Junk Glistens Under ‘Bernankecare’ as Worst Win in Stocks, Bonds

Carl Giannone says he's given up hunting for quality stocks. Now he's simply riding the wave of upward momentum in the U.S. market.

"It's a game of musical chairs," said Giannone, who manages a team of stock pickers at T3 Trading Group LLC in New York. "You just want to make sure you can sit down."

The Federal Reserve's near-zero interest rate turns five years old next month, the longest period without an increase in history. Coupled with more than $3 trillion of asset purchases, it adds up to "Bernankecare," said Joshua Brown of New York-based Fusion Analytics Research Partners LLC. And it's causing parts of the market to behave strangely. Stocks of companies with weak balance sheets are rising twice as fast as stronger ones; junk borrowers get rates lower than their investment-grade counterparts did before the credit crisis; and initial public offerings are doubling on their first day of trading.

While in the minority, some investors say prices have climbed so high it's possible to look ahead and see an ugly end. Laurence Fink, chief executive officer of BlackRock Inc., the biggest U.S. money manager, said in an interview with Bloomberg Television on Nov. 12 that he feared a bubble and the Fed ought to quit buying so many securities.

The Price

"At some point we'll have to pay the price of this," said Michael Shaoul, chief executive officer of Marketfield Asset Management LLC in New York. Among the woes Shaoul foresees: "higher inflation, higher interest rates, much more difficult business conditions." But it's a long way off. "I would be very surprised if this bull market ended sooner than 18 months, and maybe it's 36 months," Shaoul said.

Almost everything in the equity market is rising, which worries Jamie Potkul, chief investment officer of the Bread & Butter Fund. About 450 stocks in the S&P 500 are up this year, making it the broadest rally in at least two decades. That's left investors with fewer buyin! g opportunities than during the technology bubble in 2000, when the rally was propelled by an ever-shrinking pool of dot-com stocks, Potkul said.

At the same time, investors are awarding some of the highest valuations to companies that have struggled to produce consistent profits. Amazon Inc. trades at about 1,300 times reported earnings. Netflix Inc. is valued at 197 times income and Consol Energy Inc. has a price-earnings ratio of 104.

Balance Sheets

A Goldman Sachs index of companies with weaker balance sheets has rallied 42 percent this year, almost doubling the gain in a measure of more creditworthy firms. The New York-based bank uses a formula originally developed to forecast bankruptcies to put together the baskets.

The gauge of 52 firms with weak balance sheets includes stocks such as:

-- Tenet Healthcare Corp., which has the highest debt-to-equity ratio among health companies in the S&P 500. The shares have rallied 29 percent in 2013 and increased more than 1,000 percent since the bull market began in March 2009.

-- Micron Technology Inc., which more than tripled its total debt since 2011 to ten times annual free cash flow. The stock has surged 204 percent this year.

-- Hewlett-Packard Co., which has boosted total debt three-fold since 2007 while earnings have been flat. The stock, which just three of 36 analysts recommended buying at the end of last year, is up 75 percent in 2013.

Fundamental Analysis

"The analysis at some point shifts from fundamentals to being purely based on the price action of the stock," said Michael Purves, chief global strategist at Weeden & Co. in Greenwich, Connecticut.

Gains are brisk in initial public offerings. Twitter Inc. jumped 73 percent in its trading debut this month, delivering the biggest one-day pop for an IPO that raised more than $1 billion since Alibaba.com Ltd. made its debut in 2007, according to data! compiled! by Bloomberg. The unprofitable messaging service has a market value above $23 billion.

Potbelly Corp., a Chicago-based casual restaurant chain, and Container Store Group Inc., which sells storage products, doubled on their first day. Last week, Facebook Inc. offered to pay about $3 billion for Snapchat Inc., which makes a mobile photo application, according to a person familiar with the matter. It was turned down.

Musical Chairs

If Giannone's musical chairs analogy is reminiscent of former Citigroup Inc. Chief Executive Officer Charles O. Prince's July 2007 declaration that "as long as the music is playing, you've got to get up and dance," consider that subprime loans, given to people with little proven ability to pay, are making a comeback, this time to buy cars. Issuance of bonds linked to loans for the shakiest borrowers hit $17.2 billion this year, more than double the amount sold during the same period in 2010, according to Harris Trifon, a debt analyst at Deutsche Bank AG. The market peaked at about $20 billion in 2005, he said.

Not every hallmark of the credit crisis is reviving. Financial innovations such as collateralized debt obligations that bundled subprime mortgages -- and which helped hasten Prince into retirement later in 2007 -- have all but disappeared.

Fed largesse, however, has saved the lives of subpar companies such as Avon Products Inc., RadioShack Corp. and J.C. Penney Co., which wouldn't have survived without cheap loans and the Bernanke-goosed boost to their stock prices, said Bonnie Baha, head of global developed credit at Los Angeles-based DoubleLine Capital LP, which manages about $53 billion.

Falling Yields

Yields on dollar-denominated debt rated below BBB- at Standard & Poor's have dropped below 6.5 percent, the same level as investment-grade bonds the week before Lehman Brothers Holdings Inc. failed, Bank of America Merrill Lynch index data show.

"With zero-interest-rate policies, you put the conditions! in place! for everybody to be a winner," Baha said. "You've had a five-year period of government policies that have allowed companies to thrive when the free market would have allowed them to fail."

There's too many winners for Howard Marks, chairman of Los Angeles-based Oaktree Capital Group LLC, the world's largest distressed-debt investor. Marks has made a fortune buying bonds of companies that have defaulted or gone into bankruptcy and selling them for more than he paid.

Bernanke's policies made those opportunities scarce in distressed "and every place else," Marks said in an interview. "There's a lot of money around, people are risk tolerant and the capital markets are generous," he said. The defaults you'd see in a normal environment haven't happened, because rates are low, refinancing is cheap and easy, and investors are too complacent to push for debt protections, allowing companies to forgo standard safeguards and sell what are known as covenant-lite bonds and loans, according to Marks.

Party Over

"I'm not ready to blow the whistle and say 'everybody out of the pool,'" he said. "But sometime around 2010, they became risk tolerant, and risk-bearing returned to the market. When others are bearing risk, we have to be careful."

The rate of junk defaults globally fell to 2.8 percent last month, compared with the long-term average since 1983 of 4.7 percent, according to Moody's Investors Service.

Bond investors are lending money without the traditional backstops. Companies issued $257 billion of covenant-lite loans this year as of Nov. 4, compared with $7.7 billion in 2009, according to data compiled by Bloomberg.

Typical loan protections have also weakened by allowing companies to change the way leverage, or the ratio of debt to earnings before interest, taxes, depreciation and amortization, is calculated, making it easier for a borrower to comply with covenants.

Bond Returns

Bonds rated CCC or lower -- at l! east eigh! t steps below investment grade -- by S&P have gained 11 percent this year, compared with about 6 percent for all dollar-denominated junk bonds or a loss of more than 1 percent for investment-grade debt, according to Bank of America Merrill Lynch index data.

Even debt that's rated BB -- two grades below investment quality -- is specious, said James Serhant, head of high yield at Hartford Investment Management Co. in Connecticut. The $516 billion of dollar-denominated notes included in the top tier of junk are trading at an average price of more than 104 cents on the dollar and are among the most sensitive to rising interest rates.

"You're going to buy those in the mid-80s," Serhant said. Right now, "it's a relative game."

Charter Offering

Charter Communications Inc., the cable operator that exited bankruptcy in 2009, sold $1 billion of bonds in April that yielded 5.75 percent, about the same as the yield on a 10-year Treasury note at the end of 2000. Hilton Worldwide Inc., which was the subject of a $26 billion leveraged buyout by Blackstone Group LP in July 2007, sold $1.5 billion of 5.625 percent bonds in September.

For Jonathan Berger, who founded long-short credit hedge-fund firm Birch Grove Capital LP with more than $300 million in capital, the whole rally since 2009 has been uncomfortable since Fed stimulus could be curbed in a process now known as tapering at any time.

"You never feel certain," he said in an e-mail. "It wasn't just a linear trajectory from 2009 to today. There was significant volatility along the way and I would imagine we will continue to see volatility for the foreseeable future."

Forbes Media exploring sale

Forbes Media, controlled by former presidential candidate Steve Forbes, is up for sale.

In a memo sent to employees Friday, CEO Mike Perlis said the company has received indications of interest from investors for a deal.

"The frequency and serious nature of these overtures have brought us to a decision point," he wrote. "We have hired Deutsche Bank to represent us, and we expect interest from numerous suitors."

The company is looking to sell for about $400 million, according to a report by Bloomberg.

The magazine, founded in 1917 by business journalist B. C. Forbes, has been aggressively investing in its digital properties recently to make up for the sluggishness in the print ad market.

In a profile of Perlis that ran in the New York Times earlier this week, a Forbes spokeswoman said that advertising revenue for Forbes.com would grow by 35% from 2010 to 2013.

Forbes' ad pages in the magazine fell 1% in the third quarter from a year ago, while ad dollars grew 3%, according to the Association of Magazine Media.

Elevation Partners, an investment firm, bought a minority stake in the company in 2006.

"Digital revenues are expected to increase over 25% by the end of the year," Perlis wrote. "Our efforts have also focused on diversifying our revenue streams to complement our advertising-based businesses - and many of our initiatives have come to fruition this year.

Melania Trump’s firm caught in Menard dispute

INDIANAPOLIS -- It's the wife of The Donald vs. the hired legal guns of billionaire John Menard in an Indianapolis courtroom this week.

Melania Trump, the Slovenian model who married real estate developer and TV celebrity Donald Trump in 2005, earned a trip to Indianapolis to be a witness because her skin-care company got caught up in the bitter ongoing feud between Menard and businessman Steve Hilbert.

While this courtroom visit centers on a contractual dispute, it is the latest chapter in a made-for-tabloid brouhaha involving well-known names and allegations of gross financial mismanagement, sexual manipulation and a personal vendetta.

Melania Trump's New York company, Melania Marks Skincare, was sued by Menard's investment firm to void a contract it signed to market a new line of high-end creams, lotions, toners, peels and other skin-care products with Melania's name on them.

