Bernanke Vote So Far: 35 to 17 For

The turn of the tide in favor of re-appointing Federal Reserve chair Ben Bernanke is gaining, with Dow Jones Newswires and other outlets reporting numerous U.S. Senators indicating their support. Republican Lindsey Graham of South Carolina has said he’ll support Bernanke, as will Senators Dianne Feinstein of California and Daniel Inouye of Hawaii also stepping up.

The tally, as of about 11:15, was 35 senators for, 17 opposing, with 24 Democrats in favor and 11 Republicans positive, write DJ’s Darrell Hughes and Luca Di Leo.

Top Stocks For 7/28/2012-9

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HMTO, HOME TOUCH HOLDING CO., HMTO.OB

HMTO is a leading developer of Green and intelligent design building solutions in the Asia Pacific region. HMTO�s green, energy-efficient systems streamline building functions, including temperature control, lighting, security, keyless entry, media and communications. HMTO was named winner of the prestigious Hong Kong Information and Communications Technology Award for 2007.

HMTO creates new revenue streams in Asia Pacific Region, particularly the company design, patent and install cost effective intelligent building solution.

HMTO focus in both hardware and software plus integration of different brands.

The dedicated solution and products include but not limited to Novel Smart Switch, t.Home1, IP videoDoor Phone and Media Center Solution.

HMTO patents technology and solution, the solution use at home, office, school, hotel and hospital. They are also applied in industries such as education, hospitality, real estate, entertainment and healthcare.

The company has implemented an aggressive growth strategy with a clear focus on developing new technology and solution; HMTO creates new revenue streams for the Greater China Region, particularly in IP and wireless intelligent building related solution. HMTO’s business coverage from, Greater China Region, Asia Pacific region to Middle East Region.

A building with Life Style, Trend and Technology!

Home Touch Limited Receives Two Patent Approvals for Revolutionary Intelligent Environment Solutions

HMTO has received patent approval for two new products, The FLOW(TM) All-In-One Remote Control Device and the Flatten Touch Video Door Phone(TM). Home Touch designs and installs custom, green technology for buildings, luxury homes and hotels throughout Greater China and Asia Pacific region.

The Flow remote control device received patent approval from the China Intellectual Property Department on January 21, 2010. The Flow is one of several innovative solutions within HMTO�s line of integrated Smart Home Systems. The Flow features built-in motion sensors and HMTO�s exclusive Flatten Touch Technology(TM) allowing easy touch-sense operation. The remote control device contains both infrared code learning and Zigbee(R) radio frequency for non line-of-sight operation. Users can program and operate functions for home appliances, lighting and security systems, temperature controls and entertainment systems, as well as telephone and Internet.

The new Flatten Touch Video Door Phone exclusive features include 7″ video touch screen, video and voice messaging, security settings and alarm configuration. This newest of HMTO�s IP-Base technology also received patent approval from the China Intellectual Property Department on March 3rd, 2010. Flatten Touch Technology(TM) is featured throughout HMTO�s new �Born Luxury� series of high-performance intelligent design systems, including the recently patented Flatten Touch Video Door Phone. Also with innovative touch technology, the Video Door Phone is the first of its kind for use in intelligent home systems.

Home Touch Limited is Sole Provider of Green, Intelligent Home Solutions for One of Hong Kong’s Most Expensive Homes

HMTO will be exclusively featured in the first of four houses within Hong Kong�s premier Headland Road Project, on the island�s southern coast overlooking Repulse Bay. The homes are offered by Henderson Land Development Company.

The 11,000 sq. ft. luxury Show House is near completion and will be priced at around $64 million USD ($500 million Hong Kong Dollars). Completion of all four homes is highly anticipated by the luxury real estate market.

HMTO’s contract for system design and installation, valued at around $100,000 USD ($800,000 HKD), is due for completion in May, 2010.

More about HMTO at www.hometouch.asia

3 Small Stocks with 7%-Plus Dividends

It's been said the best gifts sometimes come in the smallest packages. The same is often true for dividend-seekers -- some small cap stocks can provide a reliable and sizeable source of income that's quite uncharacteristic for a company of their size. And, aside from surprisingly large dividend payouts, a few of these companies also offer growth prospects their large-cap counterparts simply can't. No, there aren't a multitude of these stocks, but there are enough for those who seek them. Here's a closer look at three high-yield small-cap stocks income investors may want to consider. 1. PDL BioPharma Inc. (Nasdaq: PDLI) Yield: 11% When investors think of the average biotech stock, the typical vision usually looks nothing like what PDL BioPharma is. In fact, the nature of the business model has little to do with biotech, and everything to do with income. PDL BioPharma first and foremost seeks royalty payments for use of its patented antibody technology. While it developed the therapeutic monoclonal antibody platform that has become the key source of revenue, it's more interested in letting other biopharma developers "lease" the know-how. And they have. Genentech/Roche's drugs, Avastin (for metastatic colorectal cancer), Herceptin (breast cancer), and Lucentis (macular degeneration), along with Elan (NYSE: ELN)/Biogen Idec's (Nasdaq: BIIB) Tysabri (multiple sclerosis) are all produced using PDL BioPharma's antibody technology. The model seems to be working, too. Since 2004, the company's revenue as well as operating profits have averaged double-digit growth, to $335 million last year, thanks to increasing royalty payments from pharmaceutical companies. A recent analyst downgrade stemmed from concerns that many of its current royalty deals will expire in 2015, which is a legitimate worry. However, other drugs built on the same platform are in the pipeline. Elan and Johnson & Johnson's (NYSE: JNJ) bapineuzumab (for the treatment of Alzheimer's), for example, is one of them, and it's currently in Phase III testing. More drugs could -- and likely will -- be added to the royalty payment stream between now and 2015. At its recent price of $5.37 per share, PDL carries an enticing yield approaching 11%. The company has recently committed to a regular "set" quarterly dividend rather than special dividends, which fluctuate. Having been profitable for quite some time now, with net margins around 35%, making those payments should be no problem. 2. Medallion Financial Corp. (Nasdaq: TAXI) Yield: 7% While the nature of PDL BioPharma's business is unique, Medallion Financial's is almost unheard of. This $175 million company makes loans to New York City cab owners and cab companies to facilitate the purchase of the "medallion" required to legally operate a taxi in the city. It's a stunningly important business too, because these medallions can cost as much as $700,000 each. Yes, you read that right -- it can take well more than half a million dollars to break into New York's taxi business, and that's assuming one of the medallions is available. See, the city only allows so many of them to be issued at any given time. There are two certainties here working in Medallion Financial's favor:

• New York City's taxi cab industry isn't going anywhere 
• Most cab drivers, and even cab companies, can't shell out $700,000 to get started

The solution is a medallion loan, which commands a relatively high price, given today's interest-rate environment. While the typical medallion loan rate fell from 7% to 6% when all rates began to be lowered in 2008, that's still a much higher rate than other consumers are finding for other loan types. That's good news for Medallion shareholders, though, as it leads to a dividend yield of about 7%. 3. BGC Partners Inc. (Nasdaq: BGCP) Yield: 10% Finally, consider BGC Partners Inc. -- an $839 million investment bank and broker with a stock sporting a solid dividend yield of 10%. This dividend has been increasing on a regular basis since early 2010, and is backed up by increasing revenue and earnings since 2006. There's nothing particularly unique about the company. It's a middleman within the financial world, able to raise funds for corporations, servicing retail brokerage customers through its 1,700 brokers and catering to the higher-level needs of its institutional clients. All are things its competitors do as well, however. Where BGC Partners stands out aside from the strong dividend yield is in the execution of its business plan. The financial company grew revenue in 2008 when few other companies in the sector could. And though it dipped into the red ink in 2009 to the tune of $0.28 per share, it made it back into the black the next year and is on pace for record-breaking earnings of $0.77 per share this year. In other words, the dividend is pretty well protected. Risks to Consider: While dividends for all companies including these three generally reflect the strength of the underlying business, there's always a chance the policy makers for BGC Partners, PDL BioPharma and Medallion Financial could dial back the payout. That's very unlikely in these three cases though, because the companies were largely built from the ground up to be dividend payers. Tips>> Of the three, Medallion Financial may be the most reliable payer, which explains the lower dividend yield. As for the other two, the yields are about the same, as are the growth prospects.

Will MF Global Customer Interests Be Crushed by Big Banks?

I'm not a lawyer. I don't even play one on TV. As a result, one of the most difficult aspects of breaking down the MF Global (OTC: MFGLQ) case has been trying to understand how the legal system works in this kind of situation.

At this point, my nagging suspicion is that it simply doesn't work. Or at the very least, a quagmire of overlapping rules and regulations has created a labyrinth that not even some of the sharpest legal minds (or at least some of the most well-paid legal minds) seem to be able to navigate.

Not that the legal issues are the only maze that those working on MF Global have had to navigate.

This just in
In an update released Monday, James Giddens, the trustee for the MF Global brokerage subsidiary, said that at this point the small army that's been picking apart the broker's books has a decent picture of where money was moved in the final days of MF Global's solvency. In short, it's not a pretty picture.

