Saturday, January 31, 2015

CBO report: Minimum wage hike could cost 500,000…

WASHINGTON — President Obama's call to raise the federal minimum wage could help lift 900,000 workers out of poverty, but at a cost of as many as 500,000 jobs, according to an analysis released today by the non-partisan Congressional Budget Office.

The White House and congressional Democrats--who are seeking to make a federal minimum wage hike a top issue in the 2014 elections--took issue with the politically sensitive report and said CBO's findings are inconsistent with the prevailing view among economists that raising the minimum wage does not impact employment.

"Zero is a perfectly reasonable estimate of the impact of the minimum wage on employment ," countered Council of Economic Advisers Chairman Jason Furman in a conference call with reporters in response to the CBO report.

Obama initially called on Congress to raise the $7.25 hourly minimum wage to $9, but he has since rallied with leading Senate Democrats who are pushing for a $10.10 increase. The Democratic-controlled Senate is expected to vote on a wage increase in March, but it is unlikely to get a vote in the GOP-controlled House.

Raising the minimum wage gets broad public support in polls, but it faces near unanimous opposition from congressional Republicans. Democrats are expected to use the issue on the campaign trail in the midterm elections.

A Gallup poll released Monday showed that nearly one in four Americans say that jobs and unemployment are their top concern, underscoring Democrats' sensitivity to the CBO's conclusion that a wage increase could result in job losses.

CBO examined the budget impacts of raising the minimum wage to $9 and $10.10. The report concluded that a $9 increase would lift 300,000 workers above the poverty line, but cost 100,000 new jobs as employers are expected to reduce workforces to make up for higher wages. A $10.10 increase would lift 900,000 workers above the poverty line, but cost 500,000 jobs.

Furman and Betsey Stevenson, also a member of the Council of Economi! c Advisers, said the CBO analysis does not take in to account the impacts of higher wages on increasing productivity, reducing turnover and absenteeism and improving worker output. "I think that that understanding has moved employment effects to zero," she said, "I think CBO didn't fully appreciate that in their review."

Republicans were quick to highlight the report's warning of job losses.

"This report confirms what we've long known: while helping some, mandating higher wages has real costs, including fewer people working. With unemployment Americans' top concern, our focus should be creating — not destroying — jobs for those who need them most," said Brendan Buck, a spokesman for House Speaker John Boehner, R-Ohio.

Minority Leader Nancy Pelosi, D-Calif., joined the White House in questioning the veracity of the CBO report, citing competing economic consensus that a wage increase would be an economic stimulus and boost jobs. "What's more, in past years, the CBO itself has acknowledged the uncertainty of its own predictions and ignored new perspectives in the wide array of analysis on the minimum wage," she said.

The CBO report acknowledges that long-term conclusions on the effect of the minimum wage are difficult to predict. In 2007 – the last time Congress voted to raise the federal minimum wage to the current $7.25 rate – CBO reported that "the potential employment and unemployment impacts of raising the federal minimum wage rate to $7.25 per hour are difficult to predict, but are likely to be small."

Senate Health, Education, Labor and Pensions Chairman Tom Harkin, D-Iowa, the sponsor of legislation to raise the wage to $10.10, issued a lengthy critique of the CBO report.

"More than 600 economists, including seven Nobel Prize laureates, recently affirmed the growing consensus that low-wage workers benefit from modest increases in the minimum wage without negative consequences for the low-wage job market," Harkin said, adding that his legislation would in! crease wa! ges for 28 million workers, and create 85,000 new jobs.

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Thursday, January 29, 2015

The Case for Strategic Income

Following a 30-year bull market in bonds, investors need to prepare for a long-term rise in rates, cautions Anton Bayer. The CEO of Up Capital looks at this transition and highlights several strategies and positions for the next stage of the interest rate cycle.

Steve Halpern: We're here today with Anton Bayer, Founder and CEO of Up Capital Management. How are you doing, Anton?

Anton Bayer: I'm doing great, thanks very much, Steven.

Steve Halpern: First, could you tell our listeners a little about Up Capital Management?

Anton Bayer: Yes, we're a registered investment advisory firm with about $160 million under management and we manage four model portfolios that are comprised of individual stocks, ETFs, and mutual funds. They are risk-based, so there are four of them; income, balance, growth and income, and growth model portfolios.

Steve Halpern: Now—as a smaller firm—you mentioned that you're not one of the big guys and that gives you some added flexibility. Can you tell listeners a little about how that allows you to react a little more quickly to markets?

Anton Bayer: One of the key aspects that large firms are handicapped with is they have an investment policy that dictates all of the advisors as to how to manage money and, for the most part, it requires the advisors keeping the investors in the risk category that, when they sign the original application, that is what they need to stay in, regardless of market conditions.

If you sign up with a large firm and you identify yourself as a growth and income investor, you will stay predominantly in an overweighted equity position and the advisor doesn't have, typically, the flexibility to increase cash positions or reduce risk, even in situations like 2008, and 2000, and 2002, because the compliance requirements are to keep the client in the category that they sign up for.

As a smaller firm, we write our own ADV—a disclosure form filed with the Securities and Exchange Commission—and our own investment policy.

So, in our ADV, we have established that all four portfolios can go 100% to cash anytime, so even if you're in our growth portfolio, if it is a high-risk scenario, as we believe it is, we can increase the cash position, which, even though it typically doesn't represent a growth portfolio, in our opinion, it is the best allocation at the time.

Steve Halpern: Let's look at the current environment. With the Fed beginning to taper, you see some challenges ahead for Janet Yellen. Could you expand on that?

Anton Bayer: Yes. This market has been so sensitive to Federal Reserve monetary policy since 2007, on both sides of the equation, which adds to our level of confidence that it is a key barometer and influencer to the market.

The best recent example is 2012, when Ben Bernanke ended QE2 June 30, immediately, the first day of the market in July and all the way through August, the market fluctuated significantly and, in the first four days of August, fluctuated 2,000 points in that first week.

It wasn't until Ben Bernanke introduced what we now have as quantitative easing, in October, that the market resumed the rally that we are in right now.

Our concern is that the emerging markets are exposing the dependency on Central Bank monetary policy, as the feds continue to slowly wind down and taper their quantitative easing, and then that is going to eventually start bringing the exposure into the US economy, as they continue tapering from $85 billion at $10 billion a month, continue reducing that.

Currently, we have an economy that is growing a meager 2.5% to 3%. We still have a high 7% unemployment and we've had trillions of dollars invested from the Federal Reserve and the federal government index, in spending and stimulus, and we have a lackluster economy.

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Best and Worst Buys of January 2014

There is no shortage of deals in January. So if you didn't bust your budget during the holidays, here's what you can expect to find on sale this month. If you've been eyeing any of these items, now is to buy them at great discounts.

SEE ALSO: 10 Online Shopping Traps to Avoid

Broadway tickets. You can get two tickets for the price of one to several popular shows during Broadway Week in January, which actually lasts two weeks from January 21 to February 6. Some shows will even offer the discount for up to four weeks, says Erich Jungwirth, chief operating officer of the Lyric Theatre (formerly Foxwoods Theatre), Broadway's largest theater and home to Spider Man Turn Off the Dark. This biannual event also happens in September, giving theater-goers another chance to score two-for-one tickets. January and February are good months, in general, to see Broadway shows for less because it's off-season and ticket prices tend to drop. See How to Save on Tickets to Broadway Shows for more tips.

Christmas décor. After staring at Christmas decorations all December, it might be hard to think about stocking up on holiday items. But January is the ideal time to find ornaments, garland, artificial trees and décor marked down as much as 75%, according to dealnews.com. If you don't mind the red-and-green theme or chocolate shaped like a wreath, you can load up on deeply discounted edible holiday treats in January, too.

Electronics. You'll see discounts on 2013 models of cameras, audio equipment, tablets and other electronics as new versions debut this month at the Consumer Electronics Show. Dealnews.com recommends watching for announcement of new models so you know which 2013-model devices will go on sale.

Fitness equipment. Retailers know that people usually resolve to lose weight in the new year, so they tend to have sales on fitness equipment to lure consumers into stores in January. According to dealnews.com, you'll find stationary bikes, treadmills, elliptical trainers, complete home gyms, and training accessories and DVDs that are marked 30% to 70% off -- and many deals extend into February.

Furniture. Many furniture manufacturers release new styles in February, so retailers must clear out old, bulky inventory in January. So you'll see some of the most significant price cuts of the year in January, according to dealnews.com. Brett Billick, senior director of Deals2Buy.com, says some stores have discounts of up to 60%, and many offer incentives such as 0% financing.

Gift cards. Several Web sites such as Gift Card Granny buy gift cards for a percentage of the remaining value and sell them at a discount. There's typically a flood of gift cards being sold to these sites after the holidays, says Luke Knowles, the founder of Gift Card Granny. The glut of inventory on gift-card reseller sites makes it a great buying opportunity for people looking to get better-than-usual discounts on gift cards. So if you find, say, a $50 Macy's gift card for just $40, you'll automatically save $10 the next time you shop there. See 3 Simple Steps to Cash in Unused Gift Cards.

