Colfax Shares Plunged Temporarily: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of pumps and fluid-handling products manufacturer Colfax (NYSE: CFX  ) have had a wild day, to say the least, with shares dropping 11% shortly after the market opened only to gain nearly all of those losses back.

So what: The culprit here appears to be its fourth-quarter earnings, which missed Wall Street expectations. Higher acquisition-related expensing resulted in Colfax reporting a $0.40 profit on $177.8 million in sales. The consensus expectation was for a profit of $0.45 on $189.7 million in revenue. Management feels confident that its acquisition strategy and the synergies it will realize from those combinations will result in savings of $100 million each year.

Now what: Colfax still has a lot of work to do, from what I can tell. Management spoke of $100 million in synergies, but also warned that implementing those cost-cutting measures won't be a walk in the park. Said CEO Clay Kiefaber: "this organization is operating way below its collective capability." That's all you need to know about Colfax right now. Wait for the company to get its act together and perhaps then we can give it another look.

Craving more input? Start by adding Colfax to your free and personalized watchlist so you can keep up with the latest news from the company.

Is This the Start of an Intel Rally?

In today's video, Motley Fool tech and telecom analyst Andrew Tonner discusses Intel's (NASDAQ: INTC  ) move as the company makes further progress in its efforts to break into the smartphone and tablet space.

Recently, Intel released details about some of its latest mobile technology, and specifically about its Trigate Transistors, the latest in its Atom Mobile Chipset line. The semiconductor company claims that these chips are substantially more power efficient and faster.

However, though this is a step forward for Intel, it may not be what will finally set the wheels rolling. The success of the chips will depend on the acceptance by major handset makers like Samsung and Apple (NASDAQ: AAPL  ) . But, those companies already design their own chips based on ARM architecture, and the likelihood of migrating to Intel is very low, especially when Intel's Atom Chip line is being estimated to cost around $45 (compared to $20 for other more cost-effective options).

When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel finds itself in a precarious situation longer term if it doesn't find new avenues for growth. In this�premium research report on Intel, our analyst runs through all of the key topics investors�should understand�about�the chip giant. Better yet, you'll continue to receive updates for an entire year. Click here now to learn more.

Top Stocks For 2011-12-13-16

Global Hunter (GBLHF.PK)
Copper jewelry has been used throughout recorded history and across multiple cultures as a pain relief agent. Few scientific studies have been conducted on whether copper jewelry does provide pain relief benefits. Because so few studies have been done, it is difficult to researchers to say whether any positive results found in their studies were due to legitimate benefits of copper, or simply due to the placebo effect (the phenomenon of patient improvement solely due to psychological reasons, without actual treatment). However, there is a vast base of anecdotal evidence for pain relief due to wearing copper jewelry.

Global Hunter Corp. (GBLHF.PK) is pleased to announce initial assay results from its previously announced surface sampling program. The results are encouraging with new gold showings as well as very positive copper oxide assays over wide-spread areas.
Highlights of the entire program
9 mineralized shear and/or alteration zones sampled total of 13.5 kilometers of strike length along know copper bearing shear and alteration zones tested with 205 rock chip samples

Good grades of soluble copper (oxide) over a significantly large area have been identified, however they represent only about 50% of the total copper grade indicating a mixed oxide-sulphide zone. Numerous iron oxide structures have also been mapped but no iron assays have been received to date.

The Company is planning to re-assay samples for iron to determine if iron is present in significant quantities to represent another target.

Global Hunter’s focus is on strategic and base metals, with an advanced stage copper oxide project in Chile and a highly prospective molybdenum property in British Columbia, Canada. GBLHF exploration and development teams are on the ground rapidly advancing the La Corona de Cobre property near La Serena, Chile and the Rabbit South property in British Columbia, Canada. Either one of these projects could carry the company forward on a stand-alone basis, but together they bring the company additional stability, strength and value.

http://www.globalhunter.ca/homeabout.html

Allegheny Technologies Inc. (NYSE:ATI) reported net income for the third quarter 2011 of $62.3 million, or $0.56 per share, on sales of $1.35 billion. Results included acquisition-related expenses of $8.3 million, net of tax, primarily related to inventory fair value adjustments. Excluding these items, net income was $70.6 million, or $0.63 per share. In the third quarter 2010, ATI reported net income of $1.0 million, or $0.01 per share, on sales of $1.06 billion. Third quarter 2010 results included a tax charge of $0.04 per share.

Allegheny Technologies Incorporated engages in the production and sale of specialty metals worldwide. It operates through three segments: High Performance Metals, Flat-Rolled Products, and Engineered Products.

Sinopec Shanghai Petrochemical Co. Ltd. (NYSE:SHI) announced the unaudited operating results of the Company and its subsidiaries (the “Group”) for the nine-month period ended September 30, 2011 (the “Period”).Under the China Accounting Standards for Business Enterprises, the Group’s operating income for the Period amounted to RMB73.743 billion, representing an increase of 33.64% over the corresponding period of the previous year.

Sinopec Shanghai Petrochemical Company Limited engages in the production of polypropylene compound products, polypropylene products, acrylic fiber products, petrochemical products, synthetic fibers, resins and plastics, and petroleum products in China and internationally.

?

PetroQuest Energy Inc. (NYSE:PQ) announced net income available to common stockholders for the quarter ended September 30, 2011 of $3,727,000, or $0.06 per share, compared to third quarter 2010 net income available to common stockholders of $4,939,000, or $0.08 per share. For the first nine months of 2011, the Company reported net income available to common stockholders of $2,579,000, or $0.04 per share, compared to net income available to common stockholders of $39,904,000, or $0.63 per share, for the first nine months of 2010. Net income for the nine month 2011 period was impacted by $18.9 million in ceiling test writedowns recognized during the first six months of 2011.

PetroQuest Energy, Inc. operates as an independent oil and gas company. It engages in the acquisition, exploration, development, and operation of oil and gas properties in Oklahoma, Arkansas, and Texas, as well as onshore and in the shallow waters offshore the Gulf Coast Basin.

4-Star Stocks Poised to Pop: Cracker Barrel

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, casual dining chain Cracker Barrel Old Country Store (Nasdaq: CBRL) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Cracker Barrel's business and see what CAPS investors are saying about the stock right now.

Cracker Barrel facts

�	�
Headquarters (founded)	Lebanon, Tenn. (1969)
Market Cap	$1.5 billion
Industry	Restaurants
Trailing-12-Month Revenue	$2.5 billion
Management	CEO Sandra Cochran (since 2011) CFO Lawrence Hyatt (since 2011)
Return on Equity (average, past 3 years)	40.3%
Cash/Debt	$127.3 million / $588.9 million
Dividend Yield	2.5%
Competitors	Denny's DineEquity Waffle House

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 86% of the 191 members who have rated Cracker Barrel believe the stock will outperform the S&P 500 going forward. ��

Earlier this week, one of those Fools, Doyle1667, succinctly summed up the Cracker Barrel bull case for our community:

Although not the best P/E, its revenue growth is noticeably amazing. Combine that with a good menu and leadership and you have a new competitor on the block. Its dividend does make it competitive to other bigger restaurants. [We'll] see how this new bull runs.

If you want market-thumping returns, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future. Of course, despite a strong four-star rating, Cracker Barrel may not be your top choice.

We've found another retailer we are incredibly excited about -- excited enough to dub it "The Motley Fool's Top Stock for 2012." We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won't be here forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

Ciena FYQ4 Rev Beats, EPS Misses; Q1 Rev View Light

Shares of fiber optic networking equipment vendor Ciena (CIEN) are up 43 cents, or 3.6%, at $12.34 after the company this morning reported fiscal Q4 revenue ahead of expectations but missed on the bottom line.

Revenue in the three months ended in October rose 9%, year over year, and 5%, quarter over quarter, to $455.5 million, yielding EPS of 3 cents per share, excluding some costs.

Analysts had been modeling $450 million and 6 cents.

On a GAAP basis, Ciena lost 23 cents a share.

CEO Gary Smith called the results “strong” and cheered the second quarter in a row of adjusted operating profit. He said the company was taking market share in an environment of “macroeconomic uncertainty.”

For the current quarter, the company forecast $435 million to $455 million. Gross profit margin, on a non-GAAP basis, is expected to be “in the low 40s range” on a percentage basis, consistent with last quarter’s 43.2%.

Analysts have been modeling $454 million in revenue.

Daily ETF Roundup: XHB Pops On Optimism, VXX Continues To Sink

Euphoria returned to the markets today as President Obama’s press�conference�restored some confidence in the domestic economic recovery;�however,�the President’s remark that the private sector “is doing fine”��did draw a lot of criticism from his opposition. On the home front, major equity benchmarks�finished�off the week in green territory, regaining lots of lost ground from the most recent correction. The Nasdaq took the lead higher, setting up 0.97% on the day, the Dow Jones Industrial Average on the other hand barely lagged behind, inching higher by 0.75% as the closing bell rang [see also 101 ETF Lessons Every Financial Advisor Should Learn].

The latest U.S. trade deficit data came in better-than-expected; the figure came in at a negative $50.1 billion, which is a modest improvement from the previous reading of negative $52.6 billion. Wholesale inventories also improved on the home front, growing by 0.6% in April and trumping last month’s figure of 0.3%. In international news, Canada’s unemployment rate came in unchanged at 7.3%, although the nation did add 7.7k jobs versus the expected 5k [see ETF Technical Trading FAQ].

The State Street SPDR Homebuilders ETF (XHB) was one of the best performers, gaining 2.0% on the day. XHB opened below yesterday’s closing price only to charge higher throughout the day; buying pressures bolstered this ETF to close near its highs for the day just shy of $20.40 a share [see also 2012 ETFdb Portfolio].