The Melania-themed products were supposed to be marketed by an Indianapolis company, New Sunshine LLC, that was overseen by an equity fund run by Hilbert, of Carmel, Ind., and financed by Menard, the owner of the Menards hardware chain.

Unfortunately for Melania Trump, the Hilbert-Menard split was happening just as she negotiated and signed her five-year skin-care products deal.

The federal trial starts Tuesday and is expected to last three days. Hilbert is expected to testify Wednesday and Melania Trump is expected to take the stand Thursday.

John Menard's investment firm sued Melania Trump's skin-care company to void a contract it signed to market a new line of high-end skin-care products with Melania Trump's name on them.(Photo: Darron Cummings, AP)

Much of the testimony will f! ocus on whether her contract was valid. It was signed by Hilbert and by the president of New Sunshine in late 2012. That was five months after Menard notified Hilbert by letter that he was out as manager of the equity fund that oversaw the Menard holdings, but four months before a court issued the order to remove Hilbert.

Melania Trump has argued in court filings that she didn't know of the dispute and her marketing contract shouldn't be voided because of it.

New Sunshine has never paid royalties or other payments due Melania Trump. She says she spent money on a public relations campaign to promote the planned 2013 launch of her product line, which never happened.

In an arbitration request filed in New York, Melania Trump sought $50 million in damages and compensation from Menard and his companies.

'Grossly favorable'

Menard's attorneys have countered that the skin-care contract was so "grossly favorable" to Melania Marks that the deal amounts to "corporate waste and gross mismanagement" by Hilbert and Eric Weber, who wasn't removed as president of New Sunshine until March when Menard took over.

The Menard-Hilbert dispute centers on Menard's claim that he lost most of the nearly $500 million he invested in the private equity investment firm MH Equity Managing Member LLC that Hilbert managed.

But a lawsuit filed in Hamilton County, Ind., by Hilbert's wife, Tomisue, against Menard earlier this year supplies a different reason for the falling out: sexual extortion. Her lawsuit alleges that Menard vowed to destroy the Hilberts, after she says she spurned his sexual advances two years ago while he was visiting the Hilberts' Caribbean home in St. Martin.

Menard, who is in his 70s, has denied through one of his attorneys that he ever made advances to Tomisue Hilbert.

Menard — who lives in Wisconsin where his hardware chain is based — also is locked in litigation in Hamilton County with Lisa Trudeau, the wife of former Indianapolis Colts quarterback Jack! Trudeau.!

Menard's investment firm, Merchant Capital, is seeking $1.5 million from Lisa Trudeau for breach of contract and fiduciary duties related to her work as a former product development specialist for Australian Gold. Hilbert invested some of Menard's money in the Indianapolis suntan products company.

Lisa Trudeau contends in a court filing that Menard fired her because of his desire "to harm Mr. and Mrs. Hilbert and because Mrs. Trudeau had rebuffed Mr. Menard's and others' sexual advances."

Tech Dividend-Payers Look Good As Stocks Surge

Forbes Dividend Investor subscribers received this update on October 18.

If you read newspapers or listen to talking heads that light up cable TV news—or if you get your news from the likes of Leno, Letterman or Jon Stewart—you no doubt know that the 17-day government shutdown is over and that the country isn't going to stiff its creditors. Congress and the president bought three more months to figure out what to do about the budget and debt ceiling, so if you're a rational person, you should expect more capital shenanigans in early 2014.

John Elway in Denver, and Brett Favre in Green Bay, conditioned Broncos and Packers fans to expect that they would always pull off the win with a scoring drive in the last two minutes. In similar fashion, our honorable elected officials went down to the wire before striking a deal to reopen the government and raise the debt ceiling.

It's been a rather recurrent modus operandi in Washington.  Going back to the summer of 2011, there have been almost as many of these deadlines for doom and government-created crises as there have been movies in the Rocky (six) or Jaws (four) series.

Don't lose sleep, though.  Shutdowns and the ensuing rebound have been decent for stocks, and this time was no different.  According to Sam Stovall at S&P Capital IQ, the S&P 500 slipped 4% during the 1995-1996 shutdown, but it then rose almost 11% in the month after resolution. Even after the U.S. debt downgrade in August 2011, when the market took a 20% dive, it was hitting new highs six months later.

This time around, every major U.S. stock index, with the conspicuous absence of the Dow Jones Industrial Average closed the week at a new high. The Dow was weighed down by big weakness in IBM and Goldman Sachs after disappointing earnings reports, and rose 1.07% for the week.

The Russell 2000 Small Cap Index jumped 2.81% on the week, and the S&P 500 was up 2.42% to 1744.  It's a bullish signal to see small caps outperforming large caps as they continue to do.

Nasdaq was the big winner, up 3.23%, and fueled by a 15% weekly gain in shares of Google, which released blowout earnings late Thursday and closed above $1,000 per share on Friday.  Nasdaq is up an impressive 38% since last November.  Google itself is up 56% in the same period. Social media stocks are full of momentum, too. Facebook is a triple from its post-IPO bottom last year.

Several stocks from the technology sector—Microsoft (MSFT), Intel (INTC), Corning (GLW) and Cisco Systems (CSCO)–remain on this week's Top 25 list of buy recommendations.

Another tech name among our recommendations is Apple (AAPL).  Apple was up 3.26% last week, and it closed decisively above its rising 50-day moving average. Technicians will bullishly note that AAPL's 50-day average crossed above the 200-day on September 9. In price only, Apple is up 18.8% since the March 13 buy recommendation at $428.35.

Still Beating The Market

Since July 11, 2012, investing equal amounts into each of our 216 dividend stock picks, and following explicit sell recommendations, would have produced a total return of 25.3% with an average yield on cost of 5.6%.  Buying the SPDR S&P 500 (SPY) at each of the same times would have returned 17.7% with an average yield near 2%.

Top 25 New Money Buys

Below is the Top 25, ranked by score on our model.  Other recommendations may also be suitable for fresh buying, but these 25 stocks rank highest along the criteria by which they were originally chosen. The three columns on the far right show each stock's percentage discount from five-year average multiples on ratios of price to sales, book value and earnings.  Questcor Pharmaceuticals (QCOR) made it back into the Top 25 last Friday and gained 9.8% last week. –JD

 

Above are the top 10 stocks for fresh buying recommended in Forbes Dividend Investor. Click here for a 30-day free trial with instant access to the complete Top 25, and two new picks each week.

RiverNorth DoubleLine

I want income investors to buy a mutual fund that has been closed to new investors—but just recently reopened, advises Doug Fabian in Successful Investing.

It is the RiverNorth DoubleLine Strategic Income Fund (RNSIX). We originally recommended this uniquely managed mutual fund in our High Monthly Income service back in December 2011.

RNSIX is a joint venture between RiverNorth Capital and DoubleLine Capital, and it allocates its assets among three principal strategies: tactical closed-end fund income strategy, core fixed income strategy, and opportunistic income strategy.

RiverNorth manages the tactical closed-end fund strategy, while DoubleLine manages the core fixed income and opportunistic income strategies.

The $1.1 billion mutual fund had been closed to new investors since March, and that's one reason why we didn't include it in our current model Income Portfolio.

Recently, however, the growing concern over rising interest rates and the possibility that the Fed would taper its bond buying program prompted many RNSIX holders to sell.

That selling opened the fund back up to new money, and this is what has provided us with an opportunity to get back into this stalwart income-generating fund.

Subscribe to Successful Investing here…

More from MoneyShow.com:

High Yield and High Quality

Multi-Asset: Two Appealing Income ETFs

Buy-Write Funds: Better than Bonds

U.S. Stock-Index Futures Rise on Iran Nuclear Agreement

U.S. stock-index futures gained, indicating the Standard & Poor's 500 Index will extend its record, as Iran agreed to limit its nuclear program.

Alcoa (AA) Inc. climbed 2.4 percent in early New York trading after Goldman Sachs Group Inc. recommended buying shares in the largest U.S. aluminum maker. Barrick Gold Corp. and Randgold Resources Ltd. fell following a retreat in gold.

Futures on the S&P 500 expiring in December advanced 0.3 percent to 1,807.1 at 6 a.m. in New York. The equity benchmark index rose for the past seven weeks, its longest winning streak since February, as reports showed retail sales beat estimates and fewer Americans than expected filed for jobless benefits. Dow Jones Industrial Average contracts added 63 points, or 0.4 percent, to 16,090 today.

"Some of the risk premium has been taken out because of the Iran deal," Henk Potts, who helps oversee about $310 billion as a strategist at Barclays Plc's wealth-management business in London, said by telephone. "The agreement creates a reduction in terms of global risk and is seen as beneficial for global markets. High commodity prices are one of the key costs to businesses and consumers so a decline in oil equates to lightening up the tax burden."

Brent crude, gasoline and heating oil all fell by at least 1.5 percent today following the accord with Iran. Gold declined 1 percent to its lowest price since July.

Iran agreed to limit its nuclear program in exchange for as much as $7 billion in relief from economic sanctions over six months. Iranian Foreign Minister Mohammad Javad Zarif and U.S. Secretary of State John Kerry announced the agreement yesterday after five days of talks in Geneva.

Barrick Gold

Barrick Gold dropped 1.1 percent to $16.20 in Germany. Randgold Resources retreated 1.3 percent to $69.10 in European trading and lost 2.5 percent in London.

Alcoa gained 2.4 percent to $9.46. Goldman Sachs upgraded the shares to buy from neutral. The brokerage said that the stock may climb to $11.

"We believe that the market is not fully appreciating Alcoa's solid position in growing value-added and high-margin aluminum products for the aerospace and automotive industries," analysts Sal Tharani and Chelsea Bolton wrote.

The National Association of Realtors publishes its figures for pending sales of existing houses at 10 a.m. in Washington. Sales (USPHTMOM) increased 1.1 percent in October, economists forecast in a Bloomberg survey. They dropped 5.6 percent in September.

[video] Dicker: What Yellen Means for Oil

NEW YORK (TheStreet) -- I was speaking with Brittany Umar about the announcement of the new Federal Reserve chairman, Janet Yellen, and what it might mean for oil.

