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4 Ways Americans Are Screwing Up Their Retirements

NEW YORK (TheStreet) -- U.S. workers, by and large, are an optimistic lot, choosing to see their coffee cup half-full rather than half-empty.

Sure, a soft economy and a sputtering job market have triggered concern, but ask an individual worker and chances are he or she will say the future will be better than the present and good times are just around the corner.

That optimism is also present when you ask U.S. adults about their finances, although data suggest that optimism may be moderately misplaced.

According to a study from Boston-based Natixis Global Asset Management, Americans "are optimistic" their money situation will improve by next year. And the vast majority of U.S. adults, as measured by the survey, say their retirement plans are on track to yield a good income in retirement. [Read: 5 Crucial Questions to Ask About Your Retirement] A closer look at the data says that is just not so. In fact, in many ways Americans may be getting in their own way on the path to a decent retirement. The Natixis study reveals four glaring (and not so glaring) omissions or mistakes being made with retirement plans: No plan. Despite an overwhelming sense that their financial futures are in order, less than half of all American workers have a financial plan for retirement. All told, 54% of Americans don't have one, and another 45% don't have clear financial goals, according to Natixis. Rose-colored glasses. The survey adds that even those workers with a financial plan may be "significantly underestimating the amount they will need in retirement." Natixis reports that most Americans say they will need 62% of their current yearly income to retire comfortably, even though firm analysts say 80% is a "commonly used" retirement income target by financial advisers. [Read: Why the Housing Recovery Doesn't Matter for Millions of Us ] Health care dichotomy. This one is more of a gray area, but Americans seem to be underestimating the impact of their health on their long-term finances. According to the survey, Americans say they will need five years worth of long-term care savings, yet 40% of Americans say LTC costs "not covered by insurance" are their largest financial roadblock in retirement. Not hitting the asset allocation mark. While 83% of U.S. investors say they want to find the right balance between safety and performance with their retirement savings, 65% say they "cannot decide" how to cover both issues. "This is particularly an issue for investors who are nearing retirement because interest rates on their savings accounts aren't generating enough income and they are reluctant to invest because volatility in the market presents more risk than they can bear," says John T. Hailer, chief executive of Natixis.

Choose the right fund to park your short term surplus

Treading on the same path, the SEBI is now planning to further tighten the noose by imposing mark-to-market (MTM) requirements for instruments with a residual maturity period of 60 days and more. Eventually the idea behind such changes is to get all the instruments irrespective of their tenure and type to be quoted on market rates and the net asset value (NAV) calculated accordingly. Moreover, the RBI and SEBI have repeatedly expressed concerns about banks and corporates round-tripping investments (continuous and frequent purchase and sale of securities) using liquid funds. Fund houses have lost significant money in liquid funds since RBI capped banks� investments in liquid funds at 10% of their net worth in May 2011.

 

 

 

 

 

 

 

 

 

The reason for such policy initiative

The MTM valuation of securities irrespective of their nature will help prevent systemic risk for mutual funds in case of heavy redemptions by institutional investors leading to winding up of their business (example cited above). Also, this move if implemented will make the mutual funds industry less dependent on institutional money but on the flipside, liquid funds and more so liquid plus schemes may lose appeal among the high-value investors as there will more volatility due to the price movements in short term papers.

Our view:

We believe that this proposal if implemented by the SEBI will have impact on mainly the liquid plus schemes holding papers of more than 60 days of maturity. Generally liquid funds may not face volatility unless the average maturity turns out to be greater than 60 days. However, if SEBI introduces a complete overhaul in the valuation of securities making them mark-to-market irrespective of their tenure may make liquid and liquid plus schemes unattractive to investors.

Hence, investors now should be careful while selecting the right debt mutual funds suiting their needs and investment time horizon. If all the securities irrespective of their tenure are made mark-to-market then the investors would be better off parking their short term surplus under savings bank account due to deregulation of savings bank account interest rates.

- Personalfn.com

(PersonalFN is a Mumbai-based personal finance website)

Yahoo! Still Needs To Generate Better Intrinsic Value

A year into her tenure as Yahoo!'s (Nasdaq:YHOO) CEO, Marissa Mayer may have ruffled a few feathers, but Yahoo!'s feathers were badly in need of ruffling as it was well on the AOL (NYSE:AOL)/MySpace path to irrelevance and doom. While there's still quite a lot of work to be done in turning the business around, the better-than-70% rise in the shares over the past year has to be encouraging to shareholders. The biggest question now is whether or not Yahoo! can take the cash coming from the Alibaba IPO and reinvest it into sustainable cash-generating growth opportunities.

Second Quarter Results Disappoint
Yahoo!'s second quarter results are a good reminder that while the tone around the stock may have changed, the business is still struggling. It is still profitable and free cash flow positive, though, which ought to buy more time for Mayer's strategies to bear fruit.

Revenue (ex-TAC) declined 1% this quarter. Search came in more or less as expected (with revenue up 5%) on a 21% improved in paid clicks, but Display disappointed. Display revenue declined 11% as overall display ads declined 2% and a shift away from premium ads send pricing down about 12%. The company's relatively large "Other" category saw revenue rise 10%.

Although revenue was disappointing, profits weren't so bad. Gross margin more or less held steady, while operating income more than doubled from the year-ago period (while declining 25% on a sequential basis). All told, Yahoo!'s EBITDA came in about 4% to 5% better than many analysts expected.

All Eyes On Asia
There is no real sign that Yahoo! is making major progress in gaining ground on Google (Nasdaq: GOOG) or Facebook (Nasdaq:FB) in ads, and while an extension of the minimum payments agreement with Microsoft (Nasdaq: MSFT) in search is a plus, it doesn't change that Yahoo!'s core operations are still in need of serious improvement.

With that, a lot of the attention around Yahoo! focuses on the company's investments in Alibaba and Yahoo! Japan. Even with the weakness in China, Alibaba's results have been quite strong recently and speculation is running that Alibaba's post-IPO valuation will run in the $90 billion to $100 billion range. As a reminder, Yahoo!'s agreement with Alibaba requires it to sell half of its stake (roughly 12%) through the IPO, while the other half can be sold at management's discretion.

There's not much that Yahoo! can do to improve the value of this stake at this point, other than to explore various tax-efficient methods of selling that second half of the stake after the IPO. Speaking of which, the timing of an Alibaba IPO is still a big unknown, as the weakness in China has many analysts speculating that the deal will be delayed into 2014 pending better market conditions.

SEE: Strategies For Quarterly Earnings Season

It Will Take Time For Seeds To Sprout
Outside of the large and much-discussed Tumblr acquisition, Yahoo! has been busy on the M&A front, with well over a dozen deals in the past few quarters. Many of these deals look like "hire by acquisition" situations, though, and it could take time for their impact to show in Yahoo!'s traffic, revenue, and profits.

Even so, I think Mayer has a cogent plan for getting this business turned around. Refocusing around mobile makes sense (and many of the deals have been targeted at mobile apps) and there are signs that traffic is on the way back. Even so, the trick will be to keep those visitors coming back and encouraging others to join them.

The Bottom Line
It's interesting to compare Yahoo! and Facebook side-to-side, and notice the relative lack of overlap. I'm not saying or suggesting that Facebook will or should buy Yahoo!, but it's nevertheless interesting to note how their strengths and weaknesses complement each other.

As is, I think Yahoo! is pretty close to fair value today. I value the Alibaba and Yahoo! Japan stakes at around $15.50 per share combined, with almost another $4.50 from cash on the balance sheet. I see the core Yahoo! business as being worth about $10 today, but that is on the basis of extremely low assumptions for future revenue and cash flow growth. Should Mayer's traffic- and value-generation strategies pay off, there could certainly be meaningful upside to the core value of Yahoo!.

Past efforts have gotten you this far, keep going

Good afternoon, Gladys, Sometimes I catch myself feeling that life has cheated me out of a good life. I am almost 55 years old and I spent my life working at low paying jobs in order to feed and care for my children. I would love to be in my own business. But, I have reached a point in my life where I feel like it's too late for me to start something new. Am I off base to think that it's possible to start anything new at this stage in life? -- A.B.

I sometimes tell people that I can imagine how Moses must have felt when he got the divine notification that he would not be retiring anytime soon. For 40 years, Moses was a shepherd and I doubt if he had any vision of leading anything but his passive sheep.

Just when he thought he had done his thing and that life was moving toward an end, God called and told him that the 40 years he had spent with sheep was just a beginning. Now it was time for the real work to begin and his real job was to lead the Israelites to the Promised Land.

I sometimes feel that way about my own life.

I spent years operating my travel company and just when I thought that successfully owning the company for many years was as good as it would get, other opportunities showed up. Today I'm writing both fiction and non-fiction, I own a successful business development company, and I do lectures and seminars around the country.

Those years that I spent in the travel industry helped prepare me for this time in my life. And yet I somehow feel that as life moves on, more opportunities with show up.

I once met a woman who in her mid 50s returned to school and after many long and hard hours finally got her degree in fine arts and has moved to Hollywood in search of both a screenwriting and acting career.

I remember being very impressed with this woman's goals and dreams. I see a lot of movies, and most of the older actresses have been acting since their youth. I asked her if she felt intimidated by getting such a late start. She responded by saying ! that she had done a great job in raising her children and making certain that they all had gotten a good education and now it was her turn and that she believed all her goals would happen.

Not once did she hint at being too old or display feelings of having been cheated by life.

We each have our own ideas of success. If you managed to find work that paid well enough for you to take care of your children I would consider that successful. So what you are in search of now is to extend that success. Only this time, it will be more for you.

Life does not cheat us nearly as badly as we can cheat ourselves. Count your blessings that you had what it took to meet the challenges in your early life. Think of the life you have lived so far as a prelude to help you with this part of your current life.

