i Life Insurance 2013: June 2014

Sunday, June 29, 2014

Royce Funds Commentary - Stock Picking Matters in the Current Market Climate

Has the current market environment begun to favor less speculative companies and investment managers with a more active orientation? Director of Investments, Managing Director, and Portfolio Manager Whitney Georgetalks about valuations, sectors and industries that he believes look promising, and some names in which he has high conviction.

Many of the portfolios you manage or co-manage have done very well so far in 2014. What conditions have helped to drive the rebound?

The market has definitely been improving for our style of investing—we'd like to think it's also normalizing; that is, returning to a more historically typical performance cycle in which company fundamentals matter. This started more than a year ago when taper talk began and interest rates started to rise.

Around that same time it became pretty clear that legislative agendas were being closed down in Washington, creating a gridlock that seems to have removed some uncertainty. Businesses no longer have to guess what might happen politically because it's become almost impossible to get anything done. This isn't likely to change until after this year's mid-term elections at the earliest. Correlation levels across all asset classes are also declining. It feels like a better market for active management overall.

What sectors or industries look most promising to you going forward?

One area that I like is Energy, which has done well so far in 2014 after bottoming out in 2012 and in general not being a significant contributor in 2013. Many of our holdings in the sector have done very well recently, especially following the cold winter in the Northeast. That brought a lot of renewed attention to Energy companies. With the slowly improving economy, some of the more economically sensitive cyclical areas have also improved, such as Industrials and Materials.

In addition, we've seen some more targeted themes that we like do well year to date, such as cheap protein producers, chicken stocks, and egg producers. Beef and pork prices have increased, so these other protein-producing areas have attracted new interest from investors. A recovery in demand for fast-food chains, driven in part by new breakfast menus, has helped to build a growing appetite. And feed costs, principally corn and soy beans, have moderated, creating an excellent fundamental backdrop. For example, Sanderson Farms—a long-term holding—saw its fiscal second-quarter profit more than double because demand for chicken was strong while costs for grain fell. M&A activity, which has been healthy through much of the equity market, has been very robust in these food-related areas.

Can you discuss a few stocks that you feel especially confident about right now?

I discussed Myriad Genetics in January, and I still really like the company. It's a molecular diagnostic company that specializes in genetic testing for cancer. After receiving a mixed ruling from a Supreme Court decision in June 2013 when it was decided that human genes can't be patented, its stock price began to fall. Many investors were concerned that Myriad would struggle to compete or be profitable in the light of the Court's decision. The stock later recovered; it enjoyed a terrific first quarter of 2014. Though its price has been a bit volatile more recently, we continue to believe in the company. It remains a leader in genetic testing with a variety of industry-standard tools for detecting hereditary cancer risk. Fiscal third-quarter revenues, announced in May, were up, helping to make fiscal 2014 nicely profitable.

I'm also confident in the prospects for Kennedy-Wilson Holdings, a real estate investment and services company that operates in the U.S., the U.K., Ireland, Spain, and Japan. The company focuses mainly on multi-family homes and commercial real estate, particularly in distressed areas, and we have liked their expertise in these places for a number of years. In February, the firm made a major investment in Europe in the form of Kennedy Wilson Europe Real Estate Plc, publicly traded on the London Stock Exchange, which one of the business's wholly owned subsidiaries will manage. I think the firm is looking increasingly like a very well-run asset manager.

Finally, I'm pleased to see RV maker Thor Industries revving up a bit so far in 2014. It's a stock that we've owned in some Royce portfolios for more than a decade. Like Myriad Genetics, its share price has been somewhat volatile in 2014, but I like its prospects for steadier improvement. After a difficult winter, the firm saw improvements in profits, margins, and earnings in the spring. It has steadily increased market share in the years since the financial crisis, expanded its operations into former competitors' factories, and successfully gained a greater presence in the high-end RV market. Its stock has done pretty well over the last couple of years, but I think it still has room to run.

What do you make of the current market climate?

I think valuations are a bit above average, but not unreasonably so given near-zero interest rates and low inflation. There are a lot of anomalies in the market, and I see a wide disparity between what looks to us like expensive stocks and those that look inexpensive on an absolute basis. The market seems to be in the process of sorting that out—certainly those areas of the market that don't interest us, and that did well in 2012 and 2013, have been far more volatile so far in 2014. We're still seeing companies that look attractively valued to us based on their fundamentals. All in all, I'd say we are in a stock-picker's market, and I feel really good about that.

Important Disclosure Information

Whitney George is Director of Investments, Managing Director, and a Portfolio Manager of Royce & Associates, LLC, investment advisor to The Royce Funds. He serves as portfolio manager for Royce Premier Fund (RPR), Royce Low-Priced Stock Fund (RLP), Royce Global Value Fund (RGV), Royce SMid-Cap Value Fund (RSV), and Royce Focus Trust (FUND). He also serves as assistant portfolio manager for Royce Micro-Cap Fund (RMC), Royce Value Fund (RVV), Royce Value Plus Fund (RVP), Royce Focus Value Fund (RFV), and Royce Capital Fund – Micro-Cap Portfolio (RCM). Mr. George's thoughts in this interview concerning the stock market are solely his own and, of course, there can be no assurance with regard to future market movements.

This material is not authorized for distribution unless preceded or accompanied by a currentprospectus. Please read the prospectus carefully before investing or sending money.Investments in securities of micro-cap, small-cap, and/or mid-cap companies may involve considerably more risk than investments in securities of larger-cap companies. (See "Primary Risks for Fund Investors" in the respective prospectus.) Investments in foreign companies may be subject to different risks than investments in securities of U.S. companies, including adverse political, social, economic, or other developments that are unique to a particular country or region. (Please see "Investing in International Securities" in the prospectus.)

Also check out: Chuck Royce Undervalued Stocks Chuck Royce Top Growth Companies Chuck Royce High Yield stocks, and Stocks that Chuck Royce keeps buying

Currently 0.00/512345

Rating: 0.0/5 (0 votes)

Subscribe via Email RSS Feeds

Subscribe RSS Comments Please leave your comment:
More GuruFocus Links

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

Wednesday, June 25, 2014

Cliffs Natural Resources: ‘Prudent’ to Idle Coal Mine, Iron Ore a Much Bigger Problem

Cliffs Natural Resources (CLF) filed notice to close its Pinnacle coal mine. Wells Fargo’s Sam Dubinsky calls the move “prudent” but doesn’t do anything about its much larger exposure to iron ore. He explains:

Reuters

We view the exit as a mixed bag as the mine was lower than average cost, but also had high exposure to the seaborne market, which has significantly more pricing volatility than the domestic market…

We estimate iron ore represents ~85% of revenue and is in a multi-year structural downturn due to ramping global supply, which is expected to outpace incremental steel demand by over 3:1 over the next few years. With new supply coming online at <$50/MT and Chinese steel production slowing at a fast pace, we see no reason why iron ore pricing will recover and expect Cliffs to burn cash. The only saving grace in our view would be the sale of high cost Canadian operations, but we are not convinced the company can find a buyer during a downturn.

Shares of Cliffs Natural Resources have gained 0.6% to $14.28 at 3:02 p.m. today.

3 Tech Stocks Spiking on Big Volume

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

>>5 Hated Earnings Stocks You Should Love

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

>>Buy These 5 Rocket Stocks to Beat the Market

With that in mind, let's take a look at several stocks rising on unusual volume recently.

Control4

Control4 (CTRL) provides automation and control solutions for the connected home. This stock closed up 6.5% to $19.26 in Monday's trading session.

Monday's Volume: 930,000

Three-Month Average Volume: 313,839

Volume % Change: 202%

From a technical perspective, CTRL ripped sharply higher here back above its 200-day moving average of $18.90 with strong upside volume. This spike higher on Monday is quickly pushing shares of CTRL within range of triggering a near-term breakout trade. That trade will hit if CTRL manages to take out some key near-term overhead resistance levels at $19.35 to $20.04 with high volume.

Traders should now look for long-biased trades in CTRL as long as it's trending above Monday's intraday low of $18.18 or above its 50-day at $17.62 and then once it sustains a move or close above those breakout levels with volume that hits near or above 313,839 shares. If that breakout triggers soon, then CTRL will set up to re-test or possibly take out its next major overhead resistance levels at $21 to $22, or even $23 to $24.

3D Systems

3D Systems (DDD), through its subsidiaries, operates as a provider of 3D printing centric design-to-manufacturing solutions in the U.S., Germany, the Asia-Pacific and other European countries. This stock closed up 7.2% to $57.23 in Monday's trading session.

Monday's Volume: 7.10 million

Three-Month Average Volume: 4.45 million

Volume % Change: 175%

From a technical perspective, DDD ripped sharply higher here and broke out above some near-term overhead resistance at $56.95 with above-average volume. Market players should now look for a continuation move to the upside in the short-term if DDD manages to take out Monday's intraday high of $57.23 with strong upside volume.

