Consumer Credit Expands Around the World

I’ve long argued that, once people in emerging market countries realize how much fun it is to buy stuff they don’t need with money they don’t have, there will be a multi-decade long economic boom the likes of which the world hasn’t seen since the U.S. set out on its orgy of credit expansion in the 1980s. According to this report at the Wall Street Jounal Real Time Economics blog, that process may have already begun.

In 2009, the year the global recession hit bottom, the aggregate credit-card balances of Chinese consumers rose 17.1% even as those of U.S. consumers fell 8.7%, according to a study by financial consultancy Lafferty Group. Brazilians increased their balances by 28.9%, part of a 9.2% rise throughout Latin America.

More people going into debt might not sound like a desirable development, but in some ways this could be. One of the global economy’s biggest problems has been its dependence on an overstretched U.S. consumer. If folks in places such as China and Brazil are now stepping up and taking on some of the burden, that could provide some much-needed rebalancing.

Now, don’t get too excited about the numbers highlighted above as this is likely a classic case of how percentage changes can be very misleading. The Chinese are undoubtedly coming up from a low base and we’ve got nowhere else to go but lower. Per this item at CreditCards.com, average U.S. credit card debt is now over $8,000 per person and I’m guessing that it’s close to zero in China.

An All-or-Nothing 2012 for JPMorgan Chase

With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at JPMorgan Chase (NYSE: JPM  ) . As I discussed last month, the Wall Street bank didn't have a very good 2011, although it did manage to hold up better than many of its banking peers. With financial challenges around the world, JPMorgan faces a tough road ahead. Can it successfully navigate the threats and recover from 2011's losses? Below, I'll take a closer look at what people expect from JPMorgan Chase and its rivals.

Forecasts on JPMorgan Chase

Median Target Stock Price	$46
2011 EPS Estimate	$4.52
2012 EPS Estimate	$4.80
Expected Annual Earnings Growth, Next 5 Years	8%
Forward P/E	7.5
CAPS Rating (out of 5)	***

Sources: Yahoo! Finance, Motley Fool CAPS.

Will JPMorgan Chase get back on track in 2012?
Analysts see good things ahead for JPMorgan. At $46, the target price for the stock is about 25% higher than current prices, and continued earnings growth of 6%, while slow, would certainly justify the attractive earnings multiple the bank sports right now.

One thing that JPMorgan has going for it is a considerable advantage in dividends over some of its peers. Bank of America (NYSE: BAC  ) tried and failed to get approval from the Federal Reserve to boost its quarterly payout above its penny-per-share level. Citigroup's (NYSE: C  ) $0.01 payout is even more insignificant after its 1-for-10 reverse split last spring, and both Citi and B of A continue to have challenges that could make it tough to boost payouts significantly anytime soon. Meanwhile, in contrast, JPMorgan's 2.8% dividend yield has it looking more like its former pre-crisis self.

One interesting area where the company appears to be playing a major role is in the MF Global bankruptcy. As fellow Fool Matt Koppenheffer reported, JPMorgan was custodian for the failed firm's segregated customer accounts and MF's biggest lender. But it's also making offers to buy bankruptcy claims from customers at a discount, which could lead to profits if customer funds are ever found. As MF and the CME Group (Nasdaq: CME  ) hash out responsibility over lost customer money, JPMorgan's behavior raises concerns about conflicts of interest and playing both sides.

What will really determine JPMorgan's fate in 2012 is the state of the economy. With interest rates purportedly on hold through mid-2013 at the earliest, the bank could see rising interest margins if the economy starts to speed up. That would further boost profits and mean what's likely to become a full recovery for JPMorgan.

JPMorgan's Chase credit card division is huge, but it has to get ready for a world where credit cards could become a thing of the past. Some stocks are already placed to take advantage of changes in the way we pay. Watch this free video to discover why your credit card may soon be absolutely worthless -- but don't wait. Click here to see it while it lasts.

Avoid This Biotech Stock

Editor's note: This article is a stock pitch made by a member on CAPS, The Motley Fool's free investing community. The pitch is published UNEDITED and is the opinion of the CAPS member whose pitch it is, in this case: zzlangerhans.

Each week, Motley Fool editors cull a top stock idea from the pitches made on CAPS, the Motley Fool's 180,000-member free investing community. Want your idea considered for this series? Make a compelling pitch on CAPS with a minimum length of 400 words. Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.

Company	Acura Pharmaceuticals (Nasdaq: ACUR  )
Submitted By	zzlangerhans
Member Rating	99.56
Submitted On	Feb. 13, 2012
Stock Price at Underperform Recommendation	$3.50

Acura Pharmaceuticals Profile

CAPS Rating (out of 5)	*
Headquarters	Palatine, Ill.
Industry	Drug delivery
Market Cap	$156 million

Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS.

This week's pitch:
It's getting close to do-or-die time for Acura, a surprisingly resilient small pharma that has shrugged off more than one obituary in its lifespan. Having written more than one of those obituaries, I feel uniquely qualified to pen another.

Oxecta appears to me to have no advantage over generic oral opiates available at a fraction of the cost. Despite widespread description of Oxecta as an abuse-resistant formulation of oxycodone, The Oxecta label carries an explicit statement that in fact it there is no evidence that it reduces the danger of abuse. Pfizer [ (NYSE: PFE  ) ] and Acura may be relying on this popular misconception to sell the drug, which is only formulated to impede crushing for purposed of snorting or injection. However, the vast majority of abuse of opiates is via oral co nsumption. Acura failed in an attempt to avert this form of abuse by adding niacin, when their niacin-containing oxycodone Acurox was rejected by an FDA panel 19-1 in 2010. Governmental and private health insurance decision-makers will likely not be misled.

Meanwhile, the company's abuse-deterrent form of the OTC cold medication pseudoephedrine is back in clinical testing after a finding that it was still susceptible to conversion to methamphetamine. The commercial prospects of this reformulation of an expendable OTC medication are dubious.

The cash position of 38M will likely decline below 35M at the next earning report February 27, which isn't strong support for a market cap of 160M. Oxecta just became available in January, which means that Acura doesn't have to cop to poor revenues until May. Until then you might want to keep an eye on this stock for a potential short if unpredictable gusts carry the share price back above 5.

Follow this!
Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.

Apple Slips But Rebounds; Kass Covers

Apple (AAPL) shares this morning have given up earlier gains and are currently down $8.40, or 1.5%, at $536.78, more than the percentage decline for the Nasdaq Composite Index, which is currently down 27.85, or 0.9%, at 2,948.34.

Still, the shares have rebounded from their low of the session of $526.

The only visibly negative element running against the stock this morning was the suggestion by BMO Capital’s Keith Bachman to the effect that Apple shares might “consolidate recent gains” following the expected announcement on Wednesday of a new iPad.

And so we turn now to Doug Kass of SeeBreaze Partners Management, who last thursday alerted folks he was taking a small short position in Apple shares.

Today, he writes that he covered that short position at $528 — right after writing “I remain short Apple” mere minutes before that.

Update: Apple shares closed down $12.02, or 2%, at $533.16.

Fin

Top Stocks For 4/5/2012-9

National Health Partners, Inc. (NHPR)

National Health Partners, Inc. is a national healthcare savings organization that provides discount healthcare membership programs to uninsured and underinsured people through a national healthcare savings network called “CARExpress.” CARExpress is one of the largest networks of hospitals, doctors, dentists, pharmacists and other healthcare providers in the country and is comprised of over 1,000,000 medical professionals that belong to such PPOs as CareMark and Aetna.

Creating a healthcare system that works for everyone requires bold measures. But before bold measures can be developed and adopted, citizens must understand what drives the cost of health care and how to improve the quality of care from an objective, analytical perspective. Since 1960, health care spending has risen from 5.1 percent of the Gross Domestic Product to nearly 15 percent in 2000.

It is really hard to find an amount of people who are unable to acquire healthcare insurance because of lack of sufficient financial standing. We know for sure that to acquire affordable medical care facilities in the US these days without any sort of medical coverage is not easy.
To increase the gravity of the situation, the mandatory access to health insurance, according to the Affordability Act, has added to the woes of these residents. Low income medical insurance always comes as a blessing for those who cannot buy health insurance.
National Health Partners, Inc.’s primary target customer group is the 47 million Americans who have no health insurance of any kind. The company’s secondary target customer group includes the millions of Americans who lack complete health insurance coverage. The company is headquartered in Horsham, Pennsylvania.

The CARExpress dental program gives immediate savings. There are no limits to visits and as a member of CARExpress can save between 15% - 50% off on dental services through this participating network of 76,000 dentists and specialists nationwide including: General Dentists; Endodontists; Orthodontist; Periodontist; Oral Surgeons.

For more information on the company, please visit its website at www.nationalhealthpartners.com

Datalink Corp. (Nasdaq:DTLK) announced that it will issue a news release Wednesday April 20, 2011 after the stock market closes to announce first quarter operating results for 2011. Datalink will hold a conference call shortly afterward at 4:00 p.m. central time during which time Datalink’s president and chief executive officer, Paul Lidsky, and vice president of finance and chief financial officer, Greg Barnum, will discuss company results and provide a business overview. Participants can access the conference call by dialing (877) 277-9804. Participants will be asked to identify the Datalink conference call and provide the designated identification number (53318947). A live Webcast of the conference call can be heard via Datalink’s website at www.datalink.com.

Datalink Corporation engages in the design, installation, and support of data center solutions to mid and large-size companies. It offers a suite of practice-specific analysis, design, implementation, management, and support services.

