Saturday, May 31, 2014

Yelp: Hands-Down Leader

This company is quickly becoming the Yellow Pages of the Internet, both in the US and around the world, says Mike Cintolo of Cabot Market Letter.

Yelp (YELP) has become the go-to Web site (and mobile app) to use when looking for ideas on what to eat and, increasingly, what to do—its users, reviews, and traffic are soaring, and we like how every market it enters follows a (relatively) predictable expansion path.

Longer-term, the possibility of offering online ordering and reservations is big. The stock had a huge run after second quarter earnings, but as we wrote last week, that move came on the heels of a huge IPO base. Expect volatility.

Technically, to most observers, the stock is far too high to buy, but if the market can hold together, the odds are that the stock has much farther to run.

Of course, charts are just one tool to use; fundamentals count just as much, if not more, and that is what really has us excited about Yelp.

About 108 million visitors use Yelp every month, contributing to the 42.5 million reviews of tens of thousands of different restaurants and attractions.

It's the hands-down leader in the field (Google hasn't been able to get any traction with its reviews) and is expanding like mad, both in the US and overseas, which currently makes up just 5% of revenue but is bound to mushroom in the years ahead.

Overall revenue growth remains very strong and steady (between 63% and 69% for seven straight quarters) and cash flow is picking up in a hurry.

YELP probably needs a little more time to digest its huge six-week advance, but given the fundamentals and the chart, the odds are that the next big move is up.

We have decided to add the stock to our model portfolio. The stock is very strong, but also very volatile; expect ups and downs, but we think the potential is huge.

Subscribe to Cabot Market Letter here…

More from MoneyShow.com:

Google: Ripe for a Bounce

Skyworks: Connect with RF Technology

Acquisitions Boost TripAdvisor

4 Stocks Under $10 Making Big Moves

DELAFIELD, Wis. (Stockpickr) -- At Stockpickr, we track daily portfolios of stocks that are the biggest percentage gainers and the biggest percentage losers.

>>5 Stocks Insiders Love Right Now

Stocks that are making large moves like these are favorites among short-term traders because they can jump into these names and try to capture some of that massive volatility. Stocks that are making big-percentage moves either up or down are usually in play because their sector is becoming attractive or they have a major fundamental catalyst such as a recent earnings release. Sometimes stocks making big moves have been hit with an analyst upgrade or an analyst downgrade.

Regardless of the reason behind it, when a stock makes a large-percentage move, it is often just the start of a new major trend -- a trend that can lead to huge profits. If you time your trade correctly, combining technical indicators with fundamental trends, discipline and sound money management, you will be well on your way to investment success.

>>5 Large-Cap Trades for All-Time Highs

With that in mind, let's take a closer look at a several stocks under $10 that are making large moves to the upside.

Vical

Vical (VICL) is engaged in the research and development of biopharmaceutical products based on its DNA delivery technologies for the prevention and treatment of serious or life-threatening diseases. This stock closed up 2.4% to $1.25 a share in Thursday's trading session.

Thursday's Range: $1.22-$1.28

52-Week Range: $1.01-$4.51

Thursday's Volume: 1.27 million

Three-Month Average Volume: 1.04 million

From a technical perspective, VICL spiked modestly higher here back above its 50-day moving average of $1.24 with above-average volume. This spike higher on Thursday is starting to push shares of VICL within range of triggering a big breakout trade. That trade will hit if VICL manages to take out some near-term overhead resistance levels at $1.30 to $1.36 with strong upside volume. Keep in mind that taking out those levels will also push VICL back above its 200-day moving average of $1.29.

Traders should now look for long-biased trades in VICL as long as it's trending above some near-term support levels at $1.20 or at $1.16 and then once it sustains a move or close above those breakout levels with volume that hits near or above 1.04 million shares. If that breakout starts soon, then VICL will set up to re-test or possibly take out its next major overhead resistance levels at $1.50 to $1.60, or even $1.66 to $1.75.

Hercules Offshore

Hercules Offshore (HERO), together with its subsidiaries, provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry worldwide. This stock closed up 2.2% to $4.55 a share in Thursday's trading session.

Thursday's Range: $4.45-$4.56

52-Week Range: $4.21-$7.96

Thursday's Volume: 6.74 million

Three-Month Average Volume: 4.15 million

From a technical perspective, HERO bounced notably higher here right off its 50-day moving average of $4.49 with strong upside volume flows. This stock recently formed a double bottom chart pattern at $4.34 to $4.32. Following that bottom, shares of HERO have now started to spike higher back above its 50-day and it's quickly moving within range of triggering a major breakout trade. That trade will hit if HERO manages to take out some near-term overhead resistance levels at $4.60 to $4.68 and then above more resistance at $4.72 with high volume.

Traders should now look for long-biased trades in HERO as long as it's trending above those double bottom support zones and then once it sustains a move or close above those breakout levels with volume that hits near or above 4.15 million shares. If that breakout triggers soon, then HERO will set up to re-test or possibly take out its next major overhead resistance levels at $4.86 to $4.98. Any high-volume move above those levels will then give HERO a chance to re-test or possibly take out its 200-day moving average of $5.84.

SFX Entertainment

SFX Entertainment (SFXE) is engaged in the production live events and digital entertainment content that focuses on the electronic music culture and other festivals. This stock closed up 2.5% to $7.34 a share in Thursday's trading session.

Thursday's Range: $7.15-$7.41

52-Week Range: $5.41-$13.39

Thursday's Volume: 482,000

Three-Month Average Volume: 780,419

From a technical perspective, SFXE rose modestly higher here right off its 50-day moving average of $7.13 with lighter-than-average volume. This move is quickly pushing shares of SFXE within range of triggering big breakout trade. That trade will hit if SFXE manages to take out Thursday's intraday high of $7.41 to some more key overhead resistance at $7.49 with high volume.

Traders should now look for long-biased trades in SFXE as long as it's trending above $7 or above $6.50 and then once it sustains a move or close above those breakout levels with volume that hits near or above 780,419 shares. If that breakout kicks off soon, then SFXE will set up to re-test or possibly take out its next major overhead resistance levels at $8.14 to $8.57, or even $9.

Cache

Cache (CACH) operates as a mall-based and online woman's specialty retailer of apparel and accessories in the U.S. This stock closed flat to $1.75 a share in Thursday's trading session.

Thursday's Range: $1.75-$1.84

52-Week Range: $1.15-$6.83

Thursday's Volume: 204,000

Three-Month Average Volume: 230,282

From a technical perspective, CACH moved within range of $1.84 on the upside and $1.75 on the downside in Thursday's trading session with decent volume. Despite the lack of movement to the upside, shares of CACH are still trending very close to triggering a major breakout trade. That trade will hit if CACH manages to take out some key near-term overhead resistance at $1.85 with high volume.

Traders should now look for long-biased trades in CACH as long as it's trending above some key near-term support at $1.72 and then once it sustains a move or close above $1.85 with volume that hits near or above 230,282 shares. If that breakout triggers soon, then CACH will set up to re-test or possibly take out its next major overhead resistance levels at $2.62 to its 50-day moving average of $2.72. Any high-volume move above those levels will then give CACH a chance to tag its next major overhead resistance levels at $3.40 to $3.63.

To see more stocks that are making notable moves higher, check out the Stocks Under $10 Moving Higher portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.


RELATED LINKS:



>>4 Big Stocks on Traders' Radars



>>3 Stocks Rising on Unusual Volume



>>Warren Buffett Is Sick of These 4 Stocks

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com.

You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.


Friday, May 30, 2014

Is Scripps Networks Interactive on Your Radar?

Scripps Networks Interactive (NYSE: SNI  ) looks stronger than ever after a great first quarter. 

While most cable networks experienced a dip in viewership largely because of the Olympics, Scripps' popular channels -- including HGTV, Food Network, and Travel Channel -- actually increased viewership numbers, especially in the key 25- to 54-year-old demographic advertisers covet.

This shows management's programming savvy as well as the staying power of its brands, all of which give Scripps tremendous pricing power when it comes to advertising rates and affiliate fees. But lots of sharks swim in the sea of cable television programming.

Stock Advisor analyst Sara Hov and Rule Breakers analyst Simon Erickson talk about what's ahead for Scripps, including the chance that this small-but-mighty company could get swallowed by a bigger fish.

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 

3 Travel Stocks to Buy as Vacationers Pinch Pennies

Facebook Logo Twitter Logo RSS Logo Louis Navellier Popular Posts: 5 Biotech Stocks Promising Future RewardsTurn Trash To Treasure with These Hot Small Caps3 High-Yield Income Stocks Worth Every Penny Recent Posts: 3 Travel Stocks to Buy as Vacationers Pinch Pennies Turn Trash To Treasure with These Hot Small Caps These 2 Travel Stocks Have Blue Skies Ahead View All Posts

Memorial Day weekend marks the unofficial beginning of the summer travel season. Many investors are going to take this as an opportunity to jump in and blindly buy travel stocks as a theme for their portfolio.

That's a terrible idea.