The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) was one of the worst performers, shedding 5.45% on the day. Uncertainty seemingly evaporated from the market today as investors rejoiced over encouraging data on the home front coupled with renewed hopes that Spain would recieve necessary funding over the weekend. The Volatility Index has come down considerably this week, although uncertainty levels will remain elevated until the VIX finds its way back below the 20 level [see The Compelling (And Simple) Case For Low Volatility ETFs].

Follow me on Twitter�@SBojinov

[For more ETF analysis, make sure to sign up for our�free ETF newsletter�or try a�free seven day trial to ETFdb Pro]

Oil Tensions in the Middle East Could Lead to 32% Gains from This Trade

First Egypt erupted, then Libya exploded. Investors might certainly wonder where the next Middle East powder keg will ignite and what effect it will have on crude oil prices. Analysts speculate there is already a $10-a-barrel "risk premium" built into crude, and that premium can go even higher if the unrest spreads.

Despite the rising price of crude now hovering near $100, in recent months "crack spreads" -- the difference between the amount a refiner pays for crude oil and the cost to refine this oil -- has also been on the rise.

Since September 2010, the crack spread is up nearly 400% -- from about $6 a barrel to nearly $23. In mid-February, it hit its highest level since 2007.

How can you profit from this combination of a high crack spread coupled with soaring crude oil prices? There's a particular stock that benefits from both trends and that stocks is Marathon Oil (NYSE: MRO).

  Marathon, the fourth-largest oil and gas company in the United States, explores, produces, refines, transports and markets oil and gas.

As a result of this exploration and refining combination, the Houston-based company is well set-up to weather any storm, no matter where oil prices head.

Traders might take advantage of this opportunity while they can. By the end of June, Marathon plans to spin-off its refining and marketing operations into two pure-play companies.

The first, Marathon Petroleum Co. -- pegged at a value of about $13 billion -- will become an independent refiner and marketer, while Marathon Oil -- valued at about $47 billion -- will become an independent producer.

For traders, the spin-off means the companies should be worth more as independent entities. However, those who purchase the stock now would acquire shares in both companies.

Spin-off discussion as well as rising crude and a high crack spreads have sent shares rallying in recent weeks. During the Feb. 14 trading week, Marathon hit a two-year high of $50.56, and again attempted to test that level this past week.

 

For much of 2009 and 2010, Marathon was caught between long-term historical support, near $26.10, and old resistance, which has become new support, around $34.18.

Finding strength in August 2010, at around $29.66, the stock formed an intermediate-term uptrend line. In late December 2010, Marathon broke old resistance, now new support, near $34.30, bullishly completing an ascending triangle.

Now on an accelerated uptrend, Marathon shares have been surging. The stock appears to be close to completing a second small ascending triangle pattern, marked by resistance near $50.56.

If shares can break resistance, the measuring principle for a triangle -- calculated by adding the height of the triangle to breakout levels -- projects a price target of $66.82 ($50.56 - $34.30 = $16.26; $16.26 + $50.56 = $66.82).

Fundamentally, the stock shows strength.

Fourth-quarter revenue rose 26% to $20.2 billion, from $15.9 billion in the year-ago quarter. Much of the increase was due to higher oil and gas prices received by the company.

For the full 2011 year, analysts project revenue will increase 9.9% to $90.4 billion from $82.2 billion in 2010. By 2012, revenue is expected to rise a further 8.7% to $98.3 billion.

Due to higher oil prices, combined with strength in the company's refining and marketing businesses, fourth-quarter earnings nearly doubled to $0.99, from $0.50 in the year-ago quarter. For the full 2010 year, Marathon earned $3.61 per share, compared with $2.06 per share in 2009.

Marathon is attractively valued with a forward price-to-earnings (P/E) ratio near 8.8 and a price-to-sales (P/S) ratio of about 0.2.

Action to Take--> Given that Marathon could prosper in a variety of pricing scenarios for crude, traders could go long on this stock and expect a nice return. However, before entering the position, I would wait for the shares to rise above current resistance at $50.56 by placing a buy-on-stop order. This means if Marathon does not hit or go above $50.76, you will not enter the position.

Coca-Cola Volume and Prices Rise; Profit Hit by Restructuring

Coca-Cola (KO) has had to contend with higher raw materials prices this year, which have cut into margins and caused the company to raise prices. Nonetheless, the company was able to post volume growth in the third quarter. Shares fell 0.5% in early trading.

Coke posted 95 cents of EPS, against expectations for $1.02. Restructuring charges and costs from a new productivity initiative reduced earnings by 8 cents.

Gross margin, however, fell to 60.2% from 65.4%. North American and worldwide volumes were both up 5%. North American volumes were boosted by particularly strong demand for Dr. Pepper, which Coke cross-licenses. Prices for Coke beverages rose 2% for North American retailers, which may have curbed volume growth.

Coca0-Cola also said it will increase its buyback authorization to $3 billion this year, up from $2.5 billion.

Harvard, Princeton post record low acceptance rates

NEW YORK (CNNMoney) -- Your odds of getting into some of the nation's most prestigious colleges are shrinking.

The country's eight Ivy League institutions finished sending out their admission decisions to applicants late Thursday. And many of the elite schools -- including Harvard, Princeton, Dartmouth and Cornell -- are reporting that they accepted record low percentages of applicants for the upcoming school year.

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While some schools were being more selective, other colleges had a bigger pool of applicants to choose from.

Harvard's acceptance rate was the lowest of the Ivy Leagues, despite a slight decline in applications. The school admitted 2,032 of the 34,302 students who applied -- amounting to an acceptance rate of 5.9%. That's the lowest rate on record for the university and down from last year's rate of 6.2%.

"We have always been conservative about the number of acceptances sent out at this time of year in order to avoid the possibility of overcrowding. Harvard's high graduation rate -- typically 97 to 98 percent -- leaves little margin for error," William Fitzsimmons, the dean of admissions and financial aid, said in a statement.

6 colleges' quirky money tricks

Fitzsimmons added that more than 14,000 applicants boasted scores of 700 or higher (out of 800) on the SAT critical reading test, 17,000 applicants had scores of 700 or higher on the SAT math test and 15,000 scored a 700 or higher on the SAT writing test. Plus, 3,800 applicants were ranked first in their high school classes.

Princeton University accepted only 2,095 students of the 26,664 who applied this year, bringing its acceptance rate to a historic low of 7.9%. Cornell University admitted 16.2% of the record 37,812 applicants this year -- its lowest acceptance rate ever.

Dartmouth College's admittance rate was a record low 9.4%, while University of Pennsylvania accepted 12.3% -- also the lowest level on record.

Meanwhile, Yale University admitted only 1,975 of the record high 28,974 students who applied this year -- amounting to a 6.8% acceptance rate, down from a 7.4% rate last year.

"We had another extraordinary applicant pool, and another challenging selection process," Jeffrey Brenzel, Yale's dean of undergraduate admissions, said in a statement. "We could not make offers to a large number of immensely talented young men and women."

Columbia University and Brown University were the only schools to accept a higher percentage of applicants this year. Columbia admitted 2,363 students, or 7.4%, of the 31,851 applicants this year -- up from last year's rate of 6.9%. Brown's admittance rate rose to 9.6%, compared to a rate of 8.6% last year.

Admitted students typically have until May 1 to accept offers from Ivy League schools.  

British Fund Managers Opt for Cash

Worries about stock prices and eurozone debt have spurred a flight to safety in Britain.

Waning faith that the eurozone can extricate itself from its debt crisis has led British fund managers to hold their highest concentration of cash in at least two years.

As stocks no longer seem safe enough amid a steadily escalating crisis atmosphere, investment managers have dropped their stock holdings by more than a percentage point in December, with their cash holdings rising by the same amount. Those cash holdings stand at an average of 10.4%.

Reuters reported that managers are hoping for a better year in 2012, but apparently are not counting on it after a year beset with everything from natural disasters to political instability and continued financial woes. Chris Paine, associate director for asset allocation at Henderson Global Investors, was quoted saying, "One would hope there would not be as many 'acts of God' in 2012, but the potential for market upsets and systemic crises remains high."

One of the top concerns of managers surveyed in the Reuters poll is, of course, the continuing debt crisis in the eurozone, with few having much confidence that it will be resolved or that the euro itself can survive as it is. The latest deal to emerge from a European Union summit meeting did little to restore that confidence.

Also of major concern is the global recession and its threat to economic engines like China and India, which are feeling the effects of consumer slowdowns. Paul Amer, investment manager at Insight Investment, was quoted saying, "Modest global growth profiles when compared with historical recoveries remain one of many concerns."

Still, there remains among some investors an appetite for strong companies and longer-term investments. Alec Letchfield, chief investment officer, wealth at HSBC Asset Management, said in the report, "Despite the more lackluster prospects for economic growth next year, we are positive on the longer-term prospects for equities, reflecting low valuations and the relatively strong financial positions of many companies."

He added, "However, further volatility is likely and downside risks remain in the event of another escalation of the eurozone crisis."

Rib-X Pharmaceuticals Looks To Inject Cash Through May 9 IPO

Rib-X Pharmaceuticals IPO Pricing

Rib-X Pharmaceuticals (RIBX) is pricing 5.8 million shares at $12.00 to $14.00 per share. The offering will give Rib-X a market cap of $204 million and the company hopes to raise $75 million from the sale. The deal is expected to come on May 9th and is underwritten by Deutsche Bank Securities, William Blair, Lazard Capital Markets and Needham.

Rib-X Pharmaceuticals Is An Emerging Growth Company

Rib-X will be classified as an "emerging growth stock" by Nasdaq and will be subject to different reporting requirements than other stocks. The emerging growth classification is a provision in the JOBS Act (Jumpstart Our Business Start-Ups), which was signed into law in early April of this year. It requires that a company have less than $1 billion in annual gross revenue and companies with less than $75 million of public common equity float have even more relaxed rules.

