Friday Options Recap

Sentiment Stocks slumped on mixed jobs data and renewed worries about European debt problems Friday. Market action was sluggish early after the Labor Department reported that the U.S. economy added 103,000 jobs in December, which was considerably less than the 150,000 increase that economists had expected. However, November numbers were revised up and the unemployment rate fell to 9.4 percent from 9.8 percent. Economists were looking for a decline to 9.7 percent. However, after steady trading at the open, the major averages followed the euro lower through midday. The European currency dipped below 1.28 against the buck after rising yields of Portuguese bonds rekindled worries about the debt crisis. The decline was orderly, however, and the situation had stabilized heading into the final hour. The Dow Jones Industrial Average is down 35 points and 62 points off session lows (11,600). The NASDAQ lost 12. The CBOE Volatility Index (.VIX) is flat at 17.40. Trading in the options market remains active. 8.8 million calls and 7.6 million puts traded so far.Bullish Flow

Big print in Intel (INTC) after an investor buys 32,700 Jan 21 calls at 30 cents each. 119K traded vs. 105K in open interest. Shares are off 14 cents to $20.63 and today’s call buyers might have their sights set on earnings, due Jan 13 (after market). Shares fell 2.7 percent after earnings were last reported on 10/13, but are up 7.2 percent since that time (down 5.8 percent since 12/10).

Human Genome Sciences (HGSI) sees a morning spike and is trading up 44 cents to $25.26 on news the company’s CEO bought 60K shares at $24.16 on Jan 5. The purchase comes ahead of a presentation at an annual confab conference Jan 10 – 13. Meanwhilie, 9,810 calls and 660 puts traded in HGSI. Jan 26 calls are the most actives. 2527 traded (72 percent ask), Jan 25 and 27 calls are seeing interest as well. Implied volatility is up to 40 from 37 yesterday. The company is still awaiting a final FDA decision regarding its Benlysta lupus drug. It was recently postponed to March from late-December.

Bearish Flow

Supervalu (SVU) is falling to session lows in volatile trading Friday morning. Shares are off 54 cents to $8.66 and recent trades include lots of Jan 7.5 puts at the 15-cent ask price. 15,400 now traded. The action comes after the company announced the departure of a Chain Services COO and after Susquehanna cut their price target on the stock this morning.

Implied Volatility Mover

Norfolk Southern (NSC) with relative strength and increasing call activity Friday. Shares notched a new 52-week high and are up $1.05 to $64.85. 11,000 calls and 2,000 puts traded on the railroad operator. The action includes a multi-exchange sweep of 7445 Mar 70 calls at 80 cents when the market was 70 to 80 cents. 7,984 traded vs. 1,145 in open interest. Feb 65 calls are seeing interest as well and night be closing trades after today’s run higher. Implied volatility is up 4.5 percent to 24.5, with earnings slated for Jan 25 (after market).

Unusual Volume Movers

Maximize Income With Dividend Capture

This article is the first part of a series that details the dividend capture strategy.

Most dividend investors are focused on consistent cash flow and modest to intermediate capital appreciation. However, dividend stocks are also the target of another type of investing strategy called the dividend capture. The dividend capture is simple to explain, but can be complex to pull off successfully. This article will focus on:

1. The mechanics behind the dividend capture strategy

2. The reasons why the dividend capture strategy exists

3. Examples displaying price behavior surrounding dividend dates

The Mechanics

A dividend capture is a trading strategy that focuses on buying a dividend paying stock on the last day that you can in order to be paid the dividend (called the cum-date), and selling the next trading day (called the ex-date). In theory, the stock price should drop the same amount as the dividend at the open on the ex-date. Nevertheless, the price hardly ever adjusts exactly to the dividend, and some companies actually display a significant amount of price resilience on a consistent basis.

Before reading any further, be forewarned that a myriad of academics have spent years trying to prove that there are no profits to be made by trading this strategy. However, a lot of smart people working at a lot of prestigious financial firms around the world have run this strategy on a long-term basis; some of which are running their own money alongside their investors.

Why Dividend Capture Strategies Exist

For the most part, a standard dividend capture website or book will make it seem like the strategy is an easy way to retirement. Unfortunately, many opportunistic investors following such guidance have watched their wealth dwindle as they flounder around in the market trying to grasp 25 to 50 basis points a day. There are very good reasons why this strategy is not fool-proof and is not implemented by everyone.

I suggest that three main reasons limit alpha:

• Transaction Costs: Depending on your broker, transaction costs can be steep. Assuming brokerage fees of $10 per transaction ($20 for getting in and out), your return can be whittled down immensely. Unfortunately, even with commissions as low as they are, this alone can be a deal breaker for a small individual investor. For instance, if you dedicated $2,000 to this strategy and found a killer trade of 1%, you would only break even net of fees.

• Tax implications: The dividend capture strategy creates daily taxable events. By trading this strategy, an investor will get cash that will be taxed at their regular income level. The stock will be held for roughly one day, and will therefore not be considered for the qualified dividend rule. For example, if your return for a day (without transaction costs) is 1% and your tax rate is 25%, your after-tax return is 1%*(1-.25) = 0.75%. Of course, this whole issue goes away if you are in a tax advantaged account such as a Roth IRA, or hold the stock long enough to invoke the qualified dividend (expiring with the Bush tax cuts).

• Other Market Participants: Dividend capture strategies can be profitable. To that end, many other investors will attempt to juice as much of a return as they can from it. Some large institutions are happy with only a few basis points a day. I make this point only to highlight that in many cases, the price of a stock will act pretty crazy around the cum- and ex-dividend dates.

Example: Standard Dividend Price Behavior

Many times, you will see a large run-up of the price right up until the cum date closing and a drop into the abyss the morning of the ex-date. As an example, here is a chart of Eli Lilly (LLY), which recently went ex-dividend on November 10th. Click to enlarge:

LLY vs GSK vs SPY: LLY Shows Negative Alpha starting 11/10/2011

As you can see, LLY outperformed both GSK (GlaxoSmithKline; a competitor) and the SPY (S&P 500 ETF; market proxy) up until Wednesday (the cum-dividend date). On Thursday, once LLY was trading without the dividend, it followed the market down until 11:00 AM, but never rebounded like GSK or SPY. Dividend traders are excited to get into a stock (result being outperformance on days leading up to cum date), but want to dump it right on the ex-date (leading to an oversupply of shares, and subsequent underperformance). I’m sure this is not a perfect example, since there may have been significant news developments. However, the general trend is consistent enough to note.

Example: Abnormal (Positive) Dividend Capture Opportunity

Although many stocks follow the same type of price pattern as the LLY case above, some stocks do not. As an example from the same time frame, we will use Manulife Financial (MFC), which also went ex-dividend on November 10th. Click to enlarge:

MFC vs SPY: Bought at highest price after 3:00 PM Cum Dividend.

In this example, the stock price did experience an abnormal drop before the end of the trading day. This is somewhat uncommon, so I’m going to assume that you bought at the high towards the end of the day (3:22 PM @ 12.07). We would hold our shares overnight and sell them the next morning (usually as soon as you could). Most likely, you would sell somewhere between 9:30 AM and 10:00 AM, which would give you a return range of 1.16% to -0.25%.

Consistent Dividend Capture Profits

As stated previously, there are many firms that maintain a dividend capture strategy portfolio. Some are successful and some are not. My next article will focus on how some of these firms analyze, select, and execute their strategies. As well, I will offer an additional framework and turnkey solution that can be useful in your own dividend capture trading.

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

FPA Announces 2010 Board Additions

Four new members have been named to three-year terms on The Financial Planning Association's board of directors. Edward Gjertsen II, vice president of Mack Investment Securities, Glenview, Illinois; Vern Hayden, president of Hayden Wealth Management, Westport, Connecticut; Christopher Rand, a senior financial planner at MetLife's Financial Planning Division in San Diego; and Janet Stanzak, principal and owner of Financial Empowerment, LLC in Bloomington, Minnesota, will all assume their positions beginning January 1, 2010.

As might be expected with the addition of four new FPA board members, four board others will be departing from the board--Michael Busch, Bonnie Hughes, Mark Johannessen, and William Moran.

In other people news from FPA, it was announced that Martin Kurtz, president of The Planning Center, Inc. in Moline, Illinois, has been named as the group's 2010 president-elect. Kurtz will assume that position as Tom Potts is elevated to the presidency, also on January 1

Rounding out the roster of 2010 positions was the announcement that Mary Bell, a member of the FPA National Capitol Area has been named 2010 FPA NexGen president-elect. Bell currently serves as a technical advisor and curriculum development advisor in the Office of Personal Finance, Department of Defense, Office of the Secretary of Defense, Military Community and Family Policy.

What a Belgian Bank Bailout Means for You

Regulators from France and Belgium decided to bail out and bust up Dexia, a totally wayward Belgian bank laid low by the Greek and related debt crises in Europe. It�s official, we have now exported the ultimate export: Too Big to Fail.

This bailout � and it is the first bank bailout in Europe (at least one that is actually being called that) � prompted finance ministers from the euro zone to say the same may need to be done for the entire European system and that, in turn, convinced traders that even terribly run outfits like Dexia of Belgium is too big to fail.

The announcement hit the wires around 3:15 p.m. EDT on Tuesday and the S&P 500 went up 4% in 45 minutes after that vague statement.