Linens. Take advantage of "white sales" this month to get new towels or sheets if the ones you have aren't looking so white anymore. Expect to see discounts ranging from 20% to 75%, with markdowns extending to a wide range of home goods.

Winter apparel. Apparel retailers aim to clear out winter gear and restock their racks by the third week of January, says Billick of Deals2Buy.com. To do so, they have clearance sales and offer plenty of coupons and merchandise promotions, such as two-for-one deals, he says. Expect sales that take up to 80% off winter apparel, and look for coupons that slash up to an extra 60% off, according to dealnews.com.

Wait a little longer to buy ...

Big-screen HDTVs. Dealnews.com doesn't expect prices to drop dramatically on name-brand HDTVs that are 55 inches or bigger until early February. Look for prices to be about 10% lower than Black Friday prices.

Gaming consoles. With demand still strong for the new Xbox One and PlayStation 4, dealnews.com doesn't expect to see any discounts on these gaming consoles until April. Even then, discounts will only be about 10%.



Wednesday, January 28, 2015

August home prices up 1.3% from July

U.S. home prices were up 1.3% in August from July , but the peak rate of gain in home prices occurred in April, a widely watched index shows.

Data through August shows that prices were up 12.8% year over year, shows the Standard & Poor's Case-Shiller 20-city index.

Both the 10 and 20-city indices showed their highest annual increases since February 2006, and all 20 cities reported positive year-over-year returns.

But while home prices continue to rise, it's at a slower pace each month since April, the data shows. In August, 16 cities reported smaller gains compared to July.

Other home price tracking services have shown slowing rates of appreciation amid higher interest rates, more homes for sale and slowing investor purchases.

U.S. home values were up 1.2% in the third quarter from the second, Zillow data show. That's down from a 2.5% jump in the second quarter from the first.

Half of 30 major metropolitan areas covered by Zillow saw values fall in September from August, seasonally adjusted numbers show. Earlier this summer, all the same metros were seeing month-to-month gains.

Pending home sales, too, declined in September for the fourth month in a row, a signal to expect lower home sales this quarter and a flat trend going into next year, the National Association of Realtors said Monday. NAR said price gains will continue, however, given still tight inventories of homes for sale in many markets.

After spiking in May, mortgage interest rates have come back down. Freddie Mac data shows them slipping last week to a four-month low at an average of 4.13% for the 30-year fixed rate loan. That's still up from 3.41% a year ago.

Bank of America’s Truce and 2 Surging Stocks

In this segment from Thursday's episode of The Motley Fool's everything-financials show, Where the Money Is, banking analysts Matt Koppenheffer and David Hanson go through a rapid-fire round of three top headlines. The newsmakers included KKR (NYSE: KKR  ) , Bank of America (NYSE: BAC  ) , Morgan Stanley (NYSE: MS  ) , Lazard (NYSE: LAZ  ) , and Evercore (NYSE: EVR  ) .

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Monday, January 26, 2015

RiverNorth, DoubleLine Reopen $1 Billion Strategic Income Fund

RiverNorth and DoubleLine announced Thursday that the RiverNorth/DoubleLine Strategic Income Fund (RNSIX) has reopened to new investors.

RiverNorth CIO Patrick Galley said in a webcast that performance of the fund, launched at the end of 2010, had been very strong until the early part of this year, “until ‘fear and loathing’ came to dominate fixed income,” particularly among the 300 fixed income closed-end funds in its universe. That sector constitutes one of the three sleeves in RNSIX, along with DoubleLine Capital’s core fixed income sleeve and that firm’s opportunistic fixed income picks.

Galley (left) said that this summer, “when interest rates sold off,” RiverNorth descried the increased discount to the value of the underlying assets in closed-end funds “go from boring to a very strong opportunity.” That opportunity is so strong, in fact, that the fund now has 33% of its holdings in each of the three sleeves. At inception, 50% of the fund’s holdings were in DoubleLine’s core fixed income sleeve. “We soft closed as opportunity shrunk; now we’ve shifted, finding new opportunity,” especially since “discount volatility is what we like at RiverNorth.”

 During the webcast, DoubleLine Capital CEO Jeffrey Gundlach (right) noted that the announcement came on the same day that Federal Reserve Chairman Ben Bernanke announced that the Fed would continue its monthly bond purchases at the same level, rather than start tapering those purchases. Saying the FOMC move made it likely that “zero interest rates are here to stay for a long time,” Gundlach said that in the “beginning of a cyclical change, closed-end funds might be more attractive than open-end funds; they’re already cheap, and may become cheaper than open-end funds or bonds themselves.”

In addition to commenting on the possible reasons for the Fed’s decision, Gundlach said of the Strategic Income Fund that “I’m an investor in the fund and I’ve been happy with its performance.”

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Check out Gross, Gundlach Cheer as Fed Holds Off on ‘Death Swim’ on ThinkAdvisor.

Sunday, January 25, 2015

4 Markets

30-Year Bond: Trade thru the pivot is WEAK and will target 130.12. There is NOT much support at the pivot; We like the upside much better if the bulls can get trade back above any support (131.14). 10-Year Treasury Note: Trade thru the yield seeks 123.25 - but the bulls will defend both 124.075 and 124.015. Trade up thru 123.295 seeks 127.00. 5-Year Treasury Note: Like the bonds, this pivot is NOT very supportive and a failure will slip hard - in this case to 119.17. The bulls do VERY well above 120.255. S&P500 Stock Index: It's ALL about WHO controls this pivot...weakness targets 86.25. We still need to go WITH the bulls on strength. As always, use stops and keep an eye on the 10-handle rule. Don't forget to catch MrTopStep on The Closing Print video found under the OptionsTV page (top bar). We report directly from the SPX pits, wrapping up the day and positioning for trade tomorrow. OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits MrTopStep can be followed on Twitter at twitter.com/MrTopStep For LIVE futures chat, more information on the 10-handle rule and futures educational content CLICK HERE FOR A SEVEN-DAY FREE TRIAL.

Saturday, January 24, 2015

Baird, Morgan Stanley, UBS Lure Advisors From Rivals

The recruiting wars for financial advisors appear to be heating up — or, at least, staying hot — despite the fact that many in the industry are taking some time off to enjoy the final weeks of summer.

Baird said Monday that it had recruited four veteran advisors to its Private Wealth Management group from UBS (UBS) and Morgan Stanley (MS) with a total of some $330 million in client assets and $2.3 million in trailing 12-month fees & commissions.

The Andersen Group in Chicago, which includes the father-and-son team of Richard and Eric Anderson, moves to Baird from UBS with about $165 million in client assets and $1.2 million in yearly production.

Dan Phillips in Edina, Minn., was recruited to Baird from UBS with some $105 million in client assets and $535,000 in yearly production.

Phillips has been in the business for more than 30 years since starting his career in 1981 with Piper Jaffray as an annuity product manager. In 2000, he became an advisor with the firm, which was bought by UBS in 2006.

Baird also added John Huynh recently from Morgan Stanley in Baltimore. Huynh's client assets are $60 million, while his yearly fees and commissions stand at $565,000.

The firm says that it has added more than 300 reps and branch managers to its wealth-management operations since early 2009. The privately owned company, which many of its advisors have a stake in as partners, now has more than 700 employee advisors.

Last month, Baird announced that it had recruited seven ex-Wells Fargo Advisors with $1.9 billion in client assets.

Meanwhile, UBS said Monday that it had recruited Bruce G. Lanser, a certified investment management analyst (CIMA) and chartered retirement planning consultant (CRPC), from Morgan Stanley in Baird’s home town of Milwaukee.

Lanser has been hired as an institutional consultant, who specializes in work for defined-contribution retirement plans. He oversaw $600 million in client assets and had production of $1.1 million, according to UBS.

The 30-year veteran  joins UBS with his partner and wife, Bernadette T. Lanser, CRPC.

For its part, Morgan Stanley said Monday that it recruited Martin Domres from Deutsche Bank in Baltimore. Domres has about $350 million in client assets and production of more than $2 million.

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Check out Janney Recruits Morgan Stanley FA in Delaware on ThinkAdvisor.