Get a new attitude! And realize that you are moving into a new phase of life that can be quite rewarding. And make a point to dream big and hold great visions and do something each day, no matter how small, that will move you toward those dreams.

Who knows? You just might be an emerging shepherd.

Gladys Edmunds, founder of Edmunds Travel Consultants in Pittsburgh, is an author and coach/consultant in business development. E-mail her at gladys@gladysedmunds.com

1 More Reason Apple Stock Is a Great Buy Today

The global smartphone industry has absolutely exploded into one of the most important segments in all of consumer tech today. And, although the competition in this space has never been fiercer, as names like Nokia and Blackberry attempt to regain their long-lost footholds, it's becoming increasingly apparent that the handset space truly belongs to Apple  (NASDAQ: AAPL  ) and Samsung. Although the first half of 2013 has seen many new and competitive offerings come to market, it's clear that the Apple/Samsung duopoly is as robust as ever. Taking a look at the smartphone industry from the lens of what matters most, profits paint quite the picture. 

It's exactly those profits that have driven such impressive gains for longtime Apple shareholders, who have been handsomely rewarded. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Why AcelRx Pharmaceuticals Shares Spiked Temporarily

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

What: Shares of AcelRx Pharmaceuticals (NASDAQ: ACRX  ) , a clinical-stage biopharmaceutical company focused on the treatment of acute pain, soared as much as 32% after the company reported positive top-line data from a late-stage trial. Shares have since given back nearly all of their gains, however, and are up only around 4% as of this writing.

So what: AcelRx announced before the opening bell that its pain management system, Sufentanil NanoTab PCA System, met its primary endpoint in a late-stage study of providing a greater reduction in post-operative pain as compared to the placebo. This study reconfirmed all of AcelRx's previously announced late-stage studies on its pain management system, and the company is on pace to file a new drug application by the third-quarter.

Now what: It's certainly a positive day for AcelRx shareholders, but I'm not nearly as excited about today's data. I'm not disputing that AcelRx's drug delivery system met its primary endpoint. Instead, I'm concerned about another opioid substance going before the Food and Drug Administration. Opioid substances don't have a particularly good track record of approval with the FDA, and AcelRx has already had a huge run higher in anticipation of today's data release. There's only so much blood you can squeeze out of a turnip, and I foresee considerably more chance of downside than upside at current levels.

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

While you can certainly make huge gains in biotechs like AcelRx, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Solid economic news puts tapering back on the agenda

Friday's surprisingly robust jobs report has triggered fresh debate about dialing back the Federal Reserve's $85 billion-per-month quantitative easing program.

The report showed that the U.S. economy added 204,000 jobs in October, 70% above the consensus estimates of 120,000 new jobs. It also included upward revisions for the jobs reports from both August and September.

The positive data followed a Thursday report showing that the economy was growing at 2.8% clip, or about 40% above what analysts were forecasting.

Meanwhile, the unemployment rate on Friday was adjusted slightly higher to 7.3% from 7.2%, an increase that market analysts see as an anomaly related to the recent government shutdown.

“I think the Fed can take some confidence from these reports and really put tapering back on the table,” said Dan Heckman, fixed-income strategist at U.S. Bank Wealth Management.

“I wouldn't be surprised to see a taper announcement from the Fed this year and with tapering starting in January,” he added. “There are good reasons to go ahead with tapering now, and it is certainly going to be a topic that gets moved to the front burner and will be more on the minds of investors.”

(But Fed’s Lockhart says Fed can’t rule out QE tapering next month.)

As if on cue, the bond market took the jobs data and treated it as tapering announcement, driving the yield on both the 10-year and 30-year Treasury bonds up about 14 basis points in early trading. Meanwhile, stocks rallied, with the Dow Jones Industrial Average climbing 95 points, or about 0.6%, to 15,688.56 by afternoon. The S&P 500 index added nearly 1%.

“The market is saying we probably should have tapered in September, and that's why we're getting the sell-off in Treasuries now,” said Dan Toboja, vice president of fixed income at Ziegler Capital. “I think this latest data definitely puts tapering back on the table. Right now, the market is telling you it's ready for tapering and it's giving you an excuse to do it now.”

One of the major wrinkles with regard to tapering is the impact of the head fake that Fed Chairman Ben S. Bernanke threw the financial markets in September by not beginning to taper after implying in May that such a move would be imminent.

“This time around, I'm not sure you'll see the same kind of buildup you saw in September when the markets thought there would be some tapering,” said Cam Albright, director of asset allocation at Wilmington Trust Investment Ad! visors.

Mr. Albright, who believe there now is a 50% chance of a tapering announcement this year, said any Fed action will still be heavily data-dependent and will be driven especially by the next jobs report, which comes about 10 days before the December Fed meeting.

The other major wrinkle that could be stalling tapering activity is the fact that Mr. Bernanke is expected to pass the Fed chairmanship to Janet Yellen on Feb. 1.

That reality has sparked a new level of handicapping around the unprecedented five-year quantitative easing program, which has already swelled the Fed's balance sheet to beyond $3 trillion.

“If Bernanke were going to remain, tapering would certainly be back on the table now, but it all has to do with the transition of power at the Fed, and that's one of the reasons they didn't taper in September,” said Sean Clark, chief investment officer at Clark Capital Management Group.

“Janet Yellen's stamp will be to begin tapering at her will,” he added. “And there's a potential for her to make Bernanke look hawkish by comparison.”

And then there are those like Dan Veru, chief investment officer of Palisade Capital Management, who believes the Fed's motivation for tapering has gone well beyond the stated dual mandate of managing inflation and employment.

“I don't want to make too much out of two discreet pieces of specific data, but 200,000 is not enough to force the Fed to start tapering,” he said, referring to the number of jobs added in October. “I think it's wrong to assume that the liquidity is going away, because this decision to taper is also subject to political winds and there's another big budget debate coming in January.”

With tapering essentially off the table, Mr. Veru thinks the stock market can gain add another 3% to 5% between now and the end of the year.

The backburner theory is also supported by Paul Schatz, president of Heritage Capital LLC.

“Before the jobs report we were hearing consen! sus estim! ates that tapering would possibly start in March, but it could be as far away as June, but now suddenly people are saying tapering is back on the table,” he said. “I just don't believe one jobs report changes the Fed's plan.”

Mr. Schatz, who sees the stock market gaining at least another 2.5% by January, doesn't believe the economy is even strong enough to absorb any reduction on the quantitative easing program.

“I don't believe the market or the economy can stand on its own two feet year, so as long as there's no inflation I think they should increase quantitative easing,” he said. “In our economy right now, banks, housing, and everything is predicated on historically low rates, and if rates begin to spike imagine what that does. The fed cannot afford that ah-ha moment.”

Google vs. Facebook: How Both Can Win

At Tier 1 Investments, I seek out and invest in elite businesses. These include companies with the most valuable brands, best management, superior products and services, and strongest competitive advantages.

Google (NASDAQ: GOOG  ) has been a stalwart at Tier 1, but Facebook (NASDAQ: FB  ) does pose a threat. Enough to knock it off its perch? Doubtful. But perhaps enough to bring Facebook up to Tier 1 status if it can reach a few more milestones.

As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.

Another Day, Another All-Time Closing High for the DJIA and S&P 500

NEW YORK (TheStreet) -- The DJIA and the S&P 500 both closed trading on Wednesday at new all-time highs once again. This really is becoming quite boring.

The DJIA was up 20.17 points at 16976.24 and the S&P 500 was higher by 1.30 to close at 1974.62. The Nasdaq was fractionally lower at 4457.73 while the Russell 2000 was down 6.45 points at 1199.50.

Whatever or whoever is causing this stock market to soar into the stratosphere is now irrelevant. The numbers are what they are. This does not mean that as a trader you should just throw in the towel and start buying at these all-time highs.

>>Who Could Take the Reins From Jamie Dimon?

There continues to be an underlying fundamental problem with this market. And that problem is lack of volume or liquidity. You have read enough of my articles to know that the lack of trading volume is a big issue with me. To put that in perspective, the S&P 500 Trust Series ETF (SPY) volume set a new yearly low in 2014 on Wednesday coming in at just over 52 million shares traded. And if you compare the SPY trading volume on July 2, 2014, to July 2, 2013, you will see that the trading volume was three times higher last year, coming in at 154.8 million shares. The argument from old Wall Street pundits will be that it is different this time. It is not different this time. There is a serious lack of the small retail trader and investor in this market. The entire volume is now controlled by the hedge fund community. Those hedge funds act in unison. That is why we are not seeing a selloff taking place. When the machines decide to sell it will be fast and furious. I expect trading on Thursday will be the slowest in memory as the stock market has an early close at 1:00 p.m. EDT. It is now more important than ever to have a risk management trading process in place to navigate around in this market. The Nasdaq index is well into overbought territory. This is being fueled by the tech-heavy stocks. At the same time, the DJIA and S&P 500 are not close to being overbought. The Russell 2000 internal algorithm numbers are heading down. So we have a market that is out of sync. The fact that all indexes have a negative divergence with price creates a risk that most traders and investors do not understand.  That trading process is critical. You need signals that tell a trader when stocks are overbought and oversold. On Wednesday, I covered my Splunk (SPLK) short position from Tuesday with a terrific gain. I also covered most of my Twitter (TWTR) short for a nice gain. This cannot be done without having an internal algorithm signal. The 94% success rate at www.strategicstocktrade.com is all time stamped and cannot be disputed. At the time of publication the author was short TWTR. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Survey: Texters, tailgaters incite road rage

Texting while driving and tailgating are the behaviors most likely to elicit road rage from other motorists, the 2014 Road Rage Report from travel site Expedia finds.

Some 69% of drivers surveyed rated those who text behind the wheel as the worst of the worst for rudeness -- or being an outright threat -- in traffic. Next comes the ever-present tailgater at 60%; multitaskers who try to pile on several activities at once besides driving at 54%, those who drift out of their lane at 43% and slow pokes,at 39%.

