Saturday, September 8, 2012

7 Stocks for a Well-Diversified Portfolio

My aim is to own no more than 40 holdings between my aggressive and conservative high-yield portfolios. This strategy gives me no less than 2.5% exposure to any given asset, assuming I�ve invested 100%. However, the stocks below represent alternative options for portfolio diversification.


This premier utility operates in the Mid-Atlantic region with very steady revenue and profit growth, thanks to better demand for power than in other regions. I might be inclined to swap Dominion (NYSE:D) for another utility company depending on how fourth-quarter earnings stack up — the company missed Q4 estimates by -9.40%, apparently due to warm weather. Despite this, Dominion is getting very interesting and attractive. Yield: 4.2%.

Consolidated Edison

A major provider of power to New York, New Jersey and Pennsylvania, Consolidated Edison (NYSE:ED) is the most conservative utility within that sector. It’s almost a proxy for a corporate bond when traders speak of it. Charts from ED show a very constructive stair-step pattern, with the shares trading in a sideways formation during the past several months. The stock is in a nice uptrend now, but I’m holding out for some higher-yielding picks if we get more good economic news. But if the economy starts to fade again, ED will be my a go-to pick. Yield: 4.1%.

General Mills

This best-of-breed food company missed earnings estimates by 3 cents in the last quarter, tempering its uptrend. The stock is coming in to test its 200-day moving average. Given the company’s sound reputation, the stock didn’t give much back. But again, I’m on the hunt for higher dividend yields if the economy is starting to pick up speed. General Mills (NYSE:GIS) stays on my watch list in case the economy stalls out on the heels of a European recession. Yield: 3.1%.

BristolMyers Squibb

This stock is getting right in the spot where a buy recommendation might be warranted soon. With the rotation out of some defensive sectors under way, the stock has pulled back about 10%. I’m highly inclined to add BristolMyers Squibb (NYSE:BMY) to my conservative portfolio. It currently has a dividend yield of 4.2% — but may get to 5%. Until then, I’ll wait.

Duff & Phelps Utility & Corporate Bond Trust

I didn’t expect the bond market to rally alongside the stock market this month, but that has been the story, and shares of Duff & Phelps Utility & Corporate Bond Trust (NYSE:DUC) reached to new 52-week high. Once again, I would expect yields to rise a tad with a stronger economy, but apparently there’s a consistently strong appetite for this kind of high-quality yield that’s trading at a premium now — and I don’t want to pay for it. Yield: 4%.

Flaherty & Crumrine Preferred Income Fund

Preferred stocks trade much like bonds: They are construed to be fixed-income assets, just junior to corporate bonds and convertible debt when a company is servicing debt payments. Flaherty & Crumrine Preferred Income Fund (NYSE:PFD) is still trading at a very steep 23.89% premium to net asset value and is outside my risk profile for an asset that doesn’t yield at least 10%.�Yield: 7.3%.

Two Harbors Investment

There’s talk of new government intervention to ease the burden of refinancing more home loans. That would carry the possible risk of massive pre-payment of higher interest rate loans, in turn pinching the already tight spread with which these mortgage REITS are grappling. Also, competitor American Capital Agency (NASDAQ:AGNC) just trimmed its dividend as a result of the narrow spread of borrowing short and investing long. I’ve been seeing that caution flag raised for weeks. If Two Harbors (NYSE:TWO) maintains its current dividend payout, I may get back in. Yield: 16.2%.

Why the Dow Fell Today

After weeks of big gains, The Dow (INDEX: ^DJI  ) closed down 0.13% today after falling 0.5% point earlier.

It's ordinary for traders to sell after a string of gains. But the last-minute negotiations between the European Union and Greece served as an added reminder today that the improving economic outlook that's been driving market returns could have vulnerabilities. If conditions in Europe continue to deteriorate (goes the worry), the slowdown in economic activity could spill over into its trading partners, including the U.S.

Greece is caught in a catch-22 -- the harsh austerity that the EU is demanding of Greece is almost certain to take a massive toll on its economy, making it even more difficult for the country to repay its loans. The only question left is whether something will get worked out that allows Greece to default in an orderly way that minimizes the damage to other economies and the global financial system. As recently as the fourth quarter, Bank of America (NYSE: BAC  ) , JPMorgan Chase (NYSE: JPM  ) , Citigroup (NYSE: C  ) , and Morgan Stanley (NYSE: MS  ) all had significant exposure to stressed European markets.

Still, so long as Europe avoids a full-blown financial crisis, it could be more likely than most think that the U.S. economy escapes from the Europe's troubles more or less unscathed. As far as the financial sector goes, regional banks generally have far less exposure to European markets or trading results.

While the market's day-to-day fluctuations get all the headlines, it's important for us to remember that it's long-term performance -- not week-to-week price fluctuations -- that ultimately matter. If you're interested in one stock that our chief investment officer picked to crush the market in 2012, check out our brand new report, "The Motley Fool's Top Stock for 2012." It highlights a company that is revolutionizing commerce in Latin America. For a limited time, you can get instant access to the name of this company by�clicking here -- it's free.�

Five ETFs With Sky High Yields

Investors have enjoyed the bull market that has been 2012, as a number of asset classes have experienced marked gains. But many are also aware that the growth in major equity benchmarks could come to a screeching halt at any time, especially if (and when) euro zone fears spark up again. To protect their portfolios against unpredictable markets, many investors have turned to income investing over the past few years, using dividends to procure the majority of their gains. But finding strong yields in an environment with record-low interest rates can be a tall order.

Many investors feel that dividend-paying firms present strong plays because a cash payout to shareholders is typically a sign of a strong company; all of the crafty accounting techniques in the world couldn’t fake a dividend payout and many feel that these distributions comment on the overall health of a firm. For those seeking to add a healthy dividend stream to their portfolio, we outline five ETFs that are currently paying out massive yields (note that this list excludes leveraged products) [see also Five Commodity MLPs With Sky High Yields].

5.�SuperDividend ETF (SDIV)

This fund, from Global X, debuted midway through last year and quickly made a name for itself in the exchange traded world. SDIV tracks an index which equally weights roughly 100 of the highest pay dividend securities in the world. As such, the fund favors international equities and is mostly composed of mid cap firms. Currently, SDIV is paying out a 30 Day SEC Yield of 7.95% on top of its gains of 10.5% on the year. It should be noted that SDIV favors the real-estate sector which has been relatively volatile in recent years [see also The Appeal Of Dividend ETFs].

4.�CEF Income Composite Portfolio (PCEF)

This ETF tracks an index which invests in closed-end funds in the US. It allows�investors�to invest in funds that may otherwise be difficult to access, which has drawn a lot of attention from investors. It is important to remember that PCEF invests in funds listed in the U.S., but the exposure of said funds often reaches across the world, so PCEF is by no means a pure play on the local economy. PCEF is currently paying out a yield of 8.04% but has struggled to maintain its ground in recent weeks.

3.�KBW High Dividend Yield Financial Portfolio (KBWD)

KBWD replicates a benchmark that chooses from a handful of financial companies domiciled in the US. The resulting exposure makes the fund a bit risky in our current environment, but for those who believe that we will continue to march forward, financials may be the perfect place to invest. A closer look underneath the hood reveals that the fund is very REIT-heavy, which may be an issue for some, although REITs are known for their massive yields. With a portfolio filled with REITs, a fair amount of KBWD’s exposure technically falls under the real estate sector despite also being considered financial firms by the index. The ETF currently has an SEC yield of 9.47% and has jumped by more than 12% on the year [see also Why Some Dividend ETFs Have Puny Dividend Yields].

2.�Peritus High Yield ETF (HYLD)

This fund shakes things up a bit, as it is an actively managed fund that focuses on the fixed income space. HYLD is a different kind of active fund, as it prides itself on unprecedented transparency; its holdings are updated live on its Web site on a daily basis, allowing investors to know exactly what they are investing in. For those who are weary of debt markets, this fund probably isn’t for you; but if you are comfortable with fixed income, this ETF might be worth a closer look as it features a solid track record and is currently paying out a yield of 9.82% [see also High Yield ETFdb Portfolio].

1.�FTSE NAREIT Mortgage REITs Index Fund (REM)

For those comfortable with REITs, this fund is one of the top dogs in the ETF industry. REM invests in REITs domiciled in the U.S., an important distinction given the major differences in real estate markets on a country-to-country basis. For now, domestic housing markets are still in the doldrums, so REM may be too risky for some, but note that REM is well off its pre-recession highs, so a recovery in the housing market would bode well for this fund. REM is currently paying out an SEC yield of 12.25% and has jumped by nearly 10% year to date [see also The Best Dividend ETFs Aren�t Dividend ETFs At All].

Caution: Not All That Glitters Is Gold

When it comes to ETFs, seeing a massive yield doesn’t always indicate a strong dividend payer. Often times a high yield can be the result of capital gains incurred, in which issuers will pay out a higher dividend to cover the capital gains for investors. A prime example comes from the�Dreyfus Brazilian Real Fund (BZF). Technically, the fund payed out a jaw-dropping dividend of roughly 27% in 2011, but all of that was due to capital gains, so the effective dividend on the year was 0%. It is always important to look under the hood of a dividend ETF to ensure that you are actually receiving the payout you see�advertised.

Are You Covered Against Online Stock Broker Failure?

Understanding the rules to an online stock broker for trading stocks is no easy task. Recently the FDIC, in conjunction with marketing-maven Suze Orman, launched a PR website to help bank depositors understand what accounts and amounts are covered by the FDIC and what aren’t.

The case studies on the website are a little absurd considering the fact that the families profiled all have more than 1 million dollars in assets (less than 1% of the U.S. population fits that demographic) but it raises some good questions for online stock brokers:

  • Are investors covered in similar ways?
  • Is it important to be covered as an investor?