The Europeans have been willing to bail out Greece — even those paragons of fiscal virtue, the Germans, who in reality are about as fiscally prudent as Kim Kardashian when meeting with a wedding planner. But unlike Ms. Kardashian, they shun headlines to avoid their own banks from melting down and requiring a bailout.

If Greece defaults � they will, next year � most European banks, including the Germans, will take a huge hit on their balance sheets and will need to raise capital, which will not be available from private investors, so they�ll need to be bailed out. This will anger taxpayers more than bailing out those wayward Greeks. So, to date, the politicians have put off the inevitable, which is more money for the banks.

Belgium�s Dexia has been unable to get short-term funding for operations due to exposure to all sorts of sovereign and other debts. Moody�s warned it would be soon downgrading the bank, and the stock took a hit and regulators and politicians stepped in and announced they would structure a bailout.

And like Caesar conquering the Belgae � this set the man up to do the same in Britain, giving him accolades and large silver mines � the regulators and governments in questions got accolades from markets but instead of getting silver, they need to spend a great deal of silver.

Re-capitalizing the banks in Europe is beginning to end. It will take months, maybe years, and there will be lots of headlines and teeth-gnashing, but it will happen. Right now, the talk is about �guarantees� of debts, and these legacy debts total roughly $17.5 billion dollars. These guarantees are going to end up being cash injections into the bank. And once a structure and some numbers are in place, European leaders will move on and let Greece default.

The longer the delay, the higher the cost. Did I mention the Belgian government guaranteed and otherwise supported Dexia assets to the tune of $121 billion in 2008?

And did I mention that Dexia passed the European bank stress tests this past summer � (everyone thought these tests were a joke, this is proof) � and this problem underscores there is no logical reason investors should believe anything about the safety or health of European banks.

What does this mean? First, more headlines for traders as speculation increases on �whose next?� to be bailed out.

Second, investors now know regulators have no serious understanding of how to properly evaluate the banks or if they do, they are not sharing with the public. They will stay away as they anticipate more problems and future needs for capital that will dilute existing shareholders.

Third, there will be continentwide bank re-capitalizations. Forget guarantees, this really means more capital over time for the banks from the public treasury � first on a name-by-name basis then individual countries will emulate what we did in the U.S. three years ago and re-capitalize all banks in their country as needed.

This will result in taxpayer money going into the banks � and not being put into social welfare and other government programs. This, in turn, means more austerity and a deeper recession there � and here.

But you can start your trading in Europe. The obvious plays are shorting the European banks with long-term puts to get past the headlines, the big dog is Deutsche Bank (NYSE:DB), followed by Banco Santander (NYSE:STD), you can short them here. You cannot short any bank, right now, over there. That regulatory strategy worked well for Lehman and Bear, didn�t it?

 

USB’s Uptrend Should Continue After Wednesday’s Earnings

The second week of earnings season is when the action really starts, with around 90 S&P 500 companies scheduled to report this week.

The big banks typically hog the spotlight in the early going, and we�ve already seen reports from JPMorgan Chase (NYSE:JPM) last week, and Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) this morning.� Results have been mixed, with Citigroup impressing the Street the most so far.

Waiting to step up to the plate this week is U.S. Bancorp (NYSE:USB), which reports on Wednesday after the close.� Analysts expect USB to earn 62 cents per share, a 38% increase from a year ago.

That may sound rather optimistic, but it�s modest compared to the average 50% quarterly growth seen during the past four quarters.� The company has an enviable track record, as it hasn�t missed an estimate in the past 10 quarters.

Performance after recent reports has been solid. The shares have gained ground following four of the past five reports, averaging +4.5% a week after reporting.

The stock is currently in the midst of an uptrend punctuated by higher highs and higher lows.� The shares are up more than 19% off their August low, with the 20-day moving average providing support throughout the rally.� The stock is currently pulling back to the 20-day, which offers an attractive entry point for a pre-earnings trade.

Sentiment toward USB is mixed, with 18 of 33 covering analysts rating the stock a �Buy.�� That tells us there�s enough skepticism available to fuel the rally, should some of these analysts move into the �Buy� camp.

We�re not looking for a huge rally from USB.� But given its recent record of earnings success and performance after reporting, look for the uptrend to continue.� With October options expiring this week, we�re going out to November for this trade to give the rally time to play out.� Buy the USB Nov 24 Calls for around $1.30.

Oil Prices Should Move Higher, Russia on the Radar

Reflecting improved global growth, crude oil prices have increased strongly since the summer. In the paragraphs below, BCA Research argues further gains are to be expected.

We have highlighted for some while that a rotation strategy throughout the commodity complex was likely, based on macroeconomic conditions: ‘First gold, then copper, and finally oil.’ Gold typically benefits most from aggressively anti-deflationary liquidity impulses, especially from the U.S., which bring down real interest rates and the dollar. That backdrop may be fading for now.

Copper benefits when China is booming and/or restocking. We expect the latter, with demand exacerbated over the short-term by the launch of two ETFs (one each for copper and nickel). However, copper prices have surged since breaking above the psychological $4/pound ($8000/tonne) level and may need to consolidate recent gains.

Finally, oil outperforms when the growth impulse broadens to the U.S. This is what appears to be currently underway: Recent economic releases suggest that the recovery is becoming more sustainable. Moreover, physical demand is starting to draw down inventories, even though several OPEC countries have been producing well above quota.

BCA Research concludes that oil and related product prices are well positioned to benefit as firmer economic growth boosts physical demand for petroleum.

Click to enlarge:

Source:BCA Research, December 16, 2010.

As an aside, while Brazil, India and China have been underperforming the U.S. stock market for almost three months, the remaining BRIC member, Russia, has been holding its own, trading solidly above its key moving averages (see price and relative charts below). The strong prices of major Russian exports products such as oil and wheat are undoubtedly helping the Russian Trading System Index and the related Market Vectors Russia ETF (RSX). Although this instrument is probably a bit toppish in the short term, it is one to put on the radar screen, especially once a downward reaction takes place.

Click to enlarge:

Source: StockCharts: com

Disclosure: None

New Zealand Property Market Ups Pace

The NZ February Property Report shows sales volume increased 25% on the year as of last month and 22% in the last three months ending in January. Experts say the surge in sales is leading to more listings coming onto the market as sellers sense an upswing in pricing power and attempt to take advantage of higher values; however, it remains to be seen whether buyers will respond with increased demand. The gains have been concentrated in main cities while provincial areas continue to experience low demand. Experts attribute this to lower supply in more populous regions, with Canterbury and Central North Island reporting record highs. For more on this continue reading the following article from Property Wire.

The property market across New Zealand has become more active in the past nine months and in January alone sales were up 25% on a year ago while the final three months of 2011 saw sales up 22%.

The February NZ Property Reports also shows that with this increasing demand the market as reflected from the supply side has been slow to respond, that is until February when listings were seen to come onto the market in a strong surge.

In absolute terms the level of new listings at 13,459 is up 18% on February last year and 14% up on a seasonally adjusted basis from January.
 
‘This new rush of listings comes with a higher price expectation of sellers, eager to capitalize on what they see as a strong property market, the test will come as to whether these price expectations result in higher selling prices or if the level of buyer demand is prepared to meet these expectations,’ said director Alistair Helm.

‘As has been noted before, this pressure in the market caused by a shortage of listing is very focused in the main cities with provincial regions still not witnessing anything like the level of buyer demand or activity as witnessed in the cities,’ he explained.

‘This new surge of listings appears in the main to be easing some of the pressure as measured by inventory levels with easing in those areas of the country feeling the shortage most significantly in recent months providing some comfort for those buyers who are eagerly waiting for the right house to come to market,’ he added.

The seasonally adjusted truncated mean asking price of $426,575 for all new listings in February rose by 2.1% from January. This is a new record level for asking price up from the prior peak of $425,936 reached in October last year.

The level of unsold houses on the market at the end of February, 47,058, was up marginally as compared to January at 46,976, as measured on a seasonally adjusted basis. This total includes houses, apartments and lifestyle properties on the market.

The national, seasonally adjusted, truncated mean asking price expectation among sellers rose significantly to a new high of $426,575 in February.

Following the new record high for the national figure of asking price, both Canterbury and the Central North Island posted record highs. In the case of the Central North Island this is the highest asking price since October 2008, for Canterbury the pressure of listings shortages continues to put pressure on asking price.

Around the rest of the country 11 regions showed rises with Nelson the largest rise of 15.3% as compared to prior month on a seasonally adjusted basis. A total of eight regions reported seasonally adjusted falls with the West Coast and Taranaki posting large falls of 8.4% and 7.3% respectively.

As has been seen in recent months the main three metro centres of Auckland, Wellington and Canterbury reported continuing rises in asking price.

‘The change which has been witnessed over the past month has been to a more balanced market in many regions. As judged by the relative inventory to long term average, seven regions are identified as being sellers markets with just four being buyers markets, leaving the remaining eight as balanced markets favouring neither one party over the other,’ said Helm.

The most extreme market pressure continues to be felt in the Canterbury and Auckland markets, but also in the Waikato and the West Coast, all of which are seeing levels of inventory when judged on rate of sale basis well below long term average.

A noticeable change in February was the fact that in all three major cities the actual inventory level in weeks of equivalent sales and physical inventory did rise thereby showing that the market is responding the demand and shortage of supply.