The numbers that Giddens included in his press release back up his familiar refrain that tracking down the $1.2 billion of missing customer money would be difficult because of the frenetic final days at MF Global. Here are a few of the pertinent numbers from the release:

• Cash transactions at the broker totaled more than $105 billion in the final week.
• There was an additional $100 billion in securities transactions.
• In all of October 2011, the trustee examined 840 individual transactions that exceeded $10 million, for a total transaction value of $327 billion.
• The large cash transactions include 47 bank accounts across eight financial institutions.
• In the final five days of solvency, MF Global was hit with margin calls totaling $554 million.

To put the magnitude of these numbers in perspective, MF Global's -- the holding company -- final earnings release reported total assets of $41 billion as of Sept. 30, 2011. Shareholder equity at that date was put at $1.2 billion. That means that in the course of one week, the broker's cash transactions alone were a multiple of the company's total assets, while margin calls were nearly half of the company's total previously reported book value.

In other words, that was indeed an incredibly hectic week.

The same old story
Of course while the new numbers may be fascinating, they still leave the same nagging question: Will customers that had segregated accounts at MF Global be made whole?

The answer is still unclear, and if it is going to happen, the road to 100% appears to be a long one. While it certainly helps that the trustee now has a good idea of where all of MF Global's money went, reclaiming it is hardly an easy matter. Since these transactions involved MF Global sending money to parties that it rightfully owed money to, Giddens said he's forced to "investigate the complex factual and legal questions" that might allow him to pursue claims against some of the recipients.

But to the non-lawyer in me, this all seems hopelessly and needlessly convoluted. The bottom line is that if MF Global pulled money from customer accounts -- without replacing the funds with certain allowed assets -- to meet other obligations, then it did so illegally. In that case, the customers should be made whole from the general assets of the broker or even the holding company if necessary.

And it appears that the latter scenario is exactly what happened. Giddens wrote:

The investigation to date has found that transactions regularly moved between accounts and that funds believed to be in excess of segregation requirements were used to fund other daily activities of MF Global. In the past, such transfers were in amounts of less than $50 million, but as liquidity demands increased and could not be met from internal sources, much larger amounts were used. ... [T]he 4(d) U.S. segregated commodity customer account appears to have reached a deficit condition on Wednesday, October 26 that continued through to MF Global's bankruptcy.

Unfortunately for the customers that are still out roughly a third of their MF Global accounts, recovering the property pits them against some of the most powerful financial bodies in the world, including MF Global Holdings' two top creditors, JPMorgan Chase (NYSE: JPM  ) and Deutsche Bank (NYSE: DB  ) . And thus far, it seems that these "too big to fail" banks have a strong ally in Louis Freeh, the trustee for MF Global Holdings. The Commodity Futures Trading Commission has already blasted Freeh's views on handling the case, writing in January:

The brief of the Chapter 11 Trustee contains errors and misstatements of law that, if accepted, may inhibit commodity customers from recovering their property. ... If, contrary to the language of the statute, the Chapter 11 Trustee were correct, the senseless result would be to render inapplicable the key regulations of the Commodity Futures Trading Commission in the largest commodity broker bankruptcy in U.S. history, and to strip of a remedy all MFGI commodity customers who entrusted their property to MFGI in reliance on applicable segregation requirements, based solely on the happenstance that the commodity broker also operated a much smaller securities business ... that is not the law.

The chapters still to come
The MF Global debacle is far from over. If controls at the broker weren't enough to keep the company from raiding customer accounts in those final days, CEO Jon Corzine may be on the hook because of assurances he made under Sarbanes-Oxley provisions. While CME Group (NYSE: CME  ) created a $100 million fund to protect farmers and ranchers in future cases like this, that exchange operator still remains under a cloud and realistically will probably have to do much more. The U.S. government and regulatory bodies have also been considering changes in how they handle this industry moving forward.

But most notable may be the showdown between the large, big-money interests such as JPMorgan and Deutsche which took legitimate risk in lending money to MF Global, and the diverse group of smaller customer interests that held the belief that their supposedly segregated accounts at MF Global were a risk-free proposition.

As I said at the beginning, I'm no lawyer, but in this case it doesn't take a legal degree to see what's right.

2 Gun Stocks, 1 Potential Bang-Bang Play

Click to Enlarge Everyone likes a good story stock — and when the �story� involves American citizens arming themselves at a breakneck pace, how can an investor resist? We�re talking, of course, about the shares of the two publicly traded pure-play firearms manufacturers: Smith & Wesson Holding Corp. (NASDAQ:SWHC) and Sturm, Ruger & Company (NYSE:RGR).

Click to Enlarge The two stocks have gained 130.8% and 39.7%, respectively, since Dec. 1, and the recent news flow has been exceptionally positive. But is it too late for investors to jump on board?

The Story

The most recent news propelling shares of the two stocks was Sturm Ruger�s announcement that its order backlog is so large, it would stop taking new orders until late May. The stock jumped more than 13% on Thursday on the back of this exceptional news item, and Smith & Wesson — which has an enormous backlog of its own and is expected to gain market share in the wake of Sturm Ruger�s decision — gained more than 11%.

This portion of the rally only extends a move that has been in place since late last year, when strong demand prompted SWHC to boost its 2012 earnings guidance. The company raised its estimate again earlier this month following an earnings report that came in well above expectations.

The result of this positive news flow has been a sharp rise in earnings estimates during the past 90 days:

	2012 Current	90 Days Ago	Increase	2013 Current	90 Days Ago	Increase
SWHC	$0.27	$0.21	28.5%	$0.40	$0.31	29.0%
RGR	$2.51	$2.10	19.5%	$2.79	$2.50	19.6%

Is There Room to Run?

Click to Enlarge It looks to be a safe bet that the positive sales trends for firearms can continue through year-end. The FBI�s National Instant Criminal Background Check System reveals that the number of firearm background checks rose 15.7% year-over-year in February, well above the monthly average — indicating that recent news events are no fluke.

Click to Enlarge Further, the election cycle represents a catalyst for firearm sales that could run through year-end and beyond. Recall that concerns about tighter gun control after President Barack Obama�s election prompted consumers to go on a buying spree that drove both stocks to massive gains in the first half of 2009:

This time around, recent polls indicate that a second term for Obama is likely to remain a strong possibility for the remainder of this year. With the president having nothing to lose in a second term — the thinking is likely to go — the greater the chance that prospective gun owners will need to buy sooner rather than later. Whether this is true is a matter for debate, of course, but in this case it�s the perception that counts. As a result, firearms sales are likely to remain robust through year-end.

Having said this, both stocks already have registered substantial gains in recent months, and neither is particularly cheap based on current estimates. Smith & Wesson is changing hands at 19.2 times current 2013 estimates, while Sturm Ruger is trading at 17.2 times. While these P/E ratios likely will fall as estimates rise further in the months ahead, at this point both stocks look expensive on a historical basis.

It therefore appears unsafe to chase Smith & Wesson here — especially after its 43% gain so far this month, which has put it a whopping 89% above its 200-day moving average and 33% above its 50-day MA. At these overbought levels, a pullback is in order in the near term. On the other hand, RGR — which had been trading sideways for a month prior to Wednesday�s news — appears less vulnerable to a reversal. It�s also cheaper on a valuation basis, and it sports a 2% yield (versus no dividend for SWHC). Therefore, Sturm Ruger appears to be the better bet between the two stocks right now.

Despite the potential for near-term weakness, Smith & Wesson and Sturm Ruger deserve a place on your radar screen for the rest of 2012. Any selloffs that occur between now and the end of the year are likely to set the stage for a nice counter-trend trade given the underlying strength in the two companies� fundamentals.

And if nothing else, the firearm makers represent an outstanding hedge against a zombie apocalypse.

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

Six Ways to Profit From the International Broadband Boom

By Larry D. Spears

Telecommunications stocks have long been favorites among American investors, both for their sustained growth and their typically lucrative dividend payouts. What many investors don't realize, however, is that U.S. telecom giants now badly lag the rest of the developed world in one key part of the telecommunications sector - broadband Internet service.

Broadband providers in much of the rest of the world offer much faster connections at generally much lower prices. And those overseas players tend to have much more room for growth than the highly saturated U.S. market.

That's why investors who are seeking to maximize their long-term profits from the telecom sector need to start looking at the industry's emerging international players.

"The average U.S. household has to pay an exorbitant amount of money for an Internet connection that the rest of the industrial world would find mediocre," reported a recent issue of Scientific American.

SM: U.S. Shares Fetch Premium Prices

A popular saying on Wall Street holds that the U.S. is the "best house in a bad neighborhood" for investors. Maybe so, but it's also starting to look like the priciest.

Also See

• For Safe, 4% Dividends, Look Here
• Time to Buy the Sinking BRICs

U.S. shares have gained 3.5% over the past year, versus declines of 18% for emerging markets like China and Brazil and 20% for Europe, according to data from MSCI, an index publisher.

The sharp divide in performance means those who buy American now pay a sizeable premium. U.S. shares trade at 13.8 times company earnings from the past 12 months. That's close to their historic average, but it's 19% more than shares cost in Europe and 25% more than they cost in emerging markets.

For investors who prize dividend income, the difference is more striking. A $1 million investment in the broad U.S. stock market yields about $23,000 a year in dividends. In emerging markets it yields $32,000 and in Europe, $44,000, according to MSCI data.

 U.S. Shares Fetch Premium Prices4:11

For bargain hunters, recent U.S. outperformance makes now a good time to look abroad. Jack Hough reports on Markets Hub. Photo: AP.

