growth may be sluggish, but profit margins are wide and balance sheets are solid. All the cash sitting on corporate balance sheets may represent a hesitation to invest and drive growth, but also indicates a capacity to pay out higher dividends, buy back shares, and snap up smaller companies. Price-to-earnings ratios are reasonable and, based on historical experience, have room to grow. The energy revolution in U.S. shale oil and gas, in particular, is a major trend that is going to make American companies more competitive.

More worrisome: Investor sentiment. Let the American Association of Individual Investors’ Charles Rotblut explain what’s happening:

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 2.9 percentage points to 49.2%. This is the highest level of optimism registered by our survey since January 24, 2013. It is also the fifth time in the past seven weeks that bullish sentiment is above its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, rose 4.4 percentage points to 33.2%. This is the first time in three weeks neutral sentiment is above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, plunged 7.3 percentage points to 17.6%. This is the lowest pessimism has been since January 12, 2012. (It was also at 17.2% on January 5, 2012.) Bearish sentiment has now been below its historical average of 30.5% for five times in the past seven weeks.

Career Education Corp. (CECO) has gained 53% to $5.80 in after-hours trading after it sold its international schools to a private equity firm.

Express Scripts (ESRX) has fallen 2.7% to $62 in after-hours trading after it reported a profit of $1.08, in line with analyst forecasts, but said the fourth quarter would come in between $109 and $1.13. Analyst had forecast $1.12.

Deckers Outdoor Corp. (DECK) has gained 14% to $66.50 in after-hours trading after the maker of UGGs reported a profit of 95 cents, above forecasts for 72 cents.

Resmed (RMD) has plunged 12% to $49.50 in after-hours trading after it reported a profit of 56 cents, below estimates of 58 cents.

Cliffs Natural Resources (CLF) has gained after it reported a profit of 68 cents, missing forecasts for 71 cents, but beat on revenue.

The Economic Data That Moved the Markets This Past Week

Despite the holiday-shortened trading week, investors were bombarded with economic data points that offered plenty of insight into the health of the U.S. economy. And most of the data was positive, leading investors to bid stocks higher. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) rose 226 points, or 1.51%, and of its 30 components, only five ended the week in the red. The S&P 500 (SNPINDEX: ^GSPC  ) rose 1.59%, while the Nasdaq (NASDAQINDEX: ^IXIC  ) increased by 2.23%.

Let's dive into the week's economic data.

Monday
On Monday, the Commerce Department reported that construction spending in May increased by 0.5% and hit an annual rate of $874.9 billion, the highest level in nearly four years. A big part of the boost came from a housing market that by most indications is really heating up. But, while we've been getting good news on home sales and construction starts, rising interest rates bear watching, as they could derail this train before it gets up to full speed.  

Tuesday
On Tuesday we got June's auto-sales numbers from Ford and General Motors, which both saw sales increase 13% and 6.5%, respectively. These reports were bolstered by a solid U.S. factory order report, which indicated that factory orders in May increased by 2.1%, up from an upward-revised 1.3% increase in April. Many economists look at this report to tell us how manufacturing in the U.S. is doing and what they can expect from the big industrial companies in the coming months. And I think analysts and economists will be raising forecasts after this report.  

Wednesday
On Wednesday, investors got both the ADP private-sector jobs report and the United States' International Trade report. The ADP jobs number was expected to come in at 160,000 but managed to reach 188,000 for the month of June. That was a welcomed surprise on the half-day of trading leading into the Fourth of July holiday on Thursday.

On the other hand, we learned that the U.S. trade deficit in May grew by more than the expected $40.1 billion to more than $45 billion. This report could mean that the U.S. is strengthening as consumers and businesses are buying more goods, but it could also mean that other nations around the world are weakening, causing them to buy less of what we have to offer. We already know China is slowing and Europe is a mess, and it's a little scary to consider that the rest of the world may not be all that healthy.  

Thursday
The markets were closed on Thursday. The only thing being released around my house was a lot of fireworks.

Friday
The Labor Department's monthly jobs report for June came in at 195,000 new jobs on Friday, while forecasts had pinned the number at a mere 155,000. The readings for April and May were both revised higher, too, by a total of 70,000 jobs. But although the jobs market is heating up, the unemployment rate stayed the same at 7.6%, as a higher number of Americans are participating in the workforce. To learn more about the jobs report, click here.

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Emerging Gain from Vanguard

Emerging markets have been struggling since 2011. Many have been in bear markets, with declines of as much as 35%, and with only bear market rallies since 2011, observes market timing specialist Sy Harding, editor of Street Smart Report.

Given the risk in individual countries these days, we prefer a diversified emerging-markets mutual fund or ETF, rather than choosing individual countries or individual stocks.

And given the potential over-valued condition of the US market, and its proximity to five-year highs, there may well be more potential in markets that have already experienced bear markets, and are rallying off lows.

Vanguard Emerging Markets (VWO) is a large fund, with 1.2 billion shares outstanding, and a market cap of $50 billion. It is widely diversified. Its twenty largest holdings are only 21.7% of its total holdings.

Those largest holdings include Taiwan Semiconductor, Petroloeo Brasileiro (Brazil), China Mobile, China Construction Bank, CNOOK (China Offshore Drilling), Gazprom OAO (Russia), America Movil (Mexico), Sasol Ltd. (South Africa), Hon Hai Precision (Taiwan), and Infosys (India).

The current dividend yield is 3.36%, and the fund has a low expense ratio of just 0.18%. Meanwhile, it is selling at a P/E ratio of only 12, compared to the S&P 500's P/E Ratio of 19.

The new expectations that the Fed will not begin tapering until sometime next year should provide a further tailwind for emerging markets.

Most recently, technical indicators had been on a sell signal for the Vanguard Emerging Markets, since its peak early this year.

In its tumble from that peak it fell 18% to its summer lows. However, it found solid trendline support again and our technical indicators triggered a new intermediate-term buy signal.

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Memory loss can put retirement savings at risk

Paul Geisert was always tech savvy and good at managing his finances until one day seven years ago when he couldn't complete his tax return. The TurboTax software that he normally used seemed complicated. And when he went out to eat, he found it hard to estimate the tip.

Geisert, then 73, quickly realized that he couldn't ignore the problem. He went to a doctor for mental tests. They confirmed that his slippage in finances was a sign of mild cognitive impairment, or MCI.

Fortunately, Geisert could turn to his wife, Mynga Futrell, for support. The couple also hired a CPA to handle their taxes, and Geisert decided to stop driving. "I really don't work now," he says. "But I have things to do. I take care of the dog. I still do the yard work, and I repair some things in the house."

Geisert's story should be a wakeup call to Baby Boomers. They not only have to make sure their nest eggs can last all their retirement years, but they also need to start planning for financial care before they experience memory loss and can't make smart financial decisions.

RETHINKING RETIREMENT: Baby Boomers are reinventing themselves in retirement

Already, older Americans are losing $2.9 billion a year to financial abuse, according to a 2011 study by MetLife Mature Market Institute.

And financial exploitation is considered much worse because many older Americans, especially those who have MCI are unlikely to report fraud. That's because they may not recognize a scam or they may be too embarrassed to tell anyone.

MCI is considered much less serious than dementia, but is "much more scary in terms of the likelihood that you'll still be behind the wheel of your financial life," says David Laibson, professor of economics at Harvard University.

MCI is more common among older Americans than Boomers may realize. It affects about 20% of Americans over age 70, according to the American College of Physicians.