Traders should now look for long-biased trades in DDD as long as it's trending above some past resistance at $55 and then once it sustains a move or close above $57.23 with volume that hits near or above 4.45 million shares. If that move begins soon, then DDD will set up to re-test or possibly take out its next major overhead resistance levels at $60 to $61, or even its 200-day moving average of $64.42.

Cognex

Cognex (CGNX) provides machine vision products that capture and analyze visual information in order to automate tasks primarily in manufacturing processes. This stock closed up 2.5% at $39.02 in Monday's trading session.

Monday's Volume: 694,000

Three-Month Average Volume: 468,642

Volume % Change: 50%

From a technical perspective, CGNX trended notably higher here with above-average volume. This stock has been uptrending for the last two months, with shares moving higher from its low of $30.67 to its intraday high of $39.16. During that uptrend, shares of CGNX have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CGNX within range of triggering a major breakout trade. That trade will hit if CGNX manages to take out Monday's intraday high of $39.16 to its 52-week high of $40.14 with high volume.

Traders should now look for long-biased trades in CGNX as long as it's trending above Monday's low of $38.26 or above $37 and then once it sustains a move or close above those breakout levels with volume that's near or above 468,642 shares. If that breakout gets set off soon, then CGNX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $45 to $50.

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

Tuesday, June 24, 2014

U.S. stocks bounce back; Dubai tanks

Click for more market data. NEW YORK (CNNMoney) Stocks hit fresh highs early Tuesday as investors finally found their beat. Upbeat reports on consumer sentiment and housing got the party started.

The Dow Jones industrial average and the S&P 500 both gained about 0.2%, which was enough to push tthe S&P 500 to a new intraday high and the Dow just shy of one. The Nasdaq was up about 0.6%.

The gains came after a measure of consumer sentiment rose to the highest level since Jan. 2008. The Conference Board's index of consumer confidence increased to 85.2 in May from 82.2 in April, suggesting that Americans remain optimistic about the economy.

There was also good news on the housing front. Home prices nationwide continued to rise in April. The S&P/Case-Shiller index measuring the value of residential real estate in 20 U.S. cities increased 1.1%. Separately, the government said sales of new homes rose more than 18% in May from April.

Stocks to watch -- Buffalo Wild Wings, Carnival, Walgreens: The World Cup has been good for business at Buffalo Wild Wings (BWLD), according to one analyst. Shares of the sports-themed restaurant chain jumped 6% Monday after an analyst at Wunderlich Securities increased his price target for shares after seeing all the demand for the flagship wings for soccer games. But the stock was down in trading Tuesday as the enthusiasm waned a bit.

World Cup GOOAL for Buffalo Wild Wings!

Carnival Corp (CCL)reported quarterly results that topped expectations, but the company's forecasts for the rest of the year weren't as rosy. The stock dropped over 2%. The cruise line operator blamed fuel prices and currency exchange rates, which it said will reduce earnings full-year by 6 cents per share.

Walgreens (WAG) said earnings rose nearly 16% in the first quarter, but the results missed analysts' expectations. Shares fell more than 1%.

You might not have heard of Vertex Pharmaceuticals (VRTX), but it's worth looking up today. Shares soared 40% after the company said a study of its cystic fibrosis drug produced positive results.

Dubai enters bear market. Stocks in Dubai have been battered by concerns about the g! rowing turmoil in Iraq, where insurgents have been gaining ground in the oil-rich nation.

The Dubai DFM General index plunged more than 6% overnight. It was the worst one-day drop since Oct. 2008, according to a note from analysts at ETX Capital. The index is down more than 22% so far this month, putting the Persian Gulf Emirate in a bear market.

"There is a possibility that traders are liquidating positions as a result of the current situation in Iraq which has eaten at sentiment in the Emirate region," the analysts wrote.

Abe lets another arrow fly in Japan: Japan's government has released details on the third and final phase of Prime Minister Shinzo Abe's ambitious plan to jolt the country's economy out of stagnation. Companies may pay less tax as a result, but the response in the stock market was muted. The Nikkei ended flat.

European markets were mixed in afternoon trading.

The ruble and Moscow stock index were stronger, continuing their recovery from sharp losses earlier this year as fears about an escalation of the crisis in Ukraine fade. A ceasefire between government forces and pro-Russian separatists declared last Friday appears to be holding. Sentiment was also improving after Abbott Laboratories (ABT) said Monday it would buy Russian pharmaceutical company Veropharm for as much as $495 million, underlining the waning threat of sanctions.

Monday, June 23, 2014

Expedia Inc. (EXPE): Itinerary - $90 says Susquehanna (but maybe more)

Expedia Inc. (NASDAQ:EXPE) shares are travelling higher today, up more than $2.50 as we type, The 3.5% move up comes compliments of an upgrade from Susquehanna. The broker says the stock now gets a "Positive" rating versus yesterday's "Neutral" recommendation.

Analyst, Brian Nowak put a $90 price-target on EXPE along with his upgrade – potential upside to target of 16.69% as of this keystroke, not including the 0.8% dividend.

Expedia operates as an online travel company in the United States and internationally. It provides travel products and services to leisure and corporate travelers, offline retail travel agents, and travel service providers through a portfolio of brands, including Expedia.com, Hotels.com, Hotwire.com, Expedia Affiliate Network, Classic Vacations, Expedia Local Expert, Egencia, Expedia CruiseShipCenters, eLong, and Venere.com.

[Related -Expedia, Inc. (EXPE) Q1 Earnings Preview: Double Beats Have Been Doubly Positive for EXPE]

Nowak believes the company's prospects are discounted by his peers on the street. He pronounced, "Our updated breakdown of EXPE's 3 main businesses (Travelocity, Trivago, and "core") shows how Street EPS numbers are 3% and 4% too low in '14 and '15 even using conservative assumptions."

To get to $90, the analysts wrote, "We raise our target multiple to a 25% premium based on faster EPS growth (19% the next 3 years) and see upward revisions, execution, and faster growth driving outperformance."

[Related -Tumi Holdings (TUMI): This Luxury Stock Has 3 Powerful Tailwinds]

It's clear; Nowak's upgrade and price-target are earnings based calls.

As it is now, Wall Street has consensus EPS estimates of $3.84 and $4.47 for 2014 and 2015, respectively. Minimally, Nowak believes the numbers will be closer to $3.96 this year and $4.60 next year, which is year-over-year growth of 16.16%.

To hit $90 based on the updated, minimum earnings, according to Susquehanna would require investors to pay 19.57 times earnings-per-share (EPS). In the last half-decade, Expedia's average price-to-earnings ratio (P/E) was 22.19 with a range of 6.29 to 68.49. During the same timeframe, EXPE earnings contracted by an average annual rate of -5.71%. That means investors have been willing to pay up for the internet service provider.

A 25% premium to earnings growth as Nowak suggests, would translate into a P/E of 20.2 using our updated, hypothetical EPS; providing some upside to the $90 target at $92.92.

Overall: If Brian Nowak has made the correct call on the street under-projecting Expedia Inc. (NASDAQ:EXPE) earnings power, then $90 should be achievable based on EXPE's recent P/E history.

Forget Procter & Gamble, Investors Need to Check Out Nestle

It sounds ridiculous to suggest that a $247 billion company could possibly fly under anyone's radar. But when you think of consumer staples stocks, chances are the usual suspects like Procter & Gamble (NYSE: PG ) come to mind. There's obviously good reason for this, since P&G is one of the biggest companies in America with dozens of universally known brands.

And yet, P&G is a smaller company than the one I'm referring to. The company I'm alluding to is Nestle (NASDAQOTH: NSRGY ) , the largest consumer goods company in the world.

Despite its huge size and stature, Nestle might not be as well-known as some of its American counterparts. Nestle is headquartered in Switzerland, and doesn't trade on a major U.S. exchange. In fact, Nestle shares trade over the counter. But in no way does that make Nestle less deserving of your attention.

Brand strength and diversity provides scale
There's a reason Nestle has resisted calls to split itself or spin off certain brands. Management believes that operating a company of its size holds inherent advantages, particularly when it comes to research and development. R&D investments in one area of the business, such as in nutrition on the health sciences side, which can directly aid other groups. This allows it to keep overall costs low and produce strong profitability, even while sales growth remains modest.

Nestle sells everything from candy bars, to bottled water, to pet food. In all, Nestle holds more than 2,000 brands and it offers them in more than 80 countries. To some, this may be considered reason to pursue a spin-off. Some investors believe that the company's parts are worth more than the whole.