 

Thursday, January 22, 2015

Declining U.S. Economic Security: 80% Face Joblessness, Near-Poverty

Signs of declining economic securityDebra McCown/APThis photo taken Friday July 12, 2013, shows the Salyers' produce stand in Council, Va. WASHINGTON - Four out of 5 U.S. adults struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream. Survey data exclusive to The Associated Press points to an increasingly globalized U.S. economy, the widening gap between rich and poor, and the loss of good-paying manufacturing jobs as reasons for the trend. The findings come as President Barack Obama tries to renew his administration's emphasis on the economy, saying in recent speeches that his highest priority is to "rebuild ladders of opportunity" and reverse income inequality. As nonwhites approach a numerical majority in the U.S., one question is how public programs to lift the disadvantaged should be best focused - on the affirmative action that historically has tried to eliminate the racial barriers seen as the major impediment to economic equality, or simply on improving socioeconomic status for all, regardless of race. Hardship is particularly growing among whites, based on several measures. Pessimism among that racial group about their families' economic futures has climbed to the highest point since at least 1987. In the most recent AP-GfK poll, 63 percent of whites called the economy "poor." "I think it's going to get worse," said Irene Salyers, 52, of Buchanan County, Va., a declining coal region in Appalachia. Married and divorced three times, Salyers now helps run a fruit and vegetable stand with her boyfriend but it doesn't generate much income. They live mostly off government disability checks. "If you do try to go apply for a job, they're not hiring people, and they're not paying that much to even go to work," she said. Children, she said, have "nothing better to do than to get on drugs." While racial and ethnic minorities are more likely to live in poverty, race disparities in the poverty rate have narrowed substantially since the 1970s, census data show. Economic insecurity among whites also is more pervasive than is shown in the government's poverty data, engulfing more than 76 percent of white adults by the time they turn 60, according to a new economic gauge being published next year by the Oxford University Press. The gauge defines "economic insecurity" as experiencing unemployment at some point in their working lives, or a year or more of reliance on government aid such as food stamps or income below 150 percent of the poverty line. Measured across all races, the risk of economic insecurity rises to 79 percent. Marriage rates are in decline across all races, and the number of white mother-headed households living in poverty has risen to the level of black ones. "It's time that America comes to understand that many of the nation's biggest disparities, from education and life expectancy to poverty, are increasingly due to economic class position," said William Julius Wilson, a Harvard professor who specializes in race and poverty. He noted that despite continuing economic difficulties, minorities have more optimism about the future after Obama's election, while struggling whites do not. "There is the real possibility that white alienation will increase if steps are not taken to highlight and address inequality on a broad front," Wilson said. ___ Nationwide, the count of America's poor remains stuck at a record number: 46.2 million, or 15 percent of the population, due in part to lingering high unemployment following the recession. While poverty rates for blacks and Hispanics are nearly three times higher, by absolute numbers the predominant face of the poor is white. More than 19 million whites fall below the poverty line of $23,021 for a family of four, accounting for more than 41 percent of the nation's destitute, nearly double the number of poor blacks. Sometimes termed "the invisible poor" by demographers, lower-income whites generally are dispersed in suburbs as well as small rural towns, where more than 60 percent of the poor are white. Concentrated in Appalachia in the East, they are numerous in the industrial Midwest and spread across America's heartland, from Missouri, Arkansas and Oklahoma up through the Great Plains. Buchanan County, in southwest Virginia, is among the nation's most destitute based on median income, with poverty hovering at 24 percent. The county is mostly white, as are 99 percent of its poor. More than 90 percent of Buchanan County's inhabitants are working-class whites who lack a college degree. Higher education long has been seen there as nonessential to land a job because well-paying mining and related jobs were once in plentiful supply. These days many residents get by on odd jobs and government checks. Salyers' daughter, Renee Adams, 28, who grew up in the region, has two children. A jobless single mother, she relies on her live-in boyfriend's disability checks to get by. Salyers says it was tough raising her own children as it is for her daughter now, and doesn't even try to speculate what awaits her grandchildren, ages 4 and 5. Smoking a cigarette in front of the produce stand, Adams later expresses a wish that employers will look past her conviction a few years ago for distributing prescription painkillers, so she can get a job and have money to "buy the kids everything they need." "It's pretty hard," she said. "Once the bills are paid, we might have $10 to our name." signs of declining economic securityDebra McCown/APRenee Adams, left, poses with her mother Irene Salyers and son Joseph, 4, at their produce stand in Council, Va. ___ Census figures provide an official measure of poverty, but they're only a temporary snapshot that doesn't capture the makeup of those who cycle in and out of poverty at different points in their lives. They may be suburbanites, for example, or the working poor or the laid off. In 2011 that snapshot showed 12.6 percent of adults in their prime working-age years of 25-60 lived inpoverty. But measured in terms of a person's lifetime risk, a much higher number - 4 in 10 adults - falls into poverty for at least a year of their lives. The risks of poverty also have been increasing in recent decades, particularly among people ages 35-55, coinciding with widening income inequality. For instance, people ages 35-45 had a 17 percent risk of encountering poverty during the 1969-1989 time period; that risk increased to 23 percent during the 1989-2009 period. For those ages 45-55, the risk of poverty jumped from 11.8 percent to 17.7 percent. Higher recent rates of unemployment mean the lifetime risk of experiencing economic insecurity now runs even higher: 79 percent, or 4 in 5 adults, by the time they turn 60. By race, nonwhites still have a higher risk of being economically insecure, at 90 percent. But compared with the official poverty rate, some of the biggest jumps under the newer measure are among whites, with more than 76 percent enduring periods of joblessness, life on welfare or near-poverty. By 2030, based on the current trend of widening income inequality, close to 85 percent of all working-age adults in the U.S. will experience bouts of economic insecurity. "Poverty is no longer an issue of 'them', it's an issue of 'us'," says Mark Rank, a professor at Washington University in St. Louis who calculated the numbers. "Only when poverty is thought of as a mainstream event, rather than a fringe experience that just affects blacks and Hispanics, can we really begin to build broader support for programs that lift people in need." The numbers come from Rank's analysis being published by the Oxford University Press. They are supplemented with interviews and figures provided to the AP by Tom Hirschl, a professor at Cornell University; John Iceland, a sociology professor at Penn State University; the University of New Hampshire's Carsey Institute; the Census Bureau; and the Population Reference Bureau. Among the findings: -For the first time since 1975, the number of white single-mother households living in poverty with children surpassed or equaled black ones in the past decade, spurred by job losses and faster rates of out-of-wedlock births among whites. White single-mother families in poverty stood at nearly 1.5 million in 2011, comparable to the number for blacks. Hispanic single-mother families in poverty trailed at 1.2 million. -Since 2000, the poverty rate among working-class whites has grown faster than among working-class nonwhites, rising 3 percentage points to 11 percent as the recession took a bigger toll among lower-wage workers. Still, poverty among working-class nonwhites remains higher, at 23 percent. -The share of children living in high-poverty neighborhoods - those with poverty rates of 30 percent or more - has increased to 1 in 10, putting them at higher risk of teenage pregnancy or dropping out of school. Non-Hispanic whites accounted for 17 percent of the child population in such neighborhoods, compared with 13 percent in 2000, even though the overall proportion of white children in the U.S. has been declining. The share of black children in high-poverty neighborhoods dropped from 43 percent to 37 percent, while the share of Latino children went from 38 percent to 39 percent. -Race disparities in health and education have narrowed generally since the 1960s. While residential segregation remains high, a typical black person now lives in a nonmajority black neighborhood for the first time. Previous studies have shown that wealth is a greater predictor of standardized test scores than race; the test-score gap between rich and low-income students is now nearly double the gap between blacks and whites. ___ Going back to the 1980s, never have whites been so pessimistic about their futures, according to the General Social Survey, a biannual survey conducted by NORC at the University of Chicago. Just 45 percent say their family will have a good chance of improving their economic position based on the way things are in America. The divide is especially evident among those whites who self-identify as working class. Forty-nine percent say they think their children will do better than them, compared with 67 percent of nonwhites who consider themselves working class, even though the economic plight of minorities tends to be worse. Although they are a shrinking group, working-class whites - defined as those lacking a college degree - remain the biggest demographic bloc of the working-age population. In 2012, Election Day exit polls conducted for the AP and the television networks showed working-class whites made up 36 percent of the electorate, even with a notable drop in white voter turnout. Last November, Obama won the votes of just 36 percent of those noncollege whites, the worst performance of any Democratic nominee among that group since Republican Ronald Reagan's 1984 landslide victory over Walter Mondale. Some Democratic analysts have urged renewed efforts to bring working-class whites into the political fold, calling them a potential "decisive swing voter group" if minority and youth turnout level off in future elections. "In 2016 GOP messaging will be far more focused on expressing concern for 'the middle class' and 'average Americans,'" Andrew Levison and Ruy Teixeira wrote recently in The New Republic. "They don't trust big government, but it doesn't mean they want no government," says Republican pollster Ed Goeas, who agrees that working-class whites will remain an important electoral group. His research found that many of them would support anti-poverty programs if focused broadly on job training and infrastructure investment. This past week, Obama pledged anew to help manufacturers bring jobs back to America and to create jobs in the energy sectors of wind, solar and natural gas. "They feel that politicians are giving attention to other people and not them," Goeas said. ___ AP Director of Polling Jennifer Agiesta, News Survey Specialist Dennis Junius and AP writer Debra McCown in Buchanan County, Va., contributed to this report.

