Deere & Company (DE) Q3 Earnings Preview: Nothing Runs Backwards Like A Deere

Deere & Company (DE) plans to announce third quarter results on Wednesday, November 20, 2013, at approximately 9:00 a.m. CT.

Wall Street anticipates that the heavy equipment maker will make a profit of $1.89 per share for the quarter. iStock expects the Deere to beat Wall Street's consensus number. The iEstimate is $1.95.

Deere & Company manufactures and distributes agriculture and turf equipment, and construction and forestry equipment worldwide.

The industrial goods company has a solid record of topping Wall Street's consensus estimate. The "Nothing runs like a Deere" company has bypassed expectation for 16 of the last 20 quarterly checkups. On average, DE beats the street by 49%. Take out two lopsided bullish surprises of 360% and 200% and the average falls to a still impressive 16.29%. Meanwhile, the four bearish misses averaged -16.10%.

[Related -Deere & Company (DE): Short-Term Risks, Long-Term Opportunities]

You'd think a company with that stellar track record would have corresponding price-performance in the days surrounding quarterly EPS announcements, but no. The stock slid 14 of the last 20 quarters by an average of -$2.83 with a range of -$0.11 to -$5.94. That works out to a typical fall of -4.07% with a max loss of -9.29%.

On happier EPS-driven days, DE 's price increased by an average of $2.07 (3.89%); ranging from $0.45 to $3.48 (0.54% to 8.04%).

Analysts downgraded their outlook during the quarter as the consensus EPS estimate dipped from $1.92 to start the quarter to today's $1.89. However, it's not earnings that could worry investors into another red reaction on Wednesday morning.

[Related -Forget Deere & Company (DE): Buy AGCO Corporation (AGCO) With 30% Upside In 12 Months]

According to producer.com, "Farm equipment manufacturers and sellers are planning to put fewer machines in farmers' hands in 2014." The site adds, "Combine sales in September fell almost 36 percent compared to the previous year, and fou! r-wheel drive tractors are off 53 percent year over year in that month."

WSJ.com chimes in with a similar view, "Sales of farm equipment wilted during October, foreshadowing a long-anticipated decline in North American farm machinery demand next year.

Retail sales of farm tractors in the U.S. and Canada slipped 1.5% last month from a year ago, according to unit sales figures released by the Milwaukee-based Association of Equipment Manufacturers." Uh-oh.

Fortunately, management did a good job of increasing margins in Q2, according to the latest 10-Q as operating margin increased 3.22%. However, those gains could be wiped out if sales continue to slide as WSJ.com and producer.com suggest. The second quarter balance sheet shows account receivables rising by 11.10% versus a 4.37% increase in sales. We also see inventory rising at nearly twice the pace of sales at 8.21%.

Overall: Deere & Company (DE) is likely to post better than expected EPS as the iEstimate suggests; however, forward guidance could damper spirits and rough the stock price up, again.

Toyota SUV for smelly triathletes has a shower

You'd think the biggest challenge for triathletes is to keep from drowning during the swim, crashing during the ride or hitting the wall during the run. Nope, says Toyota. It's contending with the filth afterwards.

Triathletes are a dripping, sweaty, smelly mess after a vigorous competition or practice, so Toyota has come up with a novel prototype of a vehicle suited to them. It comes with a built-in, sit-down shower and a mini washing machine and dryer.

The LifeTime Fitness RAV4 is one of the vehicles going on display Monday at the big SEMA aftermarket car products trade show in Las Vegas. It was created to show how outrageous a vehicle could be made to accommodate triathletes.

Created by the Motorsports Technical Center in Torrance, Calif., some of the ideas are good. Some are just plain wacky.

For instance, the RAV4 has indentations in the roof in which to trap the wheels of a triathletes racing bike during transport. Great idea. But the shower with five-gallon water tank, washer and dryer, a mini fridge for smoothies and an industrial-strength blender? That's all a little strange. And that's just fine.

"This fun RAV4 brings together a triathlete's passion for a healthy, active lifestyle and the drive for pushing ourselves to race faster and smarter," says Sarah Haskins, one of three triathletes consulted for the project. "The cutting-edge tools incorporated in the vehicle will help us continue to build our racing skills, while enabling us to relax a little too."

For the ride home after an event, there are massage units built into the seats. Plus, there's a fancy sound system for soothing post-ride music.

Formula: How Much To Put in A Retirement Account

Do you have enough money in your 401(k)? I have a formula that answers that question. You may not like the answer.

The formula was created a year ago by some financial industry experts; there's more on their methodology in this article.

Here's the bottom line, in tabular form:

Source: Fidelity Investments

If you're making $100,000 and you're 35, you should have $100,000 saved up in your thrift plan, IRA or other retirement pot. Ten years later, you should have $300,000.

This is the savings trajectory you are supposed to be on. Stick with it and you'll have a comfortable retirement, defined here to mean a steady income equal to 85% of your pretax pay when you were working. The income in question includes Social Security payments.

Do most people have anything like these amounts? No, which is one of the three reasons why John Bogle, the founder of Vanguard, is talking about a coming "train wreck" for retirees (the other two problems: the underfunding of traditional pension plans and the insolvency of Social Security).

But you can stick to the guideline, if you save a very large fraction of your income. Between age 35 and 45 the $100,000 employee is supposed to see a $200,000 growth in savings. That's $20,000 a year.

Earnings on the account, of course, will help. But remember that the goal post is probably moving farther away. Some career advancement or just inflation might mean that the age 35 $100,000 worker is making $140,000 ten years later, which means that $100,000 account has to grow into $420,000.

The only way to keep up is to have something well above 10% of salary pouring into your retirement account, between your own contributions and your employer's. That's not easy, especially for someone paying off college debts, starting a family and buying a house. You just have to do it if you don't want to be eating cat food at age 75.

The most that someone under the age of 50 can put into a 401(k) is $17,500 a year. This means that high-pay workers have to do some of their saving outside the tax-sheltered retirement plan.

The assumptions behind the salary multiples are optimistic. Among them: Stock and bond markets deliver returns well ahead of inflation, you have an uninterrupted 42-year career and Congress does not punish you for saving by clipping your Medicare and Social Security coverage.

Don't be overconfident that the government won't come after your savings. There is already in place a penalty on prosperous retirees in the form of a Medicare premium that scales up with income. Talk is in the air of rescuing Social Security by making the payouts "means-tested."

Now let's consider what would happen with two pessimistic but not implausible assumptions: (1) Your retirement lasts as long as your career, and (2) your investments just keep up with inflation.

Pessimistic assumption (1) comes into play if you start your career at age 30, stop at 60 and live to 90. Your career might start late if you're in med school or trying to become a novelist. It might end early in a layoff or disability.

Assumption (2) is relevant if you cower in low-risk investments or have bad luck with high-risk ones. Earlier this year the yield on 20-year inflation-protected Treasury bonds dipped below zero. In other words, you salt away your savings and are guaranteed to have less purchasing power after two decades than you started with. The 20-year TIPS yield has since crept up to 1%, but money market funds still have a negative real return.

Whither Japan Stocks: How Much Upside Is Left?

In the two business days following the September 7 announcement that Tokyo would host the 2020 Summer Olympics shares of Taisei Construction

A cartoon of the insides of a LNG carrier (Photo credit: Wikipedia)

(OTC:TISCY) on the Tokyo Stock Exchange (TSE) jumped 29%, while other large construction companies' shares also saw strong gains.

During the same period, shares of Taiheiyo Cement jumped 14%, Nippon Steel Sumitomo Metal (XOTC:NSSMY) rose 7%, while Mitsui Fudosan (OTC:MTSFY) rose 9%.

Advertising giant Dentsu's (OTC:DNTUY) shares rose 11%, while stocks in many other sectors expected to share in Olympics-related infrastructure building—including railroads and department stores—also advanced.

Was this stock buying just temporary Olympics euphoria? Will expectations of sharply higher earnings and profits from these companies and others be realized, or have buyers set themselves up for disappointment?

More long term, with the Nikkei 225 average at 14,742 yen, up 68% since last November (down only 6% from a May 22 high),  and with JPY/USD at 98.90, also some 30% lower than a year ago, how much appreciation may be left in Japanese stocks in general?

My sense is that for the Japanese market, measured by the Nikkei 225 and, particularly the broad market TOPIX, there is ample reason to be bullish. It is probably not too late to invest in companies, like Dentsu, that will benefit in what will surely be broadly impactful and profitable Olympics related spending.