But keeping its massive brand portfolio under one umbrella hasn't held Nestle back. In fact, Nestle produced 4% organic sales growth last year along with 11% growth in earnings per share in constant currencies. This is a testament to the company's powerful brands and its ability to effectively manage costs.

And, Nestle's global reach means the company is realizing strong growth from the emerging markets. Last year, Nestle produced 9% organic sales growth in the emerging markets, compared to just 1% in the developed markets.

A huge and diversified brand portfolio is what makes P&G such a strong company as well. P&G has been in business for 176 years, and sells its products in more than 180 countries across the globe. It holds 25 brands, which each bring in at least $1 billion in annual sales. Just a few of its core brands include Tide, Crest, and Gillette.

This has allowed P&G to post strong, consistent results year in and year out for decades. In turn, shareholders have been rewarded handsomely. P&G has passed along increases to its dividend for 58 years in a row. Likewise, Nestle maintains a serious commitment to paying a strong dividend, which gives investors income in addition to growth.

Nestle has plenty to offer
Nestle might not be your first choice in the consumer staples space, but you'd be wise to consider it, if you're looking for a company that can offer both growth and income. Nestle has a huge portfolio of well-known brands, which provide dependable profits that allow it to pay a solid 3% dividend. And before you get to thinking that this is a lumbering giant, you should know that the company is growing, particularly in emerging markets.

Nestle management contends its size is an advantage, because it allows the company to "scale up" research and development costs. So despite its size, it's by no means out of room to grow.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

4 Airlines Looking Like Value Stocks

A quick screen for potential value stocks uncovers at least 4 airline companies that may qualify. Emphasis on the word "may." Setting aside, for now, narratives that might attempt to explain "why," the simple non-story metrics lead to:

Skywest (SKYW) would seem to fit the mold. The price/earnings ratio is a measly 11 and it's trading at about half of its book value. The dividend payment comes to 1.4%. The 2012 low was 6.50 – it's doubled since then.

Republic Airways Holdings Republic Airways Holdings trades at about 90% of book value. The P/E is low at 7. The stock is priced today at 9.51 –it's been down trending for about 6 months — but is well up from it's 2011 low of 3.

China Southern Airlines China Southern Airlines has a P/E of 8 and trades at about 90% of book. It's been down trending steadily for months and at 16.40 is brushing 4-year lows.

China Eastern Airlines China Eastern Airlines has been trading in a range between 25 and 14 for 4 years now. At 16.61 today, it's available at the low end of that range. The P/E is 8 and it's priced at just about book value.

I would guess that the uncertainty and mystery surrounding Malaysian Flight MH370 is affecting the prices of airline stocks and especially those based in China. This short list is merely a starting point for more extensive research.

Airline stocks such these can be volatile and should be regarded as speculative even as they might seem to offer opportunity from a valuation perspective.

Disclosure: I do not hold positions in any of these stocks, long or short.

Saturday, June 21, 2014

Senator Joe Manchin Calls For Government Ban Of Painkiller Zohydro

A few hours ago, Senator Joe Manchin (D-W.Va.) submitted a bill demanding that the Food and Drug Administration (FDA) rescind its approval of the painkiller Zohydro, which a growing coalition of critics believes could become the next Oxycontin in the epidemic of prescription painkiller addiction. The "Act to Ban Zohydro," as Manchin suggested calling it, offers a 13-point argument as to why the drug is simply too dangerous, the FDA's approval should be overturned.

What is Zohydro and why all the outcry? Zohydro ER is a potent extended release formulation of hydrocodone, the opiate that's the primary ingredient in Vicodin among other drugs.

The difference is that Zohydro is 10 times as strong as any other hydrocodone-based opiate painkiller available – critics contend that two pills could be fatal to someone without a high tolerance for opiates, and one pill could kill a child. If brought to market, it would be the only drug that uses hydrocodone alone to treat chronic pain.

Among Manchin and colleagues' main points:

Friday, June 20, 2014

ADT: Time to Catch the Falling Knife?

There's an old maxim on Wall Street that says you shouldn't try to catch a falling knife; like a knife, your attempt to catch a stock in freefall may result in some significant damage, explains John Dobosz, editor of Forbes Dividend Investor.

With that cautionary prologue, let's get to our rationale for buying The ADT Corporation (ADT) now—after reporting quarterly results that fell short of expectations.

On January 30, the Boca Raton, Florida-based electronic security service for homes and businesses reported earnings for the October to December period of $0.43 per share on revenue of $839 million, falling well short of analysts' consensus for $0.49 in EPS and revenue of $850.7 million.

Over the next three days, the stock fell from $37.81 to $28.83 per share. That's when ADT insiders started buying the stock aggressively. On February 3, two directors purchased $181,000 worth of ADT shares, around $30.25 each.

On the same day, even more significantly, ADT's chief financial officer, Michael Geltzeiler, purchased $295,900 worth of ADT at $29.59. Five additional company officers spent another $221,000 collectively on ADT stock between February 3 and yesterday.

With the stock up about $3 from its lows, those buys have proven to be smart ones and have made a good case to try to get a handle on this falling knife.

Dividends are another good reason to get into ADT, which has paid them quarterly since its spinoff from Tyco in October 2012. ADT jacked up the quarterly payout by 60% from $0.125 to $0.20 per share in the most recent quarter.

Even at the higher rate, the dividend is just 42% of expected earnings, and only 9.2% of the $8.67 per share in cash from operations over the past 12 months.

Although it has a limited history as a stand-alone company, ADT looks cheap. Since its IPO, the stock has traded for an average of 2.68 times sales, a multiple that's 43% higher than its present price-sales ratio of 1.87.

ADT's average price-earnings ratio is 21.8 times earnings, a multiple that corresponds to a $41.85 stock price, using 2014 expected EPS of $1.92.

Subscribe to Forbes Dividend Investor here…

4 potential killers lurk as bull market hits 5

NEW YORK — The bull market that got no respect, the one Wall Street pundits said from Day 1 could not last, the one born on March 9, 2009, at the bottom of the worst stock market plunge since the Great Depression, turns 5 on Sunday.

But despite posting a gain of 177% — which ranks fifth-best in history and tops the average bull market return of 165%, according to S&P Dow Jones Indices — skeptical investors are still asking the same question about the "birthday bull": Can it last?

The question, of course, is still relevant. The life expectancy of the average bull market for the Standard & Poor's 500 stock index is a tad less than four years, according to InvesTech Research newsletter. Translated into human terms, that makes the current bull 104 years old, says Pat Adams at Choice Investment Management.

FEARS: Paranoia strikes deep with new market highs

What's more, this is only the sixth bull in the post-World War II era to celebrate its fifth birthday; only three of the previous five lived to see their sixth birthdays, S&P Capital IQ data show. And the two bulls that died ended very, very badly. One ended with the stock market crash in October 1987 known as Black Monday. The 2002-2007 bull market was followed by the financial crisis and Great Recession that led to the worst stock market downturn since the 1929 crash.

"The bull is definitely getting long in the tooth," says James Stack, editor of InvesTech Research. "One should probably assume we are in the later half, if not the later third."

The bull's fifth birthday also coincides with the S&P 500 trading at an all-time high, spurring debate on whether the market is nearing a top or fit enough to outrun the bear. Also giving market skeptics pause is the fact that "story stocks" such as electric-car maker Tesla and social-media darlings Facebook and Twitter are partying like it's 1999. Also attracting attention and increasing chatter about a frothy market is the Nasdaq composite edging closer ! to 5000 for the first time since it peaked near that level, then crashed in 2000.

Stocks are also riding a 29-month stretch without suffering a "correction," or a drop of 10% or more. Historically, corrections occur every 18 months, S&P Capital IQ says. If the past is a guide, that raises the specter of a potentially bigger drop when the bull finally expires, says Sam Stovall, chief equity strategist at S&P Capital IQ.

"The longer we go without resetting the dial, the greater the likelihood of a steeper correction, and the greater likelihood that it becomes a bear market," says Stovall.

But despite all the angst, it's important to point out that bull markets don't die just from old age. Just because stocks are trading in record territory and the bull has lasted longer and posted fatter gains than long-term averages, doesn't mean the bull can't keep stampeding, Wall Street experts say.

"Averages don't tell you anything," says Tom Lee, chief U.S. equity strategist at JPMorgan Chase.

JOBS: 5 clues to the health of the U.S. labor market

The 1990s bull market was both the longest (it lasted 9½ years) and the most profitable (it posted gains of 417%).

When looking at future outcomes in the stock market, the key question is whether conditions are ripe for economic growth and corporate earnings to rise quickly. Using that "formula," Lee says the current bull, which has been driven by Federal Reserve stimulus, a healing economy and record-profitability from Corporate America, will not only reach its sixth birthday in March 2015, but will likely chug on until at least 2017. Drivers include a rebound in infrastructure spending, households with lower debt loads and cash to spend, and massive wealth gains from the stock rally, Lee says.