What do they like? The U.S. economy expanded at an annualized rate of 1.9% in the first quarter, while Europe was flat. Emerging economies, although growing faster, have significant problems.

Russia is dependant on oil for revenues, and crude prices have been sliding. India's rupee recently hit a record low versus the dollar. China is struggling with slowing demand for goods in Europe, and Brazil, with slowing demand for raw materials in China.

That has made the U.S. seem a haven. Unlike the euro zone, it doesn't face a crisis over having a single currency but many different federal budgets. And unlike some emerging markets, its factories aren't losing their competitive edge to wage inflation.

However, investors must weigh those advantages against U.S. stock valuations. One reason to pay a premium for U.S. stocks is the belief that U.S. companies will grow fast enough to make up for the premium. But companies in the Standard & Poor's 500-stock index are expected by analysts this quarter to report their first profit decline since 2009, according to data compiled by Bloomberg.

Stock markets have a way of pricing bad news too harshly, which is one of the reasons that stocks with low price-to-earnings ratios have outperformed those with high ones over long time periods. For investors whose portfolios are diversified around the world, the U.S. portion will have swelled versus the others. Now may be a good time for some rebalancing toward cheaper markets.

One way to cautiously do that is to select markets with relatively sturdy economies and plump dividend yields (see "For Safe, 4% Dividends, Look Here"). For a more aggressive route, shop in four once-touted emerging markets whose shares have recently fallen harder than the rest: Brazil, Russia, India and China (see "Time to Buy the Sinking BRICs").

Should You Renounce Your U.S. Citizenship?319 comments

Should you renounce your U.S. citizenship for the tax perks? Facebook founder Eduardo Saverin's decision to do so has sparked interest in the strategy. Laura Saunders on The News Hub points out the downsides of such a move. Photo: AFP/Getty Images.

For some people, the best tax strategy is simply to pack up and leave.

That is the lesson from the disclosure that Eduardo Saverin, the 30-year-old billionaire who helped found Facebook, has renounced his U.S. citizenship to become a resident of Singapore.

Singapore offers huge tax advantages for people like Mr. Saverin, whose wealth is primarily in the form of capital gains. The Southeast Asian city-state has no capital-gains tax and its top income-tax rate is 20%—compared with rates of 15% and 35%, respectively, in the U.S.

According to his spokesman in New York, the Brazilian-born Mr. Saverin, whose family moved to the U.S. in 1992 and who became a citizen here in 1998, made the move for reasons other than taxes. Mr. Saverin merely found it "more practical" to become a resident of Singapore, said the spokesman, who added that Mr. Saverin remains "extremely passionate" about the U.S. and Brazil. (See How Much Did He Really Save?)

Eight Famous Ex-Americans

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ZUMAPRESS.com

Jet Li became a citizen of Singapore in 2011, and while the kung fu superstar did not say whether he had renounced either his Chinese or American citizenship, Singapore law forbids dual citizenship

Renouncing the U.S.

Track the number of U.S. citizens who have formally renounced their citizenship or residency each year since 2000.

View Interactive

Almost any U.S. citizen can decide not to be one. Should you follow Mr. Saverin's lead and high-tail it to a lower-tax country? While it might seem tempting, renouncing one's citizenship has many drawbacks.

Among them: a large "exit tax" owed to the U.S. government upon leaving, steep tax bills for any U.S. heirs and big travel headaches for people who try to return to the U.S. Some lawmakers, picking up on the Saverin case, said Thursday they want to strengthen a law barring expatriates who left for tax reasons from ever re-entering the country.

Whether or not you consider the act of renouncing one's citizenship savvy tax planning, the ultimate protest gesture, a rank insult to a system that enables great wealth or just plain weird, some U.S. taxpayers are pondering such moves. Last year, almost 1,800 U.S. citizens turned in their passports and green cards, a sixfold increase from 2008.

Related

• Why the U.S. Pursues Citizens Overseas
• Asia's Lighter Taxes Provide a Lure
• Lawmakers Take Aim at Saverin
• The Law Blog: Taxes Got You Down? Renounce!
• So How Much Did He Really Save?

"I'm getting twice as many inquiries as I used to," says Freddi Weintraub, an immigration lawyer with the Fragomen firm in New York. "People want to know their options."

Reasons to Flee

Some pundits cite looming tax increases in the U.S. as the main force driving the exodus. Next year, unless Congress acts, the top income-tax rate will jump to 39.6%, while the top capital-gains rate will rise to 20%. The top rates on estate and gift taxes are scheduled to soar to 55% from the current 35%. A 3.8% tax on investment income for high earners will kick in as well.

But other factors are just as important, experts say. The U.S. is highly unusual in that it imposes taxes on "world-wide" income, which includes international as well as domestic earnings, no matter where you live, above an exemption of about $100,000. That means any U.S. citizen or resident with earnings abroad owes U.S. taxes on the income even if the money stays overseas. Most other countries don't tax earnings from abroad, although some tax them when they are repatriated.

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Also, unlike many countries, the U.S. has a broad definition of who is a citizen—including, for example, people born on American soil. That produces a large number of "accidental citizens" who don't consider themselves American but nevertheless owe U.S. taxes.

Steven Cantor, a lawyer at Cantor & Webb in Miami, says he recently had a Latin American client accused by the Internal Revenue Service of hiding offshore accounts, but who was a citizen only because he was born here after his mother sought medical attention during a difficult pregnancy. Mother and son immediately moved back home.

"He had no U.S. passport or Social Security number and had traveled to the U.S. on a tourist visa, but I had to struggle to convince the IRS of his innocence," Mr. Cantor says. An IRS spokesman declined to comment on the case, but said the agency has since clarified the rules to provide reduced penalties for U.S. citizens in such circumstances.

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Late actor Yul Brynner

Exit Wounds

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Linzie Hunter

The act of expatriating isn't new, whether for tax or other reasons. Global investing titan John Templeton famously gave up his U.S. citizenship in the 1960s to become a citizen of the Bahamas, although his family says it wasn't for tax reasons. Biographers of deceased director John Huston and the late actor Yul Brynner report that each gave up his American citizenship in the 1960s.

In the 1990s, Kenneth Dart, president of disposable-cup maker Dart Container, renounced his citizenship. A short time later, Belize sought permission to install Mr. Dart as its consul in Florida, near his former home. (President Bill Clinton said no.) A spokesman for Dart Container declined to comment.

Tough New Rules

One reason why more Americans are expatriating is the increasingly tough tax-enforcement climate in the U.S.

Enforcement was fairly lax until worries about capital flows and terrorism rose sharply following the attacks of Sept. 11, 2001, experts say. Soon after came evidence that giant Swiss bank UBS and other offshore providers were encouraging U.S. taxpayers to hide money abroad.

In reaction to both issues, Congress in recent years has stiffened rules on undeclared foreign accounts.

Defriending the United States?

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The new penalties for a willful failure to report a foreign financial account are up to 50% of the highest value of the account each year, notes David Lifson, a CPA at Crowe Horwath in New York who has many international clients. "Two years of willful noncompliance can empty an account," he says.

In 2010 lawmakers also enacted an ambitious law, the Foreign Account Tax Compliance Act, or Fatca, requiring foreign financial institutions to certify that U.S. taxpayers aren't hiding money in them. Foreign banks and investment funds already are refusing U.S. customers because they don't want to cope with Fatca compliance, Mr. Lifson says.

"The people I see who are considering expatriation often have global connections and are finding that U.S. citizenship isn't worth tax and compliance headaches," he adds.

Many Complications

Are you thinking of following Mr. Saverin's lead? Here are some considerations.

Get ready for questions. Expatriation involves an exit interview with a U.S. official, usually abroad—although not always in the host country. Experts say the meeting is typically short unless officials are worried about irregularities, in which case it can last much longer.

You need somewhere to go. How to find a new home? Some countries, such as Ireland and Italy, often welcome relatives or descendants of their citizens—but don't always offer tax advantages. In other nations you must have a stronger argument, such as a big investment there.

On its website, the Caribbean nation of St. Kitts and Nevis says its Citizenship-by-Investment Program requires a real-estate investment of at least $400,000 or a contribution to a public charity of at least $250,000.

You might owe an exit tax. U.S. citizens who expatriate are treated as though they sold all of their property the day before they renounce, even if they will continue to own it and pay property or other taxes.

Capital gains (net of losses) are taxed at the current top rate of 15%, after an exemption of $651,000. The tax on some assets, such as an individual retirement account, will be at ordinary income rates up to 35%, notes Dean Berry, an attorney with Cadwalader, Wickersham & Taft in New York.

The tax applies to U.S. taxpayers whose net worth is greater than $2 million or whose average annual income tax for the past five years is $151,000 (adjusted for inflation).

There are important exemptions; one involves people who have been dual citizens from birth. For more information, see the instructions to IRS form 8854.

You will have to certify that you have been tax-compliant for the last five years. The upshot: Expatriation is a bad strategy for coping with past noncompliance.

Your heirs could get a big tax bill. The U.S. heirs of wealthy taxpayers who renounce their citizenship usually owe inheritance tax equal to the U.S. estate tax on assets left to them by the expatriate. (This doesn't apply to spouses who are U.S. citizens.)

