Pentagon Spends Nearly $1 Billion a Year on Unemployment

WASHINGTON (AP) -- Even as it faces budget cuts and forced employee furloughs, the Pentagon is spending nearly a $1 billion a year on a program that sends unemployment checks to former troops who left the military voluntarily.

Unemployment Compensation for Ex-Servicemembers, a Labor Department program, is a spinoff of the federal-state unemployment insurance program. The Labor Department says the overall program is meant to help "eligible workers who are unemployed through no fault of their own" such as during layoffs.

But eligibility for the military compensation requires only that a person served in uniform and was honorably discharged. In other words, anyone who joins the military and serves for several years, then decides not to reenlist, is potentially eligible for what could amount to more than 90 weeks of unemployment checks.

The program's cost rose from $300 million in 2003 to $928 million last year.

"It eats away at other parts of the budget, and is for people they no longer have control of," said Air Force veteran Joe Davis, a spokesman for the Veterans of Foreign Wars.

"Why are we spending so much on (the program) at a time when we can't afford to build a new fighter jet?" said Samuel Wright, a former Navy lawyer who helps troops with employment and other legal issues. The Pentagon is facing across-the-board cuts because of automatic spending reductions that took effect this month.

Defense officials and outside experts have become increasingly concerned about the rising cost of the compensation program. And some believe it's evidence of weaknesses in other programs, such as those designed to help veterans find jobs. Some military experts suspect the availability of the money may be discouraging some veterans from actively looking for work and thus falsely inflating data on their unemployment -- data that shows higher joblessness for Iraq and Afghanistan vets than for older ones and for society in general.

Navy Lt. Cmdr. Nathan Christensen, a Pentagon spokesman, said a factor in the higher costs is the increased use of National Guard and Reserve units over the past decade for the wars in Iraq and Afghanistan. That is, once they were activated, came home and were deactivated, they were added to the rolls of ex-active duty troops.

Another factor could be the recession, which resulted in higher overall national unemployment rates, he said.

The program for former military members started under a 1958 law aimed partly at helping troops transition from life in uniform to the private sector. Unlike the larger U.S. unemployment insurance program, there is no paycheck deduction from troops to fund the military one. In the private sector, employers pay a tax to fund compensation checks; in the military program, the service branches are the employer.

Claims are filed with the states. The Labor Department then tallies compensation sent to former military members and sends the bill to their individual service branches, as well as to the National Oceanographic and Atmospheric Administration and U.S. Public Health Service Commissioned Corps, where a smaller number of former employees also are covered.

Former military members are subject to the same state requirements as others when they apply to a given state for the money. All states have a requirement of some kind that recipients search for work while getting compensation, the Labor Department says. States vary in the types of search activity needed and the effort required, with some, for instance, requiring two job interviews within a certain period or different types of documentation on the search.

Nearly 120,000 people filed first-time claims for money in the military program over the last budget year, compared with 71,000 in 2008, the Labor Department says. Well over 515,000 have gotten compensation since 2008.

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Why Cray May Be About to Take Off

Here at The Motley Fool, I've long cautioned investors to keep a close eye on inventory levels. It's a part of my standard diligence when searching for the market's best stocks. I think a quarterly checkup can help you spot potential problems. For many companies, products that sit on the shelves too long can become big trouble. Stale inventory may be sold for lower prices, hurting profitability. In extreme cases, it may be written off completely and sent to the shredder.

Basic guidelines
In this series, I examine inventory using a simple rule of thumb: Inventory increases ought to roughly parallel revenue increases. If inventory bloats more quickly than sales grow, this might be a sign that expected sales haven't materialized. Is the current inventory situation at Cray (Nasdaq: CRAY  ) out of line? To figure that out, start by comparing the company's inventory growth to sales growth. How is Cray doing by this quick checkup? At first glance, pretty well. Trailing-12-month revenue increased 93.4%, and inventory decreased 36.6%. Over the sequential quarterly period, the trend looks worrisome. Revenue dropped 46.0%, and inventory grew 97.3%.

Advanced inventory
I don't stop my checkup there, because the type of inventory can matter even more than the overall quantity. There's even one type of inventory bulge we sometimes like to see. You can check for it by examining the quarterly filings to evaluate the different kinds of inventory: raw materials, work-in-progress inventory, and finished goods. (Some companies report the first two types as a single category.)

A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. As such, we might consider oversized growth in those categories to offer a clue to a brighter future, and a clue that most other investors will miss. We call it "positive inventory divergence."

On the other hand, if we see a big increase in finished goods, that often means product isn't moving as well as expected, and it's time to hunker down with the filings and conference calls to find out why.

What's going on with the inventory at Cray? I chart the details below for both quarterly and 12-month periods.

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FQ = fiscal quarter.

Let's dig into the inventory specifics. On a trailing-12-month basis, raw materials inventory was the fastest-growing segment, up 117.1%. On a sequential-quarter basis, finished goods inventory was the fastest-growing segment, up 219.3%. That can be a warning sign, so investors should check in with Cray's filings to make sure there's a good reason for packing the storeroom for this period. Cray may display positive inventory divergence, suggesting that management sees increased demand on the horizon.

Foolish bottom line
When you're doing your research, remember that aggregate numbers such as inventory balances often mask situations that are more complex than they appear. Even the detailed numbers don't give us the final word. When in doubt, listen to the conference call, or contact investor relations. What at first looks like a problem may actually signal a stock that will provide the market's best returns. And what might look hunky-dory at first glance could actually be warning you to cut your losses before the rest of the Street wises up.

I run these quick inventory checks every quarter. To stay on top of inventory and other tell-tale metrics at your favorite companies, add them to your free watchlist, and we'll deliver our latest coverage right to your inbox.

• Add Cray �to My Watchlist.

3 Reasons to Sell Berkshire Hathaway

As you're probably aware, here at Fool.com we generally hold Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) in high regard. In fact, I just finished outlining�three reasons�it might be a great idea to add Berkshire to your own portfolio.

Even so, we'd be fools (with a small "f") if we didn't recognize there are two sides to every coin, and Berkshire's stock certainly may not be for everyone.

Without further ado, here are three perfectly acceptable reasons you might consider selling your shares in the company Warren Buffett built.

1. You want more from your investments
Why should you own Berkshire if you see better opportunities to put your money to work elsewhere? Don't get me wrong: I still think Berkshire is a solid company and that its shares will probably continue to outperform the broader market indexes over the long run. But that future outperformance will be markedly less pronounced than in years past. After all, considering Berkshire's mammoth market cap of more than $250 billion, it seems a mathematical impossibility for Buffett to maintain his nearly half-century streak averaging 19.7% annual book value growth for much longer.

Heck, Buffett himself wrote in his 2007 shareholder letter:

Berkshire's past record can't be duplicated or even approached. Our base of assets and earnings is now far too large for us to make outsized gains in the future. ... Though we can't come close to duplicating the past, we will do our best to make sure the future is not disappointing.

Consequently, if you're looking for a company with any realistic chance of replicating Berkshire's early gains, you might be better off considering a smaller financial holding company, such as Markel (NYSE: MKL  ) .

2. You need the money elsewhere
Do you have a credit card balance that just won't budge because it's racking up 24% interest? Remember, not even the world's greatest investors can predictably achieve that rate of return over the long run, so it's probably -- no,�definitely -- a bad idea to try to invest your way out of that debt. Instead, though it may pain you to do so, you'll be better off selling your shares of Berkshire to pay down the principal balance.�

Or maybe you're just worried about how you'll buy this week's groceries or pay the mortgage. Once again, that's a perfectly valid reason to sell Berkshire -- or any�stock, for that matter. Going even further, as a general, rule the only money you should keep in the stock market at all is that which you won't need for at least another five years.

3. You want to cut the fat
Last but not least, maybe you've enjoyed Berkshire's outperformance for so long that it now represents an outsized percentage of your overall holdings. To be sure, Berkshire closed last week at all-time highs, so�everyone�who bought shares before then is sitting on paper gains. While there's a great argument to be made for letting your winners run, it's seldom a bad idea to occasionally rebalance your portfolio in an effort to minimize risk.

On a related note, maybe sitting on large gains simply makes you horribly uncomfortable. As a result, if you're convinced you'd feel much better just locking in those profits, by all means do so. After all, not everyone can remain stoic in the face of today's volatile markets, and investing decisions are inherently personal. In the end, no matter what everyone else says, you should do what's necessary to let yourself get some sleep at night.

Thanks to the savvy of investing legend Warren Buffett, Berkshire Hathaway's book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool's premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons to buy as well as important risks to watch out for. Click here now for instant access to Joe's take on Berkshire.

Budget Deficits and Recovery

Over the past week or so, I have spent a lot of time on sovereign debt and the problems being faced by various nations with respect to their budget deficits. I suggest the article “Sharing the Pain” in the March 4, 2010 edition of The Economist as a good compilation of issues relating to the situation many countries are now facing. This piece is contained in the briefing, “Dealing with Fiscal Deficits.”

We can separate the discussion into three categories: the problem, the pain, and the pragmatic response.

First, the problem. History shows us that when economies slow down, budget deficits appear or widen. Revenue growth declines as the need to increase outlays rises. Put this general movement on top of decades of undisciplined management of government budgets and you can get “one hell of a problem.”

