Thursday, May 31, 2012

Is Boeing Working Hard Enough for You?

Margins matter. The more Boeing (NYSE: BA  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong Boeing's competitive position could be.

Here's the current margin snapshot for Boeing over the trailing 12 months: Gross margin is 18.7%, while operating margin is 8.1% and net margin is 5.8%.

Unfortunately, a look at the most recent numbers doesn't tell us much about where Boeing has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter (LFQ). You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for Boeing over the past few years.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. To compare quarterly margins to their prior-year levels, consult this chart.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

Here's how the stats break down:

  • Over the past five years, gross margin peaked at 19.6% and averaged 18.4%. Operating margin peaked at 8.4% and averaged 6.5%. Net margin peaked at 6.1% and averaged 4.7%.
  • TTM gross margin is 18.7%, 30 basis points better than the five-year average. TTM operating margin is 8.1%, 160 basis points better than the five-year average. TTM net margin is 5.8%, 110 basis points better than the five-year average.

With recent TTM operating margins exceeding historical averages, Boeing looks like it is doing fine.

If you take the time to read past the headlines and crack a filing now and then, you're probably ahead of 95% of the market's individual investors. To stay ahead, learn more about how I use analysis like this to help me uncover the best returns in the stock market. Got an opinion on the margins at Boeing? Let us know in the comments below.

  • Add Boeing to My Watchlist.

IGT Is Betting Online Big-Time

Slot-machine maker International Game Technology (NYSE: IGT  ) looks poised to jump on the bandwagon of companies that are increasing their stake in online gaming. The company plans to acquire Double Down Interactive, one of the biggest virtual casino operators on Facebook.

What's it all about?
Under this deal, IGT will pay $250 million in cash and $85 million in retention payments over the next two years. Additionally, IGT will pay up to $165 million to Double Down, depending on the latter's performance in the next three years.

All in all, this looks like a large amount to pay for a company the size of Double Down, but it's not as if IGT can't afford it. IGT generated over $400 million in free cash flow over the last year.

So is the cash worth it?
This deal will certainly broaden IGT's scope of operations. Already a seller of gaming equipment to casinos, it will now be able to sell virtual products to virtual casinos as well. Being the third-largest social gaming application, Double Down may well provide IGT with a valuable foothold in casino-style social gaming.

Double Down has significantly increased its user count, to 4.7 million now from 3.3 million in October last year, as it capitalizes on the rapidly growing online gaming industry. The industry in itself is expected to grow to $30 billion in 2012 from $20 billion in 2010. What I do like about the deal, however, is the exposure to a new and complementary set of gamers, which is sure to drive IGT's fiscal 2012 earnings. But there's another, larger aspect to it.

What's the catch?
The Double Down deal would mean that IGT is investing around $100 for each one of the former's roughly 5 million users. Now that's a lot of money, something that can be justified only if we consider the potential big bucks IGT can earn if online gambling is legalized. In fact, legalization of online poker would be a dream come true for the casino and gaming industries, something that may be fast becoming a reality as the Justice Department considers doing away with the ban on online gambling.

However, IGT isn't alone. Facebook game maker Zynga (Nasdaq: ZNGA  ) has about 30 million players for its online poker game and could be a great partner for a big branded casino. Industry titan MGM (NYSE: MGM  ) has already partnered with Bwin.Party, and Boyd Gaming and is likely putting pressure on other operators to get a foothold in the space while they still can. IGT could be in for a lot of trouble if an operator inks a deal with Zynga.

Stakes in online gambling will be lower than those at real casinos. Nevertheless, the company's exposure to a widespread online audience should create abundant volumes to push up revenue. Looking at it from that aspect, $500 million doesn't seem particularly extravagant to me, after all.

The Foolish bottom line
This deal could very well be IGT's royal flush. The company seems to be banking on potential revenue based on the expectations that online poker will be legalized. Till then, let's keep our fingers crossed on this one.

Stay tuned for more on this company's fortune. Add International Game Technology to your Watchlist: Click here.

Navjot Kaur does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of International Game Technology. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

States Face Huge Pension Funding Gap

An analysis by the Pew Center on the States showed that at the end of FY2008 ended June 30, states and participating localities had set aside $2.4 trillion to pay from employees' retirement benefits, while the cost of those promises clocked in at $3.4 trillion. Worse, that calculation didn't take into account the second half of 2008, when states' pension fund investments suffered significant losses in the market downturn, which were only partly made up in 2009.

The $1 trillion gap, Pew said, owes to states' failure to meet levels of annual payments recommended by their own actuaries; expanding benefits and offering cost-of-living increases without figuring out how to pay for them; and providing healthcare to retirees without adequately funding it.

Failures to fully pay for their retirement obligations and investment losses in the dot-com downturn have pushed up states' annual required contributions. Between 2000 and 2008, Pew found, state and local governments' pension benefits bill increased by 135%, and seemed certain to rise in 2009 and later. In 2008, states and local governments owed $64 billion, and on top of that had a tab for $43 billion for retirees' healthcare benefits.

The results of this mess, according to Pew: "high annual costs that come with significant unfunded liabilities, lower bond ratings, less money available for services, higher taxes and the specter of worsening problems in the future."

Pew said that between the onset of recession in December 2007 and November 2009, states faced a combined budget gap of more than $300 billion, with revenues expected to continue to decline over the next two years. As a result, many states are considering reforms to right their public sector retirement benefit systems. Reforms include keeping up with funding requirements, reducing benefits or increasing retirement age, sharing the risk with employees, increasing workers' contributions and improving governance and investment oversight.

Michael S. Fischer is a New York-based financial writer and editor and a frequent contributor to Wealth Manager.

Three degrees of Reid Hoffman

FORTUNE -- One day last fall, Reid Hoffman, the social networking guru and founder of LinkedIn (LNKD), woke up at the MGM Grand in Las Vegas, where he breakfasted with Magic Johnson and then spoke to a few hundred HR professionals. On a flight to San Francisco he scarfed down a turkey sandwich while I quizzed him, then sat for the closing interview at the Web 2.0 Summit. While catching up with friends in the greenroom, he took a call from a board member. Next: dinner with Microsoft (MSFT, Fortune 500) CEO Steve Ballmer and guests before -- finally -- retiring to his Palo Alto home. This, says Hoffman, is pretty much a normal day. "I don't know what the opposite of a sociopath is," says his close friend, investor and PayPal veteran Peter Thiel, "but he is that."

Hoffman, 44, is a polymath with degrees from Stanford (symbolic systems) and Oxford (philosophy). But he owes his success to his ability to navigate the ever-expanding group of people he calls his tribe. His MO is making time for people because their ideas are interesting rather than potentially profitable; he is quick to offer favors for friends. In 2007, when Bret Taylor launched Friendfeed, the company he sold to Facebook, Hoffman offered him detailed feedback on his product strategy. "He sets an example for how entrepreneurs should help each other," says Taylor, now Facebook's CTO.

Hoffman's ability to both grasp technology changes and connect on a deeply human level has made him one of Web 2.0's biggest winners. He started the very first social networking website,, back in 1997 when Mark Zuckerberg was still in middle school. He later helped broker Facebook's first $500,000 investment (kicking in $40,000 of his own). He founded LinkedIn when the idea of sharing your little black book was career suicide; now it has 135 million users. And he has had a hand in nearly every other big Web 2.0 company, including Friendster, Digg, and Zynga (ZNGA).

In 2009, Hoffman joined venture firm Greylock, where he runs a seed fund and helps manage a portfolio of nearly 100 companies, including Groupon (GRPN), Tumblr, and AirBnb. With LinkedIn's IPO and other investments, Hoffman is worth some $1.5 billion. Now comes his book, The Start-Up of You, in which he shares tips on building a great career. Paramount among them: being an authentic networker. After all, Hoffman has 800 Facebook friends and 2,579 LinkedIn connections, and sits on six corporate and four nonprofit boards. At meetings he spreads out no fewer than five screens -- iPads, Androids -- to keep up with contacts. That skill has helped Hoffman recruit to Greylock such web stars as former Mozilla CEO John Lilly. Hoffman now believes that the defining principle of the web's next innovation cycle is data. "We are generating a massive amount," he says. "What are we inventing?" It's one of the first questions he asks everyone he meets. The other: "How can I help you?

This article is from the February 6, 2012 issue of Fortune. 

Syma Helicopter – Remarkable and straightforward Purchasing Tips

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"Stealth QE3" Comes to Fruition – Soaring Inflation is Next

U.S. Federal Reserve Chairman Ben Bernanke did what most everyone expected yesterday (Wednesday) at the culmination of the Federal Open Market Committee's (FOMC) two-day meeting - he left average Americans vulnerable to the pangs of higher prices and soaring inflation.

Indeed, as yet another FOMC meeting drew to a close without any significant policy changes, the central bank, as many predicted, kept interest rates at 0% to 0.25%, where they've been since December 2008.

And citing weaker than expected economic growth, the FOMC vowed to remain in an "accommodative stance" by retaining its huge $2.832 trillion portfolio of securities and loans.