Beside the Olympics, there is reason to be cautiously optimistic that the "third arrow" of Abenomics—reforms and new policies aimed at improving competitiveness and economic growth—will yield substantive and profit enhancing changes.

Finally, we continue to see in Japan's business sector bold restructurings and initiatives promising to improve competitiveness and profitability, and—critically—continuing world-leading technological innovations and applications.

An article in the September 20 Nihon Keizai Shimbun on the companies that cashed in on the 2012 London Olympics focused on the British advertising and communications agency, Chime PLC (OTC:CICPY). Just before the Olympics, Chime acquired the sports marketing and sponsorship boutique, iLUKA, that subsequently produced blow-out revenues from assisting sponsors to distribute tickets and coordinate advertising campaigns.

In the run-up to and during the 2020 Olympics Dentsu will be striving to emulate or surpass the stellar performance of Chime, even as we would expect Chime/iLUKA hope to repeat their London Olympics success in Tokyo. Dentsu's stock closed today in Tokyo at 3,815 yen, close to a YTD high of 3,920 set on May 14 and against a YTD low of 2,287 on January 9. The stock's ten year high was 4,360 yen set on April 3, 2006. At the current price, the stock offers a forward (forecast) dividend yield of 0.84% and forward EPS yield of 1.74%. The price-to-book (PBR) multiple is 1.88 times. The forward P/E is an eye-popping 57.6 times.

Taisei Construction closed in Tokyo at 488 yen, against a YTD high of 535 set on September 10 and YTD low of 247 set on April 2. The ten year high of 632 was set on January 31, 2006. PBR is 1.63 times and forward PER 31 times. Projected dividend yield is 1.02% and EPS yield 3.23%. Market value is some JPY 557 billion (USD 5.7 billion).

So far Abenomics' "third arrow" has been devoid of fundamental reforms and initiatives sufficient to move markets except by disappointing them.  This situation may be changing.  In a bit of grandstanding, Abe last week publicly sent back to its authors a corporate tax cutting proposal with a comment that it was "insufficient."  As Abe will surely decide to implement the first installment of a consumption tax increase (raising the rate from 5% to 8%) next year, he is under pressure and also wishes to provide some compensatory stimulus.  A substantial corporate income tax rate cut with a tacit quid pro quo from the business community to raise wages seems now possible.

Major, bold restructurings and initiatives are being seen throughout Japanese corporate sector, in companies big and small.  One particularly noteworthy announcement has been from Kawasaki Heavy Industries (OTC:KWHIY). The September 8 Nihon Keizai Shimbun reported that Kawashi Heavy (KHI) will be moving its large LNG tanker building to China.

The worldwide trend to natural gas, and Japan's own post-Fukushima increased reliance on gas-fueled electric power generation, ensure growing demand for large LNG tankers. Industry estimates are for 300 new vessels by 2030 with a contract value of JPY 6 trillion (USD 61 billion). The bid price of an average LNG tanker is some USD 200 million, double a regular tanker. Profit for the builder is high.

Starbucks Asks Customers to Leave Guns at Home

Brent Lewin/Bloomberg via Getty Images Coffee chain Starbucks has asked U.S. customers to leave their guns at home after being dragged into an increasingly fractious debate over U.S. gun rights in the wake of multiple mass shootings. While many U.S. restaurant chains and retailers don't allow firearms on their properties, Starbucks' policy had been to default to local gun laws, including "open carry" regulations in many U.S. states that allow people to bring guns into stores. In August, this led gun-rights advocates to hold a national "Starbucks Appreciation Day" to thank the firm for its stance, pulling the company deeper into the fierce political fight. Locations for Starbucks Appreciation Day events included Newtown, Conn., where 20 children and six adults were shot dead in an elementary school in December. Starbucks (SBUX) closed that shop before the event was scheduled to begin. Chief executive Howard Schultz said in an open letter to customers late Tuesday that Starbucks Appreciation Day events "disingenuously portray Starbucks as a champion of 'open carry.' To be clear: we do not want these events in our stores." The coffee chain didn't, however, issue an outright ban on guns in its nearly 7,000 company-owned cafes, saying this would potentially require staff to confront armed customers. The Seattle-based company hoped to give "responsible gun owners a chance to respect its request," Schultz said. The CEO told Reuters the policy change wasn't the result of the Newtown Starbucks Appreciation Day event, which prompted the Newtown Action Alliance to call on the company to ban guns at all of its U.S. stores. Nor was it in response to the mass shootings this week at the Washington Navy Yard. "We've seen the 'open carry' debate become increasingly uncivil and, in some cases, even threatening," Schultz wrote, noting that "some anti-gun activists have also played a role in ratcheting up the rhetoric and friction," at times soliciting and confronting employees and patrons. "We found ourselves in a position where advocates on both sides of the issue were using Starbucks as a staging ground for their own political position," said Schultz, who in the past has willingly waded into the public debate over the U.S. national debt and gay marriage. Schultz said more people had been bringing guns into Starbucks shops over the last six months, prompting confusion and dismay among some customers and employees. "I'm not worried we're going to lose customers over this," he told Reuters. "I feel like I've made the best decision in the interest of our company."

How to read mkt technicals? Ace trader Atul Suri explains

Below is the edited transcript of his interview to CNBC-TV18.

Q: How will you describe the art of technical analysis?

A: Technical analysis is the art of studying prices and volume. It is as simple as that. You look at price. Most things in the market are subjective but price is a reality. There is no ambiguity or interpretation.

When you study prices and predict or look at future trends it can be termed as technical analysis. Human beings commit the same errors time and again. Through prices, most people are going to behave in a certain way. Based on it, we try to predict future prices.

Any big market top you will notice that is when the euphoria is at the highest, the optimism is the highest, the leverage is the highest. It really makes the market tops. This is something whether it was true in 1900-1920, 1950 2000, and 2013.

When we study repetitive human behaviour through prices, we identify trends and by riding these trends is what we try to achieve in technical analysis.

In all its simplicity, it is a study of price and volume.

Q: Where does volume fit in the equation and how important is it in technical analysis?

A: Volume is very important. There are lots of volume indicators too. Stocks are moving. There are thousands of stocks that are listed. A trader would always look for a big trend because that is how they are tradable and money is made.

They are always accompanied with very good volumes like we use the term breakout. Breakout is essentially when price moves out of a certain range. Breakouts can happen by decimals and then fall back and fail which could be loss making. But when these happen, the trends become fruitful.

When prices are accompanied with large volumes, then those price movements are what give you confidence. However price movements happen which really do not have large volume moves.

You know that this is likely to fail. So volume cements the whole price moves. So it is a confirmation signal and it is very important in that sense.

Q: Which makes this whole concept of trend very important? People do not often understand that. How would you describe the stock or a market that is in an uptrend versus the downtrend? What marks out that clear directional move for it?

A: For this, I will have to go back to the father of modern technical analysis, Charles Dow. He came up with the Dow Theory and this is the first successful attempt which is even valid today of defining a trend. When a stock is moving up, every stock or market corrects.

However, the next move surpasses the previous high and again it corrects. The next move again surpasses the previous high. So, essentially you say a market or a stock is in an uptrend.

If the market makes new highs it's like climbing steps; if you are blindfolded and every step you take is a higher step. So you know that you are climbing upstairs that means a trend is up. You are blindfolded but your next step is lower so that is the inverse.

The moment the market starts making newer lows, you know that you are in a downtrend.

When you look at the bigger moves in the market they are all one of the underlying principles is higher tops and higher bottoms and in an uptrend lower tops and lower bottoms in a downtrend.

Refiners: Time to Get Defensive With Valero, Holly Frontier?

The last two months have been good to refining stocks like Valero Energy (VLO), Holly Frontier (HFC) and Phillips 66 (PSX)–maybe too good.

Bloomberg News

Raymond James’ Cory Garcia and Pavel Molchanov explain:

Over the past two months, the bullish sentiment on U.S. refining has become increasingly consensus – in fact, some may even look at it as a "crowded trade". While we wouldn't quite go that far, particularly given our above-consensus outlook on earnings power in 2015, the simple reality is that the Street has caught up to our near-term expectations for refiners. Looking at the WTI-Brent spread, the futures strip is actually signaling a widening from ~$11/Bbl today towards $16/Bbl by 2016. Furthermore, investors are already positioned for the potential blowout in Gulf Coast spreads this spring. Aside from general seasonality, it's tough to paint a bullish picture for gasoline/diesel cracks amid the continued upward creep in global refining capacity. And after the recent run-up in the stocks, valuations are sitting near the top end of the historical range. Lastly, while we believe large-scale U.S. crude exports are still a long ways off, the debate in Washington has been gaining some momentum – an overhang for the stocks. So we don't see much in the way of near-term catalysts to drive the next leg up in refining stocks during the historically weaker summer months.