Ultratech, Inc. (Nasdaq:UTEK) plans to announce its first quarter 2011 earnings results before the market opens on Thursday, April 21, 2011. Ultratech will host an earnings conference call featuring remarks by Arthur W. Zafiropoulo, Chairman and Chief Executive Officer and Bruce Wright, Senior Vice President Finance and CFO, followed by a live Q&A session. The conference call will be broadcast live over the Internet beginning at 11:00 a.m. Eastern Time/8:00 a.m. Pacific Time on Thursday, April 21, 2011. To listen to the call over the internet or to obtain dial-in information for the call, please go to the investor relations section of the Ultratech website at http://ir.ultratech.com.

Ultratech, Inc. develops, manufactures, and markets photolithography and laser thermal processing equipment. It supplies step-and-repeat photolithography systems based on one-to-one imaging technology to semiconductor device manufacturers for applications involving line geometries of 0.75 microns or greater and to nanotechnology manufacturers.

LCA-Vision Inc. (Nasdaq:LCAV) reported that 18,857 procedures were performed during the first quarter of 2011, compared with 19,066 procedures (62 vision centers) during the first quarter of 2010. Same-store procedures (54 vision centers) increased by 8% year-over-year from 17,408 procedures during the first quarter of 2010, the second consecutive quarter of year-over-year same-store procedure growth. LCA-Vision will release first quarter 2011 financial results prior to market opening on Tuesday, April 26, 2011. A conference call and webcast to discuss the results also will be held on Tuesday, April 26, 2011 at 10:00 a.m. Eastern time.

LCA-Vision Inc. provides fixed-site laser vision correction services under the LasikPlus brand. The company offers laser vision correction procedures to correct nearsightedness, farsightedness, and astigmatism.

Equity REIT Yields vs. 10-Year Treasury Yields

Over the past 20 years, equity REITs have yielded more than 10-year Treasury bonds most of the time. When REITs do not yield more than 10-year Treasuries, it may be time to be watchful for a possible drop in their price. The yields are very close right now and Treasury rates are rising.

It seems logical to us that REITs should produce more income than Treasuries, considering the greater risk of default, and the expansion and growth limitations of real property versus other sorts of businesses.

This chart shows yield data for 20 years for all US equity REITs (source: National Association of Real Estate Investment Trusts) and for the 10-year US Treasury bond (source: Saint Louis Federal Reserve Bank).

The spread between REIT yields and Treasury yields over the same 20 years is shown in this chart. A wide spread propels REIT prices upward, as yield motivated investors flock to higher yielding assets. On the few occasions when REITs yielded less than 10-year Treasuries, the price of REITs tended to subsequently fall.

You can see in the next chart that when the yield spread became negative in 2007, REIT prices began to decline, well before the 2008 stock market crash.

When the spread was negative in the 1997-1998 range, REIT prices declined subsequently.

It is a bit harder to see on this chart, which is not a semi-log chart, that in the 1993-1995 range, when the yield spread was minimal and touched zero, the price of REITs weakened substantially on a percentage basis.

That brings us to Thursday December 16, 2010 when the yield on the Vanguard equity REIT index was 3.52% and the 10-year Treasury was 3.47% -- still positive, but minimal. Considering past price behavior in relation to yield spreads, we think VNQ and other broad equity REIT funds, such as IYR and ICF deserve close watching for possible tactical exit.

The consensus view is that Treasury rates will rise. Unless REIT incomes rise faster (and they can’t change as rapidly as interest rates can change), probabilities suggest REIT prices may be a bit toppy.

Mean Reversion:

There may also be some risk of mean reversion negatively impacting equity REIT prices in the not too distant future.

Not only are Treasury rates bound to revert to mean levels at some point, so are REIT yields likely to do the same in harmony with Treasuries.

If we look at the history of equity REIT yields and 10-year Treasury rates from January 1972 through November 2010, we see REITs yielding a bit more than Treasuries over long periods. REIT yields did not go down as far to its minimums as Treasuries have done, nor did they rise as high as Treasuries at their maximum. However, average and median yields for REITS were at or slightly above that of Treasuries over the 38 years.

• REIT average: 7.25%; Treasury average: 7.24%
• REIT median: 7.44%; Treasury median: 7.03%
• REIT maximum: 13.07%; Treasury maximum: 15.32%
• REIT minimum: 3.40%; Treasury minimum: 2.42%

With Treasuries facing a mean reversion to perhaps 4% within a year, and perhaps 5% in two years or less; and with REITs yielding 3.52%, REITs need to produce a good deal more Funds Provided By Operations (the source of distributions), or decline in price to keep up with Treasuries.

Our View in 2007:

We published a similar view on September 24, 2007 as the end of a series of articles on risks in REIT prices that we began in January of that year. In that article “REITs vs. Treasury Yields: Something Has To Give” published at Seeking Alpha, we said,

“We have been expounding our view that REITs are overvalued since January of this year. We continue to believe that is the case, even in the face of last week's Fed rate cut and strong rise of REITs.

REITs are well below their historic yield levels, which suggest mean reversion will bring their prices down unless they can substantially increase cash flow and distributions.

REIT yields are below 10-year Treasury yields, which has occurred only 1/3 of the time over the last 30 years, and most of that was quite a while ago. Either REIT yields must rise or Treasury yields must fall to restore dominant historic relationships. Even though the Fed cut short-term rates last week, the 10-year Treasury rates increased while REIT yields fell, increasing the misalignment.

...our longer-term view compels us to wait for a better buying opportunity based on yield comparisons [between REITs and 10-year Treasuries].

Unfortunately, logic doesn't always prevail in the short-term. If the market wants to go in a particular direction, it will, at least for a while. Ultimately, though, logic does prevail — we just don’t know when.”

VNQ, SPY, BND, and SDY vs. 10-Year Treasury Rates:

In the past couple of months, 10-year Treasuries have risen and REITs have fallen in sympathy, as did bonds (proxy: BND). The S&P 500 index (proxy: SPY) moved ahead, as did the S&P 500 Dividend Aristocrats index (proxy: SDY).

Dividend stocks show more short-term sensitivity to Treasury rates than do stocks generally, because they were also bought with a substantial yield motivation. Like REITs, dividend stocks cannot immediately adjust their payout to keep pace with interest rate changes, so their prices swing a bit in response to changes in interest rates. However, because dividend stocks may be perceived as better able to grow profits, and certainly to modulate payout, they do not show as much price sensitivity to interest rate changes as REITs. Note that REITs effectively pay out nearly all their cash flow at all times, whereas dividend stocks generally pay out less and can make payout adjustments at a faster pace than REITs in response to changes in ambient interest rates.

This chart shows the reaction of VNQ, SPY, BND and SDY to current short-term interest rates changes for the US 10-year Treasury bond.

Our Current View:

We have some VNQ exposure in some accounts, as well as some individual REITs, which we are cautiously watching. They are protected by stop loss orders, as are all of our positions in liquid listed securities, but interest rates can change rapidly and change the direction of REIT prices quickly.

We are not adding to REIT index positions at this time, and may reduce or eliminate positions if Treasury rates continue their climb.

Securities Symbols Mentioned In This Article:

VNQ, IYR, ICF, SPY, BND, SDY

Holdings Disclosure: As of December 17, 2010 we hold positions in some but not all managed accounts for the following securities mentioned in this article: VNQ, SPY, SDY.

Disclaimer:

Opinions expressed in this material and our disclosed holdings are as of December 17, 2010. Our opinions and holdings may change as subsequent conditions vary. We do not make any commitment to publish or provide any public notice of future changes to our opinions or changes in our holdings.

This published material is not personal investment advice to any specific person for any particular purpose. Do not take any investment action based solely on the contents of any our published material. We are not responsible for your use of our published materials in making any investment decision, and are not responsible for any losses you incur in taking any investment action. You are fully responsible for any use you make of the content of any published material prepared by us, and for any losses that occur as a result of any investment action taken in reliance upon any published materials prepared by us. Investing involves risk of loss of capital.

All of our published materials are for informational purposes only. More factors than considered in our published materials should be evaluated before taking any investment action. Perform your own investment research before making any investment decision. Consider seeking professional personal investment advice before implementing your portfolio ideas.

We utilize information sources that we believe to be reliable, but do not warrant the accuracy of those sources or our analysis. Past performance is no guarantee of future performance, and there is no guarantee that any forecast will come to pass.

We are a fee-only investment advisor, and are compensated only by our clients. We do not sell securities, and do not receive any form of revenue or incentive from any source other than directly from clients. We are not affiliated with any securities dealer, any fund, any fund sponsor or any company issuer of any security.

Disclaimer for all our our materials anywhere in the public domain.

10 Healthcare Stocks Seeing Institutional Buying

The following is a list of healthcare stocks that have seen significant institutional inflows over the last three months. The smart money seems to think there's more upside to these names--what do you think?

We're not going to go into detailed analysis for each company. The goal here is to give you a starting point for your own analysis.

Institutional trading data sourced from Reuters. Full analysis below.

click for expanded image

1. Crucell NV (CRXL): Biotechnology Industry. Market cap of $2.57B. Institutional investors currently own 10,587,045 vs. 8,344,910 shares held three months ago (26.87% change). Short float at 0.56%, which implies a short ratio of 0.98 days. The stock has gained 51.66% over the last year.