Some 69% of those surveyed say they have been "flipped off" by a fellow motorist. Only 17% say they have delivered the obscene gesture to other drivers, the survey of 1,001 drivers found. Expedia says the survey has an error rate of plug or minus 3.1%.

"As the unofficial start of summer, Memorial Day sees a huge spike in the number of drivers on the road," says John Morrey, Expedia.com's general manager, in a statement. "The rule, as with airplanes and hotels, is that shared spaces demand decorum and attentiveness."

The list of bad traffic behavior isn't limited to texting, tailgating and the others. The survey also excoriates what it terms:

•The Swerver (failing to signal before changing lanes or turning):

38%

•The Left-Lane Hog (drivers who occupy the passing lane without moving):

32%

•The Inconsiderate (those who do not let others merge):

30%

•The Speeder (driving well past the speed limit at length):

27%

•The Honker (drivers who slam the horn at will):

18%

•The Unappreciative (drivers who do not give a wave or gesture of thanks):

13%

•The Red Light Racer (drivers who inch ever closer to the light when red):

12%

Blackstone Rises On Record Profits, Analysts Optimistic

Blackstone (BX) reported a better-than-expected first quarter on Thursday, logging its most profitable quarter ever.

The private equity firm said it earned $814 million, or 70 cents a share, up from 55 cents a share in the year-earlier period and well ahead of the consensus estimate of 57 cents.

Revenue rose 19.9% to $1.51 billion, also above the $1.3 billion analysts were expecting.

Distributable earnings rose 24% year over year in the first quarter, as total assets under management climbed 25%, thanks to double-digit increases across all of its investing businesses. Fee revenues for its real estate business were up 18%, while its hedge fund securities unit saw revenues increase 16%.

Analysts were largely upbeat about the quarter. Citigroup's William Katz reiterated a Buy rating and $40 price target on the stock, writing that the market continues to undervalue the sustainability and diversity of the firm's growing assets under management: "It is clear BX is firing across capital raising and dry powder deployment while benefiting from an acceleration in the realization cycle. Moreover, BX's strategic positioning continues to strengthen and BCP V is approaching a carry position which should drive a step function in ENI and DE and thus distributions, in our view."

Sandler O'Neill's Michael Kim and James Howley reiterated a Buy rating on the stock and $37 price target, writing that realizations remain robust, fund raising has never been stronger, and the firm is increasingly leveraging its global scale: "At a high level, we think today's news further validate momentum continues to build across the franchise. Put another way, activity levels remain high across fundraising, deal flow, and realizations setting the stage for concurrent growth in AUM (up 25% year-over-year) and distributable earnings. In turn, we look for ongoing realization activity to power a ramp up in distributable earnings (and therefore distributions to unitholders) in the near term and beyond, thereby driving a superior growth/yield profile for the stock –not fully reflected at current levels, we believe."

Morningstar's Stephen Ellis noted that he planned to increase his $33 fair value estimate about 10% to reflect the better-than-expected performance: "While all of Blackstone's segments performed well, we're particularly impressed with private equity. Because of a 400%-plus increase in incentive income to $287 million, overall economic net income jumped over 200% to $319 million. During the quarter, the carrying value of the segment's holdings leapt 7%, outpacing the market, and BCP V appreciated almost 6%. The BCP V main fund now only needs a 3% increase in total enterprise value before it can meet its hurdle rate and recognize accelerated incentive fees under the 80/20 catch-up period. We expect the fund to start recognizing these accelerated fees in 2014. We're also pleased to see the close of the Tactical Opportunities fund at $5.6 billion, which was larger than our original expectations, indicating continued healthy demand for Blackstone's services."

Fellow financial names Goldman Sachs (GS) and Morgan Stanley (MS) also reported on Thursday, while Citigroup (C) delivered a beat earlier in the week.

Finally gave a damn 'bout a bad reputation

(Fortune) Microsoft and Yahoo veteran Blake Irving didn't see much to phone home about when he first considered running GoDaddy, the web domain-name provider. At best he saw a mixed bag of opportunities at a well-known, if poorly understood, company. GoDaddy had quirky marketing and attentive customer service but weak product development. It boasted an impressive footprint in the U.S. yet had made virtually no effort to do business beyond its native shores.

However, the biggest opportunity by far was in changing how the Scottsdale-based company addressed its customers. Irving says women run 58% of small businesses in the U.S. Yet GoDaddy had built its reputation on a series of Super Bowl TV ads beginning in 2005 that were overtly sexist. The attention-grabbing spots were blatant attempts to generate chatter about a product that its founding CEO, Bob Parsons, thought was boring. And while the strategy worked gloriously in making GoDaddy the subject of water-cooler conversation everywhere, "never has a company had as big a gap between what the ads say and what the company is," Irving says.

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Feds Push Jail For Tax Crimes: Like Your Cell, Keep Your Cell

Does jail work is a large and complex question. But prosecutors are trained to want it and to push hard, in some sectors more than others. Tax charges are not violent but the tax system works on self-reporting and honesty.

That's one reason indictments, prosecutions and convictions are trumpeted during tax filing season. In the run-up to April 15, the government wants to remind you to fly right. You sign tax returns under penalties of perjury. The numbers you report must be true—they're Not an Opening Offer.

A report by the Transactional Records Access Clearinghouse, a Syracuse University research group, says the government is cracking down hard. It reports that average tax crime prosecutions sought by the Justice Department have grown to 1,568 annually. While IRS offshore account efforts continue to rake in money, the government keeps pushing hard for jail time. Cash isn't enough.

After Beanie Babies founder H. Ty Warner plead guilty to tax evasion, he was sentenced on January 13 to 2 years of probation and 500 hours of community service, but not to jail. So the feds have appealed to the Seventh Circuit. Prosecutors say Warner, Forbes' 209th richest American worth $2.6 billion, should be jailed.

Warner agreed to pay penalties of over $53 million after evading taxes. Judge Charles Kocoras cited Warner's charity work in choosing probation so his good works could continue. Mr. Warner opened an account with UBS in 1996. In 2009, the IRS launched its first Offshore Voluntary Disclosure Program (OVDP), a variant of which is still open today.

It encourages people to come forward and avoid prosecution. UBS paid $780 million to the U.S. government and the banking world will never be the same. Some Swiss banks have closed, some are still working out deals, and FATCA now promises worldwide tax transparency. But when Warner applied for amnesty in 2009, he was rejected because the IRS already had his identity.

Few people are turned down, but the IRS policy is not to accept taxpayers who are already being investigated. Mr. Warner (#209 on Forbes 400 list) is not the first Forbes 400 member to draw tax charges. Leandro Rizutto (#296), founder of Conair, had his own run in. So did Igor M. Olenicoff (#184), a California real estate developer with a net worth of $2.9 billion.

Mr. Warner still paid considerable tax on the nearly $50 million of 2002 income he did report. But he shorted the IRS by about $1.2 million. That was a painful omission, not only drawing the tax evasion charge, but huge FBAR penalties too. It was the FBAR penalties that topped $53 million.

The staggering figures tie into criminal penalties. A tax evasion conviction carries up to 5 years in prison and a $250,000 fine. Tax convictions even draw prosecution costs on top of all the back taxes, interest and penalties. And the penalties can be huge. Civil fraud penalties alone can add another 75%.

When it comes to penalties, FBARs—even civil penalties—are the real gravy train. An annual report of foreign accounts in the law since 1970, FBARs target money laundering. They were not widely known—or widely enforced—until the UBS scandal of 2008 and 2009. Now they are ubiquitous, requiring reporting of foreign accounts even by those with mere signature authority but no beneficial interest.

A willful failure to file an annual FBAR can trigger a civil penalty of up to 50% of the account balance at the time of the violation. More garden-variety taxpayers can find themselves facing the awkward combination of failing to report foreign account interest and failing to file FBARs. Even if unreported income is small, the combination of amending tax returns to report it plus quietly filing past-due FBARs is a classic "quiet disclosure."

The IRS advises against them and says it can prosecute taxpayers who do it anyway. The IRS wants taxpayers to join the Offshore Voluntary Disclosure Program. As under the 2009 and 2011 programs preceding it, taxpayers must file up to 8 years of amended returns and up to 8 FBARs. It isn't perfect, but for many, it's a way to know you've resolved a potentially explosive situation.

You can reach me at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

Burger King Takes a Run at a Soul Food Classic: Chicken and Waffles

Alamy Fried chicken and waffles is a staple menu item at countless soul food and comfort food restaurants, but that's not stopping Burger King (BKW) from trying to give the meal a fast-food spin. Burger King is testing a new sandwich in the Northeast that takes the breaded chicken patty used in its Classic Crispy Chicken Sandwich from its King Deals Value Menu and replaces the bun with a split waffle. Burger King's Chicken & Waffle Sandwich isn't as hearty as the meal that it's based on. It's selling for as little as $2.29. But the chain's latest attempt to turn heads with a unique menu item will at least attract curious nibblers if it does decide to broaden the offering across the country. Waffling About Burger King isn't the first popular chain to attempt to reinvent this classic dish. As Nation's Restaurant News points out, last summer, Popeyes Louisiana Kitchen (PLKI) offered Chicken Waffle Tenders -- consisting of chicken tenders dipped in a vanilla maple-scented waffle batter, served with a honey maple dipping sauce. DineEquity's (DIN) IHOP did it three years ago by combining its chicken strips with Belgian waffle quarters. Yum! Brands (YUM) tried to breathe new life into its breakfast business last summer by testing a Waffle Taco -- an egg, sausage, and waffle breakfast sandwich. Even if it doesn't succeed -- and some of the early taste tests haven't been very flattering to the chain's new sandwich -- it's at least comforting to see that Burger King isn't just copying McDonald's (MCD) the way that it has for the past couple of years. Burger King followed McDonald's in offering fancy coffee drinks, fresh fruit smoothies, and popcorn chicken. It has gone on to roll out doppelgangers of the Egg McMuffin and McRib sandwiches. In November, it introduced the Big King, which any patron will quickly recognize as a body double to the Big Mac. Then again, it's not as if following McDonald's lead is such a clever idea right now. The world's largest restaurant operator disappointed investors by posting a 1.4 percent decline in comps at its North American eateries during the holiday quarter. Have It Your Way Burger King isn't doing a lot better than McDonald's these days. It won't post holiday quarter results until next week, but when last it checked in, 2013 was shaping up as a dud domestically. Burger King posted negative comps for its stateside locations during each of the first three quarters. The 13,259-unit chain is expected to post flat earnings growth for the period. Revenue is also expected to fall sharply, but that's not as alarming as it sounds. Burger King is in the process of re-franchising many of its locations as it hands over company-owned restaurants to franchisees. It's a move that sacrifices revenue now for higher-margin franchise royalties later. When you're as big as Burger King, with more than 7,400 restaurants in the U.S. and Canada alone, it's hard to engineer a turnaround on a single sandwich. Absent wildly buzzing reviews, it doesn't seem as if the Chicken and Waffle Sandwich will move its revenue needle. It may not even make it past the regional testing phase. However, the popularity of fast food chains in general has been diminishing in recent quarters, leaving them all hungrier for market share. Whether it makes a splash or not, this is the kind of thinking that Burger King needs if it's to stand out in a competitive landscape.