As a result, Garcia and Molchanov changed their rating on a number of refining stocks. Valero Energy gets cut to Outperfrom from Strong Buy, while Holly Frontier, Delek US (DK) and PBF Energy (PBF) get downgraded to Market Perform from Outperform. Only “defensive, insulated” Phillips 66 gets an upgraded, to Outperform from Market Perform.

Shares of Valero, which forecasted earnings above the analyst consensus after yesterday’s close, have dipped 0.1% to $50.91, while Holly Frontier has dropped 1.1% to $47.63, PBF Energy has fallen 1% to $27.31, Delek US has declined 4.9% to $30.92and Phillips 66 is off 0.3% at $76.91.

 

More Americans Apply for Home Mortgages

Getty Images NEW YORK -- Applications for U.S. home mortgages rose in the latest week, an industry group said Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 4.7 percent to 404.1 in the week ended Jan. 17. The index hit its lowest level since December 2000 at the end of last year, soon after the U.S. Federal Reserve announced it would start pulling back on its $85 billion per month bond-buying program as the economy grows strong enough to stand on its own. The interest rate on fixed 30-year mortgages averaged 4.57 percent last week, the lowest level since November 2013 and down 9 basis points from the previous week. The MBA's seasonally adjusted index of refinancing applications rose 9.9 percent. The gauge of loan requests for home purchases, a leading indicator of home sales, slipped 3.6 percent. The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

Travelers Companies Inc Q4 Earnings Rise; Beats Estimates (TRV)

Insurance company Travelers Companies Inc (TRV) reported higher fourth quarter and full year results on Tuesday, which came in well above analysts’ estimates.

TRV’s Earnings in Brief

TRV reported Q4 earnings of $988 million, or $2.70 per share, up from just $304 million, or 78 cents per share, a year ago. Excluding special items, earnings were $981 million, or $2.68 per share,  up from $278 million, or 72 cents per share, last year. Analysts expected to see earnings of $2.10 per share. Total revenue for the quarter was  $6.74 billion, up from $6.48 billion last year. Analysts expected to see revenue of $5.45 billion. For FY2013, the company reported earnings of $3.67 billion, or $9.74 per share, up from 2.47 billion, or $6.30 per share, in 2012. Revenue for the year was $26.19 billion from $22.19 billion in 2012. On average, analysts expected to see earnings of $8.91 per share and revenue of $22.56 billion.

CEO Commentary

Chairman and CEO Jay Fishman commented on the company’s Q4 results: ”Fourth quarter operating income of almost a billion dollars provided a very strong finish to an excellent 2013. We are encouraged by the strength of our 2013 results, and we remain committed to taking the steps necessary to continue to improve returns consistent with our long-held goal of producing mid-teens operating return on equity over time.”

TRV’s Dividend

TRV’s board announced that it will pay its next quarterly dividend of 50 cents on March 31 to shareholders of record on March 10.  This dividend remains unchanged from the company’s previous quarterly dividend. TRV will likely announce a dividend increase in April. 

 Stock Performance 

Travelers Companies shares were mostly flat during pre-market trading Tuesday.

Tesla, Tucker and Stock Market Lottery Tickets

In 1988, Francis Ford Coppola released Tucker: The Man and His Dream, a film about a visionary car maker whose attempt to transform the auto industry was brought down by the Big Three. The real story was far more complex–involving allegations of fraud, an SEC investigation and even whether Tucker ever intended to really build cars–but the image of Jeff Bridges standing in front of the Tucker 48 has stuck in my head.

Getty Images

Fast forward and you have another visionary automaker and his Tesla (TSLA). Musk is no Tucker. There’s little doubt that he’s created a marvelous machine, even if the news about its safety rating has been, shall we say, overhyped (the L.A. Times reported that the government doesn’t test most luxury cars). The argument over its quality as an investment rages on.

Into the debate steps Citron Research, an online stock research website. And in a report today, it moves away from the numbers to offer what it calls some “simple common sense.” Citron asks:

Are you smarter than Carl Icahn? While the NASDAQ has been parabolic over the past 18 months, Apple (AAPL) has not been able to get out of its own way.  Why is that?  Apple has been committing the ultimate sin:  it makes money with forecastable cash flow.  Who would want to buy a company with a halo brand and a credible international footprint, when I can buy a story about the future, whose only attachment to reality might be an analyst report that has backfilled numbers to justify a stock price?

Hopefully Mr. Icahn's investment in Apple will serve as a beacon of a new market that stock should be bought on cash flow, value, and a reasonable optimism about the future.  While every speculative investor has had the opportunity over the past three months to buy Apple, it has now become completely overshadowed by the "story du jour" … Tesla.

Citron also notes that Tesla has sold 15,000 cars since it was founded, while General Motors (GM), in which Warren Buffett just increased his stake, sells 15,000 cars every two days. “Is it going to be easier for Telsa to close this gap or General Motors to adapt to a changing environment?” Citron asks.  “Mr. Buffett has placed his bet.”

The report goes on in this vein for a while, and what Citron really seems to be saying is that people love lottery tickets–hi risk stocks that promise to make you rich beyond your wildest dreams, and appear even more valuable after they’ve had big moves. Here’s how Societe Generale’s Andrew Lapthorne, Georgios Oikonomou and Dylan Grice–who has since departed the French investment bank–explained the lottery-ticket syndrome in a report from May 2012:

…people like excitement. They pay good money for it. And in their excitement they pay too much….we think it's down to what psychologists call the ‚possibility effect‛ in which people value potential changes differently. For example, suppose a family member is ill.  How much would you pay for medication which improved their chances of survival by 1%? If the prior chances of survival are 50%, that additional 1% chance is valuable. But if the prior chances of survival are 0%, that 1% increase is much more valuable. It changes the range of possibilities completely. So although both 1% improvements are identical at the margin, people tend to the give more importance to the latter because it increases the possible outcomes. It's one reason why people play the lottery so enthusiastically, regularly paying dollars for pieces of paper worth only cents. With a winning lottery ticket comes the hitherto impossible possibility of a new life.

Tesla is great story, and I’m pulling for the company. But there’s also little doubt that as a stock, it’s a lottery ticket. Tesla could be a raging success. Or it could the Tucker 48, a footnote in automotive history.

Government to Run Budget Deficits Until 2038; How Can Money Printing Stop?

 

By Moe Zulfiqar

The stock market is certainly getting all the attention these days, but not a lot is said about other disturbing fundamentals. These fundamentals are troublesome, and if they aren’t fixed, the U.S. economy could end up in a downward spiral in a very short period of time. With these conditions, those who are saving and investing for the long term can face a significant amount of scrutiny.

I’m talking about the U.S. national debt and the U.S. government posting another budget deficit.

When someone goes to get a loan, the bank usually asks how much in assets the person has or what their credit score is; this way, the bank can judge their ability to pay back the loan. If a person has a significant amount of debt already and a bad credit score, then banks will be hesitant to give them anything. There’s no rocket science behind this; the chances of a person with bad credit and a lot of debt defaulting on their liabilities are very high.

When I look at the U.S. economy, I see something very similar and wonder if those who are buying U.S. bonds, thereby giving loans to the U.S. economy, will one day say, “No, we will not give you any money.”

You see, since the financial crisis, the U.S. government has been registering a massive budget deficit. For example, in fiscal 2012, the U.S. government posted a budget deficit of over $1.0 trillion. In fiscal 2013, the U.S. government registered a budget deficit of $680 billion—slightly lower than the preceding years, but a deficit nonetheless. (Source: “Final Monthly Treasury Statement of Receipts and Outlays of the United States Government,”

U.S. Department of the Treasury web site, October 30, 2013.)

Here’s where it all becomes troublesome; according to the Congressional Budget Office (CBO), the budget deficit of the U.S. economy will continue on until at least 2038. The CBO expects the budget deficit to narrow a little in the next few years, but then increase from there once again. (Source: “The 2013 Long-Term Budget Outlook,” Congressional Budget Office web site, September 17, 2013.)