The Economist article states that, “deficits in several countries have increased so much and so fast during the economic crisis of the past 18 months or so that it is generally agreed that remedial action will be needed in the medium term. Deficits of 10% or more of GDP cannot be sustained for long, especially when nervous markets drive up the cost of servicing the growing debt.” It continues, “when markets do lose confidence in a government’s fiscal rectitude, a crisis can arise quite quickly, forcing countries into painful political decisions.”

Second, the pain. History shows, according to Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard, that it is highly unlikely that the “rich countries” of the world will experience a burst of rapid and prolonged growth. “Sluggish growth is more likely” and “the evidence offers little support for the view that countries simply grow out of their debts.”

“So, short of debt default or implicit default via inflation, that leaves just two other ways of closing the deficit. Spending must be cut or taxpayers must pay more.” Hence the pain!

Here we can point to the situation in Greece where much of the effort to return some fiscal discipline to the country is falling on cuts in government wages and in social benefits. This has resulted in substantial personal retrenchment and civil unrest. Today we read of a second general strike in the nation that closed all public services. See, “New Strike Paralyzes Greece.”

The deficits are so large in most of the affected countries that minor adjustments to spending or taxes will have little or no impact. The budget adjustments that must be made are quite substantial: hence the depth and breadth of the pain.

In recessions that are relatively minor, government monetary and fiscal stimulus seems to restore economic growth, thereby rectifying the situation and minimizing the pain. But, in a recession of the magnitude of the Great Recession, the government does not seem to be able to “buy” itself out of the trouble. Hence, the spread of the pain.

Furthermore, there is an added difficulty that enters the picture in the more extreme cases. Those that are more affected by the recession and by the adjustments that need to be made in government budgets may come to see the changes as a break in the “social contract” of the country. This government that saw to their welfare, put them to work and sustained them through the minor crises of the past, now seems to be abandoning them. And, for whom? The international financial community!

Obviously, if we get into this state of affairs, the emotions can become quite high, as in Greece.

This leads us into the third category which has to do with what governments can do in such situations. The problem with the situation brought on by large budget deficits and a growing national debt is that there are no good solutions. Anything the government does in an attempt to get the budget under control while encouraging the economy to recover hurts someone.

This is why governments must be very pragmatic in what they propose. Doctrinaire approaches just do not seem to work. There are only two suggestions from the historical perspective that seem to have borne some fruit in the past. The first is that there needs to be some “social cohesion” in the country to achieve some success in the effort to get the country’s budget under control. The second is that governments “should focus on spending cuts rather than tax increases.”

The article in The Economist points to two instances where successful government tightening has taken place in recent memory: Sweden and Canada. In both cases the crisis in the country became acute enough and the ruling governments acted in a sufficiently pragmatic way so that voters finally got behind the efforts. However, this social cohesion was not always achieved on the first attempt.

Some of the social cohesion can be gained by raising some taxes, especially on the “better off.” This may be the “quid pro quo” for the less well off to accept the other things that need to be done. The downside to this is always that the “better off” have more escape hatches that will allow them to avoid any imposition of taxes they feel are excessive. And, many countries in the past twenty years or so have built up reputations as “low tax havens” to attract business. Ireland, for example, lowered its corporate tax rate to just 12.5% and is very reluctant to increase this and harm the climate they benefited so much from. If taxes go up on these people and businesses, they can be very mobile and move to less oppressive environments. Also, tax evasion can be a huge problem, especially against sales or value-added taxes.

So, the burden of fiscal tightening falls on the spending side, but this is not an easy road either. And, when one looks at the “big” targets for cuts, good arguments for not making cuts abound. Military spending is not a major item in many countries needing budget cuts, but it is in the United States. Here, there are two wars being fought and the need to maintain the world’s “top” military machine and keep it current through research and development makes the budget almost non-touchable.

The next major item that comes up on the list to consider is government employment. Over the last 50-60 years, governments throughout the world have exploded in terms of providing employment. Over the last several years the rate of government hiring has gone up, especially in the United States, in an effort to deal with the financial crisis and the Great Recession. Is it realistic to think that governments will shrink in size or in terms of payroll expenses? This is where Greece and Ireland and Portugal and Spain have promised to do something. And, of course, this is where much of the civil unrest has come from.

Next, social programs, a huge item in many government budgets and the primary cause of the expansion of government budgets in the post World War II period. (For more on this see Niall Ferguson’s book “The Ascent of Money: A Financial History of the World.") The Economist suggests that one area that can be rationalized here is the pension system in these countries.
And, there are other ideas available.

The thing the article (implicitly) points out is that the way out of the fiscal dilemma is not easy. But, I suggest three further things that need to be considered. First, leadership. The countries facing the problems discussed here need to have someone out in front that is understood and trusted. The only way out of this situation is pragmatic: not progressive, not conservative, not liberal, not socialist, or any other dogmatic approach. But, to achieve the “social cohesion” necessary for success, there must be leaders that draw people together.

Second, the proposed solutions cannot just force people back into the way things were. One reason for the depth and breadth of the Great Recession is the changing structure of the society and culture. (For more on this see my post here.) If this is true, then the leadership must be forward-looking rather than serving just entrenched interests.

Finally, this will not be easy. As The Economist article closes: “There are many battles over deficits to come. Well chosen policies that foster growth may make them less fierce. They may be bloody even so.” Amen.

NVIDIA Goes Grey

This has been a long time coming for NVIDIA (NASDAQ: NVDA  ) : "Grey" is here. The graphics specialist turned mobile powerhouse has just announced its Tegra processor with an integrated LTE baseband, which promises to intensify its competition with dominant rival Qualcomm (NASDAQ: QCOM  ) .

The news comes just over a month after NVIDIA unveiled its next-generation Tegra 4 processor, previously known as "Wayne." The new Tegra 4i with the integrated cellular connectivity has been known as "Grey" and is a major milestone in the company's mobile ambitions.

Source: NVIDIA.

Make no mistake: this is a big deal.

There's no "I" in Tegra -- until now
The Tegra 4i uses a similar architecture to both the Tegra 4 and previous generation Tegra 3 in that there will be four primary processing cores with a fifth "companion core" for low-power tasks. However, there is a big difference in the specific cores doing the heavy lifting in each chipset.

The new Tegra 4i uses a new Cortex-A9 r4 from ARM Holdings (NASDAQ: ARMH  ) , which collaborated with NVIDIA to develop the chip. The Cortex-A9 r4 is a more power efficient version of the Cortex-A9 found in the Tegra 3, but also isn't as powerful as the Cortex-A15 cores found in the Tegra 4.

Source: NVIDIA.

On the graphics front, the same is true. The Tegra 4i features more GPU cores than the Tegra 3 but less than the Tegra 4. NVIDIA is promising console-quality gaming at full 1,080p HD resolutions with the Tegra 4i.

Integration is key
Cellular integration has been a key differentiator for Qualcomm and a significant competitive advantage. The broader market for discrete baseband modems hasn't been faring too well as a result. The largest buyer in the discrete baseband modem market is Apple, which buys exclusively from Qualcomm.

NVIDIA CEO Jen-Hsun Huang outlined what's currently happening in the market on the last conference call:

You have to invest in Tegra and you have to invest in LTE in order to engage that LTE connected device market. There is no stand-alone modem business anymore and in many of these new 4G connected device marketplace, an integrated approach is necessary and that's the reason why we bought Icera and that's the reason why we're investing in LTE. So that's really one investment. You have to do it all together or you don't do it at all. And so that's one of the reasons why all of the stand-alone modem companies really have gotten out and that's the reason why most of the stand-alone application processor companies have gone now. [Emphasis mine.]

That statement also has negative implications for Broadcom (NASDAQ: BRCM  ) , which just launched a discrete LTE modem that has a chance of grabbing the Apple win from Qualcomm. Broadcom's chip is smaller than rival offerings, which the company hopes will differentiate it from the rest. As far as Apple is concerned, a smaller die size appeals more than integrated cellular connectivity right now, since the iPhone maker uses its own A-X processors.

At the same time, Huang expressed confidence in the company's tablet prospects, with the "vast majority" of NVIDIA's growth coming from that form factor. NVIDIA has had more design wins in tablets than Qualcomm, including high-profile wins in the Google Nexus 7 and Microsoft Surface RT.

We've only just begun
Launching an applications processor with an integrated baseband will give NVIDIA more ammo in its battle with Qualcomm. Intel has also been trying to land design wins in mobile devices, but has negligible traction thus far. However, Intel won't achieve this level of cellular integration with its mobile processors until 2014.

NVIDIA is hoping to see Tegra 4i devices start shipping by year's end, although the majority of gadgets probably won't appear until early 2014. That will also be somewhat of a challenge considering the core being used in the chip. By 2014, the market will mostly be transitioned to more powerful processors so the Cortex-A9 r4 might not look as competitive in a year, especially compared to the regular Tegra 4.

Up until recently, Qualcomm has had a firm grip on both the discrete LTE baseband and integrated LTE baseband markets. Both segments will come under fire from Broadcom and NVIDIA, respectively. This competition is only now really just beginning.

NVIDIA was ahead of the curve launching its mobile Tegra processor, but investing gains haven't followed as expected, with the company struggling to gain momentum in the smartphone market. The Motley Fool's brand-new premium report examines NVIDIA's stumbling blocks, but also homes in on�opportunities that many investors are overlooking. We'll help you sort fact from fiction to determine whether NVIDIA is a buy at today's prices. Simply�click here now�to unlock your copy of this comprehensive report.

