Stocks Hit By Regulatory Differences Between U.S. And U.K. Policy

The distance from New York to London is only about 3,500 miles, roughly the distance from Maine to Los Angeles, or less than 7 hours by plane, but the two couldn't be further apart when it comes to how they police of financial markets. This has become clear from a series of recent legal filings affecting fund managers and corporate executives.

"Historically, the differences between the two countries were pretty clear," reports the Financial Times. "The US aggressively enforced laws against insider trading, overseas bribery and other white-collar fraud and the UK did not." But, recently misbehavior, like Enron or the recent financial crisis has spurred legislators to crack down on financial activities, and the difference between UK and US regulation is becoming more stark.

David Einhorn's Greenlight Capital And Punch Taverns

Hedge fund manager David Einhorn is one of the people to fall victim to these differences. Einhorn, who is the founder and manager of Greenlight Capital, was ordered to pay £7.2 million (about $11.2 million USD) by the UK's Financial Services Authority (FSA) over allegations that it was inappropriate for Greenlight Capital to sell its stake in Punch Taverns after learning the company was about to announce a round of equity financing. Greenlight Capital sold 11.7 million shares, cutting its stake in Punch from 13.3% to 8.9% and, in doing so, avoided £5.8 million in losses (read the story here). Einhorn said that he did not believe he violated any rules, saying that he was not an insider to the company, as evidenced by the fact that he never signed a Non-Disclosure Agreement (NDA), but he agreed to pay the insider trading fine "rather than continue an arduous fight" (read his story here).

Einhorn was not the only person charged in this matter either. Andrew Osborne, a former Bank of America Merrill Lynch broker was fined about £350,000 for his role in the Einhorn-Punch trading. Alexander E. Ten-Holter, Greenlight's former compliance officer, was fined £130,000, or $204,000, for failing to ensure that an order to sell shares was not based on inside information. Caspar J.W. Agnew, a trading desk director at JPMorgan Cazenove, was fined £65,000 pounds for not identifying that the sale order could be suspicious and for not reporting it to his employer.

Defining Insider Trading

In this case, the primary difference between UK and US law is the way insider trading is defined. The violation charged against Mr. Einhorn and Greenlight was "market abuse" under §118 of the Financial Services and Markets Act of 2000, which makes it a violation for an insider to buy or sell shares "on the basis of inside information relating to the investment in question." In the UK, an "insider" is anyone who learns confidential information "as a result of having access to the information through the exercise of his employment, profession or duties" or which was "obtained by other means and which he knows, or could reasonably be expected to know, is inside information." This is called possession theory. It basically means that any person who is given confidential information violates the law by trading on it. In the US, the Supreme Court rejected the idea of possession theory, ruling that, "insider trading requires the government to prove the person charged had a duty to disclose arising from a relationship of trust and confidence between parties to a transaction" (Chiarella vs. United States). As such, in the US, the matter would not have warranted charges.

For as strict as the UK can be with regard to fining insider trading, it rarely levies the high fines seen in the US and can be decidedly slack with regard to criminally prosecuting executives. Take the recent case of Ravi Sinha, who was formerly the top UK executive of JC Flowers, a US private equity firm. Sinha admitted to fraudulently billing a Flowers portfolio company £1.3 million, but he was never criminally charged. Instead, he was ordered to return the money and pay an additional £1.5 million fine.

A Changing Tide

If UK solicitor general Edward Garnier gets his way, the gap between UK regulation and US will narrow. Garnier would like to introduce deferred prosecution agreements (DPAs), like the ones the SEC has (sometimes called "non-prosecution agreements" or NPA). Under a DPA, a company can admit a wrongdoing and pay a fine. They only have to bring in an independent party as a monitor as an assurance against future issues. In exchange, federal prosecutors suspend criminal charges - a non-prosecution.

The system is extremely lucrative. US Department of Justice collected roughly $7.6 billion in fines, penalties, and disgorgement ordered in DPAs and NPAs, and related settlements, in 2010 and 2011. The largest of these settlements include:

• Merck & Co. (MRK): NPA with USAO for the District of Mass. for drug misbranding: $950 million

• GlaxoSmithKline (GSK): NPA with USAO for the District of Mass. for selling adulterated drugs: $750 million

• Deutsche Bank (DB): NPA with USAO for the Southern District of New York for promotion of illegal tax shelters: $553 million

• ABN Amro Bank: DPA with the DOJ's Asset Forfeiture and Money Laundering Section (AFMLS) and the USAO for the District of Columbia for trade sanctions and anti-money laundering violations: $500 million

• Google (GOOG): NPA with USAO for District of Rhode Island regarding drug importation charges: $500 million

More recently, Richard Schimel's Diamondback Capital Management, which is one of the largest hedge funds ensnared by the government's insider trading crackdown, was able to avoid federal prosecution by paying more than $9 million in fines and penalties. Diamondback entered into an NPA with the US Attorney's office, which the government agreed to in light of the fund's "prompt cooperation and voluntary adoption of remedial measures."

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

Best Stocks To Invest In 6/14/2012-2

Suffolk Bancorp (NASDAQ:SUBK) released the results of its operations during the fourth quarter and full year of 2011. Unaudited earnings-per-share for the quarter were $0.12, a decrease of 62.5 percent from $0.32 during the comparable period of 2010. Net income for the quarter was $1,156,000, down 62.3 percent from $3,069,000 during the same quarter last year. The net loss-per-share for the full year was $(0.01), down 101.2 percent from $0.65 as restated a year ago. The net loss for the year was $76,000, down 101.2 percent from net income of $6,256,000 as restated during 2010.

Suffolk Bancorp operates as the holding company for Suffolk County National Bank, a national-chartered commercial bank that provides domestic, retail, and commercial banking services, as well as trust services in Suffolk County, New York.

Majestic Gold Corp. (MJGCF.PK)
Majestic Gold Corp. engages in the exploration and development of mineral properties in China. The company focuses on its gold project located in the prolific gold region of Song Jiagou in eastern Shandong Province. Majestic Gold Corp. is headquartered in Vancouver, Canada.

Gold is widely distributes on the earth at a background level of 0.03 g/1000 kg (0.03 ppm by weight). Its interns and its high density cause it to concentrate in streambeds, either in small flakes or in larger nuggets, from which it may be recovered by panning. It is found free in nature and associated with quartz, pyrite and other minerals.

Most gold is mined and comes from gravels and quarts veins or is associated with pyrites deposits. Two thirds of the world’s supply comes from South Africa, and 2/3 of USA production is from South Dakota and Nevada. Other main mining areas are Canada and Russia. Gold is found in sea water, but no effective economic process has been designed (yet) to extract it from this source. World production is around 2500 tonnes per year, but reserves are estimated to be ten of thousand of tonnes.

Majestic Gold Corp. (MJGCF.PK) has arranged a $10,000,000 loan to advance its Song Jiagou project in China. Nine million dollars ($9,000,000) from the proceeds from the loan will be used by the Company to in connection with its Song Jiagou project and the balance of one million dollars ($1,000,000) for general working capital purposes.

The loan will have a one year term and loan principal will be convertible at the option of the lender in whole or in part into common shares (”Shares”) of the Company until twelve months from the date of the loan advance at the price of $0.205 per Share. The loan will bear interest at the rate of 7.5% per annum, payable on maturity, and accrued and unpaid interest will be convertible at the option of the lender in whole or in part into shares of the Company until twelve months from the date of the loan advance at Market Price at the time of conversion.

The lender is at arm’s length from the Company and will not become an insider as a result of any conversion of principal and interest. All shares issued on any conversion of loan principal or interest will be subject to a four month hold period from the date of advance of loan proceeds. The loan is subject to acceptance by the TSX Venture Exchange.

As additional consideration for the loan, the Company has agreed to forward at least $9 million to Majestic Yantai Gold Ltd., a British Virgin Islands company owned 94% by the Company to be used to further advance its Song Jiagou project. The Borrower has also agreed to a 90 day period for reciprocal due diligence reviews and discussions for the possible further involvement of the Lender in the Song Jiagou project.

In the event that no further agreement is reached between the Lender and the Company during the 90 day period, then the loan and a minimum of seven (7) months interest will automatically convert to shares in the Company at a price of $0.205 per share and the interest at Market Price respectively. In addition the Company is pleased to announce that it has arranged a non-brokered private placement of up to 15,000,000 shares to be issued at the price of $0.20 per share for gross proceeds of $3,000,000.

For more information about company: www.majesticgold.net

Hanmi Financial Corporation (NASDAQ:HAFC), the holding company for Hanmi Bank (the “Bank”), announced that Jay S. Yoo, President and Chief Executive Officer, is scheduled to participate in a Greater Los Angeles Banks Panel at the FIG Partners 3rd Annual West Coast Bank CEO Forum on Tuesday, February 7, 2012, at 8:55 a.m. PST. The forum is scheduled for February 6-7 at the Westin St. Francis Hotel on Union Square in San Francisco.

Hanmi Financial Corporation operates as the holding company for Hanmi Bank that provides general business banking products and services in the United States.

Ohio Valley Banc Corp. (Nasdaq:OVBC) reported consolidated net income for the quarter ended December 31, 2011, of $1,361,000, an increase of $63,000, or 4.9 percent, from the $1,298,000 earned for the fourth quarter of 2010. Earnings per share for the fourth quarter of 2011 were $.34 compared to $.33 for the prior year fourth quarter. For the year ended December 31, 2011, net income totaled $5,835,000, a 14.5 percent increase from net income of $5,096,000 for the year ended December 31, 2010. Earnings per share were $1.46 for 2011 versus $1.28 for 2010, an increase of 14.1 percent. Return on average assets and return on average equity was .68 percent and 8.35 percent, respectively, for the year ended 2011, compared to .60 percent and 7.54 percent, respectively, for the same period in the prior year.

Ohio Valley Banc Corp. operates as the holding company for The Ohio Valley Bank Company that provides commercial and consumer banking products and services in central and southeastern Ohio and western West Virginia.

 

IBM: Is Q1′s Mixed Bag Cause for Concern?