U.S. Auto Companies Release Sales Data; Growth Reported by Ford and Chrysler; GM Suffers Decline

December 2013 sales reports for Ford (NYSE: F), Chrysler, and General Motors (NYSE: GM) were released on Friday, with more (international) auto companies expected to release sales reports later this afternoon.

For the month, Ford reported 1.8 percent increase in total vehicle sales, Chrysler a 6 percent increase, and General Motors a 6 percent decrease when compared to the same month for 2012.

Although Ford and Chrysler experienced an increase in sales for December, both companies fell below growth estimates of 4.3 percent and 8.4 percent, respectively. General Motors' decline in sales was in drastic contrast to the estimate of a 1.5 percent increase.

Ford Motor

Ford's 2013 U.S. sales totaled 2,493,918, making it the top U.S. brand for the fourth consecutive year. The high sales performance of Ford is partly attributable to annual sales records set by Fusion, Fiesta, Escape and the F-Series. The strongest regions for Ford are the West and Southeast, with a 21 percent and 17 percent increase in yearly sales.

Other significant sales increases for Ford include the Police Interceptor Utility, which experienced a 127.1 percent increase for December and 140.3 percent for the year.

Related: Tesla May Unveil Lower-Priced Sedan at 2015 Detroit Auto Show

Chrysler

Chrysler's Jeep brand experienced its best ever December sales with a 34 percent gain, helping Chrysler reach 45 consecutive months of year-over-year gains.

"Our Jeep and Ram Truck brands had a strong finish led by the all-new 2014 Jeep Cherokee and the Ram pickup truck, Motor Trend's 2014 Truck of the Year. Sales of the new Cherokee topped 15,000 units in December as our newest SUV continues its solid sales performance out of the gate," said Reid Bigland, head of U.S sales.

The new 2014 Jeep Cherokee experienced a 48 percent increase in sales over the previous month and was awarded the "best new SUV/CUV under $35,000" by the Automobile Journalist Association of Canada. The Ram 1500 saw gains of 11 percent for December and was named Motor Trend's 2014 Truck of the Year, becoming the first ever back-to-back winner.

General Motors

GM December sales totaled 230,157 vehicles, a decrease of 6 percent from the previous year. Despite this decrease, the month's volume was the highest since August and sales for the quarter increased 6 percent.

The Acadia had gains of 53 percent, the model's best December ever. Buick also had its best sales year since 2006, partly due to the expansion into the sedan and crossover markets with the Verano and Encore.

Kurt McNeil, vice president of U.S. sales said, "2013 was the year that GM and the auto industry put the last traces of the recession in the rear-view mirror, so now we can devote our full attention to the things that matter most to customers: compelling design, world-class quality and delivering the best ownership experience in the business."

Posted-In: Acadia Chrysler Escape fiesta Fusion Jeep CherokeeEarnings News Retail Sales Markets Best of Benzinga

(c) 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

  Most Popular Solar Sector On Fire as Traders Getting More Optimistic Buffett Embarrasses Analysts Again in His Latest Big Win Oppenheimer Downgrades General Electric Benzinga's Top #PreMarket Gainers iPhone China Mobile Sales Predictions, Facebook Saves a Life & Other First Week of January Highlights Benzinga's Top #PreMarket Losers Related Articles (F + GM) Mid-Afternoon Market Update: Markets Mixed as Airlines Show a Boost in Traffic U.S. Auto Companies Release Sales Data; Growth Reported by Ford and Chrysler; GM Suffers Decline Mid-Day Market Update: U.S. Stocks Pare Early Gains; GM Shares Decline On Weak December Sales #PreMarket Primer: Friday, January 3: The Dollar Hits 2014 Running Market Wrap For January 2: Markets Begin 2014 on Negative Note A Look at Some 'Legit' OTC Stocks Around the Web, We're Loving... Lightspeed Trading Presents: Thunder and Tubleweeds: Trading Techniques for the New Market Enviroment Pope Francis Rips 'Trickle-Down' Economics Come See How the Pro's Trade in this Exclusive Webinar Wynn, MGM, Other Casino Giants Vying For U.S. Turf What Should You Know About AMZN? View the discussion thread. Partner Network

The 3 Most Anticipated TV Shows of 2014

Face it, some TV shows matter more than others.

For example, Marvel's Agents of S.H.I.E.L.D. matters more to ABC than Grey's Anatomy because Scandal is already a huge Thursday night winner for the network. By contrast, S.H.I.E.L.D. has built a following without any lead-in ratings support and in the process given ABC the bankable Tuesday night property it's long lacked.

I'm telling you this so you'll understand why I chose the shows you see below as the most anticipated TV properties of 2014. These three, I think, matter most to the studios producing them, and consequently to us as investors in entertainment stocks.

Grant Gustin as Barry Allen in Arrow. He'll reprise the role in The Flash spinoff pilot. Sources: TheCW, Wikimedia Commons.

The Flash
Episodes ordered: Pilot
Starring: Grant Gustin
Network: TheCW

Premise: Episodes 8 and 9 of season 2 of TheCW hit Arrow introduced audiences to Grant Gustin as Barry Allen, a Central City police scientist who is slated to become the super speedster known as The Flash. We don't know much beyond that right now. But if Arrow is any indicator -- and with DC's Chief Creative Officer Geoff Johns teaming with Arrow co-creators Greg Berlanti and Andrew Kreisberg to write the pilot, the comparison seems fair -- the idea is to have Gustin take inspiration from Stephen Amell's Starling City vigilante in becoming Central City's hometown hero. He'll need a fast start in the pilot, which has yet to be scheduled.

Promise: The bigger idea, of course, is to use television to expand the range and scope of the DC Cinematic Universe so that when Wonder Woman appears in 2015's Batman vs. Superman, a significant portion of the mythos will have already been established elsewhere. That, in turn, should make it easier for studio parent Time Warner (NYSE: TWX  ) to focus on epics rather than origin stories.

Executive Producer Ron Moore will adapt the acclaimed book series. Source: Starz.

Outlander
Episodes ordered: 16
Starring: Caitriona Balfe, Sam Heughan
Network: Starz (NASDAQ: STRZA  )

Premise: Based on the hit book series from author Diana Gabaldon, the show tells the tale of a married former WWII combat nurse transported in time to feudal Scotland, where she proceeds to fall in love with a young warrior.

Promise: Not exactly an all-in bet since Starz also has the pirate drama Black Sails on the horizon. But that's also a new concept while Outlander is based on beloved source material. In ordering a full 16-episode season, Starz is betting that executive producer Ron Moore, one of the principal architects of Syfy's award-winning reimagined Battlestar Galactica series, will once again figure out how to draw a wider than expected audience to a niche concept.

Comedian Bob Odenkirk brings Breaking Bad's crooked lawyer to life in the spinoff. Photo credit: Frank Ockenfels/AMC.

Better Call Saul
Episodes ordered: Full season
Starring: Bob Odenkirk
Networks: AMC Networks (NASDAQ: AMCX  ) , Sony, and Netflix (NASDAQ: NFLX  )

Premise: Breaking Bad creator Vince Gilligan apparently sees this spinoff as a prequel that reveals how Bob Odenkirk's crooked lawyer, Saul Goodman, got involved with the shady characters that would ultimately lead him to Walter White and Jesse Pinkman.

Promise: Reports say AMC, which has distribution rights, and Sony, which produces, haggled over the details till the last minute. The good news? There's enough confidence in the product that AMC has agreed to a full series order, though you could argue the network didn't have much choice with Breaking Bad finished and Mad Men nearly complete.

Netflix, meanwhile, will stream Saul episodes in Europe and Latin America shortly after they air on AMC in the U.S. North American subscribers will get access after the season finale airs.  We don't yet have a timeline for Saul but all three studios participating in the project have a lot riding on the ratings.

Now it's your turn to weigh in. Which do you rank as the most anticipated TV shows of 2014? Which studios do you believe are best positioned to profit in the year ahead? Leave a comment below to let us know what you think.

Your option to win, no matter who else loses
Improving entertainment options are one of many consequences from the widening war for your living room. Much will be decided over the next several years. The companies that prevail could earn untold sums for shareholders as the losers seek the protection of bankruptcy courts. Our top analysts sort out the likely winners in a groundbreaking special report, and we've reserved a free copy just for you. Click here now to start reading.

Can Working Too Much Cut Your Social Security Benefits?