We saw all sorts of articles this week suggesting you rush out to buy the hotel and recreation stocks as the season for summer fun begins. This is another one of those ideas that sounds fantastic, but the numbers tell a different story. Using Portfolio Grader to look at the travel and recreation stocks, I'm seeing discount airlines and -related stocks as strong buys among travel stocks — not the resorts and recreation stocks.

Southwest Airlines (LUV) has long been one of the favorite choices of cost-conscious travelers, and the company is having a fantastic 2014 so far. Earnings are up 87% so far this year; in the most recent quarter Southwest had year-over-year earnings growth of more than 160%. Analysts have been raising their estimates for both the rest of 2014 and 2015 as the fundamentals continue to just get better quarter after quarter. The stock is rated "A" by Portfolio Grader and is a "Strong Buy" at the current price.

Spirit Airlines (SAVE) is quickly becoming a favorite of budget travelers. Spirit is a no-frills airline that allows customer to take advantage of very low fares and then pay for any upgrades they may desire. Consumers seem to like it, as earnings are up more than 60% so far this year. The company is doing better than Wall Street was expecting and earnings estimates have been raised several times in the past month. Spirit Airlines just announced a bunch of seasonal routes for summer travel to places like Atlantic City and Myrtle Beach — that move should help drive profits all summer long. The stock is rated "A" by Portfolio Grader and remains a "Strong Buy."

Consumers are pinching pennies when they book their travel as well. The desire to save as much as possible on air travel, hotels and vacation packages is driving sales and earnings growth at industry-leading online travel concern Priceline (PCLN). In spite of all the attention Priceline gets from Wall Street, this company continually outperforms their expectations. Priceline has posted four consecutive positive earnings surprises, and analysts recently raised estimates for the summer travel season and the rest of 2014. The stock has received an "A" grade from Portfolio Grader since January and remains a "Strong Buy" today.

Travel season is upon us, but that doesn't mean all travel stocks will move higher. Using Portfolio Grader can help you find those stocks that will see powerful profit increases from cost-conscious vacationers this summer.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of this newsletters.

 

Thursday, May 29, 2014

Stock buybacks surge: Is that a good thing?

According to Wall Street legend, a speculator named Daniel Drew got his start by driving cattle into Manhattan, back when there really were cattle drives there. Just before they got to the market, he'd let his skinny, rangy cattle drink as much water as they wanted after the long, hot drive, giving them a nice, plump appearance — and plenty of water weight, too.

The next day, they'd be skinny, rangy cattle again, and the buyer would exclaim, "I've been sold watered stock!" Over the years, "watering the stock" has come to refer to the practice of companies issuing additional stock, and thereby, diluting its value.

It stands to reason that if watering stock is bad, then decreasing shares outstanding is good. After all, if there are fewer shares, they should be worth more, all other things being equal. But corporate buybacks are rarely the good things that companies promote them as — and they can be a warning sign that management simply has no idea what to do with its money.

Companies in the Standard and Poor's 500 stock index bought back about $160 billion in stock in the first quarter — the number is an estimate because the first-quarter tallies aren't complete, says Howard Silverblatt, senior index analyst for S&P Dow Jones Indices. If that number's accurate, it would be the second-highest amount of stock repurchases in history, trailing only the $172 billion in the third quarter of 2007.

Students of history will recall that the largest bear market since the Great Depression began in October 2007, which is one reason to view stock buybacks skeptically. Companies rarely buy their own stocks because they think the stock is undervalued, as superstar Warren Buffett pointed out in a 1999 investment letter: "Repurchases are all the rage, but are all too often made for an unstated and, in our view, an ignoble reason: to pump or support the stock price."

Reducing the share count is one way that buybacks pump a stock price. But there's a somewhat more subtle way that repurc! hases kick up a stock's value. Analysts look at a company's earnings per share. If a company's earnings are the same and the number of its shares fall, the stock magically looks a bit less expensive than it really is.

It may not be a shock that the people who benefit most from higher stock prices are executives, because much of their compensation comes in the form of stock grants and options. And yes, those executives have a big say in when a company repurchases its stock. "The people who make those decisions have a big incentive to keep stock prices high," says William Lazonick, professor at the University of Massachusetts at Lowell.

Thus, big surges in share repurchases often happen when stock prices are high, not when they're a bargain. That may have happened in the first quarter of 2014, when earnings were widely expected to slow. "Companies may have decided to spend extra money getting a tailwind going into the first quarter," Silverblatt says.

That's not unusual, Lazonick argues. Looking over four decades of data, Lazonick found that buybacks peak at market peaks, and tail off in bear markets. But he makes other, powerful arguments against corporate stock buybacks:

• Even companies that buy back shares because they think the stock is a bargain don't sell it to lock in a profit. Doing so would be a signal that management thinks the stock is overvalued.

• Companies that depend on research and development for future earnings squander their money by buying back stocks. Pfizer, for example, depends on developing new drugs. Yet, from 2003-2012, the equivalent of 71% of Pfizer's profits went to buybacks, Lazonick says. Similarly, Hewlett-Packard spent $11 billion on buybacks in 2010, $10.1 billion in 2011, then took a $12.7 billion loss in 2012.

• Buybacks are probably the least productive use of a company's money. Companies have any number of things they can do with their cash, borrowings and profits. They can invest in people, plants and equipment. Or they can ! buy other! companies. "It shows a lack of imagination," Lazonick says.

"We use it as an explanation of why earnings are holding up," says Sam Stovall, managing director of U.S. equity strategy at S&P Capital IQ. "Companies buy back stocks because management doesn't feel it has a better use for its funds."

The past five years, the PowerShares Buyback Achievers fund (ticker: PKW), has beaten the SPDR S&P 500 ETF trust by 3.91 percentage points a year, according to Morningstar, the Chicago investment trackers. So far this year, however, the fund has lagged behind the index by 2.28 percentage points — a sign that Wall Street may be getting less impressed by buybacks.

What should investors look for instead of repurchases? Stovall suggests investments in plant and equipment. Factory capacity utilization is at 80% now, about the point where companies start replacing old equipment, Stovall says. Investment in equipment grew 3.1% last year and is expected to grow 5.2% this year. Next year? a sizzling 10.4%.

Buying back stock is more of a sugar high than anything else. But wouldn't you prefer to own a company that has better ideas for using its cash?

3 Stocks Rising on Unusual Volume

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

>>5 Stocks Insiders Love Right Now

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

>>5 Large-Cap Trades for All-Time Gains

With that in mind, let's take a look at several stocks rising on unusual volume recently.

MacroGenics

MacroGenics (MGNX), a clinical-stage biopharmaceutical company, focuses on discovering and developing monoclonal antibody-based therapeutics for the treatment of cancer and autoimmune diseases. This stock closed up 1.2% to $19.44 in Wednesday's trading session.

Wednesday's Volume: 524,000

Three-Month Average Volume: 256,464

Volume % Change: 115%

From a technical perspective, MGNX trended modestly higher here with strong upside volume flows. This stock recently formed a double bottom chart pattern at $17.96 to $18.03. Following that bottom, shares of MGNX have now started to uptick higher and it's quickly moving within range of triggering a major breakout trade. That trade will hit if MGNX manages to take out Wednesday's intraday high of $19.83 and then once it clears more key overhead resistance levels at $20.96 to $20.99 with high volume.

Traders should now look for long-biased trades in MGNX as long as it's trending above Wednesday's low of $18.84 or above those double bottom support levels and then once it sustains a move or close above those breakout levels with volume that hits near or above 256,464 shares. If that breakout materializes soon, then MGNX will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $23.37 to $24.50.

Fair Isaac

Fair Isaac (FICO) provides various analytical solutions, credit scoring and credit account management products and services to banks, credit reporting agencies, credit card processing agencies, insurers, retailers and health care organizations worldwide. This stock closed up 2% at $59.01 in Wednesday's trading session.

Wednesday's Volume: 324,000

Three-Month Average Volume: 189,113

Volume % Change: 125%

From a technical perspective, FICO spiked notably higher here and broke out above some near-term overhead resistance at $58.69 with above-average volume. This stock has been uptrending for the last few weeks, with shares moving higher from its low $53.52 to its intraday high today of $59.26. During that uptrend, shares of FICO have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of FICO within range of triggering another big breakout trade. That trade will hit if FICO manages to take out some key near-term overhead resistance at $59.28 with high volume.

Traders should now look for long-biased trades in FICO as long as it's trending above Wednesday's low of $57.95 or above more support near $56 and then once it sustains a move or close above $59.28 with volume that this near or above 189,113 shares. If that breakout hits soon, then FIO will set up to re-test or possibly take out its next major overhead resistance levels at its 52-week high of $63.48.

WhiteWave Foods

WhiteWave Foods (WWAV), a consumer packaged food and beverage company, manufactures, markets, distributes and sells branded plant-based foods and beverages, coffee creamers and beverages, dairy and organic greens and produce products in North America and Europe. This stock closed up 2.3% at $31.01 in Wednesday's trading session.