2. Alere Inc. (ALR): Medical Laboratories & Research Industry. Market cap of $2.98B. Institutional investors currently own 79,344,929 vs. 66,980,365 shares held three months ago (18.46% change). Short float at 11.36%, which implies a short ratio of 14.21 days. The stock has lost -16.15% over the last year.

3. CareFusion Corporation (CFN): Medical Instruments & Supplies Industry. Market cap of $5.42B. Institutional investors currently own 199,853,633 vs. 171,659,923 shares held three months ago (16.42% change). Short float at 1.4%, which implies a short ratio of 1.24 days. The stock has gained 0.08% over the last year.

4. Dr. Reddy's Laboratories Ltd. (RDY): Drug Manufacturers - Other Industry. Market cap of $6.62B. Institutional investors currently own 29,861,733 vs. 27,054,963 shares held three months ago (10.37% change). Short float at 5.77%, which implies a short ratio of 20.42 days. The stock has gained 58.63% over the last year.

5. Teleflex Incorporated (TFX): Medical Instruments & Supplies Industry. Market cap of $2.23B. Institutional investors currently own 34,705,065 vs. 31,932,224 shares held three months ago (8.68% change). Short float at 2.81%, which implies a short ratio of 3.21 days. The stock has gained 5.75% over the last year.

6. HealthSpring Inc. (HS): Health Care Plans Industry. Market cap of $1.55B. Institutional investors currently own 53,019,798 vs. 49,171,610 shares held three months ago (7.83% change). Short float at 5.7%, which implies a short ratio of 4.81 days. The stock has gained 52.11% over the last year.

7. Theravance Inc. (THRX): Biotechnology Industry. Market cap of $2.07B. Institutional investors currently own 72,544,529 vs. 68,386,473 shares held three months ago (6.08% change). Short float at 12.21%, which implies a short ratio of 14.46 days. The stock has gained 114.08% over the last year.

8. Volcano Corporation (VOLC): Medical Appliances & Equipment Industry. Market cap of $1.4B. Institutional investors currently own 62,357,630 vs. 58,880,299 shares held three months ago (5.91% change). Short float at 9.9%, which implies a short ratio of 9.78 days. The stock has gained 58.21% over the last year.

9. Dendreon Corp. (DNDN): Biotechnology Industry. Market cap of $5.29B. Institutional investors currently own 96,375,954 vs. 91,259,051 shares held three months ago (5.61% change). Short float at 8.37%, which implies a short ratio of 4.12 days. The stock has gained 42.11% over the last year.

10. Masimo Corporation (MASI): Medical Appliances & Equipment Industry. Market cap of $1.84B. Institutional investors currently own 53,154,603 vs. 50,354,864 shares held three months ago (5.56% change). Short float at 13.34%, which implies a short ratio of 14.65 days. The stock has gained 11.73% over the last year.

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

The Dark Side of Student Debt

Imagine going to college to improve your life and walking away with $500,000 in student debt. That number is no typo. A young Seattle couple ended up so mired in debt on the way to their degrees that they "couldn't even make the initial payments," says Christina Henry, of Seattle Debt Law. After the collection agencies started calling, the couple, who have two children and earn a total of $80,000, visited Henry for help. "They took out as much as they were able to and didn't even know how much they had. It's the most egregious case I've ever seen."

Consider it a cautionary tale. Over the past decade, college students have had every reason to borrow for college and little reason not to. College costs exceeded inflation by as much as six percentage points a year, bringing the average annual price of a private-school education to $37,000. Congress raised the maximum on federal student loans and introduced the Grad PLUS loan, allowing graduate students to borrow up to the cost of attendance. And until 2008, when credit began tightening up, lenders handed out private student loans as if they were party favors.

Result? More students borrowed, and in larger amounts. The average debt at graduation was $24,000 in 2009, up 6% from the year before, according to the Project on Student Debt. But that understates the dramatically higher debt that some students racked up. And many of them got swamped by their bills almost immediately. Of the 3.4 million federal-loan borrowers who entered repayment in 2008 (as the economy slid into recession), 7% defaulted within the year, the highest percentage in more than a decade (see the explanation of late-payment penalties below). That statistic doesn't include the thousands of borrowers who fell behind on their payments without defaulting, or those who couldn't keep up with their private student loans.

Missing a few payments invites dunning calls and letters, but defaulting has the potential to destroy your future. Being on the dark side of federal student debt means the feds can demand payment in full, assign your case to a collection agency, garnish your wages, pocket any state or federal refunds, and even come after your benefits in your old age. "We see people who defaulted on loans in the 1970s and 1980s whose Social Security benefits are being garnished," says Paul Combe, of American Student Assistance, an agency that guarantees federal loans. Worse yet, old, neglected loans carry decades' worth of fees, interest and collection costs. "A $2,000 loan that defaulted 20 years ago is now $30,000," says Combe.

The federal loan program offers several plans that can get you back on track. With private loans, you have to negotiate with the lender. Either way, start by knowing what types of loans you have, where they originated and who services each one. For federal loans, go to the National Student Loan Data System. For private loans, review your loan agreements, which should include the terms of the loan and repayment options.

Help with federal loans. With the federal loans known as Staffords (now part of the Federal Direct Loan program), as well as Grad PLUS loans, the loan goes into delinquency when your payment is 21 to 30 days late. If you fall 60 days behind, the loan agency will report the lapse to the national credit bureaus. Meanwhile, late fees and interest will add up.

If none of the federal repayment programs offers a solution, apply to your lender for deferment or forbearance. Deferment lets you forgo monthly payments, usually for a year at a time, for up to three years. The feds pay the interest on subsidized Staffords but not on unsubsidized loans.

Accrued interest gets tacked on to the principal. You have a legal right to deferment if you meet certain criteria, including economic hardship or status as a half-time student or you are on active duty in the military.

Forbearance gets you off the hook on payments for up to five years, in yearlong increments. Generally, the lender decides whether you qualify. Interest accrues on all the loans, including subsidized Staffords. Forbearance makes most sense for borrowers who are experiencing a short-term financial crunch, not those whose situation is unlikely to improve. Such borrowers are better off in an income-based plan, which can reduce the payments to as low as zero and offers forgiveness after 25 years.

Defusing default. If you fail to make a payment for more than 270 days, your loan is technically in default, but most lenders wait 360 days to make the default official, giving you a window in which to redeem yourself. (If you're in that phase, call your lender immediately to discuss your options.) After the loan defaults, you lose access to forbearance and deferment, as well as to future federal student aid, and the default goes on your credit record.

Uncle Sam gives you several ways to get back in his good graces. One is to rehabilitate the loan, in which you contact your lender and arrange to make nine timely, "reasonable and affordable" payments over a ten-month period. The Department of Education sets guidelines as to what constitutes reasonable and affordable and stipulates that the lender can't require a minimum payment. In practice, however, negotiating the amount with the lender can be "a huge problem," says Deanne Loonin, of the National Consumer Law Center. If you and the lender can't come to terms, contact the Federal Student Aid Ombudsman, at 877-557-2575, and ask for help. If you rehabilitate your loan, the default disappears from your record.

The other strategy is to consolidate your loans with the Federal Direct Loan program, which lets you immediately enter one of the income-based repayment programs. (If you have already consolidated your loans in the Direct Loan program, you generally are not eligible to do so again.) "The advantage of consolidation is that it's faster. You don't have to make nine payments first," says Loonin. But the default remains on your credit record for up to seven years.

You may conclude that your debt is simply insurmountable and decide to try for bankruptcy. To succeed, you must demonstrate to the court that your payments impose "undue hardship," with no prospect of remedy, and that you made a good-faith effort to repay.

In a few circumstances, such as death or permanent disability, or if the school closed while you were enrolled, your federal loans are eligible for cancellation. For details, go to www.studentloanborrowerassistance.org.

Help with private loans. Lenders of private student loans typically consider you to be in default as soon as you blow past the payment period, and you can count on receiving collection calls shortly thereafter.

To avoid that scenario, some lenders allow you to make lower payments for a few years and catch up later. They may also grant you forbearance, for three months at a time, during which interest continues to accrue. But don't expect them to go out of their way to extend these deals, says Loonin. Check your promissory note. If you don't see an alternative plan, call the lender and try to arrange one.

Unlike the federal government, which can garnish your wages and pursue the debt indefinitely, lenders of private loans must sue to collect on a default, and they are subject to your state's statute of limitations, usually six years. Lenders can and do take borrowers to court, says Loonin. "We've seen more-aggressive collection efforts, including more lawsuits, on the private-loan side."

If they succeed, they can garnish your wages, put a lien on your house and tap into your bank account. As with federal loans, private loans are extremely difficult to discharge in bankruptcy and require that you meet the same stringent standards. But a lender might consider settling the debt when the prospects for full payment are dim, says Henry. That was the case for her Seattle clients. With no chance of repaying the entire amount, the couple settled some of their private loans, arranged an income-based repayment plan on the federal loans and hope to discharge the remaining debt in bankruptcy.

Follow Kiplinger on Twitter.

Ann Taylor Posts Lofty Earnings, but Shares Drop

Ann (ANN), the parent company of Ann Taylor, beat earnings expectations, but shares fell 6.2% in midday trading as sales at Ann Taylor stores dipped.

Ann posted61 cents of EPS, 4 cents better than expectations, and same-store sales rose 5.5%. Gross margin rose 30 basis points to 57.5%.

Revenue came in at $564 million, slightly below the company’s own projection of $565 million. Same-store sales at the company’s Loft brand grew 7.9%. Ann Taylor stores saw same-store sales fall 5.8%, although they rose 2.5% when including direct-to-consumer sales.