For example, a woman worth $50 million renounces her citizenship and becomes a citizen of the Bahamas. If she leaves each of her three grandchildren in the U.S. $10 million, each will owe (at current rates) $3.5 million of federal tax on the bequest, as a substitute for estate taxes the woman didn't pay.

You might find travel more complicated. World-wide travel might require getting more visas, Fragomen's Ms. Weintraub notes, and you might not be able to re-enter the U.S. without one. Once here, it may be hard for you to spend more than 120 days a year (on average) in the U.S., and you must not appear to be using your visitor status to live in the U.S.

There is more: Under the "Reed amendment," named after a Democratic senator from Rhode Island, U.S. officials may bar entry to any person who renounced citizenship for tax reasons. This provision is rarely, if ever, invoked—Ms. Weintraub has never heard of a case—but it is on the books. Experts say the attention surrounding Mr. Saverin's case could revive it, and recently lawmakers proposed raising the exit tax.

Is all this hassle really worth a tax savings? You be the judge.

Write to Laura Saunders at laura.saunders@wsj.com

Significance about Household furniture Shade

By : Teakcenter2607/TeakFurniture

Studying to merge different colours of color inside a color spectrum which can be nearly infinitely expandable will enable you to build up authentic color schemes with sparkle, self-assurance, personality, variation and originality.

Here are a few simple suggestions:

Coloration control relies on the area construction, consideration around the objective and function of the item of furniture as well as the location, the natural and unnatural supply of lighting effects, this feel and style and design concept.

It really is smart and cognizant of cogitate age, individuality and lifestyle of your companion residing in this and increase comfort and ease, rest and character hinge clearly around the enjoyable color control.

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Becoming an Elite Trader

The very best traders and investors have certain common traits or characteristics that separate them from the rest. Obviously, they have superior trading knowledge and the discipline to follow successful strategies, methods, techniques and principles. What other qualities do trading legends, who have amassed fortunes, share in common?

One important trait they share in common is the drive and perseverance to be the best. It takes years of proper trading education and experience to be consistently successful in the marketplace. Giving yourself enough time to learn is absolutely crucial to become a top trader or investor. Once you maximize your trading ability, the sky is the limit.

Confidence is vital. A world class trader has this quality because he or she has developed an edge with their trading plan. They know it’s not important to win or lose on any one particular trade. The odds or probabilities are in their favor long term and like a casino, they will become wealthy over time. Executing trades or getting out of trades is automatic with the best traders. There is no guesswork involved.

All top traders or investors use a methodology that fits their personality or trading style. Every trade they enter, the odds are in their favor. That’s because a position is only taken when as many factors as possible are in their favor. Analysis is totally objective and usually trend following in nature.

Elite traders treat trading as a serious business. As mentioned before, it takes years of proper trading education to be a top trader. Doctors, lawyers and engineers go to school for years before becoming professionals and earn a living. It’s exactly the same for traders and investors.

Money management or risk control is the secret to success. You must always cut all losses short. Accept a loss when it’s small. Always know what you are willing to risk before entering a position in the market. Protect your capital. Risk only a small part of the total on any one trade, 5% or less. All top traders and investors use rigid money management. A great trader of the past once stated “Take care of your losses and your profits will take care of themselves”. No truer words have ever been spoken.

One of the most important traits shared by the world’s best traders is patience. It’s absolutely critical to wait for an excellent trading opportunity to develop. This could mean watching markets for weeks or months. Wait for a clearly defined situation. Don’t buy unless the opportunity is exceptional. Another important part of patience is to stay with a winning trade until you know the trend has changed. This should be only happen through objective analysis according to your trading plan.

The world’s best traders usually do not follow the crowd. The crowd tends to be wrong, especially at key turning points in the market. Think for yourself. Be your own person. Be independent. Always try to avoid the pitfalls of responding irrationally with the crowd. A good example of this would be the dot.com fiasco early in 2000. The herd mentality caused many people to lose a lot of money.

The trading elite tend to be quite flexible in the marketplace. They are objective and change as the market environment changes. They recognize a mistake and correct it immediately. Top traders are always prepared to take alternative action if the market moves differently from what was expected. This is the ability to adapt.

All top traders and investors understand psychology when it comes to the markets. Many times the correct thing to do goes directly against human nature. Keeping emotions out of trading is vitally important. Don’t become over-optimistic or over-pessimistic. Have no ego. Consistently follow your trading plan.

Last, but certainly not least, is the fact that all of the world’s best traders and investors love what they are doing. This certainly is a must.

Gary E Kerkow is Chief Investment Strategist for Tradingmarkets4u.com. Over 20 years of trading experience including stocks, futures and options. Uses the strategies, methods, techniques, principles and psychology of the world’s best traders and investors. This includes Jesse Livermore, William J O’Neil and others. Visit my website at http://www.tradingmarkets4u.com.

9 High-Yield Mortgage REITs Now Trading Near Or Below Book Value

Mortgage REITs react to changing interest rates and spreads. Most mREITs obtain lofty yields through leverage. They borrow money at one rate and buy mortgage paper (MBS) at a higher rate, making money off the spread (or difference) between the two rates multiplied by the amount of leverage used. Because of this leverage, mREITs often have debt that is a multiple of their market value.

Rising interest rates will largely reduce spreads and values. This is not always the case, but usually is for several reasons, including that a rate increase usually affects borrowing costs more than it raises adjusting MBS payments, and the others do not adjust at all. Each mREIT has a proprietary allocation of fixed and adjustable rate (ARM) mortgage securities. Changes in rates will affect the value of these securities and the spreads these REITs can make off of them. Other differences exist in portfolio composition, including agency backing or non-agency paper, and the rating/quality of non-agency paper, if any.

In 2011, mREITs have faced the risk of a defaulting government, regulatory changes, defaulting non-agency mortgage holders and higher interest rates, among others. This has resulted in generally poor performance by most mREITs over the last several weeks. Many of these mREITs began depreciating prior to the broader recent market sell-off and continued to underperform the market. Moreover, this underperformance existed among most financials, and not just mREITs.

As a result, several mREITs yielding in the double digits are now trading at or below book value, . Below are the current price to book values of 9 mREITs [AGNC, NLY, ANH, CMO, CIM, HTS, IVR, MFA and TWO] that currently yield between a respectable thirteen and twenty percent.

These high yields are not without risks. Several depreciated considerably during 2011 some of these mREITs are now trading at more than a 10% discount to their book values. This may indicate that their MBS values will come down this quarter and that the company has used cash to pay dividends, lowering the book, but such a significant discount to high yield mortgage paper could also mark a market over-reaction. These mREITs will re-release book valuations with their Q4 earnings in four to six weeks. Mortgage REITs are also well known for having secondary offerings, which could lower book value where the funds are not used to acquire productive, appreciating assets.

REITs must distribute at least 90% of their taxable income in order to eliminate the need to pay income tax at the corporate level. Under the current tax laws, REIT dividends are taxed as ordinary income, and not at the lower corporate dividend rate. At their current values and payouts, these mREITs offer a higher yield option than almost any other equity or fixed income instrument.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.

Disclosure: I am long NLY, CIM.

Class of 2011 Grads Earning Fatter Paychecks

Good news may be on the horizon for college seniors who are nearing graduation. If a recent survey from the National Association of Colleges and Employers is any indication, soon-to-be graduates could be seeing bigger paychecks when they join the workforce.

According to the Salary Survey for 2012, the overall average salary for the Class of 2011 graduates is up to $41,701, which is 2.3% higher than graduates of the year before.

The top earners of the Class of 2011 were engineering students, who reported average starting salaries of $61,872 upon graduation — a 1.5% increase from the previous year.

Computer Science graduates weren’t far behind, with the biggest increase in pay out of all disciplines. Students in this field landed jobs with an average starting salary of $60,594 last year, up 4.1% from 2010.

Business students, which include economics, accounting, business administration and finance majors, reported the second highest increase in salaries of 3.8%, ranked third in the survey with an average salary of $48,144.

If you�re a soon-to-be graduate be sure you follow your passions, but do take note of these findings. The more time you use to prepare prior to graduation might mean the less time you�ll have to spend living at home with your parents.

Curb Your VIX Enthusiasm

I’ve often said here that the market has been anticipating an uptick in volatility and the VIX this fall since the May VIX surge ebbed away. Now that summer is almost over, we can look back to see how selling options actually did between the time the VIX peaked and now.

In the words of the great Larry David on “Curb Your Enthusiasm,” “Pretty good. Pret-ty, pret-ty, pret-ty good.”

The chart below is a comparison of CBOE S&P 500 BuyWrite Index (BXM) in black versus the S&P 500 (SPX) in yellow over the past three months.

BXM owns SPX and writes the nearest at-the-money (ATM) call each month, holds the position for one month, and then rolls into the next cycle.

As you can see, such a strategy worked nicely. Since May 21, the perception of SPX volatility outweighed the reality of a garden variety summer churn.

You want to avoid buy-writing if the market shoots north, but that didn’t happen save for a few good weeks in early July. So, as it turned out, over-writing worked like a charm as you got extra income without giving away any upside.

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Another way to view this is to look at 30-day implied volatility (the VIX, more or less) versus 20-day realized (historical) volatility (the SPX itself) over the same three months.