Top Stocks To Buy For 3/31/2013-4

Questcor Pharmaceuticals, Inc. (NASDAQ:QCOR) achieved its new 52 week high price of $43.55 where it was opened at $42.15 up 1.83 points or +4.43% by closing at $43.14. QCOR transacted shares during the day were over 1.26 million shares however it has an average volume of 1.16 million shares.

QCOR has a market capitalization $2.70 billion and an enterprise value at $2.53 billion. Trailing twelve months price to sales ratio of the stock was 15.02 while price to book ratio in most recent quarter was 14.96. In profitability ratios, net profit margin in past twelve months appeared at 31.62% whereas operating profit margin for the same period at 47.39%.

The company made a return on asset of 27.79% in past twelve months and return on equity of 38.35% for similar period. In the period of trailing 12 months it generated revenue amounted to $171.93 million gaining $2.76 revenue per share. Its year over year, quarterly growth of revenue was 91.30% holding 98.40% quarterly earnings growth.

According to preceding quarter balance sheet results, the company had $165.71 million cash in hand making cash per share at 2.65. The total debt was $0.00 billion. Moreover its current ratio according to same quarter results was 4.51 and book value per share was 2.76.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 5.52% where the stock current price exhibited up beat from its 50 day moving average price of $34.38 and remained above from its 200 Day Moving Average price of $27.89.

QCOR holds 62.49 million outstanding shares with 55.62 million floating shares where insider possessed 16.51% and institutions kept 81.30%.

ReneSola Issues Strong Preliminary Results, Raises Guidance

Renesola (SOL) provided preliminary Q2 guidance Thursday morning, beating previous estimates while raising guidance for the 2nd half. The company reports official results on August 9th. Here are highlights:

* They expect total shipments for Q2 to be in the range of 250 – 260MW, exceeding previous guidance of 230 – 250MW

* Net revenues are expected to be in the range of $245 – $255 million, exceeding previous guidance of $230 – 250 million.

* Assuming those revenue numbers hold, that would represent a more than 20% increase over last quarter and represent the 4th straight quarter of sequential revenue growth.

* Gross profit margin is expected to be in the range of 28 – 30%, ahead of previous estimates of 21 – 23%. That would be a significant jump over the 17% produced last quarter.

* They are raising guidance for the 2nd half and expect solar product shipments between 600 – 650MW, net revenues between $550 – 570 million and gross margins between 28 – 30%.

Said CEO Li Xianshou, “We expect to see stable pricing in the coming months as demand has remained strong and is expected to continue in the second half of 2010.”

Disclosure: None

Yields of 13%-Plus from the Best-Performing Asset Class of the Decade

One of the most successful high-yield energy investments in the world is a type of security few investors even know exists, let alone own.

They aren't stocks and they aren't bonds, but they are the No. 1 performing asset class of the past 10 years -- up 288%. Stocks are up just 31% during that stretch and bonds, which have been in a major bull market, are up 71%.

Many of these companies have raised dividends at an almost 10% annual pace in the past decade. And their prices have also risen, generating total annual appreciation between 15%-20%.

 

That's why these investments give you the exact same double whammy -- high yields and explosive growth -- that has propelled so many big winners to the top of The 21 Best Income Stocks of the Past Decade I told you about in my previous article.

The companies I'm talking about are called master-limited partnerships -- or MLPs for short -- and they have two overriding characteristics. They are overwhelmingly in the energy business and they usually pay high yields -- 5% to 7% on average... and upwards of 13% for some profitable firms.

What drives the revenue-generating power of these companies is the business they're in.

MLPs are publicly-traded limited partnerships that run critical "midstream" energy infrastructure. That's the pipelines, storage tanks, terminals and ships that move energy from producer to the end-user.

In short, they are the arteries through which our economic lifeblood flows.

And the beauty of MLPs is that while they are energy companies, they are insulated to some extent from price fluctuations in commodities.

For MLPs, it's more about demand. For most of their revenue, it doesn't matter whether oil is at $50 a barrel or $150. As long as the stuff keeps flowing through their pipelines, they profit -- along with their investors.

That's one big reason why MLPs have steadily churned out double-digit total returns year after year, despite volatile commodity prices.

Another reason is because MLPs pay out upwards of 90% of their profits to investors -- making them some of the highest-yielding investments on the planet.

While most investors are drawn to the high yields these businesses throw off, plenty of these companies have also grown impressively, creating sizable capital gains for investors.

For example, Enterprise Products Partners (NYSE: EPD) was launched in 1998. A $10,000 investment back then would now be getting $5,322 a year in distributions -- a 53% annual yield on the initial investment. And that's on top of a capital gain of 149%. Assuming distributions were reinvested, the total gain today would be more than $80,000.

Enterprise is by no means an isolated example. If you're looking for sky-high yields, a quick search shows the top yielder in the group is Niska Gas Storage Partners (NYSE: NKA), which pays more than 13% -- and at least eight other MLPs come close to matching that impressive number.

Now, I'm not saying that MLPs represent a risk-free investment. MLPs tend to deliver steadier results, but they're not without risk.

For example, the Alerian MLP Index -- which is a handy proxy for the major MLPs -- fell sharply in 2008.

>  That said, there are some compelling reasons that I think will drive MLPs higher during the next three to five years -- and maybe into the much longer term.

Global demand for energy has been, and continues to be staunch. In fact, we've only seen one decline in annual energy consumption in the past 30 years.

Meanwhile, the spread of production technologies such as directional drilling and hydraulic fracturing have opened huge new sources for oil and gas production from shale formations in the United States. According to industry insiders, the energy being produced from the shale in places such as Eagle Ford in south Texas is already outstripping the available pipeline and storage capacity. This shale boom has led to a big increase in the need for the energy infrastructure that these MLPs provide.

Manhattan Housing Inventory Vanishes

Homebuyers who waited on the sidelines to enter into Manhattan’s elite real estate market are now finding they may have waited too long as the New York island’s inventory plunged over a short five-week period. Experts say millions of dollars and perfect credit is of no consequence in a market that is bereft of real estate. Experts say it’s the result of a lack of building following the fallout from the U.S. recession and resulting housing crisis, and now bidding wars are driving real estate prices through the roof. Manhattan, though, is not the only place as much of the country faces an inventory shortage as the market recovers. For more on this continue reading the following article from TheStreet.

In the tiny island of Manhattan, supply of homes has always been limited and homeownership has been the privilege of a lucky few.

But the supply-demand dynamic in the city is now so out of whack that even a million dollars in the bank and pristine credit doesn't do you much good.

Buyers who are re-entering the housing market after waiting on the sidelines for so long are waking up to the cold reality that there are few homes left to buy.

"The market is absolutely insane," says Jacky Teplitzky, managing director at Douglas Elliman Real Estate. "It has completely changed in the last five weeks. There is just no inventory."

Manhattan inventory has been steadily declining over the last couple of years as new developments stalled in the aftermath of the financial crisis and sellers held off from listing their homes in a tough market. But the inventory levels are now at their lowest levels in over a decade, as you can see from this stunning chart from real estate appraisal company Miller Samuel.

The absorption rate -- the number of months it would take to sell the amount of listings in the market at the current sales pace -- fell to 5.5 months at the end of the fourth quarter of 2012, compared to the 10-year average of 9.3 months. Listings have dropped even further since then in the early months of January and February.

Doug Perlson, CEO of online real estate company RealDirect.com says prices are on the rise with bidding wars among buyers starting to drive offers above the asking price. "It is amazing how in such a relatively short time, Manhattan has gone from a neutral [housing] market to a buyers' market to a sellers' market now because of a lack of inventory. It is frustrating for buyers who have been sitting out for so long only to find out that there is nothing left."

Manhattan is certainly not the only market with a shortage of homes for sale. Nationwide, inventory levels are at a 13-year low, with the absorption rate last reported at 4.2 months. In a balanced market, it should take six months to clear all the existing inventory.

Supply of homes has plunged nationally for a number of reasons. New home construction came to a standstill following the bust. Foreclosure activity has declined reducing the inventory of existing homes in the market. Some homeowners cannot sell their homes because they continue to owe more than their homes are worth. Others can't sell because they can't qualify for the loan they would need to "trade up" to a bigger home, owing to tight credit conditions.

In Manhattan, however, there are other factors at play. Unlike the rest of the country, there are relatively fewer underwater borrowers in the city and foreclosures are also low.

The shortage of supply stems from two factors. Post crisis, almost all new construction has taken place at the high end of the market. Many projects that were originally meant to be condos were also converted into rentals because they were seen as safer bets in the depths of the recession.

But as Jonathan Miller, CEO of Miller Samuel points out, this explains only part of the problem as new construction accounts for only 10% to 20% of supply.

The real reason why there are not enough listings, he says, is because potential sellers are staying put in their homes due to lack of supply. "When sellers sell, they become buyers or renters," says Miller. "If you are a homeowner and you want to trade up, but can't find anything to buy, even though you still have plenty of equity in your home, what do you do? Nothing." says Miller.

Perlson of RealDirect.com says the inability to trade up to larger homes has dramatically reduced the supply of middle-tier housing, effectively freezing the market.

Some of the market dynamic also has to do with changing demographics. Previously, people moved to the suburbs once they had children. Now more and more families are opting to remain in the city, one reason why competition for larger three bedroom apartments is particularly stiff.

Then there has been a steady flow of demand from rich foreign buyers from countries such as Brazil, Russia and China who see New York as a safe haven for their second or third home. Teplitzky of Douglas Elliman says about 40% of her clientele tend to be international buyers.