Being an investor in any market comes with risk. Most of the risk you sustain on a daily basis is market related. Maybe the market will move in your favor and maybe it won’t.

That seems relatively straightforward, but have you considered some of the systemic risks not associated with market movement?

If your broker or dealer fails, it could destroy all, most or some of the profits and deposits you have made over many years. If this only happened once in your lifetime, it would be enough to change your financial status forever.

Investors in CDs or bank deposits have some coverage (usually up to $100,000 per account holder per FDIC covered bank), but do trading account holders have similar coverage benefits?

Yes and no. Finding out whether or not you are covered is important and definitely relevant in today’s unstable economic environment.

Stocks and Options Accounts

Traditional brokerage accounts are usually covered in two ways. First, your broker may offer a sweep account that will qualify for coverage by the FDIC (like Suze Orman’s examples) and your positions and remaining balances are usually covered by the SIPC (another Federal insurance agency) up to $500K.

If your broker were to fail�

If your broker were to fail, your account positions and balances would be transferred to another clearing firm. The process takes some time, but ultimately you can anticipate getting your money back. The SIPC has done this 317 times, and a little over 99% of investors involved have been paid what they were owed.

Exchange Trade Futures Accounts

If you own a futures account, things get a little more complicated but not by much.

Your futures account is actually separated and designated to your sole benefit. This means it cannot be attacked in a bankruptcy or receivership process. Ultimately, the account and your open positions are transferred to another clearing firm where you can access it.

Recently, this happened to the futures account holders at Refco. There is no upper limit on how much you can have in your account for this kind of coverage.

Forex Dealers

If you have an over-the-counter forex account of any kind, you are typically out of luck if your dealer fails.

Forex dealers do not segregate accounts (especially outside the U.S.) in the same way a futures broker does, and it can be attacked in a bankruptcy. This is what happened recently to traders with forex accounts at Refco. This makes it even more important to be very picky about who you trade with and to have more than one account.

Why Does This Matter?

If you have a single uncovered account or partially uncovered account and your broker or dealer fails, it doesn’t matter how profitable you have been � its gone.

Over the last year, we have learned that no bank or financial institution can be considered immune to sudden and catastrophic failure. There have been 57 bank failures in the U.S. over the last 12 months � marque names like Lehman, Bear Stearns and Citigroup have lost all or most of their value and Standard and Poors has lost their rating credibility. This is a new market, and nothing should be taken for granted.

Your homework is to call your brokers and/or dealer and find out exactly how you are covered and what you need to do to improve that coverage. Don’t get burned by ignorance. Take action now to make sure your exposure is reduced.

This article is brought to you by

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This Week in Solar

Changes in the solar industry continue to happen from day to day as this dynamic market attempts to move to a more steady state. Before that happens, however, the industry is likely to feel more pain as either capacity falls to meet demand or we wait for demand to catch up with capacity.

Here are the noteworthy events from this week that solar investors should keep an eye on.

More bearish predictions
Bloomberg compiled six forecasts for solar installations in 2012 and found that analysts are expecting 24.8 GW of solar to be installed this year, down 10% from last year. Lower German demand is expected to lead the decline, but increased installations in both China and the U.S. ensure that conditions don't get even worse.

This will put even more pressure on manufacturers and hopefully cause some capacity to leave the market. I have put LDK Solar (NYSE: LDK  ) and Hanwha SolarOne (Nasdaq: HSOL  ) on the top of my list of companies in trouble if demand continues to fall. They have lower margins than competitors and are in a weaker strategic position that better brand-name companies in the industry.

What we'll have to keep an eye on in coming months is how China handles the solar industry. The country may be facing tariffs on solar exports to the U.S., although a decision on such drastic measures has been pushed out to May. There's also the complicated financing structure of most of the world's largest suppliers to consider. LDK Solar, Suntech Power (NYSE: STP  ) , and Yingli Green Energy all have more than $1 billion of short-term debt, handed out by government-controlled banks, and as finances get worse they may have to consolidate or go under. But how exactly this process would work is unknown at this point.

Power-plant development efforts spread
U.S. solar manufacturers have been adding capabilities in both utility-scale and distributed solar power plant development for years, but Chinese manufacturers have been behind the curve. They've focused attention on adding capacity and lowering costs to remain competitive. That may slowly be starting to change.

Trina Solar (NYSE: TSL  ) announced that it's establishing two new sales and project development offices in China. The country's feed-in tariff is expected to drive demand in the country's sunnier areas, and this will allow Trina to not only serve those areas but also develop projects itself.

SunPower's utility and power-plant division had much higher margins than residential and commercial, showing that this is an important avenue for manufacturers to explore.

Are CIGS going to go big time?
MiaSole, one of the few remaining CIGS manufacturers, received another $55 million funding round this week and may be making more progress on its way to generating a product that can compete with Chinese manufacturers on cost and efficiency.

The company has hit module efficiency in production of 14% and hopes to be at 15% by the end of this year. Those numbers could make First Solar obsolete in the thin-film market, barring an acquisition.

MiaSole is still very small, with production capacity of just 150 MW annually and just 55 MW in the field right now. CIGS have been a hope of many solar observers for years, and MiaSole is at least worth watching as a potential winner in this space.

Foolish wrap-up
Earnings are out for the most part from the fourth quarter, and as I highlighted earlier this week, efficiency is playing a major role in the winners and losers. The other major differentiator is internal project development. SunPower is expecting to get up to 50% of its demand from utility and power plants, which is why it's so important for companies like Trina Solar to follow this lead. Power plants insulate a company from wild demand swings and ensure a certain level of production demand.

Interested in reading more about solar stocks? Add your favorite to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

  • Add�Yingli�Green�Energy�Holding�to My Watchlist.
  • Add�Trina�Solar�to My Watchlist.
  • Add�Suntech�Power�Holdings�to My Watchlist.
  • Add�SunPower�to My Watchlist.
  • Add�LDK�Solar�to My Watchlist.
  • Add�Hanwha�SolarOne�to My Watchlist.
  • Add�First�Solar�to My Watchlist.

Excedrin users turn to the Web to find relief for migraines

People suffering from migraines are paying a hefty price to get Excedrin through online sites nearly seven months after the maker recalled the over-the-counter medication.

On Friday, a package of 50 two-tablet packs of Excedrin Extra Strength was going for $144.95 on, and a similar package of Excedrin Migraine was selling for $245.99. Before the recall, a package cost about $8.

Excedrin, the popular pain medication that thousands take to treat migraines, has been off the market since January, when its maker, Novartis Consumer Health, pulled it from shelves and stopped manufacturing.

Dr. David Dodick of the Mayo Clinic Arizona, who is president of the American Headache Society, called the recall "a big deal for those who rely on that medication."

Many patients claim nothing else works for them. Novartis has said no adverse effects have been reported from patients who did not return the recalled product.

Molly Alexander of Goodyear, Ariz., said that while she relies on more sophisticated treatment for her migraines, her son uses Excedrin Migraine, a combination of 250 milligrams of aspirin, 250 milligrams of acetominophen (Tylenol is a popular brand) and 65 milligrams of caffeine.

"He says it is the only thing that works for him," she said. "His attacks come on quickly, he is throwing up and in bed, he completely loses his functioning."

The doctors agree that over-the-counter medications like Excedrin work only for mild to moderate migraine attacks, and that buying the product from Internet providers can be risky.

"I would never buy off the Internet," Alexander said. "It could be contaminated, and you have no guarantee of what you are getting."

Novartis recalled Excedrin in several forms as well three other popular medications, No-Doz, Bufferin and Gas-X.

Several other products were affected by a shutdown of the plant in Lincoln, Neb., including Maalox and Lamisil.

Michelle Tennis, a trade magazine editor, said she turned to generics after Excedrin disappeared.

"Yesterday, for the first time, it didn't help," said Tennis, adding that she had to leave work and ended up getting relief after taking four pills. "With the Excedrin, one pill took care of everything."

Dr. Alex Bigham, who runs Novocur pain-management clinics in Chandler and Scottsdale, Ariz., said Excedrin seems to be the most effective over-the-counter medication for migraines and patients tell him that generic equivalents or separate pills in the same dosage do not work.

"There is something about how they put it together than makes it different," he said.

Mayo's Dodick said substitutes should work.

"That particular product (Excedrin) has never been proven to be better than separate pills with the same medications and dosages," he said.

The company said in January the pill products "may contain stray tablets, capsules, or caplets from other products, or contain broken or chipped tablets."

A recent statement from Novartis read, "We are working hard to return products to store shelves as soon as possible. Novartis Consumer Health will restart production on a line-by-line, product-by-product basis to ensure control and adherence to our high standard of quality and expects to begin shipments of a limited portfolio of products in the second half of the year."

Both doctors say other treatments are available for migraines, which affect almost 20% of the population.

Dodick said the numbers might even be higher.

"Almost all people who think they have migraines do have them," he said. "And 90% of people who have chronic headaches but do not consider them migraines also have them."

"We developed a questionnaire to identify migraine called 'PIN.' 'P' is for photophobia, or extreme sensitivity to light, 'I' is impairment, and 'N' for nausea. If you get all three with the headache, there is a 98% chance of migraine. If you get only two, you still have a 93% chance."

Dodick said prescription medications are available that can be delivered orally, nasally, through an inhaler, by an injection and now even with a patch.

Doctors are getting closer to developing a blood test for migraines, which will make diagnosis much easier.