The Fed will do this by using the money from maturing bonds and principal payments from its securities holdings to buy more bonds "according to a distribution that is nearly identical to that executed under the Treasury purchase program," according to the New York Fed statement - an extension of the quantitative easing (QE2) program in all but name.

Money Morning Chief Investment Strategist Keith Fitz-Gerald saw this "stealth mode" QE3 coming.

"Instead of printing more money, the Fed is likely to start reinvesting the proceeds of maturing debt," Fitz-Gerald said. "Ultimately, that won't reduce our government's bloated, toxic balance sheet. But it will change the makeup of that balance sheet - and not for the better."

By keeping interest rates at historic lows and continuing to reinvest in maturing debt, rather than retiring it, the U.S. Federal Reserve runs the risk of feeding an inflation rate that in recent months has risen to uncomfortable levels.

But that's something Bernanke has sought to acknowledge without taking responsibility.

"Inflation has moved up recently, but the [Fed] anticipates that inflation will subside... as the effects of past energy and other commodity price increases dissipate," the FOMC said in its statement.

When judging inflation, the Fed uses the core consumer price index (CPI), which excludes food and energy. In May the core CPI rose 1.5%, the most since January 2010 but below the Fed's informal target of 2%.

In his remarks yesterday, Bernanke said he favors the Fed setting an official inflation target, but the FOMC has set no timetable to do so.

Meanwhile, the full CPI increased 3.6% in May, the most since October 2008. Although the Fed likes the core CPI because it avoids volatility, many - including some within the Fed itself - believe the full CPI more accurately reflects the real-world experience of the U.S. consumer.

"One immediate benefit of dropping the emphasis on core inflation would be to reconnect the Fed with households and businesses who know price changes when they see them," James Bullard, president of the Fed Bank ofSt. Louis, said last month.

Fitz-Gerald was more blunt.

"Companies are, in fact, passing along costs as fast as they can," he observed in May. "McDonald's Corp. (NYSE: MCD), Nestle SA, and Wal-Mart Stores Inc. (NYSE: WMT) are just a few of the companies that have spoken out about the specific impact that higher component and ingredient costs have had on their earnings. Many have adjusted their guidance."

Making inflation even harder on average Americans is an unemployment rate of 9.1% and slumping wages. Average hourly earnings fell 1.6% in May.

Of course, using the core CPI number allows the Fed to sweep inflation rate concerns under the rug to pursue policies it believes will stimulate a stubbornly sluggish U.S. economy.

Yet those policies could ultimately prove ruinous to the U.S. economy.

"Be warned: There is every chance that the Fed will lose control, inflation will spiral - and not just to the ruinous levels we saw in the 1970s, but well beyond them, too," Money Morning Contributing Editor Martin Hutchinson said recently. "Inflation may become much more acute - reaching the excruciating/ruinous 20% to 50% level - rather than reaching and then holding steady at the uncomfortable-but-bearable 10% level.

"Even after that occurs, Bernanke will refuse to launch any sort of significant counterattack, or combat it," Hutchinson continued.

Ultimately, the Fed's buying binge could cause a runaway inflation rate that would create a crisis for the U.S. dollar.

"With the U.S. market straining under the burden of rising inflation and some ill-advised monetary and fiscal moves, the death of the dollar is looming as a worst-case -- but still possible - scenario," Hutchinson said.

News and Related Story Links:

  • Money Morning: Consumers Continue to Struggle as U.S. Inflation Rate Hits Fastest Pace Since 2008
  • Money Morning: Did Ben Bernanke Hint at QE3 During Historic Fed Press Conference?
  • Money Morning:
    The Death of the Dollar: Will the Fed Kill the Greenback at Tomorrow's FOMC Meeting?
  • Money Morning: Inflation Fears: A Sanguine Fed is Underestimating the Escalating Threat
  • Bloomberg News: Fed Officials Said to Discuss Adopting Inflation Target Backed by Bernanke
  • Bloomberg News: Fed to Maintain Record Stimulus After Ending Treasury Purchases
  • MarketWatch: Fed to end QE2 as it signals economic worries

Asian Shares End Mostly Lower

  • Deal Journal: Hong Kong's IPO Window Is Open Again

Most Asian markets fell Monday as investors turned cautious ahead of a key summit of European leaders later in the day and as Chinese stocks were hit by disappointment over a lack of policy easing from Beijing.

The drop on mainland Chinese bourses applied pressure on Hong Kong, where shares fell for the first time in seven trading days. Taiwan's market, open after a long Lunar New Year holiday, bucked the trend with a sharp rise.

The Hang Seng Index tumbled 1.7% to 20160.41 in Hong Kong, while in mainland China, where investors were returning after a week-long holiday, the Shanghai Composite Index lost 1.5% to 2285.04.

"People were expecting easing in China during the Chinese New Year, and that didn't happen...Some of the speculators who did buy shares had to stop losses," said Peter Lai, director at DBS Vickers, adding monetary easing now appeared more likely after key Chinese economic releases next week.

"Many of our clients are taking profits—they did buy some shares [at the beginning of the month], and the market did well," Mr. Lai said.

Elsewhere, Japan's Nikkei Stock Average finished 0.5% lower at 8793.05, South Korea's Kospi fell 1.2% to 1940.55 and Australia's S&P/ASX 200 dropped 0.4% to 4272.7.

Taiwan's Taiex was a notable gainer in the region, climbing 2.4% to 7407.41 as trading resumed for the first time since Jan. 18.

The broad losses came ahead of a summit of European leaders in Brussels Monday, as questions surrounded Greek finances. German Finance Minister Wolfgang Schäuble issued an unusually blunt warning that the euro zone might refuse to grant Greece a fresh bailout.

Shares of developers and mainland banks fell sharply in Hong Kong and Shanghai amid fears over the outlook for the property sector in the absence of policy easing by Beijing.

Industrial & Commercial Bank of China dropped 3%, Agricultural Bank of China gave up 3.6% and China Overseas Land & Investment fell 3.1%. In Shanghai, ICBC fell 2.1% and AgBank lost 1.5% while Poly Real Estate Group slid 4.7%.

Several resource stocks also fell sharply in Hong Kong, with Aluminum Corp. of China or Chalco down 3.4% and Jiangxi Copper 4% lower.

Friday's trading in the U.S. and Europe—a 0.6% loss for the Dow industrials following a weak fourth-quarter U.S. GDP report and a 1% drop for the European Stoxx 600—hit Japanese stocks. Exporters faced additional head winds as the dollar traded below the 77-yen level. Among exporters, Toyota Motor dropped 1.7% and Mazda Motor fell 3.1%, while Fujitsu fell 3.4%.

Chip maker Elpida Memory lost 0.9%; a report late last week in the Nikkei business daily said the company would post an operating loss of ¥90 billion ($1.17 billion) when it reports later in the week.

Fighting the tide of losses for the Japanese techs, however, Advantest soared 12% after increasing its dividend for the year.

In Taipei, technology shares jumped as investors got the first opportunity to react to the strong results from Apple reported during the holiday break. Nanya Technology rose 6.6%, Advanced Semiconductor Engineering rose 7% and AU Optronics climbed 6.4%.

In Sydney, European concerns and a cyclone off the shore of Western Australia were among factors weighing on insurers, with AMP falling 1.8% and QBE Insurance Group lower by 3.1%.

Write to Shri Navaratnam at

Euro pares losses as EU leaders meet

NEW YORK (MarketWatch) � The dollar rose against the euro and other major currencies Monday, regaining some of the ground lost last week, amid ongoing worries over Greece and the region�s sovereign-debt crisis.

The euro briefly fell under $1.31, but managed to recoup some of its losses as European leaders gathered for the first summit meeting of 2012.

The benchmark DXY , which measures the U.S. unit against a basket of six other currencies, rose to 79.220, from 78.854 late Friday.

Click to Play Leaders aim to ward off future crises

Euro-zone leaders are proposing stiff rules and penalties at their summit in Brussels to prevent countries from becoming economically unstable. (AP photo: Petros Giannakouris.)

The euro EURUSD �fell to $1.3117 from $1.3216 in late North America Friday.

Going into a summit meeting in Brussels, tensions between Greece and Germany were on the rise. Greek officials rejected a proposal by Germany, the largest European economy, to give the European Union veto power over Athens�s spending plans. Read about EU summit.

�The dollar is broadly stronger against most major and emerging-market currencies as risk appetite dwindles on continued uncertainty over the developments surrounding Greece and French President [Nicolas] Sarkozy�s pledge to impose a financial transaction tax starting in August,� said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. Read more on Portugal.

He also noted yields on Italian debt were rising, as were yields for Portugal � which already accepted a bailout but may face the same issues that Greece has yet to resolve, said Dan Greenhaus, chief global strategist at BTIG. �Whatever is worked out for Greece would eventually serve as the blueprint for Portugal.�

Yields on Portugal�s 2-year notes shot up 400 basis points during the session, to top 21%, he said. A basis point is one one-hundredth of a percentage point.

Portugal�s 10-year notes yield about 17%, up about 200 basis points on the day, according to BTIG.