"The big headline," says a bullish Charlie Bobrinskoy, director of research at Ariel Investments, "is that people make the mistake of saying the S&P 500 is at a record high, so therefore, it must be overpriced. The mark! et is des! igned to make new highs."

"Age alone," adds Stovall, "doesn't kill a bull."

So if old age doesn't kill a graying bull, what does?

"Bear markets normally require a trigger," says Stack, adding that despite rising risks he would "still put odds" on the bull continuing.

What are the warning signs? Are they present now?

TRACK YOUR STOCKS: Get real-time quotes with our free Portfolio Tracker

Here are four potential bull killers:

1. Recessions. "Most bear markets are caused by recessions," says David Bianco, chief U.S. equity strategist at Deutsche Bank.

The reason: When the economy contracts, so do corporate earnings, the lifeblood of a healthy stock market.

Investors often start selling when signs of a recession start to appear. Warning signals include slowing GDP growth, falling consumer confidence and the rolling over of leading economic indicators.

The last bear market, which lopped nearly 57% off the S&P 500, began in October 2007, two months before the start of the 18-month Great Recession. Most of Wall Street's biggest bear markets, such as the 48.2% drop in 1973-74, the 60% plunge from 1937 to 1942 and the 86.2% fall after the 1929 stock market crash, were all accompanied by recessions.

But a recession is not a great threat at the moment, says Bianco. Wall Street is expecting GDP growth, which measured 2.4% in the final quarter of 2013, to re-accelerate this year and claw its way back to its longer-term trend-line growth of 3%.

"There's a great deal of potential for a long-lasting economic expansion for the U.S. economy," says Bianco, who says there's an 85% chance the bull will reach its sixth birthday and dodge a 20% drop, or bear market. Data from Deutsche Bank show that so-called secular bull markets, or long-term ones that notch record highs, tend to continue for three years, on average, after new highs are hit. The S&P 500 took out its prior peak in 2007 a year ago in March.

Ariel's Bobrinskoy, who is bullis! h, cites ! the ongoing recovery in the housing and auto industries, a vibrant new energy sector in the U.S., and a recovering Europe as "four big tailwinds" that will propel the economy.

2. Hostile monetary policy and inflation. Fed interest rate increases are often bull killers. Higher rates tend to slow growth, reduce risk-taking and cool hot markets. Inflation reduces consumer buying power, which hurts sales of goods and services and crimps corporate earnings.

Stocks suffered a 27.1% drop from November 1980 through August 1982, in large part because then-Fed chairman Paul Volcker, in an effort to snuff out double-digit inflation, raised a key short-term U.S. interest rate from roughly 11% in 1979 to a peak of 20% by mid-1981.

While the Fed has said it would hold off on raising short-term rates until sometime next year, when they expect the economy and job market to be on solid footing, there's risk of a Fed-induced sell-off, says Todd Schoenberger, managing partner at LandColt Capital.

The unwinding of the Fed's unprecedented and experimental bond-buying program, dubbed QE, could roil markets and cause a market drop of 20% or more, he says.

"It's difficult to predict what will happen as a result of tapering," says Schoenberger. "No one knows what it means for stocks or the economy. I don't see the supporting evidence to suggest the economy can support itself without help from the Fed. With less stimulus, earnings and the economy are unlikely to be strong enough to justify current prices."

3. Excessive valuation. Stock markets that sport sky-high price-to-earnings ratios are also vulnerable to a big drop. A prime example was the bear market following the dot-com tech stock bust in 2000, when stocks got wildly overvalued relative to business fundamentals.

The P-E ratio of the S&P 500 ballooned to 28.2 at the end of 1999, according to Thomson Reuters. Near the 2007 top, the market was trading at more than 17 times its past 12-month earnings. Currently, the market's P-E! is 16.9.!

The market is not widely overvalued by any measure.

"Valuations," says Stack, "are not excessive. And the greater the excess, the greater the downside risk."

4. Exogenous shocks. It's hard to predict the unpredictable. Think "Black Swan" events such as the fall of Lehman Bros. in 2008. Or the stock market crash in October 1987. Or the latest scare from saber rattling caused by the crisis in Ukraine. Or the bursting of a real estate bubble in China.

These are triggers that can end bull markets.

Regardless of what plays out on Wall Street in the next year, investors need to brace themselves for change, confusion, volatility and the occasional market pullback, says Woody Dorsey, founder of Market Semiotics.

"The market is going to be more complex this year," he says. "Chances are it will be a far different year than last year. This is likely to be a market that the average investor won't understand."

Thursday, June 19, 2014

Retirement readiness looks grim in many states

Retirement readiness is grim across much of the country, an analysis released today shows.

Nearly every state comes up short in key areas that gauge retirement readiness: anticipated retirement income, major retirement costs, such as housing and health care, and labor market conditions for older workers.

In terms of retirement readiness in 2012, Wyoming ranks the highest, followed by Alaska, Minnesota and North Dakota.

California, Florida and South Carolina rank among the lowest.

The report, presented at National Institute on Retirement Security's retirement policy conference in Washington, D.C., is designed to be used by policymakers to help identify areas of policy intervention to improve people's retirement prospects.

Every state has its work cut out in one area or another, says the report's lead author, Christian Weller, a professor of public policy at the University of Massachusetts-Boston. When it comes to states addressing retirement issues in the future, "There is no one-size-fits-all," he says.

Institute executive director Diane Oakley said in a statement: "The good news is that some states already are considering policies to reduce future retiree poverty by encouraging workers to save today."

One particularly disturbing finding of the report: Older workers suffered more from higher unemployment and lower wages in lower-ranked states in 2012 than they did in earlier years. This effect may decrease as the labor market for older workers improves with a growing economy, the report says.

Still, Weller says, "Even if the labor market improves, the next recession will surely come, and it would be great to have better labor market policies in place protecting older workers' labor market prospects."

He says, "Surveys typically find that between 70% and 80% of people, when asked what they want to do in retirement, say that they want to work in some form or fashion, such as part-time, starting their own business and volunteering."

Gary Schatsk! y, a New York City financial planner and president of ObjectiveAdvice.com, says, this report "is yet another wake-up call for people to realize that feathering their nest with retirement savings is absolutely essential."

He says people also need to focus on their spending habits and eliminate extraneous spending. They should eliminate high-interest debt and take a hard look at their budgets. People have to take "ownership" that their future is up to them, Schatsky says.

Other key findings:

• All three potential sources of economic insecurity — retirement income, retiree costs and labor markets — for future retirees deserve policy attention.

• There is room for improvement in all states in one or more measures of financial security for future retirees. For example, the highest ranking state for workplace retirement plan participation in 2012 had only 54% of private employees participating in a pension or 401(k). Some people didn't participate, and some didn't have access to either one.

• Improving the future financial security of an aging workforce requires good employment options for older workers. Recessions can have serious longer-term consequences for the economic security of mature adults who have limited time to accumulate additional resources for retirement, the report says.

Stocks Going Ex-Dividend on Friday, June 20 (PNY, AWH, More)

Ex-dividend dates are very important to dividend investors, since you must purchase a stock prior to its ex-dividend date in order to receive its upcoming dividend payout. For more information, check out Everything Investors Need to Know About Ex-Dividend Dates.

Below we highlight five big-name stocks going ex-dividend on Friday, June 20.

1. Piedmont Natural Gas

Piedmont Natural Gas (PNY) offers a dividend yield of 3.46% based on Wednesday's closing price of $37.03 and the company's quarterly dividend payout of 32 cents. The stock is up 13.97% year-to-date. Dividend.com currently rates PNY as “Neutral” with a DARS™ rating of 3.4 stars out of 5 stars.

2. Allied World Assurance

Allied World Assurance (

Wednesday, June 18, 2014

Apple leads share buyback binge

Apple was one of the many S&P 500 companies buying back stock in the first quarter. NEW YORK (CNNMoney) Apple repurchased a record $18 billion worth of its own stock during the three months of 2014, making it the "poster child" for an ongoing trend in Corporate America, according to a report released Wednesday.

The companies in the S&P 500 spent a combined $159.3 billion to buy back their own stock stock during the first quarter of 2014, according to preliminary figures from S&P Dow Jones Indices. That's up 59% from the same period 2013. It was also $30 billion more than what those companies spent in the fourth quarter.

"Companies reached into their deep pockets this quarter," said Howard Silverblatt, senior analyst at S&P Dow Jones Indices. He added that companies bought back more stock than they issued during the quarter, reducing their overall share count.

It's a bit of financial engineering. By reducing the number of shares outstanding, companies are able to report higher earnings per share because profits are spread among fewer shareholders.

Earnings for 99 companies were boosted by at least 4% in the first quarter due to reduced share counts, said Silverblatt.