Nomura analyst Paul Lejuez thinks Ann is on track to expand margins going forward.

“With Loft performing well and improvements at Ann Taylor stores, we believe that ANN is on the right track to achieve double-digit op margins over the next several years (vs. 7.6% this year).

Bank of America: Santa Rally Winner

Bank of America (BAC) was the winner among the largest U.S. banking names heading into the holiday weekend ,with shares rising over 2% to close at $5.60.

With light trading volume, investors cheered the news that Republicans in the House of Representatives agreed to a two-month extension of payroll tax cuts. Stocks were also buoyed by a U.S. Commerce Department report durable goods orders had risen 3.8% in November, blowing past the 2% increase predicted by analysts polled by Thomson Reuters.

See if (BAC) is in our portfolio

The KBW Bank Index (I:BKX) moved in line with the broad market, rising 1% to close at 39.94, with 19 of the 24 index components ending the week with gains.Coming back from their mid-week doldrums, when the shares closed below $$5.00 and were back to levels not seen since the doldrums of March 2009, Bank of America's shareholders ended the week with an 8% gain.Reuters reported on Friday that Bank of America was considering additional assets to boost regulatory Tier 1 capital. The company announced last week that its issuance of new common shares and retirement of preferred shares and long-term debt would increase its Tier 1 capital by $3.9 billion, over and above any profit booked for the quarter. Bank of America's Tier 1 common equity ratio was 8.65% as of Sept. 30, according to SNL Financial, which was the lowest among the big four. The shares trade at roughly 0.4 times tangible book value, with the heavy market discount reflecting the continued uncertainty over capital levels, but also ongoing mortgage putback litigation, including the Federal Housing Finance Agency's lawsuits, and the expected settlement between the largest mortgages servicers, federal regulators and the states' attorneys general, which Credit Suisse analyst Moshe Orenbuch on Monday estimated would cost Bank of America between $5.6 billion to $9.4 billion.Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.Shares of Wells Fargo (WFC) rose 2% to close at $27.80.Heading into the Federal Reserve's third-round of stress tests, Wells Fargo appears well-positioned for regulatory approval of an increased return of capital to investors during 2012.The company's Tier 1 common equity ratio was 9.34% as of Sept. 30, according to SNL, and Wells Fargo's operating returns on average assets exceeded 1.00% over the previous five quarters, for the best overall earnings performance among the "big four" U.S. banks.

1 2 Next › Last »

Orenbuch predicts the coming foreclosure settlement will cost Wells Fargo between $2.6 billion and $4.4 billion.

Interested in more on Wells Fargo? See TheStreet Ratings' report card for this stock.

Citigroup (C) had the highest Sept. 30 Tier 1 common equity ratio among the big four, at 11.71%, followed by JPMorgan Chase (JPM), at $9.8%. Shares of JPMorgan Chase rose slightly to close at $33.57. The company was included among three large-bank stock picks for 2012 by KBW analyst Frederick Cannon, who said in a report on Friday that even though large U.S. banks were holding record levels of capital and were highly liquid, the ongoing regulatory onslaught, mortgage overhang and transformation of the business would stifle growth. JPMorgan chase is trading just above book value. KBW analyst David Conrad has a $54 price target for the shares, based on his 2012 earnings estimate of $4.80, which is slightly below consensus. Interested in more on JPMorgan Chase? See TheStreet Ratings' report card for this stock.RELATED STORIES: 3 Big Bank Winners for 2012 - KBW >Bank of America Shares Try to Kiss $5 Goodbye >General Electric Pays $70M Fine in Muni Bond Scheme >Raymond James Makes Bid on Regions Unit: Report >NYSE-Deutsche Boerse Deal Given U.S. Approval >10 Biggest Stock Value Killers of 2011 >10 New York Bank Stocks With Most Upside for 2012 >-- To contact the writer, click here: Philip van Doorn.To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

>To order reprints of this article, click here: Reprints « First ‹ Previous 1 2

McDonald’s Shares Jump on 1Q Earnings

There was�no reason for�investors to grimace�after fast food giant McDonald�s (MCD) showed that its revenue and profit can hold up even in a difficult economy.

�At $97.40, the fast food giant�s share price jumped 2.2% or $2.14 a share during morning market action Friday after the company reportedhigher�first-quarter earnings, better-than-expected�revenue and improved margins.

Last month, McDonald’s warned that it expected continued economic uncertainty, austerity measures in Europe and commodity and labor costs to affect its first-quarter operating income growth. Yet it still rose 9% in the quarter, excluding foreign currency translation, as sales grew 7% and margins improved.

The company also said it expects April global same-store sales to rise about 4%, after posting a 7.3% rise globally in the first quarter.

McDonald’s reported a first-quarter profit of $1.27 billion, or $1.23 a share, up from $1.21 billion, or $1.15 a share, during the same quarter last year, on revenue of $6.55 billion. Analysts polled by Thomson Reuters had most recently forecast earnings of $1.23 a share on revenue of $6.54 billion.

Treasurys rise on concerns about Greece

NEW YORK (MarketWatch) � Treasury prices rose Monday, pushing yields down slightly, in response to the lack of a political agreement in Greece to make reforms necessary to avoid default.

Yields on 10-year notes 10_YEAR , which move inversely to prices, fell 3 basis points to 1.9%. A basis point is one one-hundredth of a percentage point.

Click to Play China to rescue the euro zone?

China's premier indicates Beijing should help Europe with its debt crisis, but that message may be a tough sale to the Chinese.

Five-year note yields 5_YEAR �slipped 2 basis point to 0.75%, heading back toward an all-time low touched last week.

Thirty-year yields 30_YEAR �declined 3 basis points to 3.09%.

In Greece, party leaders once again postponed a meeting where they�re expected to agree on key austerity measures, including wage cuts. They failed to come to terms during weekend negotiations.

Leaders from the European Union, the International Monetary Fund and the European Central Bank told Greece that without such reforms, it may not receive the second bailout of 130 billion euros ($170.6 billion) that was agreed to in principle last year. Without the aid, Greece is seen as certain to miss a March debt repayment, putting the country into outright default. Read the latest on Greece.

Limiting gains, traders are preparing for the U.S. government�s quarterly refunding auctions, which will include sales of 10-year notes and 30-year bonds. See story on bond refunding.

�Treasurys are modestly higher, as discord among Greek coalition members over the terms of the second bailout raises the threat of default and has sent the euro and European stocks lower,� bond strategists at RBS Securities said. �We have a very quiet week of economic data up ahead and the market�s focus will be on the Treasury refunding auctions, which begin tomorrow.�

Bond prices dropped on Friday, pushing benchmark 10-year yields up by the most since October, after the U.S. government said the economy added many more jobs in January than expected, boosting confidence that the economy continues to grow. Read about bond selloff on Friday.

Corporate-debt sales, ETFs

Corporate-bond markets were also quiet, with just a handful of companies � many based abroad � expected to issue bonds during the session. Those include Kimberly-Clark Corp. KMB , selling $300 million, according to CRT Capital Group, and Deutsche Bank AG DB selling $800 million.

�Turmoil on the macroeconomic front is never a positive for new deals in the debt market,� said Michael Gambale, an analyst at Informa Global Markets. Given �Greece uncertainty coupled with the Monday following a New York Giants Super Bowl win last night, we expect new announcements to be relatively slower than usual.�

Among some of the major bond exchange-traded funds, iShares iBoxx $ InvesTop Investment Grade Corporate Bond ETF LQD �rose 0.3%.

The iShares Barclays Aggregate Bond Fund AGG slipped 0.1% and the Vanguard Total Bond Market ETF BND �was little changed, but both are near their 52-week highs.

Some of the biggest high-yield ETFs were off slightly. The iShares iBoxx $ High Yield Corporate Bond Fund HYG �fell 0.1% and SPDR Barclays Capital High Yield Bond ETF JNK �lost about 0.2%.

Top Investors Reveal Their Holdings: Soros, Buffett, Einhorn, and More

With reporting by Avi Salzman and Brendan Conway

Every three months, many investors are forced to release a list of their stock holdings as of the end of the most recent quarter. The 13f filings are a little dated (45 days old) and they don’t include options and some other kinds of holdings, but they nonetheless offer a glimpse into the portfolios of some of the most closely followed investors in the world. The filings for the end of the fourth quarter began trickling out late on Tuesday, and they reveal quite� a few compelling bits of information: that John Paulson liquidated his Bank of America (BAC) holdings just before the stock went on a tremendous run, that Bill Ackman suddenly soured on Lowe’s (LOW),� and that George Soros and David Einhorn took a liking to some big tech stocks. We’ve broken down the holdings of some top investors below:

Warren Buffett

AP

Berkshire Hathaway (BRKB) doesn�t change its stock portfolio very much each quarter, but investors tend to watch the company�s incremental moves closely. Warren Buffett has put his two newest deputies and likely successors, Todd Combs and Ted Weschler, in charge of parts of the portfolio, but Buffett is still the head honcho.

In the fourth quarter, Berkshire bought Davita (DVA), which runs dialysis centers, and Liberty Media (LMCA), a communications and entertainment company. The company ended the quarter with 2.7 million shares of Davita and 1.7 million shares of Liberty Media.

Berkshire also trimmed and added to various positions in its legendary portfolio.