Once a government incurs a budget deficit; it has to borrow money to pay for the extra spending, which increases the national debt. As a result of the budget deficit already incurred, the U.S. national debt has gone from $9.0 trillion in 2008 to $17.0 trillion now.

If the U.S. government continues to post a budget deficit, it will mean higher national debt, which can be very dangerous.

This is because the higher the national debt, the higher the interest payment the government will have to make. Now, if we assume that the Federal Reserve will be moving towards normalizing the monetary policy by raising interest rates, the cost of borrowing will become even higher. Therefore, the interest payments will get much bigger—these payments may just become the cause of an even bigger budget deficit.

One thing is very clear: if the government continues to post a budget deficit at this pace and doesn’t take any measure to move towards a surplus—receiving more than spending—then a lot can be jeopardized; this phenomenon could even lead to the U.S. government defaulting on its debt. As a consequence, the bond market and those investors who rely on fixed income and hold U.S. bonds might just see the “income” part disappear. Investors in these areas may want to be cautious of where they’re stashing their long-term investments.

This article Government to Run Budget Deficits Until 2038; How Can Money Printing Stop? was originally published at Daily Gains Letter

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

Posted-In: Bonds Politics Economics Federal Reserve Markets General

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Milevsky Warns: Beware of Annuity Ignorance

Advisors, be very wary of what you read about annuities, for it may be devoid of any meaning.

That warning comes from Moshe Milevsky, just back from a visit to England, where he poured through dusty documents in the British National Archives, examining the actuarial assumptions of the life annuities issued by the Chancellor of the Exchequer in the 17th and 18th centuries.

While he saw evidence of mispricing that accrued to the disadvantage of the Royal Treasury, when AdvisorOne caught up with him  the subject of discussion was today’s sensationalized characterization of annuities as products of unremitting evil or of unsurpassed virtue.

Back in London’s Globe Theatre, such assessments are typically uttered by “a poor player that struts and frets his hour upon the stage and then is heard no more.”

Too often, according to Macbeth or Milevsky, “it is a tale told by an idiot, full of sound and fury signifying nothing.”

For a little wisdom—make that a lot of wisdom—on understanding retirement income, the York University finance professor and Research magazine contributor cautioned that advisors (and financial journalists even more) should pay particular attention to the first mention of annuities in an article or discussion.

“That opening sentence has got to be clarified before you can have an intelligent conversation about it,” said Milevsky (left), speaking by phone from his office in Toronto.

“Are you talking about a pension that you put money into to get an income out of…or an equity-indexed annuity that functions like a savings account?” he asks, noting there are six or seven types of products that regulators, lawyers and journalists all refer to as annuities but which to economists are all different.

“Imagine if someone came to you asked you, “Do you think ‘funds’ are a good idea?”—the first of many hilarious analogies that emanate from the professor like water flows down Niagra Falls.

What kind of funds—stock funds, bond funds—and what kind of stock fund and whose stock fund, an advisor would respond. “That’s what’s happening,” Milevsky laments.

“It’s like saying all mortgages are bad,” noting the plethora of high-rate, low-rate, floating-rate, teaser-rate products available. “You can’t just condemn an entire industry.”

He notes that the popular financial columnist Jane Bryant Quinn was outspoken in her hostility to “annuities” for years and years until she discovered an annuity product she praised as being good.

“Words matter. Let’s call some pensions and some variable annuities,” Milevsky intones, noting the significant difference between a $200 billion-a-year variable annuity market and a trifling $10 billion in annual sales for income annuities.

To clarify some of the essential distinctions among the different sort of annuities, Milevsky has just published a monograph for the CFA Institute that answers in straightforward question-and-answer format some critical retirement income questions.

That is because even CFAs, despite all their technical financial expertise, don’t understand insurance and the Institute is trying to offer more of a wealth management perspective to CFA designees, Milevsky says.

In one enlightening part of the CFA monograph, Milevsky sorts through the vast scholarly literature that attempts to explain why people should not annuitize: because of high interest rates; high embedded loads and costs; Social Security; even marriage.

He says he’s even seen the argument that if you buy an annuity you will discourage your kids from taking care of you.

“The audience for these arguments are PhDs,” Milevsky cautions, warning that popular press accounts often wildly misinterpret their meaning. Offering another analogy, he says that the medical literature is filled with the notion that exercise is healthy. “Then somebody comes along and says if you have arthritis exercising is very bad for you.”

And then comes a sensation-seeking expert or ignorant journalist to announce: “Exercise is bad for you, you might have arthritis.”

Urging greater sophistication, Milevsky says that yes, there is a huge segment of the population that doesn’t need annuities and we need to understand who is and who is not in that group.

Which brings us to another critical bit of wisdom that Milevsky emphasizes for financial advisors: namely that the diversity of strategies at retirement is magnitudes greater than during the accumulation phase.

“You need to listen very carefully to what your retiring clients’ unique needs are because no portfolio will address the variety of” client goals and balance sheet considerations, he says noting that some portfolios must be tailored to risk aversion, others to liquidity concerns and still others to health conditions.

Milevsky offers his in-laws as an illustration of how basic values shape a client’s portfolio.

“They’re spending much less than they can afford to,” he says, but  would view an annuity that would increase opportunities for current consumption as a “waste of money,” since they are determined to pass their wealth on to their children and grandchildren.

“For my in-laws, dying broke is the ultimate failure,” Milevsky says. “To many baby boomers that’s the objective. So how can you have a portfolio appropriate for [both groups]—one is trying to solve intergenerational problems, the other wants to be sure they spend their last dollar the day they die.”

That is why advisors must work to really understand their clients. “You’ve got to listen,” he says, adding some blunt cautions about an advisor’s age.

“A 35-year-old financial advisor will have a very difficult time having a conversation about life goals,” Milevsky says. “At some point it’s hysterical,” he adds, picturing a young planner with a questionnaire asking a retiring client if he’s had his first heart attack already.

“I’m willing to have a 27-year-old surgeon fix my liver, but in financial planning the intergenerational discussion is not going to work,” he says, since an older person will sense the lack of relevant life experience and void of wisdom.

“You have to have made some money and lost it before you can do a really good job. The multitude of issues that come up in retirement you can’t teach in a course,” the business professor says, expressing open skepticism of his colleagues who teach management courses without having hired people, fired them and sweat over meeting payroll.

“I’m not going to go to a doctor who smokes, a beautician who’s ugly and a financial planner without wealth,” he says.

Besides the variety of client situations, Milevsky points out that there are differences in planners.

Offering another characteristic analogy, he says a health seeker taking a walk through the supermarket aisles with a nutritionist is going to get a basket of fruits, vegetables and other healthy items.

But if he took a tour of the market with a second nutritionist—sure, both would leave out the bacon, but there are going to be differences at the checkout.

“At some point the science ends and the art begins. There is no point at which you’re going to get agreement among experts,” Milevsky says, noting that while all advisors might put some stocks and bonds in your portfolios, there will be differences in proportion and in whether to include annuities, long-term care insurance and the like.

A good advisor will tailor the portfolio to his client’s unique needs, but will also make sure that portfolio items are exercised properly. The academic, whose sideline QWeMA Group consulting firm helps institutional clients like Pacific Life, John Hancock and Principal Financial Group help their advisors and clients optimize the quantitative aspects of portfolio decisions, stresses that “if you bought annuity, make sure you use it properly.”

---

Check out these related stories on AdvisorOne:

Are tax-free bonds losing sheen? Bajaj Cap analyses

Rajiv Bajaj, Vice Chairman & MD of Bajaj Capital believes that investors are now looking at safe capital protective returns. Therefore, fixed income products and tax-free bonds saw a phenomenal response last year. However, the first tranche of such investments closing on March 15 got a lukewarm response in the current year.

Also read: See 25bps rate cut; bond yields may trough at 7%: Deutsche

He advises investors to opt for issues from institutions that are offering good returns at the moment. People are nowadays more inclined towards locking in money for a period of three to five years. But, it is best to invest in long term bonds, only when the investor can give 10 to 15 years, he opined.

"If you have 10 to 15 year's money to spare, that is when you should come into these bonds and this could be one of the major reasons why people are not coming into these bonds in a hoard. The current mindset of fixed income minded investors is they want to wait and watch, they want to lock-in money for ideally three years, maximum for five years and that is why you see mutual funds and the capital protection side ballooning, growing very fast," explained Bajaj.

Here is the edited transcript of the interview on CNBC-TV18.