Shares of International Business Machines (IBM) are down $7.16, or 3.5%, at $200.29 after the company last night reported Q1 revenue below analysts’ expectations while raising its year profit outlook above consensus.

Aside from software, results were weaker than expected across IBM’s various businesses, including hardware sales and IT consulting. Some regions struggled to match year-earlier growth, with the U.S., for example, showing flat revenue following a 7% rise in Q1 of last year, the company said. In services, IBM said it had a harder time with business in Japan and with public-sector customers in general.

Analysts participating in last night’s conference call seemed particularly worried about the backlog in IBM’s IT Outsourcing, which was down 5%, year over year, deemed a negative indicator of future outsourcing work.

Today, the bulls and bears seem to diverge over whether the “mixed bag” of last night’s results is a serious cause for concern. Price targets are going up in some cases, as are most estimates for this year’s profit, on that higher outlook, but some revenue numbers are staying as they were or actually being projected lower in some cases:

Shaw Wu, Sterne Agee:Reiterates a Buy rating and a $230 price target. He notes that “gross margin came in much higher than expected at 45.7% vs. expectations closer to 45%. Software (23% of revenue) continued to be its highest growth business while profitability in services (59%) improved.” Wu raised his 2012 estimate to $15.15 in EPS from a prior $15 in EPS while keeping his $109.1 billion revenue estimate.

Richard Gardner, Citigroup: Reiterates a Buy rating and raises his price target to $235 from $205. He describes the quarter as being “in line” with “puts and takes” here and there. “Consulting weakness was primarily driven by Japan and State & Local Govt, both of which should become smaller drags on revenue as the year progresses [...] There are other names in hardware that we believe
offer better returns over a six-month horizon, including Apple (AAPL) and�NetApp�(NTAP). However, ten years of portfolio pruning and acquisitions position IBM to deliver better revenue and EPS growth than either Hewlett-Packard (HPQ) or Dell (DELL) over a 2-3 year horizon, in our opinion.” Gardner raised his 2012 EPS estimate to $14.99 from $14.95 previously.

Shebly Seyrafi, FBN Securities: Reiterates a Sector Perform rating and a $215 price target. “IBM missed revenue consensus slightly, and it is
exhibiting slow or declining growth on a constant-currency basis across many of its key businesses (GTS, GBS, S&T, Financing) [...] Among its product categories, only software (up 7% at CC) grew well. In services (54% of pretax
profits), GBS profitability declined due to weakness in Japan and the Public sector. Still, the company is growing the bottom line well and deserves a market multiple.” Seyrafi raised his 2012 EPS estimate to $15.03 from $14.86, but actually cut his revenue outlook to $108.02 billion from a prior $109.26 billion.

Toni Sacconaghi, Bernstein Research: Reiterates a Market Perform rating and a $198 price target. It was a “typical” IBM report, he writes, with an EPS beat but “anemic” revenue. After factoring in currency effects and acquisition costs, the top-line miss was actually larger than might appear, he writes. ” The ability of IBM to parlay cost cuts into earnings upside may come to an end in coming years: “Given the magnitude of IBM’s cost reductions, we believe that the company is likely to hit a point of diminishing returns over time; we note that IBM already has best in class professional services
operating margins among onshore services vendors and has a significant percentage (40-45%+) of its workers offshore, though we believe this number could increase to 60-65%1. Additionally, we believe that IBM may lose some ability to access its offshore cash over the next 3-4 years absent a tax holiday or other changes in tax laws (as foreign credits are used up), which could limit IBM’s ability to boost EPS through share repurchases.”

Carnival battered in wake of fatal shipwreck

CHICAGO (MarketWatch) � Shares of Carnival Corp. fell sharply Tuesday, losing as much as 14% in the wake of the wreck of its cruise ship Costa Concordia off the Italian coast.

Reuters The cruise ship Costa Concordia lists after running aground off the west coast of Italy at Giglio island on January 14, 2012.

The accident, which happened late Friday, killed at least 11 and several dozen more people remain missing. The captain of the ship has been put under arrest for abandoning the stricken vessel and its 4,000-plus passengers and crew to their fate, creating a public relations nightmare for the line.

Shares of Carnival CCL �were last down $4.75 at $29.53. Rival Royal Caribbean RCL � slipped 3.5% to $27.73.

The Costa Concordia is owned and operated by Carnival�s local subsidiary Costa Crociere SpA. It cost $573 million to build and represents roughly 2% of the company�s passenger capacity. The tragedy comes at a time when demand for cruises, while higher than during the recession of 2008 and 2009, remains soft.

Carnival said in a release over the weekend that it has insurance that covers damage to the vessel with a deductible of approximately $30 million. It also has third party personal injury liability coverage subject to an additional deductible of about $10 million.

/quotes/zigman/322132/quotes/nls/ccl CCL 33.68, -0.31, -0.91%

The company noted that a damage assessment is underway and the ship is �expected to be out of service for the remainder of our current fiscal year if not longer.�

It estimates that in the current fiscal year, the loss of use will cost its 2012 bottom line $85 million to $95 million or 11 cents to 12 cents a share.

�In addition, the company anticipates other costs to the business that are not possible to determine at this time,� it said.

Even as the search for possible survivors continued, Wall Street analysts were busily totting up their own estimates of the financial impact of the tragedy.

Late Monday night, J.P. Morgan downgraded Carnival�s stock to neutral from overweight, reduced its fiscal 2012 earnings estimates from $2.73 to $2.16 a share and cut its price target to $30 from $38.

The revisions stem from �the impact that a tragic and headline catching event like this will have on an already soft consumer environment (particularly in Europe), and the resulting price discounting/promotional activity that we believe will follow,� wrote Kevin Milota.

�We believe an increasingly promotional pricing environment is particularly worrisome given the industry is at the early stages of �wave season�, the peak sales period from early January through the end of March when approximately one-third of annual cruise itineraries are sold, and helps set the tone of bookings for the rest of the year,� he added.

Click to Play How accident will impact tourism

WSJ's Arian Campo-Flores looks at the state of the cruise tourism industry and how it might be affected by the accident involving the Costa Concordia cruise ship off Italy. Photo by Laura Lezza/Getty Images

Harry Curtis of Nomura estimates that the loss of the Concordia alone will cost the company 7 cents per share in profit annually.

�The extent of the damage has yet to be fully determined, but the ship could be beyond repair,� he said. �Yields for the remaining Costa brand, which is 14% of Carnival�s global capacity, could be down around 10% this year given the timing of the tragedy.�

Making matters worse, he continued �is the company�s �silence and slow response to the incident presumably will not be viewed favorably by Costa�s passenger base in Europe, which is sourced largely from Germany, Italy, and France.�

Curtis expects Carnival will get an insurance payout of roughly $320 million and �in our view, [the company] should use the proceeds to repurchase roughly 9mn shares of stock, which limits the long-term EPS impact.�

Rachael Rothman of Susquehanna, who downgraded Carnival to neutral from positive, also pulled the trigger on Royal Caribbean.

�Cruise yields are likely to come under pressure as the timing of the tragedy and negative media attention coincides with the start of the Wave booking season,� she write. �The loss of life and significant negative media attention is likely to create a severe headwind to cruise bookings in the months ahead.�

The �read-through to Royal Caribbean is a clear negative, and as we saw with the Arab Spring in early 2011, a negative event during Wave has the potential to result in multiple downward revisions in guidance,� Rothman added.

SEC Inspector General Asked to Examine to Whom SEC Staff Is Beholden

Whose phone calls do you think the SEC returns first? Investors like you, or industry insiders? How much of their time do you think SEC Commisioners and staffers spend talking to, e-mailing and meeting with�including at exclusive conference venues�industry types? I think that an investigation into these issues by the Inspector General of the SEC would be revealing and I recently wrote to the IG recommending such a review. The goal of such an investigation would not be to merely expose pandering to the industry, but to establish standards that Commissioners and staffers would have to meet annually to demonstrate a commitment to investor concerns at least equal to their responsiveness to industry. While the prospect of employment in the industry will always be an incentive for SEC Commissioners and staffers to fawn over the industry, responsiveness to investors should be a requirement for getting and keeping a job at the agency. Today neither SEC Commissioners nor staffers are required to demonstrate any proven investor protection credentials, or records of responsiveness to investor concerns. In fact, the only track records these guys and gals typically have involve successfully representing industry concerns, as opposed to those of investors.  

Mary Schapiro, SEC Chairman, comes to the agency from FINRA, the brokerage industry�s conflicted and ineffectual self-regulator. Eileen Rominger is the Director of the SEC�s Division of Investment Management. She came to the SEC from the asset management industry, where she worked for the past 11 years at Goldman Sachs Asset Management�a firm not exactly known for its fair treatment of investors. Carlo V. di Florio is Director of the agency�s Office of Compliance, Inspections and Examinations. He comes to the SEC from PricewaterhouseCoopers (PwC), where he was a partner in the Financial Services Regulatory Practice. He replaced Lori Richards who left the Commission to become a principal with PwC�s Financial Services Regulatory Practice�the very same practice which di Florio left. It�s like they switched jobs.

I am well aware, as a former SEC attorney, that the curt, virtually hostile response investors and investor advocates receive from SEC staff is radically different from the SEC�s response with respect to representatives of the financial services industry. This has always been true but it�s gotten worse in recent years under Schapiro, not better. Despite growing criticism of the Commission, especially in response to the Madoff debacle, and promises made to Congress and the general public that the agency would become more proactive and responsive, it�s more difficult than ever to get through to senior staff.     

Today my calls to SEC senior staff (related to multi-million or even multi-billion dollar scams) are often not returned and, when returned, staffers let it be known that they have little time to talk. These bureaucrats seem to forget I used to work at the agency and later was in-house counsel to one of the largest mutual fund companies in the country. I know the difference between the SEC�s investor and industry response. I have resorted to sending emails after leaving phone messages to document my efforts to get staff to return calls. In my opinion, this lack of responsiveness is due to the fact that SEC Commissioners and senior staff are more closely aligned with the industry than ever. But I am willing to acknowledge I may be wrong. 