Some companies may have been attempting to offset the impact of bad weather on earnings during the first quarter. But the question now is whether there is a broader "shift towards more enhanced earnings via share count reduction," added Silverblatt.

In any case, Apple (AAPL, Tech30) has been one of the biggest spenders.

The iPhone maker's buybacks reduced the company's overall share count by 7% over the past 12 months. That boosted earnings per share by 7% in the first quarter, according to the report.

See Apple's new Steve Jobs in action

Apple announced plans in April to increase its share repurchase program to $130 billion, up from $100 billion. The company also hiked its dividend by 8% to $3.29 per quarter, up 24 cents from the previous $3.05.

The moves came in response to pressure from activist investors, such as Carl Icahn and David Einhorn, who have pushed Apple to return some of its cash with shareholders. At one point, Apple had more than $100 billion in cash sitting on its balance sheet.

For the most part, Apple has financed its share buybacks by selling bonds.

In addition to buybacks, companies have been rewarding share! holders with higher dividend payments.

The amount of money S&P 500 companies spent on buybacks and dividends combined was a record $241.2 billion in the first quarter. The previous record was set in the fourth quarter of 2007, when companies spent $233.2 billion to buy back stock and increase dividends.

Never Mind Ensco’s New Contract, Offshore Drillers Still Set to Struggle

Higher oil prices have helped offshore drillers like Ensco (ESV), Noble (NE), Diamond Offshore Drilling (DO) and Seadrill (SDRL) rally and now they’re getting another boost today after fleet updates from Diamond Offshore and Ensco.

Reuters

Diamond Offshore’s fleet update was largely in-line with expectations, note Cowen’s J.B. Lowe and Roland Morris:

As previously announced The Ocean Lexington has been contracted to work for a term of 1,189 days starting in December 2014 at a dayrate of $160k/d with PEMEX. The rate reflects the weak pricing environment in the lower-end of the floater market, but squeezing out any cash flow over the next several years from this asset is a positive for the rig given that it would have likely been stacked had it not won the contract.

But Ensco’s fleet status update contained a shocker: It had contracted one of its offshore drillers at a rate well above what anyone thought possible in this weak market. Johnson Rice’s Georg Venturatos explains:

Ensco provided an updated fleet status report, which was highlighted by an initial contract for its ultra-deepwater newbuild drillship, Ensco DS-8 (12,000′), expected to begin work for Total (TOT) in Angola during 3Q15 (through 3Q20) at an initial dayrate in the high $610 range (vs. our estimate of $505k/day) with periodic increases equating to an average rate in the mid-$650 range over the 5-year program (ex-mob).

Cowen’s Lowe and Morris warn not to read too much into Ensco’s new contract:

The $650kd average rate is well ahead of the low-$500′s that we expected, as negotiations with Total began nearly a year ago, and the rig was initially bid over a year ago when the UDW market was significantly stronger. The current market remains challenged, with lower-spec ultra-deep water assets commanding rates as low as $350k/ d. We expect the current market weakness to last well into 2015. There are still 10 ultra-deep water assets newbuilds scheduled for 2014 delivery and an additional 16 without contracts; we expect that several will be delivered without a contract or will have their deliveries pushed back.

That hasn’t stopped the drillers from sustaining their recent strength. Ensco has risen0.2% to $54.12 at 11:56 a.m. after rising 2.9% during the past five days of trading, while Diamond Offshore has advanced 1.2% to $48.73 after rising 4.8%, Seadrill has ticked up 0.4% to $39.60 after gaining 3.1% during the past five days and Noble is up 0.5% to $34.05 after advancing 6.2%.

RBC Capital Market’s Kurt Hallead and team don’t think the recent strength in offshore drillers can continue:

We believe that last week’s rally was driven more by short covering than a change in fundamentals. We still think the offshore market will be characterized by dayrate pressure through the rest of ’14, making it difficult for the group to sustain relative outperformance.

Still, the rally’s have been quite impressive and now their shares are approaching their 200-day moving averages. If they break through, the rally could have legs.

Fed unlikely to slow stimulus pullback

Federal Reserve policymakers were uncommonly united in their decision last month to further pare back the central bank's bond-buying program and set a high bar for veering from a plan to steadily reduce the stimulus this year, according to minutes of the Fed's Jan. 28-29 meeting.

Despite a marked slowdown in job growth in December, "all" Fed policymakers "agreed that cumulative improvement in labor market conditions and the likelihood of continuing improvement" warranted a further reduction in bond purchases, the minutes said.

The unanimity was rare for a Fed policy-making committee that often has disagreed sharply over whether the benefits of the bond-buying continue to outweigh risks such as eventual high inflation and asset bubbles. The agreement to scale back the bond purchases was the first unanimous vote since 2011.

MINUTES: Record of the Fed's January meeting

The bond-buying program is intended to hold down long-term interest rates, spurring home purchases and business investment.

At its Jan. 28-29 meeting, the Fed agreed to trim its purchases of Treasury bonds and mortgage-backed to $65 billion a month from $75 billion. Fed policymakers took a first step toward tapering the program in January, reducing the bond-buying from $85 billion a month.

The economy added only 75,000 jobs in December, far below the 200,000-plus monthly pace from August through November. But many economists cited extreme winter weather that kept shoppers at home. And the unemployment rate fell sharply, to 6.7% from 7%.

Fed officials have said they will pause the tapering if the economy sours. But at last month's meeting "several" policymakers "argued that in the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace of purchases by a total of $10 billion" at each meeting.

"A number" of policymakers said the Fed could alter its plan "if the economy deviated substantially from its expected path."

Fed officials also agreed that with the unemployment rate nearing the Fed's 6.5% threshold, "it would soon be appropriate" for the Fed to adjust its guidance about short-term interest rates. The Fed has said it will keep its short-term interest rate near zero at least until unemployment reaches 6.5%, but recently said it will maintain that low rate "well past" that time.

At the meeting, some Fed officials favored lowering the threshold. But others said the Fed should simply clarify the factors that would cause it to maintain the near-zero rate, such as inflation persistently below the Fed's 2% target. Some alternatively wanted to note that risks, such as asset bubbles, could prompt the Fed to raise its benchmark rate.

Most Fed officials have said they expect the first rate hike in 2015. But last month "a few" said it might be appropriate to increase the rate "relatively soon," with "a couple" noting that standard policy could call for an increase before the middle of this year. But other officials said standard policy shouldn't apply because of several factors, including the "lingering effects of the (2008) financial crisis."

January's meeting was Ben Bernanke's last as chairman. Janet Yellen, formerly vice chair, became chair Feb. 3.

Then-Fed chief Ben Bernanke speaking at the Brookings Institution in Washington on Jan. 16.(Photo11: Manuel Balce Ceneta, AP)

Tuesday, June 17, 2014

Active 2nd careers: Boomers as personal trainers

Many people enter the retirement years vowing to be more physically active, but others are putting more muscle into their goals: They're becoming personal trainers.

There was a 7% increase in certified personal trainers age 40 and older between 2012 and 2013, according to a survey of 2,500 fitness professionals conducted by the National Academy of Sports Medicine, which certifies personal trainers.

This reflects a national trend that shows many people want to work out with a trainer of a similar age or someone who has an understanding of their bodies and their limitations, says Andrew Wyant, the group's president. "A lot of folks like to be able to identify with their trainer, and the trainer should be aspirational as well as inspirational."

A retired teacher and a former senior marketing manager share their stories about why they chose to become personal trainers as their second acts:

Teresa Sawyer, 55, of Raleigh, N.C., loved her career as a music and theater teacher, but after she got into much better shape with the help of a personal trainer, she decided to follow that path as a second career.

For 10 years Sawyer worked as a teacher in a middle school and high school. During that time her weight climbed to 347 pounds. She had trouble walking and used a motorized cart in the grocery store. Her feet and knees hurt all the time, she says.

At a doctor's recommendation, she had gastric bypass surgery, which creates a much smaller stomach. About three weeks after the surgery, Sawyer started working out.

STORY: Retirement is a good time to pump up your exercise routine

MORE: Find related stories at retirement.usatoday.com

STORY: Seven different paths to take in retirement

At first she rode a recumbent bike for 10 minutes a day five days a week and did basic strength training with free weights with a patient personal trainer once a week. "She helped me see that my morbid obesity was not a barrier to getting fit."

Sawyer gradually worked up ! to biking for longer periods of time and doing more intense weight training. Later she took up swimming, yoga and other exercises. "I learned to swim for the first time of my life in my 50s." At 5-foot-4, she now weighs 180 pounds.

Inspired by her own success and her belief that she could help others, Sawyer became a certified personal trainer, a certified yoga instructor, an aquatics rehabilitation specialist and a group fitness instructor. "It was my way of giving back to others what I had been given."

