Saturday, April 13, 2013

Ex-KPMG Partner Hit With Civil, Criminal Charges

NEW YORK (AP) -- The accountant and the jeweler were longtime friends and golf partners. But the accountant was passing private information about two companies to the jeweler, who used it to play the stock market. Now they're both under federal investigation, their reputations unraveling on a very public stage.

Federal prosecutors and the Securities and Exchange Commission on Thursday filed criminal and civil charges against fired KPMG partner Scott London for conspiracy to commit securities fraud through insider trading. The 24-page affidavit filed in support of the criminal complaint alleges that London, 50, of Agoura Hills, Calif., provided confidential information about KPMG clients Herbalife (NYSE: HLF  ) , Skechers USA (NYSE: SKX  ) , Deckers Outdoor (NASDAQ: DECK  ) , RSC Holdings, and Pacific Capital to Bryan Shaw, a close friend, from late 2010 until last month. Prosecutors allege that Shaw made more than $1.2 million in illicit profits by trading in advance of company announcements on earnings results or mergers.

The government alleges that on some occasions, London called Shaw two to three days before press releases were issued for KPMG clients and read confidential information from the draft releases to Shaw. London, who worked for KPMG for nearly 30 years, also disclosed confidential information about impending mergers concerning KPMG clients before that information was made public, and discussed how to structure Shaw's purchases of the stock in certain companies in order to protect them from being discovered, according to the complaint.

Shaw passed London "tens of thousands of dollars in cash" in bags over the years for the information, according to the government. London also received a $12,000 Rolex watch, as well as jewelry for his wife and concert tickets. London's lawyer Harland Braun has said London received "about $25,000" over several years. The SEC puts the cash sum at at least $50,000.

The scandal has unfolded in pieces this week. Late Monday KPMG announced it fired a Los Angeles partner who leaked nonpublic information about companies that KPMG worked with. On Tuesday nutritional supplement maker Herbalife and shoe seller Skechers announced that they were the companies whose information was leaked. On Wednesday, London publicly identified himself through his lawyer and issued a statement saying that he deeply regretted his actions and was just trying to help a friend struggling after his family run jewelry business began faltering in the economic downturn.

Thursday brought one of the remaining pieces of the puzzle when Bryan Shaw identified himself as that friend. The two men had met at a country club several years earlier and became close friends and golfing partners.

In a statement through his lawyer, Nathan Hochman, Shaw said he received information from London "about a number of companies" from 2010 to 2012. He said he had "profited substantially" from trading stocks based on that information, but he didn't provide details.

"I cannot begin to apologize for my incredibly stupid actions," said Shaw. "There is no excuse for my wrongful conduct. I accept full and complete responsibility for what I have done and know that I will spend the rest of my life trying to make up for my tragic lapses of judgment."

Hochman said Thursday that Shaw received a government subpoena several months ago and has been cooperating with the investigation. "As part of that cooperation, he agreed to make monitored phone calls with Mr. London, and have monitored meetings with him as well," Hochman said in an emailed statement.

London has said that he never leaked any documents. He described the interactions as his friend asking whether a stock was a good buy and London offering suggestions. He is expected to make his first court appearance later Thursday in Los Angeles.

The SEC is seeking unspecified penalties and restitution against London and Shaw. The federal charge of conspiracy to commit securities fraud through insider trading against London carries a maximum penalty of 5 years in prison, and a fine of at least $250,000.

Why Google Fiber Is Cable's Biggest Nightmare

What's faster than a speeding cable Internet connection, and able to leap between mobile computing and old-school TV in a single bound? If you ask Google (NASDAQ: GOOG  ) , the answer's simple: lightning-fast fiber-optic Internet service.

As it stands, broad access to Google's service has been limited to the greater Kansas City area, so Fiber's been little more than an intriguing notion. But with news that Austin, Texas, is next up on Google Fiber's hit parade, the prospects are becoming intriguing that Google could build an entirely new source of revenue and turn the Internet industry upside down.

Austin, here we come
The official announcement that Fiber is coming to Austin was supposed to be a closely guarded secret, but that didn't last long. A local news outlet leaked the story a week ago that Google Fiber was going to be the subject of the joint press conference with Google and Austin Mayor Lee Leffingwell. Austin seems like a natural for Fiber, since it's widely viewed as a domestic hotbed of IT. Beginning in mid-2014, local residents will be able to choose Internet service for $70 a month, or $120 a month with Fiber TV service, at connection speeds 100 times faster than cable, according to Google.

With two new Fiber announcements in a matter of weeks -- the service is also expanding to Olathe, Kan. -- it appears Google Fiber is ramping up after its K.C.-area beta test. Though most industry insiders don't believe Google intends to take over the Internet connectivity market, Google CFO Patrick Pichette did say, "We really think that we should be making business -- a good business -- with this opportunity [Fiber], and we're going to continue to look at the possibility of expanding." Investors and Google shareholders should like the sound of that; more revenue streams mean less reliance on Internet advertising.