It raised its stake in Wells Fargo (WFC) to 384 million shares, up from 361 million at the end of the third quarter. It raised its stake in DirecTV (DTV) to 20 million shares from 4.2 million shares. Its CVS Caremark (CVS) stake was 7.1 million, up from 5.7 million. And Berkshire�s Visa (V) position rose to 2.9 million shares, up from 2.3 million.

Berkshire cut its Johnson & Johnson (JNJ) stake to 29 million shares from 37 million.

Bill Ackman

Activist investor and Pershing Square Capital Management chief Bill Ackman disposed of a sizable but brief-lived stake in hardware retailer Lowe�s Cos. (LOW) late last year, a Tuesday afternoon filing showed.

A previously reported stake of 21.2 million Lowe�s shares was nowhere to be seen in a 13-F SEC filing that showed Ackman�s holdings as of Dec. 31. �A call to Pershing Square requesting comment was not immediately returned.

It was a short-lived investment. Pershing only disclosed the position in its third-quarter filing in November, which showed that he held about 1.7% of the company as of late September. Lowe�s stock is up 7.1% for the year and it was up about 0.8% around midday on Wednesday.

Tuesday�s filings also showed a big stake in whiskey maker Beam Inc. (BEAM) after the company separated last year from the former Fortune Brands.�The 20.8 million Beam shares under Pershing�s control are worth more than $1.1 billion as of Tuesday�s closing price � or about one-eighth of the company�s entire market capitalization. The Deerfield, Ill.-based company�s stock edged up 0.7% to $54.18 Tuesday and gained fractionally in after-hours trading.

That�s in addition to his previously disclosed position in Fortune Brands Home & Security (FBHS), the other wing of the old Fortune Brands.

Ackman has an extensive presence in the consumer-goods industry. Other positions he�s previously disclosed include Family Dollar Stores (FDO), Kraft Foods (KFT) and J.C. Penney (JCP). Photo via Bloomberg News.

David Einhorn

Bloomberg News

Greenlight Capital�s David Einhorn apparently got bullish on tech companies toward the end of 2011, according to a filing released after the market closed Tuesday.

Greenlight added a 3-milion-share position in Yahoo (YHOO) and a 2.9-million share position in Research in Motion Limited (RIMM). He also bought 14 million shares of Dell (DELL). His position in Microsoft (MSFT) was basically unchanged, but he added to his Apple (AAPL) position, ending the quarter with about 1.5 million shares, up from 1.3 million.

John Paulson

Bloomberg

Hedge-fund manager John Paulson appears to have dumped his Bank of America (BAC) and Citigroup (C) stock holdings some time last quarter, after an especially tough 2011. It means he disposed of his BofA common shares before they staged a 45% rise this year.

The head of Paulson & Co. suffered last year as sagging bank stocks tarnished what had become a reputation as one of Wall Street�s shrewdest investors. But he held onto sizable positions in the financial sector into the fourth quarter, a November filing showed.

The�latest SEC filing gave no sign of what used to be a 64.3 million-share BofA stake and another 25.1 million shares in Citi.

It�s not exactly clear when the stakes were disposed of. But in the case of BofA, it doesn�t much matter. The stock didn�t start posting substantial gains until 2012 was underway.

The fund manager did hold onto a batch of warrants in Bank of America, according to the filing.

It�s been a big day for Paulson news. The Wall Street Journal earlier reported on the hedge-fund manager�s effort to break up the 200-year-old Hartford Financial (HIG).

David Tepper

Bloomberg News

Appaloosa Management’s David Tepper appears to have reduced his equity portfolio considerably in the fourth quarter, according to a filing released after the close of trading on Tuesday. The value of Tepper�s stock holdings fell to $765 million from $1.5 billion at the end of the third quarter.

Over two quarters, the drop is even more pronounced; Tepper reported stakes worth $4.2 billion at the end of the second quarter. (Of course, options and other assets don�t show up in quarterly filing reports, so it�s unclear how much Tepper actually took off the table.)

Tepper�s entire 2.5 million-share stake in Citigroup (C), which he reported at the end of the third quarter, is gone in the new filing, as is his 4.3-million-share stake in AMR Group (AMR), his 2.9 million share stake in Delta (DAL) and his 9.3-million-share stake in US Airways (LCC). Tepper opened a new 1.2-million-share position in Oracle (ORCL).

George Soros

Associated Press

Billionaire hedge-fund manager George Soros entered 2012 with a leaner, more concentrated stock portfolio that sported bigger stakes in Google (GOOG), Delta Air Lines (DAL) and Wells Fargo (WFC) a filing late Tuesday shows.

The head of Soros Fund Management LLC showed 145 positions in stocks and other securities in its most recent quarterly SEC filing, a drop of about two-thirds from the 473 positions a quarter earlier, Dow Jones Newswires reported late Tuesday. The figures show what Soros was holding as of Dec. 31.

Soros� stake of 259,900 Google shares, up from 1,126 shares last time around, is worth about $158 million. That�s now one of the biggest positions in his portfolio.

Soros also showed 1.8 million Delta shares, up from about 28,000 at the end of the third quarter, and a tenfold increase in Wells Fargo, to 1.2 million shares.

Meanwhile, Amazon (AMZN) appeared to fall out of Soros� favor. A stake of 206,000 shares disclosed in the third quarter didn�t appear in the latest filing.

It�s also worth noting the sizable change in the value of reportable securities. Soros showed $4.6 billion in stocks and other assets for the quarter, down from�$5.8 billion as of Sept. 30 and likely reflecting a shift from stocks into other assets for which the SEC doesn�t require a disclosure.

Gold Miners Balk at Dividends

Gold miners are balking at diving into the dividends that investors and analysts have been calling for.

A dividend increase isn't a sure thing for Royal Gold(RGLD), said Tony Jensen, chief executive officer, during the Denver Gold Forum. Jensen said that raising it is on the table at the November board meeting but that pumping money into projects might win out.

See if (ABX) is in our portfolio

The company has increased its dividend every year for 10 years and in 2010 it went up 20%, but it's only 0.5%, measly compared to the 1.1% dividend yield of its competitor Franco Nevada(FNV). "We'll be taking a look at it," says Jensen. But "we're still in a real growth environment ... we've actually recycled a lot of our cash flow and we've actually gone out to the market to get additional capital to do that kind of thing." "If things do become more difficult to find then I think that having a higher yield would be a very natural thing for a royalty company to do." Jensen warns, however, not to expect anything dramatic from any dividend policy. The company primarily lays out a lot of cash upfront for a percentage of gold production over the life of a mine to help the miner fund its project. It has one stream, which means it put up a smaller amount of cash and then pays $400 an ounce for gold over the life of the mine. Royal Gold has working capital of $140.4 million and $226.1 million in debt. Despite having 33 producing assets and 21 development stage projects, the company is getting hurt as producers miss their production targets -- like when Goldcorp(GG) lowered its 2011 estimates at Penasquito by 100,000 gold ounces. It's these risks, along with expansion hopes, that are blocking a big dividend. A few years ago, according to Jensen, Royal Gold received 80%-85% of its revenue from one property. Today there are 36 different pieces of revenue coming in from various projects. Barrick Gold(ABX) was just as illusive, with CEO Aaron Regent saying the company had a "progressive dividend policy," which is currently at 0.9%. This means that if the company grows earnings and cash flow enough then Barrick will return more to shareholders. "If you look at the performance of the company and the outlook for the industry, things are going well and we are generating record earnings so I would suggest to you that dividends and dividend increases are probably something that will be very much discussed." JPMorgan Chase(JPM) wrote in a recent note that Barrick might be more apt to build out current projects and pay down debt before boosting dividends. Regent hedged his answer to the question a bit by saying that the "ideal scenario is we do a bit of everything." Barrick is the biggest miner in the world and is trying to increase production from 7.5 to 9 million ounces in five years. Although that is a 20% growth profile, it is tremendously hard to do the bigger a gold miner gets. Barrick is counting on Pascua-Lama and Pueblo Viejo, both in advanced stage projects, to add 1.4-1.5 million ounces to annual gold production. The company also recently announced two gold discoveries in Nevada, which could be huge for Barrick. The company increased its exploration program to $370-$390 million for 2011, perhaps signaling that growth just might be more important than dividends. Mark Bristow, CEO of Randgold Resources(GOLD), says investors need to stop whining about higher payouts. "For an investor in the gold space now, all he is doing is worrying about -- remember he's a fund manager -- is how does he maximize his returns." Dividends for dividends sake are fine, says Bristow, but what about the long term? "Our key is to create value for all stakeholders. We work in emerging markets [like West Africa] ... We rent their assets. We don't own them and it's about how do we deliver value for all of them." Randgold has doubled it's dividend in the last 5 years but it stands at a tiny 0.2%. Bristow declined to commit to doubling the payout within the next 5 years, "you're not going to get that out of me." Bristow says that big gold companies, his peers, have all dished out piles of paper and diluted shareholder value by issuing a ton of shares over the last 10 years. "They diluted the shareholders and suddenly now they've got so much money that they have to go give it back to the shareholders." Randgold is known for not issuing shares and Bristow wants to get to a point of sustainable production -- the company produced 184,711 ounces in the second quarter -- and then pay a set percentage in dividends. Still, he will not be swayed by market or investor pressure. Companies can increase cash flow, earnings, production, but it doesn't matter unless you are giving good production per share, he says, which means high grade gold. Randgold's grade is just under 4 grams per ton when other companies can be less than 1 gram.