Lagged Correlation vs. HV 20-day and IV Index 30-day

And as you can see, 30-day implied volatility (IV) has not moved all that much. It spiked into the high 30s in late May, but quickly gave it back and has gravitated near 25. Meanwhile, historical volatility (HV) simply trended lower. It started around 28 and now sits at about 16.

Now that we have a handle on the past, what about the future?

Consider this: Options are currently trading at a nice premium to realized volatility — about 7 volatility points rather than the typical 4 points or so. And VIX futures think options are too cheap. October VIX futures closed near 32, about a 6.5 point premium to the VIX.

This is not a perfect comparison, as the VIX incorporates out-of-the money (OTM) puts that ramp up the number a bit. But even so, an October VIX future at 32 implies that Mr. Market expects downtrending realized volatility to virtually double in the next two months. Volatility almost always picks up after summer, but that’s a rather extreme expectation.

Follow Adam Warner on Twitter @agwarner.

Daily Trader�s Alert: Red-Hot Trades Sent Right to Your Inbox! – Complete with chart and trading target, this daily stock or ETF pick is e-mailed to you each trading day before the market open. InvestorPlace�s Chief Technical Analyst Sam Collins also gives you his take on what’s slated to impact your portfolio during the trading day. Click here to subscribe to the Daily Trader�s Alert — it�s FREE!

The 8 Most Fascinating Things I Read This Week

Happy Friday! There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are the eight most fascinating ones I read this week.

1. Self-destructive
Vanity Fair has snippets of an upcoming essay by contributing editor Kurt Eichenwald on Microsoft's (Nasdaq: MSFT  ) culture:

Eichenwald's conversations reveal that a management system known as "stack ranking" -- a program that forces every unit to declare a certain percentage of employees as top performers, good performers, average, and poor -- effectively crippled Microsoft's ability to innovate. "Every current and former Microsoft employee I interviewed -- every one -- cited stack ranking as the most destructive process inside of Microsoft, something that drove out untold numbers of employees," Eichenwald writes. "If you were on a team of 10 people, you walked in the first day knowing that, no matter how good everyone was, 2 people were going to get a great review, 7 were going to get mediocre reviews, and 1 was going to get a terrible review," says a former software developer. "It leads to employees focusing on competing with each other rather than competing with other companies."

2. Timeless wisdom
Nobel-winning psychologist Daniel Kahneman offers a long list of things he's learned over the years to Guardian UK. Some examples:

Human beings cannot comprehend�very large or very small numbers. It would be useful for us to acknowledge that fact.

Investment bankers believe in what they do.�They don't want to hear that their decisions are no better than chance. The rest of us pay for their delusions.

There is a powerful idea that we should want to be richer.�I went to a financial advisor in the States and said: "I don't really want to get richer, but I would like to continue to live like I do." She said: "I can't work with you."

3. Grains of salt
Floyd Norris of The New York Times talks about an important quirk of jobs statistics affecting employment reports:

The reason that few doubt that the jobs picture is getting worse is that they look at the Labor Department's seasonally adjusted figures. But those adjustments most likely overstate reality these days. Employers are acting more cautiously than they did in previous cycles. They add fewer seasonal jobs than they used to, and they therefore get rid of fewer seasonal workers when the season is over.

The result is that the seasonal adjustments make things look better than they are in the winter, when fewer workers are being let go than the government expects, and worse in the spring and summer, when the workers who were not let go cannot be rehired. There is, of course, more than seasonal adjustment going on, but I suspect that the underlying swings are far more modest than the monthly figures seem to indicate.

4. Housing's return, at long last
Homebuilding stocks such as KB Home (NYSE: KBH  ) , Lennar (NYSE: LEN  ) , and NVR (NYSE: NVR  ) have been on a tear this year. Why? Likely because it's really starting to look like housing has bottomed. David Wessel of The Wall Street Journal writes:

Nearly 10% more existing homes were sold in May than in the same month a year earlier, many purchased by investors who plan to rent them for now and sell them later, an important sign of an inflection point. In something of a surprise, the inventory of existing homes for sale has fallen close to the normal level of six months' worth despite all the foreclosed homes that lenders own. The fraction of homes that are vacant is at its lowest level since 2006.

5. Turning point
Matt O'Brien of the Atlantic points out that older workers (age 55+, red line) are about to overtake young workers (age 25-34, blue line) for the first time:

6. Tax cheats
Greece's budget is a mess and has effectively bankrupted the nation. The Wall Street Journal points out one reason why: "The economists' conservatively estimate that in 2009 some 28 billion euros in income went unreported. Taxed at 40%, that equates to 11.2 billion euros -- nearly a third of Greece's budget deficit."

7. Closing in
CNN put some numbers on how Apple (Nasdaq: AAPL  ) is closing in on PC sales:

Analyst Horace Dediu of Asymco has been following the Mac-PC war for years and recently crunched the numbers to show that, in 2011, Microsoft's PC desktops and laptops outsold Apple's Macs by a less-than 20-to-1 ratio.

Which, sure, is still lopsided. But it's the lowest margin since 1996 and is roughly the same as 1985, shortly after the Mac was first released. And it's significantly tighter than in 2004, the PC's high-water mark, when it was outselling Macs by a ratio approaching 60-to-1.

8. Paying for talent
Brent Schutte of Harris Private Bank shows (link opens PDF file) that income distribution across the U.S. is darn similar to Major League Baseball's payroll:

�	Percent of income captured by top 1%	5%	10%	25%	50%
United States	16.93%	31.72%	43.19%	65.81%	86.52%
Major League Baseball	7.24%	26.91%	44.22%	73.36%	91.93%

Enjoy your weekend.

Doctors going broke

NEW YORK (CNNMoney) -- Doctors in America are harboring an embarrassing secret: Many of them are going broke.

This quiet reality, which is spreading nationwide, is claiming a wide range of casualties, including family physicians, cardiologists and oncologists.

Industry watchers say the trend is worrisome. Half of all doctors in the nation operate a private practice. So if a cash crunch forces the death of an independent practice, it robs a community of a vital health care resource.

"A lot of independent practices are starting to see serious financial issues," said Marc Lion, CEO of Lion & Company CPAs, LLC, which advises independent doctor practices about their finances.

Doctors list shrinking insurance reimbursements, changing regulations, rising business and drug costs among the factors preventing them from keeping their practices afloat. But some experts counter that doctors' lack of business acumen is also to blame.

Loans to make payroll: Dr. William Pentz, 47, a cardiologist with a Philadelphia private practice, and his partners had to tap into their personal assets to make payroll for employees last year. "And we still barely made payroll last paycheck," he said. "Many of us are also skimping on our own pay."

Pentz said recent steep 35% to 40% cuts in Medicare reimbursements for key cardiovascular services, such as stress tests and echocardiograms, have taken a substantial toll on revenue. "Our total revenue was down about 9% last year compared to 2010," he said.

12 entrepreneurs reinventing health care

"These cuts have destabilized private cardiology practices," he said. "A third of our patients are on Medicare. So these Medicare cuts are by far the biggest factor. Private insurers follow Medicare rates. So those reimbursements are going down as well."

Pentz is thinking about an out. "If this continues, I might seriously consider leaving medicine," he said. "I can't keep working this way."

Also on his mind, the impending 27.4% Medicare pay cut for doctors. "If that goes through, it will put us under," he said.

Federal law requires that Medicare reimbursement rates be adjusted annually based on a formula tied to the health of the economy. That law says rates should be cut every year to keep Medicare financially sound.

Although Congress has blocked those cuts from happening 13 times over the past decade, most recently on Dec. 23 with a two-month temporary "patch," this dilemma continues to haunt doctors every year.

Beau Donegan, senior executive with a hospital cancer center in Newport Beach, Calif., is well aware of physicians' financial woes.

"Many are too proud to admit that they are on the verge of bankruptcy," she said. "These physicians see no way out of the downward spiral of reimbursement, escalating costs of treating patients and insurance companies deciding when and how much they will pay them."

Donegan knows an oncologist "with a stellar reputation in the community" who hasn't taken a salary from his private practice in over a year. He owes drug companies $1.6 million, which he wasn't reimbursed for.

Dr. Neil Barth is that oncologist. He has been in the top 10% of oncologists in his region, according to U.S. News Top Doctors' ranking. Still, he is contemplating personal bankruptcy.

That move could shutter his 31-year-old clinical practice and force 6,000 cancer patients to look for a new doctor.

Changes in drug reimbursements have hurt him badly. Until the mid-2000's, drugs sales were big profit generators for oncologists.

In oncology, doctors were allowed to profit from drug sales. So doctors would buy expensive cancer drugs at bulk prices from drugmakers and then sell them at much higher prices to their patients.

"I grew up in that system. I was spending $1.5 million a month on buying treatment drugs," he said. In 2005, Medicare revised the reimbursement guidelines for cancer drugs, which effectively made reimbursements for many expensive cancer drugs fall to less than the actual cost of the drugs.

"Our reimbursements plummeted," Barth said.

Still, Barth continued to push ahead with innovative research, treating patients with cutting-edge expensive therapies, accepting patients who were underinsured only to realize later that insurers would not pay him back for much of his care.

"I was $3.2 million in debt by mid 2010," said Barth. "It was a sickening feeling. I could no longer care for patients with catastrophic illnesses without scrutinizing every penny first."