Rather that speculate as to why the SEC staff seems so unresponsive to investors today, or debate whether such an allegation is well-founded, I have proposed that the SEC Inspector General review records of contacts between staff and the industry and then publish his findings so that the public will know to whom the staff is beholden. I am confident that such a review will reveal that a handful of industry insiders are treated very differently than investors and investor protection advocates. If true, let�s make it a requirement that SEC Commissioners and staffers demonstrate annually what they�ve done for investors who cannot offer them lucrative jobs, but whose interests they are supposed to protect.

As gold prices began to plunge late last year, adviser Ethan Anderson began cutting his clients' gold exposure -- in half. But like so many investors, the Grand Rapids, Mich.-based pro is now faced with a new dilemma: Where to put the proceeds?

The shiny metal's recent fall -- it settled Friday at $1,616 per troy ounce, down 7% from Dec. 1 -- along with its increasing correlation with stocks, has converted many gold bulls into bears. In December, Investors yanked $2.2 billion out of the $65 billion SPDR Gold Shares ETF (GLD), the largest exchange-traded fund that invests in physical gold. That compares to an inflow of $3 billion in November, according to fund research firm Morningstar Inc. "Gold had a lot of momentum but then it seemed to lose it," says Jeff Tjornehoj, an analyst at fund tracker Lipper.

Also See

• Stocks and the Dollar: A New Correlation?
• The Looming Takeover Boom in Oil
• Analysts' Picks No Better Than Throwing Darts

Many of these investors have simply turned to other traditional safe havens like short-term bonds and Treasurys, or are simply holding the cash. But some financial advisers who claim those options have become too crowded and expensive are trying to build a defensive hedge for clients by shifting to less-popular investments, including emerging-market debt, international currencies and even mutual funds that bet on the mergers and acquisitions market. "It's time to start looking to be more aggressive," says Brian Kazanchy, a wealth manager at RegentAtlantic Capital in Morristown, N.J.

Of course, many investing pros say they are sticking with gold as way to protect their clients' portfolios from inflation and stock market volatility. Chris Kichurchak, vice president of Strategic Wealth Partners, a financial planning firm in Seven Hills, Ohio, says gold prices should rise again, given the continued debt worries in Europe. And if the European Central Bank buys more government bonds, in what's known as quantitative easing, he predicts investors will once again pile into gold.

Still, many experts say the gold bubble is finally popping and that it's time to seek shelter elsewhere. One strategy, says Adrian Cronje, chief investment officer of Balentine, an investment advisory firm in Atlanta, is to buy emerging-market bonds, which provide some diversification against the dollar. Because the bonds are denominated in local currency, if that currency gets stronger against the dollar, the bond is worth more, in dollar terms. Adviser Anderson, who halved his clients' gold holdings last month to 1.5%, says he's considering buying emerging-markets bonds because they're issued by countries that don't carry as much debt as developed regions like the U.S. and Europe.

Instead of relying on gold as a hedge against inflation, other pros are piling into currencies that can gain against floundering currencies. Jeff Sica, president and chief investment officer at Sica Wealth Management in Morristown, N.J., pulled money out of gold and other precious metals to invest in ETFs such as the $784 million CurrencyShares Australian Dollar Trust (FXA) and the $574 million CurrencyShares Canadian Dollar Trust (FXC), to get exposure to Australian and Canadian dollars. Those currencies, along with the greenback, are among those that should benefit if the euro plunges, he says.

In Atlanta, Paul Jacobs, a financial planner at Palisades Hudson Financial Group, says he's finding stable returns in perhaps an unlikely place: mutual funds that try to profit from mergers and acquisitions. Along with avoiding gold, Jacobs is replacing about 10% of his clients' bond portfolios with the $5 billion Merger Fund (MERFX), which invests in shares of companies that are set to be acquired with the hope that the share prices of those firms increase after the deal. While the strategy could be risky, the fund, which has returned an average 4% a year for the past three years, is less volatile than gold, says Jacobs.

Stocks Rise, But Consumer Enthusiasm Mixed

Stocks are broadly higher after a raft of economic data this morning.

The Dow is up 34 points at 10,231 with the S&P up half a point at 1,097. The Conference Board’s consumer confidence index rose this month to 55.9 from 53.6 in December, the third consecutive monthly rise, even though the number of pessimists still outweighs optimists, the Board reported. The number of people surveyed who think things are better for them at the moment improved, but those who think business conditions will improve in the near term declined.

The Case Shiller Home Price Index of the top 20 cities rose 0.2% in November, below the 0.3% rise that had been expected, though the broader index was in line with expectations. Same-store sales for last week were weaker than expected, dipping 2.5% from the prior week versus an expected 2% rise, according to the ICSC Goldman Sachs survey. The survey from Redbook out this morning was a little more positive, but suggested food and drugs were the main consumable last week.

Fueling optimism, perhaps, Reuters cites International Monetary Fund representatives’ comments that global growth is not fueling any dangerous bubbles — yet. Jorg Decressin, IMF’s chief of world economic studies, told reporters that “Asset prices in some specific sectors in some specific regions of China may be frothy but there is certainly no widespread asset bubble,” according to a Reuters report.

Obamanomics

As you may know, Barak Obama is committed to a 28% capital gains increase–that’s almost double the current rate! Investors who are trying to build up their retirement savings through dividend stocks or by selling assets in the future will see the value of their retirement portfolios shrivel.

And this capital gains hit couldn’t come at a worse time.

The dual downturns in the stock market and the housing market have already upended the plans of baby boomers and retirees. According to a study commissioned by Americans for Secure Retirement, “Almost three out of five new middle-class retirees will outlast their savings unless they live more modestly after they quit the work force.”

Ernst & Young puts it in even starker terms: “…many retirees will have to cut back far more on expenditures than they had ever expected. …The risk of outliving one’s assets is quite high.” But you don’t have to wait around and take the hit. There are some investment strategies you can put in place to protect your assets.

Look What Happened to this Dividend Fund

For instance, take a look at what happened to the iShares Select Dividend Index Fund (DVY), which tracks the performance of stocks that pay the highest dividend yields. As of this writing, it’s down 24%, about double the decline of the market as a whole. And the steepest part of that fall came after June 1, when it was clear that Obama had defeated Hillary Clinton for the Democratic nomination (see also, “Red Stocks, Blue Stocks“).

That tells you that investors are already bracing themselves for the capital gains hit that will happen if Obama is elected.
So what’s the alternative? Tax free munis?

If your retirement portfolio has been knocked down this year, that’s no way to build it back up. You see, safety is only part of the solution. The other part is growth. SAFETY and GROWTH are both essential elements. In fact, I’ve focused on safety and growth for the 19 years I’ve been writing Profitable Investing–the most successful investment newsletter for low-risk growth. I’ve helped my subscribers build wealth through the most turbulent markets–and today’s market is no exception.

As an investor in today’s market, you don’t have the luxury of passively waiting around to see if capital gains taxes are raised 60% or 70% or 100%. Nor can you take undue risks (see also, “Election Season: A Great Time to Sell Stocks”).

An Investment Opportunity that Offers You Protection and Profits

And that’s why I’m happy to say I have found a number of opportunities that will not only protect you against the big capital gains increase but also bring you handsome profits. I’m very excited about one opportunity in particular…

This group of stocks will give you regular cash you can count on, plus put you in a perfect position for capital growth. It’s part of an investment class called Master Limited Partnerships (MLP). MLPs were introduced to the market only 25 year ago. They’re investment tools that give investors many of the advantages of limited partnerships, yet trade just like stocks. In the case of my recommendation, it trades on the NYSE.

And when you look at what’s been happening recently with MLPs, in general, you notice something interesting. It’s not just the MLP insiderI mentioned buying up his company’s stock. In just the first 3 months of this year, insiders have been snapping up their own MLP stocks like fashionistas at a designer close-out sale! From January to March, they’ve bought $59 million of their own stock! (see also stock buy backs)

What gives? Why MLPs? Why now?

It’s Money in Your Pocket Every Quarter

Almost all MLPs are energy-related (oil and natural gas) pipelines that distribute oil and gas throughout the country.

MLPs pay healthy dividends–called cash distributions–that put money in your pocket every quarter. And MLPs aggressively aim to keep increasing the amount every year. The MLP I’m recommendingpays an 8.3% cash distribution. In times like these, it’s nice to know you can count on at least a 7% return on your money no matter what! It’s even a step up from Treasuries that pay about 4%. In addition, MLPs are excellent defensive investments during tough times (see also, “Survive the Tax Bomb with These 5 Stocks“). They have outperformed the broader market in three of the last four economic slowdowns.

MLPs are essentially toll collectors. They collect fees to allow oil and gas to flow through their pipelines. The demand for their service has been steadily increasing. But let’s say the economic slowdown reduces demand. Will that hurt their revenues?

Not really. You see, pipeline customers pay fixed reservation fees–in advance. Imagine if you had to pay a fixed fee in advance to cross bridges and tunnels–whether you use them or not. That’s why you can count on MLPs to perform well even during this economic rough patch. And there’s even more good news in store for MLPs.

We Need Billions of New Pipelines

Industry experts estimate that the U.S. needs $100 billion of new natural gas infrastructure over the next decade and billions more in crude oil and refined petroleum products.

The increasing demand for oil and gas has fueled the impressive performance of MLP stocks. Over the past 15 years, MLPs have outperformed the S&P 500 with a cumulative gain of 886% versus 549% for the broader market, and 18.3% versus 11.1% on a compound annualized basis.

So if you’re looking for capital appreciation, in addition to dividends, I urge you to consider master limited partnerships. On top of an 8.3% cash distribution, I expect the share price of my recommendation to climb 7% to 9% this year. Add the two together and you have the opportunity to gain 15% this year–that’s not bad considering the volatile nature of today’s market. And with the prospects for MLPs being as bright as they are, you can pretty much count on that kind of double-digit gain year after year.

Like some other sectors, MLPs are currently undervalued. You can get into my Top MLP recommendation now at a good price and look forward to excellent profits quite soon. Why am I convinced that investors are about to recognize the real value of this MLP and push up the price? Because right now people realize there is a very good chance Obama will be elected.

But what if McCain is elected?