Wednesday's Volume: 3.31 million

Three-Month Average Volume: 1.47 million

Volume % Change: 104%

From a technical perspective, WWAV jumped higher here right off some near-term support at $30 with above-average volume. This spike higher on Wednesday briefly pushed shares of WWAV into breakout territory, after the stock flirted with some near-term overhead resistance at $31.48. Shares of WWAV tagged an intraday high of $31.59, before closing just below that level at $31.01. Market players should now look for a continuation move to the upside in the short-term if WWAV manages to take out Wednesday's high and its new all-time high of $31.59 with high volume.

Traders should now look for long-biased trades in WWAV as long as it's trending above some key near-term support levels at $30 or at $29.55 and then once it sustains a move or close above Wednesday's high of $31.59 with volume that hits near or above 1.47 million shares. If that move kicks off soon, then WWAV will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $35 to $40.

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.


RELATED LINKS:



>>3 Big Stocks Getting Big Attention



>>5 Stocks Set to Soar on Bullish Earnings



>>5 Rocket Stocks to Buy for Short-Week Gains

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.


Wednesday, May 28, 2014

Valeant vs Allergan: Street Unimpressed by Bigger Offer

 Valeant Pharmaceuticals (VRX) has revised its offer to buy Botox-maker Allergan (AGN), upping the size of the overall deal, as well as the cash component. Wall Street, however, isn’t rejoicing.

Shares of Allergan fell 4.2% in morning market action to $158 a share, while Valeant fell 3.3% to $125.65 a share. That's quite a changeover pace from the kick both stocks received last month when Valeant and hedge fund manager Bill Ackman unveiled their alliance to purchase Allergan in a stock and cash deal worth $46 billion.

Today's bid is worth $49.5 billion, an increase of 8.5% over its previous offer. But at roughly $166.16 per share, it's below the $185 to $200 per share expected by Stern Agee's Shibani Malhotra in a note published yesterday.

Valeant's; new offer includes $58.30 per share in cash. Still, the deal still has a very large stock component. Allergan's board said it "would carefully review and consider" the bid.

In a report published this morning, Credit Suisse writes that Valeant's offer "is better, but may not be compelling enough given AGN’s strong standalone outlook…Given that the majority of the offer would still be in VRX stock, how one values VRX stock goes a long way to determining the true value of the deal."

In a nod to investors' worry that Valeant would gut Allergan's R&D pipeline, the drug maker is proposing a contingent-value right potentially worth up to $25 a share for the vision-loss drug DARPin, and the company pledged to continue investing to develop the product.

Still, many analysts still argue that Allergan can go it alone. Buckingham Research Group's David Buck writes:

Given the still high stock component of proposed transaction, effectively a bet on a rising Valeant share price, it is unclear that this proposed transaction can match Allergan standalone's options.

Credit Suisse's Vamil Divan writes:

We still believe that AGN has several ways that they can boost standalone value of the firm, if not possibly fending off VRX completely. Strong base business and balance sheet leave AGN many options and we see them being more proactive in the face of VRX’s bid.

And Aaron Gal at Bernstein Research writes:

Not impressive…The offer continues to under-estimate Allergan value as stand-alone entity. As we noted previously, Allergan has recently increased its earnings expectations for 2014 (mid-point 5.69). It projects 2015 YoY EPS growth to 20-25% and 20% EPS CAGR for the following four years. As the putative Valeant deal will close after 1/1/2015, most investors will compare the Valeant deal to AGN value on a 2016 basis. This suggests value range of $167 to $184 as a stand-alone company (20x-22x ’16 EPS of $8.36). Thus, at the current VRX stock price, the current offer is inferior to AGN on a standalone basis. Further, even if the Valeant multiple was to expand to 12.5x its guidance for 2015 post-deal EPS of $12.74, the value of the offer is $190, not have much in the way of a control premium. Σ We think Valeant is expecting Allergan shareholders will continue to believe the stock will decline to its pre offer range ($120-$130) if the offer was not to materialize. This is, in our view, unlikely. Given the new guidance, the stock may decline to $140 (20x 2015) but is then likely to rebound immediately afterwards. We hoped for something more imaginative, like substantially altering the share of cash and stock Valeant will use or a more substantial increase in the value offer ($30) or $9B, which is one year’s worth of the combined company EBITDA.

Non-Bank Banks

Neil George, editor of By George, discusses non-bank banks and the Small Business Investment Incentive Act and suggests a way to aid your investments in the tech sector.

NANCY:  Hi, my guest today is Neil George.  Hi Neil, and thank you so much for dropping by.

NEIL:  Nancy, it’s always a pleasure.

NANCY:  That’s wonderful.  Let’s talk about non-bank banks.  When I think about non-bank banks, I think about the way they used to be back in the 1970’s and the 1980’s, and that’s not what the terminology means today.

NEIL:  Well Nancy, there’s another phenomena in the marketplace that stems from a period of time in which the US was in a real pickle.  You and I both remember the 1970’s.  We both might have been little tykes back then…

NANCY:  Yes, we were.

NEIL:  But at least we remember our history.  Inflation was really out of control.  Interest rates were to the moon.  Many people were having difficulty getting mortgages; a lot of people had one or two mortgages on their homes.

NANCY:  And negative amortization mortgages.

NEIL:  Even worse, and the idea – it wasn’t because people had bad credit, it was because banks really were kind of constrained and they knew with inflation in the double digits, if they made a mortgage loan, they were getting paid back in effectively less valuable dollars in the future, and what made it even worse and made the economy really go into that stagflation mode was that businesses couldn’t get loans, because again, banks were afraid to make loans and they were very fearful of the impact of inflation.  Jimmy Carter, the president back then, and congress…

NANCY:  The peanut guy.

NEIL:  Yeah, the fellow from Georgia – no, and the naval officer.

NANCY:  Right, a physicist.

NEIL:  And a physicist, nuclear physicist, so a guy with a propeller head, but regardless of how people judge him and his presidency, one of the bit of legislations that he basically signed off on was the Small Business Investment Incentive Act of 1980, and what this bit of legislation did, it basically examined small and mid-sized businesses and what they needed.  Needed to have access to capital, needed to have access to loans, and therefore, what this did was it enabled companies to be setup much like investment companies that were setup under the Investment Company Act of 1940.  In other words, like funds.

NANCY:  Right.

NEIL:  Companies could set themselves up as a company and be able to make loans to businesses, particularly small to mid-sized firms, and they would not be taxed as a corporation, so they don’t have to pay any corporate income tax.

NANCY:  Interesting.

NEIL:  But, at the same time, the money that they would earn would be passed through to their investors.  This provides two nice incentives.  One is that the investor in these sorts of companies that would be funding it would be able to get a fairly good dividend, and back then it was pretty high, and today, there were a handful of these sorts of companies that are quite well and we’ll talk about a few in a moment, if you would like.

NANCY:  Is there a percentage that they’re required to give back to the investors?

NEIL:  No, there isn’t.

NANCY:  Okay, so not like a REIT.

NEIL:  It’s not like a REIT, but there is a general incentive for them to pass through, so the idea the investor gets a lot of cash flow back, but also, they get all the depreciation and all the other expenses passed through, so that part of their dividend is going to be shielded from current tax liability, so the benefit is you get a lot of interest in your dividend, and you’re not going to have to pay as much of your own income tax on that amount, so it’s a win-win all around.  No double taxation and you actually get part of your dividend is tax shielded, so there have been a variety of companies that have used this formula to be able to operate, and one of the ones, since we’re in San Francisco, not too far away from here is Paolo Alto, which is sort of the tech mecca of the US.

NANCY:  Exactly, Stanford University.

NEIL:  And you have a lot of guys in hoodies in their parent’s garages that are coming up with the gizmos that you and I and the rest of the world are going to want to have or got to have, and we’ll stand in line at various stores to buy these little gizmos.

NANCY:  And pay a premium for them.

NEIL:  And we’ll pay premium, or it might very well be the next wiz bang thing on the internet, or who knows that it’s going to be, but tech is one of those things that Northern California is famous for.  Well, there’s a firm that’s headquartered in Paolo Alto right in the thick, and there’s a – the guys running this company have really gotten to know all those guys in the hoodies in the garages, and they’ve been able to identify the guys that are going to make it and not, and so their process is they will basically come in, they will help examine the company, and a lot of them are everything from small to already established private companies in the technology world, but these companies need funding, and therefore, they will make loans to them.

NANCY:  But not like VC’s where they take out part of the equity.

NEIL:  No, but what they do is they do have an equity incentive, so the idea that the companies have to pay back their loans, but they also get to participate in the equity through warrants, so when the companies go public and cash out, they’ll get a piece of the action, as well as their loans repaid, and they’ve been doing this over and over.  Now, the company in Paolo Alto is a company called Hercules Growth Technology Corporations, HTGC, and it’s a company that has had a fairly good track record.  Some companies, like, you might remember Facebook.

NANCY:  Yes, I might have heard of that.

NEIL:  You might have heard of Facebook.  Well, Facebook came to the market about a year ago, and one fellow with the hoodie in the garage…

NANCY:  Right, Zuckerberg.