Even if Greece makes a deal with bondholders, �the fiscal and growth objectives of the austerity efforts in Athens and Rome have yet to be mulled by IMF [International Monetary Fund] monitors, not to mention the liquidity difficulties encountered by Portuguese sovereign bonds,� said Ashraf Laidi, chief global strategist at trading platform City Index.

�Our base view remains that euro-dollar will fall back below $1.25 towards the end of the first quarter, before testing $1.21 before summer,� he said. �Only a break above $1.35 would lead us to re-consider this assessment.�

/quotes/zigman/1652083 DXY 82.93, -0.11, -0.13%

The European Council held its first summit of the year Monday, releasing a statement detailing the region�s plans to stimulate employment for young people, complete the single market for Europe and boost financing of the region�s economy. Read more on EC statement.

Weighed by the Fed

The dollar index fell 1.7% last week, retreating after the Federal Reserve said that it could keep interest rates at ultra-low levels until late 2014. The U.S. central bank had previously said that rates would stay low until the middle of 2013. See more on dollar�s decline last week.

�It is becoming increasingly clear that firmer activity data may still not prevent a further round of quantitative easing and attendant U.S. dollar downside risks,� said strategists at Credit Agricole.

The dollar barely fluttered after a report showed U.S. personal spending unexpectedly dipped in December, though incomes rose more than some predicted. Read about U.S. spending.

Investors have turned cautious on the U.S. currency ahead of this week�s raft of economic data.

�This is a big week for U.S. data releases, and in turn, the U.S. dollar. Heavyweight data including January payrolls, ISM manufacturing confidence and consumer confidence readings are on tap over coming days,� the Credit Agricole strategists said. Read economic preview.

Among other major currencies, the British pound GBPUSD �slipped to $1.5701, down from $1.5740 Friday.

Against the Japanese yen USDJPY , the dollar bought �76.31, down from �76.70.

Law Firms Keep Squeezing Associates

Law firms are finally starting to recover from the recession, but they aren't taking their young lawyers along for the ride.

Even as profits return, cautious partners with one eye on damaged balance sheets and the other on stingy clients plan to hang onto the lean silhouettes they acquired during the downturn.

Enlarge Image

Close Joe Schram/The Wall Street Journal

Eric Fishman's colleagues thought it risky in a tight job market when he left an elite New York practice for a midsize one. 'There was little chance many of my peers would have considered a move from a big law firm.'

That means little relief for young associates—who took on hefty law-school loans, only to run into layoffs and stagnant pay in the years since 2008—and fewer chances for new law-school graduates to get in on the ground floor. And the elusive brass ring of partnership has grown more remote.

"What happens if Greece falls apart again?" says Greg Nitzkowski, managing partner at Paul Hastings LLP, an international firm that has reduced entry-level hires by about a third since 2008. "We just think it's prudent to plan as if this coming year is going to be a relatively flat year.…We're not planning for a big upsurge in demand."

Conditions at law firms have stabilized since 2009, when the legal industry shed 41,900 positions, according to the Labor Department. Cuts were more moderate last year, with some 2,700 positions eliminated, and recruiters report more opportunities for experienced midlevel associates.

But many elite firms have shrunk their ranks of entry-level lawyers by as much as half from 2008, when market turmoil was at its peak. Salaries and bonuses for those associates have remained generally flat. Meanwhile, a degree at a top law school can cost $100,000 or more.

Enlarge Image


Associates at prominent law firms say some of their peers hired during the boom years are happy just to have jobs at all. "The world has changed," says a senior associate at a top firm.

During the downturn some firms pared associate ranks through layoffs and by delaying start dates for fresh law-school graduates. And many firms for routine tasks now use less-expensive alternatives to young associates, such as contract attorneys and outsourcing firms.

"Law firms basically focused a lot of head-count reductions during the recession on associate ranks, says Dan DiPietro, chairman of Citi Private Bank's law-firm group. "They feel like the associate ranks are where they want them to be."

White & Case LLP, an international law firm, plans to hire about 60 entry-level lawyers this year, compared with prerecession classes of 90 to 100.

"The efficiency of law practice has just changed dramatically in the past five years," says Bill Dantzler, a hiring partner and head of the firm's tax practice. "We don't have to have these armies of young associates. It's good for the clients, it's good for everybody."

That means reputable firms can be even more picky about whom they hire. While firms still compete for the highest-ranking graduates from Ivy League and other top law schools, it is a different story for solid candidates who lack gold-plated résumés. Students with lower class rankings or from second-tier schools who once would have made the cut "wouldn't have a prayer of getting in now," Mr. Dantzler says.

For those who do land jobs at big law firms, the hours remain grueling. In 2010 associates at firms with more than 700 lawyers billed an average of 1,859 hours—the equivalent of more than seven hours a day—according to the National Association for Law Placement.

As head counts fell, the average workload for those associates has risen 2.3% since 2007, or about 50 extra hours a year.

And the road to partnership is longer and more uncertain than in the past. Many lawyers now toil eight or even 10 years before being chosen. A decade ago, the most common partnership track took seven years. Other firms have thinned their top ranks of partners who didn't bring in enough business, making it even tougher to elbow into a spot.

Partners at several large law firms also say they don't plan to raise associate salaries, which haven't increased since 2007. December bonuses remained roughly the same as in 2010, with first-year associates at elite firms such as Cravath, Swaine & Moore LLP and Weil, Gotshal & Manges LLP getting $7,500. The most senior associates received bonuses of $37,500 to $42,500.

"Most firms are hesitant to lock themselves into something they can't sustain," says Paula Alvary of consulting firm Hoffman Alvary. "While there is clear evidence that work levels are returning, they're not at prerecession levels for most firms."

Still, many people continue to pursue law as a career, not least because the median starting salary for entry-level lawyers at top New York firms is $160,000. That is nearly double the going rate in 1996, before the tech boom drove salaries skyward.

And phones are ringing again at law-firm recruiters. Junior lawyers who once clung white-knuckled to their jobs are loosening their grips and moving to corporations' law departments or to law firms where they might have better shots at making partner.

Eric Fishman in 2010 took what many colleagues then saw as a huge risk when he left one of New York's elite practices for midsize Pryor Cashman LLP, where he hoped to get more experience running cases and building a practice.

"There was little chance many of my peers would have considered a move from a big law firm at that time," says Mr. Fishman, now a senior associate at the respected firm. "Now they're less fearful; the economy is getting better."

But the pace of such movement isn't what it was. Before the downturn, firms lost between 25% to 30% of their associates after a few years, people in the industry say. R. Bruce McLean, chairman of Akin Gump Strauss Hauer & Feld LLP, says the attrition rate at his firm is around 15% now.

"It's like lots of things in our economy," he says. "The outlook is brighter, the anxiety level is diminished, but it's not completely gone.…This is still a period of anxiety for our entire associate population. This is not what they anticipated when they started law school."

Wednesday, May 30, 2012

Government is Giving Out Free Cell Phones to Welfare Recipients

Did you know that the federal government is giving out free cell phones and free cell phone minutes to welfare recipients? It may be hard to believe, but it is true...  

Right now, there are companies that are running advertisements specifically targeted at low income Americans informing them of the fact that all they have to do is sign up and they can get a free cell phone and hundreds of free cell phone minutes every single month and it will all be paid for by the federal government. Some have referred to this as "The Obama Phone", but that is not exactly accurate. The outrageous federal programs that are paying for this were initiated before Barack Obama entered the White House. But the fact that welfare recipients have been receiving free cell phones and free cell phone minutes under both the Bush and Obama administrations has been confirmed as being true by Snopes.  All of this is paid for by "the federal Universal Service Fund". That is one of those annoying little taxes that you may have noticed on your phone bill. So what is essentially happening is the federal government is taking money from all of us so that they can provide free cell phone service for welfare recipients every single month.

When some of my readers informed me of this free cell phone scheme, I decided that I better go to the source.  So I went over to the FCC website, and it turns out that there are two federal programs involved. "Link Up" provides a one-time connection discount on phone service, and it can be applied to the cost of a cell phone. So this is where the free cell phone comes from. "Lifeline" provides a monthly discount on telephone service. So this is where the free cell phone minutes each month come from. The following is a description of these programs from the FCC website....

What Benefits are Available Under the Lifeline and Link Up Programs?
  • Lifeline provides discounts on one basic monthly telephone service (wireline or wireless) for qualified subscribers. These discounts can be up to $10.00 per month, depending on your state. Federal rules prohibit qualifying low-income consumers from receiving more than ONE Lifeline service at the same time. That is, qualifying low-income consumers may receive a Lifeline discount on either a home telephone or wireless telephone service, but may not receive a Lifeline discount on both services at the same time. Lifeline also includes Toll Limitation Service, which enables a telephone subscriber to limit the amount of long distance calls that can be made from a telephone.
  • Link Up Up provides qualified subscribers with a one-time discount (up to a maximum of $30) off of the initial installation fee for one traditional, wireline telephone service at the primary residence or the activation fee for one wireless telephone. It also allows subscribers to pay the remaining amount they owe on a deferred schedule, interest-free. Federal rules prohibit qualifying low-income consumers from receiving more than ONE Link Up discount at a primary residence. That is, qualifying low-income consumers may receive a Link Up discount on installation or activation charges associated with either a home telephone or wireless telephone service.