Yellen is perceived to be the most dovish candidate available to follow Ben Bernanke into the role of Fed chair. Most analysts expect her to not only continue the accommodative policies the Fed has been applying into the monetary markets, but perhaps to be even more aggressive with further bond purchases or even more "dark science" methods to keeping interest rates unusually low.

I have felt that the accommodative, "money-printing" activity of the Federal Reserve has been a factor, if not the strongest factor, in the rise in prices of what we like to call "risk assets" over the last four years.

Oil has been correctly identified as one of these risk assets, although I do believe that Fed activity has been less of a factor in its stellar recovery since the financial crisis of 2008. Much more important to me has been the desire for investment in hard assets as well as the slow but steady recovery in our economy and that of the emerging markets. Still, the Yellen appointment should be a driver of shifting yet more money into oil as an investment diversifier. The more the new Fed chairman accommodates monetary policy, the broader that shift will be. That should make the domestic oil companies that rely upon crude pricing for profitability to continue to shine going into 2014. Many of these names have already done well for 2013, but will be bolstered further by the Yellen appointment -- names including EOG Resources (EOG), Anadarko (APC) and Devon Energy (DVN). I talk more about the Yellen appointment and oil with Brittany in the video above. At the time of publication the author had a position in APC. Follow @dan_dicker This article was written by an independent contributor, separate from TheStreet's regular news coverage.

What to Do in Case of Financial Emergency

Sooner or later, you're bound to get hit with an unexpected and eye-popping cost. Maybe a hospital stay will slam you with thousands of dollars in out-of-pocket charges, expensive car repairs will take you for a ride or Uncle Sam will send you a hefty tax bill. Ideally, you've stashed at least six months' worth of living expenses in a savings account to help in situations like these (or in case a job loss stunts your income for a while). But especially for young people who haven't had much time to save, sometimes the cash isn't there.

See Also: 10 Best Ways to Earn More Interest on Your Savings

You may be tempted by easy sources of money that will actually bury you deeper in debt. For instance, a payday loan requires you to pay back the full loan amount from your next paycheck. Sounds simple, but it could come at an annual interest rate of about 400%, according to The Pew Charitable Trusts, and borrowers often struggle for months to pay back the loans. Another costly option is a cash advance through your credit card. You'll usually pay a fee of 3% to 5% of the amount you withdraw or $10 — whichever is higher — and the interest charge is often 20% or more. On top of that, interest accrues immediately, rather than after a grace period has passed as with a standard credit card purchase.

Instead, consider four smarter ways to pay for emergencies when you don't have an emergency fund.

(Once your current crisis has passed, take some time to evaluate how to prepare for the next big expense, says certified financial planner Brenda Knox, president of Financial Elements. Even on a tight budget, you can find ways to save money, such as cutting out small, discretionary expenses. For more tips, see 7 Strategies to Build an Emergency Fund.)

1. Sign up for a payment plan.

See whether you can set up a plan that would allow you to spread payments for the bill over a few months or more. "Most industries that commonly create large and unexpected expenses have payment-plan options. You just have to ask about them," says Alan Moore, a certified financial planner in Bozeman, Mont. Some hospitals, doctor's offices and dentist offices set up payment plans with patients. The IRS allows those who can't pay a tax bill in full to make monthly payments through an installment agreement. Before you seal the deal, consider the interest rate and other fees you may be charged. With the IRS installment agreement, for example, you will pay a setup fee of $43 to $105, depending on your income and how you pay, as well as 3% interest (adjusted quarterly) and a monthly 0.25% late-payment penalty.

You could also try to negotiate for a lower bill. A hospital, for example, may accept less than you owe if you hand over a lump sum rather than make monthly payments. Don't be afraid to explain that you're just getting on your feet financially. Small businesses may be especially flexible and sympathetic to a young person starting out, says Knox.

2. Ask Mom and Dad for a loan — the right way.

Going to your parents for money isn't an earth-shattering idea. The trick is to put some thought into it. First, consider whether they are in a position to assist you. Your parents shouldn't have to go broke financing your bailout, after all.

If you decide to ask them for help, figure out how much you would like to borrow, the term over which you would repay a loan and the interest rate you would pay, says certified financial planner Cheryl A. Costa, a principal at Forteris Wealth Management. "Parents usually have cash sitting in checking or savings accounts earning next to nothing," she says. "If a child pays an interest rate of 2% to 3%, it's a win-win."

Once you come to an agreement, put it in writing. Both you and your parents should sign it — and it's not a bad idea to have a third-party witness present in case there's any dispute in the future, says Megan Rindskopf, a certified financial planner with Clearview Wealth Management. Or you could use a site such as LendingKarma.com or LoanBack.com (each charges $30 for a basic package) to set up a loan, including a payment schedule and e-mail reminders. (Bonus: Even if your parents are willing to be less formal with a loan, you'll probably get brownie points for coming to them in such a mature, responsible manner.)

3. Tap your Roth IRA.

Pulling money from retirement savings isn't optimal. But the good news about tapping a Roth IRA is that you can withdraw contributions that you've made to the account without incurring taxes or penalties. (If you withdraw earnings on your investments in the account, however, you could be hit with taxes and penalties. For more on IRA withdrawal rules, see 8 Reasons You Need a Roth IRA Now.)

4. Use credit cards wisely.

Some advisers recommend that young people steer clear of credit cards in a pinch. For one, the interest charges can get ugly. If you put $3,000 on a card with a 22% interest rate, for example, and made a $60 payment each month, it would take more than 11 years to cover the bill — and you'd pay $5,206 in interest along the way. (Use Bankrate's Credit Card calculator to test other scenarios.) Plus, falling behind on payments or creating a high level of debt as a proportion of your credit limits could cause your credit score to suffer.

If you have good credit, a reliable stream of income and the ability to pay off your debt within a year or so, opening a credit card with a 0% introductory annual percentage rate might work for you. The Citi Simplicity card, for one, charges no interest on purchases for the first 18 months you have the card, and it has no annual fee. But after those 18 months have passed, the rate could be as high as 21.9%, depending on your creditworthiness. Think carefully about whether you can pay off the balance on time before you go this route. And be aware that if you apply for a few credit cards in a short period, your credit score could take a hit.

How to Profit from This Disconnect in the Oil Markets

There is something very interesting developing in the oil markets right now.

It's not front page news yet, but it is something that you'll want to keep an eye on - especially if you want to make money with oil stocks.

It revolves around what's called "the spread." In this case it's the difference in price between West Texas Intermediate (WTI) and Brent.

Once again, the price of these two oil benchmarks is moving in opposite directions. The price of crude in New York is going south, while the price in London is heading north.

In fact, as of open this morning, the spread between the two now stands at 15.6% of the WTI price and continues to widen. In the last week, this spread has almost doubled.

This move is helping to create what I call a valuation disconnect.

The good news is that this growing "spread" is going to make us even more money...

The Problem with the "Conventional Wisdom"

Let me explain what I mean by that...

In the past, we used to look at this spread as a yardstick for estimating the effect of the differential on actual changes in crude oil pricing. In this case, the "paper" barrels - representing the one-month out, or near-month, commitments to purchase crude - tend to drive up (or down) the effective price of the "wet" barrels, or the actual oil sold.

Now on any given day, there are far more paper barrels than wet barrels traded, with the excess futures commitments canceled out prior to the actual delivery of oil.

For some time, these futures have been leading the market price for oil, causing occasional criticisms that price volatility is more a result of the paper trade than the demand for the oil itself.

This has been a recurring theme when it comes to the commentary on oil price trends.

Movements in futures do tend to pull along the underlying market price. This connection still holds in large part, but it is the second part of the assumption that is now undergoing some interesting change.

The "conventional wisdom" would tell you that the futures price-market price dynamic should impact the profitability of individual oil-related companies.

Now this appears obvious, at least on its face...

If the profit margin on the actual oil shrinks, shouldn't there be a similar move in the shares of the oil companies?

Well, that's not true anymore - at least not for all companies.

In what is shaping up to be a significant revision in how investors should look at oil stocks, there is a disconnect now developing between the underlying price of the raw material and the value of selected oil stocks.

This valuation disconnect has developed because there are now several other market factors involved besides the price of the raw material itself.

A New Normal for Oil Stocks

To be sure, an absolute collapse or an accelerated spike in oil prices would have a short-term impact across the board. What I am referring to here is WTI and Brent prices losing or gaining 30% or more of value over a narrow period.

Such a highly unusual and compressed volatility cycle is what statisticians refer to as kurtosis.

This simply means that most of the change takes place in a very short period of time, rather than over broader periods where the market can compensate for changes in the trend. These are very rare events that render the model used to determine proper futures pricing inoperable. That merely adds to the volatility.

Of course, I have investment strategies designed to deal with these highly unusual events. But what occurs most of the time is something else quite different.

Here we are experiencing the emergence of a different series of relationships.

And unless a price point is determined by a sudden collapse in demand (something that is not going to happen anytime even remotely soon), there is a threshold of oil demand the market cannot cross without triggering significant supply-side pricing inflation (via localized constriction in availability).

This "new normal" tells us that prices may advance or decline in a narrower range more frequently. But this hardly has the same effect across the board.

In other words, some companies will fare better than others...

And there are three ways to identify the winners. Here's what you need to look for:

First, you need to identify where companies fall in the upstream-midstream-downstream sequence.

Second, you need to know exactly what regions and basins the companies are active in.

And finally, you need to understand what infrastructure components and assets are essential to the companies and are under their control (or ownership).

The first consideration is why my Energy Advantage and Energy Inner Circle services target specific sectors of the upstream-midstream-downstream sequence where pricing may actually improve beyond the average performance of the oil sector.

Meanwhile, the second merely reflects what has become a major factor in today's markets, especially in the United States. That's because production, pipeline transport, and refining are not subject to the same uniform pricing pressures in different areas of the country. Some basins have less expensive production costs, storage and transit fees, and refinery operating expenses than others.

However, it is the third consideration that is contributing the most to this new disconnect.

Here's why.

Moving product from the field to the end user involves a number of pricing points. If the transfer cost at each of these points requires arms-length contracts (those between distinct business entities), the overall profitability for the entire sequence will decline.

