Saturday, June 30, 2012

Bank of America: Is Nationalization Next?

As a former NLO dividend watchlist stock, Bank of America (BAC) has fallen on hard times that in many respects were predestined. In a posting titled Financial Panic Chronicles dated May 9, 2009, we pointed out the similarities of the October 1929 forced merger between Austria's number-two bank BodenKreditAnstalt with number-one ranked CreditAnastalt, and the forced mergers between Bank of America/Merrill Lynch, Wells Fargo/Wachovia, and J.P. Morgan/Bear Stearns in 2008.

Our point of making the comparison between distinctly different institutions in different eras was to show what the hazards might be when an ailing bank isn't allowed to fail. It was only two years after the merger of BodenKreditAnstalt with CreditAnstalt that the remaining "super bank", CreditAnstalt, collapsed which resulted in the worldwide banking crisis.

The failure of CreditAnstalt in 1931 did not arrive without a fight. F.M. Rothschild committed enormous amounts of money from 1930 to 1931 in an effort to use his name and financial largess to sway public opinion of the health of CreditAnstalt, not unlike Warren Buffett's most recent investment in Bank of America. Buffett's (BRK.A) announcement that he'll invest up to $5 billion may be a significant win for the Oracle of Omaha, and has temporarily boosted the share price of Bank of America by nearly 13%. However, even the biggest money interests cannot forestall the inevitable consequence of forced mergers if hobbled banking institutions. As noted in our previous article:

London banks, the Bank of England, Germany's Reichsbank, Bank for International Settlement and the Bank of Austria all threw money at CreditAnstalt starting in May of 1930 in a failed attempt to shore up the problem.

The current travails of Bank of America and Citigroup (C) may prove too enormous for market forces to bear. Talk of possible capital raises and divesting individual units through bankruptcy speak largely of the dire risk to the banking system the zombie banks pose. Bank of America, in particular, through "too big to fail" policies has become THE bank of America.

We wouldn't be surprised if Bank of America, or another of the current top ten banks in the U.S., in an effort to stave off certain failure, will be partially or fully nationalized as CreditAnstalt before its collapse. However, such actions will only demonstrate for the investing public that band-aids should not be used to deal with hemorrhages.

Because we rely heavily upon the markets to tell us what the investing public believes will come next, we are presenting the Dow Theory downside targets for Bank of America. According to Dow's Theory, the following are the long-term downside targets for Bank of America:

  • $18.59
  • $13.44 (1/3)
  • $10.865 (fair value)
  • $8.29 (2/3)
  • $3.14 (3/3)

Already, BAC has managed to decline below the 2/3 resistance level of $8.29 per share. This typically indicates that Bank of America stock will go to $3.14 (3/3 resistance level). In four prior peak-to-trough periods since 1982, Bank of America has managed to fall close to, or below, the previous low three times as demonstrated in our September 15, 2008 Dow Theory analysis of the stock.

Because we don't want to assume that the Bank of America will automatically go to the prior low of $3.14, we have provided short-term Dow Theory targets for BAC.

Dow Theory on the $8.29 to $3.14 price levels ($1.73):

  • $8.29
  • $6.65
  • $5.72
  • $4.83
  • $3.14

These targets are in hopes that the stock does not actually go below $3.14. Already, Bank of America has fallen below the $6.65 level leaving only $5.72 and $4.83 as possible support levels before the bank reaches $3.14.

If the voting machine known as the stock market continues on its current downward trajectory, any decline of BAC below $3.14 would require nationalization in the best-case scenario. The worst-case scenario might reveal that safety nets like FDIC insurance are the root cause of how our financial system got to where we are today. In the words of Citigroup (formerly National City) when FDIC was first proposed:

The element of character in the choice of bank is eliminated, and the competitive appeal is shifted to other and lower standards, such as liberality in making loans. The natural result is that the standards of management are lowered, bankers may take greater risks for the sake of larger profits and the economic loss which accompanies bad bank management increases.

Grant, James. Mr. Market Miscalculates. Axios Press, 2008, page 202

Our focus on the merger of BodenKreditAnstalt and CreditAnstalt in 1929 and the subsequent failure in 1931 that led to a worldwide banking crisis should give good reason for all individuals to be concerned. The safety nets that were created as an outgrowth of failure of the banking system are not prepared to handle what may come if the perception grows that Bank of America needs to be nationalized.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Raymond James’ Elwyn on FAs and Satisfaction of Volunteering: Weekend Interview

Tash Elwyn had a busy May. The head of Raymond James’ employee-advisor division in the Atlantic region just wrapped up organizing the firstRaymond James Cares Month. The effort included almost 300 volunteers from 15 branch offices in an equal number of states, who dedicated more than 1,000 hours to giving back to their communities, the company says. 

Some of the charities and events that received the support of Raymond James’ volunteers last month included Habitat for Humanity, the Philadelphia Chapter of Buoniconti Fund to Cure Paralysis, Outrun the Sun Race against Melanoma in Indianapolis, Stutz Artists Association of Indianapolis, Ronald McDonald House of Louisville and the American Cancer Society Relay for Life in Greenwood, Ind.

The strong participation of its advisors has led Raymond James, and Elwyn, to plan another Raymond James Cares Month next May. And the company says it hopes the program can be expanded to include all regions of the United States in which Raymond James & Associates operates in 2012.

To find out what inspired Elwyn (left) and how the volunteer activities came together, AdvisorOne spoke with him at length about the role of financial advisors in their communities.


How did you get started in the business and volunteerism?

Elwyn: I joined the Raymond James’ training program in 1993 and spent my first 10 years with the company in Atlanta, where I grew up. I’ve also been a producing manager in Chattanooga, Tenn., as well as a divisional sales director.

I’ve been a member of Kiwanis International as a club president and member, and have been active also on the college alumni board of Emory University, as well as a board member of the St. Petersburg, Fla., opera company. In addition, I supported Ronald McDonald Charities when I was in Chattanooga.

Thus,Raymond James Cares Month, you could say, was a normal outgrowth of my community involvement to date.

How did you get the idea for Raymond James Cares Month?

Elwyn: The concept was created last summer by a group in the division – the Atlantic Division Advisory Council. This is similar to a client-advisory board that some advisors have, and I have one for my division. It includes several branch managers, operations managers, clients and service associates. We meet once or twice a year in person and do regular phone conferences calls.

I created the idea and then brought it to group’s 15 members. In October 2010, they enthusiastically embraced it. We then worked with our home office to get the infrastructure going for it. That’s how it happened.

Why do you think volunteerism is important for advisors?

Elwyn: I believe it is is tied to our profession and the importance of what we and the industry do. We are taking on the task of supporting of our community, which is a lot like supporting our clients. It’s a good match that we hope our FAs will want to be a part of and have similar interests with.

My specific volunteer activities inspired me to really focus our collective efforts as Raymond James advisors, and we are currently involved in a variety of events and non-profits.

I asked if we could have a concerted effort and thoughtful plan to recruit volunteers within our

branches in the Atlantic division, identify participating organizations that the volunteers would like to get behind and really create some fun, powerful activities in a specific month.

How do you explain the project’s success?

Elwyn: Beyond our division and the advisory committee, much of the credit for the program’s success should go to the local branch managers, financial advisors and service associates. They went with the concept.

Many associates took the bull by the horns and fell in love with the project. They did the heavy lifting by researching which non-profits to support, soliciting volunteers and getting everything up and running.

Overall, in terms of the number of participants for the first year of such a program – nearly 300 – I could not be happier. That’s a staggering number of people, and in the aggregate in May, they volunteered in excess of 1,000 hours to communities. They’ve made a huge difference.

What makes this type of program so meaningful?

Elwyn: From October to May, we built an infrastructure for volunteering at the branch level, and the division worked with them to help develop further game plans. In addition, for the advisors and Raymond James to be an integral part of the community, this effort really needs to be driven from the bottom up rather than top down.

Raymond James has an entrepreneurial spirit. And since was the inaugural year, I expect the program to continue and go national next year. I am happy to lend me help as best I can.

What are your sentiments having seen the plans come to fruition?

Elwyn: I think everyone involved feels a tremendous sense of accomplishment and gratification knowing that we’re part of and care about serving local communities. We demonstrated this in a big way, particularly for the inaugural year. Plus, the program’s going forward, which we’re very excited about. It’s very much a grassroots effort that’s going to take hold.

Lots of advisors got involved above and beyond their normal community activities, with the charities and communities as the real beneficiaries.

What do these kinds of efforts mean for the industry?

Elwyn: They are very positive, whether they support the arts or other types of non-profits. The difference with this type of program is that it really connects people at the local level and focus on having an impact at the local level and within communities.

Would you like to share any other views on RJ Cares Month?

Elwyn: Serving our communities through civic and charitable activities is simply an extension of the same type of commitment we make to serve our clients. I could not be more proud of the 278 associates from throughout the Atlantic Division who chose to volunteer their time and resources in support of the 11 different non-profits in such a distinguished fashion.

The collective impact was equivalent to a full-time employee committing six months of work to community service. We look forward to even bigger and better results next year.

An Insight to Binary Options Trading

A digital option is sometimes called as binary options. These options are one of the best and most convenient ways of trading in the Forex and capital markets since it can be done online. Trading through a binary option would mean that the return could either be some fixed amount of a particular asset or even nothing. This depends upon the type of binary option one chooses. There are two categories of binary options one being ‘cash or nothing’ option or ‘asset or nothing’ option. When the option expires, the first type would pay some fixed amount of cash whereas the second type would pay the value of the underlying asset.