NEIL:  Mr. Zuckerberg, who still likes his sweatshirts.  He was able to make about $18 billion dollars out of it.  Now, investors, subsequently, they’re just getting their money back kind of.

NANCY:  Right, a year later.

NEIL:  A year later, but Hercules got their money up front, just like Mr. Zuckerberg.  Another company you might have heard of, Google.

NANCY:  Yes.

NEIL:  That one’s kind of famous now.  Well, years ago, it wasn’t so famous, and the idea that those are two examples, and there’s a myriad of other investments that this company has helped to fund with these sort of loans.  Now, one of the other great benefits, Nancy, is that, as you know, people at the Money Show are always interested in income, and income is one of those things that retirees, as well as people looking to build a portfolio really needs, and so Hercules throws off a lot of cash and the current dividend is about 8% right now.

NANCY:  Very healthy.

NEIL:  So the idea, if you like the idea of investing in technology and you like the idea of being able to cash in on what’s next and what’s going to be really big, but you also want to make sure you’re going to be paid and get a good dividend, Hercules is one I really think people ought to take a look at.

NANCY:  Fascinating.  Thank you, Neil.

NEIL:  Thanks Nancy.

NANCY:  And thanks for being with us on the MoneyShow.com Video Network.

Tuesday, May 27, 2014

Risk Is Everywhere and We're Closer to the End of This Market Run

NEW YORK (TheStreet) -- Another day of the short hedge funds covering at the all-time highs. This is becoming rather amusing to watch.

What is even more amusing is to see the S&P 500 Trust Series ETF (SPY) volume close trading at a new 2014 low of 58.3 million shares only to see the after-hours hedge fund trading take it to 71.8 million shares. Can you say manipulation?

The DJIA closed Tuesday up 69.23 points to 16675.50 while the S&P 500 closed at 1911.91, up 11.38 points -- another new all-time high on air. The Nasdaq finished up 51.26 at 4237.07 and the Russell 2000 closed up 16.01 points at 1142.20.

The Russell 2000 index is still in Trend Bearish territory while the DJIA, S&P and Nasdaq are in Trend Bullish territory. Trend is a three-month or longer time frame. It has now become very important for me to discuss the degree of risk that is prevalent in this market.

According to my internal algorithm numbers, the large-cap sector -- stocks with a market cap of $4 billion or higher -- is signaling 32 stocks with an extreme, overbought condition versus three with an extreme oversold condition. That is a 10-1 ratio. I am speaking of stocks such as Facebook (FB), Yelp (YELP), Workday (WDAY), Tableau Software (DATA), Linkedin (LNKD), Yandex (YNDX) and Ctrip.com (CTRP). These all have an algorithm number of 99 or higher out of 100. The extreme oversold have a number of under 1. These numbers can be found at www.strategicstocktrades.com. These short hedge funds have pushed these stocks to the limit and traders and investors need to understand the risk that goes along with trying to mimic these hedge funds and buy these momentum stocks. I am neither a bull nor a bear as a trader. But I do have a risk management process that allows me to know when to buy and when to sell. It signals when stocks are extreme overbought and when they are extreme oversold. Traders need to have signals. If not, you are nothing more than a momentum chaser that buys high and sells low. Not a good recipe for success. I am here to tell you this market has a bubble-like feel to it and the PowerShares QQQTrust Series (QQQ) will be the first index to signal extreme overbought with a green open on Wednesday. Heed the signal. This market is near a downturn, and that downturn has the ability to be severe with no trading volume. A market that is at an all-time high on no volume is a market with bubble-like conditions that has been created by the Federal Reserve and its policies to inflate -- policies that are failing miserably right now. It has given us a stock market bubble with a burning currency. On Tuesday, I covered most of my short in EPAM Systems (EPAM) that I added to this morning on green, only to see it trade red this afternoon. I booked a 3% gain. I added to my Yandex (YNDX) short with a 99.99 algo number and added to AmerisourceBergen (ABC) short with a 99.99 number. At the time of publication the author was short ABC, YNDX, and EPAM. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Monday, May 26, 2014

Marketers Not Sure Social Media Really Works

Marketing executives are struggling to show the value of their social media marketing, according to a survey conducted by a Duke University professor.

Christine Moorman, senior professor of business administration at Duke University’s Fuqua School of Business and director of The CMO Survey, polled more than 400 chief marketing officers to get their feelings on how well social media is serving their marketing plans.

Almost half of respondents said they haven’t been able to show that their marketing efforts on social media networks have had any impact.

Just 15% of respondents said they had a seen a measurable impact from their social media marketing expenditures. More than a third said they had a good idea of the qualitative impact, but not the quantitative impact.

In spite of limited results, if any, respondents said they would more than double their overall social media expenditures over the next five years, from 6.6% of their marketing budget to nearly 16%. Currently, marketing executives allocate about 5.5% of their marketing budget to analytics tools, the survey found. Respondents said they anticipate increasing that allocation to nearly 9% over the next three years.

However, while this would indicate marketers recognize the importance of measurable data, just 29% of marketing projects are using analytics, down from 35% last year, according to the survey.

Part of the problem may be that marketers are having trouble measuring the impact of their marketing in general, not just social media. Only a third said they could quantitatively show how well their marketing was working.

“Marketing leadership requires that CMOs offer strong evidence that strategic marketing investments are paying off for their firms in the short and long run,” Moorman said in a statement. “CMOs will only earn a ‘seat at the table’ if they can demonstrate the effect of their marketing spend.”

Marketers are optimistic about the economy in general, the survey found, rating their level of optimism at 65.7 on a 1-to-100 scale, and almost half of respondents said they were more optimistic than they were last quarter.

Just 11% of respondents noted they worked in the banking, finance or insurance industry, but of that small group, 57% said they haven’t been able to show whether their social media marketing has made any difference to their business. Almost 5% of their marketing budget currently goes to social media, an allocation that will increase to 7% over the next 12 months and 12% over the next five years.

In the banking, finance and insurance industries, 68% of respondents said they were more optimistic about the economy overall, and 54% of respondents said they were more optimistic than they were last quarter.

Fifty-five percent of respondents in the banking, finance and insurance industries, said their customers’ top priority over the next year was building a trusting relationship, followed by low price (36%). A quarter of respondents said “excellent service” was their customers’ No. 1 priority.

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Check out 5 Reasons Advisors Are Wasting Their Time on Social Media on ThinkAdvisor.

I sold my startup to Cisco. Here's why

dov yoran

Dov Yoran, CEO and co-founder of ThreatGRID, talks about why he sold his company to Cisco Systems.

NEW YORK (CNNMoney) Just four short years after Dov Yoran dreamed up his cyber security startup, one of the biggest names in Silicon Valley came calling with an offer he couldn't turn down.

Yoran had grown accustomed to refusing countless tech companies and investors who wanted a piece of his firm's sophisticated threat intelligence platform.

"We've been saying no to people for years. We didn't build a company just to flip it and move on," said Yoran, who co-founded ThreatGRID with Dean De Beer. "We really wanted to experience the whole thing from a startup and having guys sleep on couches and bootstrapping it."

And then Cisco Systems (CSCO, Fortune 500) entered the picture.

Cisco began informal conversations with New York-based ThreatGRID late last year. The talks quickly accelerated this winter and culminated this week with Cisco announcing a deal to acquire ThreatGRID and pair it with its rapidly expanding security platform.

"They made an incredibly compelling offer -- for not only today but what the vision looks like going forward," said Yoran, who is CEO of ThreatGRID.

Neither Cisco nor ThreatGRID would disclose the value of the deal due to confidentiality agreements.

But Yoran said "it was a fantastic exit for investors, shareholders and employees."

Yoran, who is 38 years old and lives in New York's SoHo neighborhood, said he doesn't plan any major lifestyle changes despite the looming financial windfall.

"It really wasn't about the money. It was about the drive and excitement of what we were building. The money came afterwards, which is pretty cool," said Yoran, who was a pre-med major at Tufts University before changing direction and earning a bachelor's in chemistry. He received his master's at George Washington University.

So why did Yoran decide to sell to Cisco after saying no to many others?

The clincher was the ability of Cisco to help ThreatGRID expand by incorporating the platform with its other products. Cisco plans to marry ThreatGRID with SourceFire, the cyber security company it acquired last year for $2.7 billion. SourceFire and ThreatGRID should be comfortable with each other since they had a previous partnership.

Watch a hacker steal encrypted passwords   Watch a hacker steal encrypted passwords

It also helps that the sale won't rock the boat for ThreatGRID's 25 employees, who will be allowed to continue doing what they do now, including working from home.

ThreatGRID crowdsources massive volumes of malware to provide threat intelligence to its clients, which include security subsidiaries of General Dynamics (GD, Fortune 500) and EMC (EMC, Fortune 500).

"We analyze data that are captured by endpoint and network vendors and we make it readable in a way their products can digest and take action," said Yoran.

Cyber security firms continue to be objects of desire for big tech companies due to the rising threat level.