RETHINKING RETIREMENT: Ways to a healthy, happy retirement

"We don't l! ike to look ahead to things like that," says Futrell, Geisert's wife. "But it's necessary to invest some resources into planning and try to cover your bases. And then if those things don't happen, lucky you."

How to prepare for memory loss

• Develop a support team. It should include those who are willing to take care of you on a daily basis and those you can trust to take care of your finances, says Louise Schroeder, a financial planner in Stillwater, Okla., who specializes in planning for aging successfully. Make sure that they are willing to handle these responsibilities and understand your wishes and how you want your finances handled, she says.

Unfortunately, it's not always easy to find younger family members to rely on. The Baby Boomer generation is the largest in U.S. history. As they are growing older and living longer, their family members are fewer and living much further apart.

LIFESTAGES: Caring for elderly parents catches many unprepared

Some people may prefer to rely on a lawyer or a financial adviser they know and trust. But if your adviser is older than you are, be sure the firm also has younger employees you can rely on. Some financial planners, such as Locker Financial Services in Little Falls, N.J., are adding elder-life advisers to provide more support for aging clients.

• Prepare documents. After you decide on whom you will rely, you need to put it in writing. By creating a power of attorney document (POA), you will give a person authority to act on your behalf if you are incapacitated.

Be sure you also have medical directives, which include a living will and health care proxy. And keep copies of your documents in a place at home where they are easily accessible.

RETIREMENT LIVING: 5 things to do now to prepare

You also should consider writing down a list of your desires and goals in case you have cognitive impairment and end up living in a nursing home. "Think about these things as a way to maintain control over your future! ," says J! anet. L. Lowder, elder law attorney at Hickman & Lowder in Cleveland. Because if you have not done this and suddenly have cognitive impairment, others can make decisions for you that you don't want.

• Simplify your investments. "A very complicated portfolio, with all sorts of individual stocks, non-publicly traded investments, related partnerships, is not good for an 85-year-old person to be running," Laibson says.

Before you reach that age, either delegate control to a very trustworthy adviser or change your portfolio to less-complex financial investments. Some people prefer to buy an annuity because, even if costly, it provides a steady stream of income.

Many people in their 60s start planning to move to a warm climate and live in a one-story home so they don't have to climb upstairs. But just as their knees will get creakier as they get older, their brains will react differently. A recent study of brain scans found that older Americans often have misplaced trust in others, says the University of California-Los Angeles research.

Their skills for making good financial decisions can start deteriorating as early as early to mid-50s, according to Shelley Taylor, lead UCLA researcher. That's why it's important to plan ahead and rely on close friends and family members as you grow older.

But not all older Americans are willing to listen to family members. Jody Thomas, vice president for the Better Business Bureau of Greater Maryland, became worried about her 81-year-old stepmother when her father, who is 86, mentioned that the couple often went to many free financial investment lunches. And he told Thomas that her stepmother had invested most of her money in real estate investment trusts.

"I went to FINRA's (Financial Industry Regulatory Authority) website and started finding out about investment fraud and senior abuse," Thomas says. "And REITs are given as one example of unsuitable investments for senior citizens."

When Thomas tried to bring up the issue with! her fath! er and stepmother, they became upset and refused to talk about it. "I know this is a really difficult subject," she says. "It has a lot to do with fear of losing independence."

The Tragedy Of AMD

I have been interested in the microprocessor business since I was in grade school, and have followed the "war" between Advanced Micro Devices (AMD) and Intel (INTC) for well over a decade. I remember the triumphant launch of AMD's K7 and K8 designs, soundly beating Intel's "Netburst" series microarchitectures that formed the basis of the Pentium 4, Pentium D, and various derivatives. I remember seeing AMD cleverly beat Intel to producing a nice, fairly elegant set of 64-bit extensions to the IA-32 instruction set, and I remember when the AMD Opteron was schooling Intel's Netburst-based Xeons on CPU performance and power efficiency as well as the actual system architecture.

I remember when AMD was great, and I will never forget the small fortune that I made buying shares of AMD at about $7 ahead of the run to the $40s (I got out at about $33, though, when I saw the evidence that Intel's "Conroe" would indeed put an end to AMD's "reign"). To those who suggest that I have some inherent dislike, you couldn't be more off the mark - AMD paid for many years' worth of new computer gear for me.

Ever since those halcyon days of the K8, AMD has stumbled year after year with products that time and again fail to hit the mark. AMD's follow-on to the K8 design, "Barcelona," was hyped up significantly as the "Intel killer" (since Intel had since taken the performance crown). One tech press outfit even claimed that AMD's engineers were "dancing in the aisles" when they saw the initial performance of the chips. Well, "Barcelona" fell flat on its face - marred by low clock speeds, an inferior micro-architecture, and a performance-crippling bug.

In its drunken stupor, AMD, under the leadership of then-CEO Hector "The Wrecker" Ruiz, levered up its balance sheet (forcing AMD to sell its fabs to stay solvent) and acquired ATI for a substantial premium to market price. While the "promise" of this acquisition ! was that AMD would quickly integrate ATI's graphics IP into AMD's microprocessors, it wasn't until 2011 that the first "Fusion" (that was the "buzzword" of the day - similar to what "HSA" and "Mantle" are today; take heed ye newbies to the AMD story) parts hit the street. By then, it was already too little, too late. The integrated graphics portion of the first Fusion chip, codenamed "Llano," was quite good, but its CPU performance was weak, and power consumption wasn't great - it failed to deliver the K.O. against Intel that the company so desperately needed to gain back market share and pricing power in PCs.

Of course, not all was lost. AMD's low power CPU effort - known as "Brazos" - was quite good. While AMD's high end share (that is in both PCs and servers) continued to wane, AMD's low cost, but high volume Brazos parts did quite well in cheap notebooks and "netbook" systems. These parts were superior to the Intel Atom parts that were being peddled, and as a result became one of AMD's best-selling products in its history. Everything seemed okay, even if it wasn't perfect.

Of course, with Apple's (AAPL) introduction of the iPad, the low end of the PC market (AMD's bread and butter) was the first to get hit - AMD's 2012 was marred by multiple guide downs. Intel wasn't immune either as its 2012 forecast was lowered three times, with the third driven by a big revenue warning for Q3. While Intel remained massively profitable, AMD began to lose some serious money during 2012 and in the first half of 2013. Newly appointed CEO Rory Read and his team implemented a restructuring plan - lay off a bunch of workers (freeing up talent to be gobbled up by the new wave of ARM chip vendors), cut SG&A, and stop trying to go head-to-head with Intel at the high end PC market and instead target "high growth" areas like tablets and micro-servers, as well as semi-custom.

It's a great plan on paper - but it's not really g! oing to w! ork like many AMD bulls think it will. Sure, semi-custom is going to work out pretty well - AMD's IP and current situation makes it ideal for this market. After all, AMD has a lot of great GPU IP, can license whatever ARM IP that it needs, and even has some decent X86 processors that it can use. It's not a bad gig.

But the problem is that AMD bulls aren't just betting on semi-custom, but are also betting on micro-servers, low cost notebooks, and tablets to save the day. Sorry, but these expectations are just completely unrealistic. While AMD joins the "ARM bandwagon" for micro-servers, the truth is that using ARM is a headwind for competing in any sort of server market, not a tailwind. It's absolutely puzzling to me that AMD has no plans to fight in this market with its own low power X86 cores - the vast majority of the server market is X86 today, and Intel's new products suggest that this will be the case for many years to come.