Some of the benefits of this classification are:

• An emerging growth company only has to file two years of audited financial statements and selected financial data and managements discussion and analysis (MD&A) in its IPO filing. (It is usually three years of statements and MD&A and five years of selected financial statements).

• It does not have to comply with several provisions in the Sarbanes-Oxley Act of 2002. It does not have to comply with any new or revised accounting standards until private companies are required to.

• It does not have to obtain an independent auditors report on the effectiveness of managements internal controls.

• The emerging growth company may submit a confidential IPO registration statement and is allowed to "shop" its IPO to institutional investors at more points in time during the IPO process than more established companies.

All of these new and more relaxed regulations are designed to help smaller companies make the transition from private to public easier. The biggest drawback is this also leaves the door open for abuse.

Rib-X Pharmaceuticals' Business

Rib-X Pharmaceuticals is primarily focused on manufacturing antibiotics. It has a first line antibiotic called Delafloxacin used to prevent and treat bacterial skin infections both intravenously and in oral form. Rib-X is hoping to start phase 3 trials of Delafloxicin in the second half of 2012. Radezolid is its other antibiotic that has been working through phase 2 trials. Three more antibiotics: RX-04, RX-05, and RX-06 are still in the discovery phase.

Rib-X Pharma's research partner is Sanofi (SNY) which has funded a large portion of Rib-X's operation. The two companies have a collaboration agreement which also allows Rib-X to receive compensation for achieving research and development milestones.

Rib-X Pharmaceuticals Financials

Over the past 11 years, Rib-X has funded its operations through government tax credits, research grants, sales of convertible preferred stock and convertible debt. The breakdown of its funding is as follows: $122.4 million from convertible preferred stock sales, $71 million from convertible notes and common stock warrants, $19 million in milestone payments from Sanofi and $2.5 million from government tax credits and research grants.

Rib-X Pharmaceuticals has never sold a product. It recognized contract revenue in the amount of $2.7 million from its collaboration deal with Sanofi. For 2012 Rib-X will recognize $9.0 million in contract revenues from its deal with Sanofi. Rib-X does not expect to receive revenue from product sales for at least another several years.

How To Trade Rib-X Pharmaceuticals

Rib-X stock will be highly speculative and any reward will be years in the making. I've seen many no name pharmaceutical company suddenly have its drug approved by the FDA and the stock doubles or triples. News like that will not come from Rib-X for a long time and there will probably be better entry points than this for the stock. This is not the type of company I like in my personal portfolio and I think the stock value will slowly erode during the research and development phase of its drugs.

Rib-X has also received a letter from its independent financial auditing firm expressing doubts about whether Rib-X will be financially able to continue its business. Additionally, in its S1, Rib-X states that the cash from the IPO is still not enough to complete a phase 3 trial of Delafloxacin. So the company will still have to seek additional financing before its primary drug gets to market, which may dilute the stock further.

Sources: Rib-X Pharmaceuticals S1, Rib-X Website, Nasdaq Market Site, Jobs Act highlights.

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

A Billion-Dollar Day for Eddie Lampert?

Sears Holdings (SHLD) raised guidance by quite a bit this morning, and the stock is currently up $13.63 in pre-market trading. As the majority owner of SHLD shares, Eddie Lampert stands to make a fortune today. As of their last filing, Lampert's firm owned 66,024,366 shares (57.13% of the company). A gain of $13.63 in the stock translates into a gain of $899,912,109 for Lampert. For Lampert to have a billion dollar day in SHLD, the stock needs to close up $15.15.

[Ed. note: SHLD closed the day +$10.31 (11.6%).]

FOREX-Euro slides as view on ECB rates changes; dollar rises – Reuters

Reuters

FOREX-Euro slides as view on ECB rates changes; dollar rises Reuters NEW YORK, May 5 (Reuters) – The euro plunged across the board on Thursday, on track for its worst day against the dollar since November, after comments from the head of the European Central Bank suggested interest rates were … Forex – EUR/USD Daily Fundamental Analysis for May 06, 2011ForexTV.com Forex: USD soars as stocks and commodities sinkFXstreet.com Daily Forex Summary on USD, Euro, GBP, JPY, AUD, CAD and GoldIBTimes Hong Kong NASDAQ -Daily FX -Forex Pros all 1,388 news articles »

{forex} – Google News

The Totally Hedged Market/Capital Neutral Strategy

WEBINAR: Najarian/Malandrino WEBINAR: Our Best Ideas for 2013 CLICK HERE FOR INVITE AND TO REGISTER

When I first began as a floor trader my capital account was quite small relative to private trading firms, and especially the well-known brokerage firms who traded their firms' capital rather aggressively by my standards of risk. Being a market maker I either had to trade against and/or facilitate their trades should they place an options market order with any of the five primary stocks traded in my pit. Market makers must do just that, i.e., make markets for their own risk/reward.

This market making process took about a N.Y. minute for me to realize that if I was going to succeed in the pit I had better be able to manage my capital, if for no other reason than to do my job of facilitating my options bids and offers. Doing so in a profitable manner quickly advanced in my mind as being my top priority. However, just above that priority of my critical path to market maker survival was that I had to be adept and profitable enough to maneuver my limited capital. Thus, I had to stay within the discipline and strategic plan of attack that I had so carefully designed prior to taking this rather huge life-changing move from being a cushy-chaired investment advisor to a registered options market maker. The plan was built on the following list of personal rules, listed by most important at the top of this list:

1) Keep risk 100% controlled. All positions were to be completely hedged at all times. Thus only positive gamma for each position was the rule. This rule applied to each position, and thus was not to be considered as a portfolio rule. Positions were not to be considered as commingled as per the total gamma of all positions. In other words, one stock or option position with negative gamma which went the wrong way in price (opposite of that negative gamma) was not going to be allowed to seriously blow up my capital.

2) Capital was to be divided into two equal parts, half being dedicated to long stock positions and half being dedicated to short stock positions. Thus, the capital generated by the short sales would be used to literally capitalize the purchase of the long stock side of the balanced portfolio. Years later I would hear or read of various types of funds that would embrace this strategy. For me, that was a quiet compliment.

3) Total positions were to be right, four from the long side and four from the short side. Thus not only was my strategic plan going to be capital neutral, it was also going to be market neutral. Years later I would also hear or read of various types of funds who embraced this strategy. Once again, that was a quiet compliment.

4) Long stock positions were to be hedged with long, at-the-money puts. Short stock positions were to be hedged with long, at-the-money calls.

5) Which expirations to use for those put and call hedges were to be totally based literally on my feel for the volatilities of the options for each stock. The goal of course would be to buy the premium as close to their cyclical volatility nadir as possible.

6) The cycle of volatility of any underlying stock's options was to be considered secondary to the volatility cycle of the underlying stock. This one rule was the catalyst for my pursuit to find a way to chart a stock's volatility, that quest eventually culminated into becoming my coiling pattern.

7) The puts or calls were always bought before the underlying stock was purchased or shorted. Plenty of times merely getting a short sale executed was a precarious undertaking due to the SEC uptick rule at the time! That element of risk is not a consideration today much to the delight of the high frequency traders who know the fact that trading profits are made much quicker from the short side than the long side. That alone should explain why I cynically refer to these trading firms as the high frequency sellers (as in short sellers).

8) The long stock, long at-the-money put combination is a synthetic call which literally is two-thirds of the combination known as a conversion. The short stock, long at-the-money call combination is a synthetic put which literally is two-thirds of the combination known as the reversal (or conversion reversal). Thus to lock in the synthetic call gain if attained I would sell short the reciprocal at the money call, that call having the same strike price and expiration as the long put that was married to the long stock combination. To lock in the synthetic put gain if attained, I would sell short the reciprocal at the money put. That shorted put was to be of the same strike price and expiration as the long call that was the locked-in hedge for the stock that had been sold short.

9) Profits were taken, positioned either closed or morphed into riskless conversions or reversals, once the unrealized profit reached the 25% level (relative to the actual put's or call's value at the inception of each trading position).

Once a conversion or reversal is executed, the risk to the market maker and his clearing firm is basically 0% as far as monetary risk is concerned because a conversion or reversal at expiration is simply closed out, the stock being out- or in-the-money at expiration. Thus, the options long or short, relative to the stock being long or short, simply expire into stock and cash which would at expiration balance into a dollar-zeroed position. In addition, clearing firms can margin a long synthetic call or a long synthetic put as they would margin the actual call or put respectively (relative to cash they would require to hold the position).

Part two, to be published tomorrow, will focus on the specifics of the portfolio selected. This portfolio will employ the totally hedged market/capital neutral strategy discussed above.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfitsFREE for a limited time only: Get TheStreet Ratings #1 Stock Report NOW!

The S&P 500: No Bargain For Income Investors

Rebounding from 2008/09, S&P 500 corporations recorded the biggest increase in profitability since 1900. The 12-month EPS for the index is $94.77, surpassing the peak of $91.47 set in 2007. Analysts estimate earnings will reach $104.78 in 2012. Despite record profitability, large established US corporations with long histories of profitability are choosing to retain large portions of their earnings. This is no recent phenomenon.

From 1982 - 2011 the S&P 500 payout ratio fell from 50 to 30%. As of Q3 2011 it stood at 28%.

From 1982 - 2011 average yield on the S&P 500 fell from 5.5 to 2%. As I wrote this, it was 1.92%.

Compare this to other markets:

Australia	UK
ASX 2011 Payout ratio = 70%	FTSE-100 2011 Payout ratio = 50%
ASX 2011 Average Yield = 4%	FTSE-100 2011 Average Yield = 3.85%

Most other major European markets are in line or exceed UK levels. Out of all the developed markets outside the US, currently only Japan's yields are lower.