Consider that the ThreatGRID deal was unveiled during a week headlined by a major hacker crackdown by the FBI, the U.S. accusing Chinese hackers of cyber espionage, eBay (EBAY, Fortune 500) disclosing a cyber attack and Target (TGT, Fortune 500) detailing its struggles to recover from last year's epic breach.

"For cyber attackers, and those who defend against them, the stakes could not be higher than they are right now," said Hilton Romanski, head of business development at Cisco, in a blog post announcing the ThreatGRID acquisition.

ThreatGRID is the first company Yoran co-founded that wound up being acquired, but it's hardly his first rodeo in the merger and acquisitions world.

Over the past two decades, Yoran worked at and invested in companies acquired by Intel's (INTC, Fortune 500) McAfee and Symantec (SYMC, Fortune 500), including a firm co-founded by his two brothers.

He said that experience helped guide him through Cisco's rigorous acquisition process and contemplate other potential options -- such as another round of funding or even an initial public offering.

And he made sure to remember this important lesson.

"You're not se! lling the! company. Someone is buying the company," he said. To top of page

Friday, May 23, 2014

There’s Still Ample Demand for Aussie LNG

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Russia's $400 billion deal to supply natural gas to China likely has the sponsors of some of the more marginal liquefied natural gas (LNG) projects squirming. Despite the eye-popping figures associated with the contract, most observers believe there will still be ample demand for Australian LNG, both in China as well as in the rest of Asia.

To be sure, Australia's ramp-up in this area is not beyond reproach. Indeed, at an energy conference in Canada this week, the CEO of Malaysian state-owned energy giant Petronas chided the Canadian government for its approach to LNG by citing Australia's experience.

He said that Canada should heed "pivotal lessons" from Australia and not make some of the same mistakes that occurred Down Under, though he failed to get into policy specifics. While the Australian LNG space has seen more than $200 billion committed to investments over the past decade and has another seven major projects under construction, companies have suffered significant cost overruns ranging from 15 percent to 50 percent.

Most of that is a result of the rising labor and equipment costs fueled by the record investment in Australia's resource boom. The latter also helped keep the Australian dollar above parity with the US dollar until last year, and the relatively strong aussie compounded the expense of operating there.

Even so, as the seven aforementioned export projects come on line between 2014 and 2017, Australia will eventually overtake Qatar as the world's largest LNG exporter, with the country's nameplate LNG capacity jumping from 24 million metric tons per year in 2013 to more than 80 million metric tons per year by 2017.

But now that China has secured a significant amount of natural gas at a favorable price, the question remains how this deal will affect global LNG prices. After all, the relatively high price of LNG bound for Asia has attracted plenty of competitors! .

Australia certainly has an abundant supply of natural gas and proximity to Asia, but the high cost of doing business there, though now falling, could still undermine the economics of some projects, while causing prospective development to be tabled.

Production from prolific shale plays has created a veritable glut of cheap natural gas in the US and Canada, which has helped keep prices low in North America, recently near USD4.39 per MMBtu.

By contrast, the Asian supply of natural gas has failed to keep pace with growing demand, which means the region must import significant quantities of LNG. As such, there's a huge spread between prices of North American natural gas and LNG that's shipped to Asia.

For instance, the forward price of the generic contract for LNG scheduled for delivery to northeast Asia in the next month is currently USD14.40, though that price was as high as USD18.95 last November. And China currently pays USD15 per MMBtu for Australian LNG, according to the Australian Financial Review.

The opportunity to exploit the pricing differential between these two markets has prompted numerous energy companies to pile into the LNG export arena.

Still, these projects and their associated contracts are so massive and complex that they can first take many years to negotiate and then at least several more years to build. For instance the deal between Russia and China was only consummated after about 10 years of negotiations, which included prior supply agreements with pricing a perpetual sticking point–until now.

Western efforts to isolate Russia both financially and politically for its involvement in Ukraine's political crisis may have caused it to finally make the pricing concessions necessary to overcome the impasse.

According to Leslie Palti-Guzman, a senior energy analyst at New York-based Eurasia Group, political fallout from the Ukraine crisis threatened Russian access to Western credit in the short term, while likely eroding Russia�! ��s share! of the European gas market in the long term.

Moscow's sudden financial needs coalesced with China's aggressive environmental strategy to curb emissions by switching from coal to gas-fired power generation–the country wants cleaner-burning natural gas to account for 10 percent of its fuel mix by 2020, up from 6 percent currently. As a bonus, both countries also get to demonstrate their political and economic independence from Western powers.

The deal signed between Russia's state-controlled OAO Gazprom and the state-owned China National Petroleum Corp (CNPC) encompasses a 30-year contract to supply 38 billion cubic meters (bcm) per year, with the potential to expand pipeline capacity to 61 bcm per year.

Although the two countries did not disclose many of the terms of the deal, including pricing, analysts estimate China will be paying around USD10 per MMBtu, which is far less than the cost of LNG imports and may be even somewhat cheaper than gas supplied to China via an existing pipeline from Turkmenistan. Not only that, this price is lower than the USD12 per MMBtu reportedly necessary for Gazprom to break even when accounting for pipeline construction.

In exchange for this rock-bottom pricing, it's believed that China will prepay about USD22 billion in order to help finance the construction of about 4,000 kilometers of pipelines, which are expected to cost about USD55 billion altogether.

Even though the numbers involved appear staggering, Australian LNG should still enjoy robust demand.

For one, both Japan and South Korea are also major importers of LNG, while China also remains in play. Because of the Middle Kingdom's enormous and growing energy demand, its contract with Russia only covers a slim percentage of future energy demand.

By 2020, China is projected to consumer around 420 bcm per year, which means that roughly two years after gas starts flowing from Eastern Siberia to China, the imports under this contract will only account for about 9! percent ! of the country's demand. And the International Energy Agency forecasts China's natural gas demand will quadruple by 2035.

China's insatiable demand means that it can't rely on any one country for supply. Indeed, the country intends to fulfill its energy needs by diversifying among a number of different countries and even has ownership stakes in LNG projects in both Australia and Canada.

And while there's plenty of speculation about what China will be paying for Russian gas, some industry experts note that we'll never actually know these figures and that, therefore, it will be difficult for them to affect LNG pricing. Additionally, the Eastern Siberia gas fields tied to this contract are so remote that they can really only serve China. So that also means this deal might not set much of a precedent for LNG pricing.

In the end Australia boasts one other attraction that Russia does not: dependability. Both China and Russia have a history of deep mistrust, and the Chinese are understandably wary of Russia's reliability as an energy supplier, given how they've behaved in other contexts.

Following the deal's announcement, Woodside Petroleum's (ASX: WPL, OTC: WOPEF) CEO Peter Coleman echoed this sentiment, "The Chinese have been very good over time at managing security of supply, so I don’t believe they are going to over-commit to any one particular source of gas over time." While one of Woodside's LNG projects has a contract to supply China with gas, most of its other projects and marketing efforts are oriented toward Japan.

Mr. Coleman said that while China is an important part of the LNG story, it's not the whole story, particularly given the rapid development of LNG import facilities in new markets such as Vietnam and the Philippines, and as some traditional LNG exporters become net importers.

Australian LNG should continue to be a source of long-term growth for the country. And with the aussie trading at a more reasonable level, it will ! become mo! re affordable to undertake new projects there.

Iran's "Oil Show" Just Revealed a Huge Opportunity

Let's face it: Iran isn't at the top of anyone's list when considering all the profit opportunities out there in the world. At least, not yet...

You see, Iran is changing - and quickly.

Its new political regime at least appears to be increasingly open to the West.

Its old-style buyback contracts with international oil companies have long been considered high-risk with little or no flexibility; they essentially allowed Iran to own the oil company assets and allow the company a stream of profit.

But the isolated nation recently announced the introduction of a new generation of oil contract, one that promises to be considerably friendlier to foreign partners.

Companies with a long history in the Middle East are already well-positioned for the change.

And, with the play I'm about to show you, you can be the first to profit.

The IPC: A (Very) New Game in an Old Oil Market

Thanks to a decade of sanctions, Iran lost many of its international oil markets to other OPEC members who've been more than happy to pick up the slack.

Economic embargos against the country's nuclear program have taken their toll and are partly responsible for Iran's currency, the rial, losing nearly 70% against the U.S. dollar in the past five years. That's sent inflation soaring and caused considerable suffering with a surging cost of living.

But there's been somewhat of a rapprochement lately. Iran's olive branch is a new oil agreement called the Integrated Petroleum Contract (IPC).

The IPC should be formally unveiled in London later this year. It's expected to allow for the transfer of ownership of hydrocarbons (though not project assets) to the foreign investor at predetermined milestones. For years the United Arab Emirates and Iraqi Kurdistan have successfully exploited their oil fields with production-sharing agreements of this type.

In early May, Iran held an "Oil Show" that was attended by more than 600 foreign companies. Delegates came from Europe, the U.S., China, Russia, Japan, South Korea, Malaysia, Turkey, and the United Arab Emirates.

Iran is telling oil producers to "be ready" for upcoming work as contract terms are updated. Some are taking the advice to heart.