Friday, September 7, 2012

Ross Stores: A Great Company But The Stock Is Too Expensive

Ross Stores (ROST) operates a chain of off-price retail stores offering high-quality, in season name brand and designer apparel, shoes, cosmetics, accessories and home merchandise at discounts of 20-60% below mainstream retailers. The company has grown profits and dividends at a 15-20% annual rate over the past 10 years, earning a 25%+ return on equity. While current retail environment experienced difficulties in the recent recession, ROST's off-price business model continued to produce above-average results because:

  • comparable store sales are on the rise,
  • its ability to deliver name brand merchandise at steep discounts should raise consumer loyalty allowing it to continue to grow even as the economy improves,
  • it is focused on strict inventory management giving it flexibility to take advantage of close outs, raise its merchandise turn and reduce markdowns,
  • better-than-expected performance from its dd's DISCOUNTS subsidiary.
  • The primary negative for this company is that retailing is an intensely competitive business.

    ROST is rated A by Value Line, has a 10% debt-to-equity ratio and its stock yields 1.0%

    Statistical Summary

    Stock Yield

    Dividend Growth Rate

    Payout Ratio

    # Increases Since 2001













    EPS Down Since 2001

    Net Margin

    Value Line Rating













    *IND is the average of the Retail (Softlines) Industry as compiled from Value Line

    Chart note: ROST stock made great progress off its December 2008 low, quickly surpassing the down trend off its September 2008 high (red line) as well as the November 2008 trading high (green line). Long term the stock is in an up trend (straight blue lines). It is also in an intermediate term up trend (purple lines). The wiggly blue line is on balance volume. The Aggressive Growth Portfolio does not own a position in ROST, having Sold it at slightly lower levels. While the fundamentals of ROST are strong, we believe that it is being generously valued at its current price. Hence, we would avoid buying this overpriced stock at these levels.

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

    Wednesday FX Brief: Worries Abound as Euphoria Dries Up

    There’s a more somber mood brewing midweek with most of the ebullience felt at the start of the week wearing thin. Crude oil prices back at $105 per barrel remind investors that all is not well in North Africa or the increasingly unstable Middle East. The Bank of England warned that sharp increases in fuel costs might sour demand causing a further economic slowdown. News from Japan turned cautious as workers struggle to restore power to the crippled nuclear plants while possibly contaminated food was banned from Tokyo from several prefectures. The Japanese government also gave its first official assessment of the damage and warned that the nature of the disaster coupled with uncertainty of nationwide power restoration means that a sharp rebound in activity is unlikely. Risk appetite feels dull on Wednesday with a further drag on sentiment coming from the Eurozone where it appears political unrest in Portugal means that nation is on the verge of a request for a financial bailout.

    Japanese yen – A three-year old toddler could probably throw a ball further than the range exhibited by the yen in the aftermath of coordinated G7 intervention. If the Bank of Japan’s intention was to iron out excessive volatility of currency movements it probably deserves a five-star rating coupled with a commendation. I don’t remember the last time the yen traded for three days within a range of just ¥0.6, which is precisely what it has done since Monday. The dollar/yen rate has the capacity to trade that range in an hour and to see it incapacitated like this is painful for traders. The government said it may introduce a restructuring agency to coordinate efforts to rebuild the economy and said that the damage caused may reach ¥25 trillion ($309 billion). It also warned that a sharp rebound might not be on the agenda given the power outages likely to take time to repair. It estimates that the damage will reduce national gross domestic product by 0.5% in the fiscal year starting April 1. The yen held steady at ¥81.00 hugging the horizontal unchanged line as it has for three days. Against the euro the yen gained to ¥114.46.

    British pound – Minutes from the Bank of England’s March meeting revealed a desire to “wait and see” how inflationary energy costs flow through the economy. Bank officials have adopted this attitude vocally recently claiming that there are copious amounts of spare capacity that would prevent price pressures from spiraling. With 330,000 public sector job cuts underway as part of a national austerity drive the Bank has been cautious in its outlook for growth and correctly assumes that it wouldn’t take much to tip the economy back into recession at a time when the latest set of readings underwhelmed economists. The pound fell sharply against the dollar as bulls were greatly disappointed that the balance of power had not shifted despite a pick-up in inflationary pressures. The minutes revealed that the committee saw fewer risks in waiting to see how surging energy costs developed and added the new threat that a negative impact on demand and already hangdog consumer sentiment might trip growth up. Hardly rate-rising material. The pound slumped to $1.6250 from a 12-month high at $1.6400 on Tuesday. Against the euro the pound eased to 87 pence.

    Euro – It’s beginning to look a lot like lawmakers will fail to agree on further measures to increase the lending limit of the financial stability fund by the weekend. The negotiations are likely to be dragged through to the early summer. An earlier agreement to boost the lending capacity from €200 to €500 billion might be enough to prevent a significant decline in the euro, but the reality of unresolved sovereign debt burdens is also likely to contain a major move higher in the meantime. The single currency has come off the boil again coinciding with the widely predicted demise of the Portuguese government whose opposition don’t want any part of the crippling austerity measures. Should a vote against occur today it would likely cause a national election. The country is one step closer to requesting a financial package from its regional partners and although the euro is slightly weaker in sympathy with this prospect, it is remarkably steady given the prospect of further sovereign debt torture for investors in coming weeks. The euro currently buys $1.4129 backing off gains more than a penny higher on Tuesday.

    U.S. Dollar – With such a dull and largely negative flow of news the dollar index is magically higher on the day. The index measuring the greenback’s value against six major trading partners stands at 75.76 having retreated from its weakest level in 15 months earlier in the week. The resumption of dollar weakness earlier in the week comes as risk appetite returned and as investors breathed a collective sigh of relief that Japanese affairs were no worse than feared.

    Aussie dollar – The tighter monetary stance adopted by the Peoples Bank of China as it attempts to squeeze inflation and cool growth has weighed somewhat on risk appetite in the Pacific region. The less positive news out of Japan in the last day caused investors to either take some profits after a spectacular Tokyo rebound or prepare for renewed selling in the days ahead. The cooler tone to risk spilled over into Asian stock prices and weakened demand for regional currencies. Investors were unprepared to drive the unit higher than Tuesday’s peak leaving the Aussie languishing at $1.0097. Thursday brings the semi-annual Financial Stability Review on which investors will draw on the authorities latest economic assumptions.

    Canadian dollar – The loonster failed to recapture its pre-retail sales glory and continues to tread water this morning against the greenback. Today the local dollar buys $1.0183 U.S. cents and looks like it has the potential to at least $1.0150 should equity prices soften further than pre-market futures indicate. Currently the Canadian dollar doesn’t seem responsive to rising crude oil prices, which have broken $105 per barrel in early midweek trading.

    What Happens in Vega…

    After a peek at delta and probabilities as well as an expos� of theta�s thievery, we now turn to a somewhat lesser known, yet equally important Greek � vega. Though not an official letter of the Greek alphabet, vega measures an option�s sensitivity to a one-point change in implied volatility. Since changes in implied volatility can have drastic effects on an option�s value, keeping an eye on your position�s sensitivity to this variable can prevent you from being blindsided.

    Similar to the other Greeks, vega�s reading can be either positive or negative. When buying options, traders acquire positive vega effectively making them long volatility. When selling options, traders acquire negative vega, effectively making them short volatility.

    Suppose after analyzing implied volatility and deciding the current level of 20% was too low, you purchased a long volatility strategy (such as a straddle) by simultaneously buying an at-the-money call and put option.

    Let�s say the straddle�s vega was +40, meaning it should rise in value by $40 for every one-point increase in implied vol. If over the next few days implied vol rises from 20% to 25%, how much would your straddle increase in value?� Given the five-point rise in volatility, your straddle should increase by $200 (5 x 40). On the other hand, if implied vol dropped five points from 20% to 15%, your straddle should fall by $200.

    Interestingly, vega is also influenced by the time remaining to expiration; longer -term options will typically possess a higher vega and shorter-term options will have a lower vega. This fact should actually be quite intuitive. If implied vol doubles, should it have greater effect on an option that expires tomorrow or one that expires in six months? The obvious answer is the six-month option as it will have much more time to be affected by larger price moves in the stock.

    Like theta, vega is also highest for at-the-money options since they possess the most extrinsic value. As an option moves deeper in-the-money or further out-of-the-money, its vega will drop.

    Equipped with a proper understanding of vega, traders should be able to calculate exactly how much money is on the line each and every day with respect to changes in implied vol.


    Top Stocks For 2012-1-12-15

    Crown Equity Holdings, Inc. (CRWE)

    Crown Equity Holdings Inc. (CRWE) is pleased to announce that it has entered into a joint venture to deploy VoIP (Voice over Internet Protocol) technology delivering voice, video and data services to residential and commercial customers. The joint venture company is Crown Tele Services Inc. which was a wholly-owned subsidiary of Crown Equity Holdings Inc. Crown Equity Holdings Inc. will own fifty percent (50%) interest in the joint venture.

    Commenting on the joint venture, Kenneth Bosket, President of Crown Equity Holdings Inc., said: “We are excited to deliver VoIP communications solutions specifically designed to meet the business and residential market needs in this fast-growing global market.”

    Crown Equity Holdings Inc’s selection of Core Link reflects recent diversification beyond CRWE’s original charter as a provider of services and knowledge to small business owners taking their own companies public. In addition to these services, Crown Equity Holdings Inc has transitioned into a multifaceted media organization that publishes clients’ news online; sells advertising adjacent with its digital network targeted at a high-income audience; designs, hosts and maintains websites; produces marketing videos from concept to final product; crafts press releases and articles for maximum SEO; develops email campaigns; and forges branding campaigns to bolster client company images.

    The benefit of internet marketing for your business is improved communication channels. With internet marketing, you can open communication with your clients 24 hours a day anywhere and anytime as long as there is an internet connection. Internet marketing also offers your business a cost effective selling tool that can increase your product or service distribution network. More and more people are now using the Internet to buy the things they like. It is very efficient because they don’t have to drive to the shop or mall, find a parking lot, and get into the queue to buy something.