Since the risks involved in a binary trading are less, this option is suitable for the newcomers also. People who are at the learners stage, it is the binary option trading that makes it easier to understand and trade for you. Using this method, one can easily learn to trade Forex, stocks, indexes as well as commodities. Expiry time is an element to be paid enough attention while trading. With the help of a good agent, within no time one would be able to learn the binary options trading and make easy and quick profits and even maximizing them. Keeping all this in mind one cannot negate the need of a proper strategy to trade using these types of options.

There are various strategies people use while trading which are devised by experts, individuals, broking companies and broking agents. Each of this strategy has a success rate of its own and has been even working well for people. Binary trade began with a very few and simple strategies which were followed by people all over the world. But with the revolution of online binary trading the atmosphere is not same anymore. It is a common belief that it is easy to strategize but may not be true in all the cases. Therefore for a common man, it is good to understand the importance of each trading strategy.

The binary trading strategies are useful if applied after correct interpretation and complete knowledge. There can be some really complex ones too and it is rightly said that this type of understanding comes with experience only. Soon there will be a time that after gaining enough experience that one may be capable of devising his strategy. It is usually quite safe to use an established and a leading binary option strategy that minimizes the chances of loss.

IntelliTraders is a free Binary options trading community to help traders to learn and start trading with best brokers.

Opinion: Zuckerberg, Primates and Thoreau

Prof. Lionel Tiger may know his ground-living apes, but their monkey-see/monkey-do he speciously and simplistically applies to the Facebook phenomenon ("Zuckerberg: The World's Richest Primatologist," op-ed, Feb. 6). He invents an arrogant "Mr. Scold," who supposedly scouted the first phone line in New England. In point of fact, it was Henry David Thoreau who remarked in "Walden" (1854): "We are in great haste to construct a magnetic telegraph from Maine to Texas, but Maine and Texas, it may be, have nothing important to communicate."

In 1917, Sigmund Freud wrote a paper praising the telegraph and telephone as wonderful innovations providing instant linkage to families and friends, promoting a beneficial social solidarity unknown to humanity before—and that while millions of men were killing each other in Europe.

Mr. Tiger sophistically counts Twittering communicators by the billion today and tomorrow, as though we are his bands of apes glancing at their leaders every 20 to 30 seconds. Thoreau thought of us as ineluctably solitary individuals: "The penny-post is, commonly, an institution through which you seriously offer a man that penny for his thoughts which is so often safely offered in jest." There speaks our great American Diogenes. No "arrogant scold" he! Thoreau wrote that most men lead lives of quiet desperation. Facebook won't answer, let alone change that fundamental fact.

Jascha Kessler

Santa Monica, Calif.

Progress FYQ2 Beats, Sees Continued Disruption from Restructuring

Shares of development tools vendor Progress Software (PRGS) are unchanged at $19.90 in late trading after the company reported fiscal Q2 revenue and profit ahead of consensus and in line with its warning on June 7th, but said it� will not provide a forecast for the current quarter given “continued disruption” caused by the company restructuring announced in April.

Revenue in the three months ended in May fell 12%, year over year, to $114.6 million, and 21 cents a share in profit.

Analysts had been modeling $112.37 million and 17 cents a share.

Progress CEO Jay Bhatt remarked that “the second quarter performance was impacted by significant disruption among our employees, customers, and partners caused by the announcement of dramatic changes to our strategy and operations, among other things. We anticipate some disruption to continue into the third and fourth quarters but feel confident with the potential of our �Core� products to exit the year with positive momentum.”

Progress declined to forecast the current quarter, fiscal Q3, owing to the ongoing disruption, but said its fiscal Q4 ending in November would see sales to be about the same as the prior-year Q4 or up as much as 1%. That is a bit better than the Street consensus for revenue to fall almost 1% in Q4.

Oracle competes for enterprise customers with the likes of Microsoft (MSFT) and Red Hat (RHT), among others.

Ultimate Software Group Hits Estimates in Solid Quarter

Ultimate Software Group (Nasdaq: ULTI  ) reported earnings on Feb. 7. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Ultimate Software Group met expectations on revenues and earnings per share.

Compared to the prior-year quarter, revenue increased significantly and GAAP earnings per share improved significantly.

Margins grew across the board.

Revenue details
Ultimate Software Group chalked up revenue of $72.7 million. The 16 analysts polled by S&P Capital IQ predicted sales of $72.1 million. Sales were 20% higher than the prior-year quarter's $60.4 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
Non-GAAP EPS came in at $0.24. The 16 earnings estimates compiled by S&P Capital IQ predicted $0.24 per share on the same basis. GAAP EPS of $0.07 for Q4 were 40% higher than the prior-year quarter's $0.05 per share.

Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 58.6%, 190 basis points better than the prior-year quarter. Operating margin was 10.7%, 290 basis points better than the prior-year quarter. Net margin was 2.7%, 30 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $75.9 million. On the bottom line, the average EPS estimate is $0.12.

Next year's average estimate for revenue is $329.9 million. The average EPS estimate is $1.02.

Investor sentiment
The stock has a one-star rating (out of five) at Motley Fool CAPS, with 81 members out of 112 rating the stock outperform, and 31 members rating it underperform. Among 39 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 25 give Ultimate Software Group a green thumbs-up, and 14 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Ultimate Software Group is outperform, with an average price target of $63.42.

Over the decades, small-cap stocks like Ultimate Software Group have produced market-beating returns, provided they're value-priced and have solid businesses. Read about a pair of companies with a lock on their markets in "Too Small to Fail: 2 Small Caps the Government Won't Let Go Broke." Click here for instant access to this free report.

  • Add Ultimate Software Group to My Watchlist.

Friday, June 29, 2012

How To Play The Legalization Of Online Gambling

Delaware's legislature on Wednesday passed a law that would legalize a full range of online gambling within Delaware's boundaries. This marks a significant step after the Justice Department's new legal interpretation on Dec. 23,2011. This law is expected to create a domino effect in the Middle Atlantic region, which is well known for its large-scale gambling competitions.

In order to capitalize on the change that this law is going to bring with it, we have three different avenues to discover: one, companies that provide online gaming solutions are surely going to be the winners; two, Internet gambling companies will also see their revenues surge; and three, the already-famous casino resorts have reacted differently to this news. One group strongly advocates this relaxation and has already shown its keenness to add this dimension to their operations. Their stocks are expected to reap the benefits after this declaration. However, the other group vehemently opposes Internet gambling, stating that it has led to depletion of their profits, and they think Internet gambling is illegal. Their stock prices are expected to decline or remain stagnant, unless they move toward Internet gambling.

Justice Department's Legal Opinion on Internet Gambling

It is important to first understand the legal interpretation that the Justice Department has issued before we can gauge its impact on the casinos and related industries. The announcement came in response to New York and Illinois seeking to use the Internet for lottery sales. The 13-page document dated September 20, 2011, was made available to the public on Dec. 23, which gave a clarification that the Wire Act of 1961 prohibited only Internet sports betting -- the other forms of Internet gambling can be legalized. However, the authority to legalize such a thing vested with the states, and online gambling could only take place within the boundaries of that state -- i.e., the person gambling should be residing within the boundaries of that state.

Online gambling bills have been introduced in different states -- e.g., California, New Jersey, Illinois, New York, etc. However, only Delaware has passed a bill whereby all forms of gambling have been legalized (except sports betting, which is not allowed by The Wire Act of 1961), something that is not found in other states where primarily lottery or online poker has been legalized. The main reason for not legalizing online gambling on a full-fledged scale in all other states is that the authorities want to see how they can effectively curb the downsides that come attached with this legalization, e.g., addiction to gambling, underage gambling, etc. -- some of the objections raised by the people after the new interpretation was announced.

Many critics say that the government has decided to embrace online gambling as it is expected to generate an additional $12 billion of annual revenue in the economy, which means at least $2 billion of annual tax revenue that will help to bridge the budget deficit. Not only that, it will directly create some 10,000 high-tech jobs.

Bricks and Mortar Casino Resorts

Common sense tells us that these resorts will experience a hit in light of this relaxation on Internet gambling. However, the stock trends of most tell us a different story altogether. This is because these companies have wisely chosen to embrace this transition, and have adjusted accordingly to add this dimension to their operations. Many of them started negotiating a partnership with online gaming companies to launch Internet gambling, well before they were given the intrastate license to trade online. These stocks have already experienced growth after the interpretation was made public on Dec. 23, 2011.

It is expected that the larger the operations a firm owns, the more intensely it will embrace online gambling and hence benefit more. One can gauge the size of operations by the number of casinos that a firm has:

Gaming Company

# of US properties

# of foreign Porperties

# of properties with poker rooms

Total # of Poker Tables

Caesers Entertainment





MGM Resorts





Wynn Resorts





Las Vegas Sands





Station Casinos





Boyd Gaming





Penn National Gaming





Isle of Capri Gaming





Ameristar Casinos





Pinnacle Entertainment





Potential Winners

Caesars Entertainment (CZR)

CZR is a gaming company that operates casino resorts in multiple continents. Formerly known as Harrah's Entertainment, CZR plans to embrace the new transition fairly quickly. The same was reflected in an interview held with its CEO Gary Loveman, who is enthusiastically looking forward to the opening of a new arena after the five-year-old terrible episode of banning online gambling by federal regulators, which dubbed "Black Friday" by the online poker community. CZR had a rocky IPO and is also having some trouble managing its debt levels. However, the size of its operations globally and its recent partnership with 888 Holdings Plc, an Internet gambling site operator, shows its determination to pull everything out of this opportunity, which has become available after online gambling has been legalized under the World Series of Poker brand.