Q: We did not see much too much investor enthusiasm even at 7.8 to 7.7 percent tax exempted returns. How do you think investors should behave, what explains that lack of enthusiasm?

A: As we know that we are in a fixed income era and investors are looking at safe capital protective return. If one sees the response one is getting to all fixed income product and tax-free bonds, there was a phenomenal response last year. This year in the first tranche the response was lukewarm and in this current tranche where many issues are closing on March 15, the response is even cooler.

I believe fixed income minded investors have a certain benchmark return in their mind and they get put off if the return falls below that. So, most of these tax-free bonds are offering tax-free returns in the range of 6.8 to 7.5 percent depending upon what rating, what bond you buy. In that case the pre tax comes to just above 10 percent with Housing and Urban Development Corporation Limited (HUDCO) being the best for a 15 year tenure, offering close to 11 percent pre tax yield.

My theory is that whenever a pre tax return of a tax-free bond comes below ten percent, the investor begins to lose enthusiasm. So, even in the first tranche last month in January, money was still flowing in because the return was above 10 percent. Investors now have options. They can even get 9 to 9.5 percent from bank deposits today. I am referring to retail investors, people putting in up to Rs 10 lakh. If you are an institutional investor, with a high networth, your return is even 0.5 percent lower than what I mentioned.

Q: There are nine issues in the market currently; some of them are from first timers like Jawaharlal Nehru Port Trust (JNPT) or National Housing Bank (NHB). Do you have preference that you would recommend to retail investors? How do you choose?

A: These are all high pedigree institutions. If one were to look at finer details, HUDCO at AA+ is as solid an institution as any other and if they offer up to 7.69 percent for a 15 year tenure, that comes to 11 percent pre tax. So, that stands out.

NHB on the other hand is offering lower interest because the prices of these bonds are set on the basis of two weeks preceding government securities (Gsec) yield. Maybe they got stuck at a wrong time and hence, they are offering 20 bps lower than other institutions.

Therefore, investors should go for institutions which are offering good returns. Otherwise, Ennore Port is offering higher yield on ten year option and all the other institutions, whether it is Rural Electrification Corporation (REC), Indian Railway Finance Corporation (IRFC), Power Finance Corporation (PFC), India Infrastructure Finance Company (IIFCL) are offering similar returns.

Q: If someone enters into these and wishes to exit perhaps in two-three years before the maturity of 10-15 years gets over, they will be listed on the exchange but when you wish to exit at the exchange, does someone lose out on the yield due to illiquidity and if yes, how much would be the yield that you lose out?

A: Not that there is much activity on the secondary market on these bonds but, I did check that last year people who bought the bond got about 4 percent appreciation of capital. This is a kind of a bonus for them but, the volume traded would not be much.

Hence, it is a theoretical comfort which investors have. My view would be clear, if you have 10 to 15 year's money to spare, that is when you should come into these bonds and this could be one of the major reasons why people are not coming into these bonds in a hoard.

The current mindset of fixed income minded investors is they want to wait and watch, they want to lock-in money for ideally three years, maximum for five years and that is why you see mutual funds and the capital protection side ballooning, growing very fast. It has already become Rs 10,000 to Rs 15,000 crore market.

Q: What explains this lack of interest? Is it higher inflation for the last few years?

A: Inflation is one of the important factors but, inflation is also an investor's friend because whenever inflation is high, you start getting higher returns. So, what investors need to look at is what is the alpha you are getting on top of inflation. Retail investors in particular are not enthused if you offer them 0.5 percent over inflation and they are very happy if you offer them anything above 1-1.5 percent over inflation and they are delighted if they get 2-2.5 percent real return.

Eastman Chemical Keeps Pace with Economic Recovery

Since today's specialty chemicals industry supplies most finished goods manufacturers, the economic and consumer recession had a direct impact on this particular industry's results since the end of 2009. Eastman Chemical Company (EMN) wasn't the exception. The firm has made an emphasis on its acetate tow production, mainly used for cigarettes. The company stands out for using coal as its input, in contrast with other competitors using petroleum and gas, both more expensive for production. This mark up has allowed Eastman to transfer some of its increasing costs onto prices,  without compromising its sales revenue.

In addition to this, the acquisition of Solutia Inc. (former global leader in performance materials) completed on July 2, 2012, broadened Eastman's specialty chemicals output by adding automotive and solar end products to its portfolio.

Although Eastman is a highly diversified company, it has proven to be severely affected by negative cycles of the economy. Even though this feature is not appealing whatsoever to investments, it certainly has caused it to become a cheap alternative. And, a quite promising one, since the economic recovery boosted its revenue, as a result of Eastman's focus on cost-advantage production methods.

Other specialty chemical competitors, such as Ashland Incorporated (ASH) didn't show such a promising comeback, and the drop in revenue during 2012 was anticipated by investor Jean-Marie Eveillard (Trades, Portfolio), who sold out his 3.9 million share position by the third quarter of that year.

Another industry giant, Huntsman Corporation (HUN) did show more promising results, and less volatile revenues during these last years. This, of course, has led to a high price to earnings ratio discouraging investors as we see later.

Geographically Diversified

On 2012, almost 50% of Eastman sales were generated in North America, while more than 25% were in Asia and 20% in Europe, Middle East and Africa. This diversification is to be taken into account since it guarantees long-term revenue, even if cigarette consumption decreases in some specific region (for instance, American sales declined  in recent years), which would stabilize acetate tow demands worldwide.

Industrial Background and Gurus' Preference

Eastman's earnings per share growth was significantly higher than industry median (46.9% vs. 5.2%) but so was Huntsman's, at 46.5%. The critical difference between these two industry giants stands out by looking at their price to earnings: Eastman's is below median (16.4 vs. 19.1) while Huntsman rose up to 130.1, thus entailing a significant price premium relative to industry peers' average.

Although Ashland does have an inferior price to earnings ratio than Eastman's (11.5), there's a significant difference in their earnings per share growth: 27%, probably caused by a decline in revenue.

This might have been one of the reasons that motivated investors David Dreman (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) to significantly reduce their stake in Huntsman (both of them by more than 80% margin). In contrast, Leon Cooperman (Trades, Portfolio) and Scott Black (Trades, Portfolio), reinforced their positions in Eastman. Most notably, Ray Dalio (Trades, Portfolio) even sold out his Huntsman position and bought more than 50,000 Eastman shares and a smaller 5,600 share position at Ashland by the end of September.

Although being volatile, Eastman appears to show a promising future since it's both cheaper and faster growing than its rivals in chemical industry. Guru holdings also demonstrate a general optimism regarding this company.

 

Disclosure: Victor Selva holds no position in any stocks mentioned.

Also check out: David Dreman Undervalued Stocks David Dreman Top Growth Companies David Dreman High Yield stocks, and Stocks that David Dreman keeps buying Jean-Marie Eveillard Undervalued Stocks Jean-Marie Eveillard Top Growth Companies Jean-Marie Eveillard High Yield stocks, and Stocks that Jean-Marie Eveillard keeps buying

Currently 5.00/512345 Rating: 5.0/5 (1 vote)

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Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
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How Your VantageScore Credit Report Is Calculated

Since the 1970s, credit scores have played an increasingly vital role in the lending industry. Fair Isaac and Company began assigning credit scores to consumers based upon various factors over 40 years ago, and these scores are now reviewed not only by prospective lenders, but also by landlords, insurers and governmental agencies. But the computation process for the FICO score has some limitations; for example, a consumer has to have a credit line open for at least six months before it will show up on a FICO credit report. This and other deficiencies have led the three major bureaus to establish a new credit score model known as VantageScore, which evaluates customers according to a somewhat different set of criteria that can be much more forgiving in some instances.

A Collaborative Effort
The three major credit bureaus have used the FICO scoring model for decades, but the differences in how each agency computes its scores has led to numerous discrepancies that are often problematic for both lenders and consumers. The VantageScore model is designed to provide a much more standardized grading system than the one used by Fair Isaac and Company. The first version of Vantage appeared in 2006, followed by Vantage 2.0 in 2010, which was modified in response to the changes that swept over the lending industry after the Subprime Mortgage Meltdown of 2008.