Hasbro Extends Mobile Gaming Agreement With EA

With games like Monopoly Hotels and Scrabble becoming mobile chart-leading games for toymaker Hasbro (NASDAQ: HAS  ) over the past six years, it announced yesterday that it has extended for an additional four years its agreement with Electronic Arts (NASDAQ: EA  ) to continue developing mobile versions of its games on a global level.

Under the new and extended terms, EA will continue to develop mobile games for several of Hasbro's most successful gaming brands including Monopoly, Scrabble, The Game of Life, Battleship, Boggle, Clue, Risk, and Yahtzee.

"The next phase of our relationship will build on this tremendous success," said Hasbro Senior VP and GM of Digital Gaming and Corporate Development Mark Blecher in a press release, "and is specifically focused on leveraging Hasbro's rich game brands with EA's leadership in the mobile space. Our relationship with EA for mobile is an integral component of our digital strategy for developing Hasbro brands across gaming platforms."

Hasbro's digital gaming business isn't exclusive with EA, as rivals such as  Activision Blizzard, DeNA, and Jagex are partners for its mega Transformers franchise. GameLoft has an agreement for mobile games based on My Little Pony and Littlest Pet Shop, and Callaway Digital Arts has one for the Mr. Potato Head mobile app.

Chip Lange, Electronic Arts Senior VP and GM of the Pogo division, said, "We're thrilled to extend our agreement with Hasbro in the mobile space, where their IP remains a priority within our portfolio. Under this partnership, our talented game designers can create mobile games that will allow Hasbro fans around the world to experience their favorite gaming brands in a whole new way."

EA said its Pogo.com gaming community will also continue to be a central hub online for digital versions of Hasbro games. Financial terms of the arrangement were not disclosed in the press release.

Wednesday, January 21, 2015

Take-Two Interactive Floats Convertible Senior Notes Issue

Take-Two Interactive (NASDAQ: TTWO  ) is looking to expand its capital base by $250 million. This comes in the form of an issue of five-year convertible senior notes in an underwritten public flotation. Additionally, the company's underwriters have been granted a 30-day purchase option for up to an additional $37.5 million worth of notes to cover over-allotments.

The notes will pay out interest on a semi-annual basis, at an annual rate of 1%. Their maturity date is July 1, 2018, and they will be convertible (at certain times, given certain conditions, until January 1, 2018) at an initial rate of 46.4727 shares of the firm's common stock per $1,000 principal amount of the notes. This represents a conversion price of $21.52 per share.

Take-Two said it plans to use some of the proceeds of the issue to redeem or pay the cash portion of an outstanding convertible notes issue maturing next year. The remaining funds will be utilized for "general corporate purposes," including potential acquisitions, debt retirement, and share repurchases.

The joint book-running managers of the offering are JPMorgan Chase's J.P. Morgan, Barclays, and the Securities arm of Wells Fargo (NYSE: WFC  ) . The issue is expected to close on June 18.

Currently, Take-Two has around 86.4 million shares outstanding. Those shares currently trade at $15.50 apiece.

Lloyds Raises £3.3bn From U.S. Mortgage Portfolio Sale

LONDON -- Lloyds Banking Group  (LSE: LLOY  ) (NYSE: LYG  )  this morning announced the latest disposal in its continued "non-core asset reduction," in the form of selling a portfolio of US residential mortgage-backed securities to a number of different institutions for a cash consideration of £3.3 billion.

With a book value of £2.7 billion, the transaction will gift Lloyds around £540 million prior to tax, which will be reinvested into the company for "general corporate purposes."

As part of the sale, Lloyds' pension trust also sold its £805 million (book value) share of the portfolio, to realize a pre-tax gain of £360 million. Management said that this will go toward reducing the deficit in the scheme.

Representing further reduction in its risk-weighted assets, this morning's statement from the 39%-taxpayer-owned bank claimed that the sale will lift the group's core tier 1 capital by around 47 points (£1.4 billion capital equivalent).

Today's news follows last week's disposal of 77 million shares in St. James's Place for £450 million, while Lloyds also reassured investors by saying that it is unlikely to need to raise further funds from shareholders, instead using cash generated from its business and disposals like today's to raise capital needed to absorb future losses on loans.

The share price was little moved in early trade, and still hovers close to its 24-month high of 63 pence. But if you are looking for alternative investment opportunities within the FTSE 100, then this exclusive wealth report reviews five particularly attractive possibilities.

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Monday, January 19, 2015

The Surprising Effects of Legalized Recreational Marijuana

Marijuana plant Smithore

All eyes turned to Colorado a year ago when the first legal sale of recreational marijuana took place in Denver. The state-operated cannabis industry has flourished since, but there were a few unexpected surprises and disappointments along the way. "The most startling aspects of the industry and the 2014 legalization of retail marijuana is that several of the state processes seem to have been completed backwards," said Kate Awada, co-founder of Awada Breen Consulting, a cannabis compliance and education specialist. "There has been no testing in the past on the medicinal side; however, it is mandatory for the recreational dispensaries to test every batch or harvest of cannabis by strain prior to sale." The perception by some is that recreational legality of marijuana has devalued medicinal use, causing a decline in credibility for medical users. "It is very difficult to be taken seriously due to the majority of consumers using marijuana strictly for novelty, because the law changed," Awada told MainStreet. "Many dispensaries converted their entire inventory from medical to recreational marijuana, which cut back the amount of supply available for medicinal use." Political Fallout Another unexpected impact is the politics that emerged in 2014. On a federal level, a coalition of Republican and Democratic lawmakers reportedly challenged the Drug Enforcement Administration, calling to remove the plant-based drug from Schedule I classification under the Controlled Substances Act, which includes heroin and acid."Marijuana law reform became what was perhaps the only bipartisan issue in Congress," said Leslie Bocskor, investment banker and entrepreneur with Electrum Partners. "I was stunned to see just how fast the Colorado data came out pointing to lower crime rates." According to data released by the Denver Police Department, the city has experienced a 14.6 percent drop in crime since Jan. 1, 2014. Property crime is also down 14 percent, and violent crime has decreased by 2.4 percent. "The most exciting result is how efficiently many new states are working to put a legal marijuana infrastructure in place," said David Bernstein, CEO with WeedHire.com, which posts marijuana jobs. "This is not an easy process and yet Colorado has embraced being the experiment." The social experiment of legalizing recreational pot has also resulted in some unexpected setbacks. "Congress trying to thwart the will of the voters in D.C. is pretty awful," Bocskor told MainStreet. Although on Election Day 2014 some 70 percent of voters approved Initiative 71 to legalize pot in the nation's capital, a proposed Congressional spending bill prohibits the use of local or federal funds to decriminalize or legalize it. The biggest disappointment noted among all experts interviewed was Florida. While Oregon and Alaska experienced victories among voters, Florida suffered from a defeat when legalization failed to pass through a medical marijuana ballot initiative -- even though it received the support of 58 percent voters. "To lose by such a small margin even after winning more than 50 percent of voter approval is very disappointing," Bernstein said. "The opportunity for jobs creation that the state of Florida missed out on is substantial, and it's sad to see people who really need it go without medicinal marijuana."

The Surprising Effects of Legalized Recreational Marijuana

Marijuana plant Smithore

All eyes turned to Colorado a year ago when the first legal sale of recreational marijuana took place in Denver. The state-operated cannabis industry has flourished since, but there were a few unexpected surprises and disappointments along the way. "The most startling aspects of the industry and the 2014 legalization of retail marijuana is that several of the state processes seem to have been completed backwards," said Kate Awada, co-founder of Awada Breen Consulting, a cannabis compliance and education specialist. "There has been no testing in the past on the medicinal side; however, it is mandatory for the recreational dispensaries to test every batch or harvest of cannabis by strain prior to sale." The perception by some is that recreational legality of marijuana has devalued medicinal use, causing a decline in credibility for medical users. "It is very difficult to be taken seriously due to the majority of consumers using marijuana strictly for novelty, because the law changed," Awada told MainStreet. "Many dispensaries converted their entire inventory from medical to recreational marijuana, which cut back the amount of supply available for medicinal use." Political Fallout Another unexpected impact is the politics that emerged in 2014. On a federal level, a coalition of Republican and Democratic lawmakers reportedly challenged the Drug Enforcement Administration, calling to remove the plant-based drug from Schedule I classification under the Controlled Substances Act, which includes heroin and acid."Marijuana law reform became what was perhaps the only bipartisan issue in Congress," said Leslie Bocskor, investment banker and entrepreneur with Electrum Partners. "I was stunned to see just how fast the Colorado data came out pointing to lower crime rates." According to data released by the Denver Police Department, the city has experienced a 14.6 percent drop in crime since Jan. 1, 2014. Property crime is also down 14 percent, and violent crime has decreased by 2.4 percent. "The most exciting result is how efficiently many new states are working to put a legal marijuana infrastructure in place," said David Bernstein, CEO with WeedHire.com, which posts marijuana jobs. "This is not an easy process and yet Colorado has embraced being the experiment." The social experiment of legalizing recreational pot has also resulted in some unexpected setbacks. "Congress trying to thwart the will of the voters in D.C. is pretty awful," Bocskor told MainStreet. Although on Election Day 2014 some 70 percent of voters approved Initiative 71 to legalize pot in the nation's capital, a proposed Congressional spending bill prohibits the use of local or federal funds to decriminalize or legalize it. The biggest disappointment noted among all experts interviewed was Florida. While Oregon and Alaska experienced victories among voters, Florida suffered from a defeat when legalization failed to pass through a medical marijuana ballot initiative -- even though it received the support of 58 percent voters. "To lose by such a small margin even after winning more than 50 percent of voter approval is very disappointing," Bernstein said. "The opportunity for jobs creation that the state of Florida missed out on is substantial, and it's sad to see people who really need it go without medicinal marijuana."