Cable companies must be scared, right?
Are cable Internet providers concerned about the threat posed by Google Fiber? If so, they aren't showing it yet. It's probably just a coincidence that my cable provider, Comcast (NASDAQ: CMCSA  ) , recently offered to crank up my Internet connectivity speed at no charge. That's right -- a cable company opted to improve service without charging. Interesting.

Time Warner Cable (NYSE: TWC  ) , Comcast, and Charter Communications (NASDAQ: CHTR  ) , have all been on the other side of the Internet subscriber fence. Phone companies such as AT&T and Verizon began losing customers to these and other cable Internet providers some time ago, largely because of speed and connectivity issues. And now along comes Google Fiber with an alternative that blows the doors off anything Comcast, Time Warner, or Charter can offer, and often for the same or less money. If the cable industry isn't worried, it should be.

Not all the growth in cable companies' Internet customers comes from defections from the phone companies, but Internet continues to be a profitable area of growth in the industry. Charter saw an 8% jump in Internet customers in 2012 compared with the prior year. Time Warner Cable and Comcast also enjoyed substantial Internet growth last year, with annual revenues up 13.7% and 9.2% compared to 2011, respectively. With margins as high as 97% on cable Internet, according to a Bernstein analyst, these guys have a lot to lose if Google Fiber really takes off. And you can bet Google knows about those ridiculously high margins, too.

Google may be downplaying Fiber, at least in terms of how quickly it's chosen to roll the service out to mainstream America. As Charter, Time Warner Cable, and Comcast can attest, the opportunity for Google Fiber to become a significant source of alternative revenue can't be denied. And Google certainly has the wherewithal to invest in Fiber for the long haul, with more than $48 billion in cash and equivalents, and operating cash flow that's off the charts.

Fiber is going to change the way we connect to the Internet, and it's yet another example of why Google is close to an ideal growth stock. If it's not already, Google should be on your short list of investment options.

As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other Web companies, it's also struggling to grow additional sources of revenue. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.

Facebook: Now Regulator-Approved

The Gold Plunge Continues. Today, $1,500. Next Stop, $1,400?

After a multiyear run that has made countless investors significant returns, gold has fallen out of favor with investors both large and small. Recently, Goldman Sachs (NYSE: GS  ) recommended shorting gold stating that it could drop even faster than they expect if certain conditions line up against the yellow metal. While the global economy remains on questionable ground, even these negatives seem to be insufficient to drive gold prices higher.

You must now begin to wonder not what the next positive catalyst will be, but if gold falls below $1,500, which looks probable, a dip below $1,400 is likely to follow.

Technically speaking
While Fools don't follow technical analysis, neither do we ignore clear and convincing evidence that can have a real impact on our investments. The commodity has solid support around $1,500, but not much below that for quite a while. Commodities are notorious for following technical patterns because so many traders look at these factors. This is not reason alone to short gold, but it's definitely worth noting.

Gold Price in US Dollars Chart

Gold Price in US Dollars data by YCharts.

Goldman's view
A significant basis for Goldman's negative view on gold is the muted reaction the commodity has had to global macroeconomic events: "With our economists expecting few ramifications from Cyprus and that the recent U.S. slowdown will not derail the faster recovery they forecast in 2H13, we believe a sharp rebound in gold prices is unlikely," Goldman said. While I think this outlook view oversimplifies the forces acting on gold, it's not without merit. While the events in Cyprus represent evidence of economic uncertainty -- which is typically bullish for gold -- it also led to a strong U.S. dollar, which is bearish. It should not be surprising that these forces cancelled each other out initially, but the lingering weakness in gold is not promising.

Continuing weakness
Perhaps one of the most troubling realities for gold is that inflation continues to remain in check despite the Federal Reserve's slavish devotion to quantitative easing. Many large and small investors piled into gold, specifically into ETFs such as the SPDR Gold Trust (NYSEMKT: GLD  ) . As these investors see their positions dwindling and stops are hit, this may accelerate selling and drive gold even lower. That's one of the catalysts Goldman points to as a potential driver of gold prices below its target of $1,450. If money flows from GLD become increasingly negative, that has the potential to put significant downward pressure on gold.

The verdict
When gold prices remain stagnant, even in the face of global weakness, it's time for concern. Gold has enjoyed a solid run, but the current slump seems likely to continue. In addition, where miners such as Goldcorp (NYSE: GG  ) have underperformed the commodity for an extended period, earlier in the week that trend seemed to be reversing. Structural changes of this nature should be seen as an additional warning sign and a cause to stay on the sidelines. If you want to maintain some exposure to gold, the miners may be ready to reverse some of their underperformance and may provide a more attractive investment profile at current levels. Gold remains under pressure, and a tumble to $1,400 seems a good probability.