She works with people over 40 who prefer training with her rather than with "twentysomething hard bodies. I have a perspective that young hard-body people don't have," she says. She has a workout studio in her home and trains at two local gyms.

"I work with a lot of people with chronic pain. Several are over 70 and want to hold onto or strengthen their fitness levels for quality-of-life purposes," Sawyer says. "I just trained a man in his late 70s who is still working. He wanted to work on balance and strengthen the muscles around joints that have osteoarthritis. He had a massive heart attack last year, and he's trying to recapture his fitness level."

She sometimes has clients get their doctor's OK before they start working out, and occasionally she encourages clients to see a physical therapist for specialized help. "I am able to quickly detect if someone needs help beyond my expertise."

"Am I in superior shape? Do I take the hardest core classes at the local gym? No, I don't because there is a risk of injury, and I want to be able to move well for the next 25 years." Sawyer says. "But I can cycle with the best of them. I can do power yoga with the best of them."

She offers these pearls of wisdom to people considering shaping up: "Find something you enjoy doing and do that. Even 10 minutes of exercise at a time is good. You are never too old to reinvent your life with exercise."

Bobb Prest, right, is a certified personal trainer at Life Time Athletic in St. Louis Park, Minn. He's working client, Carol Greenland.(Photo: Stephen Maturen for USA TODAY)

Former corporate exec becomes personal trainer

Bobb Prest, 56, of Minneapolis, decided he wanted to be a personal trainer one day when he was running on the treadmill at the gym. He looked around him and thought to himself, "I want to help people. I want to give back."

For more than 20 years, Prest worked in marketing for several Fortune 500 companies. But after his job as senior marketing manager was eliminated, he signed up for a 10-month course to become a National Academy of Sports Medicine certified personal trainer through the educational division of Life Time Fitness, a national chain of health clubs.

When he started the course, he weighed 212 pounds and had 24% body fat. He's 6-foot-1. Within eight months, he had dropped 27 pounds and was down to 14% body fat. He says he feels a lot better, is more energized, and his stress level is almost "non-existent."

Prest, who works on commission for Life Time Athletic, puts in about 45 to 50 hours a week, including his training time with clients and administrative work. He says he'll probably make a good income this year from his new job, but it will be 30% to 40% less than he made in the corporate world. Still, he says, the "intrinsic rewards far outweigh the monetary benefits of my corporate career. I love this job. I get to play all day long. I get out of bed in the morning, and I am excited to get to work. I'm excited to see my clients."

It's rewarding to see people who are struggling with weight issues, muscle loss or lack o! f balance! to turn their lives around and be able to move better and do the simple tasks of daily living without assistance, he says. "It's the most satisfying thing you can do. It's better than the paycheck."

He often tells his clients about a quote he read that says: "So many people spend their health gaining wealth, and then have to spend their wealth to regain their health."

To stay in shape, Prest does a variety of different activities, including running, golfing, rowing and doing resistance training. "My goal in life is to continue to walk down the fairways to play golf well into my 90s."

To people who are overwhelmed by the idea of trying to get in shape, he advises them to take one step at a time, even if it's just doing a few extra minutes of walking a day. "The worst thing you can do is try to do too much too fast. Have patience, and be kind to yourself."

Monday, June 16, 2014

5 Summertime Credit Card Blunders and How to Avoid Them

5 Summertime Credit Card Blunders and How to Avoid Them Elizabeth Price/Getty ImagesMaxing out your credit card to pay for a summer trip can do some damage to your credit score. The weather is warm, the kids are home from school and the grill is fired up -- it's official, summer is here! This is the perfect time of year to kick back and relax, but don't let that leisurely attitude extend to your wallet. Summer is the time to be especially careful with your finances because opportunities to make mistakes are everywhere. So which money gaffes should you be on the lookout for this season? Avoiding these five summertime credit card blunders is a good place to start: 1. Maxing out your credit card to pay for a vacation. Your friends and co-workers have been talking about their summer getaways for months, so it's understandable that you would want to join in on the fun. But if you're maxing out a credit card to pay for your trip, you're probably doing serious damage to your credit score. Thirty percent of your credit score is determined by your credit utilization ratio, which is the percentage of credit you're using compared with the amount you have available. Generally, the credit bureaus start docking points from your credit score when you start using 30 percent or more of your available credit. For this reason, maxing out a card for a summer holiday might not be worth it in the end. 2. Opening too many cards at once to finance a home renovation. Summer is a great time to work on a home improvement project. Just be sure you're not opening too many retail credit cards to get the job done. New credit inquiries lower credit scores; every time you apply for new credit, you'll lose a few points. If you apply for several cards in a short period of time, the hit will be even bigger. The credit bureaus view opening too much new plastic at once as a sign you may be in financial trouble. It's wise to apply for new credit sparingly, no matter how good the deal is at the home improvement store. 3. Getting caught up in summer fun and forgetting to pay a bill. It's easy to let your worries fade like a summer sunset when you're having a good time. Unfortunately, this is how a lot of people end up forgetting to pay a credit card bill -- and this can have big credit consequences. A whopping 35 percent of your credit score comes from paying your bills on time. It's extremely important to take steps to make sure you meet your monthly obligations in a timely fashion. Set up automatic bill pay, or use your phone's calendar reminders to alert you when a bill is due. This way, an unpaid credit card balance won't put a wrinkle in your summer fun. 4. Using the wrong card for summer travel. Hitting the roads, rails or sky is common during the summer months. But a lot of people miss out on the opportunity to earn rewards or save big bucks by using the wrong card for their needs. For instance, if you're planning a road trip, consider applying for a card that gives extra rewards on gas. Alternatively, a card that waives foreign transaction fees is a good choice if you're traveling abroad. In short, don't assume that the card you usually use is the best for your summer travels. Look into all your options to be sure you're getting the best deal.

6 Closed-End Funds to Buy Now

Closed-end funds are complex beasts that are typically marketed by brokers to individual investors only when they're first launched. They carry fees of 5% or so to cover brokerage commissions and underwriting costs. Investors who buy newly minted closed-ends often fare poorly.

See Also: Think Outside the Bank to Boost Yield

But if you research closed-end funds carefully, you can do well. This article offers six closed-end funds that look attractive at current prices, as well as two RiverNorth funds that invest in them.

But first, what are closed-end funds? Think of a closed-end as a hybrid of a regular mutual fund and an individual stock. Like ordinary funds, closed-end funds invest in a portfolio of stocks or bonds or both. (About two-thirds of closed-ends invest only in bonds.) Like stocks, they generally issue shares only once, when they first go public. After they go public, they often trade at wide discounts or premiums to the value of the securities they own, known as their net asset value, or NAV, and typically expressed on a per-share basis. (Exchange-traded funds, by contrast, create and redeem shares constantly, so their share prices are usually close to their NAVs.)

Sentiment often swings wildly on individual funds. If you're patient, you can make money by exploiting the discounts and premiums—that is, buying a fund at a big discount and selling when the discount narrows or the fund goes to a premium. Keep in mind that fund prices usually revert not to their NAV but to their long-term average discount or premium.

The sector selling at the most compelling discounts just now: tax-exempt bond funds, especially those that use leverage (borrowed money), which boosts yields but also heightens volatility. These funds got creamed last year, causing many investors to flee and discounts to widen.

The picks below come from Patrick Galley, lead manager of RiverNorth Equity Opportunity R (RNEOX), a regular mutual fund that invests primarily in closed-end funds (more on RiverNorth later).

BlackRock Municipal Target Term Trust (BTT, current price $18.71; current yield, 6.0%; current discount to NAV, 6.1%) suffered a breathtaking loss of 22.4% last year because it invests in long-term bonds, which are especially vulnerable to rising interest rates (bond prices move inversely with yields). It leverages 44% of its assets and saw its share price go from a small premium to NAV to a discount to NAV. So far this year, by contrast, it has gained 10.0%. The fund will liquidate in 2030, and the average maturity of the bonds it owns is targeted to that date. If bond yields rise one percentage point, expect this fund to plunge 16%. (All share prices and discounts are as of February 5; unless otherwise stated, returns are through the same day and are based on changes in share prices.)

Nuveen Intermediate Duration Municipal Term (NID, $11.73, 5.8% yield, 10.3% discount) tumbled 19.3% last year thanks to 37% leverage, a widening discount and the effects of rising interest rates. It has gained 2.4% so far this year. The fund will liquidate in 2023.

Nuveen Municipal Advantage (NMA, $12.73, 6.3% yield, 10.8% discount) is 38% leveraged. It lost 15% in 2013 but has rebounded 5.3% this year. If yields rise by one percentage point, expect this fund to lose 11%. (Nuveen, incidentally, runs more than 40 municipal closed-ends, many of them similar.)