The speed and strength of the return to profitability for S&P 500 companies has not changed their payout structure. Had S&P ratios been closer to other developed markets prior to '08, the current low payout ratios might be justifiable on the grounds of balance sheet rebuilding. The problem is not with the balance sheet. US corporations are holding record amounts of cash. As of Q4 2011, non-financial companies in the S&P 500 held in excess of $1.1 trillion. Cash holdings make up 7.1 percent of all company assets, the highest level since 1963. The problem is off the balance sheet. It is structural, and it appears to be permanent.

I believe the underlying cause is twofold. On the one hand we have an ingrained management culture focused on reinvesting or retaining profits, rather than returning cash to shareholders. On the other, a shareholder culture which increasingly focuses on stock's short term price movement. If we strip High Frequency (HF) from the data, and measure average holding periods for NYSE stocks between 1940-1975, they remained steady at around 7 years.

By 2007, (before HF impacted) it had fallen to 7 months. The data would strongly suggest that the motivation for owning equities has changed. Instead of a buy and hold strategy to capture a growing dividend, stock buyers seem primarily focused on short term capital gains. Short holding periods make dividends less important to total return, thereby taking pressure off management to increase payouts to stockholders.

The so called 'valuation slump' currently prices the S&P 500 at 13.7 times earnings - well below its 16.4 long term average. While it may be compelling for value investors, it is no bargain for income investors. After 10 quarters of U.S. economic growth, they are still not seeing much cash.

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

Trading Gold in the Face of a Strong Dollar

This week’s trading recommendation focuses on the highly volatile precious metals markets. After peaking 2 weeks ago, gold is more than $60 below its peak, and silver is off an astounding 30%.

We believe gold is an attractive buy at these levels, and silver may start rallying soon as well. The following chart (click to enlarge image) shows the price of gold.

As can be seen from the dashed light blue line, the uptrend in gold drawn from the January low is still intact, and is in fact being healthily followed by the 50 day moving average. As gold is not very far from the moving averages, it appears to be ready to rally, an assertion buttressed by the measurement of gold’s relative strength indicator at exactly neutral levels.

This week saw fundamentals for gold actually improve somewhat. The Producer Price Index as well as the Import Price Index both came in considerably higher than expectations. At the same time, economic fundamentals saw an extension of the same gradual improvement we’ve become used to recently. Both of these signs are bullish for gold, as they indicate increasing inflation, as well as an expanding economy that will also contribute to the velocity of money increasing, thereby stoking inflation even more.

However, the dollar index has continued its recent strength this weak, rallying 4% since May 9th. A 4% move in the index is a large one, and the sudden strengthening of the dollar had the predictable effect of weakening commodities.

Despite the dollar’s strength, we believe gold will and can rally in the face of a rising dollar index. The reason why is that the purchase of gold is not a domestic story, it is an international story of unsustainable debt levels from Europe to Japan to the US. As the dollar index rally becomes more gradual (we believe it will continue as the euro continues to fall), commodities should be able to regain their footing even with a rising dollar.

Trade Recommendation

We recommend the purchase of gold futures in the 1485-1495 level. After selling off aggressively during the commodity meltdown on May 5th and hitting a low of $1462/ounce, gold has continued to sell off, but has reached a slightly higher bottom each time it has sold off. This indicates demand for gold is picking up when it falls, and that the downside is limited. We would view the downside of gold as being limited to the 50 day moving average at $1464.

The same trade can be effected by the purchase of GLD.

Disclosure: I am long gold futures

Five Odd Small Businesses Ideas That Are Paying Off For Their Founders

Small businesses and start-up entrepreneurs have brought consumers some of the most innovative and unique products on store shelves, and five niche retailers exemplify the trend. Experts say businesses that are successful in selling niche items get there by being unique themselves. A few companies that have succeeded in standing apart include the Pet Petal Pullcart by Pawsitively Purrfect Products, golf ball marking stencils by Tin Cup Products, bacon products by BaconFreak.com and tacky holiday sweaters by SkeDouche.com. For more on this continue reading the following article from TheStreet.

What do duck-hunting whistles, ugly sweaters and even The Big Lebowskiparaphernalia have in common?

They are just a few examples of the world of niche retailers - a place where small businesses and entrepreneurs can flourish.

"At the end of the day, it's what makes a retailer different that helps drive their business," says Kathy Grannis, spokeswoman for the National Retail Federation. "Companies that can separate themselves from the competition will usually always find customers who are eager and interested in what they have to sell."

But selling the strange and unique is not for everyone, especially if the merchandise is truly specialized. Many times, these businesses are created after a consumer sees a hole in the marketplace. But that's the key - making sure there is indeed a demand for the product. Entrepreneurs who have a clear picture of their target market and competitors as well as a strategy to keep customers coming back are more likely to succeed.

Here are five companies selling odd, yet popular merchandise. 

1. Pet Petal Pullcart
Made by Pawsitively Purrfect Products
Palatine, Ill.

Sheryl Bass and her husband Neil Cline stumbled on an idea for a business as they were planning their wedding in 2006. Both wanted their dogs to participate in the wedding but didn't want anything that would be uncomfortable to wear or anything that would be toxic. Bass wanted her dog to fulfill the traditional "flower child" role, but no such product existed for the pet to hold the flower petals as they were distributed.

And so, Pawsitively Purrfect Products and its "Pet Petal Pullcart" was created.

It just so happens that Cline is pretty handy, Bass says. After testing various contraptions on their own pet, they came up with a wooden cart that attaches to a harness and dispenses flower petals from the back. The customizable hand-carved pull cart is for small dogs (less than 30 pounds) and sells for $130 on the company's website.

Bass and her husband, who both have full-time jobs as a publicist and psychotherapist, respectively, have hit on an explosive trend -- consumers are expected to spend nearly $53 billion on pets in 2012, according to the American Pet Products Association. Boutique businesses that offer pet outfits, treats (that literally look good enough for humans to eat) and toys are on the rise. And so is the trend of including furry loved ones in weddings.

The Pet Petal Pullcart is so popular that the couple cannot keep up with production (pull carts are made-to-order given the pet's weight and length specifications), Bass says. However, the couple has had to turn away customers, especially those looking to use the product for bigger breeds.

Bass says they hope to license the product, so that a bigger company can mass produce the item and come up with a solution to the big-breed dilemma. She also wants to add other products to the business down the line, she says. 

2. Golf ball marking stencils
Made by Tin Cup Products
Falls Church, Va.

Tin Cup Products makes a stainless steel ball marker that places customizable stencils on golf balls. A golfer simply traces a chosen logo or design onto the ball with a fine-point Sharpie pen. What seems like such a simple idea has become a multi-million dollar business for two golf lovers who turned their passion into profit.

Based on U.S. Golf Association rules, players must be able to identify their ball during play. Apparently up until a few years ago, no one had thought to capitalize on ways to help players comply with the rule. Tin Cup was launched in the spring of 2009 by Jim Millar and Cabell Fooshe and now has roughly 100 designs in its repertoire. The marker sells for $19.95 and can be found online, at retail stores and in pro shops across the U.S.

Tin Cup says it had a 300% sales jump in 2011 over 2010 to $1.2 million.

Some of the company's more popular stencils include the Jolly Roger (a skull and cross bones), Luck of the Irish (a shamrock) and Five O'Clock Somewhere (a martini glass).

Last week, Tin Cup rolled out a "Marine Cup" showcasing official U.S. Marine Corps logos, approved by the U.S. Marine Corps and the U.S. Military Academy at West Point. A portion of the proceeds goes to Birdies for the Brave, a military outreach initiative supporting U.S. troops. 

3. Bacon products and accessories
Made by BaconFreak.com
Moorpark, Calif.

BaconFreak.com caters exactly to who you think it would cater to: bacon lovers. The site offers a full range of gourmet bacon flavors, bacon club subscriptions and bacon-related novelties. (Bacon soda? This site has it.)

BaconFreak.com actually has roots in the wine business. Founder James "Rocco" Loosbrock also has a subscription service selling wine. After attending many chefs' dinners where he would be pitched the latest and greatest sophisticated wine, he realized that customers for the most part are not that sophisticated. He wanted to bring the subscription business model to a simpler dish. He came up with bacon.

"We like the subscription model [because] being a small business, it's great for cash flow," Loosbrock says. "People pre-pay you for an item. In the first few years we would have never survived. I needed the cash."

Loosbrock emphasizes that his bacon is no ordinary supermarket bacon. "We don't add water to our product," he says, which many manufacturers do to up the weight count of the meat. "We hand cut, we hand cure, we rub spices [instead of a machine]."

"We're taking the time to make an artisan product," he adds.

The company emphasize that its products are also great for gift-giving.

Loosbrock has taken the subscription service to other businesses as well, including GourmetFoodClubs.com, BaconChocolate.com and his newest venture, SausageFreak.com. 

4. Men's undergarments and hygiene necessities
Made by ManPacks.com
Moorpark, Calif.

Admit it. You wish you thought of this idea. ManPacks is a service catering to men in which every three months customers receive new underwear, socks, razors or any other essentials without having to go to the store.

Calling itself the Netflix (NFLX) for men's products, the subscription service was launched in 2010 by co-founders Ken Johnson and Andrew Draper.

Johnson says a lot has changed for the company since then -- in a good way.

"There's been a lot of change. We went to an incubator program in Providence, R.I. We raised $500 million. Now we have investors and advisers. That's all been good from a business standpoint. In terms of the service ... we added a lot of product categories," he says.

The website started only offering men's undergarments and socks. "Since then we've added everything from toothbrushes to condoms to shampoos. We're sort of more of a service for men's life than just underwear," Johnson says. "We find that guys are historically kind of lazy for shopping for these things so we make it really easy for them."

Johnson acknowledges that a subscription service is still a scary thing for many customers so the company makes the process as easy and accessible as possible, emphasizing that the goal is to make life more convenient, "not as a way to lock them in a billing cycle," he says.

ManPacks is adding more items and catering to different demographics, such as the military, but Johnson says the company is being selective in the products it adds. He doesn't want the site to become a generic retail site for men.