Goldcorp is one of the leading players in the gold mining market. For the past several years, investors have been the beneficiaries of several successful acquisitions and strong organic growth. Goldcorp's low-cost production of one of the most sought-after metals in the world continues to make this stock an attractive choice for long-term investors. To learn everything you need to know about this mining specialist, you're invited to check out The Motley Fool's premium research report on the company, which comes with a full year of ongoing updates and analysis to keep you informed as key news breaks. Click here now to claim your copy today.

Friday, April 12, 2013

Marks & Spencer Delivers Best-Ever Easter Week

LONDON -- Shares in Marks & Spencer (LSE: MKS  )  have risen 4% to 399 pence as of 8:50 a.m. EDT following the release of the high-street retailer's trading statement for the fourth quarter, which saw the strongest quarterly sales growth in the last two years.

Group sales increased 3.1% year on year, with total U.K. sales averaging out at a 2.6% rise. Another strong performance from its food operations, which saw a 6.3% lift (helped by its biggest-ever Easter week), more than offset the 2.2% drop-off in general merchandise. It was a similar story for like-for-like sales in the U.K., which saw a marginal increase of 0.6% as food soared 4% and general merchandise fell 3.8%.

Chief executive Marc Bolland commented:

We are working hard on improving our performance in General Merchandise and, despite difficult trading conditions, we made progress in our operational execution. We delivered an excellent result in Food, with performance well ahead of the market, as customers continued to trust us for provenance and quality. We are increasingly seen as the destination shop for special occasions.

An increased push in multichannel sales saw a 22.9% rise in the operations year on year, helped by increased participation in M&S' click-and-collect offer "Shop Your Way," while mobile sales soared more than 70% compared with the same period last year thanks to an improved mobile-shopping experience implemented.

Elsewhere, international sales grew by 7% following a good performance by its franchise business in the Middle East, while key markets in India and China continued to trade strongly. Management also highlighted the performance of its European stores, stating, "Despite the macro-economic issues in some of the legacy markets, our performance in Europe improved in the quarter." 

So Marks & Spencer appears to be making ground in its directive to become an international multichannel retailer despite the continued decline of its clothing operations. However, Bolland and the rest of the management team are addressing this with "selected tactical offers," and they revealed in this morning's update that customers are responding well to "better editing" of its spring and summer range. If they can return the general merchandise department to former glory, coupled with its excellent food division, then Marks & Spencer, on a prospective yield of 4.5%, might just return to prominence -- both on the high street and in investors' eyes.

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Do Dell Stock Bidders Know What They're Getting Themselves Into?

Dell (NASDAQ: DELL  ) isn't going to go out on top.

Grim data out of industry tracker IDC doesn't paint a pretty picture on the state of the PC market. Worldwide shipments plunged 13.9% for all PC makers during the first quarter, according to IDC. 

Dell held up relatively better globally. IDC reports that Dell's unit shipments only fell 10.9%, actually growing in the Asia/Pacific region. However, it's clear that the PC makers aren't going to bounce back anytime soon.

Market leader Hewlett-Packard (NYSE: HPQ  ) was a market bleeder, as shipments plummeted 23.7%, but even former market darling Apple (NASDAQ: AAPL  ) is having a hard time selling its Macs and MacBooks these days. The consumer tech titan experienced a 7.5% dip in U.S. shipments during the period.

Dell's deteriorating state comes at a time when founder Michael Dell's plan to quietly take the company private blew up as activist investors began to shake up rival bidders. There's thankfully more to Dell's business these days than PCs, but in this video, longtime Fool contributor Rick Munarriz wonders if the successful bidder in this surprising bidding war will wind up being the real loser here.

Dell stock has responded favorably to the prospective buyer attention, but there's little reason to expect a turnaround here in the near future.

Tech titans will get bloodied here, and there will be a battle. It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

eBay Stock Gets Charged Up: What Investors Need to Know

Investors with eBay (NASDAQ: EBAY  ) stock in their portfolios will be happy to know that PayPal's long-awaited deal with Discover Financial Services (NYSE: DFS  ) officially launches next week. As soon as next Friday, April 19, PayPal's digital payments platform will officially be available to 2 million U.S. retailers that currently accept Discover credit cards.

When PayPal and Discover first announced this partnership last year, PayPal was only available in about 3,000 U.S. stores, most of which were Home Depot (NYSE: HD  ) locations. This means that as of next week, PayPal's footprint will more than double in size -- seemingly overnight.

Growth in eBay's PayPal business should push eBay stock higher, particularly because PayPal makes up about 40% of eBay's revenue. Moreover, by leveraging Discover's broad network of merchants, eBay could see its mobile transaction volume hit record highs this year.