Further, while AMD saw a "spike" in its low cost notebook chip sales ("Kabini" and "Temash"), and while management (and AMD bulls) pumped up the imminent arrival of "Temash" for tablets, your friendly Seeking Alpha author pointed out that it wasn't time to get excited over these for the following reasons:

· The one-time spike in "Kabini" and quad core "Temash" sales for low cost notebooks would not be sustainable as AMD was simply exploiting a one-quarter window of opportunity before Intel rolled out low cost Haswell chips as well as its Bay Trail-M (Atom based, low cost) parts for this market and aggressively competed for share

· The "3.9 watt" variant of "Temash" was completely unsuitable for tablets. In addition to being woefully underpowered on the CPU side, as well as having nothing meaningful in the way of dynamic voltage/frequency scaling, the "Jaguar" architecture itself lacks the deep active-idle states needed to see really good batt! ery life.! It also lacks key IP blocks on the chip itself like an integrated Image Signal Processor ("ISP").

· AMD was on the verge of being hit by the 22 nanometer refresh from Intel in the server space, likely further pressuring AMD's limited server market share.

It gets worse, however. The effects of the Bay Trail-M ramp on AMD's P&L won't really be evident until Q1 2014 and throughout most of 2014. Further, in micro-servers, while AMD plans to ship its first 28 nanometer part by the end of the year, Intel will be on its third generation micro-server part that not only will be built on 14 nanometer FinFET technologies (that's two nodes ahead of AMD), but will also be an X86 design, which is a big plus from a software compatibility standpoint in the datacenter. AMD will also continue to feel the pressure from "Haswell" throughout the balance of 2013 and into early 2014, and then once mobile "Kaveri" (AMD's "big core" APU for notebooks) ships, it will have to compete with 14 nanometer "Broadwell-ULT." The competitive situation is just as bad as it gets for AMD - it's competing against better funded and larger design teams, as well as a two generation process generation lead. This, of course, explains why AMD's "big core" server roadmap is largely absent.

At the end of the day, it's important to be realistic. It's great to think you're holding on to the next multi-bagger story (it may be, who knows?), but at the same time there's a reason AMD is worth less than what Intel makes in profits in a good quarter - it's got a lot of problems and despite what management tries to do, the odds of "success" aren't exactly stellar. This is, at best, a speculative stock, and for most it's just a trade on whatever "story" happens to be in favor today. After all, something's got to be seriously wrong when after over 3 decades of being a publicly traded company, shareholders still haven't ever seen the following announcem! ent:

AMD declares quarterly cash dividend.

Source: The Tragedy Of AMD

Disclosure: I am long INTC, AMD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Walgreen to Pay $80 Million to Settle Federal Allegations Over Painkiller Distribution

Pharmacy chain Walgreen (NYSE: WAG  ) and the U.S. Drug Enforcement Administration and Department of Justice have reached a settlement agreement over civil charges that the company had practiced improper distribution of prescription painkillers, the company announced yesterday.

The agreement includes Walgreen's paying $80 million and requires it to to surrender its DEA registrations at six of its more than 800 Florida pharmacies until May 2014 and at a Florida distribution center until September 2014.

The company had allegedly made violations in the record-keeping and dispensing of several controlled substances. Said violations were discovered through investigations of the company's distribution center in Jupiter, Fla., and six additional retail pharmacies in Florida. Walgreen has agreed to pay $80 million in the settlement, and expects the impact to be approximately $0.04 to $0.06 per share during its next quarter.

Kermit Crawford, Walgreen's president of pharmacy, health and wellness, said in a statement that the company has already made great strides in preventing abuse of prescription drugs. "We have identified specific compliance measures – many of which Walgreens has already taken – to enhance our ordering processes and inventory systems, to provide our team members with the tools, training and support they need to ensure the appropriate dispensing of controlled substances and to improve collaboration across the industry."

Authorities said the Jupiter center failed to flag suspicious orders of drugs it received from pharmacies, and the retail outlets routinely filled prescriptions that clearly were not for a legitimate medical use. The upshot was many more doses of prescription drugs were available illegally on the street. The drugs included oxycodone, hydrocodone, and Xanax.

Miami U.S. Attorney Wifredo Ferrer said the Walgreen civil penalty was the largest in the history of the Controlled Substances Act. The settlement also resolves similar allegations against Walgreens retail pharmacies in Colorado, Michigan and New York, Ferrer said. No criminal charges have been filed.

-- Material from The Associated Press was used in this report.

link

Medtronic: A Shining Pharma Investment

Recently, Medtronic (MDT) received FDA approval for its innovative artificial pancreas, which automatically regulates insulin delivery for Type-1 diabetes patients. The device is already available in the European market as MiniMed Veo. Medtronic is the world leader in both pump and glucose monitoring device sales, and it is the first company to combine a pump and glucose monitor in a single automated device.

Its diabetes division contributed about 9% of its total revenue for fiscal year 2013, and geographically, it generates 55% of its revenue from the U.S. market. Medtronic is witnessing a low quarter over quarter revenue growth of 1% from its diabetes division for the quarter ended in July 2013.

Type-1 Diabetics' pain

In order to maintain blood sugar, people with Type-1 diabetes are required to monitor their blood sugar several times a day. Conventionally, blood sugar is checked using a pin-prick method and insulin is injected using a needle or insulin injection pen, which can be a painful process for patients. To avoid the use of needles several times a day, drug manufacturers introduced insulin pumps, which require injection only once every three days. The pump provided an alternative to needles, but requires proper education to administer because excess insulin may cause hypoglycemia; which occurs when the blood sugar level falls too low. Targeting this problem, Medtronic developed a combination device with an insulin pump and sugar monitoring sensor that works as an artificial pancreas system.

Medtronic's innovation

On September 27, 2013, Medtronic received FDA approval for "MiniMed 530G" with "Enlite", a first-generation artificial pancreas system. The device is a combination of an insulin pump, MiniMed530G, with a sensor, Enlite, which stops insulin infusion if the patient's blood sugar falls below the threshold levels. It works as an artificial pancreas which automatically adjusts insulin levels by continuously monitoring the changes in the pa! tient's blood glucose levels.

The MiniMed 530G has two features that can attract customer interest. First is the Enlite sensor, which is an improved version of Medtronic's Guardian sensor. A patient can wear Enlite for a longer duration of six days versus three days for Guardian. The second advantage is the pump's "threshold suspend automation technology" that infuses insulin, when blood glucose readings reaches a designated level.

Medtronic is the first U.S. player to market a product with an automatic insulin delivery mechanism.

Competition in diabetes-care device market

Medtronic's artificial pancreas can pose a major threat for companies that specialize in manufacturing glucose monitoring devices and insulin delivery pumps. DexCom (DXCM) is one such manufacturer that focuses on the development of continuous glucose monitoring systems. It has witnessed a revenue growth of 20.9% in the latest quarter ended in June 2013, while Medtronic's diabetic division witnessed a growth of only 1% in the latest quarter ended in July 2013. We expect Medtronic's insulin pump with Enlite sensor will provide new growth to Medtronic's Diabetes division and negatively affect DexCom's revenue.

Meanwhile, Johnson & Johnson's (JNJ) diabetes division, Animas, in collaboration with DexCom, is also seeking FDA approval for a device similar to Medtronic's artificial pancreas. Johnson & Johnson is currently conducting a second feasibility study on its insulin pump connected to DexCom's continuous glucose monitor. It is an automated device that can adjust insulin delivery according to the patient's needs. If the FDA approves the device it can give serious competition to Medtronic's artificial pancreas.