What is emerging, especially in the application of master limited partnerships (MLPs) and other restricted partnership arrangements, is the increasing consolidation of the separate components in the same operation.

Here's why that's important: It allows normal market costs to be replaced with a kind of transfer pricing.

This type of pricing is why big oil companies used to try to control as many stages of the process as possible. This ushered in the age of the vertically integrated oil companies (VIOCs).

Some of these remain, but the climate is very different now.

For most companies today, specializing in their most efficient aspect - while also finding ways to associate cost controls with others - is the new mantra.

The companies that are succeeding are the ones that have put more of their costs within a new transfer pricing arrangement. These separate operations are no longer contained in the same corporate structure (the traditional meaning of transfer pricing), but accomplish the same result.

Therefore, in a market where oil prices are declining but demand still remains, some companies are going to see better bottom line results. In the end, you can bet it will be reflected in higher share prices for oil stocks.

The game is now less about the price of oil and more about the different strengths of each individual operator.

That "spread" is already improving our prospects for higher returns.

Money really does grow on trees: Gold's Shocking New "Pick and Shovel" Play

Digital credit card Coin adds new features after post-launch criticism

Coin is a buzzy new startup that's making a digital credit card that stores information for all the other cards in your wallet.

NEW YORK (CNNMoney) After revealing its all-in-one digital credit card last week, startup Coin found itself knee-deep in fundraising money and hype -- but also a large amount of criticism. Now the company is taking steps to addressing potential users' concerns.

Critiques of the device included potential security issues: How secure is the sensitive data stored in this digital card and app? Can a Coin owner use the device as a card-skimmer, and secretly swipe someone else's card?

Other concerns included the fact that the current Coin prototype wouldn't work if your phone runs out of battery, and whether merchants will accept the device for payment.

Coin announced several changes on Wednesday as a response:

The company plans to add a button to the Coin card so users can reactivate it even if their phone is dead. Users will be able to tap a button in a "Morse-code-like" fashion. Coin will also feature a system that shows how many times your card is being swiped, and tell you if someone is using it when it isn't near you. Finally, the device will also "lock" on one particular card -- so the waitress can't accidentally switch your payment method when she grabs Coin from you.

Coin CEO and founder Kanishk Parashar told CNNMoney those changes will come "down the road" in future prototypes of the product. The card is slated for a summer 2014 release.

In addition to the new features announcement, Coin also issued an expanded FAQ "with over 50 responses to top questions." Within that list, the company stressed that the Coin app will be password-protected and that all card information is encrypted. Coin also said its app won't let users add information for cards they don't own, a fea! ture that will be powered by a financial-data service like Intuit or Yodlee.

The post-launch period has been a learning experience for Coin, Parashar said.

"One of the things we wanted from our launch was feedback ... but we didn't expect so much," he said.

While Parashar said he doesn't find the criticism unfair, he did complain about the vehemence of some of the critiques: "Everyone forgets that this thing is six months old. It takes time to put it everything together fully."

Parashar, who said he hasn't slept since Coin launched its campaign last week, was most surprised by the concerns about security and fraud.

"I was surprised that people really broke it down, really got into the nitty gritty about these specific use cases," Parashar said. In Coin's attempt to make its premise "really clear," he said, "we left some things out."

The feedback has changed Coin's philosophy on two particular issues: merchant relations and a potential global audience.

Last week, Parashar told CNNMoney that Coin wasn't planning "to go out of our way to educate the merchant world about it, because we're focused on the consumer side." Now, he said, he will talk with credit card companies and merchants "much faster than I anticipated."

Secondly, Coin also plans to focus on the global payments system. The current device is being developed for the U.S. market, but much of the rest of the world uses a chip and pin system known as EMV. Coin doesn't currently support EMV, but the company plans to add that capability in future versions of the device.

Is Investors Capital in play?

Heavy trading and a run-up in the share price of Investors Capital Holdings Ltd., the parent company of independent broker-dealer Investors Capital Corp., is fueling speculation that the firm has become an acquisition target.

Last Thursday saw an intense spike in its trading volume, with 434,100 shares changing hands and the price of the stock briefly reaching $8.90 per share, its 52-week high.

The typical daily trading volume this year has been closer 13,000 shares, according to Yahoo! Finance. Shares traded at $4.05 as recently as Aug. 30. Its low for the year is $2.96 per share.

Trading settled down on Friday, but heavier-than-usual trading resumed today, with more than 47,500 shares traded as of 2:11 p.m. The share price for the day fluctuated between $5.46 per share and $6.10 per share.

The company issued a press release after the volume spike on Thursday saying that it had been contacted by the New York Stock Exchange in accordance with the Big Board's usual practices. Investors Capital's “policy is not to comment on unusual market activity,” according to the release.

Investors Capital Holdings is a micro-cap stock with a market capitalization of $41.6 million. But with brokerage firms currently scouring the market for potential merger targets, Investors Capital may be seeing interest, as indicated by its volume and price volatility, said one industry observer.

“The spike in volume and price, along with the 'no comment' press release, could mean that Investors Capital is an acquisition target, and time will tell,” said Brad Fay, an independent third-party recruiter who focuses on midsize broker-dealers such as Investors Capital. “With 450 producers on track for $80 million to $85 million in revenue, it could be the right size and fit for a firm to achieve scale needed to reduce fixed costs and offset increased regulatory expenses.”

Bob Foney, a spokesman for Investors Capital, said he could not comment beyond what was in the company's press release Thursday.

In 2011, managers and reps from the firm bought about 40% of the firm in 2011 from its founder and longtime chief executive, Theodore E. “Ted” Charles, who retired. Mr. Charles and his family controlled the majority of the company's shares, which they sold at the time for $4.25 per share.

A heavy buyer of the stock this year has been Investors Capital rep and director James D. Crosson. According to Reuters, Mr. Crosson has made 22 insider buys of company stock this year through Sept. 2 while the other six members of the board, including CEO Timothy Murp! hy, made 24 purchases. Mr. Crosson was not available for comment.

5 Stocks With Big Insider Buying

DELAFIELD, Wis. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.

They might need the cash for a big personal purchase such as a new house or yacht, or they might need the cash to fund a charity. Sometimes they sell as part of a planned selling program that they have put in place for diversification purposes, which allows them to sell stock in stages instead of selling all at one price.

Other times they sell because they think their stock is overvalued and the risk/reward is no longer attractive. Some even dump their own stock because they have inside knowledge that a competitor is eating their lunch and stealing market share.

But insiders usually buy their own shares for one reason: They think the stock is a bargain and has tremendous upside.

The key word in that last statement is "think." Just because a corporate insider thinks his or her stock is going to trade higher, that doesn't mean it will play out that way. Insiders can have all the conviction in the world that their stock is a buy, but if the market doesn't agree with them, the stock could end up going nowhere. Also, I say "usually" because sometimes insiders are loaned money by the company to buy their own stock. Those loans are often sweetheart deals and shouldn't be viewed as organic insider buying.

At the end of the day, its large institutional money managers running big mutual funds and hedge funds that drive stock prices, not insiders. That said, many of these savvy stock operators will follow insider buying activity when they agree with the insider that the stock is undervalued and has upside potential. This is why it's so important to always be monitoring insider activity, but it's twice as important to make sure the trend of the stock coincides with the insider buying.

Recently, a number of companies' corporate insiders have bought large amounts of stock. These insiders are finding some value in the market, which warrants a closer look at these stocks. Here's a look at five stocks whose insiders have been doing some big buying per SEC filings.

Biglari

One cyclical consumer player that insiders are buying up a large amount of stock in here is Biglari (BH), which is currently engaged in investment management and the franchising and operating of restaurants. Insiders are buying this stock into modest strength, since shares are up 8.7% so far in 2013.

Biglari has a market cap of $605 million and an enterprise value of $688 million. This stock trades at a cheap valuation, with a trailing price-to-earnings of 4.83 and a forward price-to-earnings of 29.38. Its estimated growth rate for this quarter is 42%. This is not a cash-rich company, since the total cash position on its balance sheet is $153.57 million and its total debt is $236.16 million.

The CEO and chairman of the board just bought 5,165 shares, or about $1.36 million worth of stock, at $265 a share.

From a technical perspective, BH is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been trending sideways and consolidating for the last month and change, with shares moving between $408.25 on the downside and $429.97 on the upside. Shares of BH are now starting to push within range of triggering a near-term breakout trade above the upper-end of its recent sideways trading chart pattern.

If you're bullish on BH, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $410 to $408.25, and then once breaks out above some near-term overhead resistance levels $428.85 to $429.97 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 10,146 shares. If that breakout hits soon, then BH will set up to re-fill some of its previous gap down zone from August that started at $467.89 a share.

Blyth

Another non-cyclical consumer goods player that insiders are active in here is Blyth (BTH), which designs and markets home fragrance products and decorative accessories, as well as weight management products, nutritional supplements and energy drinks. Insiders are buying this stock into weakness, since shares are down by 22% so far in 2013.

Blyth has a market cap of $193 million and an enterprise value of $156 million. This stock trades at a reasonable valuation, with a price-to-sales of 0.19 and a price-to-book of 4.21. This is a cash-rich company, since the total cash position on its balance sheet is $172.96 million and its total debt is $127.98 million. This stock currently sports a dividend yield of 1.6%.

A beneficial owner just bought 20,000 shares, or $246,000 worth of stock, at $12.34 per share.

From a technical perspective, BTH is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has recently pulled back after trading just above its 200-day moving average at $14.60 a share to its intraday low of $12.05 a share. That pullback is pushing shares of BTH very close to its 50-day moving average of $11.48 a share. If that level holds off this pullback, then shares of BTH could present a solid buying opportunity.

If you're in the bull camp on BTH, then look for long-biased trades as long as this stock is trending above is 50-day at $11.48 and then once it breaks out above some near-term overhead resistance at $13.09 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 287,505 shares. If we get that move soon, then BTH will set up to re-test or possibly take out its next major overhead resistance levels at $14.60 to $15.69 a share. Any high-volume move above those levels will then put $17 to $20 into range for shares of BTH.