MGM Resorts International (MGM)

MGM, through its wholly owned subsidiaries, owns and operates casino resorts that include gaming, hotel, dining, entertainment, and other resort amenities. Having a large amount of debt has not dented the company's reputation as Standard & Poor's recently revised MGM's outlook to positive. Despite showing a loss last year, the firm is enthusiastically waiting for online gambling to become legalized throughout the U.S. Its CEO, Jim Murren, was reported as saying, "We'll be one of the first horses out of the gate when it's approved."

Researchers have estimated that at least $200 million out of a gain of $5 billion from online gambling will go to this giant. MGM recently announced its partnership with Bwin party digital entertainment -- a U.K.-based company -- to offer Internet gambling in the U.S. under the brand of Party Poker, after the wave of legalization initiated.

Boyd Gaming (BYD)

BYD owns and operates casino resorts in different parts of the U.S. The firm has been actively planning to buckle up for the foreseeable change that the industry is going to experience in the next six to seven months. The firm bought Peninsula Gaming LLC (PENN) for $1.45 billion this May. The firm earlier, unsuccessfully, tried to acquire Las Vegas-based Station Casinos for $2.45 billion, which liquidated in 2010.

Potential Losers

Las Vegas Sands (LVS)

LVS is a global developer of destination properties that feature accommodation, gaming, entertainment, and retail. The firm has massive operations and market share in Macau, Singapore, and Las Vegas. The firm is believed to have a manageable debt as Standard & Poor's recently upgraded the firm to BB+. Its debt-to-equity is also better as compared to giants like WYNN and MGM. However, the firm's CEO Sheldon Adelson has remained quiet on the issue of online gambling, which gives us no signal regarding the future plans of the business to move toward Internet gambling. History tells us that he has been against Internet gambling. However, as the regulators are taking a lot of time to "think before doing," LVS might strike a strategic partnership. Meanwhile, we take a bearish approach toward this stock.

Wynn Resorts Limited (WYNN)

WYNN develops, owns and operates casino resorts in Las Vegas and Macau. WYNN has shown favorable metrics amid other giants like LVS and MGM, which have had a tough time dealing with debt-related issues. However, WYNN CEO Steve Wynn has dealt with the online gambling opportunity in a way that has confused investors a lot. He signed a deal with PokerStars, the world's biggest online gaming company, on March 24, 2011, and terminated it on April 15, 2011, saying, "There didn't seem to be any interest in the government to enforce restrictions on the game of poker."

However, it is important to state that it took Isai Scheinburg, the founder of PokerStars, a lot of time to convince Wynn to sign the deal under which both companies would have worked together to get the game regulated in the U.S. This means that Wynn had not been interested in this dimension at all. Even though U.S. regulators will take their time to get the online gambling industry regulated, we will suggest a bearish approach toward this stock.

Online Gaming Solution Providers

Online gaming solution companies provide instant games, terminal and game-related services, and Internet applications. In this context, they will definitely experience a high demand as casino companies will seek to quickly entrench their roots in the new legal form of gambling. However, this demand will depend on certain factors that include their scale of operations and expertise, which will eventually decide as to which bricks and mortar casino they end up forming an alliance. This is extremely important given the fact that the law does not allow them to operate on their own, and they can only provide Internet gambling in a partnership with a bricks and mortar casino.

Major Players


PokerStars is the largest online gaming company in the world. The "protagonist" of the Black Friday episode, the firm is trying all the ways to come back to the U.S. after being alleged for illegal processing of payments in April 2011. However, the firm has been smart enough to retain its clients and is still a big player in the European market. If it gets a chance to reemerge in the U.S. market, which is highly improbable, PokerStars is expected to give a considerable return, if not the maximum.

Zynga (ZNGA)

ZNGA develops, markets and operates online social games on the Internet. The firm has recently come up with a social networking service that makes it easier for users to play online games across different mobile models. The developer of Texas Holdem Poker, a famous poker game on Facebook, the firm has a high potential in this restructuring of the Casino Industry. ZNGA recently acquired Marketzero, an online poker tracker company, which has added to its chances of being a winner. The main catalyst to look for is when the firm signs an agreement with a bricks and mortar casino to make online gambling games.

Bally Technologies (BYI)

BYI operates in three segments: gaming equipment, gaming operations, and systems. The transition in the industry landscape means that its technology solution providers will have a busy time in future. The firm recently got a license to provide solutions to a casino operator, being one of the first ones in the industry to get one. It is well prepared for the future hike in demand as it acquired Chiligaming in April 2012, which allows it to offer online poker software to casino operators. The stock is recommended as a buy.

International Game Technology (IGT)

IGT is a global gaming company that manufactures and markets gaming equipments and system products like online solutions. The firm's recent acquisition of Entraction, operator of one of the world's largest poker networks, of $100 million and its entitlement to an operating license in Nevada, shows that the firm is ready for the change, which is almost inevitable. The stock must be kept under watch as it will continue to start providing services in late 2012 or early 2013.

Other Players

  • Scientific Game Corporation (SGMS) is a global supplier of instant lottery games and games solutions. The stock has already shown improvement and will likely show more given that it gets a contract signed with a casino operator. International Lottery and Totalizer Systems (ITSI), a supplier of computerized wagering systems, is the same.
  • Isle of Capri Casinos (ISLE) develops, owns, and operates gaming facilities in the Bahamas, the U.S., and the U.K. Showing back-to-back quarter earnings surprises of 26.7% and 70%, the firm has enough capital in its pockets to finance the changes required to compete in its industry.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Dow, S&P Surge After European Union Consensus

It's time to exhale: The Europe crisis has ended! Not actually, but it almost looked that way this morning. Relieved investors flooded the markets, sending the Dow Jones Industrial Average (INDEX: ^DJI  ) and the S&P 500 (INDEX: ^GSPC  ) sharply higher. EU leaders debated until 4:30 a.m. in Brussels, when they paved the way for a bailout of Spanish and Italian banks after agreeing to relax requirements on Spanish banks.

The decision completely jolted the markets, pleasantly surprising investors and analysts who'd expected the summit to deadlock. But while the markets reacted to short-term news, the European crisis lingers and volatility will remain the modus operandi. That confirms the strategy here at the Fool of finding value investments and holding on to them for the long run. Surprise decisions may dictate the markets' short-term future, but great companies are likely to triumph on their own merit in the long run.

The rest of the economy took a cue from Europe, with every Dow component positive. Bank of America delivered up 3%-plus gains, making it one of the biggest winners. JPMorgan (NYSE: JPM  ) even managed a small gain despite its original $2 billion loss potentially transforming into two or three times that. From a long-term standpoint, though, the two banks are still easily two of the Dow's top stocks going forward.

From a numbers standpoint, no industry in the Dow beat tech. Hewlett-Packard (NYSE: HPQ  ) soared almost 3% due to its large European exposure, while shares of peers Cisco, Microsoft, and Intel also rose. Hewlett-Packard holds the Western Europe lead in market share at over 20%.

Boeing (NYSE: BA  ) actually jumped on some non-Europe-related news. Investors seem excited about the initiatives the company announced this morning, sending shares up 3%. Its 787 Dreamliner will fly for the first time at the Farnborough International Airshow, where Boeing also plans to present some of its new, cutting-edge technologies and services. Senior Vice President Tom Downey clearly shares investor enthusiasm, excited about "the opportunities the [air] show provides to meet with customers, partners and other stakeholders."

That's the current roundup. As the market twists and turns on a daily basis, it becomes more and more important to track all of your favorite companies. Make sure to add these companies to your free My Watchlist feature to get up-to-date analysis whenever news breaks. To get started, click on any company below:

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Boom! Caterpillar Down 5% on Weak ’10 View

It’s going to be an ugly day for Caterpillar (CAT), whose shares are down $2.96, or 5%, at $52.89 pre-market, after the company this morning reported Q4 sales off the mark, even though profit per share beat estimates. The company sees EPS this year significantly below estimates.

Sales fell 37% to $7.898 billion, about $200 million below estimates, yielding profit per share of 41 cents, which was substantially ahead of the 28-cent average estimate.

For this year, the company forecast revenue to rise 10% to 25%, which would be $35.64 billion to $40.5 billion, comfortably ahead of the $36.1 billion average estimate, though profit per share is expected to be only $2.50 “at the midpoint,” which is below the $2.71 average estimate.

The company said an “unfavorable mix of sales” was the factor most driving downside in earnings, along with a less favorable tax rate.

Chair and CEO Jim Owens gave the outlook a positive spin, stating “�We�re encouraged by signs of improving demand. Dealer sales to end users are up, order rates are up, dealer inventories came down in 2009, and we�re seeing stronger service parts sales.”

SanDisk shares volatile in after-hours trading

LOS ANGELES (MarketWatch) � Shares of SanDisk Corp. were volatile Friday evening following dayside losses stemming from weaker-than-expected financial figures from the memory chip maker.