Mobile money wars
eBay began testing its PayPal point-of-sale service more than a year ago at thousands of Home Depot stores around the country. Together with Home Depot, PayPal is finding new ways to entice in-store customers to pay with its point-of-sale service. "Home Depot and PayPal have run several promotions in recent months, offering $5, $10 or $25 rewards to users who spend a certain amount in-store with PayPal," Reuters reports.

One of the major upsides for retailers and stores such as Home Depot is the fact that PayPal's system operates at a lower transaction cost compared to traditional electronic terminals. Still, eBay isn't the only company vying for a piece of the roughly $10 trillion physical payment market. eBay's PayPal faces competition in the space from big names including Starbucks' Square service, and Google Wallet.

However, PayPal's reputation as the trusted leader in online payments is one advantage it has over Google in the space. Additionally, PayPal hopes to further set itself apart from the competition by offering merchants valuable customer data, according to Reuters.

Ultimately, if PayPal's point-of-sale initiatives catch on, it would be a boon to eBay stock. Shares of eBay are up more than 12% year to date, and the stock is trading at around $57 per share. However, thanks to its PayPal business, I think eBay stock can continue to climb higher from here.

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The U.S.' 10 Most Valuable Retail Brands of 2013

Recently, brand consultancy Interbrand came out with its report on the 50 most valuable U.S. retail brands of 2013. Read on to find out the top 10.

So how did Interbrand determine their value? In short, Interbrand looks at three key aspects. First is the financial performance of the branded products or services. Interbrand only considers companies with publicly available data that are creating economic value (meaning a positive EBITDA) and generating a minimum of 50% of their sales from their retail stores (this excludes Apple).

The other two aspects Interbrand considers are the role of the brand in the purchase decision process and the strength of the brand -- meaning, "the ability of the brand to create loyalty and, therefore, to keep generating demand and profit into the future."

Here are Interbrand's 10 most valuable U.S. retail brands of 2013:



Brand Value
(in billions)

Change From 2012










Home Depot 



















Sam's Club (a subsidiary of Wal-Mart)











Source: Interbrand.

Wal-Mart (NYSE: WMT  ) is the most valuable retail brand in the U.S. by a factor of five. Remarkably, Wal-Mart subsidiary Sam's Club is the eighth most valuable retail brand in the U.S. Wal-Mart established itself as the dominant low-cost retailer over decades by constantly improving on its processes and supply chain skills under the leadership of Sam Walton. While Sam is no longer with us, Wal-Mart continues to thrive and his family leadership continues today under Chairman S. Robson Walton.

Many people don't realize the difference in size between Wal-Mart and other retailers. The company's sales for the fiscal year ended Jan. 31, 2013, were $275 billion in the U.S. Compare that to the second most valuable retail brand in the U.S., Target (NYSE: TGT  ) , with sales of just $72 billion. Even (NASDAQ: AMZN  ) , 2013's fastest-growing major brand, only did $35 billion in sales in the U.S. in the past year.

Notably absent from the top 10 this year is Best Buy (NYSE: BBY  ) , which moved from fifth in 2012 to 13th in 2013 as the company's brand value dropped 52% to $8 billion. The electronics retailer had a tough 2012 as shoppers treated its stores as showrooms and then used apps to buy goods cheaper online from Amazon and eBay. In the past, both online retailers benefited from not having to collect state sales taxes, but that advantage is slowly ending.

Best Buy is slowly turning things around this year. It announced in February a policy to match prices found online, and earlier this month that Samsung would open "Samsung Experience Shops" in more than 1,400 Best Buy stores over the next few months. We'll have to wait a year or two to see if those efforts pay off.

Foolish bottom line
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Intel Is Helpless

Following the gloomy estimates out of market researcher IDC on the sad state of the PC market in the first quarter, Intel (NASDAQ: INTC  ) shares dropped by as much as 3%, since the bulk of Chipzilla's business is still tied directly to the PC market.

Bulls will point to the company's upcoming line of chips based on its Haswell architecture as a possible catalyst to reinvigorate growth. Intel's latest and greatest silicon is expected to offer modest CPU performance gains of 5% to 15% (assuming same clock speed as the previous-generation Ivy Bridge) and more impressive integrated GPU performance improvements of 30% to 50%, all while improving power efficiency and battery life. CEO Paul Otellini recently said that Haswell would offer "the single largest generation-to-generation battery life improvement" in the company's history.

The problem? None of that matters.

Of course performance increases every year. That's a given. There's no doubt that Intel continues to create the most powerful consumer microprocessors known to man. When it comes to manufacturing prowess, the company remains unrivaled. But those aren't the types of things that will sway the average consumer in the market for a computing device, who is increasingly switching to smartphones and tablets.