    Crown Equity Holdings Inc. together with its digital network currently provides electronic media services specializing in online publishing, which brings together targeted audiences and advertisers. Crown Equity Holdings Inc. offers internet media-driven advertising services, which covers and connects a range of marketing specialties, as well as search engine optimization for clients interested in online media awareness.

    For more information, visit

    Walter Energy, Inc. (NYSE:WLT) the world’s leading publicly traded “pure play” producer of metallurgical coal for the global steel industry, today announced enhanced financial disclosure, revised operating plans and second half 2011 sales expectations.

    Walter Energy, Inc. produces and exports metallurgical coal for the steel industry primarily in the United States. The company also produces steam coal, coal bed methane gas, metallurgical coke, and other related products.

    Deere & Company (NYSE:DE) announced a new sales and marketing agreement with Honda Power Equipment to sell Honda premium power products at participating John Deere dealerships in the United States. Shipments of Honda inventory to John Deere dealerships will be phased in, beginning in 2012.

    Deere & Company provides products and services primarily for agriculture and forestry worldwide. The company operates in three segments: Agriculture and Turf, Construction and Forestry, and Credit.

    The Coca-Cola Company (NYSE:KO) and UN Women announced a partnership to promote women’s economic empowerment. Responding to both UN Women’s Strategic Plan and The Coca-Cola Company’s global 5 BY 20 initiative, this partnership aims to enable the empowerment of women entrepreneurs by building upon the strengths of both organizations.

    The Coca-Cola Company manufactures, distributes, and markets nonalcoholic beverages worldwide. It principally offers sparkling and still beverages.

    Home-builder sentiment at best since recession


    Home builder sentiment improved in May to the highest reading since the recession on an upturn in sales and traffic, a trade group said Tuesday. See full story.

    Inflation decelerating, but Fed won�t pull trigger

    Inflationary pressures are fading, just as Federal Reserve officials expected. But don�t think that the decline in the inflation rate will automatically lead to further quantitative easing by the Fed. See full story.

    Gasoline drop keeps consumer prices flat in April

    Consumer prices aren�t changed in April as a drop in gasoline offsets rising food, apparel and car prices, according to data released Tuesday. See full story.

    U.S. stocks steady between data, Greece

    U.S. stocks shift to near unchanged Tuesday as generally upbeat economic reports deflected the latest breakdown in Greece�s attempts to form a coalition government and stay with the euro. See full story.

    Stay of execution for Greece in the offing

    With Greece�s expected new leader staunchly opposing austerity, voices are rising all over Europe to give the Greeks a stay of execution, writes Darrell Delamaide. See full story.


    J.P. Morgan�s Jamie Dimon has ousted Ina Drew. Everything is fine now. There�s nothing to look at. Move along. See full story.


    Home prices in a majority of the markets covered in Zillow�s Home Value Forecast are set to bottom this year � if they haven�t already, according to a Zillow report released on Wednesday. See full story.

    Half of U.S. cell phones are now smartphones

    NEW YORK (CNNMoney) -- Smartphones are now more common than "dumb" phones.

    For the first time, more than half of all American mobile customers own a smartphone, according to a report released Wednesday by Nielsen. That's up from 38% a year ago.

    As smartphones eclipse "feature" phones -- the industry's term for phones without touchscreens -- the way Americans are using their handsets is changing. The number of apps downloaded to Apple (AAPL, Fortune 500) iPhone and Google (GOOG, Fortune 500) Android devices grew 28% over the past year to an average of 41 apps per phone.

    Smartphone users are spending 39 minutes per day using their apps, up 10% from a year ago. A Google study also released Wednesday found that 26% of U.S. smartphone owners would rather give up their computer than their smartphone -- a sign that the devices are truly becoming mini-PCs.

    Facebook, YouTube, the Android market, Google and Gmail remain the top five most-used apps, according to Nielsen. That isn't particularly surprising, since all of those apps except for Facebook are pre-loaded onto most Android devices, which remain the most popular smartphones.

    Android makes up 51% of all smartphones in the United States, compared to the iPhone, which has a 30.7% share, according to comScore.

    That trend has held up globally as well, with Android devices making up 56% of first-quarter smartphone sales. Just 23% were iPhones, Gartner reported on Wednesday.

    It's becoming evident that Google and Apple are running away with the smartphone market. They were the only major mobile operating systems to gain share over the past year -- and those that lost share fell hard, Gartner reported.

    Nokia's (NOK) discontinued Symbian fell through the floor. It represented 8.6% of overall sales, down from nearly 28% a year earlier. But the Finnish mobile company's replacement, Microsoft's (MSFT, Fortune 500) Windows Phone, also lost share. Microsoft's phones made up just 1.9% of sales last quarter, down from 2.6% a year earlier.

    Struggling BlackBerry maker Research In Motion's (RIMM) smartphone market share was sliced in half, commanding just 7% of sales this past quarter.

    Meanwhile, Nielsen found that the number of iPhone and Android users doubled in the United States over the past year. Globally, Apple and Google smartphones grew their market share by nearly 26 percentage points. They now control 79% of the market. 

    AAII Sentiment Survey: Neutral Sentiment Reaches Four-Month High

    Neutral sentiment rose to a four-month high in the latest AAII Sentiment Survey. Pessimism about the short-term direction of stock prices topped optimism for the second consecutive week.

    Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded to 31.2%. Despite the three-percentage-point rise, bullish sentiment stayed below its historical average of 39% for the second consecutive week.

    Neutral sentiment, expectations that stock prices will stay unchanged over the next six months, jumped 4.7 percentage points to 35.0%. This is the highest neutral sentiment has been since December 22, 2011. It is also the third time in four weeks that neutral sentiment has been above its historical average of 31%.

    Bearish sentiment, expectations that stocks prices will fall over the next six months, fell to 33.8%. Even with the 7.7-percentage-point plunge, bearish sentiment stayed above its historical average of 30% for the second consecutive week.

    The difference between bullish and bearish sentiment, the bull-bear spread, narrowed to -2.6 percentage points. This is the first time the spread has been negative for two consecutive weeks since December 1, 2011.

    Neutral sentiment readings at the current level have been unusual over the past few years. Since the bear market ended in March 2009, neutral sentiment has only registered 35% or higher six times. The recent return of volatility to the market combined with conflicting signals about the U.S. and the global economy are having an impact on individual investor sentiment.

    This week's special question asked AAII members whether gasoline's rise to a national average of nearly $4 per gallon has changed their short-term outlook for stocks. The majority of respondents said it has not. A minority, however, said they have become more bearish on stock prices.

    Here is a sampling of the responses:

    • "I think the relationship between the price of gas and stock prices is overblown. Gas is just one of many metrics affecting sentiment."
    • "It has not affected my sentiment. I am carefully watching earnings reports and cash flows."
    • "The short-term price of gas will just add some minor volatility to a market driven by other, more serious issues."
    • "No change. I feel the price hike is temporary."
    • "The rising price of gasoline is eating into discretionary spending for many."
    • "At some point, the expenses for fuel will affect the purchase of other items."

    This week's AAII Sentiment Survey Results:

    • Bullish: 31.2%, up 3.0 percentage points
    • Neutral: 35.0%, up 4.7 percentage points
    • Bearish: 33.8%, down 7.7 percentage points

    Historical averages:

    • Bullish: 39%
    • Neutral: 31%
    • Bearish: 30%

    The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat, or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.) The survey and its results are available online at:

    Charles Rotblut. CFA is a Vice President with the American Association of Individual Investors and editor of the AAII Journal.

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

    Thursday, September 6, 2012

    New York Life, Ibbotson Develop Wealth Management Tools

    New York Life Insurance Company recently teamed up with Ibbotson Associates to help develop a new set of tools it is calling Lifetime Wealth Strategies, aimed at helping advisors account for their clients' total economic wealth and optimize their portfolios by making forward-looking insurance and investment decisions together.

    "When clients are asked about their wealth, or what they are worth, they immediately think of cash, stocks, bonds, and real estate," Michael Gordon, first VP of New York Life, said in a statement. "But they often need to be prompted to consider another aspect of their worth: their human capital."

    That, Gordon said, means the worth of a paycheck to a family over a lifetime, and to determine this, clients would need to fill out a questionnaire put together by Ibbotson, based on the firm's research on asset allocation strategies. This would then allow the advisor to provide the client with different proposals: Investments only, insurance only, or an integrated investment and insurance solution. The proposal could include investments only, insurance only, or an integrated investment and insurance solution which takes into account each person's human capital, financial capital, and risk tolerance.

    The financial crisis has changed the way people think about their wealth and risk-taking, Gordon said, and now more than ever, "clients are seeking a financial strategy that balances protection needs with goal achievement." While "human capital cannot be traded like a stock," Gordon noted, "it is a vital component of wealth that must be diversified and protected."

    In Case You Missed the Weekend

    Mo-mo is back:�

    • Stocks posted another gain on Friday, their sixth push higher in the past seven sessions. That’s not to say that as of the market’s close –�or even right now –�global hotspots such as the Middle East or Japan, or soverign debt issues in Europe were showing any immediate signs of abating. On the other hand, at least in terms of Japan, there were no signs that things were much worse than they had been a week earlier. The bullishness started with energy stocks, which have ridden a wave higher as crude oil prices returned this week to $105 a barrel and above — a level they hadn’t seen in a couple weeks. However, with oil then stalling and even giving back a few cents�on Thursday and Friday, momentum was back in play, and sectors that missed out specifically because of oil’s runup were given a chance to catch up.
    • On Monday, you’ll get February reports on personal income and personal spending, as well as the February numbers on pending home sale. Earnings reports slow to a virtual trickle — hardly one worth mentioning all week.
    • You may want to cut down on the food dye.
    • Tragic, but compelling: Japan, the aftermath.
    • More Japan: global supply lines at risk.
    • Not like things are so great in Syria either.
    • Why the U.S. won’t end up like Greece.
    • More Japan: evacuees struggle to endure.
    • How about that California high-tech hiring binge?
    • Many CFOs are embracing cloud computing. Many don’t know what it is.
    • Online poker’s big winner.
    • Financials and utilities — still weak.
    • Don’t mistake Twittering for actually living a life.