Late-traded SanDisk SNDK �shares swung between gains and losses, most recently trading up 0.3% after a decline of more than 3%.

The shares finished the regular session down 11% at $35.91, the worst performers on the S&P 500 Index SPX �, after the company late Thursday issued a disappointing second-quarter revenue view of $950 million to $1.05 billion. At the time, the consensus estimate produced by a FactSet Research survey of analysts was $1.29 billion.

SanDisk�s first-quarter adjusted earnings of 63 cents fell short of expectations of 69 cents a share. SanDisk said in a statement that its results were hurt by lower-than-expected pricing and demand weakness in certain segments. Read about SanDisk's results.

The shares finished the week down 13%, deepening their year-to-date loss to 27%.

Apple shares AAPL were up 72 cents, or 0.1%, at $573.25 in late trading. They closed the day session down 2.5%, putting them into correction mode as they�ve fallen 11% from their record high. The stock logged a 5.3% loss for the week. More about the drop in Apple's shares in The Tell blog.

Click to Play Verizon answer to iPhone: Windows

Verizon, fed up with the high costs of offering the iPhone, plans to push smartphones powered by Microsoft's Windows software, as a counterweight to the popular Apple device. George Stahl reports on digits. Photo: HTC

Apple is slated to release quarterly earnings on Tuesday. Read preview of Apple's results.

On the broader market during the day, U.S. stocks mostly rebounded from two straight sessions of declines, with sentiment raised by better-than-expected corporate results, including from software heavyweight Microsoft Corp. MSFT �.

Microsoft�s late-traded shares were up 0.2% at $32.47, slightly adding to their regular session climb of 4.6%. See more about Friday's gains in U.S. stocks.

The Dow Jones Industrial Average DJIA closed up 65 points, or 0.5%, at 13,029.26. The S&P 500 Index SPX �rose 0.1% to end at 1,378.53. But the Nasdaq Composite Index COMP �gave up earlier gains, closing 0.2% lower at 3,000.45.

For the week, the Dow industrials rose 1.4% and the S&P 500 Index advanced 0.6%. The Nasdaq shed 0.2%.

Top picks 2012: Twin Disc

If you are looking for a solid growth company currently trading at a discount, then I strongly recommend Twin Disc, Inc. (TWIN).

The company is expected to grow at 45.6% in fiscal 2012, but is priced at a bargain relative� to its intrinsic value ($56), with a P/E ratio of only 11.57 times earnings. Further, the company is absolutely swamped with demand.

Twin Disc, is primarily in the business of producing and selling heavy duty off-highway power transmission equipment, marine transmissions, surface drives, propellers and boat management systems.

This company began 91 years ago, founding a company that made the first �twin disc� clutch for tractors but now has evolved into a company that manufactures and sells its products not only for pleasure craft, but for military marine markets, government and industrial, energy and natural resources and commercial markets.

The company has just introduced the Express Joystick System (EJS) to the marine market and is in the development of its 7500 series transmission which is in the final testing phase.
Twin Disc is backlogged 6-months as it works to keep up with the demand for its products.

For the first three quarters of 2011, Twin Disc, Inc. has seen its net income more than double from $4,034 (M) December 2010 to $9,581 (M) in September 2011. �

Earnings grew by 45.6% this last quarter. Its gross margin is up 35.9% and has an overall growth rate of 39%. It pays a small dividend of just under 1%.

While its marine transmission business is diverse, TWIN has seen a boost in its revenues indirectly due to higher oil prices, which has allowed the oil and gas markets to boost its orders for TWIN marine transmission products use in offshore drilling marine craft.

There is risk that if oil prices fall sharply in 2012, orders from this segment may be affected.

Yet, if the Fed continues to intervene in the marketplace to hold up the financial markets, oil prices could stay elevated as they have for the last few years.

TWIN is also benefiting from growing demand in the aftermarket, industrial and airport rescue and firefighting (ARFF) markets that have also added to its profitability.

Unlike some of its peers, the stock aggressively bounced back following the sell-off in the stock market in the third quarter to establish a three-year high and it is still selling at a deep discount to its intrinsic value.

From my perspective, what I look for in a stock is a company with solid earnings, selling at a bargain, with an established technical pattern of higher highs and higher lows over the previous few years.

The stock got as low as $23 last October but then shot up to $47 a share when investors spotted this value. Look to buy TWIN in the $25-$30 range with an upside target of $56.

Obama: ‘Too much loose talk of war’ with Iran


While refusing to rule out military action, president also cautions against growing chatter of an attack. See full story.

China�s parliament to meet, discuss reform

Kick-starting stalled reform efforts and maintaining economic growth are the likely focus of discussions next week, ahead of a once-in-a-decade leadership transition set for later this year. See full story.

Putin set to reclaim Russian presidency

Russia�s prime minister, the president for eight years between 2000 and 2008, is heading back to the top job after clear, and expected, win in Sunday�s election. See full story.

Hiring, key to U.S. recovery, on upswing

Increase in job creation suggests U.S. economy is gaining steam, but doubts persist about whether strength of recovery is sustainable. See full story.

U.S. stocks face jobs data, Iran tensions

U.S. stocks have shined this year, but investors may find a reason to book gains next week if jobs data prove a disappointment, analysts say See full story.


Instead of acknowledging that banks have become a part of government, we keep pretending they are private institutions, writes David Weidner. See full story.


Higher fees are sneaking into the overall cost of most mortgages. But given ultralow interest rates these days, it�s likely few borrowers will notice. See full story.

How 2011 Sank Nordic American Tankers

As 2011 comes to a close, it's a great time to look back at what happened to the stocks that interest you. By making sure you know the important things that a company accomplished -- as well as the setbacks it experienced -- you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at Nordic American Tankers (NYSE: NAT  ) . The company owns a fleet of crude oil tankers it uses to transport oil around the world. But despite high oil prices, reduced demand in a weak U.S. economy along with a glut of tankers has combined to put a big hurt on the industry. Below, I'll take a closer look at the events that moved Nordic American's shares this year.

Stats on Nordic American Tankers

Year-to-Date Stock Return (50.5%)
Market Cap $573 million
Total Revenue, Trailing 12 Months $81.1 million
Net Loss, Trailing 12 Months ($51.5 million)
1-Year Revenue Growth (41.5%)
Cash / Debt $11 million / $170 million
Dividend Yield 9.9%
CAPS Rating ****

Source: S&P Capital IQ.

How did Nordic American Tankers do this year?
Nordic American Tankers has a fleet of 20 Suezmax crude oil tankers, up from just three less than seven years ago. Ordinarily, that would be good news, and it has certainly put Nordic American in a position where it can expect to see a big boost to its revenue -- as long as the global economy recovers.

The problem, though, is that several of Nordic American's competitors have done the same thing, building out their fleets and causing a glut of tankers. Recently, rival Frontline (NYSE: FRO  ) said that it would need more cash in order to stay in operation through next year. That has hurt companies throughout the industry, including Ship Finance International (NYSE: SFL  ) , Overseas Shipholding Group (NYSE: OSG  ) , and Nordic American.

One thing that distinguishes Nordic American from its peers is its dividend. Teekay Tankers (NYSE: TNK  ) has a higher dividend, but most other shippers fall well below Nordic American's near-10% level. But given that Nordic American has had to issue shares to finance those payouts, it's hard to feel comfortable about the dividend's sustainability going forward.

Tanker stocks aren't the best way to cash in on energy. But we've got three stocks we think will do a much better job. Read about stocks that will thrive from $100 oil in the Motley Fool's latest free special report -- it's yours free by clicking here, but only for a limited time.

Click here to add Nordic American Tankers to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

3 simple steps that will set you financially free   

What does the phrase financial freedom really mean? And are you financially free?

To some people financial freedom may refer to a lack of worry- you have enough funds to meet your family�s needs, and some surplus.

To others, financial freedom means freedom from loans- not having to set money aside for the next EMI, owning your assets outright, this is freedom from debt.

To others still, it means being a strong financial provider- providing a better future for your family than you had yourself.

The interpretations are many- and each one is personally valid and important to its interpreter.

We all have certain financial freedoms that we want to attain.

At PersonalFN we understand that your family is important to you. Providing for them and taking care of them and yourself, and living the kind of life you want to live, is the reason you work so hard to earn money.

So, here`s a small list of things you should do, easy things that will help you attain your own financial freedom.

1. Define Your Freedom List

Make a Freedom List- containing not more than 3 goals- that you must achieve to consider yourself financially free.

These 3 goals will most likely be the most important goals to you in your life.
Examples of these goals might be:

� Educate your children at good colleges

� Financially provide for your parents

� Prepay all loans and be debt-free

� Provide for marriage expenses for your children

� Buy a bigger home

� Retire at x age with a corpus of Rs. Abc

Reading the list above you`ll see that freedom is indeed hard won, so keep the list small. Think of things that are very important to you and allow only these things to be on your Freedom List.

Be sure to make the Freedom Goals S.M.A.R.T.

2. Quantify your Freedom Goals

Remember how your parents used to tell you that when they were your age, a soft drink cost 8 annas?

More than one kid has thought to themselves 'I wish you had bought 100 bottles of Pepsi and stored them!' But what we don�t realize is this is the effect of 10% per annum inflation. A very normal inflation rate for such goods.

(Read our article titled Why You Should Worry about Inflation )

Take your freedom goals and consider what they will be when you want to achieve them.