Making a smart choice about when to take Social Security is crucial, as your decision can affect your finances for the rest of your life. But some people don't realize that if they take early Social Security benefits before they stop working entirely, they can end up forfeiting some of what they receive from the government.

In the following video, host Alison Southwick interviews Dan Caplinger, The Motley Fool's director of investment planning, to learn more about how working can cut what you receive from Social Security. Dan notes that only people who have started taking early benefits but haven't reached their full retirement age need to worry, as anyone who has reached full retirement age can take their benefits without fear of forfeiting any of them no matter how much they work. But if you're younger than full-retirement age, you can lose $1 in Social Security benefits for every $2 you make above $15,120. For those who reach full-retirement age this year, higher limits apply, with the potential to lose $1 for every $3 you make above $40,080.

Dan continues by explaining that family members who receive benefits also have to pay attention to the limitations, as both their wages and the wages of the person on whose work history they're receiving benefits can come into play to cause reductions. Dan concludes that in general, it's smarter to wait until you've fully retired or reach full retirement age before starting to take Social Security in order to avoid the entire possibility of losing benefits.

Do you know everything you should about Social Security?
Complex rules like this make Social Security almost incomprehensible to many Americans. But we can shed some light on even the hardest-to-understand elements of Social Security to help you. In fact, that's why we came out with our brand-new free report, "Make Social Security Work Harder For You." Inside, our retirement experts give their insight on making the key decisions that will help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Banyan continues to expand, adding two firms, $1B in assets

Banyan Partners LLC said today it had agreed to acquire Plano, Texas-based Rushmore Investment Advisors Inc. and Madison, Wis.-based Holt-Smith Advisors Inc., with combined assets under advisement of about $1 billion.

The deals are the sixth and seventh acquisitions Banyan has made in the last five years. The two new firms will operate under the Banyan Partners name. John Vann, chief executive of Rushmore, and Marilyn Holt-Smith, chief executive of her eponymous firm, will become partners of Banyan.

Both firms are money managers that have verified performance under the Global Investment Performance Standards, which should help Banyan add institutional clients, said Peter Raimondi, Banyan's founder and chief executive. The deals also give Banyan a presence in the central states, Mr. Raimondi added.

On the equity side, Holt-Smith has strategies for large-cap growth, large-cap value, mid-cap growth and tactical, and a fixed-income product with actively managed duration.

Rushmore runs equity income, non-U.S. equity and large-cap-growth strategies. The firm has about $850 million in assets, half of it from institutional clients.

“We've been zero institutional up this point,” Mr. Raimondi said. “We haven't been GIPS-verified because we weren't playing in the institutional market.”

Banyan has expertise in equities and options management.

Mr. Vann, 65, will move into more of a “rainmaker” sales role that will allow him to work as long as he wants, Mr. Raimondi said. “John has a good reputation in the high-net-worth and institutional space.”

Mr. Vann, who started with E.F. Hutton & Co. in 1973, is well-known in the investment management consulting industry. He founded Rushmore in 1996.

By joining Banyan, the Holt-Smith firm should be able to grow, Mr. Raimondi said. It has about $100 million under management.

Ms. Holt-Smith's firm will be “a hub for any kind of Midwest expansion,” Mr. Raimondi said. “If an opportunity shows up, we've got someone there now.”

Terms of the deals were not disclosed. Mr. Raimondi said Holt-Smith was purchased for cash, and the Rushmore deal was part cash and part equity.

The two acquisitions are being financed from capital raised last January from Temperance Partners, a private-investment firm that took a minority stake in Banyan.

Mr. Raimondi wouldn't disclose the size of his war chest, but said he will still have more than half of his private-equity capital after closing on his latest purchases.

Banyan now will have 85 employees in 10 locations around the U.S.

In addition to the newly aquired firms in Madison and Plano, the Palm Beach Gardens, Fla.-based Banyan has offices in New York, Boston, Atlanta and San Francisco, and three locations in Florida: Naples, Coral Gables and! Miami.

Last June, Baynan added wealth management capabilities by agreeing to acquire Silver Bridge Advisors LLC, a Boston-based firm with $2.2 billion in assets that was owned by the Wilmer Cutler Pickering Hale & Dorr LLP law firm.

Futures Trade: Closing CL

We entered a trade last week on the expectation that if odds continued to strengthen that the U.S. will not attack Syria, the added risk premium would be priced out of longer dated options on oil futures contracts. We looked at a November short vertical call spread as one way to trade this expectation.

Since then, November WTI crude has fallen to $104.71, which benefited the short call spread because of the bearish price bias in the trade. But just as significant was the reaction in options markets.

 IV November CL Options Source: Condor Options View Chart �

 

The darker blue line shows the implied volatility for November CL options on September 12th, with the same volatility skew a few sessions later in light blue. The bid in out of the money call options dropped almost a full volatility point in some cases, and that means we can exit the options spread having collected most of the possible profit in a much faster time frame than would have been possible if we were relying on price changes alone.

Trades: BTC LOX3 November 114 calls at $0.28 and STC LOX3 November 116 calls at $0.17.

The trade collected $0.30 to open and costs $0.11s to exit, for a return of 11% on capital risked in less than a week.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits

Jared can be followed on Twitter at twitter.com/CondorOptions

KS Bancorp, Inc. Announced 2nd Quarter 2013 Financial Results (OTCBB:KSBI, OTCMKTS:CLNO)

KS Bancorp, Inc. (KSBI)

Last Friday, KSBI previously surged (+6.67%) up +0.50 at $8.00 with 235 shares in play at the close (ref. google finance July 26, 2013 – Close).

KS Bancorp, Inc. previously reported unaudited net income available to common shareholders of $200,000, or $.15 per diluted share, for the three months ended June 30, 2013, compared to a net income available to common shareholders of $86,000, or $.07 per diluted share, for the three months ended June 30, 2012. For the six months ended June 30, 2013, the Company reported net income available to common shareholders of $325,000, or $.25 per diluted share, compared to $314,000, or $.24 per diluted share, for the six months ended June 30, 2012

KS Bancorp, Inc. (KSBI) 5 day chart:

Cleantech Transit, Inc. (CLNO)

Cleantech Transit, Inc. (OTCMKTS:CLNO) (www.cleantechtransit.net ) through its Discovery Carbon subsidiary, develops emissions offset strategies for companies, municipalities, and countries. Last Friday, CLNO previously surged (+12.82%) up +0.025 at $.220 with 163,136 shares in play at the close (ref. google finance July 26, 2013 – Close).

CLNO 's daily range was at ($.22 – $.185) thus far and currently at $.22 would be considered a (+19900%) gain above the 52 wk low of $.0011. The stock is up +0.22 ( +9066.67%) since the concerning dates of January 28, 2013 – July 26, 2013. +9066.67% is the 6 month high and rightly so.

Cleantech Transit, Inc. (CLNO ) 5 day chart:

We Had a Good First 6 Weeks of 2012 – What’s Next?

I made the case last month, as I had in October, November and December 2011, that the risk of a major correction, predicted by so many, was completely off base. I noted that fears of Europe driving the world into another Great Recession were unfounded, that Greece, with the same GDP as Michigan, was unlikely to be the trigger for said event, and that U.S. private employers were lean and mean and ready to begin hiring once again if only we could keep our national government from providing so much incentive to remain unemployed and on the dole as to prevent workers from even seeking work. Despite the worst intentions of those who would create armies of expensive government employees, middlemen and administrators to give out benefits and entitlements, in fact the American private sector has become lean and mean and ready to hire again.

Fortunately for those of us willing to climb the proverbial and very real Wall of Worry, many (most?) investors continue to cling to their belief that this rally is a head-fake, that the country is headed to hell in a hand basket, and that "this time it's worse than ever before." I hear from them all the time when they tell me what an idiot I am after reading my articles on Seeking Alpha, ForexPro, GuruFocus or elsewhere.

As I wrote to a brilliant investor friend who was concerned that the institutional manipulation by Wall Street makes this time different, a viewpoint I didn't touch on in last month's issue: "It's true that HFT, program trading, dark pools, et al are new ways Wall Street has come up with to avoid transparency and middle the very people they claim to be on the same side as. But thus has it always been. Back in the 1920s it was bald-faced manipulation via "trust" companies, in the 1960s it was the crooked specialist system -- put in a trailing stop 2 points away and the stock would magically decline 2 points for one trade then magically recover by 1.98 with the next trade. We should always expect double-dealing from Wall Street.

"I don't ! know, but my guess is that the average holding period for the 76% of trading today dominated by institutions may be closer to 5 seconds, factoring in the millions daily that last a millisecond as well as the pension funds that hold for 6 months.

"But I really don't care. I don't have to compete with them, and I don'tcompete with them. While they are making millions of trades to make a sure penny each trade, I am buying quality under-loved companies too thinly traded, foreign or boring for them to bother with. My holding period may be 6 months, a year, or much longer. They can keep their approach; there is a whole universe of companies it isn't worth their while to manipulate or in which they might get caught on the wrong side and lose all their other ill-gotten gains.

"I'll still fight to get appropriate regulation of these yahoos, but we basically work different sides of the street so, while a flash crash will affect me for a couple of days, I can use Wall Street's foolishness and venality to my own advantage. You can try to fight 'em using their tools, you can join them, or you can ignore them. As much as possible, I choose the last course."

Our current portfolios reflect our optimism. But nothing goes straight up or straight down. Every day the market goes up, the more overloaded the boat is becoming on the "greed" side of the fear/greed equation: a gnawing sense on the part of many investors that they are missing something. And they have, of course. January 2012 enjoyed the largest January gain in history for both the Dow and the S&P 500. I believe people need time to digest these gains and that, for many, the temptation to grab whatever profits they can before what they see as the inevitable next slide down, means we will have a pullback.