Brokers expect tight supply conditions in the market to last for the next 12 to 18 months, as it would take time for new construction to come into the market.

Miller does not see supply easing in Manhattan or elsewhere for that matter, unless credit conditions improve and sellers can get a loan that would allow them to buy a bigger home. The catchphrase he uses to describe the constrained supply conditions nationwide is "housing is local, but credit is national." Tight credit conditions, he points out, have contributed to rising home prices because they have choked supply.

In Manhattan, demand for housing is not going away, although the process of buying a home is proving ever more frustrating for buyers. The city's sky-high rentals continue to rise and fear that interest rates will not stay low forever means buyers aren't prepared to wait on the sidelines for much longer.

"People are tired of waiting," says Teplitzky. She expects prices to rise between 5% and 10% this year and advises her clients to act quickly. "Get your pre-approval from the bank, keep your documents ready and have your attorney ready to go. You need to work ahead of time."

Perlson expects the first quarter to see a huge jump in prices in Manhattan and Brooklyn. "It is going to be a very hot quarter. People who spent the first two months of the year bidding and losing out on properties are trying to get a deal done by spring so that they get a place to move in. There are a lot of people chasing apartments and we are seeing aggressive bids, some significantly over ask."

Are there concerns of a brewing bubble? "We are still in a rational housing market," says Kathy Braddock, co-founder of Rutenberg Realty. "Everything is not flying off the shelf. When you hit the sweet spot, you get multiple offers. But there is no stupid money."

Miller does worry that prices might be rising a little too quickly in some areas, but believes that buyers this time are a little more cautious. "Back then [in the boom], buyers were panicked. This time they are more skeptical and less willing to become totally irrational. But if inventory continues to fall and the economy improves a little bit, that could change," he warns.

Coming Soon: A Market for Used E-Books

What if you could throw a yard sale to get rid of your old digital content? Songs, e-books, games, movies -- all that stuff you downloaded forever ago but don't really use anymore?

Right now, it's just not practical, or legal, to sell the digital content we've amassed over the years. The terms we agree to when we download the stuff tell us that we're technically renting it anyway. And even if we could legally sell our used songs or books, there's no good way to actually transfer ownership to a willing buyer.

But Amazon.com (NASDAQ: AMZN  ) and Apple (NASDAQ: AAPL  ) are busy trying to change all that.

Digital marketplaces
Amazon received a patent in January to set up a "secondary market for digital objects." According to the filing, the company could create an electronic marketplace where users have the option to give up their rights to the content they've purchased, and to transfer those rights to someone else. In other words, they could sell used digital content just like they can hawk their stuff in the physical marketplace.

And Apple just last week received a patent along those same lines. The Mac maker's filing imagines a digital bazaar where users can sell previously owned stuff, with a portion of the proceeds going to the creator or publisher. A cut could also go to the original seller, of course, which in this case would be Apple.

Almost like new
But I'm sure both companies see the potential for profits here. After all, the market for used physical goods is massive. eBay (NASDAQ: EBAY  ) built its gigantic marketplace around the sale of secondhand goods. And while that's less of a focus for the company now, it still lists more than 350 million items, many of which are slightly used or refurbished. Amazon has its own thriving business for used products offered by third-party sellers. People value the freedom to trade in their wares and grab a portion of the purchase price back after they're done with them.

That's just as true for previously owned video games. GameStop (NYSE: GME  ) makes a killing on used gaming software and hardware. Those products accounted for 18% of the retailer's revenue last quarter, but a whopping 39% of its gross profit.

And we know that gamers cherish the freedom to trade in those used games. With rumors swirling that Microsoft and Sony have been thinking about banning used games from their next-generation consoles, GameStop had a warning for these companies: Gamers will not be pleased. "We know the desire to purchase a next-generation console would be significantly diminished if new consoles were to prohibit playing pre-owned games, limit portability, or not play new physical games," a GameStop spokesman told Bloomberg news.

It's all about the system
And that gets to the main reason Amazon and Apple need a digital marketplace: More consumer freedom is essential to their online and offline strategies. Both companies have thriving ecosystems that lean heavily on selling their own hardware. Spurred along by the explosion in sales of iDevices, Apple just booked its 25 billionth song download last month. iTunes generated $7.5 billion in sales just last year.

Amazon has been flooding the marketplace with its own digital stuff, too. Kindle e-reader sales regularly top the company's best-seller product lists. And e-book sales passed those of print books almost two years ago. At the time, CEO Jeff Bezos said, "We had high hopes that this would happen eventually, but we never imagined it would happen this quickly."

Foolish bottom line
Apple and Amazon might not have imagined how fast we consumers would embrace the idea of shelling out for digital content. But now that the trend is here to stay, it makes sense to bring some order and flexibility to the market for digital stuff. The companies' massive business success over the years means that many of their customers have built up big libraries of downloads that are burdened by strict content-management rules.

To give their users more freedom in dealing with all the content they have been selling us -- and to keep the sales momentum going -- Amazon and Apple have every reason to figure out some answers to the tricky issues of digital content management. We need a marketplace for secondhand digital goods. The sooner, the better.

Read on
Amazon is the king of the retail world right now, but at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of its competitors'. We'll tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon in our Motley Fool premium report. Simply click here now to get started.

Painkiller sales soar, spread across U.S.

NEW YORK�Sales of the nation's two most popular prescription painkillers have exploded in new parts of the country, an Associated Press analysis shows, worrying experts who say the push to relieve patients' suffering is spawning an addiction epidemic.

From New York's Staten Island to Santa Fe, N.M., Drug Enforcement Administration figures show dramatic rises between 2000 and 2010 in the distribution of oxycodone, the key ingredient in OxyContin, Percocet and Percodan. Some places saw sales increase sixteenfold.

Meanwhile, the distribution of hydrocodone, the key ingredient in Vicodin, Norco and Lortab, is rising in Appalachia, the original epicenter of the painkiller epidemic, and in the Midwest.

The increases have coincided with a wave of overdose deaths, pharmacy robberies and other problems in New Mexico, Nevada, Utah, Florida and other states. Opioid pain relievers, the category that includes oxycodone and hydrocodone, caused 14,800 overdose deaths in 2008, and the death toll is rising, the Centers for Disease Control and Prevention says.

Nationwide, pharmacies received and ultimately dispensed the equivalent of 69 tons of pure oxycodone and 42 tons of pure hydrocodone in 2010, latest year for which statistics are available. That's enough to give 40 5-mg Percocets and 24 5-mg Vicodins to every person in the United States.

The DEA records shipments from distributors to pharmacies, hospitals, practitioners and teaching institutions. The drugs are eventually dispensed and sold to patients, but the DEA does not keep track of how much individual patients receive.

The increase is partly due to an aging U.S. population with pain issues and to a greater willingness by doctors to treat pain, says Gregory Bunt, medical director at New York's Daytop Village chain of drug treatment clinics.

Sales are also being driven by addiction, as users become physically dependent on painkillers and begin "doctor shopping" to keep the prescriptions coming, he said.

"Prescription medications can provide enormous health and quality-of-life benefits to patients," Gil Kerlikowske, Director of National Drug Control Policy, told Congress in March. "However, we all now recognize that these drugs can be just as dangerous and deadly as illicit substances when misused or abused."

Opioids like hydrocodone and oxycodone can release intense feelings of well-being. Some abusers swallow the pills; others crush them, then smoke, snort or inject the powder.

Unlike most street drugs, the problem has its roots in two disparate parts of the country � Appalachia and affluent suburbs, said Pete Jackson, president of Advocates for the Reform of Prescription Opioids.

"Now it's spreading from those two poles," Jackson said.

The AP analysis used drug data collected quarterly by the DEA's Automation of Reports and Consolidated Orders System. The DEA tracks shipments sent from distributors to pharmacies, hospitals, practitioners and teaching institutions and then compiles the data using three-digit ZIP codes. Every ZIP code starting with 100-, for example, is lumped together into one figure.

The AP combined this data with census figures to determine effective sales per capita.

A few ZIP codes that include military bases or Veterans Affairs hospitals have seen large increases in painkiller use because of soldier patients injured in the Middle East, law enforcement officials say.

In addition, small areas around St. Louis, Indianapolis, Las Vegas and Newark, N.J., have seen their totals affected because mail-order pharmacies have shipping centers there, said Carmen Catizone, executive director of the National Association of Boards of Pharmacy.

Many of the sales trends stretch across bigger areas.

In 2000, oxycodone sales were centered in coal-mining areas of West Virginia and eastern Kentucky � places with high concentrations of people with back problems and other chronic pain.

But by 2010, the strongest oxycodone sales had overtaken most of Tennessee and Kentucky, stretching as far north as Columbus, Ohio and as far south as Macon, Ga.

Per-capita oxycodone sales increased five- or six-fold in most of Tennessee during the decade.

"We've got a problem. We've got to get a handle on it," said Tommy Farmer, a counterdrug official with the Tennessee Bureau of Investigation.

Many buyers began crossing into Tennessee to fill prescriptions after border states began strengthening computer systems meant to monitor drug sales, Farmer said.

In 2006, only 20 states had prescription drug monitoring programs aimed at tracking patients. Now 40 do, but many aren't linked together, so abusers can simply go to another state when they're flagged in one state's system. There is no federal monitoring of prescription drugs at the patient level.

In Florida, the AP analysis underscores the difficulty of the state's decade-long battle against "pill mills," unscrupulous doctors who churn out dozens of prescriptions a day.