The fact is Master Limited Partnerships will be a smart investment no matter who is elected. The price of oil has shocked Americans. John McCain has made a big point of getting more out of the oil and natural gas resources we have here in the U.S.(see also, “Get Rich from High Oil Prices“)

If McCain is elected there will be an even bigger push to increase drilling for oil and natural gas, and pipelines are the means of distribution. And Master Limited Partnerships are the way you can profit from this (see also,oil article). But the best profits begin now–before the election. Before word gets out about all the benefits and profits MLPs offer investors.

Richard Band’s Profitable Investingstrategy helps investors grow their portfolios safely and securely, while taking advantage of solid growth opportunities. And the reason so many of his subscribers have stayed with him for so long is they’ve enjoyed both the protection and the profits he has guided them to for almost two decades. Sign up now for a 6 month Risk-Free trial to Profitable Investing, read Richard’s special report and consider the MLPs and other investments he is recommending. Now is the time to both protect your investments and position yourself for the gains you need. Start building up your portfolio now.

Also in this issue:

• “Put” Your Money Against This Sector

• Hidden Fees Your Broker Won’t Tell You About
  

The 12 Keynes of Christmas

On Wednesday in North Carolina, White House Council of Economic Advisors chairman Alan Krueger spoke to the World Affairs Council of Charlotte.

In his talk, Krueger listed seven foundations of the U.S. economy:

(1) �a large, free market� with �easy entry of new competitors�;

(2) �strong and stable legal and economic institutions�;

(3) �a diversified workforce, in terms of skills . . . as well as demographics�;

(4) �the best . . . higher education�;

(5) �an entrepreneurial culture, supported by a vibrant venture capital community�;

(6) �innovation� and �great inventors�; and

(7) the virtue of being �a resourceful, results-oriented people, with the capability to continually reinvent ourselves.�

These bedrock items connote the productive, creative, supply side of the economy. The list could have appeared in speeches by Hayek or Reagan. Krueger even referred to Frank Knight and Joseph Schumpeter, two icons of entrepreneurial economics.

A Cheap Way to Protect Your Portfolio From Market Crashes

Follow Mark Sebastian on Twitter @option911.�

I want to flash traders back to the flash crash. The fund I work with had entered a May S&P 100 Index (OEX) butterfly that was doing reasonably well until the first week of May.�

When the market began to fall away from my short strikes, at one point the trade was down almost 10%, even after all of the hedging and adjusting we did. Then, on May 6, the flash crash happened, and we made a bloody killing.�

Why? Because I was long what most market makers call “units.” Thanks to these units my butterfly position, which by itself got killed by the crash, was more than protected.�

A unit is an extremely inexpensive option that has unpredictable Greeks, to say the least. All units will have deltas below 5, and little to no gamma or vega.�

I break them down relative to product: The more expensive the underlying, the more expensive the unit. For instance, in the SPDR S&P 500 ETF (NYSE: SPY), an option becomes a unit around 20 cents. In the S&P 500, an option is a unit closer to $2.��

How Do Units Work?

I like to compare option trading models to Chicago Bears quarterback Jay Cutler — great between the 20s, but not so great beyond that. Nowhere does this rear its ugly head more than in super-cheap options. Inexpensive options, especially puts, tend to gain far more value than the model predicts.�

What is the cause of this volatility? One of the major issues with most models, especially those used by the retail world, is that they predict uniform increases in volatility. This simply is not the case. When the market makes a violent move downward, two things happen:�

1. Front-month options increase in value far more than any other month, in relative terms.�

2. Downside puts gain far more value than the model predicts.�

Think of the volatility curve in a strong down move like a thin piece of wood evenly balanced over a fulcrum. If a fat guy jumps on one side of the wood, what will happen? Like a seesaw, the more one moves down the board away from the fulcrum, the further the distance that the wood will move.�

There is another factor, though. Since the fat guy jumped on the piece of wood, the wood will have moved violently. This causes the wood furthest from the fulcrum to temporarily bend upward.�

This is the way cheap puts act in a major down move. In the panic, the world is buying at-the-money (ATM) puts, downside puts, you name it. Every trader that is selling or short these puts races to buy something that will protect his or her position in case the market absolutely tanks.��

So these shorts buy units, and this buying causes the unit to gain a little price, which increases vega, which increases delta, which increases the value of the unit as the market tanks, which in turn causes the unit to gain more value as traders race to buy them to protect sales, which raises vega � you get the point. In short, there is a snowball effect.�

How to Trade Units

Here is an example of exactly what we saw at the fund in the OEX trade. On April 20, we bought the OEX May 505 Puts as a hedge against a short iron butterfly. When the market fell on May 6, these options were worth almost $10. On May 7, they closed at $14.50, a return of more than 1,200%. Not bad for an option that cost us $1.20.�

So how can the average trader use units to increase the returns of his or her portfolio?�

That’s easy. Buy units, but not a huge amount. At OptionPit.com, we teach that about 5% to 10% of allocated trading money (not the total account value) should go into puts against a standard set of spread trades (condors, butterflies and time spreads). This amount should be enough so that, adjusted for any increase in volatility, if the market drops 10% your position is no longer losing money, or possibly gaining value. And if the market drops 20%, then the trader should be making money.�

Obviously, the math is not that simple. Understanding how units work comes with understanding volatility. When I am teaching at OptionPit.com, this is only one of the steps we take to ensure our traders are safe. After all, trading is not easy and nothing is for certain, but by properly implementing units, I am willing to bet that a trader will never have to sell his or her house because the market dropped 25%.

The Secret to Banking Giant Options Gains
If you’re ready to make serious money, we’re talking about 100%-5,300% profits, read our just-released trading guide online now. In it we reveal the money-doubling secret we were banned from sharing, plus two free trades to get you started. Get your FREE copy here!

Investing 101: 6 Rallying Stocks That Are Undervalued by Enterprise Value

In the search for companies that are undervalued but show promise of positive growth, we screened for potentially undervalued names that are currently experiencing upward momentum.

Momentum ideas
One of the most popular technical indicators is momentum -- the idea that recent trading trends for a stock may persist as more investors follow suit.

For instance, a stock that is trading above its 20-day, 50-day, and 200-day moving averages (MA) is clearly surrounded by positive investor sentiment, and that idea may resound with investors for some time to come.

Additional screening for undervalued stocks
From this universe, we collected data on levered free cash flow and identified the companies most undervalued relative to their levered free cash flows.

Levered free cash flow, or the free cash flow available after paying interest on debt, is a helpful way to gauge firm value because it is the cash flow available to shareholders. Enterprise value is the sum of the firm's value from all ownership sources: market cap, outstanding debt, and preferred shares. From this value we subtract cash holdings because, in the event of a takeover, that cash would be used toward the takeover price.

When the ratio of levered free cash flow to enterprise value is high, it may indicate that the firm is valued too low. At the very least, it indicates that the company is producing a lot of cash.

The list
We applied both of these concepts to a universe of stocks, with market caps above $300 million that are trading above their 20-day, 50-day and 200-day moving averages, and technically undervalued by the LFCF/EV ratio.

Do you think these companies are truly undervalued? Do you think they have the momentum to push even higher? Use this list as a starting-off point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)

1. Cedar Shopping Centers (NYSE: CDR  ) : Engages in the ownership, operation, development and redevelopment of supermarket-anchored community shopping centers and drug store-anchored convenience centers in the United States. Earnings per share expected to grow by 56.70% over the next five years. The stock is currently trading 11.51% above the 20-day SMA, 27.06% above the 50-day SMA, and 12.72% above the 200-day SMA. Levered free cash flow at $210.55M vs. enterprise value at $1.15B (implies a LFCF/EV ratio at 18.31%).

2. Asbury Automotive Group (NYSE: ABG  ) : Operates as an automotive retailer in the United States. Earnings per share expected to grow by 25.05% over the next five years. The stock is currently trading 8.98% above the 20-day SMA, 14.78% above the 50-day SMA, and 23.37% above the 200-day SMA. Levered free cash flow at $160.09M vs. enterprise value at $1.50B (implies a LFCF/EV ratio at 10.67%).

3. Tessera Technologies (Nasdaq: TSRA  ) : Develops and licenses miniaturization technologies for chip-scale, multichip, and wafer-level packaging, which enables companies to produce chips for digital audio players, digital cameras, personal computers, personal digital assistants, video game consoles, and mobile phones. Earnings per share expected to grow by 25% over the next five years. The stock is currently trading 7.45% above the 20-day SMA, 12.32% above the 50-day SMA, and 13.54% above the 200-day SMA. Levered free cash flow at $74.38M vs. enterprise value at $384.27M (implies a LFCF/EV ratio at 19.36%).

4. Lions Gate Entertainment (NYSE: LGF  ) : Engages in the motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, new channel platforms, and digital distribution activities. Earnings per share expected to grow by 27.95% over the next five years. The stock is currently trading 6.61% above the 20-day SMA, 5.26% above the 50-day SMA, and 24.62% above the 200-day SMA. Levered free cash flow at $446.47M vs. enterprise value at $1.92B (implies a LFCF/EV ratio at 23.25%).

5. Bridgepoint Education (NYSE: BPI  ) : Provides postsecondary education services. Earnings per share expected to grow by 21.67% over the next five years. The stock is currently trading 5.53% above the 20-day SMA, 5.73% above the 50-day SMA, and 8.45% above the 200-day SMA. Levered free cash flow at $181.98M vs. enterprise value at $950.15M (implies a LFCF/EV ratio at 19.15%).

6. Dollar Thrifty Automotive Group: Dollar Thrifty Automotive Group, through its subsidiaries, rents and leases vehicles through company owned and franchised stores under Dollar and the Thrifty brand names primarily in the United States and Canada. Earnings per share expected to grow by 36% over the next five years. The stock is currently trading 2% above the 20-day SMA, 6.54% above the 50-day SMA, and 3.81% above the 200-day SMA. Levered free cash flow at $296.41M vs. enterprise value at $2.89B (implies a LFCF/EV ratio at 10.26%).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

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List compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above.

Jones Group Shares Plunged, Then Recovered: What You Need to Know

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 apparel-designer Jones Group (NYSE: JNY  ) slipped sharply in early trading, falling as much as 13% before making a substantial recovery.