1 2 Next › Last »

As much as investors cry for dividends, they seem to have forgiven Randgold whose shares are up 33% this year versus the PHLX Gold/Silver Sector down 5%

Newmont Mining(NEM) took a different route, however, and went aggressive on paying investors.

The company announced a new policy Monday, tying its dividend to gold price targets. Between $1,700-$2,000 an ounce for every $100 move in the gold price, the dividend increases by 30 cents. Then, from $2,000 to $2,500 an ounce for every $100 move, the dividend jumps 40 cents. This kind of payout could give Newmont a 3% yield, higher than the S&P. "I wouldn't call it aggressive," said CEO Richard O'Brien, "I think it balances the cash flow the company is generating at ever-improving gold prices with our need to reinvest in the business." This strategy seems to be working. Year-to-date, the stock is up 7%. Since mid-April, when the company first announced a dividend linked to the gold price, shares have popped 14%. "If all we do is continue to reinvest and reinvest and don't deliver something back, I don't think it rewards [investors] for all the volatility we see in the market." O'Brien is hoping gold hits $2,000 and pushes the dividend to 3% so it can be a catalyst for the company. At some point paying out a massive dividend will hurt Newmont's cash flow, but only if gold falls to $1,000-$1,200 an ounce. "I think we have plenty of current production which yields current cash flow to more than cover our capital and exploration needs and provide for the dividend." Fund managers and traders have already been placing bets on Newmont ever since the company grabbed their attention with their bold dividend policy in April. Their interest makes Newmont's shares very liquid, which can trigger a rush to the exits if traders get skittish, but O'Brien thinks the dividend actually offers protection against shorting. "You are going to have to pay to hold if they are trying to short our stock," he said. So far Newmont has been the only one to definitively answer investors' calls for more money. Now the test is to see if other gold miners cave to the pressure. Hecla Mining(HL) got in on the act today, announcing that it will implement a dividend linked to silver prices. The dividend will be three cents per share provided that Hecla's average realized silver price for the third quarter is $40 per once. Dividends will rise or fall by 1 cent for each $5 per once move in average realized silver prices for the previous quarter."Our board's action to adopt this dividend policy reflects our strong operating performance and high silver margins, each of which has strengthened our financial and liquidity position," said, Phillips S. Baker, Jr., chief executive officer. "This policy allows us to continue to invest in projects that are expected to grow silver production by 50% in the next five years, evaluate external growth opportunities, continue to strengthen our balance sheet, and now provide cash returns to stockholders." -- New York.>To follow the writer on Twitter, go to http://twitter.com/adsteel.

>To order reprints of this article, click here: Reprints « First ‹ Previous 1 2

Another Judge Challenges SEC Settlement

Another judge has challenged the way the Securities and Exchange Commission arrives at settlements for alleged wrongdoing, this time in a Milwaukee court.

U.S. District Judge Rudolph T. Randa said in a filing on Wednesday that some provisions of the SEC’s settlement with Milwaukee-based Koss Corp. were “vague,” Bloomberg reported. Randa also wrote that the settlement failed to provide sufficient information to show the fairness of penalties assessed against Michael Koss, the company’s CEO.

Randa’s objections are reminiscent of Judge Jed Rakoff’s criticisms of the SEC’s negotiated settlement with Citigroup, in which Rakoff said that there weren’t enough facts for him to make a decision. Indeed, Randa cited Rakoff in his Koss filing.

As previously reported by AdvisorOne.com, less than a month ago Rakoff, a judge in U.S. District Court in Manhattan, rejected the SEC’s $285 million settlement with Citigroup Inc. He harshly criticized the way the agency handled the case. Among other things, Rakoff said that the agency failed to compel companies to admit wrongdoing and did not seek sufficiently tough penalties for the actions committed.

The agency responded by seeking to have Rakoff’s decision overturned, saying in a Dec. 15 statement that Rakoff “committed legal error by announcing a new and unprecedented standard that inadvertently harms investors by depriving them of substantial, certain and immediate benefits.”

In October, the SEC accused stereo headphone manufacturer Koss Corp. of making materially inaccurate financial statements for fiscal years 2005 through 2009. It also said that CEO Michael Koss failed in both that position and earlier as CFO in overseeing accounting and finance at the company.

Randa cited Rakoff’s opinion in his own filing, and questioned the adequacy of the Koss settlement’s provision that the company promise not to violate securities laws in the future; he added that the agreement is vague and could pose enforcement difficulties in times to come.

In his opinion, he also criticized the data surrounding the amount of the settlement, saying in part, “Without any factual predicate for how those disgorgement terms were determined and what more, if anything, could have been subject to disgorgement, the Court cannot assess their fairness and the extent to which they serve the purpose of disgorgement which is to deprive the violator of unjust enrichment and thereby further the deterrence objectives of securities laws.”

Randa noted that Koss and his family directly or indirectly own more than 70% of the company’s shares.

Adam Pritchard, a securities law professor at the University of Michigan Law School, was quoted saying, “If other judges start to follow Rakoff’s lead that’s a big problem for the SEC because they’ll have to try more cases.”

Rand has asked the SEC to respond by Jan. 24.

Jobs Report Summary: No Huge Surprises but Enough to Spur Monday Morning Melt-Up

Non-farm payrolls didn’t contain any huge surprises this morning as total payrolls came in below expectations at 162k. The unemployment rate was steady at 9.7% and the U6 unemployment rose to 16.9% All in all, the report appears to be of the “ugly Goldilocks” sort – not too hot and not too cold, but just ugly enough under the surface to keep the liquidity pumps fully primed. This might have been the most highly forecast piece of data in the history of the market, but managed to surprise nonetheless. Stock futures rallied modestly on the news, but the dollar is soaring 0.7% against the euro so action on Monday could be mixed to positive.

There were some definite positives in this morning’s report. The big jump in overall jobs was impacted less by the Census hiring than many presumed. Census hiring was only 48K in this report which implies that private sector job growth was stronger than many assumed (most analysts assumed 100K+ Census hiring). This means the Census hiring will bolster the next few reports substantially. January and February payroll reports were also revised higher with January tacking on 40K (from-26k tK +14K) and February tacking on 22K (from -36K to -14K). Despite the positives, the overwhelming negative is the continuing high level of unemployment on Main Street with U6 at 16.9% and the headline figure at 9.7%. This report is a start, but barely puts a dent in the job losses we’ve seen over the preceding 24 months.

Markets reacted very predictably to the news. Equities initially declined on the headline, but were then bolstered by news of worse than expected Census hiring which implies better than expected private sector job expansion. Bond and currency markets also read the report as being a sign of a stronger economy in the months ahead. By the end of the session S&P futures had added 4.25 points or 0.36%.

(S&P 500 Futures)

The rally in the dollar (up 0.7% vs the euro) implies that the U.S. economy is getting stronger. Unfortunately, it also implies that Fed rate hikes are closer than many might think. The sharp move higher in the dollar is going to offset some of the move higher in equities as commodities will likely trader lower on Monday.

(EUR/USD)

And for those wondering – the trading gift that keeps on giving is likely to continue Monday morning. The Monday morning melt-up is alive and well. This will make it 22 of 25 Mondays of late. Not too shabby.

The full statement by Keith Hall, Commissioner of the BLS is attached:

Nonfarm payroll employment rose by 162,000 in March, and the unemployment rate was 9.7 percent for the third month in a row. Job gains continued in temporary help services and in health care, while job losses occurred in financial activities and in information. The March employment increase also included 48,000 workers hired by the federal government for Census 2010.

Temporary help services employment increased by 40,000 in March. Since last September, employment in this industry has grown by 313,000, or 18 percent. Health care added 27,000 jobs in March, compared with an average monthly gain of 18,000 over the prior 12 months. Mining employment rose by 8,000 in March. This industry has added 31,000 jobs since last October.

Federal government employment rose over the month, reflecting ramped-up hiring for Census 2010. In March, the Census Bureau brought on 48,000 temporary workers. Employment in state and local governments was essentially unchanged.

Manufacturing employment continued to trend up in March. Over the last 3 months, manufacturing has added 45,000 jobs, with most of the gains in durable goods industries. Construction employment held steady in March. This industry had shed an average of 72,000 jobs per month in the prior 12 months. Employment continued to decline in financial activities (-21,000) and in information (-12,000) in March. Other major industries showed little change in employment.

Average hourly earnings of all employees in the private sector declined by 2 cents in March to $22.47. Over the past 12 months, average hourly earnings have increased by 1.8 percent. From February 2009 to February 2010, the Consumer Price Index for All Urban Consumers (CPI-U) rose by 2.2 percent.

Turning to measures from the survey of households, the unemployment rate held at 9.7 percent in March. Over the month, jobless rates for the major worker groups showed little or no change. Of the 15.0 million persons unemployed in March, 6.5 million had been jobless for 27 weeks or more, an increase of 414,000 over the month. These long-term unemployed made up 44.1 percent of all unemployed persons, a record high.

The employment-population ratio was 58.6 percent in March. This measure has been trending up since its recent low of 58.2 percent in December. Among the employed, the number of individuals working part time who preferred full-time work increased in March to 9.1 million.

In summary, nonfarm payroll employment rose by 162,000 in March, and the unemployment rate held at 9.7 percent.

Source: BLS

Low M2 Growth Makes Deflation Look More Likely than Inflation

M2 growth (data here) fell to 2.7% (on an annual basis) in the week ending December 21, 2009, the first time since the summer of 1995 that annual M2 growth was below 3%, and the lowest growth rate since a 2.4% reading in late July 1995 (see chart above).