In 2000, Florida's oxycodone sales were centered around West Palm Beach. By 2010, oxycodone was flowing to nearly every part of the state.

While still not as high as in Appalachia or Florida, oxycodone sales also increased dramatically in New York City and its suburbs. The borough of Staten Island saw sales leap 1,200%.

New York's Long Island has also seen huge increases. In Islip, N.Y., teenager Makenzie Emerson says she started stealing oxycodone that her mother was prescribed in 2009 after a fall on ice. Soon Emerson was popping six pills at a time.

"When I would go over to friends' houses I would raid their medicine cabinets because I knew their parents were most likely taking something," said Emerson, now 19.

One day she overdosed at the mall. Her mother, Phyllis Ferraro, tried to keep her daughter breathing until the ambulance arrived.

"The pills are everywhere," Ferraro said. "There aren't enough treatment centers and yet there's a pharmacy on every corner."

The American Southwest has emerged as another hot spot.

Parts of New Mexico have seen tenfold increases in oxycodone sales per capita and fivefold increases in hydrocodone. The state had the highest rate of opioid painkiller overdoses in 2008, with 27 per 100,000 population.

Many parts of eastern California received only modest amounts of oxycodone in 2010, but the increase from 2000 was dramatic � more than 500% around Modesto and Stockton.

Many California addicts are switching from methamphetamine to prescription pills, said John Harsany, medical director of Riverside County's substance abuse program.

Hydrocodone use has increased in some areas with large Indian reservations, including South Dakota, northeastern Arizona and northern Minnesota and Wisconsin. Many of these communities have battled substance abuse problems in the past.

Experts worry painkiller sales are spreading quickly in areas where there are few clinics to treat people who get hooked, Bunt said.

In Utica, N.Y., Patricia Reynolds has struggled to find treatment after becoming dependent on hydrocodone pills originally prescribed for a broken tailbone.

The nearest clinics offering Suboxone, an anti-addiction drug, are an hour's drive away in Cooperstown or Syracuse. And those programs are full and are not accepting new patients, she said.

"You can't have one clinic like that in the whole area," Reynolds said. "It's a really sad epidemic. I want people to start talking about it instead of pretending it's not a problem and hiding."

Associated Press interactive producers Phil Holm and Michelle Minkoff contributed to this report.

Get Paid to Lose Weight

A report from the Mayo Clinic at this month's American College of Cardiology scientific meeting suggest that patients given a financial incentive to lose weight are more likely shed pounds than those that weren't given the option.

Participants in the study were paid $20 for every month they met their goal of losing four pounds per month up to their predetermined goal weight. Participants who didn't meet the goal had to pay $20 to a bonus pool for each month they didn't meet their goal. The bonus pool was then raffled off at the end of the study.

The financial incentive encouraged participants to stick with their weight loss program. 62% of participants offered the financial incentive completed the study compared to 26% in the control group that weren't offered incentives.

Naturally sticking with it caused patients to lose more weight over the one-year study: 9.08 pounds for those given the incentive, compared with 2.34 pounds for the non-incentive group.

That's great, but....
I know what you're thinking: It sounds great, but who's going to pay people to lose weight? Hopefully the people that would benefit indirectly from the weight loss.

Health insurers usually pass along higher medical costs incurred by obese patients. If 25% of members are obese and they add $2,000 in medical costs, everyone's premiums have to go up by $500.

There are some employers that self-insure. They're large enough that they can form their own health insurance pool, paying more for some employees and less for others, but averaging out to less than they'd have to pay for traditional health insurance.

Other employers cover all or some of a traditional health insurance, but the cost they negotiate is someone dependent on the expected medical costs the health insurers calculate they'll have to pay out. A company with an older work force, for instance, will be quoted higher premiums than a company made up of primarily younger workers who don't get sick as often.

For employers paying medical bills -- either directly or through insurance premiums -- there would seem to be a very good incentive to get employees healthier, saving them money in the long run. Healthier employees could also be more productive. To save that money, companies might be willing to shell out some cash to help encourage employees to shed pounds and get healthier.

Provisions in the Obamacare law allow employers to charge employees who have a high body mass index or other negative health indicators like smokers more than their healthy counterparts. That sounds a lot like the $20 that participants in the study had to pay to the bonus pool when they didn't reach their goal, although the increase could be a lot more than $240 per year.

This is good news for obesity drugmakers
If companies are willing to pay employees to lose weight, it seems reasonable to assume they might also be willing to shell out cash to pay for obesity drugs. What was once strictly a cosmetic issue has turned into a real health benefit. Obesity drugs are expensive, but so are diabetes medications; obesity is a major risk factor for developing type 2 diabetes.

Even if employers aren't willing to include obesity drugs in their health insurance plans, employees might have an incentive to pay for VIVUS' (NASDAQ: VVUS  ) Qsymia, Arena Pharmaceuticals' (NASDAQ: ARNA  ) Belviq, or Orexigen's (NASDAQ: OREX  ) Contrave on their own if they know paying for them now will lower the cost of their health insurance in future years.

You could extend this line of thinking to Weight Watchers (NYSE: WTW  ) or Nutrisystem (NASDAQ: NTRI  ) that aren't typically covered by health insurers, but may increasingly be offered as a benefit to employees looking to lose weight. Same goes for gyms, such as Life Time Fitness, that might see a boost from employers offering free or reduced memberships to encourage employees to be healthy.

No magic bullet
None of these are going to solve the U.S. obesity problem on their own. The financial incentives only helped participants lose an additional 7 pounds over a year. Obesity drugs are only marginally better. Diet and exercise can be effective, but they're no fun, which is why many people regain the weight they lose.

The best option is likely to be a combination of programs to help patients lose weight. Let's hope employers can see the benefit and are willing to foot the bill.

Who will win the obesity drug market?
Can VIVUS pick up its lagging sales and fend off the competition, or will Arena Pharmaceuticals reign supreme in the obesity space? If you're in the dark, grab copies of The Motley Fool's premium research reports on VIVUS and Arena Pharmaceuticals to stay up to date. Senior biotech analyst Brian Orelli gives investors the must-know information, including an in-depth look at the obesity market and reasons to buy and sell both stocks. Click now for an exclusive look at�Arena�and�VIVUS -- complete with a full year of free updates -- today.

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Lockheed Lands $256 Million in Missile, Other Pentagon Contracts

Lockheed Martin (NYSE: LMT  ) was awarded no fewer than five separate Department of Defense contracts Friday, worth a combined a $256.6 million. The bulk of the money came in the form of a single indefinite-delivery/indefinite-quantity, cost-plus-fixed-fee award to support the operation of the Joint Land Component Constrictive Training Capability -- a high-level military simulator for training officers at the brigade level and above. Lockheed was awarded a contract with a maximum ceiling value of $146 million to support this work through March 31, 2018.

Other, smaller awards included:

• A $65 million contract modification on a foreign military sales contract to work on the Aegis Weapon System Modernization program in Japan.�Work on this contract is expected to be complete by January 2017.
• A second foreign military sales contract worth $19.9 million (cost-plus-incentive-fee) to support the Patriot Advanced Capability Missile Support Center's work in the Netherlands, Japan, and the United Arab Emirates. No completion�date was specified on this contract.
• $18.7 million to provide engineering and technical support for British Trident II Missile Systems, ensuring that the U.K.'s Fleet Ballistic Missile Program is meeting "planned milestone schedules and emergent requirements." This contract runs through March 2015.
• $7 million in a firm-fixed-price contract to perform unspecified "weapons systems support" at Luke Air Force Base in Arizona through March 31, 2014.

The Fool Looks Ahead

There's never a dull week on Wall Street. Let's go over some of the news that will shape the week to come.

Monday
The market kicks off with MFC Industrial (NYSE: MIL  ) and Cal-Maine (NASDAQ: CALM  ) reporting their latest quarterly results on Monday.

MFC is a global commodity supply chain company that used to be known as Terra Nova Royalty. It boosted its dividend rate earlier this year.

Cal-Maine's specialty is shelled eggs. Analysts see the Mississippi-based company generating a profit of $1.55 a share, well ahead of the $0.96 it laid a year earlier.

Tuesday
Tesla Motors (NASDAQ: TSLA  ) will be in the spotlight on Tuesday. CEO Elon Musk sent out an interesting tweet a few days ago, pumping up an upcoming announcement that will have him putting his money where his mouth is. The announcement will probably be about investing more in the company or paying down Tesla's debt.

We'll see what Musk is excited about on Tuesday.

Wednesday
Mitcham Industries (NASDAQ: MIND  ) checks in on Wednesday. The supplier of geophysical equipment is probably in for a rough quarter. Analysts see profitability being cut nearly in half on a 20% drop in revenue.

Thursday
Franklin Covey (NYSE: FC  ) checks in on Thursday. The provider of training and consulting services is expected to see its quarterly profit nearly double to $0.11 a share. Earlier this month, Franklin Covey was celebrating making the cut for the sixth year in a row on TrainingIndustry.com's list of Top Sales Training Companies.

Friday
The market is quiet on the first Friday of the new quarter, but things should pick up in a few weeks once earnings season starts again.

Beyond next week
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.