Best Stocks To Invest In 2012-2-13-3

 

 

Exelixis to receive $12M upfront payment and be eligible for potential development, regulatory and commercial milestones, plus royalties

SOUTH SAN FRANCISCO, Calif — (CRWENEWSWIRE) — Exelixis, Inc. (NASDAQ:EXEL) today announced that it has granted to Merck, known as MSD outside of the United States and Canada, an exclusive worldwide license to its PI3K-delta research and development program, including XL499, the company�s most advanced preclinical PI3K-delta inhibitor and other related compounds. Under the agreement, Merck will have a worldwide exclusive license and have sole responsibility to research, develop, and commercialize compounds originating from the program.

Merck will make an upfront payment of $12 million to Exelixis and Exelixis will be eligible for potential development and regulatory milestone payments for multiple indications of up to $239 million. Exelixis will also be eligible for potential combined sales performance milestones and royalties on net-sales of products emerging from the agreement. Milestones and royalties are payable on compounds emerging from Exelixis� PI3K-delta program or from certain compounds that arise from Merck�s internal discovery efforts targeting PI3K-delta during a certain period.

�PI3K-delta is an interesting target with potential utility in a number of therapeutic areas, including inflammation and oncology,� said Michael M. Morrissey, Ph.D., president and chief executive officer of Exelixis. �Our PI3K-delta program builds on our prior interest in the PI3K family, which led to the advancement of pan-PI3K inhibitors into clinical development for cancer. Merck�s global presence and significant resources make it the ideal organization to carry the PI3K-delta program forward. At the same time, this agreement provides Exelixis with resources for the continued development and potential commercialization of our lead compound, cabozantinib, which is in late-stage development for medullary thyroid and prostate cancers.�

�Exelixis has established a strong reputation for innovation in the development of targeted kinase inhibitors,� said Don Nicholson, Ph.D., Vice President and Head of Worldwide Discovery, Respiratory and Immunology Franchise, Merck Research Laboratories. �Collaborations like this are an important part of our strategy as we seek new ways to address unmet needs in inflammatory disease and oncology.�

PI3K-delta is a member of the Class 1 family of phosphoinositide-3 kinases and is predominantly expressed in cells of the immune system. Activation of PI3K-delta occurs in response to a variety of immune cell stimuli, and inappropriate PI3K-delta activation is thought to contribute to multiple inflammatory and allergic disorders, including rheumatoid arthritis and allergic asthma. Selectively targeting PI3K-delta has also shown potential in the treatment of certain lymphomas.

About Exelixis

Exelixis, Inc. is a biotechnology company committed to developing small molecule therapeutics for the treatment of cancer. Exelixis is focusing its proprietary resources and development efforts exclusively on cabozantinib, its most advanced solely-owned product candidate, in order to maximize the therapeutic and commercial potential of this compound. Exelixis believes cabozantinib has the potential to be a high-quality, differentiated pharmaceutical product that can make a meaningful difference in the lives of patients. Exelixis has also established a portfolio of other novel compounds that it believes have the potential to address serious unmet medical needs. For more information, please visit the company’s web site at www.exelixis.com.

Forward-Looking Statements

This press release contains forward-looking statements, including, without limitation, statements related to: the payment to Exelixis of an upfront payment; Exelixis’ potential receipt of development, regulatory and sales milestones, as well as royalties on sales of products; the clinical, therapeutic and commercial potential of the PI3K-delta program; the belief that Merck is the ideal organization to carry the PI3K-delta program forward; the belief that the agreement will provide resources for the continued development and potential commercialization of cabozantinib; and the clinical, therapeutic and commercial potential of cabozantinib. Words such as “will,” �eligible,� �potential,� �emerging,� �arise,� �provides,� �continued,� and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon Exelixis’ current plans, assumptions, beliefs and expectations. Forward-looking statements involve risks and uncertainties. Exelixis’ actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation: risks related to Exelixis’ dependence on the activities of Merck under the described agreement, the potential failure of the PI3K-delta program or cabozantinib to demonstrate safety and efficacy in clinical testing; the therapeutic and commercial value of the PI3K-delta program and cabozantinib; Exelixis’ ability to conduct clinical trials of cabozantinib sufficient to achieve a positive completion; the sufficiency of Exelixis’ capital and other resources; uncertain timing and level of expenses associated with the development of cabozantinib; the uncertainty of the FDA approval process; market competition; and changes in economic and business conditions. These and other risk factors are discussed under “Risk Factors” and elsewhere in Exelixis’ quarterly report on Form 10-Q for the quarter ended September 30, 2011 and Exelixis’ other filings with the Securities and Exchange Commission. Exelixis expressly disclaims any duty, obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Exelixis’ expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

Source: Exelixis, Inc.

Contact:
Exelixis, Inc.
Charles Butler, 650-837-7277
Vice President, Investor Relations and Corporate Communications
cbutler@exelixis.com

 

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY!

Top Stocks For 7/19/2012-5

Dr Stock Pick HOT News & Alerts!

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FREE Daily Stock Alerts From DrStockPick.com

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Thursday March 18, 2010

DrStockPick.com Stock Report!

MBST, Mobile Star Corp., MBST.OB

MBST has developed a free-standing entertainment vending machine that enables an individual to digitally record his or her voice singing to hundreds of songs. MBST’s patented karaoke technology utilizes a proprietary digital-media software platform, and professional-grade hardware to publish a high quality CD of the performance.

�American Idol� is one of the most popular shows in the country.

Every year, tens of thousands of people from across the nation audition for a shot at stardom.

Around the world, we can find many singing reality shows.

A few samples include:

Indian Idol (India), Britain’s Got Talent (many auditions are singers), Operacion Triunfo (Spain), EuroVoice (the new Music Contest in Europe, with singers from any country in Europe, Turkey and Israel), La Academia (Mexico) and many more.

Millions of people would like the celebrity that comes with being a professional singer.

Each one of those Millions of people represents a potential client for MBST�s Mobile Star. Let us explain why:

Like we stated before, MBST�s coin-operated, free-standing karaoke machine captures their performance and publishes a professionally edited digital CD that they can take with them.

What better judge than themselves? It’s always better know the truth in private.

But, it’s not only for people who wants to be professional singers. It�s for everybody! It’s all in fun, but the point is, MBST�s karaoke machine allows you to feel like a professional recording artist.

MBST�s Mobile Star makes singing enjoyable. You don�t have to worry about being on key, just enjoy yourself. Singing can be a beautiful stress reliever that just about anyone can benefit from.

The coin-operated cabinets will be located in popular recreation areas, from shopping malls to bars and theme parks.

And MBST’s Mobile Star has proven its HUGE Potential.

Recently MBST successfully completed a 30-day pilot of its Mobile Star in New York, where entertainment seekers used it frequently, keeping the vending machine occupied continuously throughout the pilot.

Revenues collected by MBST�s Mobile Star during the pilot were greater than anticipated, and proved extremely competitive against many of the most popular entertainment coin-operated machines.

The pilot confirmed the quality of the vending machine and demonstrated greater return on investment potential than initially anticipated (the strong revenue potential is measured in terms of return on investment rate for the machine operator).

At the same time, the pilot was closely monitored by Apple Industries’ professional team.

MBST reported that it has reached a preliminary distribution agreement with Apple Industries, one of North America�s premier manufacturers and distributors of coin-operated electronic entertainment.

Apple Industries plans to begin marketing the machine in the second half of 2010 and expects to distribute over 1,000 units in the first 12 months.

Apple Industries is a premiere manufacturer and distributor of coin operated electronic entertainment, representing some of the finest vending manufactures in the World.

As you�ve just read MBST�s Mobile Star karaoke machine has a TREMENDOUS Market Opportunity worldwide.

Each vending machine is expected to generate over $30,000 in gross annual revenues

So, with the kind of product MBST�s Mobile Star is and being distributed by Apple Industries well-established marketing channels, you can imagine the Potential HUGE numbers that MBST could book in the future.

You are on time to include MBST on your watch list.

Keep a close eye on MBST from now on!!

More about MBST at www.themobilestar.com

Forge a Profit With AK Steel

In a time when everybody on Wall Street seems to be focused on high-flying social-media companies like Facebook, LinkedIn (NYSE:LNKD) and Groupon (NASDAQ:GRPN), it�s easy for companies in more �boring� industries to get overlooked. After all, who cares about fertilizers, paper or, heaven forbid, steel, right? If you�re interested in investing in value stocks that are poised to break out, you should.

If Ayn Rand showed us anything in her best-selling novel Atlas Shrugged, it is that the backbone of any industrialized economy is built with steel. America is built on it, China is built on it, and so is the rest of the emerging global economy, and steel producers like AK Steel (NYSE:AKS) stand to benefit as the global economy regains its footing.

U.S. steel industry stocks have taken a bit of a beating since the midsummer bearish plunge in stock prices, but rising auto sales and increasing durable goods purchases should give AKS the boost it needs to jump up and through the $9 neckline of the inverted head-and-shoulders pattern that has been forming on the stock since early-August (The stock is currently at around $8.75.)

Consumers are finally starting to buy new cars and trucks in numbers that are getting investors excited. According to Autodata, auto sales jumped 14% in November, bringing the seasonally adjusted annual sales rate up to 13.63 million. That�s a lot of cars and trucks.