So what's the one thing you can't currently get in your ManPack? Deodorant.

But Johnson says that's coming. 

5. Tacky holiday sweaters
Made by SkeDouche.com

Everyone knows that ugly Christmas sweaters are always the hit of the party. People even have themed "ugly sweater" parties just for the fun of it. But if you're attending one of these said parties and haven't kept your mothball-ridden tacky sweater circa 1984, where the heck can you buy one?

Self-titled tacky sweater aficionado John Kaplar took his love of these sweaters to a new level -- and started Skedouche.com in 2009.

Kaplar began designing his own sweaters when he came to the conclusion that what was already out there was "boring." He started with over-the-top holiday sweaters like the Lighted Fireplace Sweater with 3-D Stockings and the Santa Pimp Sweater.

Kaplar's holiday gear has earned notable mentions and he was recently featured in Jimmy Fallon's "12 Days of Christmas Sweaters."

"Our Christmas sweater store is overflowing with the tackiest, ugliest, most festive and obnoxious Christmas sweaters around. And everything is brand new," the company's website states.

Customers can also buy things like LED Christmas sweaters, Hannukah sweaters, candy cane scarves, hats and in its latest expansion, St. Patrick's Day gear.

Kaplar hopes to expand his collection to other holidays.

7 really stupid investments

MARKETWATCH FRONT PAGE

Commentary: Highlights from a decade of bad investment ideas. See full story.

Fed sets jobless, inflation targets; to buy bonds

The Federal Reserve, in what analysts called a watershed move, set out new thresholds Wednesday on the level of unemployment and inflation that must be in place before it would contemplate higher interest rates. See full story.

Gold prices skid on profit-taking after Fed

Prices of gold and silver take a tumble in electronic trading as gains in the wake of the Federal Reserve�s expanded monetary stimulus give way to profit-taking. See full story.

Europe stocks drop after Fed comments

European stock markets drop on Thursday, as investors digest fresh comments from the U.S. Federal Reserve and news about a European banking union. See full story.

Big earnings on Thursday: Ciena, Hovnanian, Adobe

Among the companies whose shares are expected to see active trade in Thursday�s session are Ciena, Hovnanian Enterprises, and Adobe Systems. See full story.

MARKETWATCH COMMENTARY

The fiscal cliff is a misleading metaphor, writes Rex Nutting. The tax and spending laws will change on that day, it�s true, but the impact will be spread out over many, many months. We�re already feeling the pain. See full story.

MARKETWATCH PERSONAL FINANCE

Commentary: Presenting the 17th annual Lump of Coal Awards See full story.

Goldcorp Snatches Andean Resources in $3.6B Deal

Goldcorp (NYSE:GG) [TSX:G], the world`s second largest gold producer by market capitalization, has announced that it will acquire Australian mining business Andean Resources (ANDPF.PK) [TSX and ASX: AND], a company whose main asset is its Cerro Negro gold project in Santa Cruz, Argentina, in a C$3.6 billion share and cash deal, beating an earlier $3.2 billion offer by Eldorado Gold Corp.

Both companies are vying for Andean`s Cerro Negro gold project, which is an advanced-stage, high-grade vein system, comprising 215 square kilometers. It currently has indicated resources of 2.54 million ounces of gold and 23.56 million ounces of silver, while inferred resources total 523,000 ounces of gold and 3.12 million ounces of silver.

Cerro Negro also contains several other vein structures, including the Mariana Central zone, where numerous recent drill intercepts have showed high-grade gold and silver over significant widths.

Under the terms of the transaction, each common share of Andean will be exchanged for 0.14 common shares of Goldcorp, or a cash payment in the amount of C$6.50.

Andean shareholders will be able to choose whether they receive cash or shares or any combination of the two.

The $6.50 per share offer, represents a 35% premium to Andean`s closing price on the TSX on September 2 (the last day prior to the announcement), and is higher than Eldorado`s $6.36 per share offer.

Cerro Negro is expected to generate significant gold production at low cash operating costs, following a relatively short construction period, said Goldcorp president and CEO Chuck Jeannes.

"A very exciting feature of the project is the opportunity for significant continued growth of gold resources through expansion of the existing deposits and the discovery of additional zones along the strike of the veins. As well, the potential exists for discoveries of new veins within this large, prospective land position," he continued.

Indeed, Andean`s CEO Wayne Hubert believes that the property has the potential to double or triple its gold and silver resources over the next couple of years.

The transaction has been unanimously approved by the boards of directors of Goldcorp and Andean, but is still subject to the approval of 75% of Andean shareholders, as the deal is structured as a scheme of arrangement under Australian law.

Sentient, Andean's largest shareholder, has already stated its intention to vote in favour of the deal.

The acquisition is expected to close in late 2010 or early 2011. Andean has agreed to pay Goldcorp a termination fee equal to 1% of the total value of the deal, should it be tempted by a competing offer.

The Andean deal is not the first time Goldcorp has beat other gold companies to the punch. In January, Goldcorp trumped Barrick Gold Corp for a 70% controlling stake in the El Morro gold-copper project in Chile from global mining company Xstrata.

Andean was up more than 30% on the Australian Stock Exchange, trading at Au 6.40, as of market close in Australia on Friday.

Disclosure: no position

U.S. stock indexes climb on earnings

MARKETWATCH FRONT PAGE

U.S. stocks climb on better-than-expected quarterly results from General Electric, Microsoft and others. See full story.

French election stirs fears of euro-zone turmoil

Nicolas Sarkozy�s fading hopes for re-election have investors fretting over the potential triumph of Socialist challenger Fran�ois Hollande, but experts say either candidate will find himself in a fiscal straitjacket. See full story.

French election stirs fears of euro-zone turmoil

Nicolas Sarkozy�s fading hopes for re-election have investors fretting over the potential triumph of Socialist challenger Fran�ois Hollande, but experts say either candidate will find himself in a fiscal straitjacket. See full story.

French politics, business don�t mix

Politics is politics, but business and politics mix somewhat differently in France. See full story.

French election is clouded mirror of U.S. race

As France gears up for the first round of its presidential election on Sunday, it is striking how a French presidential election manages to be both different and yet curiously similar to presidential elections in that country it contrasts itself most against, the United States. See full story.

MARKETWATCH COMMENTARY

Instead of acknowledging that banks have become a part of government, we keep pretending they are private institutions, writes David Weidner. See full story.

MARKETWATCH PERSONAL FINANCE

A few years ago, experts warned Americans against counting on the equity in their home to fund their expenses in retirement. But six years later, some are telling retirees and pre-retirees they should consider many tactics, including reverse mortgages. See full story.

Like it or not, the euro is doomed

NEW YORK (CNNMoney) -- As European leaders unveil their latest plan to solve the debt crisis, economists and market experts aren't convinced they'll actually be successful.

At least one group says there are one too many obstacles and chances are, the currency union will break up, triggering an end of the euro as we know it.

"Three years after the first 'once in a generation' financial crisis, we may now be entering the end game for a euro of 17 countries," said Graeme Leach, chief economist at the Institute of Directors, a London-based non-political organization comprising 43,000 business leaders worldwide, but primarily in the United Kingdom.

Incidentally, the U.K. was also the one country that staunchly opposed the latest deal, with Prime Minister David Cameron saying, "What is on offer isn't in Britain's interests."

Early Friday, European leaders, including 17 members of the eurozone, which share the embattled single currency, reached a deal for a new intergovernmental treaty to deepen the integration of national budgets.

With the exception of the U.K., it appears the plan also has the backing of the majority of the European Union.

But questions remain about the role of the European Central Bank. The ECB has been buying debt on a limited basis, as part of an emergency program, but there have been calls for more aggressive action.

Leach argues that the collapse of the euro is inevitable without the ECB's virtually limitless financial support.

ECB President Mario Draghi has firmly said, time and time again, that the central bank's only mandate is to prevent inflation.

"It's the ECB or bust," Leach said. "Unless the ECB begins to operate as a sovereign lender of last resort function, with massive purchases of eurozone public debt, the inexorable logic is that the eurozone will break up."

ECB willing to help banks, not governments

The latest moves are steps in the right direction, but much more is needed, say experts.

"All of the harebrained schemes invented so far to resolve the crisis in euroland remain half thought out, unfunded and unimplemented...and therefore, still harebrained," said Carl Weinberg, chief economist at High Frequency Economics.

European leaders, particularly from France and Germany -- the eurozone's two largest economies -- have had very different views on the ultimate role of the fiscal compact, and the latest proposals are just "too little, too late, and miss the structural problem," said Leach.

Germany has been strongly opposed to sending the ECB down a path of printing money to stabilize Europe's economy.

"Printing money is associated with hyperinflation, the collapse of the Weimer Republic, and the rise of Hitler," noted Leach. "From a German perspective the question is that, once the ECB has lost its virginity printing money, just how promiscuous could it become."

European leaders hash out crisis deal

And even if a "catastrophic event" changes Germany's mind, Leach says hurdles remain because "the ECB's balance sheet is already shot to pieces. It's massively over-leveraged."

Though investors and experts alike expect the ECB to intervene for fear of the alternative, Leach doesn't think that a fundamental change is likely.

And with no other surefire way out, Europe's hard hit "Club Med" economies like Greece, Italy and Spain could be driven "to the point where they deem it in their national interest to exit the euro," despite the immediate economic, political and practical consequences. And it could happen in the next six months, he said.

Not everyone agrees.

Evolution Securities analyst Elisabeth Afseth only sees a 10% chance of a euro break-up happening that soon, but agrees that European leaders have a lot of work to do, and kicking the can down the road only increases the risks of an end to the eurozone.

"In the short-run, it's beneficial for everyone to stay in the eurozone because the cost and pain of a break-up would be huge," she said. "But European leaders have to be careful in how they formulate the fiscal union. If the terms are all wrong, that's not good for the long run, and the danger of a break-up will remain."