Microsoft May Be in Better Shape Than You Think

As much as the blogosphere and Wall Street analysts tend to love Apple (NASDAQ: AAPL  ) , they tend to malign Microsoft (NASDAQ: MSFT  ) . One of the Achilles' heels that the company has faced in the smartphone wars is that its app store has not been on par with Apple's. When Microsoft recently made a major push to "catch up," even this move was not particularly well received by the Street. Ultimately, Microsoft is making important progress in smartphones, tablets, and gaming, while maintaining its core enterprise business. The naysayers may shout loudest, but I believe Microsoft remains an absolute must-own name in the space.

The app store shuffle
There can be no doubt that Microsoft has a truly Herculean task ahead of it if it is going to assemble an app store that can be seriously discussed in the context of Apple's iTunes or Google's (NASDAQ: GOOG  ) Play. To help address the problem, Microsoft debuted a development initiative called "Keep the Cash." Under the promotion, developers can earn $100 for every app that they publish for either Windows Phone or Windows 8 through the company's app store. The program caps the awards at $2,000 per user and a total of 10,000 awarded apps, meaning the company will spend up to $1 million�to keep building out it offerings.

Rather than being praised for the initiative, one analyst, Patrick Moorhead of Moor Insights & Strategy, questioned the message the program sends.�Other analysts questioned what level of developer would be incentivized by a paltry $100, and others expressed concern that the program would lead to high volume, not high-quality apps.

This seems to be another example of Microsoft's poor reputation leading the story. While Microsoft currently has around 50,000 apps, it is pushing to grow this number. In many cases, being able to boast a high number is as important as what those apps actually do. The core apps that most people use are available across platforms in many cases. As the Windows OS becomes more popular, more and more commercial apps will be offered on Windows, so a push to hit some critical mass seems like something to be applauded, not ridiculed.

To put this in some context, at least in my opinion, when Google's Android was sitting where Windows currently sits, the naysayers were just as loud. Why would anyone buy Android when there are so many more apps available for iPhone? Google ignored the doubters and swelled to own the global market. Furthermore, and I know that this is not specifically the point, but of the 700,000 apps available on both Android and iTunes, how many are regularly used? According to some reports as many as 400,000 of those apps have never been downloaded. But 700,000 is still bigger than 50,000.

Other developments
Beyond apps, Microsoft is expected to release its latest video game console in the next few days. The new device, Xbox 720, will face stiffer competition from mobile devices than any previous iteration, but the takeaway is that Microsoft is continuing to spread its assault on the market across segments. With the increasing base represented by Windows Phone and the company's Surface and Surface Pro tablets in mobile, it is developing new ways to interact with consumers. Taken alone, none of these may be Google- or Apple-worthy, but it forms the base for a growing ecosystem that can be very powerful. Furthermore, with Microsoft's unwavering might in the enterprise arena, a swelling consumer customer base has potential.

The latent ecosystem
While Microsoft has not really pushed the issue yet, as each of its recent new releases begin to take hold, I would be looking for the company to make a major push at solidifying an ecosystem. The company's smartphones, tablets, video game consoles, cloud solutions, and, of course, Windows 8 on your PC may not alone have made huge impacts, but were several of these portals to be combined, the result could help rocket Microsoft to a much stronger position than the company has seen in years.

Microsoft's approach has never been one of glitz and show like Apple, or even one of being everywhere like Google; it seems to prefer quiet competence. What the company does possess, however, is a growing footprint in a wide range of area. If and when it finds a way to leverage these together it will be a veritable force.

Rather than focusing on the fact that the Surface Pro is well behind the iPad, or that Android sales dwarf Windows Phone sales, I suggest looking at how broad Microsoft's reach has become. As it gets better and better in each of these areas, it may surprise you. As such, keeping even a small allocation to the stock is wise.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

Futures Falling; Cliffs Plunges 13%

Futures for the Standard & Poor’s 500 and Dow Jones Industrial Average are down about 0.4% this morning, ahead of Wednesday’s bell. The S&P closed yesterday within just a couple of points of its all-time high.

Shares of Cliffs Natural Resources (CLF) are tumbling, down as much as 13% in premarket action. The stock was downgraded this morning by Morgan Stanley, and its price target cut to $14 a share (it closed at $21.43 on Tuesday).

We believe Cliffs� key US iron ore business (~60% of 2012 EBITDA) will be halved in coming years as new Great Lakes supply cuts into volumes and pricing.More bad news to be priced in:�CLF stock has dropped ~44% YTD on deteriorating operational outlook (especially for Bloom Lake) and a surprise dividend cut and equity/convertible preferred raise. We see further downside as two issues are not priced in by the market:1) Deteriorating US iron ore market balance:�We believe that the supply-demand balance in the isolated Great Lakes pellet market will deteriorate as up to ~13 mt of new supply comes online over the next ~3 years in a ~60 mt market. As the only non-steelmaking producer in the region, we believe CLF will be most impacted. US Iron Ore segment EBITDA could halve vs. 2012 levels.2) Reserve depletion:�The company�s Asia-Pacific Iron Ore segment will deplete its reserves in ~6 years.

As if that wasn’t bad enough, analysts at Credit Suisse lowered their target price for the stock to $10, writing:

We believe that there are structural changes taking place in CLF�s key Great Lakes market that will compromise its pricing power and erode the earnings potential of the US Iron Ore business.

It wasn’t all bad for Cliffs, though: Goldman Sachs raised their rating to Neutral, based largely on the stock’s valuation. I’ve written about Cliffs before; the stock is one of the worst performers of the year, down 44% in 2013 — and that’s before a likely big drop today.

Shares of Boeing (BA) are down about 0.6% ahead of the bell. A Reuters report suggests the 787 Dreamliner may face hurdles even if it passes new safety tests and is permitted to return to the sky.

Aviation experts and government officials say the Federal Aviation Administration may shorten the permitted flying time of the 787 on certain routes when it approves a revamped battery system. The plane was grounded worldwide two months ago after lithium-ion batteries overheated on two separate aircraft.

Losing extended operations, or ETOPS, would deal a blow to�Boeing�and its airline customers by limiting use of the fuel-saving jet, designed to lower costs on long-distance routes that don’t require the capacity of the larger Boeing 777. Such a loss could even lead to cancellation of some routes.

Also falling are shares of Apollo Group (APOL), parent of the for-profit University of Phoenix, which are down 3.5%. The stock fell 2.7% yesterday and is down 40% in the past six months.

Top Stocks For 3/29/2013-2

EVCARCO (OTC.BB:EVCA) is pioneering a new way to meet the demands of 21st century car buyers. EVCARCO is bringing to market eco-friendly vehicles with an emphasis on performance and affordability and the latest in developed technology. The board of EVCARCO is pleased to announce that, pursuant to a strong demand from the US Federal Government to meet environmental standards in relation to its Federal Military fleet, EVCARCO will be working with VENTA Inc. and several third party organizations to create Military grade AEV and Hybrid Diesel Electric units.

The move is part of an EVCARCO recent corporate shift aimed at increasing revenue through contracting and sourcing of units suitable for Government RFPs.

Scott O’Neal, Chief Operation Officer, stated, “We feel that working in conjunction with our corporate sales and commercial fleet division, the addition of a high revenue entity aimed at Military contracting is a significant move for EVCARCO and the corporate vision.”

EVCARCO has been working on projects with the US Federal Government as announced in previous releases since first quarter of 2010; the trials have given the management of EVCARCO insight into the needs and requirements of the Federal Government and, with this knowledge, the corporation stands at a significant advantage in respect to sourcing specific AEV and Hybrid Units for the Military.

EVCARCO is the first automotive retail group dedicated to deploying a coast-to-coast network of eco-friendly dealerships and vehicles. EVCARCO is bringing to market the most advanced clean technologies available in plug-in electric and alternative fuel vehicles. EVCARCO has developed a franchised dealer network allowing growth into most US States by 2012.

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Multiband Corporation, (NASDAQ:MBND), a leading Home Service Provider (HSP) for DIRECTV and the nation’s largest DIRECTV Master System Operator (MSO) for Multiple Dwelling Units (MDU�s), recently announced financial results for the second quarter and six months ended June 30, 2010.

Financial Highlights

• Second quarter revenues were up 7.7% sequentially to $64.9 million from $60.2 million in first quarter 2010 but down 3.7% compared to $67.4 million for the quarter ended June 30, 2009.
• Second quarter 2010 gross margins were 32.5% compared to 15.6% for the year-ago period.
• Operating income increased to $5.4 million compared to an operating loss of $7.7 million in the year-ago period, a $13.1 million swing to the positive.
• Net income for the quarter attributable to common stockholders was $2.0 million, or $0.21 per share compared to a net loss of $7.2 million, or $0.75 per share loss in the year-ago period, a $9.2 million positive swing.
• EBITDA, a non-GAAP measure, substantially exceeded guidance and was a record $7.6 million for the second quarter of 2010, up $12.6 million from $5.0 million loss for the same period in 2009 and up from $3.1 million sequentially in the first quarter of 2010.
• Negotiated a $10 million funding opportunity with Lincoln Park Capital Fund, LLC to be utilized at the Company�s discretion for working capital or other general corporate purposes.

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Multi-Color Corporation (Nasdaq: LABL) recently announced first quarter increases in net revenues and gross profit.

“Our June quarter has shown encouraging signs in revenue and underlying profit growth,” stated Nigel Vinecombe, President and CEO of Multi-Color Corporation. “While we remain cautious about brand volumes, we continue to develop new business and productivity gains to drive profit improvement.”