Medtronic's automatic infusion technology provides a competitive edge over the conventional insulin pumps. Conventional insulin pumps cannot regulate the delivery of insulin to avoid acute problems like hypoglycemia. Hence, the manufacturers like Insulet (PODD), which offers Om! niPod, an! insulin delivery pump, will also experience serious competition from Medtronic's innovation. Insulet has generated revenue of approximately $60 million in the quarter ended in June 2013.

Market opportunity

Medtronic's device is a combination of glucose monitor and insulin pump, so it will gain value from both market categories. The U.S. glucose measurement devices' market was estimated to be worth more than $4 billion in 2010, and the global market is expected to reach $10.9 billion in 2017. On the other hand, the U.S. insulin pump market was at $518.5 million in 2010, and it is expected to grow at a CAGR of 8.5%, reaching $915.4 million by 2017.

In 2012, Medtronic's share in the global insulin delivery device market was 67%. Given the potential of MiniMed 530G with Enlite and the company's leadership position, we expect fast adoption of the device among Type-1 diabetics, which will further increase Medtronic's market share. At the same time, the bundling of the device with its Enlite sensor will help the company to increase its share in the glucose monitoring device market.

Conclusion

The MiniMed 530G and Enlite combination of glucose sensor and insulin pump not only helps the patient avoid insulin needles, but it also automatically stops insulin infusion if the patient's blood sugar falls below the threshold levels. Medtronic, the global leader in the diabetes-care device market, was witnessing slow growth in its diabetes division. Medtronic's artificial pancreas has immense market potential, and we expect FDA approval in the U.S. for MiniMed 530G will bring long waited growth to Medtronic's diabetes division, which contributed revenue of $1.526 billion in fiscal year 2013.

Source: Medtronic: A Shining Pharma Investment

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: Fusion Research is a team of equity analysts. This article was written by Satya Prakash, one of our research analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

Does Your Financial Advisor Really Have a Clean Record?

By Hal M. Bundrick

NEW YORK (MainStreet) � When hiring a financial advisor, investors are told to "do their research" by using public databases such as BrokerCheck to search for past complaints and compliance infractions. But advisors may have already wiped the slate clean.

The Public Investors Arbitration Bar Association (PIABA) studied more than 1,600 arbitration cases in which the word "expungement" appeared and found that from January 1, 2007 through mid-May 2009, broker records were scrubbed in 89% of the cases resolved by stipulated awards or settlements. Even more recently -- since mid-May 2009 through the end of 2011 -- expungement relief was granted in nearly every instance: 96.9% of cases.

PIABA found one broker who requested expungement 40 times, and arbitration panels granted a clean record to that individual 35 times. Financial advisors seeking expungement are looking to remove investor complaints from the Central Registration Depository (CRD), the official database accessed by the public through state securities offices and FINRA's BrokerCheck program. "To say that 'expungement' of customer claims from broker records is a major investor protection problem is an understatement," says Scott Ilgenfritz, president, PIABA. "The result is that investors who are diligent enough to seek out information about brokers may be getting a woefully incomplete picture of the individual to whom they will entrust all or most of their nest egg. What is supposed to be an extraordinary relief measure is now being sought and granted in roughly nine out of the 10 settled cases that we studied. This clearly indicates that the current expungement procedures are seriously flawed. Regulators need to step in and crack down on the granting of expungements, particularly in settled cases." While the Securities and Exchange Commission (SEC) approved FINRA rules related to expungement, the federal oversight agency did so on the understanding that the granting of such relief would be an extraordinary remedy. "One of the key recommendations we make to investors is to check the record of anyone they are thinking of trusting with their money," says Rachel Weintraub, legislative director and senior counsel for the Consumer Federation of America (CFA). "But when it is too easy for brokers to get complaints expunged from their records, investors who attempt to do the right thing and check out the broker's disciplinary record may end up making their decision based on incomplete information. Worse, they may be led to believe that a broker has a clean disciplinary record when that is far from true. This leaves investors vulnerable to fraud and abuse." Better training for arbitrators is needed, according to PIABA. "Changes need to be made with respect to the content and thoroughness of the training arbitrators are required to complete before they can rule upon a motion seeking expungement relief," says Ilgenfritz. "Changes should also be made with respect to the procedures applicable to motions seeking expungement relief." FINRA responded to the report, issuing a statement saying the regulator is working to provide additional guidance and training to arbitrators. "As a result of these concerns, FINRA recently provided expanded guidance to assist arbitrators in the proper performance of their responsibilities with respect to expungement, and is enhancing arbitrator training with added emphasis on the importance of the integrity of the information in the CRD system," the FINRA statement says. "While still significant, the number of arbitrator-recommended expungements executed by FINRA following a court order during the five-year period (838 orders) covered by the study is less than 5% of the total number of customer disputes filed (17,635)." --Written by Hal M. Bundrick for MainStreet

Windows 8.1 update arrives with fresh changes

NEW YORK — Not quite a year later, Microsoft's Windows 8.1 arrives with considerably less drama than Windows 8, and that is to be expected—the changes are far less radical than they were for consumers who made the leap from Windows 7 to Windows 8.

But the latest software promises to be a worthwhile update for anyone who bought a PC and/or tablet with the Windows 8 operating system. And it represents a critical test for Microsoft as it attempts to satiate critics, address Windows 8 shortcomings, and ultimately improve the company's standing in both the tablet and more traditional PC businesses.

The 8.1-update starts to arrive in the Windows Store at 7 a.m. ET Thursday, and will be rolled out globally over the next 24 hours, Microsoft says. Windows 8.1 will be available on new devices and in standalone retail packaging on Friday.

So what doth the upgrade bring? The newest version is more customizable than its predecessor, with more background colors, and more variable sizes for the live tiles that have come to define the Windows 8 experience, on computers and for that matter smartphones.

Perhaps the biggest change you'll notice is the return of a familiar Start button, located in "Desktop" mode in its customary location at the bottom left corner of the taskbar. It's not like you're completely going back to the future — clicking on the new Start button returns you to the default tile-based Windows 8 Start environment, known as the Modern UI with those colorful rectangular and square tiles, some with live data for such things as weather, stocks, e-mail and so on.

Microsoft in 8.1 also lets you boot up your PC in the more traditional-looking Desktop environment if you prefer, or stick with the default tile interface.

Microsoft's better-integrated Sky Drive cloud-based locker takes on a more prominent role in 8.1, and so does Bing search. If while searching, say, for a performer such as Alicia Keys, you'll be able to stream some of her top tracks in their entirety for! free, provided via XBox Music. You'll also see pictures of the artist, her birth date and a link to her Wikipedia bio.

Multitasking gets better too in 8.1. Depending on the size of your computer screen, you can display up to four apps side by side, with the ability to alter the sizes of the windows that those apps appear in.

The Windows Store where you'll find the new upgrade also gets a design makeover. Microsoft says there are now 110,000 apps in there, up from about 10,000 about a year ago. New and updated apps are also continually being delivered to the place, a list that includes Evernote, Facebook, Hulu Plus, Netflix, and NOOK.

It remains to be seen, of course, how consumers and critics take to the changes, aesthetically and feature-wise. But if you already bought into the Windows 8 ecosystem, the 8.1-update is in the end a pretty big deal.

Follow Ed Baig on Twitter: @edbaig.

As JPMorgan Goes So Goes The Market

JPMorgan Chase is a metaphor for the stock market in the sense that while still paying mightily for the financial world's sins of commission it will share in a zippy economic setting likely to unfold.