AeroVironment

One aerospace player that insiders are loading up on here is AeroVironment (AVAV), which is engaged in the design, development, production and support of unmanned aircraft systems and efficient energy systems for various industries and governmental agencies. Insiders are buying this stock into decent strength, since shares are up 23% during the last six months.

AeroVironment has a market cap of $504 million and an enterprise value of $379 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 108.75 and a forward price-to-earnings of 44.35. Its estimated growth rate for this year is 47.4%, and for next year it's pegged at 82.1%. This is a cash-rich company, since the total cash position on its balance sheet is $128.81 million and its total debt is zero.

A director just bought 5,000 shares, or about $112,000 worth of stock, at $22.50 per share.

From a technical perspective, AVAV is currently trending right below its 50-day moving average and above its 200-day moving averages, which is neutral trendwise. This stock has been trending sideways for the last two months, with shares moving between $20.78 on the downside and $23.97 on the upside. Shares of AVAV are now starting to trend within range of triggering a breakout trade above the upper-end of its recent sideways trading chart pattern.

If you're bullish on AVAV, then look for long-biased trades as long as this stock is trending above support at $22.30 or above its 200-day at $21.05 and then once it breaks out above some near-term overhead resistance levels at $23.60 to $23.97 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 205,927 shares. If that breakout triggers soon, then AVAV will set up to re-test or possibly take out its next major overhead resistance levels at $25 to $28 a share.

PBF Energy

One energy player that insiders are snapping up a decent amount of stock in here is PBF Energy (PBF), an independent petroleum refiners and suppliers of unbranded transportation fuels, heating oils, petrochemical feedstocks, lubricants and other petroleum products in the U.S. Insiders are buying this stock into notable weakness, since shares are off by 22% so far in 2013.

PBF Energy has a market cap of $896 million and an enterprise value of $1.63 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 7.35. Its estimated growth rate for this year is -67.7%, and for next year it's pegged at 88.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $69.23 million and its total debt is $815.96 million. This stock currently sports a dividend yield of 5.4%.

A director just bought 10,000 shares, or about $226,000 worth of stock, at $22.50 per share.

From a technical perspective, PBF is currently trending above both its 50-day moving average, which is bullish. This stock has been trending sideways inside of a consolidation pattern for the last three months, with shares moving between $20.15 on the downside and $24.92 on the upside. Shares of PBF are now starting to bounce off its 50-day moving average of $22.44 a share and it's quickly moving within range of triggering a near-term breakout trade above the upper-end of its recent sideways trading chart pattern.

If you're bullish on PBF, then look for long-biased trades as long as this stock is trending above its 50-day at $22.44 or above more support at $21.89 to $20.59, and then once it breaks out above some near-term overhead resistance levels at $23.49 to $24.92 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 1.11 million shares. If that breakout hits, then PBF will set up to re-test or possibly take out its next major overhead resistance levels at $26 to $28 a share.

Aircastle

One more stock with some decent insider buying is Aircastle (AYR), which is a global company that acquires, leases, and sells high-utility commercial jet aircraft to customers throughout the world. Insiders are buying this stock into big time strength, since shares up sharply by 39% so far in 2013.

Aircastle has a market cap of $1.4 billion and an enterprise value of $4.4 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 30.42 and a forward price-to-earnings of 9.32. Its estimated growth rate for this year is 118.8, and for next year it's pegged at 6.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $430.27 million and its total debt is $3.54 billion. This stock currently sports a dividend yield of 3.9%.

A director just bought 30,000 shares, or about $518,000 worth of stock, at $17.23 per share.

From a technical perspective, AYR is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last six months, with shares moving higher from its low of $12.62 a share to its recent high of $17.94 a share. During that uptrend, shares of AYR have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of AYR within range of triggering a major breakout trade.

If you're bullish on AYR, then look for long-biased trades as long as this stock is trending above some near-term support levels at $16.80 or $16.01, and then once it breaks out above some key overhead resistance levels $17.73 to $17.94 a share and then above to its 52-week high at $18.12 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 539,800 shares. If that breakout triggers soon, then AYR will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $20 to $25 a share.

To see more stocks with notable insider buying, check out the Stocks With Big Insider Buying portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

Nice Trick For Gold Traders

Only little people pay income taxes, in the immortal words ascribed to Leona Helmsley. Big people avoid them with sophisticated loss-harvesting schemes.

Let us suppose that you bought 1,000 shares of Barrick Gold (ABX) two years ago at $50. With the stock down to $18, you're looking at a $32,000 paper loss. You could sell the stock, capturing a capital loss deduction. But you don't want to sell out at what may be a bottom. You are sure that shares of the gold miner will recover as soon as soft-money advocate Janet Yellen takes over at the Federal Reserve.

Sell for the loss and then buy right back? That doesn't work. Congress thought of that trick and, close to a century ago, defined a "wash sale" as the repurchase within 30 days of what was sold at a loss. Someone with a wash sale cannot deduct the loss immediately; instead, the loss gets added to the cost basis of the new position. It's as if the two trades didn't happen.

Well, why not sell Barrick shares and replace them with something slightly different–like a call option that would give you most of the upside? That doesn't work, either. The tax writers thought of that one and decreed that the wash sale rule applies if you buy any call option in Barrick, no matter the strike price or expiration date. Gotcha!

But wait. With two antitrader rules in place, investors can turn the tables on the IRS. Robert Gordon, whose Twenty-First Securities Corp. specializes in complicated trades, explains how: You sell the losing stock and immediately buy an option on it. For example, you sell your 1,000 Barrick shares and buy 10 calls (each representing 100 shares) with a strike price of $20 and an expiration in December. Those calls were recently trading at 29 cents, or $290 for options on 1,000 shares.

You have thereby triggered the wash sale rule–deliberately. The statute forces you to incorporate your loss on the stock into the price of the calls. You now have almost worthless calls with a cost basis of $32,290.next day you buy 1,000 Barrick shares.

The calls probably expire worthless and you have a $32,290 capital loss to claim. Or maybe Barrick rebounds to $21 and your loss is $31,290. The key fact, Gordon explains, is that selling an option at a loss and then buying the stock does not constitute a second wash sale. That's because the statute's linking of stocks and options works in one direction only.

Should this loophole be closed? Probably. In 2004 David Schizer, dean of Columbia's law school, published a paper pleading with tax writers to overhaul the wash sale rule. They haven't, and they are unlikely to undertake any reforms soon, given the congressional impasse over bigger issues (like whether to raise taxes or cut entitlements).

Meanwhile, Gordon finds even more room for mischief from legislators' clumsy drafting. Suppose you bought the gold miner two years ago and are throwing in the towel. Your $32,000 loss is going to be a long-term capital loss if you sell the stock and buy the call; the wash sale rule punishes sellers by carrying over the old holding period to the new position.

This is a punishment because short-term capital losses are more desirable than long-term ones. Depending on your circumstances, they may be worth twice as much.

To evade the punishment, Gordon suggests, do this: Sell the Barrick shares, buy an in-the-money call that is about to expire, exercise the call, then sell the newly acquired shares at a loss. You wind up with a short-term capital loss.

How did that happen? Congress, evidently wanting to make favorable long-term treatment hard to get for winning trades, decided that exercising a call resets your holding period to zero.

Here's another way to duck the wash sale problem—imperfect in maintaining your position but easier to implement. Temporarily (that is, for 31 days) swap out of one mining stock like Barrick into a collection of mining stocks like the Market Vectors Gold Miners ETF (GDX). After the required wait, switch back. You could work this trick in reverse, too, taking a loss on GDX, using Barrick to maintain a bullish stake on the metal for a month, then swapping back.

Now let's suppose you have taken a shellacking on bullion, not on a mining company. You own the metal via SPDR Gold Shares (GLD), for example. Sell the fund, immediately buy a long-shot call option on it, then the next day buy more of the fund. (In principle, this strategy works with other bullion ETFS, like SGOL and IAU, but their options aren't very liquid.)

The evasion of the wash sale rule proceeds much as it does with mining-company shares. But in this case a long-term loss is partly converted into a more valuable short-term one. Why is that? The tax writers were trying to crack down on commodity traders who'd close out losing positions in December and winners in January, postponing tax bills indefinitely.

To stop that wickedness Congress ordered that commodity options be "marked to market." A compromise had the gains and losses treated as if they were 60% long, 40% short, no matter their true history. The reform ended up creating this lovely opportunity.

This is how the tax code gets messier over time. It's like a paint can lid. When legislators whack down on one side it pops up on the other.

Our 401(k)s Show We're Not Taking Investor Confidence Seriously

NEW YORK (BankingMyWay) -- U.S. investors are bullish on the stock market, but not enough are putting the cash into their 401(k) accounts to show it -- and to gain full advantage.

That's a shame, as even a 1% hike in your monthly 401(k) savings plan can add up to $330 per month in your retiree "paycheck" down the road.

This figures come from Fidelity Investments, which is chiding Americans these days about not saving enough for retirement even though eight out of 10 investors believe the Standard & Poor's 500 Index will rise by more than 100 points by the end of the year. [Read: Wall Streets' Great Recession Cost Us All $30 Trillion ]

There is some progress for Americans with their retirement savings. According to Fidelity, 401(k) plan balances rose 11% from the third quarter or 2012 to the third quarter of this year to a nationwide average of $80,600. And if you have been working for a company that offered 401(k) plans for the past 10 years, that average balance number leaps to $211,800 -- up 19% from a year ago. But in the latest in a series of quarterly reports from Fidelity on U.S. workers and their 401(k) plans, company analysts say Americans are costing themselves income in retirement by being stingy on their retirement plan contributions now. "While it's a good sign that some workers are increasing their savings for retirement, many younger workers -- especially Millennials -- aren't saving at the recommended 10% to 15% of their income," says James MacDonald, president of workplace investing at Fidelity. "It is critical young workers realize that even the smallest increase to their monthly savings today or just 1% -- whether in a 401(k) or an IRA -- could have a meaningful impact on their retirement paycheck down the road." Here is how that translates into real dollars: [Read: 3 Money Basics That Will Help You Sleep Better ] Say you're 25 and have a salary of $40,000, and you added just $33 per month to your 401(k), with an assumed average annual rate of return of 7%. Fidelity says you could add $330 (in pretax income) to your monthly paycheck in retirement by doing so. Even if you scaled back to an average annual rate of return of 5.5%, a 1% uptick in savings translates into an extra $200 every month in retirement. If you're 35 and make $60,000 annually, and you add $50 to your monthly 401(k) contribution, an average 7% annual rate of return will yield an additional $270 every month after you turn 65, or an extra $180 at a 5.5% annual rate of return. Those are real dollars, and they really add up during your golden years. But that only holds true if you play the game right and start contributing that extra 1% every month, Fidelity says.