In taxable bonds, Templeton Global Income (GIM, $7.64, 5.5% yield, 7.4% discount) is intriguing. It's a near clone of Templeton Global Total Return (TTRZX), an excellent commission-charging mutual fund run by Michael Hasenstab. The unleveraged closed-end fund gives you access to Hasenstab's talents at a discount to NAV and without having to pay a load. Historically, the closed-end has traded at a premium to NAV. Finally, Galley recommends two venerable, low-fee stock funds:Adams Express (ADX, $12.20, 14.6% discount) and Tri-Continental (TY, $18.99, 14.2% discount), both of which launched in 1929. (Closed-ends were virtually the only kinds of funds until the Great Depression, and, partly because of their use of leverage, played a big role in the 1929 crash.) Adams, an unleveraged large-company stock fund, outpaced Standard & Poor's 500-stock index slightly over the past 15 years. Its 14% discount has remained in place for many years, with only minor variations.

Tri-Continental, which is just slightly leveraged, has about two-thirds of its assets in stocks and the rest in convertible bonds, regular corporate bonds, preferred stocks and cash. It has a stubborn 14% discount. Returns had been mediocre but have improved markedly since 2010, when the fund got a new manager.

Why bother with the stock funds? If investors really do rotate increasingly out of bonds and into stocks, Galley posits, these funds should produce solid returns. That might result in their discounts shrinking, at least temporarily, giving shareholders a double benefit.

RiverNorth runs several funds that, with the aid of computer algorithms, attempt to turn profits from ever-changing discounts on closed-end funds. A panic such as the one that hit muni bonds last year is their bread and butter. When the managers can't find good value, they sensibly stay in broad-based, index-tracking ETFs. Most of the RiverNorth funds also hire a well-known subadviser to run part of the assets.

RiverNorth/Oaktree High Income (RNOTX) is the only way I know for individual investors to invest in a bond fund run mainly by Oaktree, which specializes in high-yield debt. (Oaktree does run Vanguard Convertible Securities (VCVSX), a wonderful fund that, as the name suggests, invests in convertibles.) The RiverNorth fund, which launched at the end of 2012, returned 5.0% over the past 12 months. Oaktree runs three-fourths of the fund's assets; the rest are in closed-end funds chosen by RiverNorth.

RiverNorth Equity Opportunity invests in closed-end stock funds, including some that hold foreign stocks. Launched in mid 2012, it returned 13.1% over the past year.

One big stumbling block with RiverNorth funds: They charge too much. RNOTX charges 1.93% annually and RNEOX charges 2.17% annually, partly because of the extra layer of expenses from the closed-end funds RiverNorth owns. I think that Galley and company, as well as Oaktree, have the smarts and discipline to overcome their high expense ratios, but the fees do pose a high hurdle.

Steven T. Goldberg is an investment adviser in the Washington, D.C., area.

Sunday, June 15, 2014

Not all education comes from college

When people consider ways to get a better job or a boost in salary, one of the things they think about is whether they should go back to school.

That decision becomes more difficult as the average undergraduate student loan debt hits $25,000 and some jobs don't offer better paychecks with more education.

STORY: Motivation? There's an app for that
STORY: When grad school doesn't make sense

PayScale, which collects information on salaries, finds that those in finance, computer science or economics may see a salary increase if they have a master's degree but not those in history, English or art, lead economist Katie Bardaro says.

Those in a pickle because their professions demand a master's degree but don't see it translate into better pay are those in psychology, social work and education, she said.

To further complicate the situation, Payscale finds that while thousands of schools offer an master's in business administration, only about 50 name-brand universities' degrees can lead to better pay. That's because they can get better networking connections and more opportunities, she says.

The same holds true for those who get their law degree: Only about 50 law schools give graduates the kind of prestige they need to command higher paychecks, Bardaro says.

Well-paying jobs that will be in great demand are in science, technology, engineering and math, she says. A master's degree in those fields will make you more marketable.

Still, if you decide you don't want to go back to school because of the cost — or other reasons — you still can increase your marketability through self-directed learning.

Kio Stark, author of Don't Go Back to School, says she was inspired to write her book after listening to people talk about going back to school to learn something she knew they could learn on their own. In her book, she interviews 100 people who successfully taught themselves skills that they've used to start their own businesses or break into an industry.

"I wanted people to realize there are options for learning," Stark says.

There's more to education than sitting in a lecture hall.(Photo: Anna Gontarek-Janicka, Getty Images)

Stark doesn't dismiss traditional education and even teaches at New York University. But she says that people need to be aware that they may not receive what they need in a traditional classroom or online study programs.

She's heard many complaints about poor teachers, boring classes and a focus on test scores instead of "rewarding curiosity."

She knows one man who was interested in philosophy. Rather than attend graduate school, she says he started a podcast interviewing academics in philosophy, providing himself an education from some great teachers whom he might not otherwise have been able to meet.

In some situations, employers are willing to overlook certain education requirements if you can show that you are knowledgeable in an area, Stark says.

Still, she stresses that "independent learning is not something people do well," and advises those who want to get into a self-directed education make sure they have others with them on their journey, people that she calls "fellow learners." She also advises setting up a structured learning program, such as using online learning materials or establishing a specific project you will complete.

"This is not an easy thing to do because you're making a lot of it up on your own," she says. "It's a difficult undertaking and takes initiative."

But it's that initiative that can serve you well.

"All of our jobs and professions are changing really fast, and taking the initiative to learn something on your own really demonstrates that you're able to learn on the job," Stark says. "I! think th! at is really an important skill to have and is critical for your career."

Anita Bruzzese is author of 45 Things You Do That Drive Your Boss Crazy ... and How to Avoid Them, www.45things.com. Twitter: @AnitaBruzzese.

TD Ameritrade, Schwab put third-party exams on lawmakers' radar

td ameritrade, schwab, third party exams, adviser exams, securities and exchange commission

Congress doesn't have a direct role in determining whether the Securities and Exchange Commission will require investment advisers to use private-sector firms for compliance examinations, but industry officials are making sure lawmakers are aware of the idea.

During meetings with legislators and their staffs as part of the Investment Adviser Association's Lobbying Day on Capitol Hill on Thursday, executives from Charles Schwab & Co. Inc. and TD Ameritrade Institutional brought up third-party exams.

SEC Commissioner Daniel Gallagher floated the idea of third-party exams in public appearances last month. He proposed it as a way for the agency to increase coverage of the approximately 11,000 registered investment advisers at a time when the agency says it lacks the resources to examine more than about 9% annually.

Although there are potential drawbacks to such reviews, including costs and developing standards for the private examiners, it's an approach that should be considered, the industry leaders said.

“We would like to see the SEC retain both the rulemaking and the exam process,” said Bernie Clark, Schwab executive vice president for adviser services, between meetings on Capitol Hill. “Perhaps there's a third-party option that needs to be utilized. We would like to create options to solve the problem of frequency of exams.”

In the partisan atmosphere that permeates Capitol Hill, it's unlikely that the SEC will get the funding it seeks or that Congress will approve a bill sponsored by Rep. Maxine Waters, D-Calif., and ranking member of the House Financial Services Committee, that would allow the SEC to charge advisers user fees for exams.

“We think there ought to be an open and thorough discussion of [the third-party exam] approach,” said Jeff Brown, Schwab senior vice president and acting general counsel.

Skip Schweiss, managing director of adviser advocacy at TD Ameritrade Institutional, said he, too, wants third-party exams to be considered.

“It's something that ought to at least be entered into the discussion,” said Mr. Schweiss, who participated in the IAA Lobbying Day. “It's a concept that works well [for corporate accounting audits], and could it work as well to increase the frequency of exams for advisers?”

Lawmakers and their staff members expressed interest in the user fee and third-party approaches.

“The receptivity is there for both of these ideas,” Mr. Schweiss said.

In a letter to Mr. Gallagher earlier this week, the IAA expressed concerns about third-party exams, while saying that it was an idea worthy of discussion. It would prefer greater funding for the SEC Office of Compliance Inspections and Examinations, according to Neil Simon, IAA vice president for government relations.

“We want to talk! about strengthening SEC oversight,” said Mr. Simon, whose group brought 30 advisers to Washington. “We think there are far better options [than third-party exams]. We want to staff up OCIE."

Third-party exams are not directly a legislative issue. The SEC has the authority to write a rule, according to Chairman Mary Jo White. But the SEC does listen to lawmakers.

“They could communicate to the SEC that they think this is a viable option,” Mr. Schweiss said.