    Smith Electric Vehicles: Next Stop, IPO!

    Smith Electric Vehicles, the world’s leading manufacturer of electric commercial vehicles, now has plans to become the second electric-vehicle company to trade on public markets, joining Tesla (NASDAQ:TSLA). Also known as Smith’s, the company was founded in the U.K. and has been manufacturing zero-emission commercial electric vehicles since the 1920s.

    Smith’s vehicles are based on highly sophisticated technologies, including next-generation powertrains, power management systems and telemetry capabilities. The result is that the vehicles tend to be cheaper (once you factor in operating costs) than those that run on diesel fuels.

    Basically, Smith is an alternative for truck fleets, with payloads that range from 16,500 and 26,400 pounds and can serve routes up to 120 miles. Customers include Coca-Cola (NYSE:KO), FedEx (NYSE:FDX) and Pepsi (NYSE:PEP). A typical vehicle costs anywhere from $80,000 to $90,000 each.

    Smith currently has manufacturing facilities in Missouri and the U.K. But the company plans to expand its platform into other areas, like New York. The money raised from an IPO certainly would help with this.

    For the first half of 2011, Smith’s revenues spiked from $15.82 million to $37.60 million. There currently is a backlog of 120 vehicles, and a total of 540 have been pre-sold. But according to the prospectus, the company believes it can sell several thousand vehicles during the next few years.

    However, Smith’s still is not profitable. The company’s net loss came to $21.28 million for the first half of this year, which was worse than the $9.52 million loss during the same period a year ago. But for now, Smith is focused on ramping up growth.

    The company�s underwriters include UBS (NYSE:UBS) and Bank of America (NYSE:BAC), and the IPO is likely to hit the markets in the first quarter of next year.

    Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of �All About Short Selling� and �All About Commodities.� Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.

    The Score:

    Andrew Lloyd Webber may have composed some of theater's most memorable songs, but sometimes there's no sound sweeter than the rap of a gavel. The composer behind "Cats" and "The Phantom of the Opera" recently auctioned off part of his wine collection for nearly $6 million -- with a single case of rare Bordeaux bringing in close to $78,000. This 1982 Chateau Petrus is "the Picasso" of wine and is now worth more than 100 times its original cost, says Stephen Mould, European head of the wine department at Sotheby's, which staged the sale.

    The Backstory:

    Webber declined to comment but has previously said he began collecting wine at age 15, ultimately concentrating on French varietals, which typically make the best investment buys. (Bordeaux accounts for 70 percent of Sotheby's wine auctions.) And while Webber's celebrity status may have boosted prices somewhat, oenophiles say the auction's top sellers hit the vino trifecta: wines that are rare, mature, and from the world's best vineyards. What's more, experts credit the sale's Hong Kong location for its success -- the Asian market has exploded since the state lifted import duties on wine in 2008.

    The Takeaway:

    It's possible to profit from wine, even if you didn't start quaffing in high school. Wine appraisers suggest looking for highly rated reds that age well, from reputable producers with small outputs. (A caveat: Experts warn that getting wines from the most exclusive vineyards is no easy feat.) But even the best bottles can leave investors with cottonmouth: One index that tracks market prices for 100 valuable wines fell 15 percent in 2011.

    Top Stocks For 2011-12-20-3

    TrustCo Announces Third Quarter Net Income Up 10%

    TrustCo Bank Corp NY (TrustCo) (Nasdaq:TRST) announced net income for the third quarter of 2011 of $9.2 million, up 10.4% over the prior-year period and equal to diluted earnings per share of $0.100, as compared to net income of $8.4 million and diluted earnings per share of $0.109 for the third quarter of 2010. Third quarter 2011 per share results include the effect of the common stock offering completed on July 6, 2011.

    The Company also noted that third quarter 2010 results included one-time tax items that provided a net benefit of $836 thousand. On a pre-tax basis, earnings were up 25.0% from $11.5 million in the third quarter of 2010 to $14.4 million in the third quarter of 2011. The third quarter of 2011 also saw continued core balance sheet growth.

    Robert J. McCormick, President and Chief Executive Officer noted, “We are pleased that the third quarter resulted in solid earnings gains, continued core loan and deposit growth and a decline of approximately $1.3 million in nonperforming assets versus the second quarter, and we look forward to the remainder of 2011 and 2012 with optimism as our internal trends remain positive. The banking industry still faces challenges, but the progress we have made this year has helped to position TrustCo for continued growth and profitability.”

    For the first nine months of 2011 net income was $24.4 million and resulted in diluted earnings per share of $0.296, as compared to the first nine months of 2010 net income of $22.4 million and diluted earnings per share of $0.292. Net income was up 8.7% from the first nine months of 2010 to the first nine months of 2011, and income before taxes was up 12.7%. Return on average equity and return on average assets were 11.38% and 0.80%, respectively, for the first nine months of 2011 and 11.83% and 0.80% for the comparable period in 2010.

    On July 6, 2011 the Company completed an offering of 15.6 million common shares, raising net proceeds of $67.6 million. The additional capital significantly improved the Company’s capital position, with the tangible equity ratio rising from 6.59% at June 30, 2011 to 8.04% at September 30, 2011. Tangible book value per share also increased, from $3.47 per share to $3.62 per share over that period. Mr. McCormick noted that “Our strengthened capital position prepares us for continued balance sheet growth in the future.”

    TrustCo Bank Corp NY is a $4.2 billion bank holding company and through its subsidiary, Trustco Bank, operates 135 offices in New York, New Jersey, Vermont, Massachusetts, and Florida.

    In addition, the Bank operates a full service Trust Department. The common shares of TrustCo are traded on the NASDAQ Global Select Market under the symbol TRST.

    For more information about TRST please visit

    Cleantech Transit, Inc. (CLNO.OB) is pleased to announce it has met its funding requirement to secure the Company�s ability to earn in 25% of the 500KW Merced Project.

    The Company is in the final stages of closing its initial interest in the Merced Project and is currently working on completing the necessary documentation and expects closing the transaction soon. As previously announced Cleantech has the option to earn up to 40% of the Merced Project and the Company plans to continue to work towards increasing its interest in the Merced Project as they move ahead.

    Cleantech Transit Inc. was founded to capitalize on technology advances and manufacturing opportunities in the growing clean energy public transportation sector. Cleantech Transit Inc has expanded its focus to invest directly in specific green projects that could maximize shareholder value. Recognizing the many economic and operational advances of converting wood waste into renewable sources of energy, Cleantech Transit Inc. has selected to invest in Phoenix Energy ( This project could benefit the Company�s manufacturing clients worldwide.

    Using biomass power replaces the need to burn use coal to generate electricity. Additionally, the use of biomass power also reduces the need for oil to mine and deliver coal to far off power stations, thereby significantly reducing greenhouse gas emissions. Most surprisingly, using wood waste as fuel is actually more beneficial to the environment than allowing it to decompose naturally, because of the elimination of methane during combustion.

    Some biofuel benefits are:

    � Using biofuels can reduce the amount of greenhouse gases emitted. They are a much cleaner source of energy than conventional sources.
    � As more and more biofuel is created there will be increased energy security for the country producing it, as they will not have to rely on imports or foreign volatile markets.
    � Biofuels will create a brand new job infrastructure and will help support local economies.
    � Biofuel operations help rural development.

    To discover more about CLNO, Please visit:

    SonoSite, Inc. (Nasdaq:SONO) introduced the new BioZ� Cardio Profile system with impedance cardiography (ICG) technology for non-invasively monitoring a patient�s hemodynamic profile in the hospital. Pioneered by NASA in the 1960�s, ICG hemodynamic monitoring has traditionally been used to treat patients with heart failure and hypertension, and it is now ready to play a significant role in the anesthesia suite.

    SonoSite, Inc. develops, manufactures, and distributes hand-carried ultrasound systems for use across medical specialties and in a range of treatment settings.

    KBR (NYSE:KBR) announced it was awarded a License and Process Design Package contract for a new olefins production unit using the Advanced Catalytic Olefins (ACOTM) technology. This award represents the first license using this innovative technology which catalytically cracks naphtha and other straight run feeds to produce olefins yields which surpass those available from traditional steam cracking technology.

    KBR, Inc., together with its subsidiaries, operates as an engineering, construction, and services company worldwide.

    WellCare Health Plans, Inc. (NYSE:WCG) announced that the National Committee for Quality Assurance (NCQA), a private, non-profit organization dedicated to improving health care quality, has awarded WellCare of Georgia, Inc. an accreditation status of Commendable. This new status follows the NCQA New Health Plan Accreditation that was awarded to WellCare of Georgia in 2008.

    WellCare Health Plans, Inc. provides managed care services for government-sponsored healthcare programs in the United States.

    Equity Income Strategies With ETFs

    In a recent article, fellow blogger and portfolio manager, Roger Nusbaum noted that “it is very difficult to build an ETF portfolio that emphasizes dividend yield.” I came across a paper that discussed this topic in more detail.