First quarter highlights included:

• Net revenues increased 6% to $74.1 million from $69.7 million. The increase was due to a 7% increase in sales volume and mix and a 3% favorable foreign exchange impact, partially offset by a 4% unfavorable pricing impact. The sales volume increase was primarily due to higher volumes within our North American customer base. The unfavorable pricing impact was due to reduced pricing schedules associated with new agreements entered into in the second quarter of fiscal 2010 with three of our largest customers.
• Gross profit increased $2 million or 16% compared to the prior year due to higher sales volumes and improved operating efficiencies. Gross margins increased to 20% from 19% of sales revenues compared to the prior year.
• Selling, general and administrative (SG&A) expenses, adjusted for special charges, increased by 11% compared to the prior year. The special charges included in SG&A expenses for the first quarter of fiscal 2011 were primarily comprised of $1.3 million in severance and accelerated stock compensation charges and $535,000 for acquisition-related expenses. The increase in adjusted SG&A is primarily due to foreign exchange and higher professional fees.
• Operating income decreased slightly compared to the prior year to $6.6 million from $6.7 million. Excluding the impact of the special charges from both periods, adjusted operating income increased 20% to $8.4 million from $7 million due primarily to the increase in sales volume and improved operating efficiencies.
• Interest expense remained steady at $1.2 million compared to the prior year due to a $15.7 million or 16% reduction in bank debt offset by the impact of higher interest rates and higher interest expense related to the present value adjustment for our former corporate headquarter lease liability.
• The Company’s effective tax rate was 31% in the first quarter of fiscal 2011 compared to 29% in the same period of the prior year due primarily to an increase in income in higher tax jurisdictions. The Company expects its annual effective tax rate to be approximately 31% in fiscal year 2011.
• Diluted EPS decreased 6% to $0.30 cents per diluted share from $0.32 cents. Excluding the impacts of the special charges noted below, adjusted diluted EPS increased 18% to $0.40 cents per diluted share from $0.34 cents. Adjusted net income increased 18% to $5.0 million compared to $4.2 million in the prior year.
• As previously announced, on July 1, 2010, the Company closed the acquisition of European wine, spirit & olive oil label specialist, Guidotti CentroStampa S.p.A., based in Tuscany, Italy, for Euro 50.5 million with approximately 80% of the proceeds in the form of cash and 20% in the form of 934,567 shares of Multi-Color stock.

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Multi-Fineline Electronix, Inc. (Nasdaq: MFLX), a leading global provider of high-quality, technologically advanced flexible printed circuit and value-added component assembly solutions to the electronics industry, recently reported financial results for its third quarter ended June 30, 2010. Net sales in the third quarter of fiscal 2010 were $181.0 million, an increase of 3.7 percent from net sales of $174.5 million in the same period of the prior year. The increase in net sales was due primarily to strong demand from new smartphone product introductions.

Gross margin during the third quarter of fiscal 2010 declined to 12.3 percent, compared to 14.3 percent for the same period in the prior year and 14.5 percent in the second quarter 2010, primarily due to lower yields.

Cash flow from operating activities for the third quarter of fiscal 2010 was $17.6 million. At June 30, 2010, the Company had cash, cash equivalents and short-term investments of $162.5 million, or $6.31 per diluted share.

Commenting on the third quarter results, Reza Meshgin, Chief Executive Officer of MFLEX, said, “As we reported in our pre-announcement last month, the Company generated year-over-year net sales growth in the third quarter. Several new program wins continue to solidify our position as a key supplier of flex assemblies. While ambitious manufacturing and quality improvement initiatives implemented over the last year have helped to improve our operational performance in the initial ramp of new programs, during the third quarter we experienced lower yields than expected, mostly due to the complicated nature of one new program. However, lower than anticipated operating expenses in the quarter helped to partially offset the bottom line impact.”

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Top Stocks To Buy For 3/28/2013-1

MercadoLibre, Inc. NASDAQ:MELI opened at $70.32 and with a fall of 5.04% closed at $66.64. Company’s fifty days average price is $65.28 whereas it has a market capitalization $2.94 billion.
The total of 1.56 million shares was transacted over last trading day.

Riverbed Technology, Inc. NASDAQ:RVBD opened at $36.39 and with a fall of 3.35% closed at $35.17. Company’s fifty days average price is $31.48 whereas it has a market capitalization $5.17 billion.
The total of 2.06 million shares was transacted over last trading day.

Netflix, Inc. NASDAQ:NFLX opened at $179.05 and with a fall of 2.28% closed at $175.70. Company’s fifty days average price is $178.37 whereas it has a market capitalization $9.18 billion.
The total of 3.08 million shares was transacted over last trading day.

Ctrip.com International, Ltd. (ADR) NASDAQ:CTRP opened at $41.34 and with a fall of 2.15% closed at $40.45. Company’s fifty days average price is $46.30 whereas it has a market capitalization $11.02 billion.
The total of 1.39 million shares was transacted over last trading day.

Deckers Outdoor Corporation NASDAQ:DECK opened at $80.93 and with a fall of 2.04% closed at $79.74. Company’s fifty days average price is $69.02 whereas it has a market capitalization $3.07 billion.
The total of 1.17 million shares was transacted over last trading day.

Symantec FY Q2 Revenues, Non-GAAP EPS Top Street Views

Symantec (SYMC) this afternoon posted better-than-expected results for its fiscal second quarter ended October 1.

For the quarter, the company reported revenue of $1.48 billion and non-GAAP profits of 34 cents a share, ahead of the Street consensus at $1.46 billion and 28 cents.

For FY Q3, the company sees revenue of $1.57 billion to $1.59 billion and non-GAAP profits of 32-33 cents a share, compared with the previous Street consensus of $1.56 billion and 32 cents.

SYMC in late trading is up 92 cents, or 5.8%, to $16.72.

Key Areas to Keep an Eye on at This Coal Leader

Being the largest coal producer in the United States comes with its fair share of expectations. Peabody Energy (NYSE: BTU  ) is hoping that it can live up to those of its investors. Times have been trying for Peabody and its peers, considering that low-priced natural gas is taking over the domestic front as a substitute for thermal coal in electricity generation.

Are you wondering what to focus on?
The tide might be turning, especially for Peabody, which operates in the two cheapest coal producing regions in the United States: the Powder River and Illinois basins. What are some key areas that current and potential investors need to keep an eye on for Peabody to turn the corner?

The coal industry in the United States has been in a state of flux since the arrival of a cheaper alternative for energy production: natural gas. Exports are becoming a much bigger part of the domestic coal landscape, and Peabody Energy has deals in place to get its cheaper coal from the Powder River and Illinois basins to India, China, and the EU. For investors looking to capitalize on a rebound in the U.S. coal market, The Motley Fool has authored a special new premium report detailing exactly why Peabody Energy is perhaps most worthy of your consideration. Don't miss out on this invaluable resource -- simply click here now to claim your copy today.

Top Stocks For 3/28/2013-7

MusclePharm Corporation (OTCBB:MSLP) announced former UFC light heavyweight champion, Lyoto Machida, will be wearing MusclePharm apparel at the main fight which takes place on Saturday, November 20, 2010 in Auburn Hills, Michigan.

UFC newcomer Maiquel Jose Falcao Goncalves will also sport MusclePharm’s apparel on the UFC 123 Fight Card that includes his fight shorts, t-shirt, hat, and a banner with the MSLP Ticker Symbol. UFC 123 Event will draw an estimated 850,000 pay per view buys and is watched by an estimated 10 million viewers.

“We are very excited to have one of our UFC athletes compete in the main event fight. UFC continues to be a tremendous partner for MusclePharm as we increase our consumer demographic exposure during Saturday night’s fight,” commented Cory Gregory, MusclePharm’s President. “We will continue to focus on opportunities with UFC to further increase MusclePharm’s brand awareness and expand MusclePharm’s supplement and apparel market penetration.”

MusclePharm is a rapidly expanding healthy life-style company that develops and manufacturers a full line of NSF and scientifically approved, nutritional supplements that are 100% free of any banned substances. Based on years of research, MusclePharm products are created through an advanced six-stage research protocol involving the expertise of top nutritional scientists and field tested by more than 100 elite professional athletes from various sports including the NFL, MMA, and MLB. The Company’s propriety and award winning products address all categories of an active lifestyle including muscle building, weight loss, and maintaining general fitness through a daily nutritional supplement regimen. MusclePharm is sold in over 120 countries and available in over 5,000 US retail outlets that include GNC, and Vitamin Shoppe, as well as over 100 online stores, including bodybuilding.com, Amazon and Vitacost.com.

GreenHouse Holdings, Inc. (OTCQB:GRHU), a San Diego, California-based integrated energy solutions provider and developer of eco-friendly infrastructure, is providing a shareholder update.

2010 Operational Highlights:

Acquired Life Protection Inc., (LPI) a subsidiary that provides innovative training, support, design and construction of facilities and services to meet the needs of the U. S. Government, military, and law enforcement agencies.
Signed multiple contract awards for its Life Protection (LPI) Governmental Services Division, totaling $6 million.
o The governmental contracting entities include the U.S. Marine Corps School of Dynamic Entry in Quantico, VA and the U.S. Army Schofield Barracks Range Support in Honolulu, HI.
Announced that PepsiCo will partner with GreenHouse to utilize Southern California Edison’s Automated Demand Response program at its Buena Park bottling plant.
Signed Letter of Intent to acquire Control Engineering, Inc (CEI). Headquartered in Costa Mesa, California and serving clients globally, CEI provides turnkey automation and control solutions including engineering, installation and integration services.
o Experts in multiple technologies and applications, CEI’s client base includes recognizable brands from a wide range of industries including pharmaceutical, food, and beverage, utility, military and consumer goods.
Shareholder’s equity increased to $2.9 million from a deficit of approximately $2 million as of 12/31/09.
The Company is completing the necessary steps to Up-List its shares to a senior U.S. stock exchange.
o In order to facilitate the transition, GreenHouse established an independent board and appointed PKF, a nationally recognized accounting firm, as their SEC auditors.