Saturday, June 14, 2014

Federal Reserve Overstepped Bounds with Monetary Policy

By EconMatters

Checks & Balances If you think about it the President has checks and balances, the Supreme Court has checks and balances, and even the two houses of Congress have checks and balances. However as we have seen with the last 5 years of Fed policy that there is no actual checks and balances for what the Federal Reserve can and cannot do with regard to monetary policy, and there should be. It might not be so apparent now, but it sure will be five years from now when all is evaluated. The big takeaway will be how in the heck did we let the Federal Reserve conduct all of these ad-hoc policy initiatives with some obvious detrimental effects and unintended consequences for financial markets and the US economy? Where would Markets Go without $75 Billion assistance each month? Let us start with the most obvious detriment to financial markets the bubble that is the US equities market. Despite what Goldman Sachs says with their double speak to appease wealthy clients who they told to be invested in markets last week and this week said the markets are 10% over-valued, but there is no bubble – there is in fact a bubble in stocks.

Seems like a Bubble The barometer to use is this: If the Fed stopped cold turkey tomorrow all asset purchases, the Dow would drop 3,500-4,000 points in less than a year (maybe even as little as 6 months), and this is a conservative 25% drop in value just in the short term. If they were never allowed to intervene in financial markets with asset purchases ever again, eventually markets would fall back to sustainable levels, and all the previous liquidity fueled price appreciation in equities of the last 5 plus years would eventually come out of assets like stocks and real fundamental value would be established. My guess is that the Dow would fall back to around the 1,000 level on its own merits over the next 3 years with no asset purchases whatsoever by the Federal Reserve, something in the order of a 40% drop in value. Bond Market: A Debt Risk Valuation Mechanism The Bond market is intended for debt to be issued by parties with parties independent of the debt issuers to then determine a fair market price for the risk of holding said debt in the marketplace, and not a social instrument for creating additional liquidity in financial markets which finds its way into the equities, commodities and currency markets via carry trade liquidity driven fund flows.

It is supposed to be a risk profiler to keep governments and issuers in check in regard to issuing responsible debt at appropriate times. When debt levels reach unsustainable levels, a healthy and natural bond market prices risk accordingly; thereby incentivizing necessary changes to fiscal and monetary policies. This mechanism has been greatly distorted by Fed policy, and the long-term consequences are hard to adequately calculate at this point, but they are definitely a cost – the debate is just how high a cost? Stock Market: A Valuation Mechanism The most important point is this the stock market was intended to be a valuation mechanism for public companies based upon how well their business was being run, the economics of their given business paradigm, and the health of the broader macro-economic fundamentals of the market for their goods and services. Social Engineering Instrument It was not built as an instrument for social engineering, manipulation by a government entity, or tool to be used for monetary policy; private companies went public to raise additional financing for their capital structure to grow the business, and the market put a value on the business based upon the future prospects of the given business. It was never intended as a risk free enterprise. Companies were going to fail, investors were going to lose money; others would flourish, investors would reward these companies with higher stock prices. Fundamentally, the market mechanism would both reward and punish based upon actual operating results of the companies. This is how a healthy financial market is supposed to work, and we have devolved so far from this healthy and natural market valuation model that there cannot without question be major price discovery distortions in stocks, as in, a bubble in stocks, and the stock market pricing mechanism in general! The Fed has positively incentivized the more Nefarious Elements of Stock Buybacks Stock buybacks are bad enough, and have distorted operating results considerably with artificially making earnings appear better than they actually are, it provides incentives for other investors to front-run these company buybacks, and they are not being used properly these days by companies, i.e., buying back when shares are cheap relative to company prospects, and selling shares when they are expensive relative to company prospects – again a natural valuation mechanism. Instead they are being utilized by management to distort prices not because business prospects are so bright, but rather they can borrow cheaply right now ( again thanks to the Fed) and artificially boost their own stock prices and make shareholders happy in their performance of running and managing the company. Stock buybacks have in a sense become so perverted from their original purpose that they have become payoffs to like and invest in the company, not because the company is performing so well from an operation`s standpoint, but because they are going to buy back their own stock. It becomes both a deterrent for shorting the stock, and sort of 'mafia bribe' for shareholders to invest in the company. Remember, this isn`t even company money, these companies are borrowing to buy back shares! This is fundamentally as screwed up from a management standpoint as one can get, one should borrow money to grow the business and create long-term value, not create balance sheet liabilities for the company solely for the purpose of juicing up the company`s stock price! This further distorts actual natural market pricing in stocks, there is no actual business evaluation going on currently in financial markets, there are just liquidity injections or price distorting practices. Textbook Definition of Bubble: Non Market Price Discovery Moreover, since all these liquidity injection practices are from the long side, it would stand to reason that value is being distorted heavily to the upside, this is about as close to the text book definition of a bubble that one could possibly create, and the Federal Reserve is at the heart of doing just this act! The stock market I repeat is supposed to be an evaluator of companies, and not a social welfare program to bring about some higher good for economy policy. 15thmotgage+backed.png

Even if they succeeded in creating a short-term wealth effect for a portion of the population that ended up trickling down to some small extent to the broader economy, the damage to the already shaky financial markets that have crashed three times in fifteen years from a long-term perspective is just a case of the Fed overstepping their bounds and destroying financial markets in the process! On any reasonably weighted Cost/Benefit Analysis this is just too high a price to pay! Do not Trust Anything an I-Bank says for Public Consumption Goldman Sachs like many of these investment banks have benefited immensely from the Fed overstepping their bounds in financial markets with asset purchases, they are never going to openly tell the American public whether there is a bubble in stocks. 15th+excess+reserves.png

In fact, they have a long history of not even telling their own clients their actual feelings on markets. And given how many times these investment banks have royally screwed up their own financial investments, half of them probably have no clue of the conditions ripe for constituting a bubble in the first place until after the fact! Precedents & Moral Hazard The real overstepping by the Federal Reserve to actually buying up financial assets has severely distorted the market process, and the long-term damage to what financial markets are supposed to be about from an overall philosophy, fundamental and mechanical methodology standpoint with the associated costs is really incalculable. 15th+monetary+base.png

How do you put a value on destroying natural price discovery in financial markets? You cannot, so despite the current size of the bubble the fed has created short-term, the long-term bubble of completely destroying actual price discovery in financial markets by being able to step in and buy financial assets in markets is the real harm here. Moreover, that this act has become acceptable fed policy turf, this precedent and the fact that there were no proper checks and balances to restrict and question this intervention is the harmful and malicious fallout that will inevitably become the Bernanke Legacy. Either Markets are forever Annual Social Welfare Policy Programs or Legislation is Required to Restrict future Fed Intervention in Financial Markets with intermittent Asset Purchases There are many other measures the Fed could entertain instead of the path that Bernanke chose in destroying forever the concept of what constitutes a market mechanism. Consequently unless the Fed has forever changed what markets actually are, social good mechanisms for government wealth creation, and that means a socialized commitment for eternity, i.e., the market must appreciate 10% every year regardless of broader economics or fundamentals. Then they have caused more damage by creating a short-term bubble that is unsustainable on its own, and have set the stage for future ad-hoc interventionist asset purchases in markets on equally subjectivist timeframes and justification! This is the real area where the Fed is guilty of overstepping its bounds. They have forever destroyed financial markets with interventionist policies, and future legislation will have to be created to limit the Fed`s power in this area, and restore financial markets back to their intended purpose. Yes financial markets are built and intended to fail at times, once they are no longer allowed to fail, they become state tools for policy outcomes. And this reality is a bigger failure in a democratic state, than any short-term and well-meaning goals that result from such policies.

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

Posted-In: Economics Federal Reserve Markets

Originally posted here...

Most Popular 9 One-Time Penny Stocks Didn't Stay That Way China Gold Stone Mining Reports Cash Tender Bid for Allied Nevada Shares, Tendering Holders Will Be Paid $7.50/Share in Cash UPDATE: Ralph Nader Issues Letter to Sirius XM Holders Bank of America vs. Citigroup - Which Is The Better Bet? Four Apple Stories From Monday You May Have Missed Ford's Alan Mulally Talks Aluminum, His Future & His Favorite Ride Related Articles () Stocks Going Ex Dividend the Fourth Week of January Citi Announces Sale of Mortgage Servicing Rights for Loans with Unpaid Principal Balance of $10.3B Kinder Morgan Energy Partners Rises Slightly After Q4 Earnings Beat Market Wrap For January 15: Bulls Take Over As Economic Growth Remains Healthy CSX Falls 3% After In-Line Q4 Zoom Technologies Confirms Plans to Buy Tinho Union Holding Group Around the Web, We're Loving... Lightspeed Trading Presents: Thunder and Tubleweeds: Trading Techniques for the New Market Enviroment Pope Francis Rips 'Trickle-Down' Economics Come See How the Pro's Trade in this Exclusive Webinar Wynn, MGM, Other Casino Giants Vying For U.S. Turf What Should You Know About AMZN? View the discussion thread. Partner Network