The Likely First-Mover

Based in France, Total SA (ADR) (NYSE: TOT) is the world's fifth-largest public integrated oil company. Thanks to its European roots, the company has long had operations in many highly productive regions, like Africa and the Middle East, and could be a "first-mover" as Iran opens up.

With a market cap of $139 billion, a P/E of 12, and a current yield of 4.7%, Total has plenty of upside in the tank. And CEO Christophe de Margerie recently indicated that, if sanctions are lifted, he sees the potential for his company to return to producing oil in Iran.

The country needs partners like Total because decades of limited investment and aging technologies have weighed profoundly on output.

Unlike Myanmar or Africa, both more recent destinations for oil and gas exploration and production, Iran has one of the world's most mature oil sectors, with production dating back to 1908.

And still it holds the world's fourth-largest proven oil reserves and the second-largest natural gas reserves, which clearly have been underexploited for decades.

Should Iran truly open itself to foreign oil interests, the investment potential could be dramatic. It may not rival the North American energy boom, but it will spike.

A Perfect "Profit Storm" Shaping Up

A dramatically weakened rial and strict sanctions have conspired to make imports to Iran very costly and extremely restricted.

Oil exports represent 80% of the country's foreign revenues and about half the government's annual budget, with natural resources considered a "national asset."

Expertise and capital from outside the nation are critically needed. Over the past 15 years, Iran has enticed some $50 billion into buyback agreements. By contrast, tiny Qatar has seen quadruple that amount in the same time.

Even archrival Saudi Arabia, one of the biggest beneficiaries of restricted Iranian oil exports, last week invited Iran's foreign minister to visit Riyadh. Looking to ease tensions, Saudi Arabia is willing to discuss a number of issues. But given their common ground as large oil exporters, it's a safe bet oil will be a main dish on the menu.

A more immediate play on the region, but still outside Iran, is WesternZagros Resources Ltd. (CVE: WZR). It's a $445-million company focused squarely on Iraqi Kurdistan, neighboring on Iran, and that could share some of Iran's oil fields.

It has two significant light oil discoveries and plans to produce up to 10,000 bbl/d in the second half of 2014. Its proximity and existing operations could make it a favored play once Iran finally opens up.

The bottom line is Iran is signaling its willingness to compromise on a number of levels, and that could well mean more oil production from the area.

Sears Holdings – The Clock Is Ticking for SHLD

LinkedIn Logo RSS Logo James Brumley Popular Posts: 5 Dividend Stocks You Never Saw Comin’This Year’s 5 Hottest Marijuana StocksSears Holdings (SHLD): A Ticking Time Bomb That’s Speeding Up Recent Posts: Sears Holdings – The Clock Is Ticking for SHLD Don’t Let Weakness in Small Caps Send You Overseas Best Buy Earnings – The 3 Biggest Things to Watch View All Posts

Another decline in quarterly revenue came as no surprise when Sears Holdings (SHLD) reported first quarter results on Thursday morning. The retailer has been shedding revenue-bearing properties like Lands’ End (LE) in earnest for about three years now, while simultaneously axing operational stores; 80 more stores have been or will be closed in 2014.

sears close up 630 300x225 Sears Holdings   The Clock Is Ticking for SHLD Source: Flickr

What did come as a surprise is, even while the company is clearly on a path to bankruptcy, CEO Eddie Lampert continues to bang the “turnaround” drum to the few faithful Sears stock holders left.

Folks, it’s over, both for the company and (sooner or later) for SHLD.

It’s not a matter of “if” anymore. It’s just a matter of “when.”

Bankruptcy truly may be on the horizon.

Numbers Don’t Lie

For those who haven’t heard, last quarter, Sears Holdings saw year-over-year sales drop by 6.8%, to $7.88 billion. By retail standards, it was a disaster, although not as disastrous as the much bigger loss the company posted for the first quarter (Sears lost $402 million, vs. $279 million in the year-ago period). More damning: It was the 29th straight quarter of falling revenue.

On a per-share basis, SHLD posted a loss of $3.79 per share, versus a loss of “only” $2.63 in the first quarter of last year.

And yet, Sears stock didn’t do anything like what you’d expect. Following the report, SHLD stock quickly reversed an opening loss and finished with a 4%-plus gain.

The prod for the pop? Everything being relative, investors — some investors — liked the fact that things could have been much worse for Sears Holdings. And those who weren’t impressed by the relative success might have been encouraged by Lampert’s pep-talk. The master of spin once again offered hope, writing in his quarterly letter to shareholders:

“Sears is undergoing a significant transformation, and we fundamentally are changing the way we do business. Our performance in the first quarter highlights the challenges we are facing as well as the progress we are making in this transformation. We are moving away from a company that was heavily based on selling products solely through a store-based network to a member-centric business model focused on providing benefits to our members anytime and anyplace. We are seeing progress in our transformation to a member-centric, integrated retailer, as we continue to invest heavily in driving our Shop Your Way program.”

He used the word “progress” twice, and yet we’ve not actually seen any — in years — where it counts.

He also used the word “transformation” twice, and though one could arguably call Shop Your Way a transformation, the program has yet to actually make any aspect of the business better despite its launch years ago.

It’s time for a reality check.

Next Page

Reality Check for Sears Stock Fans & Followers

Last quarter, Sears lost $402 million. Over the past 12 months, the company has lost $1.36 billion. Things aren’t getting better on the revenue front. They don’t seem to be getting any better on the earnings front, either.

In fact, SHLD recently dumped one of its few profitable properties when it sold off Lands’ End.

Sears says it’s closing stores that are supposed to be unproductive, but at least some of the units it has been discarding have been its fruitful locations.

If Sears Holdings can’t make a go of it with its top-performing stores and divisions, can it really expect to survive with just the weak ones?

As of the end of the last fiscal quarter, Sears had $831 million in cash. That’s down from $1.028 billion for the fourth quarter of last fiscal year despite the $500 million in cash received from the spinoff of Lands’ End on top of the sale of some of its stores. That trend is pointed in the wrong direction, too.

Sears can tap into the $1.2 billion it has left with its credit facility, which is about a year’s worth of life at the company’s current cash-burn rate. The cash on hand should last a couple more quarters. That’s a total of a year-and-a-half worth of life left before the struggling retailer can’t pay its bills.

It’s conceivable Sears Holdings could get another loan. It’s just not likely, as there’s no hope that it will ever even be able to pay back its existing debt, let alone any new debt. The so-called turnaround has been in place for years. If it hasn’t worked yet, it’s not apt to suddenly start working in mid-2014.

Bottom Line

There aren’t a lot of plausible outcomes here. A complete liquidation of inventory and property is still a possibility, but a fire sale of stores and merchandise would likely mean weak prices for both.

Bankruptcy — though Sears has managed to sidestep that discussion thus far — is becoming a real possibility, too.

A white knight with a bag full of cash might be able to step and stave off the complete annihilation of the 128-year-old name, but most likely such a buyer would only be willing to purchase Sears Holdings it at a steep discount to the value the market seems to be assigning Sears stock now.

Whichever of those outcomes takes shape, none of them are actually winners for current SHLD stock holders.

It looks like the beginning of the end.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Thursday, May 22, 2014

Don’t bet on a summer rally this or any other year

Shutterstock Enlarge Image The theory of a yearly rally from June through August is easily debunked when you review returns going all the way back to the 1800s.

CHAPEL HILL, N.C. (MarketWatch) — As Memorial Day approaches each year, many advisers — like clockwork — begin referring to a so-called "summer rally."

Here's what to do if yours does so this week: Get rid of him.

That's because advisers' "summer rally" is entirely a figment of their imagination. If yours actually thinks one exists, who knows what else she is also claiming to see that is entirely fictional?

To be sure, the stock market will rally sometime this summer. But it rallies at some point during every season of the year. There is nothing exceptional about the summer in this regard.

/quotes/zigman/627449/realtime DJIA 16,511.86, +20.55, +0.12%

That, at least, is what I found when I fed into my PC's statistical software the Dow Jones Industrial Average's return from the end of May to its highest close at some point during June, July and August. Though no adviser I know precisely defines what he means by a "summer rally," this way of measuring it presumably comes close. It reflects the maximum gain an investor could achieve if he had the clairvoyance — or sheer luck — to get out of the market at what, in retrospect, is its highest value during the summer.

At first blush you might be impressed: On average since the Dow was created in the late 1800s, the Dow gained 5.27% from the end of May through its highest close over the following three months. That comes to an annualized equivalent of around 23%.

If the stock market enjoys even an average summer rally, the Dow will be trading at more than 17,300 sometime in the next three months.

There's less here than meets the eye, however: When measured this way, every month can boast a rally of similar magnitude.

Consider what I found when I calculated, for each of the other 11 months of the calendar, the potential for a similar three-month rally. Specifically, I measured the Dow's average gain from the end of each month to its highest close over the subsequent three months.

Those other months' average rally was 5.22%. That is statistically indistinguishable from the 5.27% that was the case historically for May.

Furthermore, the only reason May compares even this favorably to other months is because of what happened in 1932, during the depths of the Great Depression. In that year's summer, the Dow nearly doubled.