If you want to provide for your children`s education and marriage- consider what it costs today and inflate the cost by 10% per year. Know how much you want to achieve, and by when you want to achieve it.

Do this for each of your goals, have an amount and a year by when you want to achieve the goal.

3. Save and Invest regularly � remember, Rome wasn�t built in a day

Your goals are probably looking pretty big once you`ve quantified them, as they should be.

This kind of money takes years to build, and everybody starts small.

(Read our article titled To SIP or to VIP � That is the Question )

If you have a goal of becoming debt- free, you can slowly teach yourself financial discipline. Save what you can and repay your debt a little at a time. You can also restructure your debt, for which you need to talk to and negotiate with your bank.

If debt is not your concern, and you`re looking to grow your wealth, then set aside your savings and invest in those avenues that suit your goals. For example if you have a short term goal, invest in debt i.e. fixed income. For a medium term goal you can invest in a combination of equity, debt and gold with a higher proportion in debt and gold and a lower proportion in equity, and for a long term goal, invest in all 3 asset classes with a higher proportion in equity and a lower proportion in debt and gold.

Stick to your investment plan, don`t get swayed by internal or external circumstances changing, and within no time you�ll find that you can give yourself a pat on the back for being well on your way to achieving your goals.


To attain financial freedom, above all, you have to be patient. Trust that you will get there.

Wealth building is a gradual process. It requires continuous investing through market ups and downs. Don`t let yourself get swayed by fancy structured products, the latest mutual fund recommended by your bank, the hottest stock invested in by your neighbor. Have a plan, know which investments are the right ones for you, and invest in them regularly for the long haul.

Here�s wishing all our readers a happy and financially free life!

PersonalFN is a personal finance website.


MEMC Struggles to Shine in a Gloomy Solar Market

MEMC Electronic Materials (NYSE: WFR  ) , a supplier of silicon wafers to solar and semiconductor manufacturers, is planning to restructure its business, which would involve slashing its workforce by 20%, or 1,300 jobs. In addition, the company plans to put some of its facilities on hold in order to ride the slump in the renewable-energy sector.

Weak demand along with painfully low silicon prices in the semiconductor and solar industry are driving the changes. The restructuring would help the company trim its operating costs and strengthen its operating cash flows for the near term. Let's take a look at the company's latest third-quarter figures.

Woeful figures
The latest quarterly results were highly disappointing, with a 31% sequential fall in MEMC's top line and a net loss of $94.4 million.

But it's not just MEMC that's facing the heat. Industry peers like LDK Solar and ReneSola have also witnessed sharp falls in revenue as well as profitability margins. This is forcing them to either cut capacity or close up shop altogether.

MEMC's restructuring process is expected to cost the company $700 million in the fourth quarter. As part of its restructuring plan, it will also cut the capacity of its Portland, Ore., crystal facility and leave idle its polysilicon facility in Merano, Italy.

Apart from this, MEMC would also combine its solar material facility, which is struggling at present, with its SunEdison solar development unit. The hope is to improve efficiency and expand in the solar sector, which is considered less vulnerable to price swings, barring the present slowdown.

Facing the heat
Polysilicon prices have witnessed a tremendous crash since manufacturers raced to raise their production capacity when prices were at loftier levels of $500 per kilogram. Since then, the price has plunged over the years to as little as $25.

To make matters worse, the solar energy market in Europe is facing sunstroke as subsidies have started to shrink, thus adversely affecting demand. Moreover, Chinese competitors are relentlessly dumping their cheap products, causing prices to go southward.

The Foolish bottom line
After MEMC burned its hands with falling polysilicon prices, its restructuring initiative is definitely a welcome change. With its exit from the bottomless pit of solar materials, the company can now focus on restoring the stability of its margins and its business as a whole. So what do you Fools think about the company? Leave your comments in the box below.�

Keki Fatakia does not hold shares in any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Mack-Cali: Examining the Decline in Cash Rent Realizations

Mack-Cali Realty Corp.(CLI) reported results a fortnight ago. While revenues managed to grow by 4.7%, the operating profits and net profits have taken a beating.

Source: Gridstone Research

The primary reasons for this (common for most commercial REITS and you can also read the article discussing these issues on HRPT here) are (1) impairment charges and (2) lower same-store property-level operating income. The lower same-store income is primarily due to decline in occupancies and roll-down in rent realizations.

Rent Revenues Have Increased, But Rent Realizations Are Down...

(Click to view enlarged image)

Source: Gridstone Research

Occupancies have declined from 91.3% as of Dec 31,08 to 90.1% on Dec 31,09. The ~100 bps decline in occupancies is not a major cause for concern as long as the occupancy levels don't' decline further. In fact, on a sequential basis from Sep09 to Dec09, occupancies have increased marginally from 90 % to 90.1%. Though marginal, this is a welcome sign in a weak CRE market where tenants have the advantage.

But this robust occupancy is not without its disadvantage. See the CEO comments from the 4Q09 earnings call (Read full transcript):

"..These transactions enabled us to end the year at 90.1% lease up in fact slightly from the last quarters 90%. Rents did roll down in quarter by approximately 10.5% or 6.8% on a GAAP basis .."

Unfortunately due to the straight-line rent accounting methods, only the 6.8% decline is reflected in the P&L statement, though the rent decline is far worse at 10.5%. To get a true picture it's best to adjust these 'unbilled rents' that the company anyway discloses.

Straight-Line Rents Mask The Actual Declines

(Click to view enlarged image)

Source: Gridstone Research

As seen from the graphic above, straight-line accounting added ~7M of 'non-cash' rent revenues to the Fiscal 2009 number. If this is excluded, the rent revenue increase is from $593 M to $609M. If this exercise is repeated for previous fiscals, it shows that the rent revenue increase even in 2004-2006 (the peak) has not been that much. However, since most leases were for at least 5-7 years and had step-up clauses, the rental income increase in those periods were exaggerated due to straight-line rent accounting.

As the new leases and lease renewals come in at lower rent realizations, the 'adjusted' FFO declines even more than FFO reported on a GAAP basis.

Adjusted FFO Will Show A Sharper Decline

(Click to view enlarged image)

Source: Gridstone Research

As seen from the data above, adjusted FFO( FFO-unbilled rent adj.) declined from $286M in 2007 to $274M in 2008 to $268 M in 2009. On a per share basis, the impact is at least 8-10 cents per share. Though the impact is minor in Mack-Cali's case, it could be significant for many other REITS which had a sharp increase in rent revenues in 2005-08 and rent realizations declined in 2009. What it conveys is that REIT financial reporting needs another layer of analysis and normalization before a true picture emerges.

Both in terms of FFO and rent revenue increases reported, investors need to carefully look at the causes and see if there is any 'organic' increase or if other factors are masking the actual increase / decrease in rents. Clearly a 10% rent realization decline (cash rent declines in Mack-Cali's case, which reflects actual market asking prices) is more stark than a 6% decline as per GAAP reporting. Another concern is that if occupancies continue to remain below 93-95%, all commercial REITS will find that the cash rents roll-down of 8-10% for new leases and lease renewals will continue in 2010. While this will not immediately impact rent revenues reported as per GAAP due to the long-term nature of such leases, the 'adjusted' FFO numbers decline.

The broader question is : Should GAAP do away with straight-line rent accounting? I think so, as it distorts the true picture in a cyclical industry like CRE. Another option is that straight-line accounting should be allowed for short-time frames of only, say, 3-4 year leases and not for all leases as that tenure could represent a typical boom-bust cycle in CRE.

Disclosure: No Positions

Thursday, June 28, 2012

Cheap Nasdaq Stock Highlight; DRYS

DryShips Inc. (NASDAQ: DRYS) shares were downgraded from a Buy to Hold rating by analysts at Dahlman Rose earlier this week.

The downgrade had seemingly little effect on DryShips shares, which rose 0.7% after the rating. DryShips shares, however, are down more than 7% year-to-date. The stock is expected to remain in focus ahead of the company�s fourth-quarter earnings release.

DryShips last month announced that its wholly owned subsidiary, Ocean Rig UDW, entered into firm contracts with Cairn Energy Plc for Leiv Eiriksson and the Ocean Rig Corcovado for a period of around six months. The two contracts are worth almost $235 million.

George Economou, chairman and CEO of DryShips, said last month that the company is able to offer the customer a package solution due to the highly specialized nature of its semi-submersibles and also the state of the art drillships. Economou said that with signing of the two new contracts, the company is now left with only one drillship, the Ocean Rig Mykonos.

DryShips announced its third-quarter financial results in November, reporting third-quarter net income of $49.3 million, or $0.18 per basic and diluted share. The company reported adjusted EBITDA of $168.1 million for the third quarter of 2010.

For the third quarter of 2010, the company�s drybulk carrier segment registered net voyage revenues of $108.1 million, down $6.7 million over the same period in 2009. The company�s offshore drilling segment reported third-quarter revenue of $110.4 million, up $8.7 million over the same period in 2009.

DryShips is an Athens, Greece-based owner and operator of drybulk carriers and offshore oil deep water drilling units that operate globally. At the end of the third quarter of 2010, the company owned a fleet of 39 drybulk carriers.

  • Need fast service and cheap rates from a broker? Click here to see my favorite place to trade DRYS
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Success Trading For New Traders – What Does Bid and Ask Mean?