He's since halved his debt and taken on a second job as a consultant to hospitals. But he's still struggling and considering closing his practice in the next six months.

"The economics of providing health care in this country need to change. It's too expensive for doctors," he said. "I love medicine. I will find a way to refinance my debt and not lose my home or my practice."

If he does declare bankruptcy, he loses all of it and has to find a way to start over at 60. Until then, he's turning away new patients whose care he can no longer subsidize.

"I recently got a call from a divorced woman with two kids who is unemployed, house in foreclosure with advanced breast cancer," he said. "The moment has come to this that you now say, 'sorry, we don't have the capacity to care for you.' "

Small business 101: A private practice is like a small business. "The only thing different is that a third party, and not the customer, is paying for the service," said Lion.

"Many times I shake my head," he said. "Doctors are trained in medicine but not how to run a business." His biggest challenge is getting doctors to realize where and how their profits are leaking.

My biggest tax nightmare!

"On average, there's a 10% to 15% profit leak in a private practice," he said. Much of that is tied to money owed to the practice by patients or insurers. "This is also why they are seeing a cash crunch."

Dr. Mike Gorman, a family physician in Logandale, Nev., recently took out an SBA loan to keep his practice running and pay his five employees.

"It is embarrassing," he said. "Doctors don't want to talk about being in debt." But he's planning a new strategy to deal with his rising business expenses and falling reimbursements.

"I will see more patients, but I won't check all of their complaints at one time," he explained. "If I do, insurance will bundle my reimbursement into one payment." Patients will have to make repeat visits -- an arrangement that he acknowledges is "inconvenient."

"This system pits doctor against patient," he said. "But it's the only way to beat the system and get paid."

--- Are you a doctor who has made financial decisions you came to regret? E-mail Parija Kavilanz and you could be part of an upcoming article. Click here for CNNMoney.com comment policy. 

Shaky Market Rattles ETFs in September

Shaky market action weighed on the exchange traded product industry over the past month.

According to the flow data compiled by the National Stock Exchange, total ETF/ETN assets dipped by $90 billion in September, closing out the month at $972 billion. This is the first time assets have broken below the $1 trillion mark since breaching this level in January. September's assets mark a decline of over $160 billion since April's peak.

See if (SPY) is in our portfolio

Despite the overall decline in assets, the total universe of exchange traded products continued to expand. Over the past month, 34 new products were added, bringing the total number of ETFs and ETNs to 1,335. Thanks to weak market conditions, nearly every ETF fund sponsor watched their total assets decline over the past month. Leading the retreat were industry leaders including Blackrock(BLK), State Street(SST) and Vanguard. This trio of firms watched their assets dip by a combined $74 billion. Companies including Van Eck, PowerShares and Rydex watched their assets dip between $1 billion and $4 billion each. Pimco was one of the few companies to buck this trend in September. During the month, the bond giant watched its total ETF assets grow by $64 million. A notable decline in assets is not necessarily indicative of heavy outflows. For example, of the three firms with the steepest asset losses over the past month, only State Street suffered net outflows. During September, the firm watched as $4.5 billion head for the exits. Meanwhile, Blackrock and Vanguard welcomed over $3.5 billion each. The main culprits leading to State Street's heavy outflows were the SPDR S&P 500 ETF(SPY), Energy Select Sector SPDR(XLE), SPDR S&P MidCap 400 ETF(MDY) and SPDR Barclays Capital 1-3 Month T-Bill ETF(BIL). These products, which represent four of the five top outflows leaders, watched $3.9 billion, $1.0 billion, $820 million, and $530 million flee for the exits. On the opposite side of the spectrum, iShares MSCI EAFE Index Fund(EFA) was the biggest inflow recipient. In September, $3 billion entered the fund. Vanguard Emerging Markets ETF(VWO), meanwhile, saw net inflows totaling $1.7 billion. Given the weak market conditions, it wasn't surprising to see ETFs linked to bonds, defensive sectors, and safe haven asset classes as some of the most popular funds during September. Vanguard Barclays Short Term Bond ETF(BSV), PowerShares DB U.S. Dollar Index Bullish Fund(UUP), Utilities Select Sector SPDR(XLU), and Vanguard Barclays Total Bond ETF(BND) were among the top 10 inflow leaders.

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Although it was once heralded as a safe haven destination, investors fled from the Swiss franc in September. Following the intervention on the part of the Swiss National Bank, the CurrencyShares Swiss Franc Trust(FXF) was shunned, resulting in nearly $250 million in net outflows.

Investors also showed interest in products designed to allow them to profit from the market's downturn. The ProShares Short S&P 500 ETF(SH) gathered a respectable $695 million.

Precious metal ETFs saw peculiar action over the past month. Despite gold's and silver's struggling performance, investors continued to pile into the largest bullion-backed ETFs. SPDR Gold Shares(GLD) welcomed $3 million while iShares Silver Trust(SLV) saw net inflows totaling $294 million. The same could not be said for the iShares Gold Trust(IAU) and the ETFS Physical Swiss Gold Shares(SGOL), however. These two funds saw net outflows totaling $165 million and $7 million, respectively. Precious metal miner ETFs saw similar bipolar action as well. While Market Vectors Gold Miners ETF(GDX) scored a spot among the 10 largest inflow recipients and Market Vectors Junior Gold Miners(GDXJ) saw over $175 million enter the fund, investors fled the Global X Silver Miners ETF(SIL), resulting in net outflows. Interestingly, although investor sentiment has been soured thanks to resounding macroeconomic concerns, investors appeared hesitant towards fear-tracking exchange traded products. Over $180 million exited the iPath S&P 500 VIX Short Term ETN(VXX). September's NSX flow data provides interesting insight into the ways investors have opted to protect themselves in today's turbulent market environment. As we move ahead, many of the same factors that weighed on sentiment last month will continue to be in play. In will be interesting to see what adjustments are made. RELATED ARTICLES: >>Mr. Market's Mental Breakdown4 Resilient Tech Stocks for a Weak Economy

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Netflix Inks Content Deals, Market Ignores Verzion Takeover Talk

Netflix�s stock rose by about 10% last week before falling lower, driven by rumors about potential acquisition by Verizon. While reports indicated that Verizon may be seriously considering the acquisition at around $4.6 billion, the company denied that it has organized any talks or meetings with Netflix. We think that Netflix will not sell itself at the implied price per share that results from $4.6 billion bid. For details see Verizon Would Have a Tough Time Acquiring Netflix which talks about why an acquisition at stated value is unlikely, be it by Verizon or another potential suitor Amazon. In general, several analysts including Trefis analysts see any acquisition as highly unlikely. [1]

See our full analysis for Netflix

On the content side, there were certain developments last week. Netflix continued its efforts towards original programming and is close to signing a deal which will result in production of 13 episodes of horror series, Hamlock Grove [2] The more Netflix tries for original and first-run content, the more it pits itself again traditional pay-TV providers. It will need to tread carefully. In addition to this deal, the company added new Telemundo content for its Latin American streaming services as well as signed a deal with BBC to offer its shows.

It appears that the analysts� tone on the stock is somewhat between neutral and positive if we look at the price target from some of the reputed research firms. [3] Our price estimate of $126 for Netflix echoes positive tone, implying a premium of about 70% to the market price.

Understand How a Company�s Products Impact its Stock Price at Trefis

Notes:

Netflix, Verizon Deal Unlikely: Analysts (Update 1), The Street, Dec 13 2011 [?]

Netflix Prepping Eli Roth-Directed Horror Series, The Hollywood Reporter, Dec 12 2011 [?]

Goldman Sachs Analysts Now Covering Netflix Stock, Localized USA, Dec 14 2011 [?]

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A Hidden Way to Play the Energy Boom

The following video is part of our "Motley Fool Conversations" series, in which senior analyst Matt Argersinger and analyst Paul Chi discuss topics across the investing world.

In today's edition, Matt and Paul discuss Alleghany, an undervalued insurance company with a tremendous long-term investment track record. Over the last 10 years, the total annual return of Alleghany's investment portfolio is more than double that of the S&P 500. These days, Alleghany is finding value in the energy sector with investments in some of the biggest names in the oil and gas industry. Get the names and the scoop on Alleghany in today's video.

As oil prices climb, investors can find opportunities to ride the wave of surging profits for energy companies. Take a look at the top oil stocks recommended by Motley Fool analysts in a recent special free report: "3 Stocks for $100 Oil." The report won't be available forever, so we invite you to enjoy a free copy today. You can access it by clicking here. Fool on!

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The Two Sides to Banking Reform

David Champion of the Harvard Business Review is unimpressed with the Obama administration's proposal on banking reform. In fact, he's downright dismissive:

"The Obama reform... seems to be neither radical nor particularly useful, except perhaps as political theater," Champion writes.

Of course, that's far from the consensus view, at least when surveying the movers and shakers. Britain's central banker Mervyn King seems to be in favor of Obama's plan. Ditto for OECD's secretary general.

Meanwhile, a pair of finance professors from NYU weigh in and offer support, with some caveats: "On balance, President Obama’s plans – a fee against systemic risk and scope restrictions - seem to be a step in the right direction from the standpoint of addressing systemic risk, if their implementation is taken to logical conclusions."