In some ways, Intel is facing performance oversupply. Most of that raw power likely isn't being tapped by casual users anyway, so consumers are turning their attention to lower-cost mobile devices where Intel still has no traction. Intel's fate remains inextricably linked to Microsoft's (NASDAQ: MSFT  ) , and Windows 8 is absolutely bombing with the average user. Having a cutting-edge processor does no good if a consumer hates the interface.

J.P. Morgan analyst Mark Moskowitz concurs. He believes that though Haswell may spur some demand within the Ultrabooks, it won't be enough to offset the broader declines that the PC industry is facing. Of particular concern were shipments in the Asia-Pacific region. Units fell 13% there, which is the first double-digit decline posted in that geography. Moskowitz also thinks that OEMs will start looking for price breaks amid soft demand.

Haswell is more of a threat to NVIDIA (NASDAQ: NVDA  ) than anything else, primarily at the low end of the discrete GPU market. NVIDIA has held up admirably to the threat of integrated graphics, and its high-end discrete GPUs will always blow integrated solutions out of the water.

Last year, NVIDIA investor relations exec Rob Csongor emphasized to me that investors should focus more on the difference between integrated performance and discrete performance, since that difference is where NVIDIA conveys its value proposition to gamers and enthusiasts. With Haswell, that difference will get smaller.

Despite Intel's attempts to crack mobile, it still has little to nothing to show for it. Within the PC market that Intel still leans on (63% of revenue last quarter), Intel is helpless.

When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel finds itself in a precarious situation longer term if it doesn't find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Click here now to learn more.

Thursday, April 11, 2013

Rite Aid Jumps on Surprise Profit

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Rite Aid (NYSE: RAD  ) jumped as much as 20% today after the drugstore chain turned in its first full-year profit in six years.

So what: Higher margins from generic drugs, and an increased number of prescriptions, helped spur the turnaround. Despite a drop of same-store sales of 2%, the retail chain was still able to make a $0.13 per-share profit, thanks to an increase in gross margin from 24.9% to 31.7%. Analysts had expected a loss of $0.02 a share, and today's results were greatly improved from a year ago, when Rite Aid lost $0.18 per share. Sales were in line with estimates, dropping nearly 10%, as the company closed down stores over the last year.

Now what: Rite Aid is one of the cheaper stocks in the market based on price/sales ratio, so any step in the right direction is bound to send shares skyrocketing. Still, the retailer has a huge debt load on its hands, and declining same-store sales is always a concern, as well. The implementation of the Affordable Care Act could be a windfall for Rite Aid, however, as it's likely to add the number of prescriptions and drug sales nationwide, benefiting the country's No. 3 drugstore chain. Keep an eye on that issue moving forward.

Want more on Rite Aid? Add the company to your Watchlist by clicking here.

An Investor's Look at Obama's Pick for Energy Secretary

On Tuesday, Ernest Moniz testified in front of the Senate Energy and Natural Resources Committee in hopes of being confirmed as the next U.S. Energy Secretary. Given that there seems to be bipartisan support for him taking up the position, investors should know where he stands on key issues. In this video, contributor Aimee Duffy talks to fellow contributor Tyler Crowe about the decisions Moniz will face when he takes up the post, like whether or not the U.S. should export natural gas, and whether alternative energy companies should be allowed to utilize the master limited partnership business structure.

Master limited partnerships like Energy Transfer Partners dominate the midstream industry and delight investors with their high yields. To see if ETP and its sizable dividend payment could be a good fit for your portfolio, you're invited to check out The Motley Fool's premium research report on the company. Simply click here now for a thorough expert analysis of this midstream company.

Voluntary Product Recall Sacks Shares of Integra LifeSciences

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Integra LifeSciences (NASDAQ: IART  ) , a manufacturer of surgical instruments and medical implants, fell as much as 13% after the company announced a voluntary recall of certain products at its Anyasco manufacturing facility in Puerto Rico.

So what: The recall encompasses its DuraGen Dural Graft Matrix products that were manufactured between December 2010 and May 2011 and between November 2012 and March 2013. Integra noted that there "may have been deviations from approved processes in their production." On the bright side, there have no adverse events reported, and it appears to have remedied the manufacturing problem. However, the damage of the recall is done and will reduce its upcoming quarterly revenue by $8 million to $11 million to a range of $194 million to $197 million. Earnings will also be affected, with the company slated to now only earn an adjusted $0.30-$0.40 in the first quarter. Further, its second-quarter forecast was adjusted slightly lower to $205 million to $211 million because it may not be able to meet all necessary DuraGen Dural Graft Matrix product demand. As icing on the cake, Northland Capital downgraded Integra to "market perform" from "outperform."

Now what: Now here's a company that I'd love to see perform a strategic review and potentially shop itself around. Integra has been a chronic underperformer over the past five years, and its board would be wise to consider that course of action. But, that's just my opinion. The fact of the matter is that between possible legal ramifications, the recall cost itself, and lost production time, this is going to be a two-to-three quarter event for Integra. Although it will only marginally affect EPS, I'd prefer to wait on the sidelines and see what management has to say when it updates its 2013 fiscal guidance on May 2.