Afseth said the fiscal union needs to focus more on boosting economic growth, rather than just pushing for budgetary discipline and fiscal austerity. And it needs to advocate for pooling the eurozone's debt together, so the region can issue eurobonds, another highly contentious topic among Europe's political leaders.

Despite the multitude and extent of the political disagreements that could lead to the eurozone's crumble in the near-term, more optimistic experts say Europe's leaders will likely find a middle ground to avoid the severe economic consequences.

"The political arguments are strong, but they come against a hard economic reality," said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, Scotland, noting that the costs for a single country leaving the eurozone could amount to at least 15% or 25% of its economy, if not more.

World's largest economies

"A break-up could result in very major recession in Europe, and so it's hard to imagine how any politicians and governments could possibly make a conscious, voluntary decisions to leave the eurozone," said Milligan.

But that doesn't mean it won't ever happen.

Milligan said leaders will likely lurch from crisis to crisis, and Europe's leaders will keep having to face complex political hurdles.

"The chances that the eurozone will remain intact over the next several months are high, but the danger could get worse over the next couple of years, as they try and transition toward any sort of fiscal union," said Milligan. 

A Big Decision Coming for Big Pharma: Part 3

As was discussed in Part 1�and in Part 2, the Supreme Court of the United States announced earlier this month�that it will hear the case of Federal Trade Commission v. Watson Pharmaceuticals that involves the legality of "reverse-payment" or "pay-for-delay" agreements. This is the name given to the settlement agreements between brand-name and generic-drug makers in which the patent holding company pays the generic to stay out of the market for a set period. The instant case involves an agreement that was reached �between Watson (NYSE: WPI  ) and Abbott (NYSE: ABT  ) relating to Abbott's Androgel. The case comes from the 11th�Circuit, but its outcome will directly impact a case from the Third�Circuit that was decided against these agreements�.

Breaking it down
In order to give this topic the thorough coverage it needs, this discussion has been broken into three distinct parts. In Part 1, I discussed the history of the case and how it got to the Supreme Court. In Part 2, I focused on the critical questions of law that are at issue and what considerations are most critical. Finally, in this final installment, I will analyze the ramifications of various potential outcomes.

In an effort to make this more than an academic exercise, in each part, I will include some investment analysis; ultimately the three parts combined will be of the greatest value to you as an investor.

The case basics
In the complaint that SCOTUS will hear, the FTC asserts that the price of Androgel would have decreased by at least 75% when the generic version was released in 2007. The loss of exclusivity could have cost Abbott as much as $125 million in annual revenue. In response to the application by several generics to manufacture cheaper options, Abbott filed suit alleging that the generic infringed on its patents. The patent litigation between the parties was settled by delaying the release of the generics until 2015 in exchange for combined payments that amounted to roughly $42 million annually.

The FTC, which has made these types of settlements a target, filed suit, alleging that the agreement was anticompetitive. As described in Part 1, the case made its way through the lower courts until the FTC appealed by filing a Writ of Certiorari that was granted by the high court. The case is expected to be decided by June.

Possible outcomes and corresponding impacts
There are three possible outcomes to the case, within some fairly broad parameters:

Uphold the ruling of the lower court, thus leaving as settled law that reverse payment arrangements are legal.

Overturn the ruling, determining that pay-for-delay agreements are presumptively anticompetitive and making them illegal

Limit the scope of these agreements, making them permissible under specifically enumerated circumstances.

Technically, the court could remand the case, sending it back for further consideration, but a more concrete answer seems more likely at this point. Let's take a look at how each of these scenarios could play out.

If the court upholds the ruling of the lower court, the most significant impact will be felt by Merck (NYSE: MRK  ) . Last July, the Third�Circuit broke from the opinions of the Second, 11th, and federal circuits , determining that pay-for-delay agreements violate antitrust laws and are therefore presumptively illegal. The appellate court ruled that purchasers of Merck's drug could pursue claims against the company for illegally paying Upsher-Smith Labs $60 million to delay the release of a generic alternative. If the Supreme Court disagrees, any ongoing litigation based on the Merck case will be ended and Merck's liability removed.

Under this outcome, the industry is likely to continue doing business as usual. Since 2005, several major drug companies, including Teva (NYSE: TEVA  ) and Bristol-Myers (NYSE: BMY  ) , have entered into these agreements. If the court finds these agreements permissible, it should be seen as a positive for the whole industry and will be a short-term positive catalyst.

If, however, SCOTUS sides with the Third�Circuit, the potential shakeup to the entire industry could easily reach into the billions. The brand-name players will be forced to seriously reconsider the strength of the patent protection that is available to them. Settlements of this nature will no longer be an option, so the cost of patent litigation will be higher. Additionally, since many drugs will lose exclusivity faster, the big pharmas may have to revisit their pricing models. This should be seen as collectively bearish for the brand-name players like Abbott, Merck, and Bristol-Myers.

On the other hand, the case breaking this way is net bullish for the generics like Watson and Teva. These companies will be able to get their drugs to market faster, which should be a positive. The caveat to this benefit is that they will forgo the income that these settlements generated with less certainty of success. If the big drug companies are not permitted to settle, the protracted litigation may delay the generics nearly as much as the settlement, without the benefit of the payment. Still, the overall impact should be positive.

The wild-card scenario is if the court limits the scope of these agreements. For example, earlier this month, U.S. Senior District Judge William Walls interpreted the Third�Circuit's ruling as defining reverse-payment arrangements as presumptively illegal only when actual payments are made. He explained:

K-Dur's pressing concern is about uneven bargaining power -- companies with money buy off too easily generic challengers with lump payments. In settlement situations where monetary payments are off the table, companies with abundant cash have less leverage to delay entry of generic drugs.

If SCOTUS goes this route, or some variation thereof, the impact to the industry may be difficult to define without further analysis. Overall, brand-name shareholders and generic drug company shareholders should each be aware of how the case is progressing. The negative impact to the big pharma names is likely to be more severe than the positive for the generics. A ruling against pay-for-delay will likely be bad for the industry.

A more near-term event with major implications for these player is the impending spinoff of Abbott Labs' branded-drug business. In doing so, the company is losing a massive blockbuster drug in Humira. It's a confusing event to understand, with many investors left wondering what to do with these two stocks once they're separated. To help investors better understand the upcoming event, the Fool has created a�brand new premium report�outlining both Abbott Labs and its spinoff, AbbVie. Inside, we outline all of the must-know opportunities and risks facing both companies, so make sure to claim this 2-for-1 report by�clicking here now.�

iRobot: Benchmark Starts At Hold; Cautious On Military Demand

iRobot (IRBT) shares are trading modestly lower this morning after Benchmark analyst Josephine Millward this morning launched coverage of the company with a Hold rating and $20 price target. The stock closed yesterday at $19.09.

While she notes that the company has a strong balance sheet, with almost $4 a share in cash, Millward writes that she is cautious on 2011 and 2012 demand for military robots. “We estimate about 80% of the military robots shipped this year by the company are funded by war supplementals, and have limited funding
visibility in the coming years,” she writes in a research report. She also says mass adoption of the company’s SUGV – Small Unmanned Ground Vehicle – robots could take longer than expected.

IRBT this morning is down 18 cents, or 0.9%, to $18.91.

American Capital: A cash machine?

I had been considering getting back into American Capital Agency (AGNC) after the company declared its dividend and priced any secondary stock offering that usually occurs right after it posts earnings.

Well, those events are now in the books, and shares of this popular mortgage REIT have pulled back� from its recent high. Now,it is trading at $29.50 with a forward dividend yield of 17.01% based on an annual dividend payout of $5 per share.

AGNC primarily deals in fixed-rate government-backed residential mortgages backed by Fannie Mae and Freddie Mac. In the most recent Q4 results, American Capital Agency recorded an annualized economic return of 33% for the quarter.

As of Dec. 31, 2011, the company's investment portfolio was composed of $54.7 billion worth of agency securities at fair value, including $51.5 billion of fixed-rate securities, $2.8 billion of adjustable-rate securities and $0.4 billion of CMOs.

For the fourth quarter of 2011, AGNC reported earnings of $208.7 million or $0.99 per share, compared with $138.1 million or $2.50 in the year-earlier quarter.

The decrease in quarterly earnings per share is primarily due to a higher number of weighted average shares in fourth quarter 2011 compared with the prior-year quarter.

Including one-time items, comprehensive income for the reported quarter was $476.8 million or $2.27 per share, compared with $68.2 million or $1.23 in the year-ago quarter.
Comprehensive income per share for fourth quarter 2011 was well ahead of the Zacks Consensus Estimate of $1.22.

During the reported quarter, the annualized weighted average yield on the company's investment portfolio was 3.06%, and its annualized average cost of funds was 1.16%, resulting in a net interest rate spread of 1.90%.

The company decreased its first-quarter 2012 dividend to $1.25 per share to reflect the narrowing of the spread along with the rise in leverage of the portfolio. The company's net book value per share was $27.71 at the end of December.

Even after a dividend reduction last month to compensate for the narrowing of the spread between borrowing short and investing long, shares of AGNC held their ground because, quite simply, the newly adjusted dividend yield was still huge by comparison with the other mREITs in the sector.

The company is using about 9-times leverage to produce that 17% yield, and it's employing a sophisticated interest rate hedging strategy to manage downside risk.

AGNC has priced 62 million shares in a secondary offering for proceeds of $1.8 billion for acquiring additional securities and is the latest offering by AGNC since it raised about $1 billion in late October last year.

The size of the offering was originally 54 million shares, but institutional demand allowed for the 10 million share overallotment to kick in.

I was hoping to see the stock come in further after trading ex-dividend March 5 and pricing such a huge stock offering, with the objective of buying it at 1-times book value, but demand for the yield in this market is strong -- and so is the stock's price action.

At its current price, we're paying about 1.09-times book, which is a bit of a premium, but I don't see that coming down, thanks to the attractiveness of the yield.