And what are all of those cars and trucks made of? Steel. Sure, cars may not be as heavy as they used to be � where have all the fins gone? � but the skeleton of every car or truck on the road today is still made of steel. In fact, AK Steel sends about one-third of the steel it produces to the automotive industry. So as consumers start demanding more and more cars and trucks, car and truck manufacturers are going to be demanding more and more steel.

Cars and trucks aren�t the only big-ticket items consumers are buying these days. According to the U.S. Census Bureau, durable goods orders are up more than 9% this year compared to last. That means consumers are buying more refrigerators, washers and dryers and other large appliances and businesses are buying more heavy equipment and industrial machinery.

And what are all of those large appliances and pieces of heavy equipment and machinery made of? Of course you know the answer — steel. AK Steel sends another one-third of the steel it produces to producers of durable goods, and demand for that steel continues to grow.

Since its 50% drop from $16 to $8 in late-July, early-August, AKS has been consolidating in a classic reversal pattern: an inverted head-and-shoulders pattern.

This is characterized by a single resistance level � which forms the neckline of the pattern � and three distinct support levels � which form the left shoulder, the head and the right shoulder of the pattern. The support level that forms the head is the lowest of the three support levels, and the two support levels that form the two shoulders are typically just about level with each other.

In the AKS chart below, you can see the stock formed the left shoulder in August, the head at the end of September and the right shoulder in November � with the neckline running across that entire time span.

Once the stock breaks up and through the neckline, it doesn�t have much resistance between that level at $9.50 and the $16 price point from where the stock started to fall this summer. We expect the stock to break up and through the neckline of the inverted head-and-shoulders pattern and continue higher until it reaches the $14 to $17 trading range it was channeling in earlier this year.

If you�re interested in trading options on AKS in anticipation of the breakout higher and through the neckline of the inverted head-and-shoulder pattern, you need to make sure you give yourself plenty of time before expiration. Don�t get caught with a looming expiration date at the same time you are waiting for a breakout above the neckline.

If you want to decrease the amount of money you have to pay up front for the time value you are buying, you might want to consider entering a bull-call spread with an at-the-money, or slightly out-of-the-money, strike price for the long leg and an out-of-the-money strike price just below or at the target price for the short leg.

 

STOCK Act Doesn’t Bar Lawmakers From Trading on Their Knowledge

Should lawmakers refrain from taking actions in their financial portfolios when they have information not yet known by the public?

That is the question at the heart of a Washington Post analysis published Sunday which found that 19 Democrats and 15 Republicans, many in leadership positions, adjusted their portfolios 166 times within two business days of contacts with Federal Reserve or Treasury officials.

The Post’s lengthy analysis found no smoking guns. For example, it found no evidence of insider trading and said that the portfolio moves it did discover were permitted under congressional ethics rules and the STOCK Act, which Congress passed this year. Under that law, lawmakers and senior congressional staffers cannot use confidential information for their personal benefit.

But the Post points out that Congress has imposed stricter rules on executive branch officials, such as the chairman of the Fed or secretary of the Treasury, who cannot invest in the stock of financial institutions.

So the main takeaway of the Post article is that, even following the passage of the STOCK Act, lawmakers can still take actions that would be prohibited for Treasury Secretary Tim Geithner or Fed Chairman Ben Bernanke. In other words, the STOCK Act does not prevent lawmakers from trading in stocks of companies they oversee or in shifting their portfolios after meeting with senior Fed or Treasury officials.

Readers can judge for themselves the scenarios the Post describes. A typical one involves Kent Conrad (D-N.D.), chairman of the powerful Senate Budget Committee. At 4:30 p.m. on Aug. 13, 2007, Conrad met with then-Treasury Secretary Hank Paulson at a time when the market was plunging in reaction to the first revelations of the subprime mortgage crisis.

The day of the meeting with Paulson, Conrad shifted some $150,000 to $300,000 invested in three mutual funds in his wife’s 401(k) account (congressional rules allow for ballpark rather than precise amounts) to safe money-market accounts.

The move proved savvy; countless stories at the time related the depletion of assets in 401(k) account invested in stocks. But Conrad vigorously denied any connection between the meeting with Paulson and his portfolio moves.

Quotes the Post: “The decision that my wife and I made with our financial advisers to diversify into lower-risk investments had everything to do with what was happening that was on the front pages over every paper, including yours. His call to me had absolutely nothing to do with those issues.”

Other lawmakers, with quite similar stories, told the post that any portfolio shifts occurring after meetings with senior administration officials were purely “coincidental.”

A number of issues would seem to emerge from the fact scenarios reported by the Post.

First, it can be very difficult to ascertain whether lawmakers’ portfolio moves following meetings with senior administration officials were mere coincidences. Do lawmakers therefore have a duty to refrain from actions because of the mere appearance of impropriety?

Secondly, judicial rules allow for judges to recuse themselves in areas where they have some personal stake. How is it that lawmakers can trade stocks of companies in industries they oversee? Can they serve in the public’s best interest where they may hve personal interests pulling them in one direction?

Third, if lawmakers do in fact make sell decisions based on unequal information not available to all market participants, when does that sale rise to the level of fraud? Normally, a buyer in such a situation would have been a fraud victim. But what if the thrust of that information genuinely was “on the front pages over every paper?”

What do financial advisors think of the ethics of lawmakers making portfolio decisions in the course of their work as law and policy are set?

S&P Debt Downgrade Ramps Up Pressure to Resolve Budget Crisis

When Standard & Poor's Rating Services Inc. yesterday (Monday) downgraded its outlook on U.S. debt to "negative," it sent the U.S. government a simple message: Deal with your deficits.

The rating agency expressed concern that continued dithering in Washington over how to address the $14 trillion-plus debt and ever-growing annual budget deficits would "render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA' sovereigns" - a hint the United States could lose its AAA rating.

"More than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures," wrote S&P credit analyst Nikola G. Swann.

S&P said it will maintain its AAA credit rating on U.S. bonds for now. However, the outlook was downgraded from "stable" to "negative," meaning the firm sees a one-in-three chance that it will lower the rating within two years. The agency said it foresees a significant risk that the political battles over how to fix the nation's fiscal woes could drag on until after the 2012 elections.

"This new warning highlights the need for the U.S. to take better control of its fiscal destiny if it is to avoid higher borrowing costs and maintain its central role at the core of the global economy," Mohamed El-Erian, chief executive at PIMCO, told Reuters.

Markets reacted swiftly to the news. The Dow Jones Industrial Average plunged more than 200 points in the morning, with most major U.S market indices slipping about 1.5%. Gold prices rose 1% to $1,498 an ounce before sliding back slightly.

By midday, yields of two-year Treasuries fell five basis points to 0.65%, while the 30-year yield rose three basis points to 4.50%.

"The back end of the curve reacts clearly to inflation expectations and credit concerns, and this is clearly a credit concern," Ray Humphrey, senior portfolio manager for the TIPS, government and non-dollar sectors at Hartford Investment Management, told Bloomberg News. "It's the 30-year that definitely is going to take the brunt of this rating action."

The S&P report acknowledged the two budget plans currently on the table in Washington, from U.S. President Barack Obama and Rep. Paul Ryan, R-WI, but noted that the "gap between the parties remains wide."

Members of the Obama administration disagreed with S&P's grim assessment, offering assurances the two sides can and will cooperate on solving the country's budget problems.

"We believe S&P's negative outlook underestimates the ability of America's leaders to come together to address the difficult fiscal challenges facing the nation," Mary Miller, assistant U.S. Treasury secretary for financial markets, said in the statement.

Austin Goolsbee, chairman of the Council of Economic Advisors, gave several television interviews over the course of the day saying that President Obama and Republican Congressional leaders are "pretty close" in the amount they seek in deficit reductions - about $4 trillion.

"I believe we can get to some long-term deficit reduction that would address these issues that S&P's discussing," Goolsbee told MSNBC.

Goolsbee also pointed out that Moody's Corporation (NYSE: MCO) last week retained its positive outlook on U.S. sovereign debt, saying it viewed President Obama's plan as a favorable development.

Republican leaders, however, seemed to verify S&P's concerns by issuing distinctly partisan statements.

S&P's announcement is a "wakeup call" to "stop our nation from digging itself further into debt," House Majority LeaderRep. Eric Cantor, R-VA, told Bloomberg. "House Republicans will only move forward on the president's request to increase the debt limit if it is accompanied by serious reforms that immediately reduce federal spending."

Ryan, the architect of the Republican plan, said in a statement, "House Republicans took action last week to chart a new course by passing a budget that lifts our crushing burden of debt and puts our economy on the path to prosperity. By contrast, the President's budget locks in Washington's recent spending spree, adds $13 trillion to the debt over the next decade, and accelerates our nation toward a fiscal crisis."

Then again, in challenging U.S. politicians S&P may nudge them closer to a deal.

"By saying there is a ‘material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013, S&P actually increases the chances that just such an agreement will be reached," Fidelio Tata, head of U.S. interest rate strategy at Société Générale (PINK: SCGLY), told The Financial Times.

"The best way to make Washington actually do something is to tell politicians there is something they cannot do," said Tata.