Morgan weathered the storm better than Citigroup, while the likes of Bear Stearns, American International Group, Merrill Lynch and a host of mortgage insurers and packagers of housing paper like Washington Mutual were merged out for a song or required massive cash infusions from the Federal Reserve and U.S. Treasury.

As financial assets rebounded from their panic lows early in 2009, regulators like the Justice Department, SEC and a host of state attorneys general sharpened knives, sued for tens of billions and won court cases or settled with their defendants.  The bill for Morgan could reach $30 billion by year end 2014.  This is over 1½ year's earnings, and we shareholders will have experienced a haircut to book value near $8 a share.

But, TARP assistance funds largely have been repaid with interest. The federal government may lose some capital on the General Motors bailout, but GM is hearty, profitable and a solid world player with a respected line of new model trucks and cars. I don't fully understand why regulators demand and get tens of billions from JPMorgan Chase and its ilk. After all, no senior bankers were indicted for criminal fraud and then jailed.

Awaiting JPM's September quarter's report, I mused over the sheer size and scope of Morgan. It reminded me of the old Standard Oil of New Jersey which bestrided the oil sector like a colossus; finally it was broken up by the Justice Department. Talk about too big to fail! Rockefeller's domain was a cornucopia of asset values – oil reserves in the ground, cash flow, earnings power and dividend paying capacity.

Ma Bell was dismantled in the sixties but kept its long lines franchise.  Today, both AT&T and ExxonMobil are polite investments but are structurally incapable of outperforming. AT&T has too much landline business, slowly withering away and XOM is troubled replacing oil reserves year over year.

I can imagine how you break up JPM, but is it worth the government's efforts? The best control is indirect control. You keep raising reserve requirements against earnings assets, keeping leverage to a respectable ratio. Below 15:1 rather than 25:1 makes sense.

The enormity of this colossus shouldn't go unremarked:  Shareholder equity of $196 billion, headcount of 255,000 and total assets of $2.46 trillion. The stock, like many other banks, sells at book value before intangibles, but there's not much free capital left for buybacks.

JPMorgan Chase's 16-page quarterly report is chock-full of statistics, ratios and year-over-year comparisons as well as sequential quarterly results. The numbers come fast and furious, complicated by releases of loss reserves in almost every segment of the bank's operations. The initial reading left me nonplussed.

Could I rely on management's pronouncement that "real" earnings were $1.42 a share, excluding litigation expenses and reserve releases? Maybe yes, maybe no. What was eerily missing from the density of the report was any feed-out on how each sector of the bank's business might fare going forward, quarterly, annually, whatever. How was capital going to be allocated to each major earnings sector? In short, what were areas of strength or softness? The silent message is do your own your homework.

OK. I dug in, amazed at the runoff in assets in the mortgage sector, largely from the peaking of mortgage refinancing and some sloughing off currently of home mortgage writing. The numbers are enormous, but are squeegeed out by loss reserve reversals in the billions.

Mortgage banking revenues declined $1.7 billion to $2 billion. Non-interest revenue declined $1.6 billion to $877 million. Loss provisions dropped by $1.5 billion. Mortgage production pretax income was minimal, dropping almost a billion, year-over-year. These are enormous shrinkages in the face of mortgage application volume dropping 45% year-over-year and 38% sequentially.  Prime home mortgages are tagged near 4.5%, not the 3% over 6 months ago.

In the bank's real estate portfolio, again, credit loss provisions swung by $1.5 billion.  Allowance for loan losses in mortgage banking dropped from $11.3 billion to $7.7 billion or from 4.6% to 2.4% of loans. I'm untroubled by such earnings management just so long as the country doesn't lapse into a no-growth setting next year or two.  It's hard to see the loan loss ratio cut much more.

Likewise, in the credit card and autos sector, Morgan experienced spread compression and flattish revenues offset by loss reserve flowbacks. Another major profit center, consumer banking, also showed lower revenues, spread compression and loss reserve flowbacks of over $2 billion, year-over-year.

10 Best Penny Stocks To Buy For 2014

On Wednesday, JPMorgan Chase (NYSE: JPM  ) shares were trading a penny shy of $50. Today, the superbank has broken through the $50 barrier, and is trading at $50.21 two hours into the day: up 1.09% since the opening bell after being up 0.13% in overnight trading.

Given the trials and travails the bank has been experiencing lately, and truthfully, ever since the London Whale trading scandal broke last year, this is a bit of a shocker -- one that defies easy explanation.

Market roundup
And before we even attempt one, here's what JPMorgan's peers and the markets are up to so far:

Bank of America is already up a big 2.16%. Citigroup is also up big: 1.91%. Wells Fargo (NYSE: WFC  ) -- the low-drama, Steady Eddie of big banking -- is up a more measured 1.15%.

The markets are all in the green so far, as well:

The broader S&P 500 is up 0.80%. The narrower Dow Jones Industrial Average is up 0.50%. The Nasdaq Composite is up 0.77%.

Foolish bottom line
Without a doubt, the primary explanation for today's share-price jump is the simple fact that the markets are all up. A rising tide is lifting all boats. But JPMorgan had a big day yesterday, too, while its peers didn't, and today's bull market can't explain that.

10 Best Penny Stocks To Buy For 2014: PostRock Energy Corporation(PSTR)

PostRock Energy Corporation, an integrated independent energy company, engages in the acquisition, exploration, development, production, and transportation of oil and natural gas in the United States. It operates in two segments, Oil and Gas Production, and Natural Gas Pipelines. The Oil and Gas Production segment primarily focuses on the development of coal bed methane in the Cherokee basin and the Marcellus Shale in Appalachian Basin, as well as has oil properties in Central Oklahoma. As of December 31, 2009, it had approximately 51.9 billion cubic feet equivalent (Bcfe) of estimated net proved reserves; development rights to approximately 516,184 net acres; and operated approximately 2,849 gross wells in the Cherokee Basin. It also had approximately 44,507 net acres of oil and natural gas producing properties with estimated proved reserves of 18.9 Bcfe and approximately 498 gross wells in Appalachian Basin; and had 65 gross wells, development rights to approximately 1,4 80 net acres, and estimated net proved reserves, 3.9 Bcfe in Central Oklahoma. The Natural Gas Pipelines segment involves in transporting, gathering, treating, and processing natural gas. It owns and operates a natural gas gathering pipeline networks of approximately 2,173 miles in the Cherokee Basin and 183 miles in the Appalachian Basin; and a 1,120 mile interstate natural gas pipeline, which transports natural gas from northern Oklahoma and western Kansas to the metropolitan Wichita and Kansas City markets. The company is headquartered in Oklahoma City, Oklahoma.

Advisors' Opinion:

• [By Eric Volkman]

  LeBlanc is a veteran energy industry CFO. He has filled that role at East Resources -- now a unit of Royal Dutch Shell (NYSE: RDS-A  ) -- as well as�PostRock Energy (NASDAQ: PSTR  ) , and Range Resources, among others.

10 Best Penny Stocks To Buy For 2014: Homeowners Choice Inc.(HCII)

Homeowners Choice, Inc., an insurance holding company, provides property and casualty insurance in Florida. The company provides property and casualty homeowners? insurance, condominium owners? insurance, and tenants? insurance to individuals owning property. It serves approximately 59,500 policyholders primarily through independent agents. The company was founded in 2006 and is headquartered in Tampa, Florida.

Advisors' Opinion:

• [By CRWE]

  Homeowners Choice, Inc. (Nasdaq:HCII), a Florida-based insurance holding company, reported that its board of directors has declared cash dividends of 5.833 cents per share on its Series A Cumulative Redeemable Preferred Stock (“HCIIP”) for the months ending September 30, October 31 and November 30, 2012.