But this is all beside the point for the moment. What will the reform really look like once it runs through the political sausage grinder? Meantime, one might wonder if the core of the alleged solution--separating conventional banking from the trading-oriented aspects of financial institutions--is a touch misguided. It certainly plays well as headline material. But wasn't the real problem one of poorly designed loans? In that case, what do proprietary trading desks at investment banks have to do with any of this? Is it really the case that if we separate prop desks from banks the odds of another real estate buying frenzy will be diminished? Or might there be other factors to consider? Such as extraordinarily low interest rates?

Beat the Banks at Their Own Game

Managing your credit is one of the most important keys to financial success. Good credit can make or break some landmark moments in your life, such as buying your first home or getting financing for college tuition.

But by now, any illusions you may have had that banks and other lending institutions are somehow on your side should be gone forever. With Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , and Wells Fargo (NYSE: WFC  ) among the big banks that agreed to pay more than $25 billion to settle a dispute about alleged foreclosure abuse, you hardly need any further evidence that when it comes to getting credit, you have to be on your guard at all times.

Make the most of your plastic
One key battleground where banks and consumers wage war is with credit and debit cards. Over the years, the changing trends in plastic have closely followed profit opportunities for the banks that issue them. Consider:

• Credit cards allowed banks to earn fees from the merchants who accept card payments as well as lucrative interest charges from cardholders. For years, that win-win scenario was enough for banks to earn hefty profits, even with grace periods that allowed those who paid their balances in full every month to escape finance charges and get free float on their money.
• To get rid of the float problem, banks started pushing debit cards as an alternative to credit cards. Debit cards allowed issuers to earn similar fees from merchants while eliminating all of the credit risk associated with credit cards, as they could immediately tap cardholders' bank accounts for payment.
• But recently, as new laws have clamped down on debit card fees, banks are moving back toward credit cards -- and they're pushing big rewards as incentives to get cardholders to switch.

If you play your cards right, you can reap a lot of benefits. But you still have to be careful.

Are rewards worth it?
Debit card rewards have largely become a thing of the past, but credit card rewards are on the upswing. As SmartMoney described in an article on credit cards, lucrative benefits like extended 0% interest periods, no-fee balance transfers, and big upfront cash-back and rewards points bonuses have become more common recently. For instance, recent data show that more than 80% of card offers include 0% teasers on purchases. At the same time, American Express (NYSE: AXP  ) recently offered some prospective customers 100,000 points to take its platinum card -- redeemable for up to $1,200 in travel or $1,000 cash. Citigroup and JPMorgan Chase (NYSE: JPM  ) have made similar offers to select customers.

If you invest in these card issuers, don't fear for their prospects. The reason these issuers are willing to pay so much for your business is that they expect to make it back over time. With a combination of sizable annual fees, merchant-related income, and the potential for interest payments if you overextend yourself, card issuers can turn even highly rewarding cards into profits. Meanwhile, perks like 0% interest don't really cost issuers that much -- especially when most of those banks are paying their deposit customers little more than that on checking and savings accounts.

In order to turn the tables on the banks, you have to be ruthless -- and willing to take small dings on your credit report. Closing out newly acquired cards after you earn rewards but before you have to pay hefty annual fees or other charges can give you a reputation for switching cards frequently, which in turn can cost you a few points on your credit score. You have to decide what your credit is worth, and whether the rewards you earn are worth the cost.

It's your money
One thing is certain: Banks want to earn profits, and they're not giving you any incentives to sign up for new products because they want to do you a favor. But if you're opportunistic about making the most of your credit, you can get some valuable rewards and beat the banks at their own game.

Managing your credit is an important part of preparing yourself for a financially comfortable retirement. But you also need the right investments in your portfolio. Let me invite you to look at three promising stock picks, which you'll find in the Motley Fool's special report on long-term investing. But don't wait; get your free report today while it's still available.

Gartner Increases Sales but Misses Estimates on Earnings

Gartner (NYSE: IT  ) reported earnings on Feb. 7. Here are the numbers you need to know.

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

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

Margins grew across the board.

Revenue details
Gartner logged revenue of $427.7 million. The nine analysts polled by S&P Capital IQ foresaw revenue of $427.6 million. Sales were 12% higher than the prior-year quarter's $382.3 million.

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

EPS details
EPS came in at $0.46. The nine earnings estimates compiled by S&P Capital IQ averaged $0.47 per share. GAAP EPS of $0.46 for Q4 were 28% higher than the prior-year quarter's $0.36 per share.

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

Margin details
For the quarter, gross margin was 57.8%, 90 basis points better than the prior-year quarter. Operating margin was 16.2%, 210 basis points better than the prior-year quarter. Net margin was 10.5%, 90 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $366.7 million. On the bottom line, the average EPS estimate is $0.37.

Next year's average estimate for revenue is $1.62 billion. The average EPS estimate is $1.75.

Investor sentiment
The stock has a one-star rating (out of five) at Motley Fool CAPS, with 76 members out of 100 rating the stock outperform, and 24 members rating it underperform. Among 31 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 29 give Gartner a green thumbs-up, and two give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Gartner is outperform, with an average price target of $42.38.

Is Gartner playing the right part in the new technology revolution? Computers, mobile devices, and related services are creating huge amounts of valuable data, but only for companies that can crunch the numbers and make sense of it. Meet the leader in this field in "The Only Stock You Need to Profit From the NEW Technology Revolution." Click here for instant access to this free report.

• Add Gartner to My Watchlist.

The Meanest 10% Yield in the World

High dividends are a great way to generate cash flow and increase total return in an uncertain market.

But where can an investor find companies that make enough money to support a high dividend in a rough economy?

One place to look is the entertainment industry. In times of financial hardship, people tend to seek an escape from the harsh realities of life.

During the Great Depression, for example, the movie industry proved to be remarkably resilient. Before the 1929 market crash, some 90 million people were going to a show every week. The number initially fell off, but movie attendance recovered. By the middle of the Depression, 80 million moviegoers were lining up every week.

 

The need for entertainment and a little escape remained buoyant even as most other industries suffered mightily.

In the aftermath of this financial crisis, with unemployment hovering at about 10%, many people are finding their escape with another form of entertainment. This time it's not the silver screen, it's the over-the-top theater of professional wrestling.

World Wrestling Entertainment (NYSE: WWE, $14.65) is the dominant player in the outlandish world of professional wrestling. Professional wrestling is one part sport and one part maniacal theatrics, but it's a 100% serious commercial enterprise. It's Big Business with a capital B.

WWE is an integrated media company that broadcasts in more than 145 countries in 30 languages to more than 500 million people worldwide. Through television programming, pay-per-view, digital media and publishing; WWE brings wrestling to an intensely loyal fan base and is one of the world's most popular entertainment brands.

Here are a few more facts.

WWE broadcasts reach 16 million U.S. viewers each week and millions more internationally. It holds more than 300 live events that attract more than two million fans every year. The company has more than 160 consumer-product licenses and sells products in more than 50 countries. It also operates studios that produce films, DVDs and TV shows. The company's big annual event "WrestleMania" outdrew the 2004 Super Bowl in attendance last quarter.

Did I mention the stock is yielding a phenomenal 9.8%?

In the past few years WWE has been firing on all eight cylinders. Revenues soared from $263 million in 2006 to $526 million in 2008. While resilient, WWE has not been immune to the slow economy. Despite its strong gross margin of 45%, revenues slid -15.6% in the first half of 2009 from their year-ago levels. Aggressive cost-cutting pushed operating income +17% higher in the period. And, astoundingly, earnings per share in the first half of 2009 increased to $0.41 from $0.37 in the first half of 2008.

While earnings and profit remain solid, a major question surrounding WWE is the dividend's sustainability. The company pays $1.44 in quarterly payments of $0.36, which gives the shares a serious 9.8% yield. The company has never cut its dividend, and it has raised the payout four times since 2004. This is a good record but not a perfect one, as WWE's dividend in the first half of 2009 exceeded its earnings. Its payout ratio in the first half was 176%.

But there's more to the story.

The McMahon family which owns about 65% of outstanding shares only receives $0.24 a quarter versus $0.36 for the rest of the shareholders. Also, in the first half of 2009, WWE generated $75 million in operating cash flow, which easily covered $41 million paid in dividends. And, the company's balance sheet is rock solid. As of the end of the second quarter, WWE had virtually no debt and $163 million in cash.

Latest ‘Mini-Madoff’ Arrested in Spain, Accused of $300 Million Fraud

Spanish police said they arrested a foreign-exchange operator suspected of running a $300 million Ponzi-type fraud that may have affected at least 100,000 investors in Europe, the U.S. and Latin America.

Bloomberg reports the latest "mini-Madoff," a reference to jailed con man Bernard Madoff, offered returns of as much as 10% to 20% monthly for investments in foreign currencies and instead used the money to buy real estate for himself and colleagues, according to a National Police statement today.

The man, German Cardona Soler, is 49 years old and a Spanish citizen, said a police spokeswoman who declined to be named, following agency policy. He was arrested in the Mediterranean city of Valencia. Two more people were apprehended and seven people were accused in relation to the suspected fraud, the statement said.

Accounts in 12 banks have been blocked and the titles frozen for more than 20 properties in Spain, the police said.

Is TETRA Technologies Going to Burn You?