News and Related Story Links:

• MarketWatch:
  Text of S&P's downgrade of U.S. ratings outlook
• MarketWatch: Rep. Ryan: S&P action shows danger of huge debt
• Reuters: U.S. credit outlook cut by S&P on deficit fears
• Financial Times: Capital Markets: S&P cuts US credit outlook to ‘negative'
• Bloomberg News:
  Goolsbee Says Negative Outlook for U.S. Doesn't Deserve `Too Much Weight'
• Bloomberg News: Gap Between U.S. 2-, 30-Year Yields Widens to Most in 5 Weeks on S&P Move
• Money Morning: Obama Deficit Plan Sets Stage for Capitol Hill Budget Debate
• Money Morning: GOP Spending Cuts Fuel Readers' Federal Debt Debate
• Money Morning: President Obama Tackles Deficit Reduction and Debt Ceiling as Budget Battle Continues
• Money Morning: The Ugly Debt Ceiling Debate
• Money Morning: Washington's Debt-Ceiling Debate - A Political Sham

All Hail Caesar! Casino Company Jumps in Debut

Caesars Entertainment (CZR) went public in an unusual stock offering today, and shares are already way above the offering price. In fact, in midday trading they were trading hands at $13.91 per share, 57% above the $9 offering price.

But the dynamics of this odd IPO make it difficult to determine just how successful it has been.

Private equity firms Apollo Global Management and TPG Capital took the company private in 2008. In the IPO today, Caesars sold 1.8 million shares, or about 1.4% of the company, on the public market. Those shares were basically granted to the company by private investors who wanted to gain some liquidity for the shares they got at the time of the leveraged buyout.

At the current share price, the company’s equity value is below $2 billion, versus about $5.4 billion when the company first tried and failed to go public in 2010.

For more on this unique IPO, read Andrew Bary’s article from yesterday on Barrons.com.

4-Star Stocks Poised to Pop: Fluor

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, engineering services specialist Fluor (NYSE: FLR  ) has earned a respected four-star ranking.

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

Fluor facts

Headquarters (founded)	Irving, Texas (1912)
Market Cap	$7.8 billion
Industry	Construction and engineering
Trailing-12-Month Revenue	$24.6 billion
Management	Chairman/CEO David Seaton CFO Biggs Porter
Return on Equity (average, past 3 years)	18.1%
Cash/Debt	$2.2 billion / $532.8 million
Dividend Yield	1.4%
Competitors	Jacobs Engineering Group Shaw Group URS

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

On CAPS, 97% of the 1,310 members who have rated Fluor believe the stock will outperform the S&P 500 going forward. �

Just yesterday, one of those Fools, MagicDiligence, touched on the several tailwinds working in Fluor's favor: "Refinery demand in U.S., infrastructure spending critical in both U.S. and worldwide, continued high commodity prices, winning gov't contracts it didn't compete on before. Stock trades well below historical multiples."

If you want market-thumping returns, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future. Of course, despite a strong four-star rating, Fluor may not be your top choice.

We've found another stock we are incredibly excited about -- excited enough to dub it "The Motley Fool's Top Stock for 2012." We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won't be here forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

Why Dividends Will Continue to Dominate in 2012

The following video is part of our "Motley Fool Conversations" series, in which industrials editor/analyst Isaac Pino discusses topics across the investing world.

In today's edition, Isaac reflects on the recent earnings season and provides an outlook for dividend stocks in 2012. After analyzing the state of corporate profits and the incredible amount of cash on balance sheets, Isaac believes blue-chip stocks will continue to funnel dividends to shareholders in the year ahead. The Federal Reserve's recent announcement only reinforces his view. In particular, the high-yielding utilities sector looks promising with attractive opportunities in First Energy, Southern, and Exelon.

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Utilities aren't the only companies paying shocking dividends. In fact, the Fool has compiled a special free report outlining our 11 top, dependable, dividend-paying stocks. It's called "Secure Your Future With 11 Rock-Solid Dividend Stocks." You can access your complimentary copy today at no cost! Just click here to discover the winners we've picked.

Why Greece Will Default

What is clear from the Greek situation is that Greece faces a tough battle to reign in its high budget deficit. The best example of what is in store comes via the note from Win Thin which I highlighted yesterday. He pointed to only two cases where a primary budget deficit has been reduced as much as Greece would have to reduce its budget deficit. The fact that they can do so over 5 years (2010-2014) instead of three (2010-2012) is helpful. But, they have only enough money to last them through one and a half years of deficits as most prognosticators put the net new borrowing at 65-80 billion euros for this coming year and have received 110 billion euros.

I voted for default (and restructuring). I don’t think the Greeks can make it and for one good reason: the economy. First and foremost, the European economy may be improving but it is still weak. As Win Thin pointed out, a large reduction of the primary deficit requires a robust economic outlook. However, the austerity measures that all European nations are taking to reign in their budget deficits reduces consumer demand across the Eurozone. That makes for a weak economic outlook in the Eurozone. I laid this out in March regarding the situation in Spain, when I said:

If Spain is forced to run austerity measures as seems likely, in stage two, this shifts their government deficit markedly down. Given Spain’s poor labour competitiveness, sticky wage prices and inability to depreciate the currency, all of the adjustment falls onto the private sector in the form of reduced net savings (which could include larger debt burdens). But, the thing to realize is that total GDP in Spain is lower in this scenario, which means total imports are lower, which means Germany’s total export volume is lower. This is a deflationary scenario.

I know for a fact that Germany and Austria (another net exporter) are already cutting back their deficits, Austria via higher taxes. We see Ireland, Spain, Greece and Portugal doing ‘austerity’ measures to rein in government deficits too. Meanwhile, having seen the financial sector balances chart, you know that austerity means higher debt burdens in those countries, but also lower exports in Germany, which is also cutting back its own Government spending. So, austerity not only kills the Spanish economy and makes it prone to a debt deflation scenario, it also hurts the German export economy while they themselves are cutting back on government deficits.

What you have here is a perfect recipe for a double dip and a serious economic nightmare. Unless Germany can get its consumers to start spending more, the Eurozone is going to double dip.

Read more

So, there is no excess consumer demand coming from within the Eurozone. And given what I have detailed in two recent posts (see here and here), the excess consumer demand in the U.S. is unsustainable. The only way that Greece could get around this problem is through exports, which requires currency depreciation or consumer exports to the BRICs which are actually growing at a good clip.

We know that U.S. President Obama wants to export his way out of weakness. A competitive currency depreciation by the Eurozone would not sit well with U.S. policymakers even if the Europeans could pull it off. Another potential avenue out of this problem is via an increase in tax compliance by the wealthy. If the government can raise more tax revenue without hurting the domestic economy, this could be Greece’s saving grace.

I say ‘hats off’ to the Europeans for executing their Hail Mary pass. They have put something workable together and that has put a floor under Eurozone sovereign debt yields. The ECB has even gone along for the ride. The European Central Bank has decided to junk up its balance sheet with subprime sovereign debt collateral much as the Fed has done with US mortgage subprime debt.

Maybe we will see a masterful tax-raising plan that doesn’t crimp growth or Eurozone consumer demand firing on all cylinders. We can always hope. But, the bail out is really just the blind hope kicking the can down the road. It simply is not credible to expect austerity and robust growth at the same time or even one after the next. Something has to give, either austerity or growth or both.

Putin to Seek Presidency in 2012

Russian Prime Minister Vladimir Putin will seek the president's job in next year's elections.

The current president, Dmitry Medvedev, Saturday backed his predecessor's bid, ending months of speculation about whether he or Putin would run.Putin left the president's office in 2008 because of term limits and became Medvedev's prime minister.Putin's United Russia Party has approved his proposal that the two should switch jobs, with Medvedev becoming prime minister if Putin wins the 2012 elections, the Associated Press reported. The election is scheduled for March 4.If Putin is successful -- which is highly likely given his popularity -- he could conceivably rule Russia until 2024. That's because in 2012, the country's presidential terms will be extended from four years to six. The constitution allows a president to serve two consecutive terms.>To order reprints of this article, click here: Reprints

Roth Change Strategy Can Lower Your Tax Bill

If you have an IRA you probably know about the concept of a Roth IRA conversion -- in which you take distribution of a portion of your IRA and transfer that money directly into your a Roth IRA, paying tax as you go. Then the Roth IRA can continue to grow tax free (as Roth IRAs do) and you'll never owe tax on your qualified distributions.

In addition, if the investments you've made in the Roth IRA have lost money, before Oct. 15 of the following year you have the opportunity to recharacterize your Roth conversion. If you didn't recharacterize, you'd be paying tax on a conversion amount much lower now if there was a downturn in the investments, so your average tax rate is much higher than you'd hoped. By recharacterizing, you can undo the conversion or a part of it.

Get alerts before Link and Cramer make every trade

I had a question raised to me recently about using the recharacterization option to your advantage. Here's the gist of the strategy: If you have an IRA worth, say, $100,000, you could convert it into two Roth IRAs, one half invested in a 2x leveraged bull-oriented investment and the other in a 2x leveraged bear-oriented investment.If the two investments go flat for the year, your conversion could be recharacterized with no tax consequence. If the market went up by 10%, though, your bear holding would be down 20% (being leveraged 2x) and the bull holding would be up 20% (vice versa had the market dropped). This would give you the opportunity to recharacterize only the bear holding, leaving you with a traditional IRA worth $40,000. Your Roth IRA would be worth $60,000, although you would have to pay tax only on the original $50,000 converted at a 25% tax rate that works out to $12,500 in tax, which would only be 20.83% on the Roth IRA.