Hot Performing Stocks To Watch For 2014: PIMCO California Municipal Income Fund III(PZC)

PIMCO California Municipal Income Fund III is a close ended fixed income mutual fund launched and managed by Allianz Global Investors Fund Management LLC. It is co-managed by Pacific Investment Management Company LLC. The fund invests in fixed income markets. Its investment portfolio include California municipal bonds, and other municipal bonds and notes; California variable rate notes and other variable rate notes; California variable rate demand notes and other variable rate demand notes; U.S. treasury bills; and call options written and put options written. Allianz Global Investors Fund Management LLC serves as an investment Manager to the fund. PIMCO California Municipal Income Fund III was formed in 2002 and is based in New York City.

10 Best Penny Stocks To Buy For 2014: Sutron Corporation(STRN)

Sutron Corporation designs, manufactures, and markets products and solutions for the collection and monitoring of hydrological, meteorological, and oceanic data for the management of critical water resources and optimization of hydropower plants, as well as for warning of disastrous floods, storms, or tsunamis. The company?s Hydromet Products division manufactures real-time data collection and control products consisting of dataloggers, satellite transmitters/loggers, water level and meteorological sensors, and tides monitoring systems. Its Integrated Systems division provides system integration services consisting of the design, integration, installation, and commissioning of customer-specific hydrological and meteorological monitoring and control systems. These systems also include software applications based on it XConnect database software and Ilex Tempest database software. This division also integrates and installs airport weather systems. The company?s Hydrological Services division provides hydrologic services, including data interpretation and analysis, flow modeling, field studies, hydrologic studies, environmental permitting, legal or expert witness and equipment integration, installation, commissioning, and maintenance services. Its Ilex division offers Tempest database software, DOMSAT systems, custom software, and engineering services. The company primarily serves federal, state, local, and foreign governments; engineering companies; universities; and hydropower companies. Sutron Corporation markets its products through direct sales force in the United States, as well as through resellers and agents in Canada, Latin and South America, Europe, Africa, Asia, and Australia. The company was founded in 1975 and is headquartered in Sterling, Virginia.

10 Best Penny Stocks To Buy For 2014: Enstar Group Limited (ESGR)

Enstar Group Limited, through its subsidiaries, acquires and manages insurance and reinsurance companies in run-off. The company settles insurance and reinsurance claims. It also offers management and consultancy, claims inspection, and reinsurance collection services to its affiliates and third-party clients. The company operates in the United States, Bermuda, the United Kingdom, Europe, and Australia. Enstar Group Limited was formerly known as Castlewood Holdings Limited and changed its name to Enstar Group Limited. Enstar Group Limited was founded in 2001 and is based in Hamilton, Bermuda.

10 Best Penny Stocks To Buy For 2014: Natural Alternatives International Inc.(NAII)

Natural Alternatives International, Inc. provides private label contract manufacturing services to companies that market and distribute vitamins, minerals, herbs, and other nutritional supplements, as well as other health care products, to consumers in the United States and internationally. It offers strategic partnering services, including customized product formulation, clinical studies, manufacturing, marketing support, international regulatory and label law compliance, international product registration, packaging in multiple formats, and labeling design. The company also develops, manufactures, and markets its own branded products under the Pathway to Healing product line through print media and the Internet distribution channels. It manufactures products in various forms, including capsules, tablets, chewable wafers, and powders. The company was founded in 1980 and is headquartered in San Marcos, California.

10 Best Penny Stocks To Buy For 2014: Taiwan Greater China Fund(TFC)

Shelton Greater China Fund is a close ended equity mutual fund launched and managed by CCM Partners, LP. The fund is co-managed by Nikko Asset Management Co. Ltd. It primarily invests in public equity markets of Taiwan. The fund seeks to invest across diversified sectors. It benchmarks the performance of its portfolio against the Taiwan China Strategy Index, TAIEX, and MSCI Taiwan Index. The fund was formerly known as Taiwan Greater China Fund. Shelton Greater China Fund was formed in July 1988 and is domiciled in the United States.

10 Best Penny Stocks To Buy For 2014: Cowen Group Inc.(COWN)

Cowen Group, Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides alternative investment management, investment banking, research, and sales and trading services for its clients. It manages separate client focused portfolio through its subsidiaries. Through its subsidiaries, the firm invests in equity and fixed income markets. It also invests in alternative investments markets through its subsidiaries. Cowen Group, Inc. was founded in 1994 and is based in New York, New York with additional offices in Boston, Massachusetts, Chicago, Illinois, Cleveland, Ohio, Dallas, Texas, and San Francisco, California.

10 Best Penny Stocks To Buy For 2014: Life Partners Holdings Inc(LPHI)

Life Partners Holdings, Inc., through its subsidiary, Life Partners, Inc., operates in the secondary market for life insurance in the United States. It facilitates life settlement transactions by identifying, examining, and purchasing the policies as agent for the purchasers. The company?s financial transactions involve the purchase of life insurance policies at a discount to their face value for investment purposes. It serves institutional purchasers, which include investment funds designed to acquire and hold life settlements; and retail purchasers, such as high net worth individuals. The company was founded in 1971 and is based in Waco, Texas.

10 Best Penny Stocks To Buy For 2014: Trailer Bridge Inc.(TRBR)

Trailer Bridge, Inc., an integrated trucking and marine freight carrier, provides freight transportation services between the continental United States, Puerto Rico, and the Dominican Republic. It provides services through southbound containers and trailers, as well as through marine vessels that are configured to carry 48 inch and 53 inch long, and 102 inch wide high-cube equipment. The company also involves in moving new and used automobiles, non-containerized or freight not in trailers, and freight moving in shipper owned or leased equipment. It offers highway transportation services in the continental United States; and marine transportation services between Jacksonville, Florida, San Juan, Puerto Rico and Puerto Plata, and the Dominican Republic. The company also provides rail transportation services. In addition, it engages in chartering its vessels that are not in liner service to third party operators. The company ships furniture, consumer goods, raw materials for manufacturing, electronics, new and used automobiles, and apparel to Puerto Rico; healthcare products, pharmaceuticals, electronics, shoes and recyclables from Puerto Rico; raw materials for manufacturing to the Dominican Republic; and apparel, raw materials for manufacturing, and recyclables from the Dominican Republic. As of December 31, 2010, it operated a fleet of 141 tractors comprising of 79 company owned units and 62 leased and owner operator units; 2 736' triple-deck ro/ro ocean-going barges and 5 triplestack box carriers; and 3,957 high cube containers, 3,157 chassis, 164 high-cube trailers, and 299 vehicle transport modules, as well as leased 435 chassis and 531 high-cube containers. Trailer Bridge, Inc. was founded in 1991 and is headquartered in Jacksonville, Florida.

Market Opportunity or Value Trap?

Timing the market is a losing game. However, that doesn't mean investors can't catch their favorite businesses on sale every once and a while. In a bull market, sometimes those opportunities are rare, and there's a sharp difference between buying a stock on sale, and catching a falling knife. Let's take a look at a company that has lost more than 15% of its share price in the past month. Are you catching a great deal, or just getting cut? Let's take a closer look.

Fashion sale?

URBN data by YCharts

Urban Outfitters'  (NASDAQ: URBN  )  stock price continues to decline since its September earnings release, while the S&P 500 has been relatively flat. Urban Outfitters' net sales growth of 12% was solid, but the outlook for the third quarter for retail in general is expected to be soft, and this has surely weighed on Urban Outfitters' stock.