Manitowoc: Even Weaker Than Anticipated

You’ll have to crane your neck to find even a hint of good news in Manitowoc’s (MTW) update yesterday.

Manitowoc said its sales would fall ever so slightly to $1 billion during the third quarter, when analysts were predicting a slight increase. Manitowoc also said its third-quarter Ebitda would fall to $90 million from $112.4 million.

BMO Capital Markets’ says the data is even worse than they expected:

After our non-deal roadshow with management in mid-September, we believed the company would likely have a softer 3Q than anticipated and lowered our estimates and price target at that time. However, the pre-announced 3Q14 results and lowered guidance are even weaker than we had anticipated, prompting us to further reduce our estimates and our price target. We are also now lowering our rating to Underperform from Market Perform as we believe the weakness in Crane will persist at least into 4Q14 and likely into 1H15. Additionally, while we expected some pressure on Foodservice margins owing to the hiccup in the consolidation of manufacturing plants, the revenue outlook is softer than we expected. Although Manitowoc shares have already declined significantly over the past few months we believe Street estimates will have to come down and we expect some further multiple contraction. We see no catalyst over the next 3-6 months to drive either multiple or forecasts higher.

Shares of Manitowoc have plunged 10% to $19.29 at 1:39 p.m.–and pulled down the shares of its competitors as well. Machinery manufacturer Terex (TEX) has fallen 3.6% to $28, while cooking-equipment maker Middleby (MIDD) has dropped 5% to $82.51.

Stocks Hitting 52-Week Highs

Related VIMC Morning Market Movers Benzinga's Top #PreMarket Gainers Related MOVE US Stock Futures Surge Ahead Of Walgreen Earnings, Economic Data Benzinga's M&A Chatter for Thursday September 4, 2014

Vimicro International (NASDAQ: VIMC) shares reached a new 52-week high of $11.70 after the company announced a $12.4 million contract win in Taiyuan City of Shanxi Province. The company's joint venture, Shanxi Zhongtianxin Science and Technology Co, secured a $65 million revolving line of credit.

Move (NASDAQ: MOVE) shares jumped 36.82% to touch a new 52-week high of $20.92 after the company agreed to be acquired by News Corp (NASDAQ: NWSA) for $21 per share, or $950 million.

Cintas (NASDAQ: CTAS) shares jumped 5.96% to touch a new 52-week high of $69.88 after the company reported upbeat fiscal first-quarter earnings and issued a strong fiscal 2015 earnings outlook. The company also reported it is evaluating strategic options for Document Storage and Imaging unit.

Teekay (NYSE: TK) shares rose 13.26% to reach a new 52-week high of $66.10 after the company adopted a new dividend policy and announced its plans to increase dividend by 75%-80%.

Posted-In: 52-Week HighsNews Intraday Update Markets Movers

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

  Related Articles (CTAS + MOVE) Stocks Hitting 52-Week Highs Morning Market Movers UPDATE: Bank Of America Reiterates On Cintas Corporation As Improving Trends Are Reflected In Shares Benzinga's Top #PreMarket Gainers #PreMarket Primer: Tuesday, September 30: Hong Kong Protests Continue Despite Efforts To Disperse US Stock Futures Surge Ahead Of Walgreen Earnings, Economic Data Around the Web, We're Loving... We're Now Hiring Journalists for our Newsdesk! Better Manage Your Persona

Saturday, January 17, 2015

A Few Reasons Why You Would Want To Buy Tesla

The luxury car maker Tesla (TSLA) is on an uptrend. There is no other company that provides electric vehicles in the luxury segment. The success of this automaker is quite evident with its one-year return of 80% for its investors.

Tesla reported its second-quarter results, which was way ahead of Street's estimates. In fact, it is not the first time the company has over-delivered. It beat the estimates in the last five consecutive quarters. Let us explore the quarter in details.

Into the results

Driven by higher demand for its products, revenue stood at $858 million, higher than the year ago top line of $552 million. Also, this number is higher than $810 million, expected by analysts. Higher deliveries of its Model S sedan led to a growth in sales. Tesla delivered a total of 7579 vehicles of Model S and produced a total of 8,763 vehicles, during the quarter. The deliveries were higher than the company's own estimate of 7,500 vehicles. Number of vehicles delivered is indeed an important metric and an uptick in this figure shows growth prospects of the company.

Even the bottom line did well. Adjusted earnings for the quarter stood at $0.11 per share, as compared to the expectation of $0.04 per share. Therefore, the carmaker managed to outperform the consensus in all the key metrics reported.

Road ahead

Further, Tesla has some amazing plans for the future, which will make investors even more confident about the company. First, it has entered into partnership with Panasonic (PMPC), the battery maker, to participate in setting up Gigafactory, the world's largest battery factory in the U.S. This lithium ion battery factory will produce battery cells for 500,000 electronic vehicles on an annual basis. This initiative requires an investment of $5 billion and a total of 6,500 employees.

Also, the luxury carmaker is in plans to make a mass market electric vehicle in the next 3 years. This model, known as the Model 3, will be priced around $35,000 and will be 20% smaller in size. The affordable car will cater to the middle income group people, who are unable to buy expensive Tesla cars. The upcoming Gigafactory will help in this endeavor.

Another new model, called Model X, is expected to hit the market in the spring season of 2015. This news has brought much excitement to people who are eagerly waiting for the new release.

The automaker is also expanding its wings as it gets into new markets. It plans to expand in China, which is the largest luxury car market. This should help in boosting Tesla's revenue. It will also be expanding to Japan in the coming months, which is an important market as well. Further, demand for model S is already on the rise in the existing markets of the U.S. and Europe.

Therefore, the company is confident about its sales outlook of 35,000 vehicles, during the year. Moreover, Tesla expects to produce 9,000 cars and deliver a total of 7,800 cars in the current quarter.

To end up with

Tesla is the leader in the luxury electric car market with very few players matching up to its standards. In fact, it's been 7 years when the company launched a car with 250 mile battery range and no other company has been able to reach the same level since then. The luxury car maker is doing well and is beating its benchmarks each time. Moreover, with the new cars, slated to be launched, and the new Gigafactory on the cards, Tesla looks like a great pick for the long run.

Currently 2.00/512345

Rating: 2.0/5 (1 vote)

Voters:

Thursday, January 15, 2015

Chinese struggle to give away their riches

us china charitable donations HONG KONG (CNNMoney) Some of China's millionaires have an unusual problem: They're having trouble giving their money away.

Would-be donors have to navigate the country's fledgling non-profit sector, which suffers from a relative lack of trusted organizations, weak tax incentives and public concerns over transparency.

Philanthropy is also a new idea in China. Traditional values emphasize an individual's responsibility to family, so pursuing riches only to donate them to outsiders strikes some as odd.

Chinese gave an estimated $13 billion to charity in 2012, compared to $316 billion in the U.S. The country has around half a million non-profits, whereas the U.S. has about 1.5 million.

Anke Schrader, a China-based researcher at the Conference Board, said that China's position is not unusual for a developing country. While the U.S. has a long history of producing massively rich individuals, China didn't have a single billionaire just 10 years ago.

"Overall, it's still in its very early stages," she said. "Entrepreneurs are shifting their thinking from what I would say is a pure consideration of pure wealth accumulation to thinking about wealth distribution."

Related story: Alibaba founders fund mega charity ahead of IPO

Advocates are hopeful that a decision by Alibaba co-founder Jack Ma will encourage other billionaires to open their wallets. In April, Ma partnered with current Alibaba CEO Joe Tsai to establish charitable trusts that could be worth more than $3 billion.

"It will send a ripple effect through the community," said Dien Yuen, managing director of Kordant Philanthropy Advisors. "They're being proactive ... I think it will encourage more people to step up."

But growth in charitable giving will also require the government to make substantial changes to the tax code, and loosen its grip on civil society.

The central government has been at work for about a decade on a charity promotion law, but nothing official has materialized. The rules that do exist are thin, vague and sporadically enforced.

Just setting up a non-profit or NGO can be exceedingly difficult.