Perhaps that rate isn't low enough for you, though. Maybe you need to ensure that the tax rate is even lower, say, 15% or less. Following the example, you'd need to see an increase of 66% or more in your holdings, which would equate to a 33% move in the market (for your leveraged holdings, one way or the other). If the market doesn't move in the amount you hoped, you can just recharacterize the entire conversion, nothing lost.

You probably want to pull your "winnings" off the table and put the remaining Roth IRA into a safe (or safer) investment than the leveraged investments chosen before, such as a balanced fund or even straight bonds.

Now you can pull the same maneuver in the following year with whatever is left in the traditional IRA, splitting it just as before. Over time you should wind up with a significant Roth IRA with a lower tax cost.This is not a huge payoff strategy -- you'll be losing money in your traditional IRA holdings each year, guaranteed. Your net position would be the same (minus the tax).After the first year of the example, assuming a 20% gain you'd have $60,000 in the Roth and $40,000 in the traditional IRA, having paid $12,500 in tax. Second year, same result and you'd have $84,000 in the Roth and $16,000 in the traditional IRA, paying $5,000 more in tax. Third year, again the same 20% gain resulting in a total of $93,600 in the Roth, $6,400 in the trad, paying $2,000 in tax. And so on, until the amount gets too small to work with any more.The end result is that all of this tallies up to the same $100,000 you started with, having paid tax of just less than $21,000 versus the original $25,000 you would have paid. Holding out for a higher return from the strategy would yield a lower tax rate overall.RELATED STORIES: >>Recharacterize Your Roth IRA Conversion>>Don't Forget Social Security in Roth Conversion>>Stretch IRA Is Quite a VehicleFollow TheStreet.com on Twitter and become a fan on Facebook.

>To order reprints of this article, click here: Reprints

What Tim Hortons Does With Its Cash

In the quest to find great investments, most investors focus on earnings to gauge a company's financial strength. This is a good start, but earnings can be misleading and incomplete. To get a clearer understanding of a company's ability to earn money and reward you, the shareholder, it's often better to focus on cash flow. In this series, we tear apart a company's cash flow statement to see how much money is truly being earned, and more importantly, what management is doing with that cash.

Step on up, Tim Hortons (NYSE: THI  ) .

The first step in analyzing cash flow is to look at net income. Tim Hortons' net income over the last five years has been impressive:

�	2011	2010	2009	2008	2007
Normalized Net Income	$344 million	$322 million	$320 million	$302 million	$257 million

Source: S&P Capital IQ. *In Canadian dollars.

Next, we add back in a few non-cash expenses like the depreciation of assets, and adjust net income for changes in inventory, accounts receivable, and accounts payable -- changes in cash levels that reflect a company either paying its bills, or being paid by customers. This yields a figure called cash from operating activities -- the amount of cash a company generates from doing everyday business.

From there, we subtract capital expenditures, or the amount a company spends acquiring or fixing physical assets. This yields one version of a figure called free cash flow, or the true amount of cash a company has left over for its investors after doing business:

�	2011	2010	2009	2008	2007
Free Cash Flow	$210 million	$393 million	$282 million	$201 million	$218 million

Source: S&P Capital IQ.

Now we know how much cash Tim Hortons is really pulling in each year. Next question: What is it doing with that cash?

There are two ways a company can use free cash flow to directly reward shareholders: dividends and share repurchases. Cash not returned to shareholders can be stashed in the bank, used to invest in other companies and assets, or to pay off debt.

Here's how much Tim Hortons has returned to shareholders in recent years:

�	2011	2010	2009	2008	2007
Dividends	$110 million	$90 million	$73 million	$66 million	$53 million
Share Repurchases	$572 million	$243 million	$130 million	$169 million	$178 million
Total Returned to Shareholders	$683 million	$333 million	$203 million	$235 million	$231 million

Source: S&P Capital IQ.

As you can see, the company has repurchased a decent amount of its own stock. That's caused shares outstanding to fall:

�	2011	2010	2009	2008	2007
Shares Outstanding (millions)	162	174	180	183	188

Source: S&P Capital IQ.

Now, companies tend to be fairly poor at repurchasing their own shares, buying feverishly when shares are expensive and backing away when they're cheap. Does Tim Hortons fall into this trap? Let's take a look:

Source: S&P Capital IQ.

It doesn't look terrible, but things could get dicey. Tim Hortons waited until shares boomed to an all-time high before deciding they were cheap enough to buy in big amounts. With shares trading at 22 times earnings, the current buyback binge might very easily end up looking too optimistic down the road.

Finally, I like to look at how dividends have added to total shareholder returns:

Source: S&P Capital IQ.

Shares returned 73% over the last five years, which increases to 81% with dividends reinvested -- a nice boost to top off already high performance.

To gauge how well a company is doing, keep an eye on the cash. How much a company earns is not as important as how much cash is actually coming in the door, and how much cash is coming in the door isn't as important as what management actually does with that cash. Remember, you, the shareholder, own the company. Are you happy with the way management has used Tim Hortons' cash? Sound off in the comment section below.

• Add Tim Hortons to�My Watchlist.

Don’t Fall Victim to the Open

Stocks opened almost 200 points higher yesterday, answering the question, �What would the market do if good news occurred?� The good news that caused the big opening again had its source inEurope, as their appeared to be an agreement on how to handle the complex financial issues that threaten to destroy the EU. But when it was clear that not all members were in agreement, theU.S.stock markets gave back a substantial amount of the initial gains, but still retained an increase of about 1.2%.

Volume on the NYSE totaled 1.2 billion shares, and the Nasdaq crossed almost 600 million shares. Advancers led decliners by 4-to-1 on the Big Board and 3-to-1 on the Nasdaq.

Yesterday I provided charts from October 2008, illustrating how the high volatility of a typical bear market rally could dissuade most investors to give up their short positions and go to the long side only to be whipsawed with losses on both short and long positions.

The above chart of the S&P 500 shows that the next area of resistance to the current bounce is at the 50-day moving average at 1,208 — that�s over 7% from Thursday�s close. If a trader had taken a position in a 3x inverse index ETF on Thursday�s close at 1,130 and held the position through yesterday�s close at 1,175, his current loss is about 12%. And if he continues to hold until the rally reaches the first resistance, he would be under water by over 20% and no doubt thinking of selling, going long, or even worse, doubling up.�

The correct action of course is to stop out the position at a small loss and come back into the market at a higher level. Traders must accept the fact that bear markets are characterized by very high volatility, and so even if they have the direction right they will often have the timing wrong.

Trading tip: Avoid taking positions on the opening trade since high volatility often creates gaps at the open that are most often followed by a move back to a standard mean. Also, traders should be very cautious of holding highly leveraged ETFs overnight, especially under conditions where news from countries in other time zones can have impact on our opening prices.

The S&P 500�s reaction bounce faces numerous areas of technical resistance. The first is the 50-day moving average at 1,208, then the neckline at 1,265, and the 200-day moving average at 1,282. Use these areas as opportunities to purchase inverse ETFs or buy put options. (Speaking of options, my colleague Joe Burns has some trades that might interest you.) But if you get the timing wrong, get out to fight another day.

How To Become A Data-feed Super Affiliate

The program that I manage offers a product feed, and I get a chance to see a sad picture of many good affiliates wasting their potential.

Here is my advice from the affiliate manager's perspective.

Whenever you join (or think bout joining) a program, you need to look for two things:

• Temporary or permanent opportunities
• Flaws of a merchant

Here is an example of an opportunity that was created by an outside factor.

Recently, we got removed from the Yahoo index because of a penalty. I have no idea when (or if) we will get included back in, but I do know that it makes one decision much easier for our affiliates.

Judging by the numerous posts on various SEO-related message boards, it looks like Google and Yahoo use very different algorithms to rank pages. So for any given site, you have a choice to make. You can optimize for Yahoo, for Google, or for both.

Since Yahoo and Google use different algorithms, it is going to be hard to optimize the same set of pages for both of those engines at the same time, unless you employ heavy cloaking. And the way I see it, for an affiliate, it is better to appear high on one search engine than to appear low on both of them in an attempt to optimize for different algorithms at the same time.

Imagine that you are one of our affiliates. Given the information I just told you, shouldn't you concentrate on Yahoo for that data-feed site that is being used to promote our products?

Why spend (at least) half of your time and resources on optimizing for Google when you know that we are nowhere to be found in Yahoo?

You have to have an extremely well linked and optimized site to get ahead of the merchant for the exact product-name search terms. The merchant is your biggest obstacle when it comes to the search engine traffic. So if there is a route that lets you get around that obstacle - take it!

Most of our well-performing affiliates did just that. Either intentionally or unintentionally, they ended up making much more money by appearing high in Yahoo results, while not being ranked high in Google.

So on a practical side of things, here is what you should do.

For your existing merchants, check if they are removed from the index in any of the major search engines, and if they are, then start reading and implementing SEO tips for that particular engine.

And if you are thinking about joining a program and can't decide between several merchants, then check if any of them is not in the index of either Yahoo or Google. If you find a merchant like that - drop everything else you are doing and jump on that program.

As far as theory goes, this was just a simple, but specific example of what you should look for to make your efforts pay off. There are many different opportunities to get ahead in existing programs with data-feed sites; you just have to look for them.

Now, let's talk about flaws of merchants and how you can exploit them to make more money and help consumers at the same time.

I will give another specific example, but you should be able to apply this concept to many different programs.