Unlike many commentators, I see that "slide" as relatively slight and well-contained. Still, we have been placing ever-tighter trailing stops all during February. It doesn't matter that I see this as an excellent year; it matters that we ge! t ahead o! f the crowd our clients and avoid the falling knives investor panic creates. The catalyst for the decline could be something real, like soaring U.S. unemployment or terrible corporate earnings, or it could be a chimera like Greece defaulting or fear of Europe dragging us all into the morass. (Re the latter: the highest estimate I've ever seen show that Europe represents no more than 10% of the earnings of S&P 500 companies. We are competitors of the big Euro firms rather than suppliers or recipients of their sub-contracting. In addition, I read a great quote from Lazard Capital Markets' head of Product Strategy, Art Hogan, who noted, "Portugal is smaller than Greece. If Italy's economy was a dinner meal, then Greece and Portugal's combined would not be enough to leave the tip."

None of this means that one can simply buy and hold yet! "There is many a slip twixt cup and lip." Though I believe the year will end well, I expect thrills and spills along the way. Those facile fools who say things like, "As goes January, so goes the year," are repeating trite piffle that will doom them to lose even as we exit the year with a profit.

There are no short cuts to investing success. Yet every year people too lazy to do the hard analysis required to beat the market try to take short cuts like the "January Barometer." An up first five days of January means the year will be up? Dumb. The market rises roughly 70% of the time anyway (albeit not in Secular Bear years!) If you just said, "The market will rise every year," you'd be right about 7 out of 10 times (which is why perennial optimists get all the forecasting jobs on Wall Street). So to say, "The market will rise if January — especially the first five days of January — rises," is stating the obvious — but for the wrong reasons.

Since there is a January effect in most years, however, and since the market goes up most years, there is a strong correlation. But is it causative or merely correlative? I'd argue the latter. The fact that the first! five day! s of January are up, or even the whole month of January is up, doesn't mean the market is destined to outperform. The fact that the market is up most years, anyway, simply gives credence to throwing bones in a circle, reading tea leaves, or using astrology or the January Barometer to "predict" an up year. I think tea leaves, old bones, and the January Barometer are harmless distractions unless you take them seriously with serious money.

What you might want to note, instead, in support of an up market this year, is that there is a latent strain of optimism that runs through the American national consciousness. We believe in vast frontiers and the power of high technology, cosmetic surgery, and paying taxes up to the point of fairness to propel us ever forward. For that reason, we simply cannot abide this many down years in a row. American optimism and, more importantly, American entrepreneurialism, spurred by a complete revamping of the idiotic way we invite immigrants to our country, will be a better barometer than the date on the calendar every time.

Putting aside the January Barometer as unworthy of serious consideration as a predictive tool doesn't mean we should ignore the January effect. This is typically due to large asset inflows and/or year-end repositioning of portfolios from institutional investors. Big mutual funds and others hold what they have at year-end, hedging so they can hang on to whatever gains they have and get their bonuses for beating the benchmarks by .00001%. The New Year gives them a reason to get frisky again — after all, they'll have 50 weeks or so to undo any damage they do by taking big risks on small companies early in the year. (And those small companies just might provide good gains to create a cushion for mediocre performance the rest of the year.)

Then there's the self-fulfilling prophecy angle: Once the January effect became well known, investors who didn't want to miss out put cash into the market, thus confirming the hypothesis that the market ri! ses in Ja! nuary. There could even be an element of New Year's resolutions at work, as people resolve to save and invest more this year. And people often do get cost-of-living increases, raises, bonuses and retirement plan contributions at this time of year, all of which mean money that needs to be saved or invested.

I'm not one to look a gift horse in the mouth. If someone wants to give us a 10%-plus gain in six weeks, we'll take it. But we'll now tighten up our trailing stops so we still retain 8-9% if I'm correct and the market takes a breather here. There will always be other opportunities for those of us who don't choose to follow the market up and then right back down. I don't expect a correction to last more than a month or so, but I think it will be less than enjoyable for the group that wants to buy and hold, and I'll wager will only reinforce the stubborn view of those who believe we are doomed to enter a Great Depression. The former will give back a chunk of their profits, the latter will stay on the sidelines until the news is all rosy again. We think there's lots of money to be made between now and then! Place trailing stops on your stocks and see future articles for what we will be buying.

e-Commerce Stock Update - July 2013 (pt. 2) - Zacks ...

This is part two of our e-Commerce Industry Outlook. Click here to read part one.

Although retail e-Commerce is the segment that most of us are interested in, it is in fact just a part of the overall e-Commerce market. In fact, retailers and service providers generate just 4.7% and 3.0%, respectively of their revenues online, a slightly higher percentage than they did in the prior year. The U.S. Census Bureau categorizes these two segments as business-to-consumer.

According to the U.S. Census Bureau, the manufacturing sector is the largest contributor to e-commerce sales (49.3% of their total shipments), followed by merchant wholesalers (24.3% of their total sales). These two segments make up the business-to-business category.

This places the business-to-business category at 90% of total e-Commerce sales, with the balance coming from the business-to-consumer category. The latest numbers from the Bureau suggest that the fastest-growing segments were retail and wholesale. [All the above data from the U.S. Census Bureau relate to 2011, as published in May 2013]

The industry is evolving very rapidly, so data collection and evaluation are particularly difficult. Consequently, one has to rely largely on surveys by both government and private agencies.

In this section, we will discuss segments of the e-Commerce market than do not relate directly to the retail of goods, and discuss instead travel, payments, security and advertising.

Travel

The U.S. Commerce Department expects international travel to the U.S. to continue increasing over the next few years. Visitor volume is currently expected to increase 6-8% a year from 2012 to 2016 leading to a 49% increase in the number of users during the period.

Visitors from the Middle East are expected to be the slowest-growing (29%). South America, Asia and Oceania growth rates are expected to be comparable at 83%, 82% and 82%, respectively.

The fastest growth is expected to come from China (232%), Sou! th Korea (200%), Brazil (150%), Russian Federation (139%) and India (94%). Travel and tourism is one of the country's strongest industries, contributing a trade surplus in each of the last 20 years.

The top travel booking sites are Booking.com, Expedia.com, Hotels.com, Priceline.com, Kayak.com (acquired by Priceline), Travelocity.com, Orbitz.com and Hotwire.com. Since Booking.com and Kayak are part of Priceline (PCLN) and both Hotels.com and Hotwire.com part of Expedia (EXPE), this narrows down the top companies in the segment to Priceline, Expedia, Orbitz Worldwide (OWW) and Travelocity. However, there are several others worth considering that include Ctrip International (CTRP), MakeMyTrip (MMYT) and TripAdvisor (TRIP), which was spun off from Expedia.

The global travel market grew 4% in 2012 and is expected to grow another 2-3% this year. The Asia/Pacific region is expected to see the strongest growth (up 6%), followed by Europe and South America (mainly Brazil) at 2% each. North America (mainly U.S.) is expected to be flat this year. [World Travel Monitor 2012]

According to the April 2013 TravelClick North American Hospitality Review (NAHR), both occupancy and average daily rates (ADRs) in North America are seeing steady growth this year, with individual bookings (both leisure and business) doing better than group bookings. In the second quarter of 2013, total travel occupancy growth was 3.6% from last year with ADR growth even better at 3.8%.

Online travel agents (OTAs) are growing the fastest this year – up 13.7% in the first quarter, according to the TravelClick North American Distribution Review (NADR). The hotels' own websites were up 5.0%, with direct walk-ins and calls to the hotel growing 3.7%. The areas of weakness were the global distribution system used by travel agents and CRS (calls to a hotel's toll-free number).

Share of individual bookings-



Global corporate travel bookings were up 8.8% in April, according to Pegasus Solutions, which is the single largest processor of electronic hotel transactions. This is the highest volume growth through GDSs since August 2011.

Smartphones are playing a key role in travel purchases, especially for last minute purchases. eMarketer expects smartphone travel researchers in the U.S. to grow to 50 million or 40% of all digital travel researchers this year, with total U.S. mobile travel sales touching $13.6 billion.

The top site for travel content is TripAdvisor, visited by 60% of Americans when choosing a hotel. Google's (GOOG) YouTube is now growing in popularity and is the second in line, according to MMGY Global's 2013 Portrait of American Travelers study.

Another report by PhocusWright mentioned that when online penetration of the travel market reached 35% in any country, growth rates were likely to slow down to single-digits. The research firm mentioned that only the U.S., U.K. and Scandinavia had reached this level of penetration and most other markets across Europe, Asia and Latin America would continue to show good growth rates.

Payment Systems

With practically all market research indicating solid growth in e-Commerce sales over the next few years, online players are vying with each other to come out with convenient and secure payment solutions.

The FIS Mobile Wallet from Fidelity National Information Services Inc. (FIS) is basically a bar code reader that feeds information related to the purchase into the user's smartphone and uses it as a medium to transfer the information to the cloud. Online purchase of merchandise is also possible. The solution provides good security, since the transaction is carried out entirely in the cloud through the retailer's and banker's applications and personal information is not shared at the time of purchase.

QR code payments have already been made by most smartphone users in the U.S. an! d the tec! hnology is moving mainstream. However, the safety of the system comes at a price, which is the time it takes to complete a transaction. This is the reason that Google is still hanging on to its digital wallet.

Google's digital wallet allows a customer to make a payment by waving his mobile phone over a POS terminal. Other than the convenience of the whole thing, the main attraction being highlighted is the security of the payment channel, since neither the customer nor the retailer would be recording the personal information related to the customer. Adoption of the device, although it is some way off, will have a remarkable effect on the volume and value of mobile transactions, since it should increase the percentage of higher-value sales.

However, the cost of POS terminals is a downside to the system that could easily turn away retail partners. This is an evolving area and much could change over the next few years.

Visa (V) has also jumped on the bandwagon, claiming that its V.me is a digital wallet with a difference. Not only can it be used to make mobile contactless payments (bar code, QR code or NFC), but it can also be used for online checkout (it remembers card details from several providers).