There's no foolproof way to know the future for TETRA Technologies (NYSE: TTI  ) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company's current health and future prospects. It's an important step in separating the pretenders from the market's best stocks. Alone, AR -- the amount of money owed the company -- and DSO -- the number of days' worth of sales owed to the company -- don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can also suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like TETRA Technologies do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.

Is TETRA Technologies sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I've plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. TETRA Technologies' latest average DSO stands at 73.7 days, and the end-of-quarter figure is 73.8 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let's get back to our original question: Based on DSO and sales, does TETRA Technologies look like it might miss it numbers in the next quarter or two?

The numbers don't paint a clear picture. For the last fully reported fiscal quarter, TETRA Technologies's year-over-year revenue shrank 4.9%, and its AR dropped 1.9%. That looks ok, but end-of-quarter DSO increased 3.2% over the prior-year quarter. It was up 18.4% versus the prior quarter. That demands a good explanation. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.

What now?
I use this kind of analysis to figure out which investments I need to watch more closely as I hunt the market's best returns. However, some investors actively seek out companies on the wrong side of AR trends in order to sell them short, profiting when they eventually fall. Which way would you play this one? Let us know in the comments below, or keep up with the stocks mentioned in this article by tracking them in our free watchlist service, My Watchlist.

• Add TETRA Technologies to My Watchlist.

2 Ways to End Your Stock Market Worries

You don�t have to deal with the emotional pain caused by the meltdown of a speculative investment.

If you learn the two simple market truths I�m about to reveal, you could actually protect your brokerage account from big losses. You�ll also know how use these tips to spot a failing investment before you buy shares…

I know how easy it is to get caught up in the story of an exciting company. In fact, nearly every person who has invested a dollar in the stock market has bet on an intriguing story.

Inevitably, most of these stories don�t pan out. Whether it�s a futuristic technology or even a new source of energy, we�ve all laid money on a bold speculation that delivered terrible returns. Unfortunately, losing money on what you thought was a sure-thing can be traumatic. You�ll find yourself wondering why it went bad. You might even want out of the market for good…

The two market truths I�m revealing today will hopefully put an end to your uncertainty. They don�t require an advanced knowledge of economics or finance. And you can apply the tips to virtually any investing situation.

Here�s what you need to know…

First, a stock can become �detached� from the company it represents.

What this means is the share price can quickly drop�even if the company in question is releasing favorable news or impressive earnings. A sharp decline in share price on �good news� is one of the most gut-wrenching situations you�ll experience when investing. It�s frustrating. And it can cause you to think irrationally.

There are countless reasons the stock of a seemingly good company can drop. The company could simply be too early along the development curve to attract more investors. Maybe only a few forward-thinking folks can see the potential that others have yet to grasp.

The truth is, promising companies can have bad weeks or even bad years. You have to prepare for this possibility that your idea might not translate to an obvious investment to the average speculator…

The second market truth you need to remember is that selling won�t abruptly stop and turn into buying.

If the market collectively decides to sell a name for any reason, the selling is likely to continue. Rarely will you see a stock reverse course and move higher immediately following a strong selloff. Investors and traders won�t want to buy a stock that�s exhibiting a strong downtrend�because they think they�ll be able to get it cheaper if they wait.

With both of these situations, it�s important to identify when sellers are taking control. If the price starts to move lower on high volume, you must act immediately to preserve your capital. After all, you can always wait and buy shares at a lower price if you still believe in the company.

Let�s apply this thinking to some reader mail:

I want to ask you about SEFE Inc. (OTC:SEFE)… it appears to be a real company with a working prototype. I am familiar with the electrical potential in the atmosphere they are trying to tap and the idea is basically sound… though I consider SEFE very speculative. Now that the dump is over it might be an opportunity.

� S.D.

Here�s a chart of the stock in question:

I don�t know anything about the technology, but I can tell you that this stock is not exactly popular right now. It enjoyed an impressive run in April, but the share price has completely tanked since then.

It appears SEFE is trying to find support at 40 cents. But it could very well move lower from here. If you are interested in the company and want to try to get in at a lower price, you should wait to see if the stock holds here at 40 cents, or even tries to move higher. It might take time� but you have to make certain that anyone who bought in May has sold their shares. Anyone who failed to sell at or near the April top is underwater. They might be looking to sell on any move higher…

Remember today�s second tip: selling won�t abruptly stop and turn into buying. If you remain patient, you will see if and when the stock begins to level out. This will give you a much better chance at finding an ideal entry point.

Retirees Should Prepare For The Unexpected With A Diversified Income Portfolio

Most retirees seek to find a certain amount of stability of income as well as peace of mind to allow them to enjoy time in their retirement years. Unfortunately due to our current monetary system and our focus on stemming intermittent crisis situations we believe the world financial system carries significantly greater risks. We advise retirees to read The Black Swan of Cairo published byForeign Affairs. Authors Nassim Taleb and Mark Blyth discuss how suppressing volatility makes the world a less predictable and dangerous place.

Complex system that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting no visible risks.

Just as suppressing small forest fires only builds risk and brings the risk of an abrupt and significantly larger fire in the future, our collective want to suppress pain in financial markets simply builds the stockpile of risks to the system.

Our view is that investors, in particular retirees who are focused on wealth preservation, should seek to diversify into pools of assets that may have been overlooked in the past. Diversification no longer means tuning into CNBC’s Mad Money to see if the five equities you own get the Jim Cramer stamp of approval. Diversification truly means different assets classes. In today’s market correlation of equities is very high. Most often individuals limit diversification into equities from different sectors as well as allocation to bonds. We think that this type of diversification is too narrow.

Our view is that retirees should consider raising cash and diversifying among a broad portfolio of high quality U.S. equities, short duration bonds, income-generating real estate (i.e., rental properties), hard assets (e.g., gold and silver), infrastructure assets such as MLPs, and mortgage REITs.

Note: How much an investor allocates to each of these asset classes will depend the investor's specific situation and risk tolerance.

Cash and Deleveraging

While many trash the U.S. dollar due to monetary policies we think that it is prudent for retirees to “raise cash and delever.” Given a wider set of outcomes, we believe that investors should think twice about carrying debt while remaining invested. Retirees should look to “derisk” their personal balance sheets by lowering monthly payments.

Low-Beta, High Quality Dividend Stocks

With a diversified portfolioof high-quality dividend paying stocks (like the ones on the list below), retirees can generate a stable income stream that will perform well in bull or bear markets. As volatility increases (especially downside volatility), low beta dividend stocks will help dampen portfolio volatility. In general, companies with low betas will tend to be less volatile than the general market.

(Click charts to expand)

While this is not an exhaustive list of high quality dividend stocks, this sample portfolio would yield 4.8% with an average beta of 0.38.

Hard Assets

While not gold bugs ourselves, we think that retirees should allocate a small portion of their assets to gold and silver (5-10%). Our view is that the world is awash with paper assets (stocks and bonds), holding assets that are less correlated to paper assets is prudent. The world remains uncertain and more broad diversification is warranted. Our view is that gold is under owned relative to financial and paper assets.

We own gold and silver in physical and ETF forms (GLD and SLV). We follow a policy of not timing the market, but slowly accumulating these metals, as they are our insurance policy against inflation. Investors interested in vehicles that retain physical metal should look into Sprott Asset Management’s Sprott Physical Gold Trust (PHYS) and Sprott Physical Silver Trust (PSLV).

Master Limited Partnerships ("MLPs")

MLPs generally offer stable yields that are typically higher than those of common stocks. In addition, MLP returns have traditionally had low correlations with stocks and bonds, making them good portfolio diversification assets (especially in times of economic uncertainty).

As highlighted in Standard & Poor's Guide to MLPs (pdf), MLPs offer investors three distinct positive characteristics:

Tax Treatment - Since MLPs are structured as partnerships they do not pay corporate income taxes. Taxes are only paid when distributions are received, thus avoiding the double taxation faced by investors in corporations.

Consistent Distributions - MLPs face stringent provisions including the requirement to pay minimum quarterly distributions to limited partners, by contract. Thus, the distributions of MLPs are very predictable.

Energy Infrastructure – The majority of MLPs operate in the energy sector, particularly in energy infrastructure industries such as pipelines, which provide stable income streams. The performance of companies in the energy infrastructure industry is not highly correlated with the price of oil and other types of energy, but rather with the demand for energy. The demand for energy is far less volatile than commodity energy prices and generally increases steadily over time, resulting in steady, predictable cash flows for companies in these industries.

Below is a list of the seven largest MLPs, which have an average dividend yield of 5.9% and average beta of 0.54.

Mortgage REITs

Mortgage REITs are levered investment vehicles that generate income from investing in mortgage backed securities. We believe that a small allocation of to agency mortgage REITs is appropriate for retirees as these assets benefit from low interest rate policy. Income from these securities will offset declining interest from savings. See our recent article on mortgage REITs.

Unlike large capitalization U.S. equities that have benefited from a stabilized economy and are levered to growth in the economy to grow dividends, mortgage REITs will perform well in a slow growth, low interest rate world. We believe that due to the structural headwinds in the U.S. economy, the Federal Reserve will keep things on hold for an exceptionally long period of time. That said, we believe that current valuations are attractive for agency-focused mortgage REITs (see table below).

Disclosure: I am long AGNC, NLY, JNJ, MO, SO, KMP, T.