So what: The early dip was connected with Jones' announcement that it has terminated its efforts to sell its jeans division. The company had been working on a deal with Israel's Delta Galil that was reportedly for $350 million-$400 million. Jones had hoped to jettison the segment and focus more on its higher-end wares.

Now what: Traders reacting quickly to the news this morning appear to have overestimated the broader market's reaction to the revelation. Looking ahead, this development may not be all that meaningful -- perhaps Delta Galil was hoping that a tough economy would allow it to buy the business at a bargain price and Jones wasn't interested in that. On the other hand, it could mean that the jeans division isn't worth as much as Jones management -- or shareholders -- had hoped.

Without a window into those closed-door discussions, we won't be able to know which direction those discussions went. Instead, investors will simply have to stay tuned in to the results that the company is able to turn out in the quarters to come.

Want to keep up to date on Jones Group? Add it to your watchlist.

17 Companies Increasing Dividends

Another week is in the books, and once again we saw another bevy of big names reporting earnings — and boosting shareholder bottom lines. This week�s diverse group of dividend divas includes a REIT, a bourbon maker, a tech titan and two iconic toy makers. Here are 17 companies increasing dividends.

Apartment REIT AvalonBay Communities (NYSE:AVB) raised the rent it pays to shareholders by 8.7% to 97 cents per share. The new dividend is payable on Apr. 16 to shareholders of record as of March 30. The new dividend yield, based on the Feb. 1 closing price of $136.92 (the day the dividend was declared), is 2.83%.

Bourbon maker Beam (NYSE:BEAM) distilled a new dividend of 20.5 cents per share, a 7.9% increase from the previous payout. The new, higher-proof dividend will be poured on March 1 to shareholders of record as of Feb. 8. The new dividend yield, based on the Jan. 27 closing price of $52.77, is 1.55%.

Wireless chipmaker Broadcom (NASDAQ:BRCM) rang up shareholders� cell phones with an 11% spike in its quarterly payout to 10 cents per share. The new dividend will be paid March 5 to shareholders of record as of Feb. 17. The new dividend yield, based on the Jan. 31 closing price of $34.35, is 1.16%.

Exchange operator CME Group (NYSE:CME) traded up for a higher payout to shareholders, increasing its dividend by 59% to $2.23 per share. The company also declared an additional, annual variable dividend, amounting to $3 per share in 2012.� Both dividends, totaling $5.23 per share, will be payable on March 26 to shareholders of record as of March 9. The new dividend yield, based on the Feb. 2 closing price of $266.01, is 3.35%.

Electric and gas utility CMS Energy (NYSE:CMS) turned the power up on its dividend, increasing the payout 14% to 24 cents per share. The new dividend will be paid on Feb. 29 to shareholders of record as of Feb. 10. The new dividend yield, based on the Jan. 27 closing price of $22.09, is 4.35%.

Filtration systems maker Donaldson (NYSE:DCI) purified its payout, upping its quarterly dividend 7% to 16 cents per share. The new dividend is payable March 9 to shareholders of record as of Feb. 17. The new dividend yield, based on the Jan. 27 closing price of $71.61, is .89%. The company also authorized a two-for-one split of its common stock, which will take effect March 23 to shareholders of record as of March 2.

Engineering and construction firm Fluor (NYSE:FLR) built a new payout for shareholders, raising its quarterly dividend by 28% to 16 cents per share. The new dividend is payable Apr. 3 to shareholders of record as of March 5. The new dividend yield, based on the Feb. 2 closing price of $57.97, is 1.10%. The company also tapped CEO David Seaton to takeover the role as chairman.

Toy maker Hasbro (NYSE:HAS) added some mirth to shareholders� portfolios, increasing its dividend by 20% to 36 cents a share. Shareholders will be able to play with the new payout on May 15, if they’e owners of record as of May 1. The new dividend yield, based on the Feb. 2 closing price of $35.14, is 4.10%.

Confectioner Hershey Foods (NYSE:HSY) sweetened its payout by 10% to 38 cents per share. The tastier dividend will be paid March 15 to shareholders of record as of Feb. 24. The new dividend yield, based on the Feb. 1 closing price of $61.30, is 2.48%.

Trucking and logistics firm J.B. Hunt (NASDAQ:JBHT) carried an increasing dividend payload to shareholders, delivering a penny increase in its quarterly payout to 14 cents per share. The new dividend will be paid Feb. 24 to shareholders of record as of Feb. 14. The new dividend yield, based on the Feb. 2 closing price of $51.17, is 1.09%.

Lingerie and bath products seller Limited Brands (NYSE:LTD) raised the limit on its dividend, increasing its quarterly payout 25% to 25 cents per share. The sexy new dividend is payable March 9 to shareholders of record as of Feb. 24. The new dividend yield, based on the Jan. 30 closing price of $41.00, is 2.44%.

Oil sands giant Marathon Oil (NYSE:MRO) dug up a 13% increase in its quarterly dividend to 17 cents per share. The new payout will be pumped into portfolios on March 12 to shareholders of record as of Feb. 16. The new dividend yield, based on the Jan. 27 closing price of $31.24, is 2.11%.

Barbie and Hot Wheels maker Mattel (NYSE:MAT) dressed up its dividend by 35% to 31 cents per share. The hot new payout will be wheeled out March 9 to shareholders of record as of Feb. 23. The new dividend yield, based on the Jan. 31 closing price of $31, is 4%.

Office and business machine maker Pitney Bowes (NYSE:PBI) increased the fiscal productivity of shareholders, lifting its quarterly dividend to 37.5 cents per share. The new dividend is payable March 12 to shareholders of record as of Feb. 17. The new dividend yield, based on the Feb. 1 closing price of $19.16, is 7.83%.

Discount clothing retailer Ross Stores (NASDAQ:ROST) increased the price it pays to shareholders by 27% to 14 cents per share. The dressed up payout will be donned March 30 to shareholders of record as of Feb. 17. The new dividend yield, based on the Feb. 2 closing price of $51.19, is 1.09%.

Energy stock Sunoco (NYSE:SUN) gave shareholders a ray of dividend light, increasing its payout 25% to 20 cents per share. The new dividend is payable March 8 to shareholders of record as of Feb. 15. The new dividend yield, based on the Feb. 2 closing price of $38.25, is 2.09%.

Global direct-selling giant Tupperware (NYSE:TUP) sealed up a 20% gain in its quarterly dividend to 36 cents per share. The new dividend is payable Apr. 6 to shareholders of record as of March 20. The new dividend yield, based on the Feb.1 closing price of $61.38, is 2.35%.

Disclosure: At the time of publication, Jim Woods held no positions in any of the stocks mentioned in this article.

Gartman: Gold Prices To Be Higher Next Year, U.S. Dollar Dramatically So

(Kitco News) -Gold prices should be higher next year, but corn and the U.S. dollar should see dramatic gains, said an influential newsletter editor.

Dennis Gartman, editor of the newsletter, The Gartman Letter, said he�s most bullish on corn and the �English-speaking� currencies, including the U.S. dollar, but also the Canadian, Australian and New Zealand dollar, plus the British pound.

Gartman wouldn�t give a specific forecast for gold, only to say that he expected prices to be higher than they currently are a year from now, but not �demonstratively so.�

�I really don�t like to put numbers on things. If you say gold is going to $2,100 and it goes to $2,085, I�m telling you, you taken to the rack because you missed it. The best that you can do in this business is to get the direction right�. If you get the direction right 45% of the time you�re going to beat everybody else,� he said.

Gartman spoke to Kitco News Thursday on the sidelines of the Executives� Club of Chicago�s Annual Economic Outlook.

He said gold is still in a bull market, but right now he is holding a neutral stance. �There are only three positions you can take in a bull market: really long, long and neutral. Right now I think neutral is the place to be,� he said.

Gartman is famous for trading gold in currencies other than the dollar, which gold is denominated in. He frequently trades gold in euro and yen terms. To do so he has said that buys gold and simultaneously sells the other currency, trying best to match equal dollar sums on both sides of the trade.

�Too many people have thought of gold as being an anti-dollar trade. If it is, by buying it in euro terms, I�ve effectively hedged out the dollar risk. Quite honestly under most circumstances � not all � but on days that gold would get whacked, then the euro would get whacked. That has allowed me to breathe on down days in gold,� he said.

He told the audience at the Executive�s Club outlook panel that other markets he�s bullish on are corn, coal � both thermal and metallurgical � and dollars, whether U.S., Canadian, Australian and New Zealand, but did not elaborate.

He added that the U.S. dollar will be �dramatically higher� by next year and said it will remain as the world�s reserve currency, saying it�s �idiocy� not to think so. He said the U.S. military superiority guarantees that dominance. �No one else comes close to the U.S. defense capability,� he said.

He�s also very bullish stock markets, both U.S. and other stock markets, saying that the amount of fiscal stimulus via quantitative easing by the Federal Reserve and ultra-low interest rates in many other countries will benefit equities. When the moderator of the panel asked what his forecast for the Dow Jones Industrial Average would be in a year�s time, he said 16,500. It is now around 12,350.

He also told the Executive�s Club audience that he has no love for �gold bugs,� saying that they remind him of Ted Kaczynski, a recluse survivalist who was known as the �Unabomber� for his letter bombs than spanned 20 years. Gold bugs, he said, have their gold holdings, �dried food, water and live up in caves.�

Bernanke: Nothing’s off the Table (But Nothing’s on the Table Either)

Fed Chairman Ben Bernanke told Congress this morning that “At this point I can’t say that anything is completely off the table,” in response to a question about whether the Fed will take more action to stimulate the economy.

That said, nothing’s on the table either.

Bernanke was careful to say that the Fed needs to further analyze the labor market in particular to determine how badly it’s deteriorated and why. Once the FOMC has done that, it still needs to determine whether it can have any real effect. He also pointedly said that maybe Congress could “take this burden from us.”

Update, 10:53: Indexes are still trading higher since Bernanke began to speak, but have cut their gains, with the Dow recently trading about 68 points higher.

He added that there “may be diminishing returns” from further quantitative easing.