Craving more input? Start by adding Integra LifeSciences to your free and personalized Watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in device makers like Integra LifeSciences, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Why Citibank Is Up Big Today

Last week at this time, I was writing about how Citigroup (NYSE: C  ) and the rest of the big-four banks were tanking for no apparent reason. This week, I'm happy to report that Citi and its peers are decidedly not tanking. In fact, banks appear to be leading an overall market rally.  Here's what we know.

The exact opposite of last week
First, let's have a quick look at exactly where Citi, its peers, and the markets are about midway through the trading day:

Citi is up a big 2.43%. Bank of America is up 0.65%. JPMorgan Chase is up 1.36%. And Wells Fargo is up 0.92%.

The markets are all in the green, too, with the Dow Jones Industrial Average up 0.86%, the S&P 500 up 1.08%, and the Nasdaq Composite up 1.68%.

The Facebook effect
Two days ago, The Wall Street Journal broke the news that Citi plans to file suit against Nasdaq OMX Group for its botched handling of last May's Facebook initial public offering, and Citi's share price has been on the rise ever since.

There's no word yet on how much money the bank will ask for, but the Journal is reporting that securities firms as a group lost around $550 million total on the deal. Swiss banking giant UBS lost $356 million alone, which leaves less than $200 million for Citi and its cohorts to split.  

Based on this, we know that whatever the superbank eventually claims in the filing won't be a game-changing amount of money. But investors -- like myself -- are probably just happy to see that the sometimes languid and unfocused bank is stepping up to try to right a wrong and recover monies it feels are justly due.

Speaking of game changers, thank you to CEO Michael Corbat for going to bat for Citi's bottom line and for investors.

Of course, in addition to the Facebook news, Citi is also up likely just because the markets are up. The stock market, as we know, moves because of human psychology as much as for any other reason. There's a reason we have terms like "vicious cycle," as well as its flip side, "virtuous circle."

But Foolish investors like yourself know you're in the stock market for long term, and you know you don't need to check on your share prices everyday. In the short term, the markets may move up and down, but over weeks, months, and years, so long as the companies you're invested in have strong fundamentals, you know your money is in the right place.

Looking for in-depth analysis on Citi?
If so, look no further than our new premium report on the superbank. In it Matt Koppenheffer -- The Motley Fool's senior banking analyst -- will fill you in on both reasons to buy and reasons to sell Citigroup.

He'll also clue you in on what areas investors need to watch going forward. For instant access to Matt's personal take on Citi, simply click here now.

Starz Shares On Watch With New Vietnam War Drama

In January, Liberty Media (LMCA) completed the spin-off of Starz (STRZA). The newly separated company has key premium channel assets in the Starz and Encore brands. Starz also has developed a plan of creating original shows to coincide with its strong release of new movies. One new drama in development could turn out to be a sleeper hit for the network.

It was announced this week that MTV personality Gideon Yago, who co-wrote for "Newsroom", will script a show called "Airborne". The show will be a coming of age drama centered around the Vietnam War. Rob Tapert, who served as a producer on Starz's own "Spartacus", will be the executive producer of the show.

I see this show being a huge hit for Starz and think it could really help the new public company increase its likelihood of being acquired or push global expansion. A similar show called "Tour of Duty" ran from 1987 to 1990. That show saw three seasons and 58 one hour episodes aired before ratings couldn't keep up with competing shows.

The Vietnam War is still on the minds of many Americans. The show will air at a time when Vietnam War veterans are in their 60s and 70s and a new generation of grandchildren hears stories of the war. The show will be similar to "Platoon", in which it focuses more on characters and their struggles than the actual war itself. A show like "Airborne" will do well because everyone knows someone who was affected by the Vietnam War.

If the show can get high ratings numbers, it will help boost subscriber fees for Starz in an increasing competitive market. Starz loses "Spartacus", which has been one of the brightest launches in Starz's history. "Airborne" will have high expectations and should meet them and continue to pick up press and demand as the show approaches its undetermined air date.

After being used as a showcase for recently released movies, Starz has shifted into original content. This gives the company a better chance of competing with rivals and helps to negotiate higher su! bscription fees from the cable networks. Starz has aired original shows including "Spartacus", "DaVinci's Demons", "Magic City", "The White Queen", and "Boss".

Starz is the leading premium movie company with over 56 million subscribers. The company's Starz brand increased its subscribers 8% in 2012 to 21.2 million. Encore, Starz's other corporate brand, increased subscribers 5% to 34.8 million. In comparison, HBO owned by Time Warner (TWX) has 39.5 million subscribers, and Showtime, owned by CBS (CBS), has 21.3 million subscribers.