Apparently these programs are becoming quite popular.

You can find a company called Safelink Wireless offering welfare recipients a free cell phone and 250 free cell phone minutes a month right here.

You can find a company called Assurance Wireless offering welfare recipients a program that is virtually identical right here.

This is absolutely outrageous, and it is yet another sign that dependence on the government is totally out of control.

Not that assisting the poor is bad. Of course we always want to help those that cannot help themselves. We never want to see anyone go without daily food or sleep in the streets.

But providing the poor with the basics of life is much different from providing them with luxuries such as cell phones.

In some areas of the country, the poor can also receive nearly free Internet service every single month.

Just check out the following example from the Houston Chronicle....

When Comcast acquired NBC Universal earlier this year, an FCC-mandated requirement was that the cable giant offer cheap Internet access to low-income households. Comcast is making good on the mandate through a new program called Internet Essentials.

Families who qualify will be able to sign up for 1.5-Mbps Internet access – the same download speed as AT&T’s basic DSL service – for just $9.95 a month. Customers may also be eligible for a computer that costs just $150 and free Internet training.

Also, a new bill has been introduced in Congress that would give "eligible" households money to help pay for gasoline....

Low-Income Gasoline Assistance Program Act - Directs the Secretary of Health and Human Services to make grants to states to establish emergency assistance programs to pay eligible households for the purchase of gasoline.

These days, as long as you are "eligible", just about everything you need will either be purchased for you or subsidized by the federal government.

Yes, we will always need programs to help take care of the poor, but some of the things that go on today are absolutely outrageous.

There are millions of people out there that have become extremely comfortable receiving government benefits and it will be extremely difficult to ever get them to give them up.

After all, why bust your behind for 40 or 50 hours a week at some meaningless, low paying job when you can live a similar lifestyle by just depending on government benefits?

Yes, everyone needs a helping hand once in a while. But if you do have to rely on government benefits for a time, you should be fighting like crazy to improve your situation so that you can get off of them as soon as possible.

Of course the biggest welfare recipients of all are the big corporations. The federal government showers billions upon billions of dollars on them every year, and this has got to stop.

The following example comes from an article in the Weekly Standard....

General Electric, one of the largest corporations in America, filed a whopping 57,000-page federal tax return earlier this year but didn't pay taxes on $14 billion in profits. The return, which was filed electronically, would have been 19 feet high if printed out and stacked.

Can you imagine a 57,000 page federal tax return?

That is absolutely disgusting and it is a perfect example of how corrupt our system has become.

All year long, GE has people pouring over the tax code just looking for any little tax loophole that it can exploit.

GE made $14,000,000,000 in profits, but they paid less taxes to the government than you or I did.

There is something very, very wrong with that picture.

All of this unnecessary welfare has got to stop.

No more free cell phones for people on welfare.

No more giving billions of dollars in tax breaks to big corporations.

We simply cannot afford it.

The U.S. debt problem is way, way out of control.  We have piled up the biggest mountain of debt in the history of the world, and it gets about 150 million dollars worse every single hour.

Sadly, none of this is likely to change any time soon.

The big corporations provide the money that our politicians need to win campaigns, and most of our politicians are very careful not to bite the hands that feed them.

On the other end of the spectrum, our economy continues to crumble and the number of poor Americans continues to increase.  So even if we don't provide them with free cell phones, the truth is that the number of Americans that need basic food and housing is not going to go down any time soon.  In fact, it is going to go a lot higher in the years ahead.

We are rapidly becoming a European-style socialist welfare state.

In America today, the poor are absolutely showered with outrageous government benefits and so are the big corporations.

So who pays for all of this?

You and I do.

I am afraid that the joke is on us, and nothing is going to change as long as we keep sending the same kind of politicians back to Washington D.C. over and over.

*Post courtesy of The Economic Collapse Blog.


Restructuring Should be Positive for Spanish Savings Banks

Restructuring of the ailing Spanish savings bank sector through mergers and other consolidations is likely to prove positive for their intrinsic financial health.

In a Special Comment, Moody’s notes that so far, 24 of Spain’s 45 savings banks, accounting for close to EUR350 billion in total assets, have publicly announced consolidation intentions, and many others are maintaining contacts in this direction at different levels.

“The Spanish government’s creation of the Fund for Orderly Bank Restructuring (or “FROB” in its Spanish initials) in June 2009 has been a particular driving force of such consolidation. The fund’s declared purpose is not only to support the Spanish financial system, but also to foster its restructuring by means of sector consolidation. In our opinion, both FROB assistance and such integration processes will be crucial for the long-term financial health of this sector,” says Alberto Postigo, a Moody’s Vice-President–Senior Analyst and author of the report.

Moody’s explains that Spain’s savings banks are pursuing consolidation in two different ways: a traditional merger or an alternative option known as an Institutional Protection Scheme (”SIP” in Spanish initials). Although both options are eligible to receive support from the FROB, the rating agency has some concerns with regard to integration processes through SIPs, as their success lies chiefly in some of the governance details as well as the execution of agreed plans, and so far no SIP has been established in Spain.

In general, Moody’s remains moderately positive about the likely impact of the consolidation process on the intrinsic financial strength of savings banks, although the extent of such improvement will depend on the actual benefits that result from integration.

However, this positive effect is unlikely to translate into improvements in senior debt and deposit ratings, as the expectation of extraordinary systemic support that Moody’s currently incorporates into such ratings is anticipated to return to more moderate levels as the financial position of the consolidated entities improves. Pressure on debt and deposit ratings could even be downwards if the withdrawal of such extraordinary support is not accompanied by a sufficient improvement in the institutions’ intrinsic financial health.

Federal student loan rate set to double

NEW YORK (CNNMoney) -- Attention college students: The interest rate on federal student loans is scheduled to double this summer unless Congress acts soon.

Loans taken out for the current school year carried an interest rate of 3.4%, thanks to a 2007 law that phased in rate reductions for subsidized Stafford loans to undergraduate students. But the law did not specify the rate after this year. So unless something is done, rates on new loans will revert back to 6.8% -- where they were in 2007.

President Obama urged lawmakers in his State of the Union address Tuesday to stop this rate hike from going into effect. He also asked Congress to extend the enhanced Hope Scholarship program, which increased the maximum tax credit to $2,500. And he wants to double the number of federal work-study jobs.

But it remains to be seen whether this deficit-conscious Congress will act, especially since extending the 3.4% rate would cost $5.6 billion a year, according to Mark Kantrowitz, publisher of All told, Obama's proposals would total at least $10 billion a year.

While the president has focused on expanding access to college for low- and middle-income children, lawmakers have taken several steps to whittle away at student aid.

5 colleges slashing tuition

Congress has eliminated subsidized loans for graduate students, as well as most discounts. They also cut $8 billion out of the Pell Grant program for low-income students and reduced the income threshold for eligibility for a full Pell Grant.

"[Since] Congress just passed legislation cutting student financial aid funding, it's unlikely they'll pass legislation increasing student aid funding," Kantrowitz said.

Raising student loan rates will prove costly, said Lauren Asher, president of the Project on Student Debt. Someone who graduates with $23,000 in debt will pay an additional $4,600 in interest over 10 years.

Two-thirds of college seniors graduating in 2010 had student loan debt, and the average balance was more than $25,000, the project found.

"In this tough economy, people are concerned about the cost of college and the burden of debt to follow," Asher said. 

S&P’s Loud ‘Buy’ Signal Has Crummy Timing

The good news: The S&P 500 has just given us a major technical buy signal that has a ton of historical “street cred.”

The bad news: The signal couldn�t have come at a worse time for investor psyches.

Click to Enlarge That signal is the so-called “Golden Cross,” where a major index�s 50-day moving average line crosses above the 200-day moving average line. The premise of the Golden Cross theory is that such a crossover — where a relatively lengthy trend line moves above an even longer trend line — serves as undeniable proof that the major trend by that point is indeed a bullish one.

But let’s say you�re not impressed by all that technical mumbo jumbo, since stocks trade based on perceived values rather than chart-based events. Fair enough. Just know that the last eight Golden Crosses (which go back as far as 1998) have all successfully marked a rally that could have made investors some money by jumping in for at least a few months at the time the hint was dropped.

Just to reiterate, that�s 8-for-8. If the Golden Cross were a baseball player, he’d be a Silver Slugger.

But What About Valuation?

How can the market possibly be going higher when clearly all hope is lost for global economy? After all, Europe is slipping into a financial abyss, the American economy is shrinking at an uncontrollable rate and earnings stink … right?


A funny thing happened on the way to Armageddon — we didn�t get there. Europe�s financial woes still aren�t fixed (they actually might be getting worse). Yet the sun still rises for every country in the European Union. In Q3, America�s corporate earnings reached record levels. The GDP growth rate has improved three consecutive quarters now.

It might not have been pretty, but it�s still all on the positive side. More than that, though, it�s getting tough to keep arguing stocks aren�t worth owning unless you�re willing to ignore a bunch of data.