    The ETF provider iShares (UK) has published a report on using dividend yield ETFs for income. The following are some of the key takeaways from this report:

    a) ETFs provide the benefits of dividend investing, combined with the usual advantages of index investing: easy diversification, low costs, transparency and market representativeness.

    b) Many factors are considered when building dividend indices.For example, STOXX and Euro STOXX Select Dividend indices screen companies based on dividend per share growth and earnings per share ratios whereas DivDAX uses one-year historic yields.

    Methodologies followed by various dividend Indices:

    click to enlarge images

    c) iShares offers country-specific and regional dividend ETFs to track the following indices:

    d) “There are two key differences between the dividend yield of an index and the distribution yield of the ETF that is tracking that index.

  • The historical fund distribution yield is based on the last 12 months of fund distributions and therefore is NOT EQUAL to the future/expected fund distribution yield
  • The index dividend yield is NOT EQUAL to the fund distribution yield”
  • e) Dividend ETFs can be used to offset inflation, create regular inflows, enhance portfolio yield and reduce portfolio volatility

    To download the Equity Income: Investment and Strategies with iShares ETFs paper, click here.

    Related ETFs from iShares (US):

    1. Dow Jones International Select Dividend Index Fund (IDV)
    12-Month Yield: 3.85%

    2. Dow Jones Select Dividend Index Fund (DVY)
    12-Month Yield: 3.57%

    3.S&P U.S. Preferred Stock Index Fund (PFF)
    12-Month Yield: 7.41%

    Buy, Sell, or Hold: Sify

    When considering any stock for your portfolio, don't be swayed just by the positives. Examine its pros and cons, and decide whether its possible upsides outweigh its risks. Let's take a look at Sify Technologies (Nasdaq: SIFY  ) today, and see why you might want to buy, sell, or hold the company that has been called a "more exciting" version of Level 3 Communications.

    Two reasons you might favor Sify are its business and its location. Sify is a provider of connectivity, hosting, and other IT-related services -- dynamic businesses that are changing and growing rapidly and for which investors in Level 3 and similar companies have high expectations. Better still, it operates chiefly in India, a developing economy featuring 1.2 billion people! As more and more people move up out of lower economic classes, they'll be more able to plug into our great global telecommunication infrastructure.

    That's not all you get with Sify -- it also sports a Sify Movies website, which has advanced from being India's seventh-most-visited site for news and movies to its third. (Remember that India is home to the bustling Bollywood film industry.)

    Sify is also not limiting itself just to India. It's expanding internationally, via a deal with Saudi Telecom, for example. Diversification is good, as it can bolster the company should India experience a big or small setback.

    One reason to sell, or avoid, the stock is its volatility. It has delivered many heart-stopping annual performances, such as gains of 78% in 2011, 81% in 2005, 119% in 2004, and 31% in 2010. That's darn appealing, until you notice 2006, 2007, and 2008 featured three drops in a row, of 11%, 41%, and...71%. If you don't think you could stomach a 71% drop very easily, think twice about this stock. Not surprisingly, the stock's beta, which measures its volatility against the market, is nearly 4.0 (a 1.0 would have it moving roughly in tandem with the market).

    Another reason to cross to the other side of the street when you see Sify coming is its profitability: It doesn't have any, at least not yet. That's just the way things are with many small companies. Sometimes it can take years to ramp up to a scale that permits good returns on investments. But other times, companies run out of money or strategies before they become sustainable. To be fair, though, Sify is somewhat close to being profitable, and it actually ended its fiscal 2010 in the black.

    Then there's dilution. The number of Sify's shares of stock has reportedly more than tripled over the past two years. It can be effective for a company to raise much-needed cash by issuing more shares of stock, but each new share dilutes the stake in the company held by existing shares. Worse still was that the shares were heavily discounted and issued to those connected to company insiders. In other words, it looks like these new shares may have benefited their recipients more than the company.

    If neither the buying nor selling arguments have moved you enough to action, consider just holding off on acting on this stock. You might want to wait until it's profitable. You might want to see the share count not grow too much more. You might wait for greater expansion abroad.

    The verdict
    As for me, I'm not jumping into Sify, as there seems to be plenty of other more attractive candidates for my portfolio.

    If you're drawn to India, though, you have other options -- Sify isn't the only fish in the sea. Also not-quite-profitable is (Nasdaq: REDF  ) , though its recent falling revenue makes Sify look good. Also in the online arena and just recently in the black is MakeMyTrip, a growing travel portal. Its profitability is a big draw, but that hasn't gone unnoticed, so the stock isn't quite a bargain. (If you're interested in telecom infrastructure companies and aren't tied to India, there's always Level 3 Communications, too. It's not in the black, but has been improving its position.)

    Better still, consider more established Indian companies that are very profitable. Automaker Tata Motors (NYSE: TTM  ) , for example, has been posting growth rates above 30% for years, is introducing inexpensive cars globally, and seems undervalued today. Infosys (Nasdaq: INFY  ) , a giant in the outsourcing industry, has also been growing briskly, and has many fans in Fooldom.

    While Sify Technologies certainly has potential, we think we've found a better opportunity for investors. The Motley Fool recently compiled a research report detailing its Top Stock For 2012. Better yet, we made it absolutely free for our readers, so click here to access your free copy today.

    Top Stocks For 3/22/2012-2

    Unisys Corporation (NYSE:UIS) announced its Application Modernization Platform as a Service (AMPS(SM)) offering, a subscription-based service to help federal government agencies reduce the cost, complexity, risk and time involved in modernizing their legacy software applications. The platform, managed and monitored by Unisys, can be implemented via a cloud infrastructure or hosted on-site, allowing federal organizations to shorten the time associated with typical enterprise platform integration and procurement.

    Unisys Corporation operates as an information technology (IT) company worldwide. The company operates in two segments, Services and Technology. The company was founded in 1886 and is based in Blue Bell, Pennsylvania.

    There is much in the life of oil and natural gas.

    When you take time and think about it, it�s awesome how many things get their start from oil and natural gas. Comfy synthetic fabrics we wear all year. Medicines that help us feel better. Transportation fuels that help us get from place to place. Fertilizers that make our gardens grow. And just about every toy our children play with. Oil and natural gas - they�re the stuff of life.

    Proper Power & Energy, Inc. (PPWE.PK) a Tampa-based independent oil and gas exploration and production company, has announced the next stage of its Western U.S. operations. The Company met with the executives of Thrust Resources Inc. and EQ Resources Inc. in Dallas, Texas on January 20, 2011. The meeting focused on a joint venture for the Central Utah Prospect between the Companies. This was the initial meeting between Clint Brower, CEO and Chairman of EQ Resources, and Andrew Kacic, the newly named President of Proper Power & Energy Inc.

    The next steps will be circulating a memorandum of understanding followed upon definitive agreements. �We look forward to expedite future discussions of both Companies working together to mutually reach our Utah objectives,� stated Andrew Kacic.

    The state of Utah is ranked 13th in the country in crude oil production and 9th in natural gas gross production (Energy Information Administration; rankings based on 2008 production, not including Federal Offshore production areas). There are approximately 9,100 wells currently in production within the state.

    Proper Power & Energy is an independent exploration and production company. The Company�s operations are in Kentucky, which provides for low risk developmental drilling and production, and Utah, which the Company controls over 11,000 acres for its exploratory prospect. Renowned geophysicist and consultant to Proper Power, Robert Dunbar, believes the Utah prospect could hold up to one billion barrels of recoverable oil.

    Please visit our website

    Americans are being forced to self-insure and pay a growing portion of the cost of their healthcare. Some are entirely uninsured. Others can only afford or choose only a high deductible or limited benefit health insurance policy. In either case, this patient population increasingly forgoes medical procedures or relies on emergency care for its healthcare needs and often incurs prohibitive expenses. Additionally, costs of healthcare (in doctors� offices and hospitals) for this patient population are often far higher than the amount an insured and the insurance company would pay for the same healthcare services for its insureds. The uninsured and underinsured patients have had no one to negotiate healthcare service costs on their behalf.

    NATIONAL HEALTH PARTNERS, INC. (NHPR.OB) is a national healthcare savings organization that provides discount healthcare membership programs to uninsured and underinsured people through a national healthcare savings network called �CARExpress.� CARExpress is one of the largest networks of hospitals, doctors, dentists, pharmacists and other healthcare providers in the country and is comprised of over 1,000,000 medical professionals that belong to such PPOs as CareMark and Aetna. The company�s primary target customer group is the 47 million Americans who have no health insurance of any kind. The company�s secondary target customer group includes the millions of Americans who lack complete health insurance coverage.

    National Health Partners, through its CARExpress membership programs, offers CARExpress health discount programs and CARExpress Plus membership programs. National Health Partners CARExpress health discount programs cover various aspects of healthcare, including physicians, hospitals, ancillary services, dentists, prescription drugs, vision care, hearing aids, chiropractic services, alternative care, 24-hour nurseline, medical supplies, and equipment, as well as long-term care facilities, which include skilled nursing facilities, assisted living facilities, respite care, and home health care.

    Buckeye Partners LP (NYSE:BPL) announced that it has completed the purchase of the 20 percent interest in FR Borco Coop Holdings, L.P. (”FRBCH”), the indirect owner of Bahamas Oil Refining Company International Limited (”BORCO”), from Vopak Bahamas B.V. (”Vopak”) for $340 million. As partial consideration for Vopak’s interest in FRBCH, Buckeye issued 1,095,722 of its Class B units and 620,861 of its LP units to Vopak. As previously announced, Buckeye acquired its initial 80 percent interest in BORCO from affiliates of FRC Founders Corporation on January 18, 2011. This now completes Buckeye’s acquisition of 100 percent of BORCO. In the aggregate, Buckeye paid $1.7 billion in a combination of cash and equity to acquire BORCO.