Our site has one huge structural flaw: we only list products by product-oriented categories.

In other words, there is no way to navigate our site by a specific occasion or by the purchasing intent of a visitor.

You can follow a path like:

widgets -> wooden widgets -> red wooden widgets

This setup works fine for some type of shoppers, but is a complete turn-off for others.

And the problem is that most affiliates simply mirror the catalog structure of a merchant according to their feed.

But if you structured your site to list widgets as:

• widgets for birthdays
• widgets for girlfriends
• widgets for those who are over 50
• the Independence Day widgets

  
  etc.

then you would attract different type of shoppers. You would no longer compete with the merchant, but instead you would complement them.

A visitor who is looking for a gift for his 50-something friend and has no idea that a red wooden widget would be perfect, will not travel down the path laid out by our catalog. So if he gets to our home page, we simply lose a sale. And if your data-feed-based site follows the same structure - you lose a sale as well.

Also, since the visitor does not know that he really wants a red wooden widget, he we not use those keywords while searching for a present on the search engines.

But if you attracted that visitor to your site, presented him with ideas for older friends' birthday gifts and guided him to that specific widget's page - then we would make a sale, you would make a commission, and the visitor (turned customer) would get his present with much less searching around. Everyone wins.

Such approach takes more work than simply cloning the merchant's site with a feed, but affiliates who actually do something to complement merchant instead competing with them make a lot more money. After all, if you create a copy of a merchant's site - you are not only competing with the merchant, you are also competing with all of their affiliates that use the same feed in the same way.

Conoco Is 33% Undervalued, Its Competitors Even More So

Given my expectations for a quicker-than-expected recovery, I am bullish about the energy sector at large. As an IR consultant, I see particularly strong upside for smaller under-followed companies Aroway Energy (ARWJF.PK) and Derek Oil & Gas (DRKOF.PK). These companies are significantly undervalued and are well positioned to gain from improving press coverage. Towards that end, I plan on writing focus pieces on these attractive gems soon.

In the meanwhile, larger producers like ConocoPhillips (COP) will receive a disproportionate amount of attention. In this article, I will run you through a DCF model on ConocoPhillips and then triangulate the result with an exit multiple calculation and a review of the fundamentals compared to Chevron (CVX) and Valero (VLO). I find that the company is attractively undervalued.

First, let's begin with an assumption about revenues. ConocoPhillips finished FY2011 with $251.2 billion in revenue, which represented a 26.5% gain off of the preceding year; a slight deceleration. Analysts model a 4.7% per annum growth rate over the next half decade, which seems much too conservative given that it is around 600 bps below what is expected for the S&P 500, despite stronger growth in the recent path. But for the sake of proving my point, I accept the projection.

Moving onto the cost-side of the equation, there are several items to consider: Operating expenses, capital expenditures, and taxes. I model cost of goods sold as 82.% of revenue versus 2.7% for SG&A, 0.6% for R&D, and 6.5% for capex.

We then need to subtract out net increases in working capital. I expect that this will basically net around 0% over the projected time period.

Taking a perpetual growth rate of 2.5% and discounting backwards by a WACC of 8.7% yields a fair value figure of $101.10, implying 33% upside. The market seems to be factoring in a WACC of 10.5%, which is too high considering that the company has an unlevered beta of 0.95.

All of this falls within the context of strong momentum:

During the quarter, our earnings adjusted for special items were $2.7 billion or $2.02 a share. That's up from $1.9 billion or $1.32 a share in the fourth quarter of last year. Our annualized return on capital employed was 13%. We generated cash from operations of $5.8 billion, which is $4.39 per share.

In E&P, our production of 1.6 million BOE per day was higher than the prior quarter and slightly above our expectations. In R&M, our global refining capacity utilization rate was 94%. We made significant progress on our asset disposition program with the sale of the Colonial, Seaway Crude and Seaway Products pipelines for $2.4 billion in proceeds during the quarter. Our repurchase of 46 million shares is quite a represented [sic] 3% of our shares outstanding, and we ended the year with $6.4 billion in cash and short-term investments.

From a multiples perspective, ConocoPhillips is equally attractive. It trades at 8.5x past and forward earnings versus 8x for Chevron and a respective 7x and 5.8x past and forward earnings for Valero. Assuming a multiple of 11.5x and a conservative 2013 EPS of $8.90, the rough intrinsic value of ConocoPhillips' stock is $102.35 - virtually in-line with my DCF result.

Consensus estimates for Chevron's EPS forecast that it will be roughly flat around the $13 - $13.40 period. Assuming a multiple of 11.5x and a conservative 2013 EPS of $13.10, the rough intrinsic value of the stock is $150.65, implying 40.4% upside. With management committed to returning free cash flow to shareholders through a generous capital allocation policy (i.e. 3% dividend yield), I also believe the downside is fairly limited.

Valero is the riskiest investment of the three. Accordingly, it is 43% more volatile than the broader market. Consensus estimates for its EPS are that it will grow by 12.7% to $3.81 in 2012, grow by 16% in 2013, and then fall by 18.8% in 2014. Assuming a multiple of 8x and a conservative 2013 EPS of $4.35, the rough intrinsic value of the stock is $34.80, implying 35.8% upside. I like the firm's vertical integration and relative strength in absorbing input inflation, but risk does give me pause. Overall, however, the company leans more heavily towards reward than risk.

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

Sandstorm Gold: Reaching Critical Mass

My regular readers will recall this graph from my previous Sandstorm Gold (SNDXF.PK) article:

Click to enlarge

After adding June and September’s financial results, it now looks like this:

Click to enlarge

The rescaling of the chart was done automatically by Excel, and for good reason, as the operating losses of just under $500,000 in June 2010 have been dwarfed by the recent quarters operating cash flow of $8,558,000. In fact, even June 2011’s results have been dwarfed, as September 2011’s cash flow is over 200% greater. This was a great quarter for Sandstorm (to which i will refer as SSL), who continues to deliver fantastic results on the sustained +$1,500 per ounce gold price.

The stock price has responded to these results, moving from $0.56 in December 2009 to $1.35 in December 2011:

Click to enlarge

With the above chart, I’ve taken the stock price and operating cash flows on the day of the earning release. At the end of the chart, I extended the September 30th results to match up with Friday’s closing price.

This filters out much of the noise, and after doing so it becomes apparent that the market has recognized the cash flows of SSL. It also becomes apparent that the share price has not reacted as sharply as the recent earnings suggest it should, with the shares up 90% year to year, whereas the earnings are up quarter to quarter +200%. In addition, management continues to put new deals together, improving future cash flows, with the latest being for Bracemac-McLeod Mine. Although this deal is relatively small, it is one of many I expect management to close, as in 2 short years they have amassed an impressive record of deals.

The estimated gold production for each mine has far from peaked, with current deals in place not set to peak until 2015. This means more cash, which according to the previous chart, means a higher share price:

Click to enlarge

Comparing SSL to Gold Prices, now that the mines are producing, it has become highly correlated with the price of gold with a correlation of +0.80 since June 2010.

Click to enlarge

This indicates that much of the success of SSL will be dependent on the price of gold, although I was surprised by the price action when gold dropped to just below $1,600, as most PNAV calculations for SSL have a long range maximum price for gold of $1,500. Keep in mind, the average price per ounce that SSL pays is less than $450, thus they are cash flow positive well below the $1,500 range. Therefore, these dips are excellent buying opportunities.

There is one key reason I find the latest results especially encouraging-- SSL has now reached critical mass.

Imagine you were exerting effort to spin a massive wheel-- let’s call it the “wheel of fortune”-- as it functions similar to the game show, with the participants winning cash. Each push of the wheel represents an equity offering, and like an equity offering, pushing this wheel takes a lot of effort and there are significant opportunity costs. For instance, rather than spending time at a beach resort in Thailand, you’re pushing a massive wheel.

But eventually, this “wheel of fortune” picks up enough momentum to spin without additional pushes (equity offerings). You may still decide to push it from time to time, but that’s just to get it spinning even faster. Unlike the game show, this wheel never stops, and the faster it spins, the more money the participants make.

With over $8 million generated this past quarter alone, SSL is now on track to earn enough cash to fund additional deals without equity financing. Looking at the Aurizona, Santa Elena, Summit, Black Fox, Ming and Bachelor Lake projects, SSL is now on the verge of generating enough cash to fund one of these projects every 6 months:

Click to enlarge

There still may be additional equity offerings, but only in the event of SSL closing much larger deals, meaning more speed for the wheel.

Sandstorm Gold has reached critical mass, and reached it with style. With cash flows up 200% from quarter to quarter, and the company still 3 years out from peak production on existing deals, the future is bright for this junior gold streaming company headquartered in Vancouver, BC. This is definitely a game show you want to participate in.

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

iPod Nano, Kobo, UniCredit: Hot Trends

Popular searches on the Internet Monday include iPod nano on news that Apple(AAPL) is recalling its first-generation iPod nano devices due to an overheating issue.

Apple is concerned that the battery in some first-generation nanos may overheat to the point where the devices catch fire. Not all batteries in first-generation nanos are at risk. The issue has been traced to a supplier that produced batteries with a manufacturing defect.