Related story: China's new richest man worth $22 billion

Charities are supposed to register with Beijing, and in many cases, submit to its control -- some! of the biggest groups are joint partnerships with the government. The rules are opaque and applicants must complete a huge pile of paperwork.

As a result, many decide to skirt the law. Yuen estimates that more than 1 million charities in China are unregistered. The lack of transparency can make it hard for donors to pick a legitimate group, and some choose to set up their own private foundations in an effort to avoid swindlers.

Non-profits and donors also have to consider political circumstances -- advocating for free speech and human rights is off limits. More acceptable causes include the environment, rural education, poverty and support for migrant workers.

Most charitable donations in China are made by corporations, which accounted for 58% of total donations in 2012, according to the Conference Board.

Related story: Chinese billionaire buys 007's yacht maker

Corporate donations outstrip individual gifts, Yuen said, partly because there aren't strong tax incentives to give to charity. While the government does offer some tax breaks for charitable donations, it can be difficult to claim the deduction.

And since China doesn't have an inheritance tax, there isn't much impetus for the rich to reduce their heirs' tax bill by donating money.

Numerous scandals in recent years have only added to the distrust of charities. One state-run group, the Red Cross Society of China, is still working to rebuild public confidence after a supposed employee was caught posting photos of herself with expensive cars and extravagant accessories.

While China's Red Cross denied that the woman, Guo Meimei, was an employee, her posts led to widespread outrage in China and allegations of corruption.

The incident had a lasting effect on the group, which has also been accused of misappropriating funds earmarked for disaster relief following the massive 2008 earthquake in Sichuan.

"There was a huge backlash for years until this Jack Ma gift be! came publ! ic," said Yuen. "And suddenly, there is this whole positive movement again."

Hawaii raises minimum wage to $10.10 per hour

HONOLULU (AP) — Hawaii has raised its minimum wage to $10.10 per hour, putting the state among the first to meet President Obama's goal of increasing the minimum wage nationwide.

Gov. Neil Abercrombie signed the minimum wage bill into law in a ceremony Friday, marking the first time Hawaii's minimum wage will be raised from $7.25 since 2007.

The increase will be phased in gradually over four years. Abercrombie said he wished the hike was coming quicker, but "we're swimming in the water that we're in."

"I always thought it's not a minimum wage, it's a survival wage," Abercrombie said. "And in today's world, that minimum wage is not a survival wage, certainly in Hawaii."

Hawaii is the third state this year to increase its minimum wage to $10.10 per hour, following Connecticut and Maryland, said Jack Temple, policy analyst for the National Employment Law Project.

Supporters say higher wages will help working families. Living costs are high in Hawaii because nearly everything from apples to air fresheners is shipped to the island chain.

"Money put into the hands of Hawaii's working people will get spent, it will increase the economic activity in the state," said Rep. Mark Nakashima, a Big Island Democrat.

Some had argued the change will hurt small businesses and that managers may lay off workers or hire fewer people. Abercrombie said he has heard the same argument since the 1960s.

"The take-home wage compared to the cost of living has steadily gone down," Abercrombie said. "This country is about moving up."

Sen. Clayton Hee, a Democrat who represents Kaneohe, said he wished the resulting minimum wage hike was better, but lawmakers had to reach a compromise.

"I grew up thinking meat came from a can, not a cow...because that's all we could afford," Hee said. "That's what local people do. We make ends meet."

Employers with tipped employees can get a credit of 50 cents per hour starting in 2015 and 75 cents per hour in 2016 for those workers who! earn $7 more per hour than the minimum wage.

"Hawaii's move to do that really sets it apart," Temple said. "For the vast majority of tipped workers, employers will have to pay the minimum wage."

There are seven states that have no tip credit, meaning that tipped workers can keep all of their wages and tips without having a tip credit taken out. But their laws have been on the books for decades, Temple said. Hawaii is the first state in recent history to enact a change to the tip credit that preserves the full minimum wage for the majority of workers, he said.

Tuesday, January 13, 2015

Annuities and Taxes, Pt. 2: Contract Payments

As part of ThinkAdvisor’s Special Report, 21 Days of Tax Planning Advice for 2014, throughout the month of March, we are partnering with our Summit Professional Networks sister service, Tax Facts Online, to take a deeper dive into certain tax planning issues in a convenient Q&A format.

Q: What is an annuity contract and what general rules govern the income taxation of payments received under annuity contracts?

An annuity contract is a financial instrument where a premium is paid to a company (or in some cases to an individual) in return for a promise to pay a certain amount for either a specific period of time or over a person’s lifetime. There are different variations of this basic form. An immediate annuity contract is one in which regular annuity payments will commence within one year. A deferred annuity contract is one in which the annuity start date (i.e., the date when regular annuity income payments begin) is deferred until the contract’s owner elects to start payments; payments can be deferred for many years, and in today's world many annuity owners simply maintain the contract in deferred status. Nonqualified annuities are annuities that are not held within a “qualified” retirement plan or an IRA .

The rules in IRC Section 72 govern the income taxation of all amounts received under nonqualified annuity contracts. IRC Section 72 also covers the tax treatment of policy dividends and forms of premium returns. Qualified annuity contracts are governed by the tax rules of the retirement account in which they are held.

The term “annuity” includes all periodic payments resulting from the systematic liquidation of a principal sum and refers not only to payments for a life or lives, but also to installment payments that do not involve life contingency, such as payments under a “fixed period” or a “fixed amount” settlement option.

All “amounts received” under an annuity contract are either “amounts received as an annuity” or “amounts not received as an annuity.”

“Amounts received as an annuity” (annuity payments) are taxed under the annuity rules in IRC Section 72. These rules determine what portion of each payment is excludable from gross income as a return of the purchaser’s investment and what portion is taxed as interest earned on the investment. They apply to life income and other types of installment payments received under both immediate annuity contracts, and deferred annuity contracts that have been annuitized.

Payments consisting of interest only are not annuity payments and thus are not taxed as “amounts received as an annuity.” Periodic payments on a principal amount that will be returned intact on demand are interest payments. Such payments, and all amounts taxable under IRC Section 72 other than regular annuity payments, are classed as “amounts not received as an annuity.” These include amounts actually received as policy dividends, lump sum cash settlements of cash surrender values, cash withdrawals and amounts received on partial surrender, death benefits under annuity contracts, a guaranteed refund under a refund life annuity settlement, and policy loans, as well as amounts received by imputation (annuity cash value pledged as collateral for a loan).

Except in the case of certain annuity contracts held by non-natural persons, income credited on a deferred annuity contract is not currently includable in a taxpayer’s income. There is no specific IRC section granting this “tax deferral.” Instead, it is granted by implication. The increase in cash value of an annuity contract, other than by application of dividends, is neither an “amount received as an annuity” nor an “amount not received as an annuity.” As a result, an increase in cash value is not a distribution and is not includable in the taxpayer’s income, except where the IRC specifically provides otherwise .

IRC Section 72 places a penalty on “premature distributions.”

Contracts issued after January 18, 1985 have post-death distribution requirements. These post-death distribution requirements also apply to contributions made after January 18, 1985, to contracts that were issued before that date. Contracts issued before January 18, 1985, with contributions that were made before that date are not subject to post-death distribution requirements.

The income tax treatment of life insurance death proceeds is governed by IRC Section 101, not by IRC Section 72. Consequently, the annuity rules in IRC Section 72 do not apply to life income or other installment payments under optional settlements of life insurance death proceeds. However, the rules for taxing such payments are similar to the IRC Section 72 annuity rules. On the other hand, as noted earlier, death proceeds under an annuity contract (i.e., from some form of guaranteed death benefit) are taxed as amounts not received as an annuity.

Employee annuities, under both qualified and nonqualified plans, and periodic payments from qualified pension and profit sharing trusts are taxable under IRC Section 72, but because a number of special rules apply to these payments, they are treated separately.

Under the Pension Protection Act of 2006, qualified long term care insurance can be provided as a rider to an annuity contract, beginning after December 31, 2009.

---

For more tax stories and Tax Facts Q&A’s, check out our Special Report: 21 Days of Tax Planning Advice for 2014 home page.

Monday, January 12, 2015

Can Bank of America Continue to Outperform?

With shares of Bank of America (NYSE:BAC) trading around $16, is BAC an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Bank of America is a financial institution serving individual consumers, small- and middle-market businesses, corporations, and governments with a range of banking, investing, asset management, and other financial and risk management products and services. With its banking and various non-banking subsidiaries throughout the United States and international markets, the company provides a range of banking and non-banking financial services and products through several business segments: consumer and business banking, consumer real estate services, global banking, global markets, global wealth, investment management, and other.

The U.S. government has raised the amount it is seeking in penalties from Bank of America Corp. to $2.1 billion after a jury found the bank was liable for fraud over defective mortgages sold by its Countrywide unit. The request in a court filing late on Wednesday for $2.1 billion was based on gross revenue generated by the fraud, the government said. The Justice Department had previously asked for $863.6 million. The initial request was based on gross losses it said government-sponsored mortgage finance companies Fannie Mae and Freddie Mac incurred on loans purchased from Countrywide Financial Corp in 2007 and 2008.