The greatest success however is currently being enjoyed by eBay's Paypal, which has seen success at a large number of traditional retailers such as The Home Depot (HD) and Office Depot (OD). One drawback that remains is that although the system is itself secure, there is always a security risk for a buyer not used to dealing with Paypal, since it requires personal information.

Mobile banking is set to grow very strongly over the next few years, according to Juniper Research. The research firm estimates that a billion mobile devices (or 15% of the installed base) will be used for banking transactions by 2017, up from an expected 590 million at the end of this year. Most banks already offer at least one mobile banking offering, with some larger banks offering more tha! n one opt! ion. Messaging remains the most popular across the world, but apps are likely to remain the preferred channel in most developed markets.

Mobile banking has not picked up sufficiently in either the U.S. or Canada, due to security-related concerns. However, an analysis by Deloitte shows that mobile banking could become the most-preferred banking method by 2020. The study estimates that 20-25 million "Generation Y" (Gen Y) consumers will become new banking customers by 2015.

A banking.com study shows that 48% of Gen Y consumers are already using online banking services. Moreover, their preference for online banking is so high that around 30% said they would consider switching financial institutions if they did not provide the service. Both online and mobile banking by Gen Y largely consists of checking account balances and transferring funds, although they also like to pay bills on the platform.

It is believed that high smartphone penetration, higher income within this group and greater digital sophistication will drive increased demand for mobile banking services. Since mobile banking is expected to be the most cost efficient for banks, investment in technology to improve and expand mobile banking services is likely to increase.

Security

With online transactions expected to boom over the next few years, the topmost concern remains security. While banks will spend significantly on secure payment systems, hackers are expected to have a field day, largely targeting the flood of customers going online. Last year saw a huge increase in security breaches, something that may be expected to continue.

Recent research from McAfee revealed certain important facts: first, that mobile malware was primarily spreading through apps; second, 75% of infected apps came from Google Play; third, the chances of downloading malware or suspicious URLs was 1 in 6; fourth, 40% of malware families disrupt the system in more than one way, which is an indication of the increasing sophist! ication o! f hackers; and fifth, 23% of mobile spyware can result in data loss.

Even more alarming is that even "secure" payment platforms like digital wallets using NFC technology can now be infected by worms within close range of devices ("bump and infect"). An infected device can give out personal information during the payment process that can be used to steal from the wallet.

Mobile security offerings currently come from AirWatch, Apple (AAPL), Avast, Check Point, Cisco (CSCO), IBM (IBM), Juniper (JNPR), Kaspersky, McAfee, Microsoft (MSFT), MobileIron, RIM (Blackberry) (BBRY), Symantec (SYMC) and Trend Micro, among others.

Alternative payment systems will continue to gain popularity. While some of these payment systems, such as eBay's (EBAY) PayPal have been around for a while, other systems, such as Google's digital wallet, V.me and the FIS Mobile Wallet are still in the making. Alternative payment systems never really gained momentum in the past because of the low volume of transactions. However, as online transactions continue to increase, many more such systems could suddenly become more available.

We expect mobile security to become a major focus area for technology companies, since this is the stumbling block to payments through the mobile platform (currently just 2% of U.S. online spending).

Digital Advertising

The U.S. digital advertising market has seen some very strong growth in the past few years, despite the recession that impacted the entire economy. eMarketer estimates that the market will grow 14.0% in 2013, compared to the 15.0% growth in 2012.

Growth rates are expected to continue declining: 12.4% in 2014, 10.2% in 2015, 9.0% in 2016 and 6.9% in 2017. Retail, financial services, consumer packaged goods (CPG) and travel in that order, are expected to drive this growth.

The current strength in online advertising is coming primarily from the growing popularity of the display format. Of all the forms of online advertising,! display ! (including video, banner ads, rich media and sponsorships) is expected to see the strongest growth over the next few years. Also, of all the forms of display advertising, video and banner ads are expected to grow the strongest from 2011 to 2016.

Search will remain supreme until 2016, gradually giving way to video and banner ads, both of which will grow rapidly. The lower pricing of video and banner ads has made them popular with brand advertisers, so ad inventories are solid. Another factor favoring display ads is the proliferation of smartphones, where the smaller screens make display ads more effective than text ads.

The underlying drivers of growth of the display format are the continued increase in the number of users, greater propensity of users to consume online, a growing inventory of advertisements that serve to lower advertisement prices and the need to create brand awareness online.

Search advertising is expected to remain popular, because results are measurable, and therefore, more predictable than other media. This also makes the market more resilient in recessionary conditions, since advertisers are more confident about the results of their spending.

Since ecommerce entails the buying and selling of goods or services over electronic systems, it includes companies that are totally dependent on these sales, those that are gradually moving to it, as well as those that want to use it partially. Therefore, the biggest sellers or the ones growing the strongest are not necessarily those that are solely dependent on the Internet. The following diagrams seek to explain the position of companies primarily dependent on the Internet for the distribution of their goods and services in the context of the Zacks Industry Rank.

Two (Retail/Wholesale and Computer & Technology) of the 16 broad Zacks sectors are related to the ecommerce industry as depicted below.



! We rank t! he 264 industries across the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank.

The outlook for industries positioned at #88 or lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.'

Therefore, Internet Commerce being in the 114th position is in Neutral territory, with Internet Services (185th position) being negative and Internet Services – Delivery (58th position) being positive.

So it is not surprising that the average rank of stocks in the Internet Commerce industry is 3.00, for Internet Services it is 3.15, while for Internet Services – Delivery, it is 2.76. [Note: Zacks Rank #1 denotes Strong Buy, #2 is Buy, #3 means Hold, #4 Sell and #5 Strong Sell].

Earnings Trends

The broader Retail/Wholesale sector, of which Internet Commerce is a part, appears to be turning the corner. While the revenue beat ratio is on the low side (34.1%), the earnings beat ratio is pretty robust at 61.4%.

Total earnings for the sector were up 5.7%, but not nearly as good as the 7.4% growth in the fourth quarter of 2012. Total revenues were up 1.5% from last year compared to a 4.9% increase in the fourth quarter.

The other companies we are discussing in the e-Commerce outlook (Part 2) fall under the broader Technology sector. Here too, we see a fairly strong earnings beat ratio of 63.1%, partially supported by a revenue beat ratio of 45.6%.

However, total earnings in the sector were down 4.4% compared to a 1.7% increase in the fourth quarter. Total revenues did slightly better, increasing 2.9% from last year, down from 5.3% in the fourth quarter.

Initial earnings estimates for 2013 and 2014 indicate double-digit growth in both years for Retail/Wholesale. Technology on the other hand is expected to be flat this year and up double-digits in the next.

OPPORTUNITIES

While many of the compan! ies discu! ssed are expected to do well this year, there are a few stand-out opportunities.

TripAdvisor (TRIP) is doing extremely well right now and the company's decision to invest in offline advertising (TV) makes sense. Traffic continues to surge, as the company continues to add content, both in the U.S. and important international markets.

Another good investment is Yahoo (YHOO), which is altering course under the leadership of Marissa Meyer. The company has been acquiring aggressively to position itself in the mobile segment and last reports indicated growing engagement.

Facebook (FB) is another opportunity worth looking into. The company is cozying up with Samsung, which has taken the mobile market by storm. It is also getting more innovative by the day, which is the only way to success here.

WEAKNESSES

We do not see a lot of weakness, although many of the companies may not be great opportunities either.

Revenue growth prospects for online travel companies Priceline, Expedia and Orbitz Worldwide are good. International expansion is a key factor driving growth for these companies and collaborative agreements with local players will be the key. Lower-value inventories in international markets are on the rise, so margins could be impacted.

Thursday’s ETF Chart To Watch: FXE In Focus After ...

After grinding sideways all week in anticipation of GDP data and FOMC commentary, Wednesday proved to be quite anticlimactic for many as markets responded with a whimper. Stocks were anticipating for the Fed to reveal a more concrete QE tapering timeline; however, policymakers offered no new hints and markets responded with a contained sell off in the last hour .

Our ETF to watch for today is the CurrencyShares Euro Currency Trust , which could experience volatile trading as investors react to the latest ECB rate decision. Analysts are largely expecting for policymakers to leave rates unchanged at 0.50%, although the commentary issued after the rate decision itself may offer further insights.



Chart AnalysisConsider FXE's one-year daily performance chart below. This ETF has been stuck in a range all year; notice how FXE has failed to hold above $132 a share while at the same time bouncing off support at the $127 level (green line) after each failed attempt. It was encouraging to see FXE peer above $131 a share (blue line) in early June of this year; however, selling pressures quickly returned and dragged it back down to virtually the same support level it had previously rebounded off. With FXE trading along resistance again, we feel that investors should hold off from jumping in long given the recent pattern at hand .

Click to EnlargeHistorically, we would expect for FXE to decline in the coming weeks as it battles resistance and profit taking; nonetheless, we would advise conservative investors to avoid taking a short position at these levels because encouraging developments overseas may inspire a breakout that propels FXE past resistance with little warning .

OutlookIf the latest ECB outlook strikes a pessimistic tone among investors, the euro could struggle in the currency market on the day; in terms of downside, FXE has support around $129 a share followed by the $127 level. On the other hand, a surprisingly optimistic outlook may inspire a rally for European ! markets; in terms of upside, FXE has stiff resistance at $133 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

Follow me on Twitter @SBojinov

Disclosure: No positions at time of writing.