    Buckeye Partners, L.P. primarily operates refined petroleum products pipeline systems in the United States. . Buckeye GP LLC serves as the general partner of the company. Buckeye Partners was founded in 1986 and is based in Houston, Texas.

    URS Corporation (NYSE:URS) will host a conference call on Tuesday, March 1, 2011 at 11:00 a.m. (EST), to discuss its 2010 fourth quarter and year-end results. A live webcast will be available at along with a link to the Company�s 2010 fourth quarter and year-end earnings release when it becomes available.

    URS Corporation provides engineering, construction, and technical services to the power, infrastructure, federal, and industrial and commercial market sectors in the United States and internationally.

    Obama Reveals 2012 Campaign Slogan

    Not surprisingly, “Change” won’t be President Obama’s official campaign slogan in 2012.

    Instead, the president’s reelection team has debuted its new motto: “Forward.”

    The slogan appeared in a seven-minute campaign video released on Monday, the Associated Press reported. The video is intended for political rallies. Included in it are highlights of the president’s accomplishments and a review of the economy when he took office in January 2009.

    Predictably, the video contains jabs at congressional Republicans who attempted to block the president’s legislative agenda.

    In keeping with the new slogan, the video assures Democrats and Obama supporters that, despite his achievements, the president has much more to do going “forward.”

    Conservatives were quick to pounce. A columnist at the Washington Times said that the “Forward” motto came with “a long and rich association with European Marxism.”

    The new slogan debuts as Republicans and Democrats�bicker over another campaign video,�released by the Obama campaign last week, suggesting that presumptive GOP presidential candidate Mitt Romney would not have authorized the Seal Team assault that killed Osama bin Laden last year.

    �Remember, the election is still six months away.

    The opinions contained in this column are solely those of the writer.

    Want to share your own views on money, politics and the 2012 elections? Drop us a line at and we might reprint your views in our InvestorPolitics blog! Please include your name, city and state of residence. All letters submitted to this address will be considered for publication.

    2011 SMA Manager of the Year, Large-Cap Growth: Wedgewood

    Large-Cap Growth 2011 SMA Manager of the Year

    Wedgewood Partners Inc.

    Large-Cap Focused Growth Strategy

    Throughout the month of April, AdvisorOne will focus on separately managed accounts: the money manager options advisors have, the platforms through which they can gain access to those managers, how they can conduct due diligence on those managers, and how advisors are using SMAs in client portfolios.

    We begin our coverage by presenting the Investment Advisor-Prima Capital seventh annual Separately Managed Account Managers of the Year. In a feature article in the April 2011 issue of Investment Advisor, seven managers in six different asset classes were chosen as "A Class Apart."

    In this article, we focus on St. Louis-based Wedgewood Partners' Large-Cap Focused Growth Strategy, winners in the large-cap growth space.

    The philosophy: A long-term-focused research process coupled with disciplined valuation and low turnover to produce long-term returns, “investing as ‘owners’ in companies.

    The portfolio: A focus on select companies that the firm’s research suggests has the brightest multi-year prospects for growth.

    The performance: 
    2010 performance (company supplied).

    Strategy return: 15.34%

    S&P 500: 15.06%

    Return since inception (9/92-12/10): 12.53%

    S&P 500 retunr since inception: 8.32%

    Total AUM (12/31/10): $657 million (See firm’s Form ADV Part II.)

    The people: Investment Advisor Editor John Sullivan spoke in March with David Rolfe, CFA, CIO of Wedgewood Partners Inc. Team members include president and founder Anthony Guerrerio, a West Pointer and Harvard MBA; Dana Webb, CFA, senior portfolio manager; and Michael Quigley, CFA, portfolio manager.

    Large-Cap Growth Award
    Wedgewood Partners Inc.
    Large-Cap Focused Growth Strategy

    Ask David Rolfe for the firm’s elevator pitch and he has it at the ready.

    “We’re big subscribers to the arguments put forth by Charles D. Ellis, author of ‘The Loser’s Game’,” begins Rolfe, chief investment officer of St. Louis-based Wedgewood Partners. “Instead of trying to time the markets and getting sucked into short-term volatility, we take a long-term view and let the markets work for us. Too many of our competitors try to do otherwise, and we refuse to play that loser’s game. That, quite simply, is our investing philosophy. ”

    This longer-term view naturally leads to a big belief in—and heavy reliance on—index investing which, as Rolfe notes, by definition is buy-and-hold investing. This means the firm has a history of minimum turnover in the portfolio. As a corollary, Rolfe notes, this approach also affects the firm’s stock selection.

    “If we expect to invest in companies for many years, we focus on those select companies with the brightest multi-year prospects for growth,” he says. “Additionally, our view


    on risk is contrary to the typical manager as well. We don’t view risk via individual security price volatility, rather all of our risk analysis is centered on the individual business.”

    The second time’s the charm for the 22-year-old firm, as Prima has previously recommended Wedgewood for an SMA award. In recommending the firm this year, Prima said it was “pleased the manager is looking to grow its business through the SMA channel and is solely focused on the large-cap growth strategy.”

    Wedgewood believes consistent execution of its fundamental, long-term-focused research process coupled with disciplined valuation can produce excellent long-term returns, according to Prima. The strategy has delivered, producing top quartile performance on an absolute and risk-adjusted basis over the last three, five and 10 years. Wedgewood builds a concentrated portfolio of 18 to 22 stocks trading at a deep discount to their estimated intrinsic value that are typically driven by two factors: overly conservative consensus estimates and compressed valuation multiples.

    Confirming Rolfe’s long-term views, Prima says Wedgewood is a very patient investor focused on a three- to five-year outlook which typically results in low turnover. Over the past five years, portfolio turnover has ranged between 30% and 53%, which contributes to its tax efficiency. Additionally, Wedgewood is able to accommodate tax loss harvesting at client request, further improving potential tax efficiency. The firm was a strong candidate for the large-cap growth SMA award due to its ownership structure, talented and tenured investment team and consistency of alpha generation.

    The investment team includes Anthony Guerrerio, president and founder; David Rolfe, chief investment officer; Dana Webb, senior portfolio manager; and Michael Quigley, portfolio manager.

    Wednesday, September 5, 2012

    The Most-Important Year End Tax Tip for Small Business: Start a 401(k) before 12/31

    As 2011 winds down to a close, many small business owners are scrutinizing year-end tax deadlines in a last-ditch effort to lighten their payment to Uncle Sam come April. One of the smartest moves they can make (including the self-employed) is to start a 401(k) plan before December 31st.  It�s important to note that while a few solo 401(k) plan providers will allow purchases for a 2011 plan through December 31st, a traditional plan for a business with employees would need to be purchased a week or two earlier.   Then the business can use the 401(k) profit sharing component to make tax deductible contributions for 2011 through the business� tax deadline (that�s April 17th for many).

    But before any small business rushes out to buy a plan, it�s important to have the right information that allows for smart and informed decision making.  To simplify this process, I�ve hand-picked the following five articles from my Forbes blog to help dispel some common misperceptions, identify the right type of 401(k) plan for businesses based on their structure and goals, and help them to quickly discern which providers should ultimately make the final cut.  Its twenty minutes of time well spent that can make a big difference in the success of a business� saving and tax management strategies for years to come:

  • Five Reasons Your Business Is Not Too Small for a 401(k)
  • Five Ways to Lower Taxes with a 401(k)
  • So Many Types of 401(k)s. Which is the Perfect Match for Your Business?
  • The Top Four Things to Look for When Shopping for a 401(k)
  • Six Things Your 401(k) Provider Doesn�t Want You to Know
  • Something you still have questions about?  Let me know and I�ll help answer.

    2 Lies the Market Wants to Believe

    The world’s financial markets are responding to the “global Goldilocks” scenario, and one of the big winners has been copper. But I’d be careful about jumping aboard, because copper is heavily tied to the China story. In fact, the China story IS the copper story. As long as the latest China story holds, copper prices should continue to rise, but many aspects of that narrative could change on a dime.

    Monday, the ISM manufacturing index for July and construction spending for June beat expectations. But who cares about that? Did anyone in Europe or China even think about those numbers yesterday? I know they were announced at 10 a.m., after all the excitement had already hit the market. But the world seems to be less concerned about the U.S. economy than ever, and Monday’s action was proof.�

    Uncle Sam sneezes and nobody says “bless you” anymore!

    They used to say that when the United States sneezes, the world catches a cold. But it seems the tables have officially turned.�

    Financial markets have been focused on fear about Europe imploding or China overheating. Yesterday, those fears were put to rest, at least for this month. But as the markets go, we’ve been hearing very different stories and forecasts with each quarter that passes, and my feeling is that the changes in the global economic story will swing back to negative in no time.

    So, Europe Isn’t Imploding?

    I’m not ready to buy this story, although the market sure seems ready.

    Of course, we recently got positive results on those super reliable, highly trusted bank stress tests (kidding). Monday, BNP Paribas reported a 31% surge in second-quarter profits, beating market expectations. HSBC Holdings plc (NYSE: HBC), Europe’s largest bank by market capitalization, reported its first-half net profit more than doubled to $6.76 billion.�

    Boy, I guess there’s no need to worry about Europe anymore.�

    I’m not buying the notion that all is well in Europe, because these banks’ reported earnings, in my mind, say little about the health of European banks overall or about the European governments. The problem with the banks is that they own lots of government bonds, and the stress tests didn’t even account for the health of the governments that back those bonds. But I recognize that it’s not whether I agree with the rationale of the market that counts. What matters is what the market thinks.�

    So, China Isn’t Growing Too Fast?