The employment question, he said, is a complicated one:

“The main question we have to address is the likely strength of the economy going forward. The weakness in labor markets may reflect the end of a catch-up period in which employers were off-setting [declines] in employment from the recession. We’ll need to see growth at or above the trend rate. That’s the essential question we have to look at: will there be enough growth going forward to make material progress on the unemployment rate.”

For now “it’s too soon for me to do that.”

“In looking at those options,” he said the Fed needs to determine� “how effective they would be and whether there are costs and risks that would outweigh the benefits they would achieve.”

The housing market, he added “looks to be stabilizing.”

Bernanke said in a prepared statement before the Q&A that the Fed is ready to act if Europe’s woes get worse. Bernanke didn’t specify action the Fed might take, and arguably sounded less aggressive than other Fed officials have in the past week, as they worked to reassure markets that they’re ready to act.

Said Bernanke:

“The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely. As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.”

He also noted that monetary policy is already “highly accommodative”:

“With unemployment still quite high and the outlook for inflation subdued, and in the presence of significant downside risks to the outlook posed by strains in global financial markets, the [Federal Open Market Committee] has continued to maintain a highly accommodative stance of monetary policy.”

Are These Energy Stocks in a Bubble?

With oil around $100 per barrel, many small cap energy stocks have seen huge rallies. The energy stocks below have hit new 52 week highs. Investors might want to think seriously about whether these stocks are rising based on solid fundamentals, or if they are showing signs of a speculative, blow off top. When stocks move this far, so quickly, there is a good chance they could run even more (due to momentum) before settling back.

However, I think it is prudent to take at least some profits on these shares after an incredible run. In particular, I am looking at the market caps and the high Relative Strength Index (RSI) levels which can indicate overbought conditions. Stocks with an RSI rating of about 70 can signal that the shares are overbought and due for a pull back. To learn more about RSI, see here.

Also, with some of these shares trading at very high valuations, I would not be surprised to see management announce capital raising share offerings, as AXAS recently has. If there was a time to raise capital, it appears the window is wide open for now.

Kodiak Oil and Gas Corp. (KOG) hit a new 52 week high today at $7.60. The relative strength index is about 78.4.

These shares have risen from a 52 week low of $2.35. The 50 day moving average is $6.35 and the 200 day moving average is $4.31. Yahoo Finance lists the market cap for KOG to be about $1.1 billion. Compared to the market cap, revenues are minimal and insiders have been selling shares (see here).

Samson Oil and Gas Corp. (SSN) hit a new 52 week high today at $3.50. The relative strength index is about 82.82.

These shares have risen from a 52 week low of about $2.35. The 50 day moving average is $2.05 and the 200 day moving average is $1.31. These shares traded for under 50 cents less than one year ago. Yahoo Finance shows a market cap of about $245 million and says the company has only 7 full time employees. I'd think twice about a valuation of nearly a quarter billion dollars for a company that has as many employees as some families have members. Most likely, SSN has more employees since that report, but still, this likely to be a very high market cap per employee ratio. SSN has reported revenues of less than $6 million for the fiscal year ended June 30, 2010. See their annual report here.

Abraxas Petroleum Corporation (AXAS) hit a new 52 week high today at $6.14. The relative strength index is about 78.61.

These shares have risen from a 52 week low of $1.85. The 50 day moving average is $4.61 and the 200 day moving average is $3.40. Yahoo Finance shows a market cap of about $456 million and annual revenues of about $61 million. You can read the latest quarterly report here.

I think it's time to sell while the getting is good. Most likely the easy money has been made for now and at these levels, the statement "buyer beware" seems appropriate.

Data is sourced from Yahoo Finance and company websites. The information and data is believed to be accurate, but no guarantees or representations are made.

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

Sonic Solutions To Buy Divx For $323 Million In Cash And Stock

Sonic Solutions (SNIC) this morning said it signed a deal to acquire Divx (DIVX) for $3.75 a share in cash plus 0.514 Sonic shares for each Divx share, for total value of about $9.83 a share. Holders of both video production software tools companies need to approve the deal. Divx holders will own about 35% of the combined company.

Sonic said the deal will be accretive, potentially doubling FY 2012 non-GAAP EPS.

The company said the deal will give it “a more extensive solution for Internet video delivery,” including tools for content preparation in the cloud, video playback and Hollywood-approved DRM.

Current Sonic management will lead the company, along with key managers and execs from Divx, but Divx CEO Kevin Hell, CFO Dan Halvorson and general counsel David Richter will not stay with the combined company.

Sonic also said that for the fiscal fourth quarter ended March 31, it will report $26.4 million in revenue, with $1.2 million in net income and GAAP EPS of 4 cents. For the June quarter, the company expects abotu $25 million in revenue,

This morning:

• SNIC is down 75 cents, or 6.3%, to $11.08.
• DIVX is up $2.05, or 29.5%, to $9.

Another Day, Another Positive Close for SPY

Make that 13 in a row! The S&P 500 tracking ETF (SPY) finished the day up 0.8% today, bringing its current streak of consecutive up days to 13. This is now SPY's longest winning streak since the ETF started trading back in 1993.

Over this 13 day winning streak, SPY has rallied over 5%, bringing the ETF to new bull market highs.

Looking back at the last two weeks of trading, it looks like those who argued that the February's weak Consumer Confidence marked the end of the bull market and the beginning of a double dip may now have to go back to the drawing board. (Click to enlarge)

Sales of New Homes Rise at Fastest Pace in 47 Years

The drumbeat of positive news in the housing market continued for a second day, as sales of new homes in March had its biggest monthly jump in 47 years, the Commerce Department reported Friday, April 23.

Sales soared 27%, the biggest since a 31% gain in March 1963, as buyers were spurred by a government tax credit that expires at the end of this month. Sales of new homes increased in March to a seasonally adjusted annual rate of 411,000, the highest since July, and followed a rise of 324,000 in February.

The government extended an $8,000 tax credit to first-time home buyers in November and expanded it to include some current owners, who could get a credit of up to $6,500. The deadline for signing contracts is the end of April, and the sales must be completed by June 30.

Economists like Lawrence Yun of the National Association of Realtors (NAR), which reported Thursday that sales of existing homes rose 6.8%, have pointed to the tax credit with spurring purchases. "The home buyer tax credit has been a resounding success," Yun said Thursday.

Sales rose in all four regions of the U.S. last month, led by a 44% jump in the South and 36% climb in the Northeast. The median price of a new home rose 4.3% in March from the same month a year earlier, to $214,000.

Read the full version of the Commerce Department's report on new home sales.

Century-old IBM hits fresh all-time high

NEW YORK (CNNMoney) -- Young upstarts like Apple and Google dominate the headlines, but century-old IBM is holding its own with the newbies. Big Blue's stock hit an all-time high on Monday, topping $200 per share.

Shares of IBM (IBM, Fortune 500) are up nearly 24% over the past 12 months, giving the company a market cap of around $230 billion.

IBM, whose predecessor company was founded in June 1911, overcame a decade of instability in the 1980s and has generally posted strong earnings in recent years.

Sam Palmisano took the helm in 2002, and his nine-year reign -- which ended in December -- was dedicated to turnaround and transparency. His vision for the future helped draw investors back to IBM.

In 2007, IBM deployed a roadmap that boldly stated it would achieve earnings of $10 to $11 per share in 2010. IBM went on to earn $11.52 per share for the year.

In its latest roadmap, IBM says it plans to achieve operating earnings of $20 per share by 2015. The company says it expects 30% of its sales will come from growth markets, that it will spend $20 billion on acquisitions, and that it will earn half of its profits from high-growth software sales.

That's good enough for legendary investor Warren Buffett, whose Berkshire Hathaway (BRKB) bought a position in IBM in November. It was Buffett's first investment in the tech industry.

Meanwhile, IBM announced earlier on Monday that its "Jeopardy!"-playing computer Watson has scored its first job in banking.

Citigroup (C, Fortune 500) is exploring possible uses for Watson's question-answering software. Citi didn't go into specifics, but the bank said Watson could help "advance customer interactions" and "improve and simplify the banking experience."

News of Watson's first commercial application came in September. Health insurer Wellpoint (WLP, Fortune 500) said it would use Watson to help medical professionals diagnose and sort out treatment options for complicated health issues. 

Credit Card Banks Complain About Consumer Complaint Database

Last week, a grave injustice was done in America. A government-sponsored website appeared, naming and shaming some of America's leading corporate citizens. Capital One (COF) and Citigroup (C), Bank of America (BAC) and JPMorgan Chase (JPM) -- even American Express (AXP), the one bank whose products no Americans in their right mind would ever "leave home without" -- had their good names smeared by government fiat.

But never fear. When there's injustice in the world, a minority being oppressed, a "little guy" being crushed by the jackbooted bullies of the government's consumer protection agencies ... the American Bankers Association is there to help.

On Tuesday, the Consumer Financial Protection Bureau launched its new public Consumer Complaint Database. As the name suggests, this is a database of consumer complaints, filed by consumers wishing to chastise their credit card providers for misfeasances, malfeasances and other ill behaviors.

Full of issues ranging from mundane billing disputes and complaints of usurious interest rates to problems involving identity theft, unwanted credit card offers, troubles collecting on card "rewards," and everything in between, the main database runs to some 17,000 individual instances of consumer credit card rage, logged between the months of July 2011 and May 2012. At present, only the most recent complaints (those filed since June 1, 2012) are searchable -- 137 records in all -- and even these aren't the easiest to access or make sense of.

It is, however, a start -- and if the bankers have anything to say about it, that's all it will ever be.

Don't Ask, and We Won't Tell

According to the ABA, and its allied Consumer Bankers Association and National Association of Federal Credit Unions, out of the 383 million credit card accounts currently active in the U.S., fewer than 1% have ever had a complaint submitted about them to the CFPB. Now, one wonders whether 1% of credit card holders have ever even heard of the CFPB. But regardless, the bankers think that the small number of complaints being registered means there's really no need for the database to exist.

But if it must exist, the bankers would like to suggest some improvements. As you can see on the site, banks' names are named, accusations leveled, and protestations that the bank responded in a "timely" manner to the complaints are disputed -- but the identities of the consumers doing the naming, accusing, and disputing are hidden. Only the names of the banks in this case are published.