Do you ever wonder exactly what’s going on in the trading pits after you’ve sent an order to purchase stock? You’ve no doubt seen market quotes either online or even in the newspaper. Have you noticed that there are always two sets of prices given? What exactly do those mean and where will my order get filled? Let’s discuss the basics of the two prices you see.

Let’s say you’re trading stocks. The first price (usually the one on the left) is called a “bid”. This is the price at which the market is offering to buy the stock. If you sell your stock at the market, this is the price that you’ll get. The second price (usually located on the right) is called the “ask”. This is the price at which the market will sell you the stock. If you submit an open order to buy shares at the market, you will get them for the ask price. Another element that comes into play sometimes is the size of the bid and ask. Usually, there’s an order size that comes with the bid and ask. If that size is exceeded then the price will usually change – and generally, that small price change will move slightly against you since you’re creating a demand for that stock.

The difference between the bid price and the ask price is called the “spread”. If you look at the spread of a large cap stock that trades over a million shares a day, and compare that to a small cap stock that only trades a thousand shares a day, you’ll see a huge difference. Stocks that are more liquid (or more activity) will have much smaller spreads than those with less activity. Thus, you will get a better fill (or deal) for a market order on a more liquid stock. One tool you can use to possibly improve your price is to use limit orders. If you want to buy XYZ at no more than $12 and the bid is $11.50 and the ask is $12.50, you can place a purchase order with a limit of $12. This means that the order won’t be filled unless you can get it for $12 or better.

One word of caution with limit orders is that the market could run away without you if used with a buy order. And if your order is filled, you’ll be buying the stock on a downtick, which means it could be making a major move down. As a general rule, it’s not a good idea to use limit orders when selling stocks as the market could make a big move against you without ever hitting your limit price and you’d be stuck with a big loss.

Chuck Cox is a Technical Writer and Industrial Scientist by professional with a background in statistics. He has used mathematical and statistical methods to invest and trade in the stock, futures, and options markets. Chuck has owned various businesses and presently operates several websites. To investigate a new stock trading idea, visit his website, Stock Trading Reviews

UBS Americas Now at 6,870 FAs; Assets Up but Outflows Continue

UBS reported a first-quarter profit of roughly $2.9 billion, topping analysts' expectations and giving the Swiss-based investment bank its best results in nearly three years vs. a loss of about $2.6 billion in the same year-ago period.

In the quarter ended March 31, UBS' Wealth Management Americas division has a pre-tax profit of 15 million Swiss franc vs. a pre-tax loss of 35 million Swiss francs in the first quarter of 2009.

The number of UBS financial advisors in the Americas, however, fell by 217, or 3%, to 6,867 in the first quarter of 2010 vs. 7,084 in the fourth quarter of 2009 "as a result of voluntary departures and limited recruiting."

A year before, UBS had about 8,760 financial advisors. Thus, it is down nearly 1,900 FAs, or about 22 percent, from a year ago - meaning that it has lost more than one in five advisors.

Client assets stand at 768 billion Swiss francs or 112 million Swiss francs per FA - or about $101 million per FA in U.S. dollars. This is up from 711 billion Swiss francs a year ago and 737 billion Swiss francs in the fourth quarter of 2009.

In its first quarter, Bank of America-Merrill Lynch said its 15,005 advisors had total client assets of nearly $1.45 billion or $96.6 million per FA. Morgan Stanley Smith Barney, with 18,140 advisors, had $1.6 trillion in AUM, representing an average of $88 million per advisor.

According to several news sources and company reports, UBS' advisors have yearly sales of $736,000 per FA vs $807,000 at Merrill Lynch and $685,000 at Morgan Stanley.

UBS' U.S. wealth management's personnel costs rose 13% over the fourth quarter to 1,069 million Swiss francs.

Financial advisor compensation grew due to "higher accruals for variable compensation [including deferred compensation] and the introduction of the GrowthPlus program, a compensation program based on prospective revenue production and length of service with UBS," the company said in its quarterly report.

Year over year, the division's personnel costs grew 6% in U.S. dollars, "due to higher financial advisor-related compensation on higher revenue levels and the introduction of the above-mentioned GrowthPlus program," as well as from higher FA recruiting costs.

GrowthPlus is aimed at rewarding advisors with five or more years of experience with the bank and $500,000 and up in yearly sales or production.

Financial advisors in the Americas had net new money outflows of 6.4 billion Swiss francs vs. 11.3 billion Swiss francs in the previous quarter. "Though net new money remained negative, outflows related to financial advisor attrition decreased. Net new money from financial advisors with UBS for more than one year was positive for the first time since the first quarter of 2008," the company said.

Best Car Dealers for Auto Service Satisfaction

When you purchase a new car, you hope to avoid all the headaches and hassles you deal with when having an older car with lots of mileage. However, every car needs regular maintenance to make sure the vehicle keeps purring along like expected. The last thing you want to do is make a car purchase to find out the auto dealer is known for lousy service.

Fortunately J.D. Power and Associates just released the 2012 U.S. Customer Service Index (CSI) report that examines satisfaction among vehicle owners who visit a service department for maintenance or repair work. The CSI rankings are based on dealer service performance during the first three years of new-vehicle ownership, which typically represents the majority of the vehicle warranty period. Five measures are examined to determine overall customer satisfaction with dealer service (listed in order of importance): service quality; service initiation; service advisor; service facility; and vehicle pick-up.

Here�s the ranking of customer satisfaction based on car dealer service for regular maintenance or repair work.

Top 5 Luxury Car Brands based on Dealer Service Customer Satisfaction:
1. Lexus
2. Cadillac
3. Jaguar
4. Acura
5. Porsche

Top 5 Mass Market Car Brands based on Dealer Service Customer Satisfaction:
1. Mini
2. Buick
3. GMC
4. Chevrolet
5. Hyundai

J.D. Power�s Customer Service Index predicts depressed auto sales to subsist until the nationally economy improves. If this is the case, maintaining the highest levels of dealer service customer satisfaction could be a competitive advantage for those car brands that keep up the dealer service customer satisfactions scores.

Before you make your next car purchase you’d be well served by keeping these rankings in mind.

Stock Picks – S&P 500 Near Overvalued Level


S&P 500 (SPX) — Our trading, or near-term, target is 1,120, with the first zone of support at 1,020 to 1,070, and the 20-day moving average near the top of the support at 1,063.   

The Relative Strength Index (RSI) is high at 66.45 and getting close to the very overvalued level of 70 we’ve discussed before.

At this level, investors should buy only stocks with excellent earnings and a high probability of future earnings gains. And a reliance on stocks with a long record of earnings gains and dividend increases will help raise the odds of success.   

Go after money doublers with every trade you make! Download your FREE copy of The Options Trader’s Guide to Technical Analysis today.

Given Jobs Strength, Was Fed 2014 Pledge “Foolish”?

Did the Fed get ahead of itself when it said that it plans to keep interest rates at virtually zero into late 2014? Or maybe Ben Bernanke had his fingers crossed behind his back? Job growth was much stronger than expected in January and the economy has added more than 200,000 jobs now for two months in a row. Other economic indicators, including manufacturing data, point to more robust demand in the economy.

Clearly, the Fed never set its words in stone, and the board has noted it can change course depending on conditions on the ground. But its “2014″ statement is starting to raise eyebrows.

“We believe that consensus expectations for growth are understating the rising momentum in the economy,” wrote John Ryding and Conrad DeQuadros of RDQ Economics. “These data only further underscore the foolishness of the Fed�s promise to keep rates on hold until late 2014�how can the Fed see that far into the future?”

But PIMCO CEO Mohammed El-Arian told Bloomberg Television that he expects the Fed to keep interest rates low and probably even initiate QE3. The economy still has numerous secular problems despite cyclical improvements, he argues.

“So far, the Fed has been dismissing the short-term data�They have been looking beyond the cyclical bounce, and saying that secularly the economy is still weak. What does it mean for policies, don’t expect any change in the signal that they intend to keep interest rates float at 0 or at exceptionally low levels until the end of 2014. In terms of QE3, my gut says we are likely to see it, but the question is when and how big.”

Don’t Let Yourself Retire Broke!

The economic and stock market recessions of 2007-09 didn�t help those Americans who are nearing retirement age, did they?

While the stock market has mostly come back, folks who didn�t panic and sell out of their holdings during the downturn are generally ahead of the game these days. However, the economic recession forced many people who had been dedicated savers to forgo investing for retirement. For several reasons:

  • Many were too scared to stay in or get back into the markets after seeing the Dow Jones Industrial Average fall to less than half of its value, so they just put their money under their mattresses or into very low-yielding assets.
  • Others were afraid of losing their jobs, so they put as much of their income as possible into very liquid savings, incurring the opportunity cost of investing in lower-yielding assets instead of the stock market.
  • The rest lost their jobs or had to take a cut in pay, putting their savings/investing on the back burner.
8 Clever Ways to Save Your 401(k) or IRA

The result: 60% of Americans, according to the Employee Benefit Research Institute, have less than $25,000 put away for retirement — not counting defined benefit plans and the equity (or none) in your home.

Is that scary, or what? If you�re brave, stay with me here, and let�s look at some even more frightening numbers:

Say, you�re 55 years old, you make $75,000 per year, and you have $25,000 in savings. You�ve decided that you will have to retire with full Social Security benefits, so that means you can�t collect your gold watch until you are 66 and 6 months old. Let�s also assume that Uncle Sam — in those yearly Social Security statements he sends you — says he will �give� you $2,000 per month for the rest of your life, if you wait until full retirement age.