The VantageScore Model Methodology
VantageScore credit scores are computed in a fundamentally different manner than FICO scores. They start with a somewhat different set of criteria than FICO and also assign a different weighting to each segment. A comparison of the two is shown as follows:

FICO Score
The Consumer's Payment History: 35% Total Amounts Owed by the Consumer: 30% Length of the Consumer's Credit History: 15% Types of Credit Used by the Consumer: 10% Amount of the Consumer's New Credit: 10% VantageScore
Amount of the Consumer's Recent Credit: 30% The Consumer's Payment History: 28% Utilization of the Consumer's Current Credit: 23% Size of the Consumer's Account Balances: 9% Depth of the Consumer's Credit: 9% Amount of the Consumer's Available Credit: 1% The VantageScore model is also quantified differently than FICO scores. It still uses a numerical range for its scores, but it also assigns a corresponding letter grade for a given range, in some instances, that helps consumers to understand the quality of their score. The grade is statistically based upon the ratio of consumers who are likely to charge off versus those who will pay on time. The VantageScore system is broken down as follows:
901 to 990 = A – 1 charge off for every 300 consumers who pay on time 801 to 900 = B – 1 charge off for every 50 consumers who pay on time 701 to 800 = C – 1 charge off for every 10 consumers who pay on time 601 to 700 = D – 1 charge off for every 5 consumers who pay on time 501 to 600 = F – 1 charge off for every 1 consumers who pay on time As with FICO, the consumer's creditworthiness matches his or her score and grade. Each of the three major credit bureaus computes a score based on the VantageScore model using its own data. Of course, while all three bureaus use the exact same model to compute the VantageScore credit score, it can still differ from one bureau to another because each bureau typically records slightly different information in their consumer files.

The VantageScore Benefit
One of the chief advantages that the VantageScore model brings is the ability to provide a score to a large segment of consumers (about 30 to 35 million) who are currently unscorable when traditional methodologies are applied. The VantageScore model differs from FICO in that a line of credit only has to be open for a single month in order to be factored in, yet this model takes 24 months of consumer credit activity into account, whereas FICO only looks back for six months. The longer look back period can be a big help for consumers who are working to rebuild their credit and are able to show a marked improvement over the longer time span. The VantageScore credit score is also designed to serve as a "predictive score" for those with thin credit histories by indicating the probability that they will meet their future payment obligations in a timely manner. It can also use rent and utility payments in its computations if they are reported by the landlord and/or utility provider.

VantageScore 3.0
The most recent version of the VantageScore model represents a substantial improvement over the previous two models. It was created beginning with over 900 data points from 45 million consumer credit files spanning two overlapping time frames from 2009 to 2012. However, it only uses about half the number of reason codes (which signify various reasons why the consumer's credit score carries the number that it has been assigned), and these codes have been rewritten in plain language that consumers can easily understand. VantageScore Solutions, the company behind the model, also provides an online resource where consumers can look up their reason codes, which can be found at www.reasoncode.org.

As mentioned previously, the risk assessment formula that is used in the model is now identical for each of the major bureaus because it employs uniform definitions for consumer payment and credit information that is received by each bureau. The VantageScore model also claims that the predictive score in this version will be 25% more accurate than the previous one due to the substantial increase in both the quality and quantity of data upon which the model is based.

Impact with Lenders
Despite the hype with which the three credit bureaus have promoted their new scoring system, it has been slow to catch on in the lending industry. The VantageScore model remains a very distant second to the traditional FICO score in the amount of market share that it has carved out among lenders. As of April 2012, less than 6% of the credit scoring market and only 10% of the major banks use the VantageScore model in their underwriting.

The Bottom Line
Although its method of computation is considered to be more fair and realistic than the FICO model, it will likely take some time for lenders to become comfortable with shifting to this alternative methodology. Nevertheless, the number of institutions that accept the VantageScore model is growing, and its popularity will likely continue to increase with its ability to tap a new market of potential lending customers. For these reasons, the major credit bureaus continue to view VantageScore credit scores as a model for the future.

Unemployment rate is still far from normal

December's U.S. jobs additions show an economy that has healed. But compared to the unemployment rate from 1995 though mid-2008, the recovery is remarkably poor, at least as far as jobs are concerned.

Ben Bernanke and the Federal Reserve set a target of 6.5% as the unemployment rate that should trigger an action to set higher interest rates. That action, if the Fed sticks to the number, may come quickly.

However, a really strong economy is measured by a jobless rate of much closer to 5%. Until the rate falls to that level, the recovery has substantial risks.

JOBS: Big miss in December, just 74,000 new jobs added

The unemployment rate in January 1995 was 5.7%, and it remained just above the 5% level until May 1997, when it dropped to 4.9%. It stayed below 5% until September 2001, and reached 3.9% in in the final four months of 2000. There was another run of sub-5% unemployment from December 2005 through late 2007. And the rate did not rise to about 6% until August 2008.

In February 2011, analysts at the Federal Reserve Bank of San Francisco tried to describe unemployment rates of about 6% as the "new normal." By their own admission, their analysis was flawed:

Recent labor markets developments -- including mismatches in the skills of workers and jobs, extended unemployment benefits, and very high rates of long-term joblessness, may be impeding the return to "normal" unemployment rates of around 5%.

An examination of alternative measures of labor market conditions suggests that the "normal" unemployment rate may have risen as much as 1.7 percentage points to about 6.7%, although much of this increase is likely to prove temporary. Even with such an increase, sizable labor market slack is expected to persist for years.

The reasons given for excusing a rate above 5% were all temporary ones, which have persisted since the analysis was done. Long-term joblessness has become a larger problem.

The fight over extended unemployment rates has become more heated ! as more than one million people lost their benefits at the end of 2013, and millions more are at risk of the same in 2014. The forecast of "labor market slack" has become true.

How much of the larger economy is at risk if the jobless rate stays well above 6%? Traditional economists would argue that the recovery of housing and consumer spending will remain shaky so long as the labor market is slack. To some extent, the revenue of consumer-related businesses cannot recover completely to the health of six years ago. As a matter of fact, the recovery as a whole risks weaknesses that, if job creation deteriorates again only slightly, could drag the national economy back into a "slow growth" mode.

No matter how much cheer there is in a sub-7% unemployment rate, the figure remains much worse than its needs to be for a complete economic recovery.

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24/7 Wall St. is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.

Best Growth Stocks To Invest In Right Now

According to the Dividend Channel, Public Service Enterprise (PEG) has been named as the ��op Dividend Stock of the Dow Utilities��as of its most recent DividendRank report. The report states that Public Service Enterprise has demonstrated ��ttractive valuation metrics��as well as ��trong profitability metrics.��

Public Service Enterprise Group�� current annualized dividend is $1.44 per share which is currently paid in quarterly installments. The company most recently went ex-dividend on Sept. 4. Most recently, the company declared a dividend of $0.36 per share on July 16 which is payable on Sept. 30, 2013, to shareholders of the record on Sept. 6, 2013.

The company�� historical dividend growth is as follows:

路 10-year: 3.4%
路 5-year: 2.2%
路 3-year: 2.2%

[ Enlarge Image ]

As of the company�� most recent quarterly dividend, Public Service Enterprise Group offers a dividend yield of 4.50%.

Best Growth Stocks To Invest In Right Now: Waste Management Inc.(WM)

Waste Management, Inc., through its subsidiaries, provides waste management services to residential, commercial, industrial, and municipal customers in North America. It offers collection, transfer, recycling, and disposal services. The company also owns, develops, and operates waste-to-energy and landfill gas-to-energy facilities in the United States. Its collection services involves in picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility, or disposal site; and recycling operations include collection and materials processing, plastics materials recycling, and commodities recycling. In addition, it provides recycling brokerage, which includes managing the marketing of recyclable materials for third parties; and electronic recycling services, such as collection, sorting, and disassembling of discarded computers, communications equipment, and other electronic equipment. Further, the company e ngages in renting and servicing portable restroom facilities to municipalities and commercial customers under the Port-o-Let name; and involves in landfill gas-to-energy operations comprising recovering and processing the methane gas produced naturally by landfills into a renewable energy source, as well as provides street and parking lot sweeping services. Additionally, it offers portable self-storage, fluorescent lamp recycling, and medical waste services for healthcare facilities, pharmacies, and individuals, as well as provides services on behalf of third parties to construct waste facilities. The company was formerly known as USA Waste Services, Inc. and changed its name to Waste Management, Inc. in 1998. Waste Management, Inc. was incorporated in 1987 and is based in Houston, Texas.