Zeke Ashton (Tilson Dividend Fund) Semi-Annual Letter To Investors (June 2013)

We have a rather simplistic investment philosophy: we like to buy assets when the prices of those assets reflect a sizable discount to what we believe them to be worth. We like to sell those assets back to the market when the market is willing to give us what we believe is a full, fair price. The catch is often that in order to buy discounted assets, there usually needs to be some fear and uncertainty reflected in securities prices. As the old saying goes, you can have cheap prices or you can have good news, but you usually can't have both. When it appears that all is well in the world and the market is driving asset prices higher, we tend to be net sellers. That has been especially true for us over the past year, in large part because there has not been a significant market sell‐off during that time that has lasted for more than a few days to allow us to make significant new investments. Our strategy greatly benefits from the occasional market break in order to re‐stock our portfolio with new investments that meet our Fund's risk‐averse, income generating mandate. In a way, we need the occasional market volatility that accompanies fear and uncertainty in order to achieve our strategy's full potential.

It is somewhat unusual for mutual funds to let un‐invested cash build up in their portfolios, because it is an invitation to under‐perform the markets if the market appreciates in the near term. We suspect that very few mutual funds would be willing to let more than 30% of the assets sit fallow, particularly given the historically low rates on money market funds, but in our view the willingness to do so can be a competitive advantage in the right circumstances. The reason for this is that markets tend to run in cycles driven by fear and hope; when the market is going up, it feels like it will never come back down. The reverse is also true. Our view is that the best way to exploit the occasional bouts of market fear is to have an inventory of ideas that one is ready to buy at the r! ight price, and the cash available to carry out that buying. One without the other is useless. The willingness to radically flex our invested balance up and down with market conditions (buying heavily into fear and uncertainty, selling appropriately into happy, fully‐valued market conditions) based on the availability of cheap individual securities or the absence of the same is likely to increase the chances of a good experience over time, and theoretically should reduce risk. The unfortunate reality is that following such a course can lead to uncomfortably long periods of under‐performance which can test the patience of both the Fund's manager and its investors. It is for this reason that we are satisfied with the Fund's recent returns that essentially matched the market's strong performance. We are willing to endure a performance drag in the short term in order to achieve our longer‐term objectives, but it's nice when we don't have to.

On that note, it is important for our investors to understand that there are really only two ways within a mutual fund structure that one can ensure that there will be cash available at the right times to follow this discipline. One way is to have sold assets that have fully appreciated in price and allow cash to build up in the Fund. The other is to have a base of investors that are conditioned to invest more money into the Fund during significant market selloffs. Unfortunately, this latter source of potential cash is rarely available and certainly can't be counted on. This is because it is the natural impulse for most investors to sell assets when the market is down and assets are cheap, only to buy assets when things are "safe" and prices are higher. As noted above, this is pretty much the opposite of what we try to do. The next best thing is to have a reasonable base of Fund investors that mechanically add to their investments over time, for example via an automated investment plan. This allows the manager the comfort of knowing that at l! east some! new capital will become available to buy assets in a market downturn.

As an investor in our Fund, you can help contribute to our chances of longer term potential success if you can condition yourself to make additional investments when market declines are making front page news – or at least not to sell during such times. Usually we will be net buyers at such times, and the more capital we have available, the better. Alternatively, you can make your investments fully mechanical by establishing programs to automatically invest a certain amount on a monthly or quarterly basis.

Portfolio Update

As of April 30, 2013 the Tilson Dividend Fund was approximately 70% invested in equities spread across 30 holdings, offset by notional covered call liabilities equal to approximately 1.1% of the Fund's assets. Cash and money market funds represented approximately 30% of the Fund's assets. The top ten investments represented just over 44% of Fund assets.

As of April 30, 2013, our top 10 positions were as follows:

Position	% of Fund Assets
1) First American Financial Corp. (FAF)	7.0%
2) Apple, Inc. (AAPL)	6.5%
3) Coinstar, Inc. (CSTR)	4.8%
4) EMC Corp. (EMC)	4.4%
5) Coach, Inc. (COH)	4.4%
6) Kohl's Corp. (KSS)	4.1%
7) Blucora, Inc. (BCOR)	4.0%
8) Tetra Tech, Inc. (TTEK)	3.1%
9) OM Group, Inc. (OMG)	3.0%
10) American International Group, Inc. (AIG)	2.8%
TOTAL	44.1%

One area that we believe still offers some value in the market is in high quality, large‐cap technology stocks that may be momentarily out‐of‐favor as they transition from rapid growth to slower growth. In particular, we become interested when that transition is also acco! mpanied b! y a change in capital allocation policies designed to return more cash to shareholders in the form of dividends and share repurchases. We believe that Apple and EMC are two of the absolute highest quality technology businesses in the world and both have recently announced very material, shareholder‐ friendly changes to how they will allocate capital.

Apple is a business everyone knows and likely has an opinion about; the stock price reflects an opinion that Apple's best days are behind the company and that Apple is in for a protracted period of decline. We believe that this negative outlook is unwarranted, and at recent prices net of its cash balance, Apple is priced at a mid‐single digit multiple to the cash flow generated by the business. Even better, Apple recently increased its dividend (the stock yields just under 3%) and also announced that it would repurchase roughly $60 billion worth of shares between now and the end of 2015. This would reduce the share count by approximately 15% at current prices. Our view is that Apple likely enjoyed a "peak year" in 2012, and that intensifying competition is likely to reduce Apple's amazingly high profit margins in the future. However, even accounting for that, we believe the recent stock price discounts too pessimistic a view of how Apple's business will perform over the next several years. In our estimation Apple remains an extraordinarily well‐run business with terrific products in expanding product categories and will remain a relevant and uniquely valuable business for many years into the future.

EMC is the leader in data storage and cloud computing technology and has, in our view, one of the best management teams in the IT industry. EMC was able to lead the trend towards server virtualization through its majority‐owned subsidiary VMware, and it has historically been a leader in data storage, which is a huge and growing market as more and more businesses look to store and utilize customer and business data. The company has a! lso stake! d out an early presence in the nascent trend of network virtualization through its acquisition of a company called Nicira. Like Apple, EMC carries a significant amount of excess cash on the balance sheet and generates enormous amounts of cash flow from its business every year, some of which is used to invest into new technologies via acquisitions and internal research and development. But there is plenty of cash left over, and in June 2013 EMC announced a much more aggressive share buyback program (similar in scope to Apple's announcement) and also initiated a dividend for the first time. EMC, like Apple, is valued by the market at a single‐digit multiple to cash flow net of cash on the balance sheet.

Importantly, while technology businesses are inherently difficult to predict due to rapid changes in product cycles, stock price can be an important risk mitigation element if they are low enough that one doesn't need to project significant growth in the future to justify today's stock price. In the case of both Apple and EMC, the stock prices are low enough to offer us a reasonable margin of safety should both companies suffer near‐term set‐backs as each is priced as if a meaningful and lasting decline in business profitability is an inevitable outcome. Importantly, these aren't businesses that have been left behind in terms of technology trends and need to invest heavily to catch up; these are both leaders in technology with track records of getting out in front of the pack and creating new product categories.

The Chimera Called Risk

Risk is an interesting concept when discussed in the context of investing. It is impossible to measure, and while the financial industry has a lot of ratios that purport to "risk adjust" returns, it is our view that while some of them are interesting none of them are definitive. There are also an infinite number of risks that an investment portfolio is exposed to; including the risk of being under‐exposed. Further, risk means different! things t! o different people. Our primary view of risk when it comes to investing in our Funds is the risk of a significant and permanent capital loss across our portfolio – one that cannot reasonably be recovered within a short period of time by the resumption of normally functioning capital markets. But others may define it differently. Finally, every single investor in our Fund likely has a unique and personal risk threshold; some people get nervous if their account is down relative to where it was yesterday, or last week, or last month. Others will have a very high tolerance for short‐term volatility, particularly if they are confident that they are invested in a vehicle appropriate for their particular goals and risk profile. We make every effort to be risk‐conscious in our investing decisions for the Fund, and we like to think of our ideal investor as one who wishes to have the opportunity for equity‐type returns over a multi‐year horizon but is willing to sacrifice some positive return if necessary in order to enjoy a lower risk profile than a typical equity portfolio. We believe an important "litmus test" for risk is how defensive a Fund is during very significant market declines, and we believe that the Fund scored well on this test during the market downturn of 2008‐2009. Of course, we also think that our Fund is a good fit for those who are looking for equity‐type returns with a meaningful income profile.

Over longer time horizons, we have been pleased to discover that by being focused on reducing risk, we have actually not been required to sacrifice returns. We cannot guarantee that this will be the case going forward, but we would like to think that we will generate satisfactory returns at a risk profile that most people can handle, even if those returns don't always keep up with the broad stock market indices or our benchmark. On the other hand, our number one priority is to avoid permanent capital loss and it is this guideline that drives our activities at the margin.!

Le! t's bring this discussion back to the here and now. The current environment feels very much on the risky side to us; the market is going up, and has gone up for what seems like a long time now. The securities in classic yield and dividend‐bearing categories are extremely expensive, particularly REITS, MLPs, and utility stocks. We see some stocks in these categories that we believe are worth much less than the current stock price, but investors are buying them because the stated (and in our view, unsustainable) dividend yield seems acceptable. For those companies that can legitimately earn and pay their stated pay‐outs, yields are very low by historical standards. In adjacent capital markets, such as high yield and convertible corporate bonds, yields are also quite unappealing. In our view, the prevailing low interest rates (which we believe are also unsustainable for much longer) have caused a dramatic yield compression across the capital markets and force many investors to take on significant risks to achieve a given yield profile.

Outside of the traditional categories for income investors, prices are somewhat more reasonable, and we have been able to use covered call selling in spots to create investments that can justify the deployment of capital. As we've noted in past letters, we believe the flexibility our strategy offers to use the option markets to generate income can be a big advantage, and we believe this is one of those times. Even so, we've not been able to find enough ideas to maintain a fully invested portfolio, and we aren't willing to bend our standards for safety to be more fully invested. We will remain patient for as long as necessary to find compelling opportunities.

As always, we wish to thank all of our investors for your continued trust and confidence in the Tilson Dividend Fund.

Zeke Ashton

Portfolio Manager, Tilson Dividend Fund