Now, according to the U.S. Centers for Disease Control and Prevention — as of 2009 — the average mortality rate for folks who live in the United States is 78.5 years (76 for men and 80.9 for women). That means your measly $25,000 and your $24,000 annual Social Security payment will, actuarially speaking, need to last you for 12 years.

Let�s just play with some simple math and pretend that you won�t add to that $25,000 in savings, and let�s also assume that you won�t receive a pension. That means you will have $24,000 plus an additional $2,083 (your original $25,000 divided by 12 years of retirement — excluding any interest you might receive on the $25,000), or $26,083 per year to live on for the remainder of your life.

That�s not much! In fact, it�s barely twice the 2012 poverty level of $11,170, as defined by the Census Bureau. And, as we all know, costs don�t stay stagnant, especially the price of aging. Even if you have no debt when you reach retirement age (which is pretty unlikely for most of us), $26,000 a year is not going to take you to the promised land of a truly golden retirement.

Don�t stop reading — the best is yet to come!

While that scenario should strike terror in your very soul, it�s not too late! The number crunchers tell us that employment is improving and the stock market certainly is attractive these days — two very promising trends.

But it also means there is no time to wait. You must act now. Not tomorrow, or next week. I firmly believe that we will see a very strong stock market for at least a year or two, but time�s a-wastin�. You must begin investing for retirement immediately to take advantage of the good returns that you can get right now!

Let me crunch a few numbers to show you how your current financial situation can improve drastically, if you just begin a disciplined savings plan, right now:

Scenario 1

You’re 55 years old; let�s round your time until retirement to 12 years to make the math easier:

If you invest $500 per month from now until retirement, in 2024, at average stock market returns of 10.56% (averaged since 1871), you will have approximately $243,000 in 12 years.

If you can only put in $200 per month, you will have socked away approximately $153,000 in that same time period. That�s not a huge amount of money, but it sure beats the heck out of $25,000, doesn�t it?

Now, let�s see what happens if you are younger and start saving now:

Scenario 2

At a rate of $500 per month, with 32 years to retire (at 67 years old, according to Social Security), all things being equal, you can potentially accumulate $2.6 million!

Investing just $200 per month will reduce that number to $1.6 million.

And that�s if you just earn the average stock market returns. But it is possible to beat those. And I�m going to share some ideas to help you do just that. Tune in next week.

Analysis Of Institutional 5% Ownership Filings On Tuesday

Many leading funds filed forms 13-D and 13-G (and form 4) with the SEC on Tuesday, including Baillie Gifford, Relational Investors, and BMO Financial Corp., indicating that they had amended their ownership in U.S. traded public companies. The forms are required to be filed within 10 days, so the institutions traded these shares sometime after the end of last year. Also, we have included, when applicable, SEC Form 4 filings by Institutions that are considered corporate insiders by virtue of their holding more than 10% ownership, and in many cases having representation on the Board of Directors. The following are the most notable filings on Tuesday.

Baidu Inc. (BIDU): Often touted as the Google (GOOG) of China, BIDU is a leading Chinese provider of internet search, targeted online advertising and other internet content services. On Tuesday, Edinburgh-based esteemed investment management firm Baillie Gifford, with over $100 billion in assets under management, including $24.5 billion in U.S. equity assets at the time of its latest 13-F Q3 filing, filed SEC Form SC 13G/A indicating that it held 26.2 million shares, an increase from the 26.0 million shares it held at the end of Q3 (or a purchase of over $25 million). Baillie Gifford is currently the largest institutional holder of BIDU shares, and a long-term holder since 2008. We too are firm believers in the long-term value of BIDU, and recommended buying BIDU in our coverage of Chinese equities on October 3, when it traded at $105, identifying it as the best opportunity among Chinese equities; it is now up 25% from that price after rising as high as 40% during the month after our recommendation.

Besides Baidu, in separate SC 13D/G filings, Baillie Gifford also indicated that it increased its holdings in New Oriental Education & Technology ADS (EDU), a Chinese provider of foreign language training and test preparation courses for admissions and assessment tests in the U.S., the PRC and Commonwealth countries, in which it increased its holding by 12,000 shares (or $0.3 million) to 16.73 million shares; and First Solar Inc. (FSLR), a manufacturer and seller of solar modules using a thin-film semiconductor technology for residential and commercial markets in the U.S., Europe and Asia, and also a provider of photovoltaic solar power systems, in which it increased its holding by a 15,600 shares (or $0.7 million) to 6.47 million shares. Baillie Gifford is the largest institutional holder of EDU, and it is the second largest institutional holder of FSLR.

PMC Sierra Inc.(PMCS): PMCS designs, develops, markets and supports high-performance internet infrastructure semiconductor networking solutions that enable the transportation and storage of large quantities of digital data. It sells its semiconductor devices in five market segments, including enterprise storage, fiber access, wireless access, metro transport and aggregation, and printer and enterprise networking. On Tuesday, San Diego-based shareholder activist value-oriented hedge fund manager Relational Investors, with $5.3 billion in equity assets under management per its latest 13-F Q3 filing, filed SEC Form SC 13D indicating that it held 16.5 million or 7.2% of outstanding shares, an increase of 8.7 million shares from the 7.8 million it held at the end of Q3. This makes Relational the third largest institutional holder behind Fidelity Investments (32.5 million shares) and T Rowe Price (21.6 million shares). Relational initiated the position in Q1 of 2011, and has been adding to it since then, including adding 1.3 million shares in Q3.

In its filing, Relational elaborated on its rationale behind the investment, stating its belief that "the company's share price does not adequately reflect the longer-term earnings and cash flow generating potential," and arguing that "the discount is at least partially attributable to the company's business mix and capital allocation strategy." Furthermore, Relational also stated that the Company may need to consider "broader strategic alternatives" if it is unable to achieve sales growth in its Optical and Mobile segments.

Manitowoc Co. (MTW): MTW is a manufacturer of cranes and related lifting equipment for the energy, petrochemical, construction and mining markets, and it also serves the foodservice industry by providing ice machines, ice/beverage dispensers and refrigeration products. On Tuesday, Chicago-based BMO Financial Corp., a holding company that is a subsidiary of the Bank of Montreal, with over $50 billion in U.S. equity assets under management at the time of its 13-F Q3 filings, filed SEC Form SC 13G indicating that it held 8.0 million or 6.1% of outstanding shares, an increase from the 0.06 million it held at the end of Q3. This makes it now the largest institutional holder of MTW shares, ahead of Vanguard Group (6.0 million shares), that was previously the top holder. MTW trades at a fair 12-13 forward P/E and 3.1 P/B compared with averages of 12.3 and 2.0 for the construction and mining machinery group.

Incyte Corporation (INCY): INCY develops small molecule drugs for hematologic and oncology indications, and inflammatory and autoimmune diseases. On Tuesday, New York-based biotech-focused hedge fund Baker Bros. Life Sciences Capital, with $2.1 billion in assets under management, filed SEC Form 4 indicating that it now holds 12.4 million shares, after purchasing 0.5 million shares for $8.9 million. This is an increase from the 11.1 million shares that Baker Bros. reported owning at the end of Q3, and the 11.9 million shares it reported owning in a prior 13-D/G filing that we reported in mid-December. Also, on Tuesday, 14159 Capital controlled by brothers Julian and Felix Baker of Baker Bros., filed SEC form 4 indicating that it purchased 14,625 shares for $0.24 million, increasing its holding to 0.36 million shares.

Jaguar Mining Inc. (JAG): JAG is a Canadian company engaged in the exploration, development and extraction of gold in Minas Gerais, Brazil. On Tuesday, Hong Kong-based Senrigan Capital Management filed SEC Form SC 13G indicating that it held 8.0 million or 9.5% of outstanding shares, thereby also making it the largest institutional holder of JAG shares. JAG trades at 13-14 forward P/E and 2.2 P/B compared with averages of 12.0 and 3.6 respectively for its peers in the gold mining stocks index, while earnings are projected to more than double from 26cents in 2011 to 54cents in 2012.

Credit: Fundamental data in this article were based on SEC filings, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Gold And Silver: Where (And When) To Place Your Investment Bets

Let's explore the advantages of saving in gold and silver over dollars. Here's a hypothetical look at what could occur over the remainder of this decade.

The charts below compare saving $100/month in gold and silver vs. an interest-bearing money-market account. For our projections, we assumed gold's average annual gain of 18% since 2001 will continue through 2020. For the money-market account, we used an annual interest rate of 1% in 2012 and added 0.5% each year, so that by 2020 it's earning 5%.

Here's what would transpire by 2020:

(Click to enlarge)

If you invested $100/month from January 2012 through December 2020, your total contributions would amount to $10,800. In the money-market account, your savings would compound to $12,959.48, for a gain of 20%. For gold, however, the value of the metal would reach $27,025, for a return of 150.2%.

For silver, we'll assume it matches its 25.3% average annual gain from the last ten years through 2020. Here's how it would stack up against money saved in a money market account.

(Click to enlarge)

The money-market account would again gain 20%, but the value of silver would reach $39,302, for a total return of 263.9%.

[We caution against investing more money in silver than gold; the metal is much more volatile, and has large industrial applications that could hinder the price in a poor economy. And if fear is high, gold will be sought before silver.]