Advisors' Opinion:

• [By Helix Investment Research]

  We note that Keating Capital's co-investors in many of its portfolio companies are not simply other venture capital or existing investors, but strategic investors as well. Examples include Agilyx, where Waste Management (WM) is a co-investor, BrightSource, where Chevron (CVX) and BP (BP) are co-investors, Kabam, where Google (GOOG) and Intel (INTC) are co-investors, or Tremor Video (TRMR), where Time Warner (TWX) is a co-investor. As of the end of Q2 2013, 9 (excluding Jumptap) of Keating Capital's portfolio companies had unrealized gains, with an average gain of 25.6% (again excluding Jumptap, which had unrealized gains of 8% as of the end of Q2 2013). The remaining 6 companies had an average loss of 44.46%. However, on an overall basis, Keating Capital's portfolio currently has an average unrealized gain of 2.15%. While this is not a large gain, we note that the bulk of Keating Capital's profits are realized upon exiting an investment in conjunction with the portfolio company's IPO or sale. Furthermore, portions of Keating Capital's portfolio are defended by structurally protected appreciation clauses that the company has struck with its portfolio companies, clauses that are not reflected on its balance sheet. These clauses, which are negotiated between Keating Capital and its portfolio companies, allow the company to receive shares in the portfolio company's IPO at a discount, or grant it warrants to purchase additional shares in an IPO for a nominal price. Since inception, Keating Capital has negotiated structurally protected appreciation clauses in 11 of the 20 companies it has invested in. As of the end of Q2 2013, 6 of Keating Capital's 15 portfolio companies were protected by structurally protected appreciation clauses, representing $22 million in total capital (almost 43% of the company's invested capital), thereby entitling Keating Capital to a weighted-average aggregate value of 1.9x its investment at the time of an IPO.

• [By Geoff Gannon]

  For example, a company involved in a mundane business like running hair salons ��like Regis (RGS), dentist offices ��like Birner Dental (BDMS), grocery stores ��like Village Supermarket (VLGEA), or garbage dumps ��like Waste Management (WM), may be easy to estimate as essentially a no-growth business.

Best Growth Stocks To Invest In Right Now: Sara Lee Corporation(SLE)

Sara Lee Corporation engages in the manufacture and marketing of a range of branded packaged meat, bakery, and beverage products worldwide. Its packaged meat products include hot dogs and corn dogs, breakfast sausages, sandwiches and bowls, smoked and dinner sausages, premium deli and luncheon meats, bacon, beef, turkey, and cooked ham. It also offers frozen baked products, which comprise frozen pies, cakes, cheesecakes, pastries, and other desserts. In addition, Sara Lee provides roast, ground, and liquid coffee; cappuccinos; lattes; and hot and iced teas, as well as refrigerated dough products. The company sells its products under Hillshire Farm, Ball Park, Jimmy Dean, Sara Lee, State Fair, Douwe Egberts, Senseo, Maison du Caf

Best Financial Companies To Invest In Right Now: Nordstrom Inc.(JWN)

Nordstrom, Inc., a fashion specialty retailer, offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States. It offers a selection of brand name and private label merchandise. The company sells its products through various channels, including Nordstrom full-line stores, off-price Nordstrom Rack stores, Jeffrey? boutiques, treasure & bond, and Last Chance clearance stores; and its online store, nordstrom.com, as well as through catalog. Nordstrom also provides a private label card, two Nordstrom VISA credit cards, and a debit card for Nordstrom purchases. The company?s credit and debit cards feature a shopping-based loyalty program. As of September 30, 2011, it operated 222 stores, including 117 full-line stores, 101 Nordstrom Racks, 2 Jeffrey boutiques, 1 treasure & bond store, and 1 clearance store in 30 states. The company was founded in 1901 and is based in Seattle, Washington.

Advisors' Opinion:

• [By Andrew Marder]

  The 1% has seen phenomenal income growth recently, and that's spurred growth at companies like Saks (NYSE: SKS  ) and Nordstom (NYSE: JWN  ) , both of which managed 5% increases in revenue in the last quarter.

• [By Nathalie Tadena]

  Nordstrom Inc.'s(JWN) fiscal third-quarter profit slid 6.2% as the high-end retailer’s sales growth was tempered by the absence of a key sale event that was held earlier in the year, while overhead expenses jumped.

Best Growth Stocks To Invest In Right Now: Intuitive Surgical Inc.(ISRG)

Intuitive Surgical, Inc. designs, manufactures, and markets da Vinci surgical systems for various surgical procedures, including urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Its da Vinci surgical system consists of a surgeon?s console or consoles, a patient-side cart, a 3-D vision system, and proprietary ?wristed? instruments. The company?s da Vinci surgical system translates the surgeon?s natural hand movements on instrument controls at the console into corresponding micro-movements of instruments positioned inside the patient through small puncture incisions, or ports. It also manufactures a range of EndoWrist instruments, which incorporate wrist joints for natural dexterity for various surgical procedures. Its EndoWrist instruments consist of forceps, scissors, electrocautery, scalpels, and other surgical tools. In addition, it sells various vision and accessory products for use in conjunction with the da Vinci Surgical System as surgical procedures are performed. The company?s accessory products include sterile drapes used to ensure a sterile field during surgery; vision products, such as replacement 3-D stereo endoscopes, camera heads, light guides, and other items. It markets its products through sales representatives in the United States, and through sales representatives and distributors in international markets. The company was founded in 1995 and is headquartered in Sunnyvale, California.

Advisors' Opinion:

• [By John Udovich]

  In addition and last summer, Luna Innovations Incorporated announced a new multi-year supply contract with robotic surgery system maker Intuitive Surgical (NASDAQ: ISRG). No specific terms were disclosed but the deal�covers the work necessary to bring a new component to market and it includes�development milestone payments through 2015. Moreover and under the existing development and supply agreement, Luna Innovations Incorporated is the exclusive supplier to Intuitive Surgical of these components.

• [By Sue Chang and Saumya Vaishampayan]

  Intuitive Surgical Inc. (ISRG) �shares gained 2.4%. Analysts at J.P. Morgan said they remain ��onstructive��on longer-term potential for Intuitive Surgical�� da Vinci surgical system despite headwinds in the past few months. Da Vinci ��as evolved from being a tool with limited uptake in the surgical suite to a diversified platform, with increasingly broad applicability in areas such as colorectal, bariatric, thoracic and vascular surgery,��Tycho Peterson, an analyst at J.P. Morgan wrote in his note.

• [By Monica Gerson]

  Intuitive Surgical (NASDAQ: ISRG) is expected to post its Q3 earnings at $3.40 per share on revenue of $525.99 million.

  Posted-In: Earnings scheduleEarnings News Pre-Market Outlook Markets

Best Growth Stocks To Invest In Right Now: Buffalo Wild Wings Inc.(BWLD)

Buffalo Wild Wings, Inc. engages in the ownership, operation, and franchise of restaurants in the United States. The company provides quick casual and casual dining services, as well as serves bottled beers, wines, and liquor. As of July 26, 2011, it had 773 Buffalo Wild Wings locations in 45 states in the United States, as well as in Canada. The company was founded in 1982 and is headquartered in Minneapolis, Minnesota.

Advisors' Opinion:

• [By Brian Pacampara]

  Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, restaurant operator Buffalo Wild Wings (NASDAQ: BWLD  ) has earned a respected four-star ranking. �

• [By Victor Nguyen]

  (c) 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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• [By James Brumley]

  Earlier this year, McDonald’s (MCD) tiptoed into KFC’s territory — and even put Buffalo Wild Wings (BWLD) on notice — with the launch of its Mighty Wings chicken wings. Sales of the fried chicken wings have failed to take off as expected, though. As McDonald’s CEO Don Thompson (under)stated it, the wings’ price of $3.69 for five pieces was “not the most competitive.”

• [By Steve Symington]

  Though shares of Buffalo Wild Wings (NASDAQ: BWLD  ) rose more than 4% in Monday's after-hours trading following a strong quarterly report from the company, the stock fell into a tailspin Tuesday morning after a pair of analyst downgrades stemmed investors' excitement.

Best Growth Stocks To Invest In Right Now: TrueBlue Inc.(TBI)

TrueBlue, Inc. provides temporary blue-collar staffing services in the United States. It supplies on demand general labor to various industries under the Labor Ready brand; skilled labor to manufacturing and logistics industries under the Spartan Staffing brand; and trades people for commercial, industrial, and residential construction, and building and plant maintenance industries under the CLP Resources brand. The company also provides mechanics and technicians to the aviation maintenance, repair and overhaul, aerospace manufacturing, and assembly industries, as well as to other transportation industries under the Plane Techs brand; and temporary drivers to the transportation and distribution industries under the Centerline brand. It primarily serves small and medium-size businesses. The company was formerly known as Labor Ready, Inc. and changed its name to TrueBlue, Inc. in December 2007. TrueBlue, Inc. was founded in 1985 and is headquartered in Tacoma, Washington.