However, investors should remember a couple of key advantages which Urban Outfitters offers. Much like The Gap  (NYSE: GPS  )  operates multiple brands (Gap, Banana Republic, Old Navy, Piperlime) catering to different demographics, Urban Outfitters (Urban Outfitters, Anthropologie, Free People, Terrain, BHLDN) is diversified in its offerings. However, unlike Gap with its more than 3,400 global locations, Urban Outfitters has less than 500 stores today; this despite Urban Outfitters being founded in 1970, only one year after Gap. However, since its IPO in 1993, Urban Outfitters' stock has handily outperformed Gap's:

URBN data by YCharts

There is also one remarkable aspect of this out-performance to consider. Urban Outfitter's trailing annual revenue of $2.95 billion is less than one-fifth that of Gap's $16+ billion in sales. Simply put, the better historical investment (at least since its founding) has been Urban Outfitters; it's also the company with a much larger growth opportunity ahead of it. 

But let's not ignore Gap's success going back to its beginnings. Investors who bought close to the IPO back in the early '70s, would now be up a whopping 50,000%, when factoring in dividends. That's a life-changing investment. The point? Just because Urban Outfitters is up over 2,000% doesn't mean the best money has already been made. 

Another way to diversify into retail
For investors looking to add retail  fashion to their portfolios, VF Corp  (NYSE: VFC  ) is worth a look. With popular brands like Wrangler, Reef, and 7 For All Mankind under the VF umbrella, there's a lot to like about this acquisitive clothier with both direct retail stores and brands available everywhere. VF management walked away from an acquisition of Billabong earlier this summer, instead of paying more than it deemed the business was worth. That's a positive sign that management will keep making the right acquisitions, and not just growth for the sake of growth.

Earnings announced on July 19 were stellar, with the company beating on both revenue and earnings, and raising guidance for the remainder of the year. The market does have high expectations, as shares are already up over 30% this year, and a forward price to earnings ratio of 18. Earnings are just around the corner (October 21,) so there could be some short-term volatility in the share price. It might be best to start with a small bite and add shares over time versus trying to time the market around earnings. 

Foolish final thoughts
Retail is tough, and being small relative to peers like Gap is no guarantee of growth. However, the short-term softness of retail and any headwinds that it causes certainly isn't reason to look past a well-run business like Urban Outfitters. On a valuation basis, its trailing P/E of near 20 looks like a great buy. It may not be The Gap in 20 years, but the potential is still worth a close look. Don't try to call the bottom. Look for signs of a successful future, too. 

 

Looking for more ways to invest in retail?
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

 

Another Budding "Buy the Rumor, Sell the News" Biotech Opp. (ARNA, VVUS, ETRM)

Look out VIVUS, Inc. (NASDAQ:VVUS) and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). There's a new weight-loss player ready to take aim at your target market, and its name is EnteroMedics Inc. (NASDAQ:ETRM). If the recent action from ETRM is any indication, the market thinks it could be a real threat to your weight-loss ventures.

Of course, anyone more than a little familiar with EnteroMedics knows the current bullish interest in ETRM hasn't always been the case. This is the same stock that cratered from $2.88 to $1.26 in February of this year when the company announced its primary device - the VBLOC obesity-control device - failed to meet its clinical trial's goals. So what, pray tell, has pushed the stock up from the February low of $0.81 to the current price of $1.27? Hope, for starters.

Although the clinical trial being performed in the U.S. for the FDA ultimately failed, it's not as if the Food and Drug Administration told the company "don't call us, we'll call you." In fact, the device actually does work - the folks in the trial who used the VBLOC technology did lose more weight than the placebo/control group. They just didn't lose an amount that ETRM was hoping for. Just for the record (and perspective), the device is approved for use in Europe and Australia; clearly there's something positive about it. EnteroMedics is still in talks with the FDA regarding the device, with a decision from the agency expected sometime in the first half of 2014.

But is it really a threat to Arena Pharmaceuticals or VIVUS? Maybe.

It's not exactly an apples-to-apples comparison. Belviq from ARNA and Qsymia from VVUS are both orally-taken pills, while the VBLOC technology is a device implanted into a body to make that individual feel full, and in turn stimulates the metabolism of a meal. It's not as crazy as it sounds. Qsymia is an appetite suppressant that chemically indices the release of norepinephrine, and has nothing to do with the burning of calories. Belviq's mechanism of action is the activation of the brain's response to serotonin, which can make an individual feel satiated. But a device implant? It's no crazier than a pacemaker. Point being, it's not like the approach will be too bizarre for the FDA or potential consumers. Indeed, there are many overweight individuals who would prefer not to put an unnatural chemical into their body. At least the VBLOC implant only does what the human body would/should normally be capable of on its own.

With all that being said, the most compelling part of EnteroMedics Inc. right now isn't that it could make a dent in the massive weight-loss market where Arena Pharmaceuticals are already getting a head start. What's most exciting here is that ETRM shares are making technical progress consistent with clues seen in front of major rallies.

For starters, on the weekly chart of this stock we can see how it's rocked its way out of a long-term wedge pattern, and above the upper edge of that triangle shape.

That alone is a bullish clue, but things get even more bullish when we can zoom into a more detailed daily chart of EnteroMedics.

The basic gist of the bullish undertow is clear in the daily timeframe as well, but what shows up on the daily chart of ETRM is the way the bullish volume has really started to pour in over the past four weeks, and how the stock's on the verge (as in maybe today) of hurdling the 200-day moving average line (green). It's also only pennies away from moving above the July peak of $1.37. Any move above those two levels would be, and should be, bullishly catalytic. It may be needlessly cautious to wait for that move, however.

One thing to bear in mind... this may be an idea "buy the rumor/sell the news" scenario, meaning any of the potential gains here are likely to be seen well before any FDA decision is unveiled. Both VVUS and ARNA shares made their biggest gains leading up to their key FDA announcements, and both stocks have struggled following that news. It's not logical or rationale, but it is a trading reality.

If you'd like to get more trading ideas and insights like this one, sign up for the free SmallCap Network daily e-newsletter. It's full of stock picks, market calls, and more.

How to Play the Rebound in Oil Pipeline Stocks

 

By John Whitefoot

The idea of nearly one million U.S. federal employees (read: consumers) being furloughed and not getting paid has sent oil prices tumbling to a three-month low, hovering near $100.00 a barrel.

The reach of the U.S. government shutdown goes well beyond those furloughed; it also affects those who rely on government services. Permitting and leasing for oil and gas drilling is at a halt, with 81% of all employees in the Department of Interior (which encompasses the Bureau of Land Management) on furlough. (Source: Ackerman, A., “Which Government Workers Are Affected by Shutdown?,” Wall Street Journal web site, October 2, 2013.)

Investors are also fearful that even a temporary furlough will dampen an already tepid economic recovery and drive the demand for oil and gas lower. And they should be afraid, as fourth-quarter U.S. growth is projected to decline 0.2 percentage points for every week that the U.S. government shutdown continues.

But that’s only one in a number of factors that are putting pressure on oil prices. On Wednesday, U.S. commercial crude oil inventory numbers came in at 5.5 million barrels, well above the forecasted 2.4 million barrels.

On top of that, improving relations in the Middle East, the resumption of full oil production in Libya, an easing of Western sanctions on crude oil exports from Iran, and a relatively quiet U.S. hurricane season could weigh on oil prices even longer.