This, worries the ABA, creates a situation in which "the bureau's plan to release unverified data is disappointing and could mislead consumers." The CBA objects that "there are many complaints that at the end of the day are not justified." And when unfounded accusations are made and published then "there is a significant chance of a reputational hit." Thus, NAFCU laments that "given the nature of viral media, disclosing all complaints may paint a misleading picture and trigger reputational risks for solid institutions that could raise safety and soundness concerns for the financial institutions in question."

And you know if there's one thing bankers hate, it's seeing people get undeservedly "painted" with a bad reputation. Why, that would almost be like...

A Bad Credit Report

Lots of factors go into building a person's credit report. According to website CreditSesame.com, the number of credit inquiries made on your account, the amount you owe on your cards, and the percentage of your credit limit these owed amounts represent are just a few of the factors determining your "reputation" as a user of credit. What really hurts your credit score, though, are reports of unpaid or late-paid bills -- reports that, by the time they show up in a person's credit report, are hard to dispute and harder to resolve. And in some cases, it's hard to be sure who's even making the allegations.

Similarly, the banks' worry that unsubstantiated complaints by a few crank callers could raise "soundness concerns" regarding "solid institutions" echoes objections that consumer advocates used to make against the banks' system on universal default. Before this system was banned by the 2010 CARD Act, if you paid just one bill late on a single credit card, you could quickly find yourself punished with interest rate hikes on all your credit cards, regardless of who issued them or whether you were current on most of them.

In short, the banks may be right that the manner in which the CFPB reports consumer credit card complaints is flawed and unfair. In fact, when pointing out how the system is rigged against them, they should be right.

After all, they're the ones who figured out how to rig it that way against their customers in the first place.

Related Articles

• Online Credit Card Complaint Database Debuts
• Do Your Credit Reports Contain These Three Red Flags?
• You're a Responsible Borrower? 'So What?' Say Credit Card Banks

Gallery: 10 Credit Report Myths -- Busted!

Motley Fool contributor Rich Smith does not own or short shares of any company named above (but he does have a few of their cards in his wallet). The Motley Fool owns shares of Citigroup, JPMorgan Chase, American Express, and Bank of America. Motley Fool newsletter services have recommended writing a covered strangle position in American Express.

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One of the Most Successful Venture Capital Firms in the World is Buying this Stock

Want to know what separates a mid-level financial advisor from a major Wall Street hedge-fund manager?

The ability to discern opportunity before the rest of the pack...

It's something not many can do, especially when it comes to investing... It takes a curious alchemy of financial understanding, subject-matter expertise, curiosity, synergetic aptitude, creative imagination and good, old-fashioned entrepreneurship...

If you want insight from this sort of brilliant mind, then I suggest reading Andy Kessler, the former hedge-fund manager.

 

But if you want to watch an entire firm with these sorts of qualities, the best place to look is Kleiner Perkins Caufield & Byers -- one of the most successful venture capital firms in the world. (A venture capital firm provides financial capital to early-stage, high-potential growth startup companies)

I won't talk too much about Kleiner Perkins, the firm's track record speaks for itself... It was an early investor in Amazon (Nasdaq: AMZN), AOL (NYSE: AOL), Compaq, Electronic Arts (Nasdaq: GS), Genentech and Intuit, just to name a few.

Then in 1999, long before "Google" was even a verb, Kleiner Perkins paired with Sequoia Capital and paid $25 million for 20% of the search engine -- Google (Nasdaq: GOOG) is now worth about $200 billion today.

All told, if you add up all of Kleiner Perkins successful ventures, they have produced 250,000 new jobs, brought in more than $100 billion in new revenue, and created more than $650 billion in market cap.

As the chief investment strategist behind Game-Changing Stocks, I like to see where firms such as Kleiner Perkins are parking their cash -- their long history of savvy investment success is chief among its several areas of distinction.

Right now, Kleiner Perkins invests in four distinct areas: Greentech, China, Digital and Life Sciences... But an overwhelming number of their success has come from high-flying tech start ups.

And after looking through some of Kleiner Perkins most recent investments, I think they may have found another future success story in RPX Corp. (Nasdaq: RPXC), or "Rational Patent."

Rational patent is ultimately a response to the growing trend of patent litigation. If you follow financial news, then you're likely aware of how important having access to the right patents has become, especially for tech companies.

In fact, the need for patents led Google to buy out telecommunications giant Motorola for a whopping $12.5 billion in 2011. By purchasing the telecomm leader, Google gained access to Motorola's roughly 25,000 patents.

All-in-all, in 2010, a total of 2,727 patent lawsuits were filed, according to Rational Patent. In the first quarter of 2011 alone, another 918 hit the courts, which works out to annualized growth of 35% in one year. It's a messy business with an extreme amount of risk.

Companies with patent concerns can manage this risk by buying a membership in Rational Patent.

RPX holds a portfolio of some 1,600 patents -- nearly all of them from marquee names from the high-tech sector -- and clients pay RPXC $60,000 to $6.6 million a year to license all of the patents and thus avoid trampling on anyone else's proprietary technology, whether inadvertently or on purpose.

Rational Patent then uses its revenue to buy more patents, which attracts more members, and so it goes.

There are about 2,500 companies that could benefit from a membership, which gives RPX a huge amount of growth potential. That is reflected in its top line: Revenue is growing at a phenomenal pace.

What's more, happily, the company is profitable and has no long-term debt. With a market cap of $640 million and annualized 2011 net earnings of about $30 million, RPX is trading at 21.3 times earnings, or roughly equal to the Nasdaq Composite Index.

Risk to Consider: Let me warn you though, like any growth stock, investing in Rational Patent carries significant risk, because the company trades as a small-cap, you can expect greater volatility when the market roils.

> But, if you're an aggressive investor looking for a stock with big upside potential, then I think Rational Patent could be a smart play.

Water bills expected to triple in some parts of U.S.

NEW YORK (CNNMoney) -- Many consumers could see their water bills double or even triple, as the country attempts to overhaul its aging water system over the next 25 years.

A new study by the American Water Works Association found that repairing and expanding the U.S. drinking water system between 2011 and 2035 will cost at least $1 trillion, an amount that will largely be paid for by jacking up household water bills.

"The amounts will vary depending on community size and geographic region, but in some communities these infrastructure costs alone could triple the size of a typical family's water bills," the report said. (CNN's Building Up America)

Currently, the average household water bill is about $335 per year, according to the non-profit, which focuses on drinking water quality and supply.

Small, rural communities are likely to be hit the hardest because there are fewer people to share the expenses of infrastructure projects. Families in these areas are likely to see their bills jump between $300 and $550 per year due to infrastructure repairs and expansion costs.

And that doesn't even include added costs of other big projects that may come up like replacing pipes to meet new regulations.

Home repairs: Which jobs come first?

While it's a lot of extra money to pay, delaying the investment could lead to poor water service, pipe breakage and an increase in costly emergency repairs which would lead to higher costs in the long-run, the report states. (U.S. water infrastructure in trouble - CNN)

"We face the need for massive reinvestment in our water infrastructure over the coming decades," the report states. "The pipe networks that were largely built and paid for by earlier generations -- and passed down to us as an inheritance --last a long time, but they are not immortal."

The $1 trillion in water infrastructure costs over the next 25 years includes fixing leaky pipes, replacing pipelines and expanding water systems to accommodate growing populations. 

The Toxic Past Haunting Anadarko’s Future

Despite�Anadarko‘s (NYSE:APC) recent drilling successes in unconventional assets in Mozambique and Utah, shareholders may not want to jump for joy just yet. A major lawsuit stemming from the company�s past has finally made its way into the U.S. judicial system. The suit involves environmental events that occurred back in the 1970s. But Anadarko and its shareholders could be in a world of hurt soon if the verdict doesn�t go their way.

Similar to BP�s (NYSE:BP) legal issues resulting from the Deepwater Horizon disaster, which killed 11 workers and created one of the worst oil spills in recent history, Anadarko�s problems could create the same kind of legal overhang that threatens to weigh on shares for years to come. Some analysts have even postulated a potential breakup or bankruptcy for the firm due to the pending legal issues.

Insider Selling Activity Says Stocks Are a Buy

Yet, the independent exploration and production (E&P) firm is one of the rising stars in unconventional energy assets and continues to generate production and earnings gains. At Monday’s closing price of $64.63, Anadarko has a market cap of just of $32 billion, and the stock is down some 15% so far this year. So, the questions now are: Just how serious are Anadarko�s problems, and should investors just walk and choose another E&P option?

Kerr-McGee, Karen Silkwood and Tronox

Anadarko�s legal headache can be traced back to its June 2006 acquisition of Kerr-McGee�s oil and gas assets. Anadarko paid nearly $17 billion, including an estimated $1.6 billion worth of debt and other liabilities, for the assets, which were a key part of former CEO Jim Hackett’s plan to expand the firm into an independent giant.

According to the U.S. EPA, Kerr-McGee left a toxic legacy in its wake. The company, which was founded in 1929, was responsible for various environmental �atrocities� that span everything from uranium mines to creosote wood treatment plants in Mississippi and Pennsylvania. Perhaps the most famous — or infamous — event occurred in the 1970s when labor activist Karen Silkwood died mysteriously after bringing several of Kerr-McGee�s issues to light. Silkwood claimed that the company was contaminating her and other workers at its plutonium pellet plant in Crescent, Okla., and she died shortly afterward in an alleged car crash that was never fully investigated.

Overall, the EPA and state environmental agencies estimate that Kerr-McGee fouled over 2,772 sites across the country. The company�s former assets in Chicago are home to five superfund sites, alone. After a 2000 lawsuit, in which 5,100 Columbus, Miss., residents sued Kerr-McGee for alleged creosote damage and illegal dumping, is where Anadarko�s headaches really begin.

Due to these various environmental issues, Kerr-McGee started an internal reorganization in 2001. As a result, it eventually spun off its chemicals business and a paint pigment plant into Tronox (NYSE:TROX) in 2005. That spin-off took many of Kerr-McGee�s old environmental liabilities with it. Three months after it was complete, Anadarko offered to buy Kerr-McGee’s oil and gas assets.