Since becoming a separate public company, Starz has been tossed around as an acquisition target. Media companies like Time Warner and CBS could benefit from the addition of Starz's subscriber base. Smaller companies like AMC (AMCX) and Lions Gate (LGF) could also greatly expand their reach with Starz.

Shares trade at $21.77, just off their highest price of $22.30 since the spin-off. Analysts on Yahoo Finance are calling for earnings per share of $1.73 in fiscal 2013. This marks a current price to earnings ratio of 12.6. Analysts expect to see earnings per share of $1.80 in fiscal 2014, representing 12.1 times next year's earnings.

Back in January, shares of Starz began trading at $14.20. Shareholders have seen a 50% gain since that time, but are not done. This is a great company that has room to run and will most likely be acquired in the next two years. "Airborne" could be the last piece that Starz needs to get a bidder lined up for its 56 million subscribers.

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

Wednesday, April 10, 2013

Goodyear Sued by French in Ohio

Since this country's discovery, France always had a large presence in the Ohio River Valley, until its defeat by American colonials and the British during the French and Indian Wars.

Today it's back again, declaring war on U.S. tire maker Goodyear (NASDAQ: GT  ) , by suing it in Ohio courts over the announced closing of its French tire factory earlier this year because it was no longer profitable. Despite losing money there for five straight years, the plant's workers are suing in U.S. courts because they say that's where the decisions emanated from.

Taking a siesta
Time magazine labeled the French factory in Amiens as Goodyear's "nightmare." Despite trying to work with the unions over the years to change work hours or eliminate redundancies and prevent just such an outcome, the unions thwarted every entreaty. The government has a heavy-handed way of dealing with closures and layoffs, for example castigating ArcelorMittal (NYSE: MT  ) for also having the temerity to want to close down an unprofitable facility. So just because Goodyear says it wants to end the bloodletting doesn't mean it will happen anytime soon.  

It probably didn't help any when the French government approached the CEO of tire maker Titan International (NYSE: TWI  ) , Maurice "The Grizz" Taylor, to see if he would be interested in buying the plant and was greeted with a giant guffaw instead.

"How stupid do you think we are?" he wrote to the French industry minister. "The French workforce gets paid high wages but works only three hours. They get one hour for breaks and lunch, talk for three, and work for three." He concluded by saying, "You can keep the so-called workers."  

Getting while the getting's good
France is a worker's paradise and, as Time aptly put it, a business owner's nightmare. Look no further than a bill making its way through the French parliament that would grant union members amnesty for pillaging corporate offices and threatening executives with bodily harm. With violent protests breaking out at Goodyear offices and protesting union workers battling with French police, it's quickly become clear that France is not a place where you want to do business.

In addition to factory closings by Goodyear and Arcelor, Ford, Coca-Cola, Renault, Samsonite, Sanofi, Sony, and Merck Serono are among some 1,500 firms looking to get out of Dodge. Or France, anyway.

Locking the gate
Because French courts have actually upheld the business' right to close, the French are seeing a mass exodus at a time when their unemployment rate is approaching 11%. That also probably informed the unions' decision to try their luck in American courts. In addition to stopping the closure, the union is seeking $4 million in damages.

It took nearly a decade for the French and Indian War to come to a conclusion, and analysts expect Goodyear will have to go nearly as long before it's able to finally close the French factory. The bloody battle will hardly serve as an enticement for other companies to locate to France in the future.

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KKR Names New Leaders for Japan Unit

Why IBM Still Looks Solid

Another Analyst Gets Even More Bullish on Qualcomm

Following a bullish note on Qualcomm (NASDAQ: QCOM  ) from Susquehanna analyst Chris Caso, the mobile chip giant is getting another analyst vote of approval today. This time, we're talking about Canaccord Genuity analyst Mike Walkley boosting his estimates on Qualcomm's prospects.

The analyst is reiterating a "buy" rating on the company while adding a couple bucks to his price target, bringing it to $85. Walkley believes that Qualcomm's core businesses are holding up admirably to recent assaults from Broadcom (NASDAQ: BRCM  ) , Intel, and NVIDIA (NASDAQ: NVDA  ) . In fact, he's even raising his market share estimates.

In February, Broadcom announced a new LTE baseband chip to target the discrete modem market, supporting next-generation technologies like LTE Advanced carrier aggregation. There is even speculation that Broadcom is looking to expand its relationship with Apple beyond Wi-Fi combo chips, and that the company was hoping to score another iPhone spot.

That same month, NVIDIA reached a major competitive milestone with its Tegra 4i. Previously code-named "Grey," the Tegra 4i is NVIDIA's first applications processor with an integrated LTE modem. Qualcomm's focus on integration has been a key driver of its smartphone market share gains, and NVIDIA wants a piece of that success.