T = Technicals on the Stock Chart Are Strong

Bank of America stock has been flying higher in recent quarters. The stock is currently trading near highs for the year and looks set to continue this path. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Bank of America is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

BAC

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Bank of America options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Bank of America options

25.77%

43%

41%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

February Options

Flat

Average

March Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Bank of America’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Bank of America look like and more importantly, how did the markets like these numbers?

2013 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)

866.67%

20.00%

68.42%

233.30%

Revenue Growth (Y-O-Y)

364.48%

-1.52%

3.46%

4.13%

Earnings Reaction

2.26%

2.24%

2.80%

-4.72%

Bank of America has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Bank of America’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Bank of America stock done relative to its peers, JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), and sector?

Bank of America

JPMorgan Chase

Wells Fargo

Citigroup

Sector

Year-to-Date Return

8.32%

-4.04%

1.34%

-8.03%

-1.60%

Bank of America has been a relative performance leader, year-to-date.

Conclusion

Bank of America is a bank and financial services giant that operates in a recovering financial industry, the backbone of the United States economy. The U.S. government has raised the amount it is seeking in penalties from Bank of America to $2.1 billion. The stock has been exploding to the upside in recent quarters and is currently trading near highs for the year. Over the last four quarters, earnings and revenue figures have been have been increasing. However, investors have had conflicting feelings about recent earnings announcements. Relative to its peers and sector, Bank of America has been a year-to-date performance leader. Look for Bank of America to OUTPERFORM.

Why the Mortgage Crisis Is Far From Over

The housing market has recovered sharply from its worst levels following the mortgage crisis. But even five years later, millions of homeowners are still struggling under huge amounts of home debt.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at recent data from RealtyTrac noting that 9.3 million homeowners remain underwater on their homes by at least 25%. Dan points out how even a big rise in prices and efforts from JPMorgan Chase (NYSE: JPM  ) , Bank of America (NYSE: BAC  ) , and Wells Fargo (NYSE: WFC  ) to agree to modify customer mortgages haven't made a huge dent in those numbers. Dan notes that big problems exist in hard-hit states like Nevada and Florida, causing potential problems for Hovnanian (NYSE: HOV  ) , PulteGroup (NYSE: PHM  ) , and other homebuilders seeking to recover from the worst of the crisis. 

Get smart about your money
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Saturday, January 10, 2015

Gap’s 3rd-quarter profit up 9.4%

NEW YORK — Gap reported a 9.4% increase in third-quarter earnings as the fashion retailer's turnaround continues.

The company, which operates Gap, Old Navy and Banana Republic, also reaffirmed its full-year profit guidance and said it's increasing its stock buyback authorization by $1 billion.

The results, announced late Thursday, are among a few bright spots in a third-quarter earnings season that has many retailers including Wal-Mart Stores Inc. and Kohl's Corp. lowering their outlook in an uncertain economy. Teen retailer Abercrombie & Fitch reported earlier Thursday a loss in its third quarter, dragged down in part by charges related to closing its Gilly Hicks stores. The teen retailer's sales softened and it said sales weakness continues in the fourth quarter.

Gap's push into new designer collaborations, brighter fashions and livelier stores have helped invigorate sales since early last year, but the holiday shopping season is expected to fiercely competitive with stores ramping up discounts to grab shoppers.

The San Francisco-based chain posted net income of $337 million, or 72 cents per share in the three-month period ended Nov. 2. That compares with $308 million, or 63 cents per share, last year.

Revenue rose 2.8% to $3.98 billion.

Analysts were expecting 71 cents per share on revenue of $3.98 billion, according to FactSet estimates.

Revenue at stores opened at least a year rose 1 percent, compared with a 6 percent increase a year ago. By division, Gap's results were up 1 percent, while Banana Republic's metric was down 1 percent. Old Navy was unchanged from a year ago.

The measure is considered a key indicator of a retailer's health.

A year ago, Gap announced a management overhaul to help it respond more quickly to shifting tastes around the world. The change put the North American, international, online, outlet and franchise divisions under a single global executive for each of the company's brands. The company also formed a new innova! tion and digital strategy team.

The company said Thursday that it repurchased approximately 20 million shares for about $790 million during the third quarter, completing all but $100 million of its existing share repurchase authorization. The new repurchase authorization follows the company's recent announcement to increase its annual dividend per share to 80 from 60 cents. That represents the second increase this fiscal year.

Shares fell 2 percent, or 86 cents, to $41 in after-market trading Thursday, after closing up 62 cents at $41.86.

Seinfeld star's adviser Bambi Holzer sued by Finra over Provident deals

Bambi Holzer Bambi Holzer

Bambi Holzer is infamous in the securities industry as a Beverly Hills, Calif.-based broker who aggressively courted Hollywood stars as clients, along with the less glamorous rich, before and after the tech bubble burst in 2000.

She wrote books, made television appearances and counted as her most famous client former “Seinfeld” star Julia Louis-Dreyfus, who wound up suing Ms. Holzer and one of her numerous former securities firms in 2007 over a dispute concerning $4.4 million invested in annuities.

Now it appears that Ms. Holzer, who was sued last week by the Financial Industry Regulatory Authority Inc., is facing the wrath of securities regulators for far less glamorous reasons: she allegedly lied to one of her former firms, Wedbush Securities Inc., about several clients' net worth when in 2008 she sold preferred shares of one of the series of deals issued by Provident Royalties LLC. She also allegedly failed to report a pending regulatory action on her employment history, according to Finra.

112-PAGE FINRA REPORT

Litigation is not new to the 55-year-old Ms. Holzer, who has worked for 10 securities firms in the past 30 years.

Indeed, her BrokerCheck report is a staggering 112 pages in length, which makes it a little longer than — but just as compelling as — Franz Kafka's 1915 novella “The Metamorphosis.” That tale is about a young traveling salesman who wakes one morning to discover he has been turned into a dung beetle. A broker with a clean record typically has a BrokerCheck report of six to eight pages. Reading one of these files is akin to staring at instructions for making oatmeal on the back of a box of Quakers Oats.

Ms. Holzer has 53 settled customer complaints, six more that were dismissed or denied, and four others still pending, according to BrokerCheck. The suit with Ms. Louis-Dreyfus eventually was settled; Ms. Holzer and her firm at the time, UBS PaineWebber Inc., paid out at least $11.4 million to settle dozens of investor claims that she misrepresented variable annuities by asserting they offered guaranteed returns, according to a 2009 Forbes article titled “Beware of Your Broker.”

After resigning from her last firm, Newport Coast Securities Inc., in August, Ms. Holzer was suspended by Finra in September. She could not be reached Thursday afternoon for comment.

'LOST HER SAVINGS'

Rex Beaber, her attorney in the Finra matters, says that Ms. Holzer lost her entire retirement savings, between $250,000 and $500,000, when she invested in Provident preferred shares along with nontraded real estate investment trusts and private real estate partnerships sponsored by Behringer Harvard Holdings. One of the largest fund raisers for nontraded REITS in the past decade, Behringer Harvard has seen several of its offerings slash dividends and collapse in value.

Ms. Holzer also invested her mother's portfolio in Provident and Behringer Harvard, Mr. Beaber said. “This isn't an evil person who says, 'To make the commission I'm goin! g to put money into'” private placements, he said. “She thought the history of these products would be their future.”

InvestmentNews readers over the past few years know, of course, about the damage to broker-dealers, advisers and clients caused by Provident. The purported oil-and-gas leasing company turned out to be a $485 million Ponzi scheme that contributed to the demise of dozens of small to midsize broker-dealers after the Securities and Exchange Commission shut Provident down in July 2009.

To date, Ms. Holzer is one of the most prominent brokers to be associated with selling Provident, which promised annual returns of 18% at a time when the housing market was falling apart and interest rates were collapsing. But it's not the Provident fraud that Finra is focused on in its latest complaint against Ms. Holzer; rather, the industry's self-regulator is focusing on the mundane details of how Ms. Holzer allegedly fudged documents involving six clients to whom she sold one of a series of private-placement offerings, Provident Shale Royalties 8, in 2008.

“In the course of obtaining supervisory approval of the Provident 8 transactions in March 2008, Holzer submitted to her firm net worth information for six of these customers, which Holzer knew or should have known to be false,” according to the Finra complaint, which is dated Oct. 18. Ms. Holzer's behavior allegedly violated the Finra rule pertaining to standards of commercial honor and principles of trade. The Finra alleges that she made unsuitable recommendations to seven clients who bought Provident 8 — a “speculative and illiquid investment,” according to the Finra complaint.

Wedbush Securities is not named in the Finra complaint.