Indeed, although the market�s P/E is a hair above multi-decade lows hit in the latter part of 2011, it’s still hovering at stunningly cheap levels. In fact, valuations for U.S. equities have now remained under their 50-year average for as long as they have since the early ’70s.

Sure, stocks can lose value in anticipation of an economic contraction. But after 446 days of subpar valuation, it�s time to start acknowledging the possibility that maybe — just maybe — we�re not headed off a cliff after all.

Before You Jump to Conclusions

Just to put these Golden Cross signals in perspective, this is 50 days worth of market value dancing with 200 days worth of market value. Yet the media is apt to induce the masses into thinking this Golden Cross is a “now or never” kind of clue. It�s not. In fact, odds are good the market�s overextended condition now is an open invitation for a little profit-taking.

Of course, any pullback at this point will be used as “obvious evidence that such technical signals are hogwash.” The problem is, three or four days of bearish movement doesn�t unwind a buy signal that took at least 50 days to develop.

Translation: Don�t confuse the short-term trend with the intermediate-term trend (even if the media doesn�t care to denote the difference).

The fact is, we saw several short-term dips within long-term rallies following the last eight Golden Crosses, and they ended with moves to even higher highs. There�s no reason to think any pullback from here has to be a quick end to this technical buy signal. So don�t get psyched out at the first sign of trouble here.

Bottom Line

The S&P 500�s Golden Cross occurred right at 1,256, versus Monday�s close of 1,312.80. So the index could fall back to 1,256 — a 4.3% dip — and the uptrend still would technically be intact. It doesn�t even need to give up that much ground to give us a good reset of the longer-term uptrend, though. We simply need to burn off a little of the excess froth we�ve added in the middle of January before resuming the bigger-picture uptrend that�s just been confirmed by the 50-day average�s cross above the 200-day moving average line. A slide to the 1,280 could do the trick.

Either way, this crossover signal has been too good to dismiss now, whether you�re a believer in technical analysis or not. The funny thing is, the market�s actually justifying stronger price levels for the long haul.

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Why Wall Street is rooting for the Giants

CHAPEL HILL, N.C. (MarketWatch) � Can the Super Bowl help you make more money this year?


But that profit won�t come from basing your investments on who wins this coming Sunday�s game � even if, per the veritable Super Bowl Predictor, the Giants win on Sunday and the market rises, or the Patriots win and the market falls.

On the contrary, Sunday�s game can help us become better investors only if we use it to understand how almost any data set is vulnerable to being tortured into saying something meaningless.

/quotes/zigman/627449 DJIA 12,443.40, -137.29, -1.09%

The Super Bowl Predictor, for those of you who haven�t heard of it, holds that stocks will rise over the coming year if the winning team can trace its roots back to the original National Football League � and fall if that team�s roots are in the old American Football League. Followers claim that the Indicator has an impressive 79% success rate.

There�s less here than meets the eye, however � even if we overlook the Predictor�s spectacular failure the last time the Giants won the Super Bowl, in 2008. Far from rising, as it the indicator predicted, stocks turned in their worst year since the 1930s.

The problem with the Predictor�s 79% success rate: It is artificially inflated by the indicator�s especially good record in the late 1960s and early 1970s, which came before even the most diehard football fan ever dreamed of correlating the Super bowl winner with the stock market. The earliest mention in a mainstream publication of such a correlation, as far as I can determine, came in 1978 by the late Leonard Koppett, a sports writer for the New York Times.

Reuters New York Giants quarterback Eli Manning.

To properly judge the indicator�s success, we should be focusing only on its record since then. Otherwise, we would be guilty of what statisticians refer to as hindsight bias. To put that in football terms, it�s akin to Monday-morning quarterbacking.

Unfortunately for the indicator, its real-time success since 1978 has been less impressive � 68%, in fact. While that might still seem much better than a coin flip, it isn�t. A simple bet that the market would rise each year would have been right 76% of the time since 1978.

Another essential reality check that can help immunize us from being seduced by spurious correlations: Estimate how many others were tested during the process of �discovering� the one that now appears to be so impressive. We should never forget that, even at the 95% confidence level that statisticians use to conclude that a pattern is genuine, there will be five �false positives� out of every 100 apparent correlations.

This is a crucial point, given the millions of investors who constantly analyze the market�s every squiggle and are correlating those squiggles with everything from sunspots to tea leaves.

To give one example: Consider another sports-related predictor, which also was popular in the 1970s. According to it, if the American League won the World Series in a presidential election year, then the Republican candidate would win the presidency, while the Democrat would win if the National League team won. Based on its �uncanny� success rate from 1952 through 1976, many began singing this indicator�s praises.

It failed in 1980, however, and its record since then has been statistically indistinguishable from 50:50. Now hardly anyone but the old-timers have even heard of it.

Click to Play Why market likes the Giants

For 36 of the 45 Super Bowls, the stock market has gone up after a win by an "original" National Football League team, and gone down when they lose. Does that mean everyone should root for the Giants? (Photo: Getty Images)

To be sure, hope springs eternal, and some believers in the Super Bowl Predictor will undoubtedly continue to believe in it � my calm, reasoned prose notwithstanding. They will find apparently strong support for this belief in an article that appeared in the Spring 2010 issue of the Journal of Investing, written by George Kester, a finance professor at Washington & Lee University.

Kester measured the returns of a portfolio that switched between the market and cash according to the Super Bowl Predictor, and found that even in real time since the indicator was first publicized, this portfolio has beaten a buy-and-hold. So even if it�s not statistically significant, it�s economically significant.

Note carefully, however: Kester does not endorse the indicator. In an interview Monday afternoon, he told me that he thinks it�s ridiculous for anyone to do so. On the contrary, one of his goals in conducting the study was to show how difficult it is to beat a buy-and-hold.

Is Kester nevertheless hoping that the Giants will win on Sunday, I asked him? Laughing, he said �yes,� acknowledging that maybe even he was unconsciously believing that a win by an old NFL team would be better for the stock market than a win by an old AFL team.

Click here to learn more about the Hulbert Financial Digest.

Tuesday’s ETF To Watch: Energy Select Sector SPDR (XLE)

This week got off to a rocky start as Greece and Germany remained at odds regarding the fiscal future of the currency bloc. Many investors fear that without a significant aid package, Greece will endure a widespread default which has the potential to sink markets around the world. Despite the issues persisting overseas, the focus of the week will still be heavily centered around the U.S. economy, as we close out earnings season and report unemployment figures on Friday. With a number of bellwether firms slated to announce earnings in the next few days, markets may soon shrug off Greek fears and focus on the domestic economy instead [see also The Ten Commandments of Commodity Investing].

Today will see the most recent earnings statement from�Exxon Mobil Corporation (XOM). Exxon had long been the largest company in the world by market capitalization, but after Apple’s (AAPL) stunning earnings�announcement, XOM fell just behind the tech giant to now hold second place. Even still, a market cap of $407 billion is nothing to be ashamed of, especially given the ADV topping 18 million as well as a solid dividend yield of 2.2%. With the price of crude vaulting back and forth in recent weeks, this report will be especially key to see how an industry giant has withstood volatile pricing [see Energy Bull ETFdb Portfolio].

Analysts estimate the firm will bring in EPS of $1.95 with revenues just under $120 billion, not bad for three month’s work. Of their last four announcements, XOM has missed the Street’s estimates just once and it hopes to keep it that way today. Exxon has also been in focus due to the tensions surrounding Iran and their crude oil production. Many are concerned how big oil companies will hold up if Iran decides to block off the�Strait of Hormuz, a small body of water through which nearly 40% of the world�s oil passes [see also Iran Tensions And Crude Oil: What It Means For Your Portfolio].

In light of this major release, today’s ETF to watch will be the�Energy Select Sector SPDR (XLE). The fund is one of the most popular ETFs on the market, with over $8 billion in assets, XLE has been offering exposure to the U.S. energy sector for more than a decade. Top holdings include Chevron, Apache, and the highest ranked security, Exxon Mobil, which accounts for more than 19% of total assets. With such a significant weight in XLE, today’s earnings report make this fund crucial to watch as it will likely move in whatever direction XOM takes it [see also ETF Insider: Bears Are Lurking Around The Corner].

Bankrupt tax protester gets own bailout

Corporate bailouts. Troubled assets. Bank rescues. Federal stimulus. While the Bush and Obama administrations were scrambling to put spins on what they labeled "economic recovery" programs, angry taxpayers had a more simple description: increased government spending.

Increasingly frustrated that their voices were not being heard, they banded together to form organized groups that they called "Tea Parties," a reference to the infamous 1773 Boston Tea Party which sparked the American Revolution.

Beginning on Tax Day, April 15, 2009, Tea Party activists organized a number of protests across the country, speaking out against what they view as wasteful government spending at taxpayers' expense. Many have called for a tax revolution, evoking imagery from the American Revolution and taking as their slogan "Taxed Enough Already."