Even though rivals are sampling competing chips this year, Canaccord believes that Qualcomm's third-generation chipsets still boast considerable advantages to the first-generation silicon of other companies, particularly in areas like global and support and TD inclusion. LTE frequency fragmentation is also a tough nut to crack for newer entrants.

Like Caso, Walkley also sees Qualcomm benefiting greatly from Samsung's new Galaxy S4. While only about a third of Galaxy S III variants were LTE enabled, the analyst estimates that two-thirds of Galaxy S4 variants will feature LTE connectivity. Qualcomm's Snapdragon processors also seem to be in more Galaxy S4 variants this year instead of Samsung's own Exynos. Add in the fact that Galaxy S4 units should come in at about 100 million over the next year, up from approximately 65 million Galaxy S III units to date, and you get a recipe for some healthy revenue upside.

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Tuesday, April 9, 2013

North Korea and the Fear of Total Destruction

Days after warning that it couldn't assure diplomats' safety in the event of war, the news of the day is that North Korea is preparing for a missile test on April 10. Another day, another act set to raise the stakes in a standoff that heated up with surprising ferocity across the past month.

The stakes on the Korean peninsula are enormous. North Korea has a reported 13,000 artillery pieces at its disposal, the majority of which are close to the thin demilitarized zone that separates the two countries. While South Korea's capital of Seoul may not be "flattened" within the first 30 minutes of conflict, as past reports have concluded, the scale of destruction to a modern global metropolis would be unlike anything most have witnessed in their lifetimes if a full-scale war broke out.

How unique and dangerous of a situation is this? Imagine a 30-year-old despot sitting across a small 2-mile-wide zone in White Plains N.Y., ready to shell Midtown and move more than a million troops south to attempt occupying the remainder of the Tri-State area, and you essentially have the situation playing out in Korea.

The recent elevated bluster from the North is commonly dismissed as showmanship. North Korean leader Kim Jong-un is still a new "Supreme Leader" of the country and the youngest head of state in the world. The thought is that his saber-rattling builds credibility with a military establishment that's one of the few functioning establishments in the country.

Every few years, tensions rise on the Korean peninsula, such as in late 2010, when the two countries briefly traded artillery fire, only to settle back. The stakes of war are too high, and even Kim Jong-un and his father didn't want to risk a full-fledged war and the total destruction it would cause to the Korean peninsula.

Yet in a world that's recently been obsessed with "financial weapons of mass destruction" that led to the financial crisis of 2008, it's important to remember that we live in a world with real weapons of mass destruction. The financial crisis of 2008 came about because financial models deeply underestimated the risk inherent in their construction. In hindsight, many of the risks seemed obvious; of course insuring hundreds of billions in poorly constructed home mortgages for pennies on the dollar was riskier than believed!

So far, world markets have largely ignored the situation playing out in Korea. We've been there, done that. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is still up more than 11% on the year. Yet you can't help wondering if the risks in Korea are being miscalculated. Would it be such a stretch of the imagination that in five years the common refrain was "of course a 30-year-old unelected ruler of an impoverished country was likely to act out a bit too strongly and start a war"?

The odds are: that North Korea continues acting out for attention over the next few weeks, the United States and South Korea end their joint exercises on April 30, and the peninsula heads back to the status quo. The world is constantly sitting on the edge of danger, a few unforeseen events away from turning back from the relative peace that's marked the past half-century. This is just another political crisis, the vast majority of which lead to little to no escalation.

Yet what's spooky about North Korea is the instability of the leadership, its increasing capabilities, and its ability to inflict massive destruction across somewhere as populated as the Korean Peninsula, an area with more than 75 million people in it.

Aside from artillery pointed at the South, the country continues testing nuclear weapons. Its long-range-missile program has its share of failures, but it continues moving toward intercontinental missiles that could threaten the western United States. To think that these capabilities are in the hands of such a young ruler whose upbringing few know of or understand is truly terrifying.

While we fret about financial weapons of mass destruction today, history's greatest destroyer of wealth has been the physical kind of destruction. Maybe a world in which the greatest fear is the destruction caused by trillions of dollars' worth of financial derivatives isn't so bad after all.

Why Inflation Hasn't Spiraled Out of Control

"Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation."
--Warren Buffett, 2009.

As the Federal Reserve double-, triple-, and quadruple-downed on monetary policy starting in 2008, the common-sense response was to predict that booming inflation was right around the corner.

But they warned it would come in 2009, and it didn't. They warned it would come in 2010, and it didn't. The same goes for 2011 and 2012.

The Consumer Price Index has increased at an average annual rate of 1.87% since 2008. That's almost half the average post-World War II rate of change. Privately measured inflation gauges show roughly the same thing.

What happened?

I recently sat down with Hoover Institute economist Russ Roberts. He took a stab at the inflation conundrum. Have a look.

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