Southerners load up on car loan debt

In which cities will you find the most people who owe the most dough on their auto loans?

The quick answer appears to be look south. Three of the 10 cities where borrowers owe the most on their auto loans are in Louisiana, including No. 1 Shreveport, according to analysis by Manilla.com, a personal consumer finance online service. Six of the metro area with the highest loan balances are in the heart of Dixie.

The list:

1. Shreveport, La.: $18,603

2. New Orleans: $ 17,759

3. Houston: $ 17,281

4. Little Rock-Pinebluff, Ark.: $ 17,061

5. San Antonio: $16,999

6. Lafayette, La.: $16,639

7. New York: $ 16,566

8. Miami-Ft. Lauderdale: $16,326

9. Las Vegas: $16,257

10. Wilkes Barre-Scranton, Penn.: $ 16,229

Why the South? The economy was generally better in the South during the recession. Manilla.com, citing government figures, says Louisiana has had some of the strongest employment gains over the summer.

Nationally, as we reported recently, auto loans are up and delinquencies are down. It's a boon to the auto industry, which is thrilled that customers can get credit again after largely being shut out during the depths of the recession.

Disney Plans Massive Share Buyback (DIS)

Walt Disney Corporation (DIS) announced that it will be increasing its share buyback in fiscal 2014.

In the last few years, Disney has been buying back approximately $4 billion in shares every year, but that was planned to be $6 billion next year. The company has now announced that fiscal 2014 will see $8 billion in share buybacks, sending Disney’s stock surging for the day.

The company also promises to approach high budget films with a higher sense of caution after a disastrous summer movie season that saw films like “The Lone Ranger” flop; that film is now expected to lose around $190 million when all is said and done.

Disney shares were up $1.55, or 2.37%, at market close today. The stock is up over 31% this year.

Time Is Running Out on Energy-Efficient Home Improvement Tax Credits

Can I still get a tax credit for home improvements?

SEE ALSO: Is It Tax Deductible?

Yes, but most of them are about to expire (again). Last year, Congress extended the tax credit for many energy-efficient home improvements through 2013. You can receive up to $500 in total tax credits for eligible home improvements you've made since 2006. If you haven't already claimed a credit of $500 or more for eligible home improvements, then you may be able to take the break before the end of the year. The improvements must be to your principal residence.

The size of the credit depends on the type of improvement. The tax break applies to 10% of the purchase price (not installation costs) of certain insulation materials, energy-efficient windows ($200 limit for windows), external doors and skylights, metal roofs with pigmented coating, and asphalt roofs with cooling granules that meet certain Energy Star requirements.

You can count both materials and labor costs for certain central air conditioners, biomass stoves, electric heat pumps and electric heat pump water heaters that meet specific energy-efficient guidelines -- up to a maximum of $300 each. You can count up to $150 for an eligible natural gas, propane or oil furnace or hot water boiler.

The items must meet specific energy-efficient requirements to qualify. See the U.S. Environmental Protection Agency's tax breaks site, the Alliance to Save Energy tax credit page and the Tax Incentives Assistance Project for more information. Keep your receipts and the manufacturer's certification of eligibility for your records.

Some alternative-energy improvements qualify for larger tax credits with a later deadline. You can take a credit worth 30% of the cost of buying and installing certain alternative-energy equipment, such as geothermal heat pumps, solar water heaters, solar panels, fuel cells and small wind-energy systems. You must make these improvements by December 31, 2016, and they aren't subject to the $500 limit. See the Energy Star tax credit Web site for details on these credits. You can claim these credits by filing IRS Form 5695, "Residential Energy Credits," which also includes more details about these credits.

If you don't qualify for the federal incentives, see if you can get any state tax breaks for energy-efficient home improvements. For links to information about the programs in each state, see the American Council for an Energy-Efficient Economy site. For a list of several state and utility programs, see the Tax Incentives Assistance Project.

Got a question? Ask Kim at askkim@kiplinger.com.

Massad’s job: Live up to Gensler’s legacy at CFTC

SAN FRANCISCO (MarketWatch) — Timothy Massad, the senior Treasury Department official expected to be nominated to head the Commodity Futures Trading Commission, has a rare challenge as a regulator: he has a legacy to live up to.

The White House is expected to pick Massad to replace Gary Gensler, the outgoing CFTC chief. The transition is expected to come roughly at year-end pending confirmation, according to The Wall Street Journal.

Bloomberg Enlarge Image Timothy Massad

For investors, the choice of Massad is significant. Few regulators are charged with such an enormous and challenging task as regulating a $125 trillion to $180 trillion market, not to mention one as tangled and complicated. Just consider interest-rate and credit default swaps and the derivative of derivatives: the synthetic derivative.

Under Gensler, the CFTC has been surprisingly active in trying to rein in the marketplace. Gensler is a former Goldman Sachs Group Inc. (GS)  banker whose appetite for aggressive regulation was in doubt. He's surprised, time and again.

Massad also will have something to prove. The Treasury Department, especially under Timothy Geithner was often criticized for being too generous with Wall Street interests. Massad's role at the department was to oversee the Troubled Asset Relief Program, the bank bailout program.

To make his task more difficult, the CFTC is struggling with turnover. Two commissioners, not including Gensler, have either left or plan to leave. Should Massad seek to keep the CFTC proactive, he will have to build support among an untested panel of commissioners.

Like the popular Sheila Bair formerly at the Federal Deposit Insurance Corp. and Elizabeth Warren, formerly a congressional bailout watchdog and now a U.S. senator from Massachusetts, Massad can gild his reputation as an investor advocate and keeper of the financial system.

Or he can "work" with the industry. Problem is, usually those kind of regulators get worked over instead.

Dow Sets New Record As Stocks Inch Higher

U.S. stocks inched higher at Monday's closing bell, with the Dow Jones Industrial Average hitting a new record high during a day that afforded investors little excitement and a chance to consider their next move following last week's big gains.

The Dow gained 21.07 points, or 0.13% to close at 15,782.85, another record high. On Friday, it surged 168 points, or 1.1%, closing at a record after better-than-expected October jobs data.

The S&P 500 index climbed 1.25 point, or 0.07% to close at 1,771.86, while the Nasdaq Composite reversed an early loss to rise 1.67 points, or 0.04% to end the day at 3,919.79.

Despite the new record highs, it was a nothing sort of day investors. No major economic releases were issued today due to the Veterans Day holiday. The Treasury market was closed. No significant corporate earnings reports hit the wire.

Bill Stone, Chief Investment Strategist at PNC Asset Management Group, told Barrons.com:

Quiet market today with the lack of both US economic and earnings data. Also markets likely lacked some participants thanks to the holiday and the resultant bond market closure. Following on last week’s data, investors will likely be hungry for US economic data to better gauge the possibility of a Fed taper as soon as December.

Last week's stock market rally was fueled by growing confidence in the U.S. jobs market after the Labor Department said employers added 204,000 jobs last month.

Some speculate those figures open the door for the Fed to start tapering its stimulus programs. Others have been skeptical of the stock market's steady climb, worried that recent highs are not sustainable.

Late this week, Federal Reserve chairwoman nominee Janet Yellen's confirmation hearing on Thursday in front of the U.S. Senate banking committee

European stocks nudged higher in quiet trading. The Stoxx Europe 600 tacked on 0.6%. The U.K.’s FTSE 100 added 0.3%.

In Asia, the Philippines PSE Composite dropped 1.4% after the country was devastated by a typhoon. Elsewhere, Japan’s Nikkei Stock Average rose 1.3% and China’s Shanghai Composite edged up 0.16%.

The euro edged higher against the dollar. December crude-oil futures rose 0.6% to $95.14 a barrel, while gold futures shed 0.3% to $1,281.00 an ounce.

In corporate news:

Google (GOOG) retreated on Monday after it was removed from Morgan Stanley's Best Idea List, while Twitter (TWTR) rose during its third trading day as a public company.

Tesla Motors (TSLA) gained 4.9%, after losing 15% last week on the heels of yet another Model S car fire that resulted in major front-end damage.

J.C. Penney (JCP) advanced 4%. Last week, the retailer said its same-store sales rose 0.9% in October, the first rise since December 2011. Meanwhile, Best Buy (BBY) added 4.5%.

Shares of ViroPharma (VPHM) spiked nearly 26% after the rare-disease company said it was being acquired by U.K. biopharmaceutical firm Shire (SHPG). Shire is paying $4.2 billion, or $50 a share, to ViroPharma. Shire's ADRs rose 0.7%

FirstEnergy (FE) fell 5.7%. The power company last week narrowed its full-year outlook.

Denbury Resources (DNR) shares dropped 5.9% after oil-and-natural-gas explorer on Sunday announced that it will initiate quarterly dividend and raised its share repurchase plan to $250 million from the $109 million remaining in its program.

 

 

 

 

Guest Post: Is Transfer Pricing The Fix To Corporate Tax Reform?

It's that time again! As I do once every year, I'm turning over the blog to my readers for the last week in August. This year, readers had the opportunity to answer one of three tax-related questions; each of the questions is related to pending legislation or active issues in Congress.

I received a number of great responses. In order to have a balanced mix of posts, I have read through all of the submissions have chosen those that represent a mix of viewpoints on each of the three issues.

Our next guest post was submitted by Barb:

One of the most controversial issues over the past year has been the issue of corporate tax reform. Do corporations pay their fair share? What, if anything, would you do to alter the current corporate tax structure?

Transfer pricing shenanigans between domestic and international corporate entities vexing the tax systems both in the US and in Europe. Corporations assign ownership of valuable assets to offshore entities in low tax regions, sell expensive products in higher tax areas, and then say that they really don't have much profit in the high tax areas because the "cost" is that artificial high amount assigned to the offshore entity.