In the midst of it all is Jenny Beth Martin. Martin is credited with co-founding the national organization, Tea Party Patriots, which has, as a main priority of the organization, to bring attention to and oppose massive government spending. Speaking just before a Sept. 12 protest in Washington, D.C., Martin explained that she, like many Americans "don't want to bailout things and organizations and individuals who haven't been fiscally responsible."

Martin may know a little bit about not being fiscally responsible. She filed bankruptcy along with her husband in August 2008, having racked up debt including more than $71,000 to Ford Motor Co. Martin also lost her home.

Martin and her husband have made no secret of their financial woes, even talking about it on appearances on Fox News' Fox & Friends. She told Fox: "We've been hit by the financial crisis and the recession, and we are like everyday Americans."

Fair enough. Only there was one aspect of her financial situation that she failed to disclose during her Fox appearance: Martin owed the IRS $510,000 in unpaid taxes just to prior to her bankruptcy. In other words, she got her own bailout.

Martin claims that the recession -- and problems with a business partner -- led to the failure of her husband's business. That failure, she claims, led to her bankruptcy and her tax situation. She says those woes make her an "everyday American." But here's the thing: "everyday Americans" don't rack up $510,000 federal tax bills.

As a tax attorney, I work with a number of people who find themselves in tax trouble. Bankruptcy and tax delinquencies happen. I understand that. Bad things happen to good people.

But half million dollar federal tax bills don't just happen. They take some time to amass. And you know they're coming.

While Martin tries to paint what she did as noble, noting that her husband chose to pay his employees instead of the IRS, it's anything but noble. That $510,000 in lost revenue to the IRS could have been used to pay for equipment in a VA hospital, provide funds for homeland security or maybe even buy a Kevlar vest or two for our military personnel.

I'm all about protesting wasteful spending. I don't understand why we need to spend millions of dollars on the "search for extraterrestrial intelligence" or why it's necessary to fund commissions to study whether we need a committee to study an issue (does that even make sense?). And as Americans, we're fortunate that we're allowed to stand up and say what we believe in. But let's call things what they are.

Martin and her husband didn't pay their taxes. A LOT of taxes. That doesn't make them noble. It doesn't make them martyrs. And it doesn't make them "everyday Americans." It makes them hypocrites.

U.K. House Prices Fall 1.0% - Nationwide

Nationwide released its monthly house price survey, and it showed the first month-to-month fall in UK house prices since last Spring. However, house prices are still up 9.2% year-on-year according to their survey.

Martin Gahbauer, Nationwide’s Chief Economist, said:

The price of a typical UK property fell by a seasonally adjusted 1.0% month-on-month (m/m) in February, ending a strong run of nine consecutive monthly increases. The relatively smoother three month on three month rate of inflation remained positive at +1.6%, though this is down from +2.0% in January and a peak of +3.7% in September 2009. The annual rate of price inflation still managed to increase from 8.6% to 9.2% year-on-year, as this month’s fall was smaller than the 1.5% m/m decline recorded in February 2009. The average price of a typical property sold in the UK during February was £161,320.

Note, that unlike the S&P/Case-Shiller data that I quote for the U.S., this data is already seasonally adjusted. Therefore, going forward, a multi-month price decline would signal a reversal of trend. The evidence does point to weakness as new buyer enquiries and mortgage approvals have dipped of late.

The Halifax is due out with their own house price survey. And while the trend there has mirrored the Nationwide data, the data are slightly less robust. My view is that the market is shifting away from a position of undersupply which had buoyed markets. This will dampen further price increases.


House Prices Slip in the Winter Snow During February – Nationwide

Fund Lineups Shift

ETF managers are reshuffling their investment menus to better reflect investor interest and demand. And ETFs with too few assets are on the chopping block.

Global X Funds is planning to liquidate eight Global X Funds ETFs. All of the funds are stock ETFs covering emerging markets to narrow industry sectors.

The following Global X ETFs are set for liquidation:

  •  Global X Russell Emerging Markets Growth ETF (EMGX)
  •  Global X Russell Emerging Markets Value ETF (EMVX)
  •  Global X Mexico Small-Cap ETF (MEXS)
  •  Global X Oil Equities ETF ( XOIL)
  •  Global X Farming ETF (BARN)
  •  Global X Fishing Industry ETF (FISN)
  •  Global X Food ETF (EATX)
  •  Global X Waste Management ETF (WSTE)

The funds listed above will close to new investors and cease trading on the NYSE Arca at the end of the trading day on Feb. 16, 2012 and will liquidate on Feb. 27, 2012.

The Board of Trustees of Global X Funds unanimously determined that it was in the best interests of the Funds and their shareholders to liquidate the Funds.

In other industry news, IndexIQ has closed three Asia-focused stock ETFs; The IQ Taiwan Small Cap ETF (TWON), IQ Hong Kong Small Cap ETF (HKK) and the IQ Japan Mid Cap ETF (RSUN) had their final trading day on Dec. 23, 2011. 

Also, ALPS ETF Trust pulled the plug on the Jefferies TR/J CRB Global Agriculture Equity Index Fund (CRBA) and Jefferies TR/J CRB Global Industrial Metals Equity Index Fund (CRBI). The two commodities focused ETFs were liquidated on Dec. 28, 2011.

For advisors that like stocks in commodity linked sectors, ALPS still offers the TR/J CRB Global Commodity Equity Index Fund (CRBQ) and the TR/J CRB Wildcatters Energy & Production Equity ETF (WCAT).

Global X Funds has relaunched the Global X NASDAQ China Technology ETF (QQQC) on the NASDAQ. The fund was previously named the Global X China Technology ETF (CHIB).

QQQC tracks the NASDAQ OMX China Technology Index, which lists ASM Pacific Techno, Lenovo Group, and BAIDU as the three largest holdings within the underlying index.

The stocks within QQQC have their main businesses in the following technology sectors: computer services, Internet, software, computer hardware, semiconductors and telecommunications equipment. Altogether, QQQC holds 30 Chinese technology stocks. QQQC’s annual expense ratio is 0.65 percent. •


Tuesday, May 29, 2012

The Safe, Sure Road to a Golden Retirement

It has been called the "royal road to riches."

Starting with just $10,000 and a small monthly contribution, any investor can use this method to create their own golden parachute - a million-dollar retirement portfolio.

All you need is time.

Time. That is something nobody seems to have anymore - or really appreciate.

But at 48 years old, I understand how 30 years can slip by in an instant. It may seem like forever, but it's not.

Instead, today it's all about the fast money. In the market, out of the market... this stock, that stock. Nobody has the patience to ride out the rough spots anymore.

However, there is one thing that never changes in the investment world: When you buy solid companies and reinvest the dividends you can build true wealth.

The best part is you'll never have to rely on Social Security to fund your golden years.

Of course, seasoned income investors have known this for years. That's why the truly rich don't spend their days glued to the financial news.

In this style of investing, less truly is more.

Because the biggest factor behind this well-worn strategy is time itself and time never fails.

The Most Powerful Investment Strategy of All-TimeThe secret to this approach is in the compounding effect that Albert Einstein once called "the most powerful force on earth."

It's the safe, sure road. And anybody who tries it can become a millionaire if they are smart enough to stick with it.

In fact, this force is so powerful that I think the government is deliberately keeping it from you.

I say that because if the masses actually knew the income this compounding approach could deliver, they would immediately demand an end to Social Security as we know it.

Why is that? you ask.

That's where the Rule of 72 comes in.

The Rule of 72 says that in order to find the number of years it takes for you to double your investment at a given rate just divide the yield into 72.

For example: If you are earning a 9% dividend on your investment, it only takes eight years to double your money, and roughly 13 years to triple it.

This compounding effect arises when your dividend yield is added to the principal, so that from that moment on, the interest begins to earn interest on itself.

Over time, that process can add up to a small fortune even with a very modest start - say the $10,000 initial investment I spoke of earlier.

Using this simple but effective strategy, you can build a reliable nest egg in just 40 years.

Here's how:

Let's say you took that $10, 000 you have in the bank earning nothing and invested it in shares of Duke Energy Corp (NYSE: DUK).

Doing so, you would be buying about 475 shares of a solid company that also happens to pay a 4.7% dividend yield.

Now admittedly that may not seem like much- but one day it may just be the best investment you will ever make.

That's because at the ripe old age of 25 you make the smartest call of your life. You decide not only to reinvest those dividends but also to contribute another $50 a week to your cause.

When you wake up 40 years later you will have accumulated a $1,029,743.08 nest egg assuming the underlying share price grows a modest 4% a year.

But that's not all. You would also have an investment that now throws off a $44,420.54 yearly income stream if you need it.

Better yet, if you let this investment ride just another five years and decide to retire at age 70, your pile of cash would grow to $1,576,981.27 with an income stream of $68,082.17 a year.

And all you have to do is stick to the plan. That's what it means to be an income investor who understands time.

By comparison, starting at age 25 and contributing the current maximum of $551/month your estimated Social Security check would be just $51,000 a year at retirement. That's it - no cash cushion, no nest egg, and nothing to leave to your children.

How to Pick Dividend Stocks for the Long HaulOf course, savvy investors also know how important it is to limit their risk.