As you consider these data, keep in mind the power of dollar-cost averaging. Using this strategy to accumulate gold and silver will lower your cost basis automatically because you'll buy more ounces when prices are low and less when they're high. And that highlights another gain: Buying systematically removes emotion from the equation. "Buy on dips" is good advice, but it doesn't tell you exactly when to buy. A commitment to dollar-cost averaging eliminates that question.

You may argue that interest rates will be higher later this decade, and you'll probably be right - but we offset that likelihood by excluding any mania in precious metals. Also, taxes must be considered, as rates are higher on capital gains for gold and silver than for passive income, yet you'd still be left with a much greater return.

At the risk of repeating ourselves, at this point, with the monetary and fiscal predicaments confronting many of the world's governments, and the probable responses they will employ, we recommend a good chunk of your savings be held in gold and silver.

Is There a Best Time of the Month to Buy Gold and Silver?

If you're going to dollar-cost average your purchases, it might be useful to know if there are days of the month that are better to buy than others.

We measured the performance of both gold and silver for each day of the month from 2001 through 2011, and then calculated the average daily return.

Here's what we found for gold.

(Click to enlarge)

Clearly, the 13th, 15th, and 23rd are ideal days to buy since the price tends to be the weakest.

Here are the data for silver.

(Click to enlarge)

The 13th and 15th again stick out as good days to buy.

If you're accumulating on a weekly basis, we found Tuesday is the weakest and thus a good time to buy (as well as Friday for silver).

A few things to consider if you decide to use this information:

  • The figures are averages, so there are days when prices bucked the trend. View these results as tendencies, not certainties.
  • These days might fall on weekends or holidays and so won't be available every month.
  • The calculations use daily closing prices, which would be almost impossible for an investor to match.
  • The results measure past performance and can't predict the future (though we see no reason for a significant shift).

That said, if you arrange to buy gold on the 13th and silver on the 15th of each month - or on Tuesday for either metal if buying weekly - your cumulative gains stand a statistically greater probability of being slightly higher. Again, your mileage may vary.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Wednesday, June 27, 2012

Beware the Case-Shiller Lag

[click to enlarge images]

Both the Case Shiller 10 & 20 city Home Price Indices rose 1% in June on a non-seasonally adjusted basis. S&P cautions that their seasonal adjustments are probably being distorted by seasonal factors that’s why I prefer to look at the NSA numbers. 18 out of 20 Metro areas recorded price rises with only Phoenix and Las Vegas recording price declines. Whilst that sounds good, it should be remembered that the Case-Shiller indices are an average of 3 months, thus the latest report is an average of April, May and June, the last 3 months of the tax incentives. As S&P notes;

Housing prices have rebounded from crisis lows, but other recent housing indicators point to more ominous signals as tax incentives have ended and foreclosures continue.

We know sales fell off a cliff in July but it is not reasonable to think that the Case-Shiller indices will plunge when the July report comes out at the end of this month as that report will still include the months of May and June in the 3 month average. However, we should expect prices to stagnate and start falling as we progress into the 4th quarter.

Year over year comparables for both indices have been looking better however in the latest month, year over year increases reversed slightly, I would suggest that this reversal will be more abrupt in the coming months and that we will ultimately see year over year price declines in 12 months time. Of course, all bets are off if the government decides to intervene and prop up house prices yet again.

Apple: How to Play the World’s Hottest Stock

If you’re a long-term investor, there’s a lot to look forward to. Apple (NASDAQ:AAPL) is much more than a brand; it’s a lifestyle. People tattoo the company’s iconic symbol on their rear ends, for crying out loud!

Always the innovator, Apple has barely scratched the surface with regard to new devices and has hardly tapped into every way in which to use them. People line up thousands-deep to buy newer versions of the company’s most basic products every year, whether they need them or not. That’s something no other tech company has been out able to do. Plus, Apple’s market share is growing overseas, with a particular emphasis on the Pacific Rim.

In China alone, for instance, there’s the potential for an additional 30 million to 50 million iPhone sales in the next 12 months that could add an additional $4 to $6 in EPS to Apple’s bottom line. I remain convinced that Apple could be the world’s first trillion-dollar company, and I’m not alone in my thinking. Since I first voiced that highly controversial opinion a few years ago, many other firms and analysts have joined me.

How to Play the Short-Term Apple Top

However, in the short term, Apple’s chart looks like a classic blow-off top — and technically speaking, it is. Last Wednesday, we saw the stock close near the lows of the day after a quick runup and a high volume, high-speed failure midday.

The chart tells the story:Click to Enlarge

Like all charts, though, interpreting this is a matter of perspective. Stocks that have run a long way in a short time often require some “digestion,” or to use a market term, “give back.” And Apple is no exception, particularly when you consider the stock has moved up 44.76% in only three months, from $363.57 to $526.29.

If we contrast the prior chart with a longer-term view, we see Apple is simply accelerating ahead of a major trendline (seen below in red). Not only does this speak to a pullback for the company, which traders have simply pushed ahead of itself on nothing more than euphoria, but it also highlights the next logical value buying point, at $463 for aggressive traders — or roughly 6.96% lower than Wednesday’s blow-off-induced close of $497.67.

Click to EnlargeClick to EnlargeOf course, if you are more conservative, you could consider buying Apple at roughly $420 to $430, which is where Apple was trading prior to the most recent earnings announcement that fueled this latest run.

Positioning Your Portfolio in Apple Stock

When might we get there?

Blow-offs like this one typically set intermediate-term highs that last, on average, 90 to 145 days. Not always, but often, even if the stock wants to run higher in the days ahead, a period of lower price digestion is likely ahead. So there’s a little time to play.

Aggressive traders wanting to play the downside could consider put options or shorting the stock until it gets down to the $460-ish ranges, where there is likely to be aggressive buying support. More conservative investors who want to add to existing Apple positions or establish new ones may find that waiting until the price drops to the $420 area makes more sense.

Either way, be prepared for some volatility. Stocks like Apple that become media darlings tend to take on a life of their own before they settle down and then head higher.

This article originally appeared on Money Morning.

Apple Inc. (AAPL) Stock Rumors – iOS 4 Hints at Next Gen iPad, iPhone

Here is your daily Apple Inc. (NASDAQ: AAPL) stock news and rumors for August 17, 2010. Most interesting today is a look at Apple programming behind iOS 4 that hints at future features on a next generation iPad or iPhone. Also on tap is a schedule for Chinese Apple sales and the prospects of FM radio on iPods and other AAPL gadgets.

iOS 4 Source Code Hints at Future iPod, iPhone Features: It’s not easy to keep your plans secret in a tech savvy world. If you’ve built your software with the future in mind, chances are your code hides a tell that breaks your business poker face. Such is the case with APPL’s iOS 4 mobile operating system. According to a report from Boy Genius Report, the source code of iOS 4 references multiple upcoming products from Apple Inc., including two revised versions of the iPhone 4, the next model of iPad, and the much-desired Verizon-compatible CMDA iPhone. The code specifically references three products, “iProd 2,1,” “iPhone 3,2,” and “iPhone 3,3.” Boy Genius‘ source claims, “[This] code queries the device, and if the device is either a CMDA iPhone or iPad 2, the device will auto-activate, thus bypassing the need for iTunes. We’re told this block of code has appeared every year consequently before a major iPhone/device release, removed right before launch.” The “iProd” code began appearing in iOS 3.1 last year, right before the iPad was revealed in January 2010. The “iProd 2,1″ in the iOS 4 source code would naturally seem to indicate an iPad 2.

iPhone 4, iPad Get Chinese Release in September: Just two short weeks ago, Apple finally released a Wi-Fi capable iPhone 3GS in China after months of trying to get the device approved for sale. Now APPL has announced plans to release the next model of their popular smartphone, the iPhone 4, in China, and a whole lot sooner than anyone might have expected. A MarketWatch report says that China Unicom will start supporting a Chinese iPhone 4 at the beginning of September with the iPad to follow shortly thereafter. Media group Chinese Caixin is cited as the source of this information. It is unclear at this time if the Chinese iPhone 4 and iPad will support Wi-Fi communication or just 3G network support from China Unicom. A Chinese ban on IEEE 802.11 Wi-Fi standards held up the release of a Wi-Fi iPhone 3GS until August 2010.

APPL Under Pressure to Include FM Radio Reception in iPod Touch, iPad and iPhone: The 30 year-old pop axiom that the video killed the radio star doesn’t hold true anymore. iTunes killed the radio star. Just like it killed the CD and the record store. But just as the recording industry has fought tooth and nail to keep its business viable in the digital age, so too is the broadcasting industry readying for battle According to a report by Nate Anderson of Ars blog “Law and Disorder,” the National Association of Broadcasters and musicFirst, a RIAA-backed lobbying group, have been in an ongoing dispute over how royalties are paid for radio broadcasts of music. A new plan that both groups agree on would require radio stations to pay limited performance rights fees to music studios on an annual basis. The agreement also requires the passage of a law requiring all mobile devices include FM radio chips, including North America’s most pervasive media player, Apple’s iPod Touch line. Of Apple’s entire line of mobile products, including the iPhone and iPad, only the iPod Nano includes an FM radio chip. While Apple hasn’t commented on the agreement, the Consumer Electronics Association has condemned the agreement as “a back room scheme� not in out national interest.”

As of this writing, Anthony Agnello did not own a position in any of the stocks named here.

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