Advisors' Opinion:

• [By Travis Hoium]

  What: Shares of staffing agency TrueBlue (NYSE: TBI  ) jumped 10% today after the company reported earnings.

  So what: Revenue jumped 19%, to $422.3 million, and beat estimates of $420.2 million from Wall Street. Adjusted earnings per share were also up 19%, to $0.31, outpacing estimates by $0.05.�

• [By Jonathan Yates]

  For those looking to invest in real estate stocks, highly recommended is the Dr. Housing Bubble blog. In a recent posting, the "Dr." pointed out that there was a "Lost Generation" when it came to household income. That has not happened for those investing in staffing industry stocks such as Paychex (NASDAQ: PAYX), Robert Half International (NYSE: RHI), TrueBlue, Inc. (NYSE: TBI), and Labor SMART (OTCBB: LTNC).

Best Growth Stocks To Invest In Right Now: Checkpoint Systms Inc.(CKP)

Checkpoint Systems, Inc. manufactures and markets identification, tracking, security, and merchandising solutions for the retail and apparel industry worldwide. The company operates in three segments: Shrink Management Solutions, Apparel Labeling Solutions, and Retail Merchandising Solutions. The Shrink Management Solutions segment provides shrink management and merchandise visibility solutions. It offers electronic article surveillance systems, such as EVOLVE, a suite of RF and RFID-enabled products that act as a deterrent to prevent merchandise theft in retail stores; and electronic article surveillance consumables, including EAS-RF and EAS-EM labels that work in combination with EAS systems to reduce merchandise theft in retail stores. This segment also provides keepers, spider wraps, bottle security, and hard tags, as well as Showsafe, a line alarm system for protecting display merchandise. In addition, it offers physical and electronic store monitoring solutions, incl uding fire alarms, intrusion alarms, and digital video recording systems for retail environments; and RFID tags and labels. The Apparel Labeling Solutions segment provides apparel labeling solutions to apparel retailers, brand owners, and manufacturers. It has Web-enabled apparel labeling solutions platform and network of 28 service bureaus located in 22 countries that supplies customers with customized apparel tags and labels. The Retail Merchandising Solutions segment offers hand-held label applicators and tags, promotional displays, and queuing systems. The company serves retailers in the supermarket, drug store, hypermarket, and mass merchandiser markets through direct distribution and reseller channels. Checkpoint Systems was founded in 1969 and is based in Thorofare, New Jersey.

Advisors' Opinion:

• [By John Udovich]

  Small cap Checkpoint Systems, Inc (NYSE: CKP) fights shoplifting or retail theft and other forms of�"shrink��that costs retailers over $112 billion worldwide last year (according to a study funded by the company), meaning it might be an interesting stock to take a closer look at and to compare its performance with that of SPDR S&P Retail ETF (NYSEARCA: XRT) and PowerShares Dynamic Retail ETF (NYSEARCA: PMR). Just how bad can shoplifting or shrink be for a retailer? Troubled retailer J.C. Penney Company, Inc (NYSE: JCP) has just reported that shoplifting took a full percentage point off the department store chain's profit margins during the quarter. Moreover and given that tens of millions of Americans are now facing higher health insurance costs thanks to Obamacare (which will likely impact consumer discretionary spending),�retailers�will need to find ways to shore up their margins and bottom lines by preventing�retail theft with solutions from company�� like Checkpoint Systems.

• [By Rich Smith]

  Three months after settling upon a new chief executive officer, it looks like Thorofare, N. J.-based Checkpoint Systems (NYSE: CKP  ) will soon have itself a new CFO as well.

Best Growth Stocks To Invest In Right Now: MEDIFAST INC(MED)

Medifast, Inc., through its subsidiaries, engages in the production, distribution, and sale of weight management and disease management products, and other consumable health and diet products in the United States. The company?s product lines include weight and disease management, meal replacement, and vitamins. It also operates weight control centers that offer Medifast programs for weight loss and maintenance, customized patient counseling, and inbody composition analysis. The company markets its products under the Medifast and Essential brand names, including shakes, appetite suppression shakes, women?s health shakes, diabetics shakes, joint health shakes, coronary health shakes, calorie burn drinks, calorie burn flavor infusers, antioxidant shakes, antioxidant flavor infusers, bars, crunch bars, soups, chili, oatmeal, pudding, scrambled eggs, hot cocoa, cappuccino, chai latte, iced teas, fruit drinks, pretzels, puffs, brownie, pancakes, soy crisps, crackers, and omega 3 and digestive health products. Medifast Inc. sells its products through various channels of distribution comprising Web, call center, independent health advisors, medical professionals, weight loss clinics, and direct consumer marketing supported via the phone and the Web; Take Shape for Life, a physician led network of independent health coaches; and weight control centers. The company was founded in 1980 and is headquartered in Owings Mills, Maryland.

Advisors' Opinion:

• [By Holly LaFon] ast produces, distributes and sells weight and health management products with the brand names Medifast, Take Shape for Life, Hi-Energy Weight Control Centers and Woman�� Wellbeing.

  Its return on assets in the third quarter of 2011 was 19.6%, which has been increasing in the past several years. The average return on assets for the specialty retail industry is 10.48% for the trailing 12 months.

  The company�� total assets amounted to $94 million in 2010, which increased from $62.8 million in 2009. Net income also increased to $19.6 million in 2010 from $12 million in 2009.

  Boston Beer Inc. (SAM)

  Boston Beer Inc. is the largest brewer of handcrafted beers in America. Boston Beer is a growing company that recently saw a large increase in its return on assets. It increased from 19.3% in 2010 to 29.7% in 2011, and was negative as recently as 2008. The average return on assets for the beverages industry in the trailing 12 months is 9.47%.

  In 2011, the company�� total assets increased to $272.5 million from $258.5 million in 2010. Net income increased to $66 million from $50 million.

  Alliances Resources Partners (ARLP)

  Alliance Resources Partners is a coal producer and marketer primarily in the eastern U.S. Its ROA has been increasing since 2008 and increased to 22.5% in 2011 from 21.4% in 2010. The average return on assets for the oil, gas & consumable fuels industry in the trailing 12 months is 24.47%.

  In 2011, its total assets increased to $1.7 billion from $1.1 billion in 2010. Its net income increased to $389 million from $321 million.

  Factset Research Systems Inc. (FDS)

  Factset researches global market trends and develops analytical tools for investors. Of all of GuruFocus��5-star predictable companies, it has the highest return on assets at 27%. ROA has been increasing over the past several years. The average return on assets for the software industry for the trailing 12 m

• [By Jon C. Ogg]

  Medifast Inc. (NYSE: MED) saw its stock down 5% in evening trading on Tuesday after the weight loss player had soft sales and guided expectations lower. Shares were still indicated down about 5%, but volume has not yet started.

Linamar

The automobile industry is doing very well these days, and our top speculative idea for 2014 is an auto parts manufacturer that is among the companies that are benefitting, asserts Gordon Pape, Canada stock specialist and editor of Internet Wealth Builder.

Linamar Corp. (TSX:LNR), which we initially recommended in July of 2012 at $19.72, has more than doubled in the year and a half since, but I believe it still has more upside potential.

The company is not as well-known as competitor Magna International (MGA), but it is highly successful and employs 17,600 people in North America, Europe, and Asia. It has 40 manufacturing locations, five research and development centers, and 15 sales offices in 12 countries.

Linamar's financial reports have been showing steady improvement in the past few years. Third-quarter results, released on November 13, showed a 15.5% year-over-year increase in sales to $893.3 million.

Operating earnings were up 53.4% to $73.5 million, while net earnings rose to $52 million ($0.80 a share) from $33.7 million ($0.52 a share) last year.

This is a relatively small company, with a market cap of only $2.8 billion. The shares are reasonably priced with a trailing 12-month P/E ratio of 14.5 and a forward P/E of 12.2. The stock pays a small annual dividend of $0.32.

A word of warning: the auto industry is highly cyclical. It is in a boom phase right now, which is why Linamar and similar companies are doing well.

But this is not a buy-and-hold-forever stock. It should continue to perform well in 2014, but be ready to cash in if the economy starts to falter.

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