This current system tremendously benefits corporate giants like Google Google, Apple Apple, and virtually all of the large pharmaceutical companies, but leave solely domestic corporations (especially smaller businesses) to pay the full, high corporate taxes charged in US and Europe.

There is no simple and perfect solution. Setting correct transfer prices is hard and theoretical. But remarkably, that is what good markets do every day. Why not let a market system solve a current market inefficiency?

A company that wants to transfer rights to an offshore entity must do so by public auction, open to any interested bidder. They may match the highest bid. The value of the bid is ordinary income to the company reported in the US based on the percentage of the product's R&D expense that was US based. Apple develops the iWatch and spends $100MM on R&D, $66MM of which is spent in the US. They put it up for bid, and Nokia Nokia is the winning bidder at $3 billion. Apple can either match Nokia's winning bid, or not. Either way, Apple then must recognize 2/3 of the proceeds ($2 billion) as ordinary income in the US subject to the full US corporate income tax.

It would be a small market, because much of the advantage of offshoring would go away — and that would be a very good thing.

–

Thanks Barb! Barb is a regular reader who prefers not to be identified by last name.

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Want more taxgirl goodness? Pick your poison: You can receive posts by email, follow me on twitter (@taxgirl) hang out with me on Facebook and check out my YouTube channel. NEW at taxgirl: you can subscribe to the podcast on the site or via iTunes (it's free).

Best Canadian Companies To Own In Right Now

Canadian Solar, Inc. (CSIQ) in collaboration with Strata Solar has completed the construction of two utility-scale solar power projects, with the third project to be completed very soon.

Located in North Carolina, these projects, namely, Lenoir 1, Lenoir 2 and Wilson 1 have electricity generation capacity of 18 megawatt (MW). These plants are a part of a 15-project portfolio expected to come online by 2013 end. Together these projects will have an electric generation capacity of 85 MW.

The three projects have used 40,608 Canadian Solar CS6P-P 245 and 19,896 CS6P-P 250 watt solar modules. Post completion, these plants will be able to power 2,500 homes and will allow the state to get rid of 13,250 metric tons of CO2 per year, which is equivalent to eradicating 3,944 cars from the road.

Strata Solar LLC is a leading provider of complete solar energy systems and installations in the U.S. It provides a full array of engineering, procurement and construction services. Strata Solar projects in North Carolina bring employment opportunities to the state and provide clean, sustainable energy.

Best Canadian Companies To Own In Right Now: 3M Company(MMM)

3M Company, together with subsidiaries, operates as a diversified technology company worldwide. The company?s Industrial and Transportation segment offers tapes, coated and non-woven abrasives, adhesives, specialty materials, filtration products, energy control products, closure systems for personal hygiene products, acoustic systems products, and components and products that are used in the manufacture, repair, and maintenance of automotive, marine, aircraft, and specialty vehicles. Its Health Care segment provides medical and surgical supplies, skin health and infection prevention products, inhalation and transdermal drug delivery systems, dental and orthodontic products, health information systems, and food safety products. The company?s Display and Graphics offers optical film solutions for LCD electronic displays; computer screen filters; reflective sheeting for transportation safety; commercial graphics sheeting and systems; and mobile interactive solutions, includin g mobile display technology, visual systems products, and computer privacy filters. The company?s Consumer and Office segment provides office supply products, stationery products, construction and home improvement products, home care products, protective material products, certain consumer retail personal safety products, and consumer health care products. Its Safety, Security and Protection Services segment offers personal protection products, safety and security products, cleaning and protection products for commercial establishments, track and trace solutions, and roofing granules for asphalt shingles. The company?s Electro and Communications segment provides packaging and interconnection devices; fluids that are used in the manufacture of computer chips, and for cooling electronics and lubricating computer hard disk drives; high-temperature and display tapes; insulating materials, including tapes and resins; and related items. The company was founded in 1902 and is based in St. Paul, Minnesota.

Advisors' Opinion:

• [By Jessica Alling]

  3M (NYSE: MMM  ) is also leading the winners, with a 1.34% rise this morning. Just a week after announcing a reduction in its 2013 earnings guidance, the multifaceted company is taking back some lost ground. 3M announced that it would be selling two subsidiaries�to a private company, with the sale expected to close during this quarter. While there are numerous segments within 3M, the sale may be an opportunity for the company to refocus on some "core" operations that seemed to lag during the first quarter, giving investors some hope that a return in global demand may lift the manufacturer back to its previous earnings guidance.

• [By Dan Caplinger]

  Moreover, it's not as if Dow stocks haven't delivered some solid dividend increases lately. Just earlier this week, Procter & Gamble (NYSE: PG  ) declared a payout 7% higher than what it paid in the previous quarter, marking its 57th straight annual dividend increase. Back in February, Coca-Cola (NYSE: KO  ) came through with an even more aggressive increase of 10% in its quarterly payout, while 3M (NYSE: MMM  ) hiked its dividend by 8%. Both companies also have half-century streaks of increasing payouts annually.

• [By Travis Hoium]

  3M (NYSE: MMM  ) is trying its hardest to pull the Dow higher, gaining 1.8% today. There are no huge drivers of the stock, but investors are starting to realize the value in 3M stock and appreciate the small innovations the company is making. Shares trade at just 15 times forward estimates and pay a 2.4% dividend, which has grown for 53 straight years, so there's value there.

• [By Jessica Alling]

  Trying to help the Dow move higher is 3M� (NYSE: MMM  ) , whose new line of masking tape is set to help consumers determine the right tape for the job. Since the company first introduced the product to the market in 1925, it has been working to make it easier on consumers to perform simple to complex tasks. The new line is designed and labeled to help purchasers with the task of figuring out what strength tape they need to get the job done. Ranging from 101+ to 501+, the new line goes from value masking tape for small general purposes to specialty high-temperature masking tape that can be used for industrial needs including high-temperature paint-baking applications.

Best Canadian Companies To Own In Right Now: Piper Jaffray Companies(PJC)

Piper Jaffray Companies provides investment banking, institutional brokerage, asset management, and related financial services to corporations, private equity groups, public entities, non-profit entities, and institutional investors in the United States, Asia, and Europe. The company raises capital through equity financings; provides advisory services, primarily relating to mergers and acquisitions for its corporate clients; underwrites debt issuances; and offers financial advisory and interest rate risk management services. Its public finance investment banking capabilities focus on state and local governments, as well as healthcare, higher education, housing, hospitality, transportation, and commercial real estate industries, as well as operates in business and financial services, clean technology and renewables, consumer, and industrial growth, as well as media, telecommunications, and technology industries. The company also offers equity and fixed income advisory and t rade execution services for institutional investors, and government and non-profit entities; and is involved in proprietary trading, as well as has equity sales and trading relationships with institutional investors. In addition, it provides asset management services to separately managed accounts, private funds or partnerships, and open-end and closed-end registered investment companies or funds; and offers an array of investment products comprising small and mid-cap value equity, and master limited partnerships focused on the energy industry, as well as fixed income. Further, the company engages in merchant banking activities, which comprises proprietary debt or equity investments in late stage private companies, and investments in private equity and venture capital funds, as well as other firm investments and forfeiture of stock-based compensation. Piper Jaffray Companies was founded in 1895 and is headquartered in Minneapolis, Minnesota.

Advisors' Opinion:

• [By Monica Gerson]

  Piper Jaffray Companies (NYSE: PJC) is expected to report its Q3 earnings at $0.52 per share on revenue of $117.55 million.

  W.W. Grainger (NYSE: GWW) is estimated to report its Q3 earnings at $3.03 per share on revenue of $2.42 billion.

• [By EXPstocktrader]

  3) Piper Jaffray (PJC): Recent weakness is unwarranted as the landscape for Acthar remains favorable: OVERWEIGHT (BUY) rating and $74 PT

  4) CRT Capital: BUY rating and $79 PT.

Top Safest Stocks To Buy For 2014: DCP Midstream Partners LP (DPM)

DCP Midstream Partners, LP, together with its subsidiaries, engages in gathering, compressing, treating, processing, transporting, storing, and selling natural gas in the United States. It also transports, stores, and sells propane in wholesale markets; and produces, fractionates, transports, stores, and sells natural gas liquids (NGLs) and condensate. The company operates in three segments: Natural Gas Services, Wholesale Propane Logistics, and NGL Logistics. The Natural Gas Services segment operates Northern Louisiana system that gathers, process, and transports natural gas; Southern Oklahoma system; Colorado system; Wyoming system that covers 1,300 miles of natural gas gathering pipelines that cover approximately 4,000 square miles in the Powder River Basin in Wyoming; and Michigan system. It also operates Discovery system, East Texas system, and Southeast Texas system. The Wholesale Propane Logistics segment owns and operates a propane marine import terminal; a leased propane marine terminal; a propane pipeline terminal; and six propane rail terminals, as well as access to several open access pipeline terminals. This segment sells its propane to retail propane distributors. The NGL Logistics segment operates Seabreeze and Wilbreeze NGL transportation pipelines, the Wattenberg NGL transportation pipeline, the Black Lake interstate NGL pipeline, and the NGL storage facility in Marysville, Michigan. DCP Midstream Partners, LP was founded in 2005 and is based in Denver, Colorado.

Best Canadian Companies To Own In Right Now: Silvercorp Metals Inc(SVM)

Silvercorp Metals Inc. engages in the acquisition, exploration, development, and operation of silver mineral properties in China and Canada. The company holds interests in four silver, lead, and zinc mines, including the Ying Project, the HPG Project, the TLP Project, and the LM Project at the Ying Mining Camp in the Henan Province of China. It also holds interests in the GC Project, a silver, lead, and zinc mine in the Guangdong Province; and the BYP gold, lead, and zinc mine project in Hunan province, as well as the Silvertip silver, lead, and zinc mine project in northern British Columbia, Canada. The company was formerly known as SKN Resources Ltd. and changed its name to Silvercorp Metals Inc. in May 2005. Silvercorp Metals Inc. is headquartered in Vancouver, Canada.