The growth rate of the monetary base (data here) has also been falling, and is now below 20% for the first time since early October 2008 (see graph below):

MP: For those worried about inflation, I think you better tell the money supply to start growing a little faster for your fears to be realized, because deflation looks more likely now than inflation, based on the monetary aggregates? Doesn't it?

How Valuable Is Encana?

When it comes to the oil and gas industry, assets matter a lot. For companies operating here, there's nothing more important than reserves, rigs, submersibles, and refineries. However, these assets must be capable of generating profitable returns.

Value for money
These returns indicate whether a given company has the capability of using its assets efficiently and profitably. After all, it makes little sense for an exploration and production company to have a lot of acreage, but not the ability to pull out the oil (or natural gas, for that matter) within. In short, it pays to find out how valuable these assets are to the company.

Here, we will find out whether a given company's assets are profitable and efficient compared with its peers based on some important metrics:

• Return on assets, or net income divided by total assets shows how much the company is earning compared against the assets it controls. The ratio is an indication of how effectively the company is converting the money it has invested in reserves, property and other equipment into net earnings. Higher the value, more profitable the assets are. The metric is pretty useful when used as a comparative measure -- against peers and also against the industry in general. A value greater than 5.8% is what investors should be looking for in this industry.
• Fixed-asset turnover ratio, or revenues divided by total fixed assets (like plant, property, and equipment). Fixed assets form a major chunk of total assets for companies in this industry. This metric shows how efficiently the company is using its fixed assets to generate revenues. The higher the turnover rate, the better. A value above 0.6 looks pretty good.
• Total enterprise value/discounted future cash flows shows how expensive the company is when compared against its standardized future cash flows. The denominator indicates the total present value of estimated future cash inflows from proved reserves, less future development and production costs, discounted at 10% per annum. It's based on today's energy prices and doesn't give any credit for unproved reserves.

With these factors in mind, let's take a look at Encana (NYSE: ECA  ) and see how it stacks up against its peers:

Company	Return on Assets (TTM)	Fixed-Asset Turnover Ratio	P/B	TEV/DFCF
Encana	1.3%	0.3	0.84	1.18
Chesapeake Energy (NYSE: CHK  )	4.0%	0.5	1.19	2.16
Devon Energy (NYSE: DVN  )	7.7%	0.5	1.23	3.19
Pioneer Natural Resources (NYSE: PXD  )	5.8%	0.3	2.09	2.41

Source: S&P Capital IQ; TTM = trailing 12 months.

Encana's assets don't seem to generate great returns compared with some of its peers. Additionally, at 1.3%, its ROA is much below the industry average. Its fixed-asset turnover isn't the best, either.

The company's strategy to increase natural gas production could backfire given the lousy market conditions for this commodity. Encana has agreed to sell its North Texas natural gas properties for $975 million, and it recently completed a debt offering of $1 billion. It seems the company is in dire need of cash. Investors should dig deeper.

Deeper analysis suggests that the company is toward the cheaper side when compared with peers' future cash flows from proved reserves. However, this might be justified. Keeping these figures in mind, I believe the stock is priced fairly relative to its book value.

Foolish bottom line
This isn't the only criterion you can use, although assets generally indicate how oil and gas companies have been faring in terms of operations. You can get a more comprehensive understanding by digging deeper. However, on the surface, Encana doesn't seem to be doing fine.

We, at Motley Fool, will help you to stay up to speed on the top news and analysis on Encana. You can start by adding it to your�watchlist.

AdMob Receiving 2 Billion Ad Requests Per Day

By Leena Rao

Google’s mobile ad network AdMob is releasing a number of staggering statistics today as the network begins its first full year under the Google umbrella. Google (GOOG) says that AdMob is receiving 2 billion ad requests per day, a data point which has quadrupled over the past year. To put that in perspective, as of May of 2010, AdMob was receiving 10 million monthly mobile ad requests.

To give you a picture of the current pace of mobile advertising, Google receives more ad requests in a single day than AdMob received for the entire month of December 2007 (a growth rate of 30 times in just over three years).

AdMob says that more than 100 million unique Android and iOS devices requested an ad each month, which is double the rate over the last six months. Google says that AdMob is seeing a significant amount of growth in international markets. Nine countries in the AdMob network generated more than a billion monthly ad requests in December 2010, up from just one country a year ago. In fact, the strongest regional growth in monthly ad requests over the past year has come from Asia (564%), Western Europe (471%) and Oceania (363%).

We know that AdMob has been steadily growing within Google, most recently serving its 300 billionth mobile ad since 2007 at a record-breaking fast pace for the company.

Perhaps this recent data is a sign that Google may start publishing the monthly statistics and data surrounding AdMob again (the company stopped discontinued the reports in May 2010 for “a few months”).

Original post

OpenTable: A Rocket Stock or Dud?

Thesis

OpenTable (OPEN) illustrates the fast structural changes occurring in our society toward the next stage of full digitalization. This firm installs an automated hardware and software reservation system for restaurants, which then interface with OpenTable’s website or smart phone applications, where diners can make free reservations. This next stage of full digitalization is often referenced as “Web 2.0.” OpenTable has the potential to become the next “iTunes platform” in the restaurant industry. The long-term profitability and growth of the firm is derived from the direction of the world economy and consumer sentiment given that its revenue correlates with consumer spending.

Over the last six months, U.S. consumer sentiment has been improving, retail has posted s strong turnaround, and the job market has illustrated positive signs of life. Improvement in these macro-economic variables should pay dividends for OpenTable as people enjoy more late nights out on the town. As well, the probability of a double dip in the economy is now unlikely. At this point, OpenTable is still scaling up at a low cost, with the power of an established economic moat, while leveraging its viral popularity and generating free cash flow with nominal debt. For these reasons, OpenTable has the potential to keep surprising investors.

With the recent acquisition of TopTable.com, a major player in the European space, we see the first sign of substantial expansion into foreign markets. With the acquisition, OpenTable gained 5,000 new restaurant clients and roughly another three million seated diners annually. This appears to be a smart move, however it could become worrisome if this is how they attempt to enter every foreign market as it could result in overpriced acquisitions.

OpenTable has ensured their success through executing multiple lines of revenue.

Below revenue is broken down into three separate categories:

1. Revenue is generated through an inclusive one-time onsite hardware installation and training fee at restaurants.

2. Restaurant customers subsequently pay a monthly subscription fee for the use of OpenTable’s software and hardware.

3. For every reservation created, OpenTable is paid a fee regardless of whether or not the customer shows up. If the customer does arrive for the reservation, the fee is higher. This revenue stream thrives off of repeat users.

When looking at the first line of revenue it’s simple to understand why it works well. Every restaurant is looking to increase its volume. Any type of tool that is going to allow a restaurant to potentially increase its volume in a cost effective manner is going to be a hot commodity. The demand for the hardware has the potential to become self-fulfilling in that restaurants will want it in order to remain competitive with other restaurants that already use it. No business in any industry likes to be behind the curve.

Restaurants today understand that using a technology platform such as OpenTable is not an optional tool but vital instrument to their success and profitability in a digital world. Thus, in our opinion the “bread and butter” of this firm is the second line of revenue. It’s not fancy, it’s not earth shattering, but it’s stable and very profitable given the low cost scalability and the monthly recurring subscription charge. A slight to moderate increase in volume equals tangible benefits for a restaurant. As OpenTable continues to become the new “standard” in making reservations, this should translate into increased loyalty and reliance on the platform by the restaurant.

The platform created by OpenTable is reminiscent to when iTunes first launched from our perspective. It is extremely user friendly, has a viral networking effect, and is tapping a giant consumer demand base that was previously unrecognized. We now see that one of the biggest reasons iTunes was so successful and profitable was due to the construction of an engaging platform that made users not only loyal to it, but repeat consumers. We see an identical situation taking place with OpenTable’s platform. Users are becoming more loyal and repeatedly it. This idea of an online consumer platform being used repeatedly by millions of users around the world gives OpenTable a substantial X-Factor. The firm has even taken action toward adding ancillary revenue streams such as SpotLight, which offers email based restaurant discounts. This third revenue stream is what gives OpenTable that sexy and mysterious tech aura that could justify a high PE multiple similar to other tech juggernauts.

Risks and Head Winds

In terms of a serious rival, OpenTable currently lacks one. This isn’t to say one couldn’t arise and or be in development currently, but as of right now we don’t see anything substantial on the horizon.

No matter how great any product, idea, and/or service, one of the biggest factors to succeeding in any business is quick scalability that doesn’t entail out of control rising costs and or investments. Currently, OpenTable does not appear to have an issue as they have been able to keep costs low while growing and are already generating free positive cash flow. However, this is something to keep an eye on.

There are risks and headwinds when attempting to penetrate any international market. Every foreign market will have its own set of preferences, cultural norms, and challenges. This is something that cannot be avoided. OpenTable’s ability to successfully navigate through foreign markets has yet to be seen. Looking at OpenTable’s positive impact from the acquisition of TopTable.com relative to foreign market prowess must be taken with a grain of salt because TopTable.com was already well established with 5,000 restaurants.

From a macro perspective, we can see that OpenTable is very dependent upon the health of the global economy. This firm is a transaction volume based business. Any economic contractions that increase unemployment rates and hurt consumer confidence will likely have an adverse impact on the firm.