Without outlier years like that one, the summer rally loses even more statistical support. Since 1940, for example, the average Dow gain from the end of May to its highest close over the next three months is just 4.0%. Seven of the other 11 months of the calendar sport higher average "rallies" than that.

Here's one way to make this summer special: Resolve to use it as the season to subject any of your hunches — summer rally being just one of them — to rigorous statistical scrutiny. You'll find that almost all of them are worthless.

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Poll: Caring For Spouse More Stressful Than Mom

Stephen Lance Dennee/AP WASHINGTON -- You promise "in sickness and in health," but a new poll shows becoming a caregiver to a frail spouse causes more stress than having to care for mom, dad or even the in-laws. Americans 40 and older say they count on their families to care for them as they age, with good reason: Half of them already have been caregivers to relatives or friends, the poll found. But neither the graying population nor the loved ones who expect to help them are doing much planning for long-term care. In fact, people are far more likely to disclose their funeral plans to friends and family than reveal their preferences for assistance with day-to-day living as they get older, according to the poll by The Associated Press-NORC Center for Public Affairs Research. And while 8 in 10 people who've been caregivers called it a positive experience, it's also incredibly difficult. "Your relationship changes. Life as you know it becomes different," said Raymond Collins, 62, of Houston, who retired early in part to spend time with his wife, Karen. Diagnosed with multiple sclerosis 15 years ago, her mobility has deteriorated enough that she now uses a wheelchair. Collins, a former business manager for an oil company, said he has felt stress, frustration and, at times, anger. "The traditional vows are through sickness and health, for richer or poorer, for better or worse, etc.," he said. "At the age of 25 and 32, you say those things and you're high on love and healthy, and life is all in front of you. The meanings of those words are pretty much lost, even when you concentrate on them." Still, he said caregiving has strengthened his marriage commitment in ways he couldn't foresee as a newlywed nearly 37 years ago. Caregiving may start with driving a loved one to the doctor or helping with household chores, but progress to hands-on care, such as bathing. Increasingly, family members are handling tasks once left to nurses, such as the care of open wounds or injections of medication. With a rapidly aging population, more families will face those responsibilities: Government figures show nearly 7 in 10 Americans will need long-term care at some point after they reach age 65. Yet just 20 percent of those surveyed think it is likely they will need such care someday. Almost twice as many, 39 percent, are deeply concerned about burdening their families. Contrary to popular belief, Medicare doesn't pay for the most common types of long-term care -- and last year, a bipartisan commission appointed by Congress couldn't agree on how to finance those services, either. But the AP-NORC Center poll found nearly 6 in 10 Americans 40 and older support some type of government-administered long-term care insurance program, a 7-point increase from last year's AP survey. The poll also found broad support for a range of policy proposals: More than three-fourths favor tax breaks to encourage saving for long-term care or for purchasing long-term care insurance. Only a third favor a requirement to purchase such coverage. Some 8 in 10 want more access to community services that help the elderly live independently. More than 70 percent support respite care programs for family caregivers and letting people take time off work or adjust their schedules to accommodate caregiving. Two-thirds want a caregiver designated on their loved one's medical charts who must be included in all discussions about care. Oklahoma this month became the first state to pass the AARP-pushed Caregiver Advice, Record and Enable -- or CARE -- Act that requires hospitals to notify a family caregiver when a loved one is being discharged and to help prepare that caregiver for nursing the patient at home. Just 30 percent in this age group who say they'll likely care for a loved one in the next five years feel prepared to do so. Women tend to live longer than men and consequently most family caregivers, 41 percent, assist a mother. Seventeen percent have cared for a father, and 14 percent have cared for a spouse or partner, the poll found. The tug on the sandwich generation -- middle-aged people caring for both children and older parents, often while holding down a job -- has been well-documented, and the new poll found half of all caregivers report the experience caused stress in the family. But spouses were most likely to report that stress and to say caregiving weakened their relationship with their partner and burdened their finances. Spouses are more likely to handle complex care tasks, on duty 24-7 with less help from family and friends, said Lynn Feinberg, a caregiving specialist at AARP. Physically, that can be harder because spouse caregivers tend to be older: In the AP-NORC poll, the average age of spouse caregivers was 67, compared with 58 for people who've cared for a parent. Virginia Brumley, 79, of Richmond, Indiana, cared for her husband, Jim, for nearly five years while he suffered dementia and Parkinson's syndrome, care that eventually required feeding, dressing and diapering him. "I think I loved him more after I started caring for him. I saw what a wonderful person he was: his [positive] attitude, his kindness, his acceptance of things," she said. But he lived his last 11 months in a nursing home because "I couldn't handle him anymore," Brumley said. "He was too big for me. He was as helpless as a baby." The AP-NORC Center survey was conducted by telephone March 13 to April 23 among a random national sample of 1,419 adults age 40 or older, with funding from the SCAN Foundation. Results for the full survey have a margin of sampling error of plus or minus 3.6 percentage points. -. Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. More from The Associated Press
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Which Billionaire Investor Has the Right Idea on The Big Banks?

Blindly following moves by the largest money managers isn't advised; however, investors may gain valuable insight by looking behind the headlines when 2 fund manager titans have divergent views on stocks in the same industry.

While billionaire George Soros saw his Soros Fund Management LLC dumped positions in banking giants JPMorgan Chase (NYSE: JPM), and CitiGroup (NYSE: C), Warren Buffett's Bershire Hathaway Group continued to hold huge stakes in Wells Fargo & Co. (NYSE: WFC) and US Bancorp (NYSE: USB).

Why such differing outlooks?

Wall Street versus Main Street banks
Behemoths Citigroup (NYSE: C  ) and JPMorgan Chase (NYSE: JPM  ) run worldwide empires reviled for exotic, financially engineered products, rapid-fire trading desks, and expensive miscues. These are among the "Wall Street banks." Some pundits argue that no one can really understand the inner workings; not even top management. They are not only "too big to fail," but perhaps "too big to manage."

However, institutions like Wells Fargo & Co.  (NYSE: WFC  ) and US Bancorp (NYSE: USB  ) never strayed from traditional "Main Street" banking business models.

Management emphasizes taking in customer deposits, and making sound community loans and mortgages. In addition, these 2 banks have little overseas exposure.

Here's a simple proof challenge: go read the "Overview" section of the most recent 10-Q filing for JPMorgan Chase and CitiGroup. Then try to explain to a novice how these institutions make money. Warren Buffett once quipped he only invests in companies "that don't take a genius to run."

Citigroup: troubles in the U.S. and Mexico
Citi took a confidence hit when Federal regulators rejected its 2014 shareholder return-of-capital plan. CEO Michael Corbat said the bank would wait until next year before resubmitting a new capital plan, thereby precluding current investors from a higher dividend or a more robust share-repurchase program now.

In late February, Citigroup's Banamex unit in Mexico made the news when it alleged the unit had been defrauded by an oil-services company, causing losses of as much as $400 million and forcing the bank to restate 2013 results.

Soon after, Citigroup reported it had discovered a smaller potential fraud at another company that dealt with Petróleos Mexicanos, or Pemex, Mexico's state-owned oil company.

Soros opened a CitiGroup position in 2010.  He's now exited all shares.

J.P. Morgan Chase: fines upon fines
The 2012 "London Whale" fiasco caused a stir, costing the bank about $6.2 billion, along with another $1 billion regulatory fine. Two former traders became targets of criminal charges. The mishap tarnished the image of CEO Jamie Dimon, with Wall Street now questioning whether Dimon (or anyone else for that matter), can run the far-flung operation.

According to New York Post, as many as 10,000 more job cuts are planned for 2014 in addition to previously announced layoffs; a result of shrinking business lines and heavy regulatory oversight.

In October 2013, JPMorgan Chase reported its first quarterly loss during the Dimon tenure, with results weighed down by $7.2 billion in legal costs. Then the bank missed 2014 first quarter earnings big-time.

Source: Wikipedia / Harald Dettenborn.

Evidently, Soros Fund Management LLC had seen enough.  Despite just adding JPMorgan shares in 4Q 2013, the fund ditched all shares at the end of March.

US Bancorp: a different story
This bank is known for a long history of conservative management and prudent underwriting standards.

In 2008, US Bancorp didn't need Federal Trouble Asset Relief Program money, but took $6.6 billion after pressured to do so, then paid it back immediately when afforded the chance.

Since that event, the most newsworthy item around the bank is....there isn't any news. This is just the way Warren Buffett likes it. He added more shares as reported in the most recent 13-F filing.

USB simply builds its deposit base, makes good loans, and collects bank fees. In turn, senior leadership rewards shareholders with a steadily rising dividend and aggressive stock repurchase plan. US Bancorp targets 60-80% of its earnings to shareholder return-of-capital.

Wells Fargo & Co.: Buffett's darling
Wells Fargo equity is Warren Buffett's biggest investment; and Mr. Buffett is Wells' biggest shareholder. He has afforded management consistent praise. Indeed, Wells Fargo used the financial crisis to build assets, including stealing Wachovia Bank right out from under CitiGroup. By most measures, Wells' has become the nation's best megabank. Management targets 40% of earnings to a cash dividend, and an additional 15-35% to share repurchase.