Advisors' Opinion:

• [By Doug Ehrman]

  The recent sell-off in precious metals has boosted the dividend yield on various silver companies, including Silver Wheaton (NYSE: SLW  ) . Current conditions give investors the chance to own this best-in-class silver streaming company with both a strong income element and plenty of upside. Unlike miners Pan American Silver (NASDAQ: PAAS  ) and Silvercorp Metals (NYSE: SVM  ) , which offer higher dividend yields, Silver Wheaton has important advantages.

• [By Selena Maranjian]

  Silvercorp Metals (NYSE: SVM  ) shed 50%, but that leaves it yielding 3.1% -- and it's even earning more than it's paying out, which is promising. The company,�China's biggest primary silver producer, has been in the news as an alleged scammer as well as a possible scamming victim. (It's worth noting that it has been up front about problems, rather than evading them.) In its latest quarter, net income fell 25%, due in large part to falling silver prices, but its silver production was up 17% and gold up 42%. (It produces far less gold than silver, and it also mines lead and zinc.)

Best Canadian Companies To Own In Right Now: Wells Fargo & Company(WFC)

Wells Fargo & Company, through its subsidiaries, provides retail, commercial, and corporate banking services primarily in the United States. The company operates in three segments: Community Banking; Wholesale Banking; and Wealth, Brokerage, and Retirement. The Community Banking segment offers deposits, including checking, market rate, and individual retirement accounts; savings and time deposits; and debit cards. Its loan products comprise lines of credit, auto floor plans, equity lines and loans, equipment and transportation loans, education loans, residential mortgage loans, health savings accounts, and credit cards. This segment also provides equipment leases, real estate financing, small business administration financing, venture capital financing, cash management, payroll services, retirement plans, loans secured by autos, and merchant payment processing services; purchases sales finance contracts from retail merchants; and a family of funds, and investment managemen t services. The Wholesale Banking segment offers commercial and corporate banking products and services, including commercial loans and lines of credit, letters of credit, asset-based lending, equipment leasing, international trade facilities, trade financing, collection services, foreign exchange services, treasury and investment management, institutional fixed-income sales, commodity and equity risk management, insurance, corporate trust fiduciary and agency services, and investment banking services. This segment also provides banking products for commercial real estate market, and real estate and mortgage brokerage services. The Wealth, Brokerage, and Retirement segment offers financial advisory, brokerage, and institutional retirement and trust services. As of December 31, 2010, the company served its customers through approximately 9,000 banking stores in 39 States and the District of Columbia. Wells Fargo & Company was founded in 1929 and is headquartered in San Franci sco, California.

Advisors' Opinion:

• [By Nicholas Ward]

  I knew that I wanted exposure to the financials. I saw this sector as a whole as being extremely under valued. When looking at the major banks I narrowed down my choices to Wells Fargo & Co (WFC) and JP Morgan Chase (JPM). Ultimately, Buffett made this decision for me. I had been considering WFC since the first of the year after having seen that Buffett added to his position in Wells Fargo on 12/31/2012, making it the most prominent holding of Berkshire Hathaway. While I saw WFC and JPM as near equals, I decided to follow in the footsteps of the man who greatly inspired this experiment and my investing career as a whole (BRK's cost average for WFC is $33.71; I bought in at $35.17, already 4.33% behind the eight-ball, but I felt confident in WFC's future growth prospects and feel comfortable making this company a long term holding in my portfolio) . I like WFC's diverse product line (commercial, consumer, and investment banking services). Wells is a paramount player in the domestic mortgage origination sector and I believe that the company will greatly benefit from an improving American housing market. WFC boasts a much higher dividend yield than many of its major competitors (2.70% on date of purchase). I remain bullish on WFC and have no plans of making changes to this position within my portfolio.

• [By Alex Dumortier, CFA]

  Now, NY Attorney General Eric Schneiderman is going back to the well. He intends to sue Bank of America (NYSE: BAC  ) and Wells Fargo (NYSE: WFC  ) for violating rules regarding loan modifications. This is no longer a matter of transgressions that occurred during the frenzy of the credit and housing bubble or the pandemonium of the immediate crisis that followed; Schneiderman alleges that the organizations did not respect the terms of the $25 billion global settlement regulators finalized with banks in February 2012.

• [By Larry Smith]

  Short-term events may affect various sectors of the market differently. During market declines, fund managers may move money into what are considered safe stocks, the Coca-Colas (KO) and Procter & Gambles (PG) of the world, thus minimizing the decline in those stocks. Other sectors considered more sensitive to economic disruptions may see larger declines. In 2011, the banks were treated much worse than the consumer staples, like P&G. The chart below shows the price action in P&G and Wells Fargo (WFC).

• [By Amanda Alix]

  Financials are looking spiffy this morning as banks begin to turn in superb second-quarter earnings. Heavy hitters JPMorgan Chase (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) unveiled some sweet numbers earlier today, and Wells was up more than 2% in midday trading. Though the KBW Bank Index (DJINDICES: ^BKX  ) was in the red early this morning, it too has been buoyed by these excellent reports.

Best Canadian Companies To Own In Right Now: SMART Technologies Inc.(SMT)

SMART Technologies Inc. designs, develops, and sells interactive technology products and solutions that enhance learning and enable people to collaborate worldwide. The company offers a range of SMART Board interactive whiteboards and displays, as well as other interactive products, such as interactive tables, interactive pen displays, student response systems, wireless slates, audio enhancement systems, document cameras, conferencing software, and a line of interactive learning software. Its portfolio of related attachment products include SMART Response, SMART Slate, SMART Document Camera, SMART Table, SMART Audio, and SMART Classroom Suite. SMART Technologies also provides free online learning resources, an online teacher community, and training and professional development. It sells its interactive whiteboards through a network of distributors and dealers to the education, business, and government markets. The company was founded in 1987 and is headquartered in Calgary , Canada.

Advisors' Opinion:

• [By Seth Jayson]

  Smart Technologies (Nasdaq: SMT  ) is expected to report Q4 earnings on May 16. Here's what Wall Street wants to see:

  The 10-second takeaway
  Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Smart Technologies's revenues will wither -22.4% and EPS will remain in the red.

Best Canadian Companies To Own In Right Now: Stantec Inc(STN)

Stantec Inc. provides professional consulting services in planning, engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics in the areas of infrastructure and facilities for public and private sector clients in North America and internationally. The company involves in the design of healthcare, education, science and technology, airport, retail and commercial, and sports and recreation facilities. Its environmental solutions include water supply, treatment, storage, and distribution; wastewater collection, pumping, treatment, and disposal; watershed management; environmental assessment, documentation, and permitting; ecosystem restoration planning and design; environmental site management and remediation; subsurface investigation and characterization; and geotechnical engineering services. Stantec Inc. also provides industrial planning, functional programming, engineering, project mana gement, and construction support services in oil and gas, fossil and renewable energy, underground mining, linear infrastructure, power transmission and distribution, automotive, forest products, food and beverage, and general manufacturing sectors. In addition, the company prepares transportation master plans for communities; conduct transportation investment studies; plans and designs airport, transit, rail, and highway facilities; and provides administration and support services for the construction of specific projects, and ongoing management planning for the upkeep of transportation facilities, as well as simulation modeling services. Further, it offers urban land solutions for the land development, real estate, and retail and commercial industries, as well as professional services. The company was formerly known as Stanley Technology Group Inc. and changed its name to Stantec Inc. in October 1998. Stantec Inc. was founded in 1954 and is headquartered in Edmonton, Canad a.

Best Canadian Companies To Own In Right Now: Penn West Petroleum Ltd(PWE)

Penn West Petroleum Ltd. engages in acquiring, exploring, developing, exploiting, and holding interests in petroleum and natural gas properties and related assets in North America. The company produces light and medium crude oil, natural gas liquids, heavy oil, and natural gas. It operates in two major regions, including the Southern District, which covers properties within Manitoba, Saskatchewan, and southern and east central Alberta with developed and undeveloped land base totaling approximately 3.3 million net acres; and the Northern District encompassing northeastern British Columbia, northern Alberta, parts of west central Alberta, and the Northwest Territories with developed and undeveloped land position of approximately 2.9 million net acres. The company was formerly known as Penn West Energy Trust and changed its name to Penn West Petroleum Ltd. in January 2011. Penn West Petroleum Ltd. was founded in 1979 and is headquartered in Calgary, Canada.

Advisors' Opinion:

• [By Alex Planes]

  One thing investors need to watch is Pengrowth's sky-high payout ratio, which, at present levels, is clearly unsustainable. Pengrowth's asset sales will help paper over the shortfall in the near term, but it's not good policy to pay out so much in the middle of a major exploration project. The company has no plans to cut its dividend, in spite of anticipated production declines in the near term, which stands in stark contrast to competitor Penn West (NYSE: PWE  ) , which slashed its dividend by nearly half�in a wide-ranging announcement earlier this week. Both Pengrowth and Penn West trade at substantial discounts to book value, but at least Pengrowth's monster dividend gives investors something more substantial while waiting for big exploration projects to bear fruit. However, given the company's multi-year weakness, it will take a strong stomach, and a very firm belief in Pengrowth's prospects, to jump in today.

• [By CRWE]

  Penn West Exploration (NYSE:PWE) wishes to notify interested parties that Rob Wollmann, Senior Vice President, Exploration will present at the EnerCom Oil & Gas Conference on Tuesday, August 14, 2012 at 1:55pm (MST) in Denver, Colorado.

• [By Eric Volkman]

  Penn West (NYSE: PWE  ) is about to change the nameplate on its CEO's office. The company announced that current Chief Executive and President Murray Nunns has announced his departure, effective July 1. Starting June 19, his place will be taken by David Roberts, onetime executive vice president and chief operating officer of Marathon Oil. Penn West said it intends to name him to its board of directors once he takes up the CEO post.

• [By Insider Monkey]

  Penn West Petroleum (PWE) is the next on the list, with Y/Cap raising its position by over 100,000 shares to 875,000 shares, worth around $9.7 million. Penn West reported a net loss of $40 million in the second quarter, after reporting an income worth $235 million, with revenue also remaining almost flat on the year. The company also reduced the number of its employees by 25% since the beginning of the year, in order to increase its competitive performance.