    China hardly seemed to get the memo about the global recession. Instead, economic growth in China accelerated to 11.9% in the first quarter, the fastest pace since 2007, triggered by government-led stimulus and expansive bank lending. But there IS such a thing as growing too fast. If the new 800-pound gorilla overheats, it could have huge effects on the rest of the world.

    The fear with the China bubble is the same as all historic bubble-based fear: The China bubble gets too big to manage, too difficult to pop, because the bigger it becomes, the more difficult it is to manage.�

    Monday, markets rallied because we saw more evidence of China’s growth slowing: A purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics, fell to 49.4 from 50.4 in June. Readings below 50 mean that the sector is expanding, while below 50 indicates a decline. Manufacturing contracted for the first time in 17 months.

    The latest economic data lends credence to economists’ recent argument for a “soft landing” scenario that we heard two weeks ago when we saw that China’s second-quarter GDP grew 10.3% year-over-year (below forecasts of 10.5%), slowing from the 11.9% annual growth recorded in the first quarter. China’s government clamped down on property speculation and lending in general, and now that they are seeing their economy slow down, they seem to be keeping a steady hand.

    Over the weekend, China’s central bank said it would continue to implement its current “moderately loose” monetary policy. Comments like that ease fears that China might tighten monetary policy too fast for a soft landing.

    The comment was key, because markets want to see China sort of “tap the brakes” instead of coming to a screeching halt. If they tighten too fast, it can cause markets to collapse. And if China — the biggest buyer of commodities and the biggest buyer of U.S. debt — runs into serious trouble, that means the rest of the world is in serious trouble. In fact, that scenario may be the biggest threat we all face.

    I definitely have to commend China for doing what seems to be (so far) a great job at managing their economy. It’s a very tough task, and as you probably know, the Fed here in the United States is known for over-tightening or over-loosening, and doing both a little too late and for too long. It seems we do too much, too late, so we tend to perpetually fishtail.�

    It’s a difficult job, and more times than not, economies with bubbles just don’t see soft landings. If China can pull it off, then kudos to them. But I like to bet on high probability outcomes, and the odds of soft landings from asset bubbles are low. And the situation is even more sensitive than investors may think.

    China is in a forced tightening position.�

    Contrary to popular belief, China isn’t exactly ahead of the curve, or tightening on their own terms. They have a cool poker face, but that’s all it is. They don’t want to cause a panic by telling the truth.�

    Don’t let Monday’s headlines fool you — China’s in a jam. And it’s only a matter of time until investors start to focus again on media reports that 23% of the 7.6 trillion yuan ($1.1 trillion U.S.) that banks lent the local authorities to finance infrastructure could become non-performing. According to New Century Weekly, just 27% of the projects currently are on pace to pay off the loans!

    China can, of course, mitigate that risk by requiring borrowers to set aside more capital. But that hardly seems like a realistic answer. If you’re already not bringing in enough cash, then how easy can it be to set aside more capital?

    When China takes measures to slow their economy, in this day and age, that actually might mean slowing down global growth. Where do you think commodity prices will go when the house of cards falls in China?

    Goldman Sachs Group, Inc. (NYSE: GS) says that 27% of copper demand comes from China. Look at the two charts below from Metal Miner. The fist one shows world copper consumption growth. The second shows world copper consumption growth, excluding China.

    Sometimes a picture is worth a thousand words. The pictures above illustrate the reasons why the copper tracking ETF iPath DJ-UBS Copper Total Return Sub-Index ETN (NYSE: JJC) ripped higher on Monday, and has been in rally mode over the last couple of weeks. So the copper story, like many commodity stories, is really a China story.�

    When you hear about a potential “double dip” recession, just remember that all the pundits that are good enough to give us their opinions are giving you an “all things remaining constant,” plus or minus a couple variables of their choice.�

    But if China doesn’t successfully cross the economic tight wire, we’ll all be facing problems that most investors haven’t even considered.��

    Double Your Money as the Market Plunges and Then Soars — The Dow is headed for 9,000, and you can either get run over OR go along for a profitable ride. Download your FREE options trading guide for details on how to make a ton of money on the short side of the market. Get your free copy here, including two trades you can make right now.

    Is Filing Bankruptcy The Only Way Out Of Debt?

    The world is suffering financial turmoil at today. While recession rages, price hike becomes extensive. Citizens are more financially hassled-as their expenses escalate so as their financial obligations. You might just be one of them. You’re losing control over your finances. Aren’t you? How long can you hang on? Are you thinking of filing bankruptcy? Hold on a little longer. Read this article first before you decide.

    When you file for bankruptcy, you legally declare your inability to pay your creditors. Apart from the relief that you think you could get from filing bankruptcy, you need to go through the strenuous filing process. The government had amended the bankruptcy law in 2005. And since then filing for bankruptcy has never been easy.

    Collective in the bankruptcy filing process is the appointment of a trustee over your non-exempt assets. The trustee who is appointed by the court itself has the discretion to sell your assets-all of your assets as in Chapter 7. Thus when you file for bankruptcy, you’re going to practically lose everything that you own. You have no capacity to decide what to do with your assets. You will have to agree with the decision of the trustee.

    Even if the government sees bankruptcy as a chance for people to have a ‘fresh start’, your filing will still be reflected in your credit record. Needless to say that filing for bankruptcy will injure your credit scores significantly. That’s not the end of it yet. Even if you declare bankruptcy you will still have to pay $3,000 to $5,000 for legal and filing fees.

    Other than the remedy provided by the law, there are other options which you would like to reconsider. There are companies that offer debt consolidation and credit counseling. They can neither protect your assets when the court has decided on them already, nor can they elucidate your debt to disappear in thin air. But they can sit down with you and discuss what alternatives you have to avoid filing for bankruptcy. On a brighter note, these companies will neither seize nor control ownership over your assets. Contrary to what you might be thinking, these companies’ techniques are lawful. So you don’t have to worry about doing something illegitimate.

    More and more companies are offering these kinds of services nowadays and only few of them offer the quality of service you totally need to resolve your financial difficulties. You must carefully choose which company to work with. Your decision is the key to either solve or worsen your problem. Weigh your options well and never put at risk your family’s future just because of a wrong decision.

    Learn more about debt relief. Stop by Allan Henry’s site where you can find out all about debt plan and what it can do for you.

    Bernanke looks past January jobs report

    WASHINGTON (MarketWatch) � Federal Reserve Board Chairman Ben Bernanke did not throw the spotlight Tuesday on last week�s surprisingly strong January unemployment report, sticking to his forecast only moderate growth ahead.

    In testimony to the Senate Budget Committee, Bernanke said the Fed was not forecasting any �sharp improvements� in the unemployment rate.

    While he was not asked specifically if the job report impact Fed monetary policy, Bernanke said that the 8.3% unemployment rate reached in January, the lowest in almost three years, �understates the weakness of the labor market in some broad sense.� See live-blog of Bernanke hearing.

    �Reuters Job gains to be frustratingly slow, Bernanke says
    Federal Reserve Board Chairman Ben Bernanke sketched out for members of Congress the weaker economic outlook and stressed that the central bank is prepared to take further action to try to give the recovery a jolt.
    �Hawaii, Qwerty, Libor: Topics on Day 1
    � Bernanke doesn�t expect double-dip recession
    � Text of Bernanke�s prepared testimony
    � Fed minutes show limited support for more asset buying
    � Highlights of the Fed minutes
    � Fed extends Operation Twist through year-end
    � Fed not cowed by elections
    � Revised Federal Reserve meeting schedule

    � U.S. economic calendar |Global calendar
    �Market Snapshot |Bond Report |Currencies
    � Sign up for breaking-news alerts by email /conga/story/misc/fed.html217023

    �We�re looking still at a couple more years of recovery,� Bernanke said at another point.

    �We see growth at something close to potential which, under normal circumstances, would mean that we�re creating enough jobs to employ new entrants to the labor force but not making sharp improvements on the unemployment rate,� Bernanke said.

    Dan Greenhaus, chief global strategist at BTIG LLC, said Bernanke�s �pretty dovish� testimony cheered financial markets.

    �If you believe Bernanke, and by extension the Fed, is continuing its easing bias, well then you�ve got an improved economic backdrop and a super accommodative Fed. All else equal, that supports higher prices and that�s what we�re seeing,� Greenhaus said.

    Stocks stayed in positive territory after Bernanke started speaking. The Dow Jones Industrial Average DJIA �was recently up 25 points to 12,868.

    The Fed said last month that it plans to hold interest rates close to zero if the economy evolves as expected.

    The statement was designed in part to keep interest rates from rising quickly at the first signs of recovery as higher rates could choke off the nascent improvement.

    After the stronger-than-expected jobs data Friday, Fed fund futures declined, in effect seeing the first rate hike in the summer of 2014.

    In other remarks, Bernanke denied that the Fed would tolerate higher inflation to try to foster better near-term economic conditions.

    �We are not going to seek higher inflation in order to advance unemployment,� Bernanke said.

    He acknowledged that the Fed zero-rate policy was designed to move investors from �very conservative� positions �slightly more into riskier positions that involve investment and lending� that will strengthen the economy.

    But this can go too far, he said, and the Fed has a new team in place to watch out for bubbles.

    Bernanke told the committee that fiscal policy now in place - which would see tax hikes and spending cuts at the beginning of next year - would �indeed slow the recovery.�

    Congress must not ignore longer-term debt woes if it moves to address the contractionary nature of short-term policy, he said.

    investors and business may become concerned about the looming deficit contraction unless Congress sets out a clear �road map,� he said.

    �The U.S. federal deficit will become unsustainable within 15 or 20 years at the most and possibly some of those effects will be even brought forward by markets,� Bernanke said.

    The Fed chairman said that U.S. banks and money-market mutual funds have made progress reducing their exposures to Europe but said a major problem would still �have a powerful impact on our financial system.