Instead of putting all their eggs in one basket, they are smart enough to diversify their portfolios by investing in stocks that are not closely correlated.

For most investors, four solid dividend payers from different sectors of the market would easily be enough to do the trick. Warren Buffett typically concentrates over 75% of his dividend investments among just five stocks.

"That's how Buffett got as rich as he did," says Martin Hutchinson, Editor of the Permanent Wealth Investor. "He's never invested much in the tech sector, but he bought stocks in stable areas and held them for decades while they grew, paying him substantial and growing dividends, thus compounding it."

Picking successful dividend paying stocks, however, is not as simple as buying only the stocks with the highest yield. In fact, it is usually the stocks with the highest yields that often trip up investors the most.

Instead, picking winning dividend stocks usually requires finding candidates with the following two qualities:

  • The payout should have strong history with a minimal risk of a dividend cut.
  • There should be a high probability that the dividends will increase while you own the stock.
  • In short, look for stocks that are stable enough to push through the downturns.

    According to Hutchinson, "The main thing is to look at the company's business and its dividend policy to make sure that it can sustain the dividend through ups and downs, and that you're genuinely buying something long-term, not an annuity that will run out of steam in 10 years."

    In fact, Buffett believes you should "only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."

    Now there is a guy that understands time.

    Of course, you could always rely on a Social Security check to fund your golden years...if it's still around.

    If not, all it takes is that crucial first step.

    To learn more about finding these dividend "sweet spots" click here.

    News and Related Links:

    • Money Morning:
      The Income Investments You Need to Focus On Right Now
    • Money Morning:
      How to Win Bernanke's War on Savers with a 19% Yield

    7 Great Latin America ETFs

    Among emerging market investments, Latin America is gaining momentum as the region where investors can make some big bucks. From Brazil ETFs to Chile stocks, returns in this investing region have been hot.

    Participating in the booming Latin American markets of Brazil, Chile, Columbia, Mexico and Peru is possible via individual stocks.� Yet for the average investor, the better way to gain broad-based (and in some cases specialized) exposure to Latin America is through exchange-traded funds (ETFs).� Over the past decade, the palette of ETFs offering exposure to the best of Latin America has exploded, and there�s now enough for any international investing artist to paint a nuanced picture in his or her portfolio.

    Although there are quite a few ETFs pegged to the fortunes of Latin America, there are seven that stand out in my mind for their combination of performance, diversity and specialization.� Let�s take a look at each of them now.

    iShares MSCI Brazil Index (NYSE: EWZ).� This ETF allows you to essentially buy the biggest and best stocks on the Brazilian market. �Because Brazil is a country rich in natural resources, many of EWZ�s top holdings are in the commodity sector.� Stocks like oil and mining giant Petroleo Brasileiro (NYSE: PBR) and iron ore mining firm Vale S.A. (NYSE: VALE) are two of its biggest holdings, but you�ll also find banks and beverage companies among the top of EWZ�s list.

    iShares MSCI Chile Investable Market Index (NYSE: ECH).� This fund allows you to participate in the growth of this South American nation, and that growth is likely to continue. In fact, on Wednesday Chile�s central bank revised its growth estimates higher, saying that it now expects gross domestic product growth of 5% to 5.5% this year, solidly above its previous projections for growth of 4% to 5%. Ironically, the renewed economic activity has been fueled in large part by reconstruction efforts prompted by the earthquake that hit the country in late February.� While the Chilean central bank may be guilty of what Bastiat called �the fallacy of the broken window,� there is no doubt that there is measurable growth taking place in Chile.

    Global X/InterBolsa FTSE Colombia 20 ETF (NYSE: GXG). While I suspect many investors equate Columbia with some rather illicit exports, they may want to rethink that stereotype.� Colombia actually has a thriving economy that�s benefitted from legitimate exports such as petroleum, coal, gold, coffee and bananas.� This ETF concentrates its holdings in the 20 biggest and most liquid Columbia-based companies, including Petroleum Company Ecopetrol, BanColombia and Pacific Rubiales Energy.

    iShares MSCI Mexico Investable Market Index (NYSE: EWW).� Many people put Mexico in the same category as Columbia in terms of the nation�s reputation for illegal imports and corruption in government.� While there certainly is that element, investors shouldn�t ignore the huge legitimate investment opportunities in our closest Latin American neighbor.� EWW allows you to participate in some of the biggest companies in Mexico, including telecom giant America Movil S.A.B. de C.V. (NYSE: AMX), Walmart de Mexico, a subsidiary of Walmart (NYSE: WMT), and infrastructure behemoth CEMEX, S.A.B. de C.V. (NYSE: CX).

    Those are the country-specific funds that make up our list of the seven great Latin America ETFs.� Now it�s time to look at the more unusual ways to play this market segment.

    iShares S&P Latin America 40 Index (NYSE: ILF).� This diversified ETF still contains a lot of exposure to Brazil (some 60%), but it also contains some of the best companies in Chile, Mexico and Peru.� This ETF gives you stocks like Petroleo Brasileiro, Vale S.A. and Walmart de Mexico, but it also gives you exposure to leading Chilean financial firm Banco Santander, S.A. (NYSE: STD).� ILF can be viewed as a sort of best-of-breed, big-cap ETF pegged to Latin America.

    SPDR S&P Emerging Latin America (NYSE: GML).� This ETF is actually very similar to ILF in that it holds some of the biggest and best companies in Latin America, chiefly from Brazil, Chile, Mexico and Peru.� There�s also a lot of overlap in this fund when compared to ILF, including stocks like Petroleo Brasileiro and Vale S.A. There are, however plenty of different holdings between the two, as GML has over 100 holdings while ILF has only 34, so it�s okay to own both.

    Direxion Daily Latin America Bull 3X Shares (NYSE: LBJ).� If you�re really bullish, I mean really bullish on Latin America, you can go for the gusto with this leveraged ETF.� LBJ seeks to achieve price performance that�s equal to 300% of the price performance of the S&P Latin America 40 index.� Basically, you�re getting ILF on steroids.

    As you can see in the table below, of these seven Latin America ETFs (ranked here by year-to-date performance), Columbia�s GXG has been the best performer.� Not only is the fund up over 51% so far in 2010, it also has climbed over 35% in the past three months.� If you want to continue riding a winner, then Columbia is the place to be. Data is as of 9/8.

    GXGGlobal X/InterBolsa FTSE Colombia 20 ETF10.0035.4151.52
    ECHiShares MSCI Chile Index8.1929.6329.04
    EWWiShares MSCI Mexico Index-3.923.051.88
    ILFiShares S&P Latin America 40 Index-0.1910.79-1.42
    GMLSPDR S&P Emerging Latin America-0.6412.19-1.45
    EWZiShares MSCI Brazil Index-0.8312.96-5.52
    LBJDirexion Daily Latin America Bull 3X Shares-2.8334.20-18.81

    The table also shows the worst performer this year is the highly leveraged LBJ.� Though over the past three months the fund has surged, its poor start to the year has left it nearly 19% in the red year-to-date (as of Sept. 8).

    The biggest takeaway from this data clearly is the recent surge in all seven of these Latin America ETFs over the past several months.� With domestic equities struggling with an epic battle between bulls and bears, the smart money now knows that the real bullish action is in Latin America�and that�s quite possibly where you should consider a visit with your portfolio.

    As of this writing, Jim Woods did not own a position in any of the stocks named here.

    #1 ETF to Own Now. Louis Navellier’s new profit guide reveals the hottest ETF to buy now, plus details his breakthrough new strategy designed to help you lock in short-term gains from ETFs in sectors just heating up, and then when those sectors are on fire, grab money-doubling profits from the fastest-moving individual stocks. Get your FREE copy here!

    Tech ETFs That Put Microsoft in Your Porfolio

    How you can tell that exchange-traded funds, despite their rise in popularity, have a long way to go to catch mutual funds? Check out the number of ETFs with Microsoft (NASDAQ:MSFT) as a top 10 holding compared to mutual funds. According to Morningstar, 66 ETFs count the tech giant among its top holdings compared to 2,416 mutual funds. Clearly, a lot of portfolio managers feel Microsoft is a necessary component of any portfolio.

    So, if you’re thinking about owning its stock, why not contemplate an ETF instead. You’ll get a stake in Microsoft as well as some other great tech companies. Read on, and I’ll highlight some ETFs that investors might consider.

    Because of the large group of ETFs from which to choose, there are several ways investors can play this. Let’s start with traditional technology funds. If assets under management and size are a concern, then your first fund to consider must be the Technology Select Sector SPDR (NYSE:XLK), which has $8.6 billion in total net assets and average daily volume of 12.2 million, about one-quarter the volume of Microsoft itself.

    Microsoft is XLK’s second-largest holding behind Apple (NASDAQ:AAPL), with a weighting of 8.41%. It’s a fairly concentrated portfolio with 78 holdings, and 65% of its assets are invested in the top 10 holdings. A play on the XLK is a bet on the tech giants. Less than 12% of the fund is invested in mid-caps or smaller.