Valuation and Modeling Method

We are rating OpenTable as an overall HOLD. Despite being bullish on the company we do not see the stock being undervalued as it holds a fair value of $72 in our DCF model and priced at $77.32 (01/30/2011). As well, the stock currently holds a trailing PE Ratio of 152. We would wait to see the stock lower in value and or want to see earnings before potentially upgrading it to a BUY. Still, OpenTable is a hotly debated stock so we went the extra mile to give bulls, bears, and those in-between an equal voice by providing multiple valuation scenarios.

Bear Scenario:

In a bear camp scenario, we forecasted a decrease in revenue growth from last quarter’s 43% down to 30%. We would assume no material improvement in lower operating costs as well. The fair estimate is $34. We’re pretty sure that somewhere, a bear investor is “fist pumping” in front of his computer like it’s the show "Jersey Shore" after reading this.

Neutral Scenario:

We fell into neutral camp where nothing materially improved or deteriorated. Here we assumed a quarterly revenue growth rate of 43 % along with operating costs staying in line proportionately. The fair value estimate this time is $72 which indicates the firm is still a little overpriced, but not by much.

Bullish Scenario:

In our bullish scenario the company continues to demolish the numbers and reach new highs. The fair estimate is $96. We forecasted quarterly revenue growth increasing by 7% to equal 50%. As well, we forecasted a substantial increase to bottom line growth due to increasing economies of scale. We dropped operating costs from 41% to 20%. Bulls, if this isn’t bullish enough we don’t know what is for OpenTable.

Conclusion:

We assumed under all scenarios that the long-term growth rate was 3% for terminal value using the Gordon Growth Method and a discount rate (WACC) of 5%.

Unusual Action

We would be remise if we didn’t mention that we noticed that the OpenTable has a short float of 43%, as of Jan. 14, 2011 according to Morningstar. Earnings will be reported on Feb. 8, 2011.

X-Factors

1. The firm operates three differentiated revenue streams and is quickly developing new one’s that are easy to integrate into the current business model. SpotLight would be the most easily identifiable.

2. The firm can easily take its current platform and test it out in new foreign markets without spending heavily in new R&D and or capital expenditures. Further, it has already done so successfully with the integration of TopTable.com in the European market.

3. OpenTable has created a profitable and user-friendly platform that flourishes in an environment of repeat end users. It’s difficult not to say it isn’t reminiscent of the iTunes platform.

Management

CEO, Jeffrey Jordan, has served in this position since 2007. Prior to this, he had multiple executive positions within Walt Disney and a successful run as president of eBay's PayPal division. In terms of his executive compensation for 2009, Jordan received a base salary of $360,000, which we found to be pretty fair given the firms performance under his direction. The overall stewardship and management of the firm looks to be fair and sound.

Financial Health and Analysis

OpenTable looks to be as strong as an Ox relative to financial health. The firm is all but debt-free and is extremely liquid. Looking closer at current assets to check the nature of its high liquidity, we see that it has roughly $87 million in cash and short-term investments. Even after the acquisition of TopTable.com it will still hold over $32 million once everything is said and done. It is safe to say we would expect the firm to continue generating strong free cash flow after reviewing the financial statements.

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

FOREX-Euro sluggish in Asia, no rush to USD either – Reuters

Telegraph.co.uk

FOREX-Euro sluggish in Asia, no rush to USD either Reuters * Euro 2.4 pct down vs USD for the year * Euro near all-time lows against Aussie By Cecile Lefort SYDNEY, Dec 23 (Reuters) – The euro barely budged in holiday-thinned Asian trade on Friday, leaving it on track to end the year modestly lower against the … WORLD FOREX: Niggling Ratings Fears Erase Euro's Early GainsWall Street Journal Forex Market Outlook 12/22/11FXstreet.com FOREX-Euro struggles after ECB tender; more pressure eyedReuters UK Daily Markets -Stock Markets Review all 2,808 news articles »

{forex} – Forex News

IMF: Central Banks Must Keep Rates Low

The chief economist of the International Monetary Fund, Olivier Blanchard, tells french paper Les Echos today that central banks around the world should keep interest rates very low given a lack of recovery in private demand.

“So long as there is no recovery in private demand,” Blanchard tells the paper, “it is absolutely vital–maybe even beyond 2010.�If that creates bubbles between now and then, different means must be found (to address them), buy it is essential for economic activity to start up again.”

Coinstar Beats Up on Analysts Yet Again

Coinstar (Nasdaq: CSTR  ) reported earnings on Feb. 6. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Coinstar beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue grew significantly, and GAAP earnings per share grew significantly.

Gross margins increased, operating margins shrank, net margins grew.

Revenue details
Coinstar logged revenue of $520.5 million. The 16 analysts polled by S&P Capital IQ foresaw a top line of $498.5 million. Sales were 33% higher than the prior-year quarter's $390.8 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
EPS came in at $1.00. The 15 earnings estimates compiled by S&P Capital IQ averaged $0.64 per share. GAAP EPS of $1.00 for Q4 were 186% higher than the prior-year quarter's $0.35 per share.

Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 29.7%, 100 basis points better than the prior-year quarter. Operating margin was 10.5%, 50 basis points worse than the prior-year quarter. Net margin was 6.1%, 310 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $517.8 million. On the bottom line, the average EPS estimate is $0.86.

Next year's average estimate for revenue is $2.17 billion. The average EPS estimate is $3.91.

Investor sentiment
The stock has a two-star rating (out of five) at Motley Fool CAPS, with 542 members out of 633 rating the stock outperform, and 92 members rating it underperform. Among 152 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 129 give Coinstar a green thumbs-up, and 23 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Coinstar is outperform, with an average price target of $63.43.

Over the decades, small-cap stocks, like Coinstar have provided market-beating returns, provided they're value priced and have solid businesses. Read about a pair of companies with a lock on their markets in "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke." Click here for instant access to this free report.

• Add Coinstar to My Watchlist.

The great bond bubble joins the S&P

The two most important questions Will you lend to someone who is insolvent and has no plan to get out of insolvency at 1.47% for 10 years when inflation is running at about 3% and prospects of hyper-inflation loom?

Will you sell good assets that are likely to protect your future because S&P 500 crossed an arbitrary line on a chart?

Any astute investor would answer the above two questions with a firm �no.�

A question everybody should askYet fear is such a powerful emotion that it has overcome logic and sanity in the markets.The good news is that when the majority acts out of fear, it provides opportunity for the rest of us.

A CBOE Interest Rate 10-Year T-Note (^TNX) chart illustrates the point.

The driving force behind price movements in popular bond ETFs such as TLT , TBT and TBF , and many others.

As the chart shows, panic has now exceeded the panic at the deepest point of the 2008 financial crisis when measured by the 10-year yield. Ask yourself a simple question, "Is the situation today worse than the situation during the worst of the 2008 financial crisis?"Anyone who is willing to set opinions aside and rigorously analyze the data would answer with a definite �no.�

Is the U.S. government worthy of 1.47%? Here are the statistics to ponder:

• U.S. national debt $15.76 trillion or $138,577 per taxpayer.

• Unfunded liabilities not included in the national debt:

• Social security $15.71 trillion.

• Prescription drug $20.78 trillion.

• Medicare $82.64 trillion.

• Total unfunded liabilities $119.13 trillion or $1,047,713 per taxpayer.

• U.S. federal budget deficit $1.41 trillion.

The Great Bond Bubble

The bubbles form because those making the bubbles bigger are fully convinced of the arguments in favor of the bubbles never busting.

This is true of every bubble we have studied ranging from Dutch tulips to the housing bubble. History is repeating itself.

The real questions

Here are the real questions:

• How big will the bubble become?

• When will it burst?

• How to make money from the bubble?

What Happened to the iShares Dow Jones Select Dividend ETF Yesterday?

There was some bizarre trading behavior that occurred around 2:47 PM (EST) yesterday. Some of the wildest trading occurred with (DVY). DVY is broadly diversified fund that seeks to provide price and yield performance that corresponds to t he Dow Jones Select Dividend index. It is the kind of stock that would appeal to widows, orphans and many senior citizens who are looking for steady dividend returns. DVY is a liquid stock and is also the kind of stock that is traded by high frequency trading programs.

The stock closed at $45.21, down around 3.1% on the day, but the low for the day was $17! I checked Time and Sales and found that most of the bizarre trading occurred between 2:46 and 2:48 PM EST. There were about 100 trades in that time period. Most of the trades were 100 shares each and were likely generated from a high frequency trading program.

At 2:46:10, DVY traded at $40 a share. There were then numerous small trades that walked the price down to below $20 by 2:46:43. It was striking how there were long sequences of 100 share trades that walked the price down one penny at a time. This is the modus operandi of a high frequency trading program. The low of the day was $17 which occurred at 2:47:19 EST. There was then no trading for the next 27 seconds when DVY traded at $24.54 at 2:47:46. Within three seconds, the price hit $43 at 2:47:50. It then continued to gyrate wildly but generally had an upward bias and closed at $45.21

Some high frequency trading programs must have made a windfall profit in the 30 second period where DVY appreciated over 100% from $17 to $45.

Retail investors who use stop losses were stopped out at very poor prices. By the way, DVY does not even own PG which may have had a trading glitch yesterday.

I do not own DVY, but I follow it on a watch list. The SEC should investigate yesterday's trading pattern to make sure everything was done legally. But even if everything was legal, it seems clear that major changes are needed to modify or restrict high frequency trading which clearly played a role in exaggerating the major market meltdown we experienced yeterday.

Full Disclosure: No Position in above securities.