If AGNC management can pay out this kind of income in what I believe is the toughest of all environments for such entities, then as interest eventually ticks higher as the economy improves, the prospect for future dividend increases will grow, too.

With the recent stock offering, AGNC now ranks as one of the largest mREITS, trading with a price earnings multiple of under 6-times. The company also continues to hold about $10 of cash per share.

The one overriding risk for AGNC is further tightening of the spread. The way to keep the dividend at current levels is to grow the portfolio to generate more income.

Thus, raising $1.8 billion in new capital is a great vote of confidence in executing this very strategy, and it's why I believe the dividend payout will be maintained at its current level and will provide investors with a huge yield. Buy AGNC for the Aggressive High-Yield Portfolio under $30.



Related articles:

• MV Mortgage REIT: Double digit yield
  
• iShares Residential: Rental gains
• American Capital: Still a 16% yield
• DoubleLine: 'Exceptional' bond bets

5 Reasons Not to Worry This Week

It's not a perfect world out there for investors.

After a smoking-hot first quarter -- one that found the S&P 500 rising by at least 3% or better in each of its three months -- Mr. Market is taking a breather.

April was a dud, and May is off to an even uglier start.

I recently went over some of the companies that are expected to post lower quarterly profits when they report this week.

Thankfully, they are the exceptions and not the rule. Let's go over some publicly traded companies that are expected to stand tall this week by posting year-over-year improvement on the bottom line.

Company	Latest-Quarter EPS (estimated)	Year-Ago Quarter EPS	My Watchlist
Jamba (Nasdaq: JMBA  )	($0.06)	($0.11)	Add
MAKO Surgical (Nasdaq: MAKO  )	($0.20)	($0.27)	Add
Cisco Systems (Nasdaq: CSCO  )	$0.47	$0.42	Add
SodaStream (Nasdaq: SODA  )	$0.36	$0.27	Add
Universal Display (Nasdaq: PANL  )	$0.05	($0.08)	Add

Source: Thomson Reuters.

Clearing the table
Let's start at the top with Jamba.

The parent company behind the 769-unit Jamba Juice chain is spinning like its fleet of fruit-pulping blenders. Jamba's same-store sales have climbed for five consecutive quarters, and it posted back-to-back profitable quarters during last year's spring and summer seasons. That hasn't happened in years.

Analysts are expecting a small deficit when Jamba reports after today's market close, and that's fine. This is a seasonal business. Chilly and nutrient-boosted fruit drinks are better sellers as temperatures heat up. However, losses should continue to narrow during the off-season as the company hands over more of its company-owned stores to proven franchisees.

MAKO is the company behind the RIO robotic arm platform for orthopedic procedures and RESTORIS implants used in its patented MAKOplasty procedures. Squeamish investors may turn away at the sight of red ink, but this is a cutting-edge company that's updating the orthopedic market in an undeniably positive way.

Profitability may be two years away for MAKO at this point, but the top-line growth is undeniable. Wall Street's banking on an 82% pop in the top line, and the deficits should continue to shrink at this point.

Cisco is the networking giant. The tech bellwether's routers and switches connect corporate networks. Cisco has struggled on the consumer side. Competition has been fierce on the enterprise side. However, the pros see Cisco's earnings moving in the right direction these days.

SodaStream is the Israeli company behind the popular namesake beverage maker. SodaStream's simple yet patent-protected appliance turns tap water into carbonated soda. The knee-jerk reaction when the company went public toward the end of 2010 was to dismiss the company as a novelty, but SodaStream has been a hit in overseas markets for years.

SodaStream has blown past Wall Street's bottom-line targets in each of its first four quarters as a public company. We'll find out on Wednesday if it's able to stretch that streak to five.

Universal Display is a pioneer in organic light-emitting diode technologies. The efficient lighting source is starting to gain traction in televisions, monitors, and even smartphones. Rich in OLED patents, Universal Display has been striking lucrative deals for its technology.

Universal Display was losing money for years until it surprised the market with its first quarterly profit six months ago. The black ink continues, and this should be the company's third consecutive quarter of profitability.

Cross those fingers, but know the fundamentals
Investors in these five stocks have a right to be excited. They are all improving their financial situations. They are worthy of the gains that the market rally has bestowed upon them over the past year.

I wouldn't be uncomfortable owning any of these companies. They're doing the right thing, regardless of Mr. Market's mood swings.

The expectations may be high, but these five stocks wouldn't have it any other way.

David Gardner has been behind some of these winning picks, but now there's a new multibagger on his growth newsletter's radar. Read up in a free report that's available right now.

Pasta Perils at Darden

This article is part of our Rising Star Portfolio series.

In retrospect, perhaps I should have waited about a week to purchase shares of Darden Restaurants (NYSE: DRI  ) for the Rising Star portfolio I'm managing for Fool.com. After all, yesterday investors ditched the shares like last week's stale breadsticks after the restaurateur revealed unappetizing 2012 guidance.

Blame Darden's Olive Garden concept; value promotions like never-ending pasta bowls (including never-ending salad and breadsticks) didn't do the trick in luring never-ending strings of customers to the chain.

Meanwhile, in the face of rising food costs, Darden decided not to mess with momentum at Red Lobster and LongHorn Steakhouse by passing too many of those costs on to customers. Therefore, there was little to offset the weakness at Olive Garden.

Now Darden expects 2012 per-share earnings to increase 4% to 7%, a far cry from the previous guidance for 12% to 15% earnings growth. It reduced its sale- growth expectation by 0.5% to a range of 6% to 7%.

Granted, these aren't great tidings; reduced profitability next year also means the price I paid for Darden wasn't as inexpensive as I thought.

However, there's no use crying over spilled milk (or uneaten breadsticks). The lowered price represents a cheaper opportunity than I got when I added Darden shares to the portfolio last week.

Although one could certainly argue that restaurant stocks like McDonald's (NYSE: MCD  ) , Chipotle (NYSE: CMG  ) , and Panera (Nasdaq: PNRA  ) are all fired-up growth stocks and preferable to Darden, let's also remember that all three of those are currently trading near their 52-week highs. Whether they're trading at reasonable prices now certainly could be called into question.

Meanwhile, I far prefer Darden to beleaguered restaurant stocks like Wendy's (NYSE: WEN  ) or DineEquity (NYSE: DIN  ) , both of which have struggled to turn a profit in the past 12 months. Wendy's has had only one quarter with positive net income out of the past five.

Darden has some work to do in adjusting its Olive Garden menu to fire up its customers more, and at prices they're willing to pay for the value they get in their meals. Meanwhile, CEO Clarence Otis told CNBC he believes food costs will stabilize, and if that's the case, then we're simply dealing with temporary headwinds right now.

I have my eye on the situation at Darden, but I see no reason to cut and run. Although management obviously has some work to do in getting Olive Garden's menu adjusted and sales back up to par, I see no reason for investors to bail out of Darden. Don't sweat the short term, Fools.

If Darden or any of these restaurant stocks are becoming more appetizing, add them to your Watchlist to track all the latest developments:

• Add Darden�Restaurants to My Watchlist.
• Add Wendy's to My Watchlist.
• Add Panera�Bread to My Watchlist.
• Add McDonald's to My Watchlist.
• Add DineEquity to My Watchlist.
• Add Chipotle�Mexican�Grill to My Watchlist.

Daily State of the Markets: Opening Up the Playbook Again

Good morning. Maybe it's the jet lag talking or perhaps I've simply become a little cynical after 25 years in this business, but yesterday's action sure felt like a case of déjà vu all over again as the fast-money types (who are arguably the only people in the game who react to each and every headline, each and every minute of each and every day) appeared to open up the playbook on sovereign debt crises again and make the prescribed trades.

Let's see, the playbook says that you should first bid up the credit default swaps on the country in question; in this case, we're talking about Italy. If you're lucky, you might get a nice headline such as "The world doesn't have the cash to bail out Italy" or "EU considers partial default in Greece" to help convince your bearish buddies to join in on the fun. If enough people jump in, soon there will be talk of spreads "blowing out" and new record prices for buying insurance against a country defaulting on its debt.

Speaking of bonds, they are the vehicle of choice for those looking to keep things simple as selling bonds (and maybe some derivatives thereof) is another way to pump up the fear factor in the sovereign debt trade. Remember, higher yields (caused by lower prices) makes it more difficult for an embattled country to borrow money ... which, in and of itself, makes the situation more problematic ... which, of course, creates more incentive to bid up the CDS's and sell the bonds, and ... okay, you get the idea.

Next, the playbook suggests that you might want to cover your asset classes and do some shorting of equities in the country currently under attack. And if you've got the capital, why not lever it up a bit with margin and the use of an option or two? Oh, and if you want to really make a statement, you can go ahead and run sell programs on any other country or region that may (or may not) be in trouble.

If things go according to the playbook, all of your efforts will get noticed in the wee hours of trading in the US and the futures will start to be sold off as fear of "contagion" knows no borders. And for those looking to raise the bar on the degree of difficulty on the trade, chapter four says you can go ahead and buy gold, dollars, and U.S. government bonds.

In case my point isn't clear, I'm of the mind that this is what was taking place on Monday. When you mix in the sovereign debt playbook with an overbought market that is also uncertain about the state of the economy, the strength of the upcoming earnings season, the political games occurring in D.C., and the goings-on in China ... well, you've got the makings of an ugly day on your hands.

To make matters worse, every trader worth her keyboard knew that the major indices were within spitting distance of the old cycle highs. This may have caused some to wonder if things had improved that much over the past eight trading sessions, or if earnings were going to be robust enough to justify new highs and blue skies ahead. And with an obvious trading range continuing, the long-only crowd may have decided to sit on its hands yesterday.