See if (AAPL) is traded within the Action Alerts PLUS portfolio by Cramer and Link

Apple has set up a Web page at which nano owners of units sold between September 2005 and December 2006 can check the serial numbers of their devices to see if they are at risk. If they are, users can ship their nanos back to Apple and the company will replace the product within six weeks free of charge, but not with a newer model. Users will receive a replacement first-generation nano with a different manufacturer's battery that is not prone to the overheating issue. Kobo is trending as the Toronto company announced its $99 Kobo Touch with Offers e-reader. The device is the same as the $130 Kobo Touch, except this version achieves its price point in part by displaying ads at the bottom of the home screen and when the device is locked. The e-reader has a 6-inch e-Ink touch display and features its Reading Life social networking platform that tracks reading patterns, allows users to earn awards for their progress and lets users share Reading Life status with social networks like Facebook and Twitter. The Kobo Touch with Offers faces competition from the Amazon(AMZN) Kindle Touch with Special Offers, also $99, and the Barnes & Noble(BKS) Nook Simple Touch, which is $99 and ad-free. The Kobo Touch with Offers will begin shipping in two to three weeks. UniCredit, Italy's biggest bank, is another popular search with news that the company's board is considering a stock sale of €7.5 billion. The sale is expected to be approved Monday after it was recommended by the bank's strategic committee on Sunday. The stock sale would be the largest Italian stock sale in more than two years.

The European Banking Authority said last month that UniCredit has the largest shortfall in capital among all of Italy's lenders. The bank must meet a regulatory deadline of reaching 9% core capital by June 30 after writing down sovereign debt holdings and must submit its plans to reach that target by Dec. 25.

The chatter on Main Street (a.k.a. Google, Yahoo! and other search sites) is always of interest to investors on Wall Street. Thus, each day, TheStreet compiles the stories that are trending on the Web, and highlights the news that could make stocks move..

>To order reprints of this article, click here: Reprints

5-Star Stocks Poised to Pop: Thompson Creek

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, molybdenum producer Thompson Creek Metals (NYSE: TC  ) has earned a coveted five-star ranking.

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

Thompson Creek facts

Headquarters	Denver
Market Cap	$1.3 billion
Industry	Diversified metals and mining
Trailing-12-Month Revenue	$709 million
Management	Chairman/CEO Kevin Loughrey President/COO Scott Shellhaas
Return on Equity (Average, Past 3 Years)	7.7%
Cash/Debt	$365 million / $368 million
Competitors	General Moly

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

On CAPS, 98% of the 1,206 members who have rated Thompson Creek believe the stock will outperform the S&P 500 going forward.

Just a couple of weeks ago, one of those Fools, gamblingkev, tapped the stock as a tempting turnaround opportunity:

Thompson Creek is being punished for trying to change from being a one trick pony, namely molybdenum, to a major producer of molybdenum, copper, and gold. They bought Terrane and their huge copper & gold discovery in Mt Milligan and are now realizing how much it costs to bring it to production. Add to that the cost of expanding their big moly mine and they have cash flow problems. ... But they bring an opportunity in the next couple of years. This is a well managed company who has chosen to diversify from the massive swings molybdenum prices have had over the past few years. Within 2 years they will be producing at Mt Milligan. If they can raise the cash needed to complete Mt Milligan -- probably by selling another part of the gold stream -- they will reap the benefits in the next few years and in a big way. I like their management, I believe they will do it.

What do you think about Thompson Creek, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Want to see how well (or not so well) the stocks in this series are performing? Follow the new TrackPoisedTo CAPS account.

Raymond James Loses a $200M Rep, but Keeps 90% of MK Advisors

Janney Montgomery Scott hired an ex-Morgan Keegan advisor with more than $200 million in client assets and several million in annual production, the firm said Tuesday.

While this is bad news for Raymond James Financial (RJF), which acquired Morgan Keegan in April, it shouldn’t detract from the strong advisor retention that RJ has achieved over the past few months, experts say.

“They’ve done a fabulous job with their rate of retention,” said recruiter Rick Peterson of Rick Peterson & Associates in the great Houston area, in an interview at AdvisorOne. “Frankly, it surprised me.”

According to results of the quarter ending June 30, which were released late Wednesday, Raymond James has kept more than 900 of the roughly 1,000 Morgan Keegan advisors and managers it could have potentially added through its acquisition. (The deal was announced in January and completed in April.)

“I knew the Morgan Keegan reps were all in discussion with somebody else … and could have signed on [to other firms] with better [compensation] packages elsewhere,” added Peterson. “It came down to the camaraderie and the uniqueness of the firm; they did a great selling job.”

As expected, Raymond James executives are upbeat about how their retention efforts have done, as well.

“While departures are driven by individual reasons, we are naturally disappointed when any advisor decides to leave the firm,” said Tash Elwyn (left), president of Raymond James & Associates Private Client Group, in a statement. “We recognize that competitors can be very aggressive with their offers, but we are nonetheless very proud of the overall retention rate of both our newly affiliated Raymond James | Morgan Keegan advisors as well as our existing advisors.”

As Elwyn points out, RJ is “continuing to recruit high-quality, experienced advisors to all of our channels. Since April, 10 advisors have been recruited thanks to the leadership of former Morgan Keegan managers, he adds.

On Wednesday, Raymond James said that Elisabeth D. Baldwin joined the firm in Gainesville, Ga., from BB&T Wealth Management, where her team managed more than $100 million in client assets. Previously, she was a financial advisor for Wachovia Securities.

On July 17, Raymond James said it had hired Tom Shoup, formerly of Morgan Stanley, to join its employee broker-dealer’s Atlanta operations. He has managed almost $300 million in client assets and had $1.3 million in yearly production.

Some 150 RJ|MK advisors and branch managers attended Raymond James & Associates’ July Summer Development Conference, along with about 450 RJA advisors and their families, according to Elwyn.

“The appeal of a firm such as Raymond James, with a client-first culture and conservative management, is not lost on those seeking an alternative to the Wall Street firms with their ongoing irritants,” concluded the RJ executive.

Soaring Food Costs Pushing Millions Into Poverty

Soaring food and energy prices, still-fragile financial systems and continued tensions between the United States and China over trade and currency issues will all be on the agenda at meetings over the next three days of global finance officials.

World Bank President Robert Zoellick said Thursday that food prices are 36 percent higher than they were a year ago and already have pushed 44 million people into poverty. He called on major countries to do more to help poor countries meet the challenge of feeding their populations at a time of surging prices.

Finance ministers and central bank presidents of the Group of 20 major industrial countries were involved in talks that began Thursday on ways to address the food crisis and to better coordinate their economic policies.

Zoellick cited a new World Bank study that showed that another 10 percent increase in global food prices could drive an additional 10 million people into extreme poverty.

That would be in addition to the 44 million people who have been driven into poverty since June because of soaring food prices. The World Bank estimates there are about 1.2 billion people living below the poverty line of $1.25 per day.

"We have to put food first and protect the poor and vulnerable, who spend most of their money on food," Zoellick said at a briefing to preview the upcoming finance meetings.

Those discussions began Thursday with talks first among finance officials of the world's seven wealthiest countries - the United States, Japan, Germany, France, Britain, Canada and Italy. Those countries were joined later by finance officials from the Group of 20 nations, which include not only the traditional economic powers but fast-growing emerging economies, including China, India and Brazil. French Finance Minister Christine Lagarde and U.S. Treasury Secretary Timothy Geithner also led a discussion on how the major economies could provide support in the Middle East and North Africa following a change of governments in Tunisia and Egypt. In a joint statement issued after those talks, Geithner and Lagarde said the goal of the major economies would be to work with major financial institutions such as the International Monetary Fund and World Bank to support economic growth that would benefit a broader group of people in Egypt and Tunisia.

"We recognize that these transitions are about expanding the freedoms and opportunities of people," Geithner and Lagarde said. They said a joint action plan would be developed with early recommendations coming in May to support "inclusive and sustained growth, transparency and improved governance

After a dinner Thursday night, the G-20 discussions were to continue Friday, led by Lagarde. France is head of the G-20 this year. The group is expected to issue a joint statement of goals at the end of Friday's discussions.

The G-20 talks will be focused on making more progress on a set of economic indicators that the group can use to gauge whether countries are pursuing the correct policies to prevent the growth of dangerous imbalances in trade and government debt which contributed to the last financial crisis.

The United States is pushing for the indicators to be set up, hoping they can be used to bring more pressure on China to allow its currency to rise in value against the dollar as a way to narrow the huge trade gap that exists between China and the U.S.

However, Chinese officials do not want the rebalancing process to be used as a way to attack China's currency policies, and it was unclear whether any progress will be made during the Washington talks.

But the United States hoped to gain support from other G-20 nations, especially given the group's pledge to put in place policies to guard against a repeat of the past economic crisis at a time when the global economy remains fragile.

"There are lots of things to worry about and we want to make sure we don't fall back into another crisis as we did not that long ago," Canadian Finance Minister James Flaherty told reporters.

The finance meetings will wrap up on Saturday with meetings of the policy-setting committees of the 187-nation International Monetary Fund and the World Bank that will discuss issues involving their institutions.

IMF Managing Director Dominique Strauss-Kahn said that while the global economy began growing again last year after the most severe downturn since World War II, there still were multiple risks to the recovery from rising energy costs to continuing debt problems in Europe and new inflation dangers coming from China and other fast-growing emerging economies.

"The recovery is getting stronger but ... it is not the recovery we want because it is still imbalanced," Strauss-Kahn told reporters. "We must be aware of complacency, and we need urgent action."
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