Since its spin-off, Tronox reported that it was spending as much as $126 million a year on Kerr-McGee�s old environmental liabilities and had spent over $27 million on related tort claims. The chemical firm declared bankruptcy in 2009 and then later sued Anadarko, claiming that Kerr-McGee had begun to separate oil and gas assets from toxic liabilities and purposely launched the bad stuff onto shareholders through the Tronox IPO. Top managers and the most profitable assets went to Anadarko, according to the suit.

The Justice Department seems to agree with Tronox, saying the deal was a �two-step fraudulent scheme� in order to transfer assets to Anadarko where they would be out of reach of future creditors of the defunct chemical firm. Also, Justice has alleged that Anadarko knew about the issues and deliberately concealed material knowledge. Lawyers for the U.S. estimate the value of assets transferred at nearly $15 billion, plus an additional $10 billion for interest and appreciation.

A Massive Hit

A potential $25 billion dollar lawsuit is nothing to sneeze at, especially when Anadarko�s entire market cap is only around $32 billion. With testimony only just beginning, the case can go either way.

Anadarko has maintained its innocence in the matter, arguing that separating the chemical business from the oil and gas assets was done to maximize shareholder value. Counsel for Anadarko has countered that the Justice Department is attempting to recoup the costs of cleanup by manipulating the facts.

At the same time, internal documents from Merrill Lynch back in 2002, show the bank was hired by Anadarko to look at ways it could buy Kerr-McGee�s oil and gas assets without the 70 years� worth of chemical liabilities. Likewise, several former Kerr-McGee executives are scheduled to testify about “Project Focus,� a plan designed to isolate the environmental liabilities so the energy assets couldn�t be used to satisfy them.

While energy companies can bounce back from environmental litigation — Occidental Petroleum (NYSE:OXY) and the Love Canal disaster in Niagara Falls, N.Y., comes to mind — Anadarko shouldn�t be taking this suit lightly. The case will ultimately test whether feds can recover money decades later from a descendant of a polluting company, even when a bankruptcy has cleaned the slate.

Like BP�s oil spill and Chesapeake�s (NYSE:CHK) recent CEO and financial issues, Anadarko�s legal overhang will continue to put pressures on the stock price. Currently, based on where it’s trading relative to its peers, the market seems to be pricing in only a $2 billion settlement. However, various analysts and legal experts estimate that Anadarko will have difficulty minimizing the effect of the $25 billion lawsuit. So far, it has taken charges of just $525 million for the case.

Given Kerr-McGee�s past and this lawsuit, I can�t see getting behind Anadarko�s shares until the dust settles. Investors could be discounting a whole heap of trouble at current prices, if the verdict is worse than the company expects. Anadarko has tremendous promise, given its leadership in unconventional assets. However, this environmental litigation will cast a dark cloud over its prospects until the case is resolved.

Investors would be wise to stay away, especially because other energy firms offer as much exciting growth potential — minus the litigation risk.

As of this writing Aaron Levitt doesn’t own any securities mentioned here.

Boeing Shares Reaching Thin Air

Boeing (NYSE:BA) has had a lot to celebrate in recent weeks.� It beat out Dutch rival EADS for a $30 billion deal to build the U.S. Air Force�s next-generation aerial refueling tankers, and last week marked the second successful launch of its ultra-secret X37B mini-shuttle.�

But while those contracts are certainly good news for Boeing, the stock has already had a decent run (a little more than 10% in 2011) and may not gain much more altitude in 2011. In addition, competitive challenges remain for Boeing, particularly in the commercial aircraft sector.

One of those challenges was the expressed confidence by rival EADS� Airbus unit that it would retain a 45%-50% share of global commercial aircraft sales over the next decade.� That�s a tough act for any manufacturer given burgeoning competition from Embraer (NYSE:ERJ), Bombardier, and Commercial Aircraft Corporation of China (Comac) and likely could only be attained by putting a significant dent in Boeing�s sales.�

Airbus is proving itself to be a tough competitor, posting 574 net aircraft orders in 2010 — beating out Boeing�s 530.�

Granted, some of the Chicago-based Boeing�s slippage stems from well-publicized challenges with its 787 Dreamliner.� The 787, which is constructed using mostly carbon-composite material rather than the traditional aluminum, has been bedeviled by delays and is nearly three years behind schedule.� An electrical fire onboard a 787 aircraft last November grounded flight tests until January, further delaying the aircraft�s certification. Boeing officials said Monday that the Federal Aviation Administration-required changes were back on track and that the FAA would certify the plane in 2011.

A potentially bigger competitive challenge for Boeing revolves around the next generation of its workhorse 737 narrow-body jet.� As more airlines seek the greater fuel efficiency offered by these smaller planes, this market niche is likely to post substantial growth over the next decade.� For example, Delta Air Lines (NYSE:DAL) already has requested bids from aircraft manufacturers for 100-200 new narrowbodies (with deliveries beginning as early as 2013).� The airline also floated the possibility of buying an additional 200 down the road.

Initial speculation pointed to Boeing adding new engines and other upgrades to its existing 737s to meet the requirements of Delta and other potential airline customers to boost fuel efficiency.� But after reportedly receiving an �underwhelming� response to this plan by potential customers, the company now is considering designing a completely new aircraft for market delivery around 2019.��

There are two potential problems with this strategy should Boeing decide to pursue it: 1. Airlines may view the extensive 787 delays as an omen that the manufacturer�s delivery timetable is overly optimistic.� 2.� Competitors may have workable options that meet many of these criteria sooner � notable among them are the Airbus A320neo and Bombardier�s Cseries � both of which boast increased fuel efficiency over today�s narrow-body jets.

Bottom Line: No doubt about it, on the defense side of the house, Boeing�s got game. But with the drive to cut federal spending gaining momentum on both sides of the aisle in Congress, something�s got to give.� And potentially more significant challenges persist for Boeing on the commercial aircraft side.� Delays in the 787 Dreamliner hammered Boeing�s earnings down to $1.87 a share in 2009. And while earnings rebounded to $3.95 a share last year, the company�s R&D costs for the 787 and the lengthened 747-8 will rise in 2011 � and could total as much as $3.9 billion.�

The company also faces higher pension spending this year.� Combined, these factors could drag down 2011 earnings under $4/share on expected revenue of more than $70 billion.� While Boeing is likely to find a way to fly through the turbulence, the stock may lose altitude in the short term.�

As of this writing, Susan J. Aluise did not hold an interest in any of the stocks mentioned here.���

SM: IRAs Are Better Than Ever as...

ONLY A FEW YEARS AGO, IRA contributions were limited to a measly $2,000. Plus, strict income limits prevented many folks from being able to contribute to deductible or Roth IRAs at all.

No more. Favorable changes to the IRA contribution rules have eased these limitations considerably. So if you haven't considered the IRA as a powerful retirement savings tool, it's time to change your thinking.

Contribution Rules for Traditional IRAs

For 2012, you can contribute up to $5,000 to a traditional IRA. Even better, if you'll be age 50 or older as of Dec. 31, 2012, you can contribute up to $6,000.

If you're married, the same limits apply to your spouse if he or she wants to fund a separate IRA. As a result, the two of you can together contribute up to $10,000 or maybe even $12,000.

Whether you're single or married, and whether you're age 50 or younger, the current IRA contribution limits are generous enough to take seriously (which was not necessarily the case just a few years ago).

Here are the rest of the traditional IRA contribution ground rules.

* After turning age 70 , you can't make any more contributions. However, Roth IRA contributions are still allowed (more on that later).

* You, and/or your spouse if you're married, must have earned income at least equal to what you contribute.

* If you are unmarried and covered by a retirement plan in 2012, your eligibility to make a deductible traditional IRA contribution for this year is phased out between adjusted gross income (AGI) of $58,000 and $68,000. However, you can contribute to a traditional nondeductible IRA regardless of income. (For an overview of the three types of IRAs, click here

* If you're married and both you and your spouse are covered by retirement plans in 2012, your eligibility to make a deductible traditional IRA contribution is phased out between joint AGI of $92,000 and $112,000. Ditto for your spouse. However, you can both contribute to traditional nondeductible IRAs regardless of income.

* If you're married and only one spouse is covered by a retirement plan in 2012, the covered spouse's eligibility to make a deductible traditional IRA contribution is phased out between joint AGI of $92,000 and $112,000. The noncovered spouse's eligibility is phased out between joint AGI of $173,000 and $183,000. However, you can both contribute to traditional nondeductible IRAs regardless of income.

* These AGI phase-out ranges are considerably higher than just a few years ago.

Contribution Rules for Roth IRAs

The annual contribution limits and the contribution deadline for Roth IRAs are the same as for traditional IRAs. But the rest of the rules are different:

* After age 70 , you can still make Roth IRA contributions as long as you (and/or your spouse if you're married) have earned income at least equal to what you contribute.

* For 2012, eligibility to make Roth IRA contributions is phased out between AGI of $110,000 and $125,000 for unmarried folks. For married joint filers, the phase-out range is between joint AGI of $173,000 and $183,000.

* Eligibility to make Roth IRA contributions is unaffected by whether you (or, if you're married, your spouse) are covered by a retirement plan.

* You can also consider the idea of converting a traditional IRA into a Roth IRA. To be eligible for the conversion privilege before 2011, your AGI had to be $100,000 or less (not counting the extra taxable income triggered by the conversion). The same $100,000 limit applied if you're single or a married joint filer. For 2011 and beyond, however, the income restriction on Roth IRA conversions is history. Now, even billionaires can do Roth conversions.

Bottom Line

You can contribute more to your IRA than ever before, and you have a better chance of deducting contributions to your traditional IRA than ever before. While in the not-too-distant past contributing to IRAs was barely worth the effort, it's definitely worth the effort now.

Ready to go? Good! The IRA contribution deadline for the 2012 tax year is April 15, 2013. However, you can make your contributions any time between now and then unless you've already done it. (You can make a contribution for your 2012 tax year as early as Jan. 1, 2012.) Of course, the sooner you stash some cash in a traditional or Roth IRA, the sooner you will start collecting the tax benefits.