The bulls argued Monday that we've seen this movie before and that the EU/ECB/IMF (and maybe the central banks of other nations such as China and the U.S.) are unlikely to let anything really bad happen. In response, their opponents pulled out an oldie-but-a-goodie by suggesting that Italy isn't Greece and, therefore, this time it is different.

So with traders opening up the sovereign debt playbook and some uncertainty in the air on a handful of topics, it is little wonder that the indices had a bad day. The question now, of course, is how bad things will get before the next batch of good news shows up or the dip buyers decide to do their thing.

Turning to this morning: Despite reassurances by the Eurogroup, fears regarding credit contagion are running high once again this morning. CDS spreads are continuing to "blow out" while bond yields on Italian bonds have spiked higher. In addition, Cisco's (CSCO) surprise announcement that it plans to cut 10,000 jobs is weighing on sentiment.

However, there are rumors that the ECB is stepping into the currency markets this morning, which has created a bounce in the futures.

On the economic front: The NFIB Small Business Optimism Index fell 0.1% in June to 90.8. Next, the U.S. Trade Deficit fell in May to $50.23 billion, which was above than the consensus estimate for a deficit of $43.83 billion.

Thought for the day: Just for fun, try smiling at everyone you meet today.

Pre-Game Indicators

Here are the pre-market indicators we review each morning before the opening bell:

• Major Foreign Markets:
  • Australia: -1.79%
    
  • Shanghai: -1.72%
    
  • Hong Kong: -3.06%
    
  • Japan: -1.43%
    
  • France: -1.29%
    
  • Germany: -1.25%
    
  • London: -1.01%
• Crude Oil Futures: -$0.64 to $94.51
  
• Gold: +$1.70 to $1550.90
  
• Dollar: Higher against the yen, euro and pound
  
• 10-Year Bond Yield: Currently trading at 2.899%
  
• Stocks Futures Ahead of Open in U.S. (relative to fair value):
  • S&P 500: -1.50
    
  • Dow Jones Industrial Average: +21
    
  • Nasdaq Composite: +3.30

Wall Street Research Summary

Upgrades:

• M&T Bank (MTB) - BofA/Merrill
  
• City National (CYN) - BofA/Merrill
  
• Synovus (SNV) - BofA/Merrill
  
• Sealed Air (SEE) - Barclays
  
• Owens-Illinois (OI) - Barclays
  
• Arch Coal (ACI) - RBC Capital
  
• Internationl Game Technology (IGT) - Sterne, Agee
  
• HiSoft Technology (HSFT) - UBS
  
• Helmerich & Payne (HP) - Estimates increased at Wells Fargo
  
• Patterson-UTI Energy (PTEN) - Estimates increased at Wells Fargo

  Downgrades:
  

• Bank of Hawaii (BOH) - BofA/Merrill
  
• Commerce Bancshares (CBSH) - BofA/Merrill
  
• HollyFrontier (HFC) - BofA/Merrill
  
• Tesoro (TSO) - BofA/Merrill
  
• China Unicome (CHU) - Credit Suisse
  
• ProLogis (PLD) - FBR Capital
  
• Procter & Gamble (PG) - Jefferies
  
• Motorola Solutions (MSI) - Morgan Stanley
  
• AnnTaylor (ANN) - Piper Jaffray
  
• Maxim INtegrated (MXIM) - UBS
  
• Microchip (MCHP) - UBS
  
• Waste Management (WM) - Wedbush Securities
  
• Radiant Systems (RADS) - Wedbush Securities

  Long positions in stocks mentioned: None

Why Would Liberty Want to Own Sirius XM?

John Malone has plenty of reasons to love satellite radio. Some of them wouldn't matter to us regular Joes.

Every Sirius XM (Nasdaq: SIRI  ) investor knows that Liberty Media (Nasdaq: LMCA  ) owns a 40% stake in the company. It's not obvious from ownership reports in services like Yahoo! Finance because Liberty's stake isn't made up of plain old shares. Instead, it's a large batch of preferred shares, convertible into regular shares and with all the voting and dividend rights of the fully converted holdings. Malone is Liberty's chairman.

Liberty has agreed to stay below a 49.9% Sirius stake until March 2012. With that date approaching fast, you have to wonder whether media tycoon John Malone wants to take over the satellite radio business.

At Liberty's annual investor and analyst meeting in mid-November, Liberty sure left the door open for a big move. "There are few businesses that I have as much confidence in," said Liberty CEO Greg Maffei. "Boy, it's got a heck of a tailwind behind it."

Love is all around
Some of that confidence might come from Liberty's pleasant history with Sirius. That boatload of preferred shares was created right after Lehman Brothers went belly-up and the Sirius-XM merger still smelled of wet ink. Sirius was in dire need of capital but borrowing was difficult and expensive. In rides Malone on a white horse, saves the day, and reaps a massive reward as share prices rebounded something fierce from that low point:

�

Sirius XM Radio Stock Chart by YCharts

The balance sheet is still shaky but improving, and Liberty would rather rip up that old agreement than let one of its most profitable investments fail. Not that it's necessary -- Sirius is barely GAAP profitable, but actually has strong cash flows nowadays. Amortized costs of pricey satellite launches help keep the tax man away.

And that's exactly why Malone would love a bigger bite of Sirius.

Tell me more!
Malone loves cash flows and hates paying taxes. Sirius' history of negative earnings and recently found positive cash flows bring together the best of both worlds. The company has nearly $10 billion in accumulated deficit from net operating loss carryforwards. Liberty paid $541 million to Uncle Sam over the past year; a tax credit pool like that could keep the tax man away for many years to come.

Sirius CFO David Frear explains that Liberty would need to own at least 80% of the company in order to take advantage of these credits, or about double its current holdings.

That would cost about $2.6 billion at today's share price, plus a bit of a bid premium to get investors to part with their shares. Liberty doesn't have that kind of cash available, but debt is cheap now and Liberty doesn't have any -- yet. This could happen, and March is just around the corner.

Blink and you'll miss it
That being said, Frear dodged questions about a possible Liberty boost at this week's UBS media conference. "In terms of what are their intentions with respect to going north of 50%, I really don't know," he said. "You would have to ask Greg."

If Liberty's top brass really believe in the Sirius opportunity, they should start dropping stronger signals over the next few months. We'd see the company raising capital, and perhaps trying to integrate other major holdings such as Barnes & Noble (NYSE: BKS  ) into the Sirius story (XM on your Nook, anyone? A B&N-sponsored satellite channel of audio book readings?). Malone needs to lay the foundation before building a bigger deal.

To keep an eye on Malone's intentions, you should add the Liberty family of tracking stocks to your Foolish watchlist. In just one click, you'll get an instant handle on Sirius, Liberty Capital, and both of the Liberty Interactive (Nasdaq: LINTA  ) (Nasdaq: LINTB  ) share classes. You won't find that kind of convenience anywhere else.

US Mint Testing New Metals to Make Coins Cheaper

By Joann Loviglio

PHILADELPHIA (AP) - When it comes to making coins, the Mint isn't getting its two cents worth. In some cases, it doesn't even get half of that. A penny costs more than two cents and a nickel costs more than 11 cents to make and distribute. The quandary is how to make coins more cheaply without sparing our change's quality and durability, or altering its size and appearance.

A 400-page report presented last week to Congress outlines nearly two years of trials conducted at the Mint in Philadelphia, where a variety of metal recipes were put through their paces in the massive facility's high-speed coin-making machinery.

Evaluations of 29 different alloys concluded that none met the ideal list of attributes. The Treasury Department concluded that additional study was needed before it could endorse any changes.

"We want to let the data take us where it takes us," Dick Peterson, the Mint's acting director, said Wednesday. More test runs with different alloys are likely in the coming year, he said.

The government has been looking for ways to shave the millions it spends every year to make bills and coins. Congressional auditors recently suggested doing away with dollar bills entirely and replacing them with dollar coins, which they concluded could save taxpayers some $4.4 billion over three decades. Canada is dropping its penny as part of an austerity budget.

To test possible new metal combinations, the U.S. Mint struck penny-, nickel- and quarter-sized coins with "nonsense dies" - images that don't exist on legal tender (a bonneted Martha Washington is a favorite subject) but are similar in depth and design to real currency.

Test stampings were examined for color, finish, resistance to wear and corrosion, hardness and magnetic properties. That last item might be the trickiest, as coin-operated equipment such as vending machines and parking meters detect counterfeits not just by size and weight but by each coin's specific magnetic signature.

Except for pennies, all current U.S. circulating coins have the electromagnetic properties of copper, the report said.

A slight reduction in the nickel content of our quarters, dimes and nickels would bring some cost savings while keeping the magnetic characteristics the same. Making more substantial changes, like switching to steel or other alloys with different magnetic properties, could mean big savings to the government but at a big cost to coin-op businesses, Peterson said.

The vending industry estimates it would cost between $700 million and $3.5 billion to recalibrate machines to recognize coins with an additional magnetic signature. The Mint's researchers reached a lower but still pricey estimate of $380 million to $630 million.

Another challenge for the Mint is the rising cost of copper (used in all U.S. coins) and nickel (used in all except pennies).

Only four of the 80 metals on the periodic table - aluminum, iron (used to make steel), zinc and lead - cost less than copper and nickel, the report stated. Lead isn't an option because of its potential health hazards.

"Pricing of steel, aluminum and zinc are pretty close to each other ... there are promising alternatives for the nickel, dime and quarter," Peterson said. "There wouldn't be any advantage to shift the composition of the penny, so we offset that cost with (savings from) other denominations."

Pennies may not be cost-efficient, but they won't be getting pinched as long as they're in demand.

"We produce 6 billion pennies a year," Peterson said. "Our customers want them."

Concurrent Technologies Corp. (CNC), a Pennsylvania-based scientific research and development company, is working with the Mint on the alternative materials study under a $1.5 million contract awarded in 2011.

The Philadelphia mint, established in 1792, is the country's oldest and largest. Circulating coins are made there and in Denver.
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