Similar to USB, investors learned Wells' didn't want or need Federal bailout money, either.

Big banking's little $20.8 trillion secret
There's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. To learn about about this company, click here to access our new special free report.

Wednesday, May 21, 2014

Week In FX Asia – Indian Election Results Boost INR And Sensex

INDIA

India's Opposition Wins Election by Landslide Election Result Pushes Rupee and Sensex Higher New Indian Government Will Inherit Slow Output and High Inflation Indian Central Bank Could Come Under Pressure From New Government

The largest democracy in the world finished its five week long election process. The final results will be a surprise to no one as the BJP had a strong campaign. In January polls favoured them to win a majority after the party's leader was hitting all the right notes on the campaign trail. The opposition is on track to win by a landslide and score a majority in the lower house.

The optimism surrounding the potential BJP win aligned with a strong market rally that pushed the currency and the stock market higher. The INR appreciated the whole week to finish at 58.55 after starting the week close to 60 USD/INR. The expectation is for the new government to deliver on its promise of economic growth. Narendra Modi the BJP's candidate has promised a strong economic revival. The main challenge will be to turn campaign rhetoric against the political establishment into a reality for all Indians.

The economic growth goals could put the new government on a collision course with the Reserve Bank of India. The market has given a lot of credit to Governor Raghuram Rajan for steering India's economy in the last year as inflation, output and the rupee have been concerns. The interaction between the central bank and the newly elected government is one of the most anticipated partnerships by market participants.

A good working relationship will go a long way of boosting India's credentials abroad and create optimism surrounding the country's growth goals. A rivalry could mean a return to the vicious cycle that has engulfed India in the post credit crisis years.

JAPAN

College Grad Employment Rises to 94.4 Percent Four Largest Banking Groups Report Increase in Profits in 2013 GDP Grows 5.9 Percent on Pre Tax Hike Shopping Japanese Growth Beats Forecasts Wholesale Prices Rise 4.1 Percent in April BOJ Could Be Called Into Action if Japanese Exports Continue To Fall

Japan had on net a very positive week. Inflation continues to rise which will help the economy reach its 2 percent inflation goal. Gross Domestic product surprised to the upside. The GDP rose 1.5% in the first quarter of 2014. The forecasts called for a 1% increase. The major driver for the increase was the introduction of the sales tax hike in April. The higher tax prompted consumers to expedite large purchases to avoid paying the extra tax. Consumer spending accounts for 60% of GDP so the real question is what effect it will has going forward after the new higher sales tax.
The JPY was stuck in a tight range this week and could not pierce the 102 level for too long. The currency finished the week at 101.56 USD/JPY after a good GDP print and uncertainty about the Bank of Japan's next move.

Next Week in Asia:

Reserve Bank of Australia Meeting Minutes Bank of Japan Interest Rate Decision and Monetary Policy Statement Chinese Manufacturing Purchasing Managers Index (PMI)

Next week in Asia there will be a release of the Reserve Bank of Australia's minutes from their May 6 meeting. The minutes are released two weeks after the interest rate decision to avoid introducing more market moving information at the same time. There is a low level of probability that there will be surprises on the minutes as the meeting held rates at 2.5%. The expectation in the market has shifted to the effect the newly announced budget could have on the economy before the RBA commits to any policy changes.

The Bank of Japan has been under pressure to act since the start of the year. After being the most proactive central bank of 2013 with the bold policy change that gave Abenomics a running start not much has been done by the BOJ. The economy continues to struggle even though it has seen incredible growth in Q1, but boosted by a transitory sales tax hike which increased consumption. Exports continue to fall even with the benefits of a lower yen. The BOJ is probably going to wait for another major central bank to act first with the ECB being the most likely candidate after its President's comments this month.

Chinese manufacturing has been steadily contracting for the past four months. Next week's HSBC/Markit Purchase Managers Index will probably confirm the downward trend. The Chinese president Xi Jinping commented last weekend that the country needs to get used to slower growth. The comments were taken as a negative to the question of further stimulus.

Japanese Government Task Force Recommends Corporate Tax Cuts – MarketPulse Japan College Grad Employment Rises to 94.4 Percent – MarketPulse India's Opposition Wins Election by Landslide – MarketPulse India Election Result Pushes Rupee and Sensex Higher – MarketPulse China Sees Increase in Bad Loans – MarketPulse JPY Rises As Europe and America Dissapoint – MarketPulse Japan 4 Large Banking Groups Report Increase in Profits in 2013 – MarketPulse Japan GDP Grows 5.9 Percent on Pre Tax Hike Shopping – MarketPulse Japanese Growth Beats Forecasts – MarketPulse Japanese Wholesale Prices Rise 4.1 Percent in April – MarketPulse Indian Central Bank Could Come Under Pressure From New Government – MarketPulse Australia's Tough Budget Big on Spending Cuts – MarketPulse Five Points on The Australian Budget – MarketPulse India Stocks Hit Record High on Election Optimism – MarketPulse Australia New Budget Aims to Halve Deficit – MarketPulse China's Slowdown Deepens – MarketPulse Chinese President Tell Country to Get Used to Slow Growth – MarketPulse BOJ Could Be Called Into Action if Japanese Exports Continue To Fall – MarketPulse Hong Kong and Singapore At Risk of Higher Fed Rates – MarketPulse New Indian Government Will Inherit Slow Output and High Inflation – MarketPulse

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: Forex Markets

Originally posted here...

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Tuesday, May 20, 2014

Mid-Day Market Update: Campbell Soup Slides After Weak Forecast; InterMune Shares Spike Higher

Related BZSUM Market Wrap for May 19: Markets Finish Higher On M&A Monday Mid-Afternoon Market Update: Markets Drift Higher Amid A Flurry Of Weekend M&A Activity

Midway through trading Monday, the Dow traded up 0.15 percent to 16,515.49 while the NASDAQ surged 0.83 percent to 4,124.58. The S&P also rose, gaining 0.34 percent to 1,884.17.

Leading and Lagging Sectors
Technology shares gained about 0.68 percent in today's trading. Meanwhile, top gainers in the sector included Intermolecular (NASDAQ: IMI), up 38.3 percent, and Infinera (NASDAQ: INFN), up 9.4 percent. In trading on Monday, utilities shares were relative laggards, down on the day by about 0.68 percent.

Top decliners in the sector American Electric Power Co (NYSE: AEP), down 2.5 percent, and FirstEnergy (NYSE: FE), off 2.5 percent.

Top Headline
On Sunday, AT&T (NYSE: T) announced its plans to buy DirecTV (NASDAQ: DTV) for $48.5 billion, or $95 per share in a combination of stock and cash. The offer price of $95 per DirecTV share represents a 10 percent premium to closing price of $86.18 on Friday. The deal has a total value of $67.1 billion, including DirecTV's net debt.

Equities Trading UP
Ryanair Holdings plc (NASDAQ: RYAAY) shares shot up 6.55 percent to $54.32 after the company reported full-year results. Ryanair's net profit for the year ended March 31 slipped to 522.8 million euros ($716 million), versus a year-ago profit of EUR569.3 million.

Shares of InterMune (NASDAQ: ITMN) got a boost, shooting up 14.31 percent to $39.22 after the company presented Phase 3 ASCEND study of Pirfenidone in idiopathic pulmonary fibrosis. Leerink upgraded the stock from Market Perform to Outperform.

Gogo (NASDAQ: GOGO) shares were also up, gaining 9.06 percent to $14.92. UBS upgraded Gogo from Neutral to Buy.

Equities Trading DOWN
Shares of AstraZeneca PLC (NYSE: AZN) were 10.50 percent to $71.85 after the company's board rejected the new $119 billion takeover offer from Pfizer (NYSE: PFE).

Campbell Soup Company (NYSE: CPB) shares tumbled 3.44 percent to $43.57 after the company reported a rise in its fiscal third-quarter earnings and cut its FY14 forecast.

AT&T (NYSE: T) was down, falling 1.33 percent to $36.25 after the company announced its plans to buy DirecTV (NASDAQ: DTV) for $48.5 billion, or $95 per share.

Commodities
In commodity news, oil traded up 0.73 percent to $102.76, while gold traded up 0.26 percent to $1,296.80.

Silver traded up 0.24 percent Monday to $19.38, while copper rose 0.62 percent to $3.17.

Eurozone
European shares were mostly lower today.

The eurozone's STOXX 600 dropped 0.14 percent, the Spanish Ibex Index fell 0.51 percent, while Italy's FTSE MIB Index tumbled 1.60 percent.

Meanwhile, the German DAX gained 0.31 percent and the French CAC 40 rose 0.30 percent while UK shares slipped 0.12 percent.

Economics
The Treasury is set to auction 3-and 6-month bills.

Posted-In: Earnings News Guidance Eurozone Futures Forex Global Econ #s Economics Intraday Update Markets Movers Tech

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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