'NO KNOWLEDGE'

Mr. Beaber, her lawyer, said that Ms. Holzer had no knowledge of her clients' net worth beyond what they told her. He also said that Wedbush Securities knew about the pending regulatory action because it was a public matter.

The clients exagg! erated th! eir net worth because they wanted to meet a $5 million net worth minimum that Wedbush required for such investments, Mr. Beaber said. Ms. Holzer's clients were desperate for the juicy returns, he said.

“In a number of instances, the clients wanted to qualify for the investment, and because they owned real estate, they just played up the value of real estate to meet the criteria,” he said. He added that one client's application for Provident was clearly inaccurate but likely the fault of an employee Ms. Holzer failed to oversee properly.

The plethora of Finra arbitrations is due to the fact she works with wealthy clients, Mr. Beaber said. Many saw positive returns through investing in private placements sold by Ms. Holzer but want redress due to the failures of Provident and Behringer Harvard.

The industry should keep a watch on what Ms. Holzer turns to next if she ever returns to the industry to sell securities or perhaps looks to sell insurance. Based on her voluminous track record of litigation, she might choose a product that could turn into a disaster, or perhaps a dung beetle, for investors.

Friday, January 9, 2015

Will Comcast Benefit from a Possible Addition?

With shares of Comcast (NASDAQ:CMCSA) trading around $46, is CMCSA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Comcast is a provider of entertainment, information, and communications products and services. The company operates in five segments: cable communications, cable networks, broadcast television, filmed entertainment, and theme parks. Comcast offers television, video, high-speed Internet, and voice services to residential and business customers. It also operates NBC and Telemundo broadcast networks; provides filmed entertainment under the Universal Pictures, Focus Features, and Illumination names; and operates theme parks, studios, and a dining, retail, and entertainment complex.

Comcast and Time Warner Cable (NYSE:TWC), among others, are reportedly in negations with Netflix (NASDAQ:NFLX) to provide its service as a part of pay-TV packages and allow pay-TV providers to include Netflix as an app on their set-top boxes. According to people familiar with the matter who spoke to the Wall Street Journal, talks are in early stages and could still break down. Netflix cut a similar deal with the U.K.'s Virgin Media recently, but pay-TV and Netflix are still enemies in many ways, although they are apparently willing to explore partnerships.

T = Technicals on the Stock Chart Are Strong

Comcast stock has been surging higher over the last several years. The stock is currently trading near highs for the year and looks set to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Comcast is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

CMCSA

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Comcast options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Comcast Options

25.95%

83%

81%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

October Options

Flat

Average

November Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Comcast’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Comcast look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

30.00%

20.00%

20.09%

136.40%

Revenue Growth (Y-O-Y)

6.96%

2.90%

5.95%

15.38%

Earnings Reaction

5.54%

1.35%

0.85%

3.30%

Comcast has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Comcast’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Comcast stock done relative to its peers, Time Warner Cable (NYSE:TWC), DirecTV (NASDAQ:DTV), Dish Network (NASDAQ:DISH), and sector?

Comcast

Time Warner Cable

DirecTV

Dish Network

Sector

Year-to-Date Return

24.28%

18.73%

21.31%

31.02%

22.53%

Comcast has been a relative performance leader, year-to-date.

Conclusion

Comcast provides communications and entertainment products and services to consumers and companies. Netflix is reportedly in talks with Comcast, among other pay-TV providers, to bring its services to the cable TV giant. The stock has been surging higher in recent years and is currently trading near all time high prices. Over the last four quarters, earnings and revenues have been increasing which has left investors pleased about recent earnings announcements. Relative to its peers and sector, Comcast has been a year-to-date performance leader. Look for Comcast to OUTPERFORM.

Norwegian Airline Demands Better from Boeing Dreamliner

Is this the fourth or the fifth technical problem that Norwegian Air Shuttle ASA has experienced with the two 787 Dreamliners it recently purchased? Hey, who's counting? Well, Norwegian Air Shuttle is — and it has demanded a meeting with Boeing Co. (NYSE: BA) executives later this week to make the airline's position perfectly clear.

Monday morning saw one of the airline's Dreamliners grounded due to problems with the oxygen supply to the cockpit. On the previous day, technicians had repaired a valve problem on the airline's other 787. Problems with the aircraft's brakes, hydraulic pumps and electrical system have kept one or another of Norwegian Air's Dreamliners on the ground for a good portion of the past three weeks.

An airline spokesperson told Reuters:

We are going to tell them this situation is far from good enough. We have not had the reliability that we had expected from brand new planes, so something must happen, fast … Clearly Boeing has not had good enough operative quality control.

Norwegian Air is scheduled to take five more Dreamliners, and Boeing probably will offer reimbursement for the lost flights to date, along with some other compensation, such as a discount on future deliveries. Earlier this year the Dreamliner's electrical system problems led to a grounding of the entire fleet, and Boeing almost certainly paid compensation for the disruption to schedules.

Boeing recently was added to the Dow Jones Industrial Average, and we noted that it could become the most important stock on the index. Shares are trading down about 2% in premarket trading Monday morning, at $116.63 in a 52-week range of $69.18 to $120.38.

Tomorrow could be another big day for Boeing. The South Korean government is expected to announce its decision on a vendor for new military fighter planes. Boeing was the only company to enter a bid under the government's maximum price, and it looks like the company is on its way to a contract valued at about $7.4 billion.

Thursday, January 8, 2015

Don't get carried away by one pet asset class

I have always been fascinated by Raju, our friendly neighbourhood shopkeeper, who defies any slotting � for he changes stripes with the season.  His is a stationery cum general store, normally. But, now his shop would have morphed into a fireworks shop, during this time of the year. 

After Diwali, he will get back to being a stationery and general store and again by Christmas, he would again do his Houndini act and transform it into a Gifting cum sweets/ bakery shop. And so it keeps happening throughout the year.

There is nothing like a core competence for him, unlike Miteshbhai.  Miteshbhai  is into stationery business and he sticks to it, like a horse with blinkers. But, in this field, he is an ace. His range is wide & his stocking deep. Even if he does not have an item when a customer asks for it, he notes it down and ensures that he has it in his shop. Hence, he is well known in the entire locality for stationery and has a loyal clientele. Miteshbhai has done very well for himself,  while Raju is still a struggler.

Raju�s tactics of taking advantage of every situation finds resonance with people in various walks of life. Infact, the Rajus are generally considered to be �street smart� & Savvy. Yet, in the final analysis, the opposite is true.

This Raju-like propensity is displayed by many with their investments too.  The smart-alecs think that they can move in and out of various investment products, riding the crest of every wave and switching to the next rising wave, timing the whole thing to perfection. 

This is what is currently being played out, when it comes to Gold and property. Gold has been doing well throughout the year. It has also given excellent returns for the last 10 years. Hence, there is a buying frenzy in Gold today. The assumption is that Gold will continue to climb in times to come and will prove to be a fantastic investment. In fact this is assumed to be the case and people come to us seeking advice whether they could put all or most of their investments into Gold.

The frenzy about property is similar. There are many who have tasted success in property investments over the past five-seven years. This has given them an aura of invincibility and many see themselves as someone endowed with a midas touch. But, all boats are lifted by the high tide. It is only when the tide turns, we will know who has been swimming naked, as Warren Buffett had once colourfully remarked.

Predicting the ups and downs of one asset class is one thing. This may help in making money. But predicting that to a nicety and doing it with different asset classes over and over again, is entirely another. Different asset classes have different dynamics. One needs to see the risk attached to the investment class, liquidity, tenure, taxation and other aspects before choosing the correct mix.

Choosing  the correct mix of asset classes based on one�s goals, is of paramount importance. At different points, different asset classes will perform well.  The assets one chooses should match the time frame when the proceeds are required, the risk one is willing to assume to get the returns, liquidity etc.

Some asset classes like equities may perform well only in the long-term and one has to give it sufficient time to deliver results.  In the short-term, the volatility in equities could be gut-wrenching.  So if one has chosen equities as a part of the overall asset-allocation, short-term volatility will not cause any disruptions and heartburns. 

The next on the totem pole is diversification. No matter how well an asset class is performing, it is always a better idea to spread one�s investments among the various asset classes � for overtime, one asset class can slacken and another will take the slack. Not for nothing do we have a wisecrack like �Do not put all your eggs in one basket�.

Choosing just Fixed Deposits or Gold or Property , just because they do well now, is hence not a great idea. Choosing the product which is currently doing well and cycling among those from time to time, will again not meet the longterm objectives.

For one, in this process of choosing the current favourite, one may actually get trapped in the down cycle � like in properties ( which has long cycles ). The other is that, one will end up with the wrong set of products that do not meet one�s requirements overtime.

Jumping from one to the other product may look exciting. But sticking to a pre-meditated asset allocation strategy brings home the bacon. Miteshbhai can vouch for that. Due to his roving, free-wheeling ways, Raju ab tak nahi bana Gentleman!

The author is a Principal Financial Planner at Ladder7 Financial Advisories.