However, once the U.S. government shutdown is in the rearview mirror, oil prices should start to recover. But in the meantime, while oil prices are trending lower, the price of some pipeline stocks have been breaking out.

Chart courtesy of www.StockCharts.com

Over the last year and a half, pipeline stocks have been following oil prices. Between July and September, investors were indecisive and, as a result, oil and pipeline stocks traded sideways. All of that changed, though, in the middle of September.

On September 17, Magellan Midstream Partners L.P. (NYSE: MMP) and El Paso Pipeline Partners, L.P. (NYSE: EPB) touched three-month lows while oil was still spiking near a two-year high.

On September 18, the Federal Reserve said it would continue its $85.0-billion-per-month quantitative easing strategy. Since then, oil prices have slipped more than six percent, while the price of oil and gas pipeline stocks such as Midstream and El Paso reversed their downtrend, increasing more than 9.5% and 6.5%, respectively.

Investors interested in oil and gas pipeline stocks can start researching any number of energy infrastructure companies, including Atlas Energy, L.P. (NYSE: ATLS), Energy Transfer Equity, L.P. (NYSE: ETE), and Targa Resources Partners LP (NYSE: NGLS).

Since the beginning of the year, oil producers and pipelines have been performing solidly, and thanks to the Federal Reserve, oil and gas pipeline companies have been on an upswing. While any threat to the U.S. economy, like a government shutdown, will send oil prices lower, energy companies will continue to produce oil—and they’ll use the North American pipeline infrastructure to get it wherever they need to.

This article How to Play the Rebound in Oil Pipeline Stocks was originally published at Daily Gains Letter

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Markets Trading Ideas

  Around the Web, We're Loving... Petition urges Wal-Mart, McDonald's to pay more Obama's Syria Waffle Huge Blow to US Credibility in Mideast Microsoft Buys Nokia Phone Unit for $7.2B - And CEO? What Should You Know About AMZN? Most Popular The Government Shut Down May Be Your Next Great Trade Best Buy Drops iPhone 5C Price To $50 Deutsche Bank Reiterates Buy on Tesla Motors Following News of Model S Fire Incident Tesla Model S Catches Fire - Causes Stock To Dip Facebook Shares Mixed Following Pivotal Research Downgrade; Macquarie Price Target Increase Lexmark acquires PACSGEAR for $54M Related Articles (ATLS + EPB) How to Play the Rebound in Oil Pipeline Stocks UPDATE: Jefferies Initiates Coverage on El Paso Pipeline Partners LP on Balanced Risk/Reward Profile View the discussion thread. Partner Network #marketfy-ae-block { display: none; border: 2px solid #0a3f75; overflow: hidden; width: 300px; height: 125px; text-align: center; background-color: #45719E; position: relative; z-index: 1; } #marketfy-ae-block a { display: block; width: 300px; height: 125px; position: relative; z-index: 2; color: #ffffff; text-decoration: none; } #marketfy-ae-block-countdown-text { color: #f9fc99; padding: 0px 0 0 0; font-size: 19px; font-weight: bold; line-height: 19px; } #marketfy-ae-block-countdown-text-start { font-size: 12px; } #marketfy-ae-block-countdown { padding: 5px 0 5px 0; font-size: 26px; } #marketfy-ae-block-signup { padding: 5px 47px; } #marketfy-ae-block-signup:hover { background-color: #457a1a; } #marketfy-ae-block #marketfy-ae-block-logo { display: block; padding: 3px 0 0 0; margin: 0; } #marketfy-ae-block-logo { text-indent: -9999px; } #marketfy-ae-block-free { display: block; position: absolute; top: 7px; right: -23px; width: 80px; height: 16px; line-height: 16px; text-align: center; opacity: 1; -webkit-transform: rotate(45deg); -moz-transform: rotate(45deg); -ms-transform: rotate(45deg); transform: rotate(45deg); font-size: 13px; font-weight: normal; color: #333333; background-color: yellow; z-index: 500; text-shadow: 1px 1px #999999; } #marketfy-ae-block-arrow { position: relative; width: 60px; height: 60px; z-index: 10; margin: -80px 0 13px -21px; } #marketfy-ae-block-arrow img { height: 60px; width: auto; } Marketfy's International
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The Gun Stocks Trade Is Still Firing

Popular Posts: 5 Fire-Breathing China Mutual Funds to BuyThe Gun Stocks Trade Is Still FiringForget Amazon and eBay — China Has the Hottest Online Retailers Recent Posts: The Gun Stocks Trade Is Still Firing SSO — Double Down When D.C.’s Squabbles Die Down 5 Fire-Breathing China Mutual Funds to Buy View All Posts

When you own a firearm, you want to have confidence in both your ability to use it properly in an emergency situation, and in that firearm's ability to perform without malfunctioning. Similarly, when you're at the helm of a company, you want to have confidence that your stock is going to continue to perform.

An expression of such confidence was seen today when gun-maker Smith & Wesson Holding (SWHC) announced plans to buy back up to $15 million of its stock.

In a statement accompanying the announcement, CEO and President James Debney said, "Given the strength of our balance sheet and our expected cash flow from operations, our Board has approved the repurchase of an additional $15 million of our common stock. We continue to believe that investing in our own company is presently one of our greatest opportunities."

That is the kind of confidence Wall Street likes to see from a CEO and management, so it's no surprise that SWHC stock was up nearly 2% in early Tuesday trade.

For Smith & Wesson, seeing a jump in shares is nothing new. During the past two years, SWHC stock has had an incredible run, shooting up nearly 340%. Year-to-date, the stock has seen a much more modest (yet still impressive) move higher of nearly 30%.

The gains in Smith & Wesson shares have been the result of strong revenue and earnings — metrics that have been fueled by a gun buying public fearful that the current leadership in Washington is intent on restricting gun rights. Of course, efforts to pass gun legislation in Congress were unsuccessful, but still, the threat of an impingement on Second Amendment rights caused gun lovers throughout the country to stock up on arms — and investors to pile into gun stocks.

This certainly is the case with Smith rival Sturm, Ruger & Co (RGR), as that company also has seen big jumps in revenue and EPS over the past two years. The gun-maker also has seen a big spike higher in its share price, with a two-year gain of 141%. Year to date, RGR stock actually has outpaced SWHC, rising nearly 38%.

One reason why RGR shares have outperformed SWHC is due to a correction of sorts in Smith's share price in August and early September leading up to, and immediately following, the company's second-quarter and full-year outlook revision. Despite having reported Q1 sales of $171 million, or more than a 25% year-over-year increase, and better-than-expected earnings of 40 cents per share, the stock fell on the company's tailored estimates going forward.

The reduced forecast calls for Q2 sales to in the $135 million to $140 million range, which is below expectations for sales of $143 million. EPS is estimated by Smith to come in at 20 cents to 22 cents, also below expectations for EPS of 29 cents. The company cited the implementation of a new software program and the resulting delays in production for the shortfall.

For SWHC, I suspect the August-September slide was more of a misfire than any kind of real problem for the company and the stock going forward. Apparently, the company feels that way too, hence its plan to buy back those additional shares.

I have said this in the past, but it bears repeating once again: When it comes to firearms, there is an attitudinal bid higher in the shares of both SWHC and RGR that stems from what I think is a permanent change in the mind-set of a significant segment of America. This new mind-set is, in my opinion, a justifiable fear of more federal control over our lives in general, and in particular more control over guns.

Until this attitude is altered, and until gun-makers actually see their fundamentals flounder, I will remain bullish on firearms stocks.

As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.