    Over the past decade through Jan. 20, the fund trailed the S&P 500 by 136 basis points annually, but it has beaten Microsoft by 123 basis points annually over the same period. At an expense ratio of 0.20%, if you like Microsoft, but want some extra tech diversification, this is a good choice.

    An interesting alternative to an ETF based on a market-weighted index is to invest in a tech fund that’s equal-weighted instead. The Rydex S&P 500 Equal Weight Technology Fund (NYSE:RYT) seeks to replicate the performance of the index of the same name. It has 71 holdings, with Microsoft’s weighting a tiny 1.45%. If you must have a bigger percentage of the pie invested in Bill Gates’S baby, then this isn’t for you.

    However, it’s important to keep in mind that RYT’s top holding, JDS Uniphase (NASDAQ:JDSU), has a weighting of just 1.79%. Its top 10 holdings represent just 16.2% of the fund’s $106 million in total net assets. Over the past five years, the RYT has underperformed the XLK by 191 basis points annually.

    Here’s where it gets interesting. While the XLK is invested mostly in large caps, RYT has 53% of its assets in mid-cap stocks. Mid-caps historically outperform both large- and small-caps over longer periods of time. The RYT launched only a little more than five years ago. Give it another decade, and I think you’ll see a different story.

    Moving outside technology to large-cap and all-cap funds, we have several interesting alternatives. For those fixated on cost, I’ll make my first choice from funds with an expense ratio less than 0.25% and holding Microsoft in the top 10. The obvious choice is the PowerShares QQQ (NASDAQ:QQQ), which tracks the 100 largest nonfinancial stocks on the NASDAQ.

    Around since March 1999, QQQ now has total net assets of $29.2 billion, making it the ninth-largest ETF by assets. Microsoft is its second-largest holding with an 8.49% weighting, and technology represents 64.3% of its overall holdings. At an expense ratio of 0.20%, if technology is your thing and not just Microsoft, this is the ETF for you.

    Finally, if you’re interested in an ETF that invests in large-caps such as Microsoft, but also spreads its assets around, making room for small- and micro-cap stocks, the Flexshares Morningstar US Market Factor Tilt Index Fund (NYSE:TILT) is a definite possibility. With an expense ratio of just 0.27%, its move beyond large-caps won’t break the bank. Considered an all-cap fund, micro-caps and small-caps account for slightly less than 43% of its assets, mid-caps another 14.7% and large-caps the remaining 42.3% of the portfolio.

    When you bring everything together, its investment style ends up being a mid-cap blend of growth and value. With QQQ holding almost 2,500 stocks, Microsoft’s weighting is a mere 0.93%, despite being the fourth-largest holding. That because it takes the traditional U.S. broad market-weighted ETF and tilts the holdings toward smaller-cap and value stocks while still providing a fair representation of the total U.S. market. The fund got its start only in September 2011, so there’s not much of a performance record, but it definitely has an interesting premise.

    I could go on for days talking just about ETFs investing in Microsoft. For many investors, technology is a must for their portfolio. Hopefully, the few I’ve mentioned will give you a good head start.

    As of this writing, Will Ashworth did not own a position in any of the stocks named here.

    Top Stocks For 2012-2-1-4

    CSRH, Consorteum Holdings Inc, CSRH.OB

    DrStockPick Stock Report!

    DrStockPick News Report!

    Consorteum Holdings Inc. (OTC BB: CSRH) Providing Government Agencies

    a Streamlined Benefits Payment Solution.


    DrStockPick Stock Report!

    Tuesday September 8, 2009

    Consorteum Holdings Inc. (OTC BB: CSRH) Providing Government Agencies a Streamlined Benefits Payment Solution.

    -Social Security may be more secure than ever-

    Prepaid benefit cards have been developed to allow federal, state, municipal, and provincial governments to deposit Social Assistance and other government Benefit payments directly onto a prepaid card instead of issuing millions of manual checks.

    These cards provide recipients, (many of whom are �unbanked� or �underbanked�) which comprise approximately 30 million of us, with immediate access to their social assistance payments. These unbanked recipients are swelling in numbers as the economy continues to slide.

    Upon enrolment into the program, individuals will receive a personalized, re-loadable prepaid social assistance/benefits card. Each payment period, the recipient�s funds are automatically deposited into their individual card account.

    Cardholders will be able to use their card, to access money, at any participating ATM (Automatic Teller Machine), pay for purchases at retail locations, or pay bills online.

    Benefits cards are often issued under one of the major card association brands (Visa/MasterCard) and are welcome everywhere credit cards are accepted, worldwide.

    Consorteum Holdings Inc. (OTC BB: CSRH) generates residual monthly revenues by charging the end user monthly account fee, transaction fees and other fees based on usage of the card. Because the card is reloaded on an ongoing basis with the benefits payment, Consorteum will be assured long-term repeat revenues.

    Quent Rickerby, President & COO of Consorteum Holdings Inc., stated, �Consorteum generates recurring transactional revenues on every program we implement. By maintaining full control of all products and services launched, Consorteum is enabled to increase its revenue opportunity by an additional 10 to 15 percent.�

    Mr. Rickerby added, �All of our programs establish a direct long-term relationship with our customers by providing them robust, secure and reliable solutions. Consorteum will continue to expand our list of new and innovative products and services to our customer base that will drive increased revenues for the company.�

    For more information on Consorteum Holdings, Inc. visit:


    Consorteum Holdings Inc.

    2900 John Street, Suite 202,
    Markham, Ontario, Canada L3R 5G3

    Telephone: +1 866 824 8854

    Keep a close eye on CSRH, do your homework, and like always BE READY for the ACTION!

    Will Intel Make the Transition to Mobile?

    In the post-PC world, where mobile devices outnumber desktops and notebooks as the personal computing device of choice, Intel (NASDAQ:INTC) has a problem. While its x86 processor architecture dominated the PC era, it has virtually no presence in smartphones or tablets, which are fast becoming the dominant personal computing platform.

    Intel faces an uphill battle to get back in the game. An estimated 90% of smartphones are powered by chips licensed from ARM (NASDAQ:ARMH), the UK-based processor technology company. While Intel continued to market powerful but power hungry CPUs for desktop and laptop computers, ARM has grown into the dominant producer of the compact, energy efficient, system-on-chip technology that’s in demand for mobile devices. According to ARM’s latest report, it shipped 1.2 billion processors for mobile devices in the fourth quarter of 2011 alone.

    Intel has made moves in the past to capitalize on the growing mobile market, but for all the talk about going mobile, the company has little to show for it. A 2010 partnership with LG Electronics for an Intel-powered handset ended without any product being released.

    In May, 2011, CEO Paul Otellini announced that Intel was going to refocus from PC processors to chips for mobile devices, but the company spent most of the year pushing the so-called Ultrabook class of compact laptops, powered by the company’s Ivy Bridge processors. Even longtime strategic partner Microsoft (NASDAQ:MSFT) dealt Intel a significant blow when it announced that the forthcoming Windows 8 operating system would run on mobile devices using ARM chips.

    Reaching for the brass ring

    However, at the International Consumer Electronics Show in January, Intel’s mobile plans appeared to taking shape when the company announced that both Lenovo (PINK:LNVGY) and Motorola (NYSE:MMI) would be releasing Intel-powered smartphones in 2012. Lenovo is coming off its own mobile challenges, having sold off its smartphone division in 2008, then paying twice the selling price to buy it back again in 2009. Motorola saw its smartphone sales drop in 2011, despite high hopes for its new Droid Razr.

    Perhaps not the most inspiring hardware partners; then again, Intel would likely have a hard time convincing a smartphone manufacturer enjoying booming sales, such as Samsung (PINK:SSNLF), to take a chance on an unproven chip.

    The new Lenovo and Motorola smartphones will use Intel’s Medfield system-on-chip, which is smaller than a fingertip and designed to maximize battery life while delivering capable performance. Whether Intel will be able to compete with ARM �and other mobile processor manufacturers such as Qualcomm (NASDAQ:QCOM) and Nvidia (NASDAQ:NVDA)� is likely going to be decided in the next year or two.

    Competition in all quarters

    Apple (NASDAQ:AAPL) is highly unlikely to switch chip suppliers since it now designs its own chips (under a licensing deal with ARM). Other manufacturers will likely take a wait-and-see attitude to gauge whether the Intel offerings are able to compete in terms of battery life, performance, and price. Then there’s the matter of all the mobile applications that have been compiled specifically for ARM chips�they would need to be recompiled (or run more slowly in emulation) if used on a device powered with one of Intel’s chips.

    As if things weren’t challenging enough for Intel, it faces a real threat in its core market. ARM processors are moving beyond smartphones and tablets and into notebook computers where their low power capabilities mean extended battery life. As noted in a recent Businessweek article, researchers from IHS Inc. estimated ARM processors will be in almost 25% of all notebooks by 2015, while ARM itself indicated it was shooting for 40%.

    With the PC market slowing and ARM planning to move into what’s left of it, Intel has no choice but to make the transition to mobile. Competitive, powerful, energy efficient system-on-chip solutions are what Intel needs to gain a foothold in the mobile market as well as to hold on to its own turf.