Community Shores Bank Corp. (Nasdaq:CSHB), Muskegon�s only locally headquartered independent community banking organization, reported a third quarter net loss of $3.92 million, or ($2.67) per diluted share, compared to a net loss of $0.57 million, or ($0.39) per diluted share, for the 2009 third quarter. For the 2010 nine months year-to-date, the Company recorded a net loss of $5.55 million, or ($3.78) per diluted share, compared to a net loss of $2.17 million, or ($1.48) per diluted share, for the first nine months of 2009. Third quarter�s results were heavily impacted by impairments on troubled assets to reflect declining property valuations in Community Shores� markets.

Community Shores Bank Corporation operates as the holding company for Community Shores Bank that provides commercial and consumer banking services primarily in the communities of Muskegon County and Northern Ottawa County, Michigan. It offers a range of deposit services, including checking accounts, savings accounts, and various types of time deposits.

Consumer Portfolio Services, Inc. (Nasdaq:CPSS) announced operating results for its third quarter ended September 30, 2010. Operating results for the third quarter of 2010 included revenues of $36.8 million, a decrease of approximately $16.0 million, or 30.3%, compared to $52.8 million for the third quarter of 2009. Total operating expenses for the third quarter of 2010 were $40.3 million, a decrease of $16.8 million, or 29.5%, as compared to $57.1 million for the 2009 period. Pretax loss for the third quarter of 2010 was $(3.5) million compared to pretax loss of $(4.3) million in the third quarter of 2009. Net loss for the third quarter of 2010 was $(4.5) million, or $(0.26) per diluted share, compared to net loss of $(4.3) million, or $(0.23) per diluted share, for the year-ago quarter. Net loss for the third quarter of 2010 includes a charge to income tax expense of $(1.0) million, or $(0.06) per diluted share, related to an addition to the valuation allowance against the deferred tax asset.

Consumer Portfolio Services, Inc., a specialty finance company, engages in purchasing and serving retail automobile contracts originated primarily by franchised automobile dealers and select independent dealers of new and used automobiles, light trucks, and passenger vans in the United States.

LOGIC Devices Incorporated (Nasdaq:LOGC) announced its revenues and results of operations for its fiscal year ended September 30, 2010. Revenues for fiscal 2010 were $2,193,300 down 27 percent versus $3,013,200 for fiscal 2009, with a net loss of $1,084,500 or $(0.16) per share in fiscal 2010, compared to a net loss of $811,300 or $(0.12) per share in fiscal 2009. Fiscal 2010 was a very difficult and disappointing year for LOGIC Devices. Our mature product revenues fell by 33% and our newly developed products were not ready to make up that loss. Our sales of chips related to a digital cinema application fell over 60% from the prior year, and while sales related to military programs were relatively flat, we saw a steep fall-off in the latter half of the year. Sales of our other legacy products were relatively flat year to year,� stated Bill Volz, president of LOGIC Devices.

LOGIC Devices Incorporated develops and markets digital integrated circuits that perform storage and signal/image processing functions. Its products enable high definition video display, transport, editing, composition, and special effects, as well as storage of electronic information.

Buffett and Goldman: A 50-Year Relationship

By the looks of things this morning, stocks won't be hitting a new all-time high today, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) down 0.56% and 0.57%, respectively, at 10:10 a.m. EDT. Europe's major indexes are all down significantly today, particularly France's CAC-40 and Spain's IBEX 35, with losses exceeding 1.5%.

Buffett and Goldman: For the love of the deal
Berkshire Hathaway (NYSE: BRK-B  ) CEO Warren Buffett and Goldman Sachs (NYSE: GS  ) have modified the terms of his warrants to buy Goldman shares such that Berkshire will likely become one of the bank's top 10 shareholders without putting up a single dollar.

Berkshire received warrants (which are simply long-dated options) to buy 43.5 million shares of Goldman at a "strike" price of $115 in 2008, when he flew to Goldman's rescue with a $5 billion preferred-share investment. The warrants expire on Oct. 1 of this year, and exercising them would require a $5 billion cash payment to Goldman. Instead, Berkshire will receive shares equal in value to the difference between the average closing price during the 10 days prior to Oct. 1 and the strike price of $115, multiplied by 43.5 million. Based on Monday's closing price, that would give Berkshire nearly a 2% stake.

In announcing the new terms, Buffett commented: "We intend to hold a significant investment in Goldman Sachs, a firm that I did my first transaction with more than 50 years ago. I have been privileged to have known and admired Goldman's executive leadership team since my first meeting with Sidney Weinberg in 1940."

1940? Buffett would have been 10 years old at the time -- how did he manage to meet the senior partner of the firm? It turns out that Howard Buffett, Warren's father, gave each of his children an East Coast trip when they were 10 years old. Warren had a clear agenda: He wanted to visit the Scott Stamp and Coin Company, the Lionel Train Company, and the New York Stock Exchange. On that 1940 trip, while they were in lower Manhattan, Howard Buffett took his son to visit Goldman Sachs. As Buffett recounted the event to his biographer Alice Schroeder:

That's when I met [Goldman senior partner] Sidney Weinberg, who was the most famous man on Wall Street. My dad had never met him. He had this little tiny firm out here in Omaha. But Mr Weinberg let us in, maybe because a little kid was along or something. We talked for about 30 minutes. As I went out, he put his arm around me and he said, 'What stock do you like, Warren?' He'd forgotten it all the next day, but I remembered it forever.

Buffett's relationship with Goldman is not built on sentiment, though. Over the years, Goldman's Byron Trott (who left the firm in 2009 to strike out on his own) became Buffett's go-to investment banker. As Buffett wrote in Berkshire's 2007 shareholder letter: "Byron is the rare investment banker who puts himself in his client's shoes. Charlie [Munger] and I trust him completely."

Trott came up with the idea of having Buffett invest in Goldman in 2008, and he brought some significant deals to Berkshire over the years, including its $1.5 billion acquisition of the MacLane company from Wal-Mart and its $4.5 billion purchase of Marmon Holdings from the Pritzker family.

Deal making and making money: The cornerstone of a happy and healthy 50-year relationship.

Thanks to Buffett's investment savvy, Berkshire Hathaway's book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool's premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons to buy, as well as big risks to watch out for. Click here now for instant access to Joe's take on Berkshire!

Flextronics Shares Jump After Hours On Strong FY Q2 Results

Flextronics (FLEX) shares are trading sharply higher after hours on better-than-expected results for the fiscal second quarter ended October 1.

For the quarter, FLEX posted revenue of $7.4 billion and adjusted profits of 23 cents a share, ahead of the Street consensus at $7.01 billion and 20 cents.

For FY Q3, the contract electronics manufacturer sees revenue of $7.5 billion to $7.7 billion, and adjusted EPS of 23-25 cents a share; the Street has been projecting $7.44 billion and 22 cents.

The company also noted that it bought back $195 million of stock in the quarter.

FLEX in late trading is up 71 cents, or 11.1%, to $7.11.

AOL: Barclays Ups to Buy on Cost-Cutting, Buybacks

Shares of AOL (AOL) today rose $3.03, over 8.4%, to $39.20, after Barclays Capital‘s Anthony DiClemente raised his rating on the shares to Overweight from Equal Weight, and raised his price target to $44 from $38, writing that the Street’s Ebitda estimates can go higher with even modest revenue growth as AOL cuts costs.

DiClemente is modeling “gross revenue” this year, before subtracting the cost of traffic acquisition, of $2.27 billion, with Ebitda of $440.6 million, and EPS of $1.60. That compares to a Street consensus for $2.26 billion, $425 million, and $1.60 per share.

AOL is balancing the decline of its ancient dial-up subscriber base with investments in its media properties, the so-called “Brand Group,” writes DiClemente, and that balance can continue to bring improvements in Ebitda:

Despite declines in its high-margin subscription business and investments in content at its Brand Group and in technology at its AOL Networks business, in 2012 AOL managed to modestly grow EBITDA through the elimination of $20 million of overhead costs and modest margin improvements in its Brand Group and AOL Networks segments. We believe this can continue as 1) shutting down or bringing hyperlocal offering Patch to breakeven by 2014, as promised, should yield an incremental $100M+ of EBITDA vs 2012; 2) overhead cost reductions can add $10M+ to EBITDA annually the next 2-3 years; and 3) modest incremental margin in its Brand Group ex-Patch and AOL Networks segments can each add $10M+ to consolidated EBITDA annually. We see
particularly high upside to 2014 consensus, as we believe the AOL�s promise to shutdown Patch or take on a partner to make the business breakeven, should it not achieve its 4Q13 profitability goal, should alone lift 2014 EBITDA by $70 million Y/Y. Our new EBITDA estimates of $441 million and $492 million for 2013 and 2014, respectively, are well above consensus of $423 million and $449 million.

DiClemente also likes the comes intentions for share buybacks:

AOL returned $1.1 billion of cash to shareholders in 2012 using the proceeds of its patent sale and the remaining $40 million authorization on its buyback program. On its 4Q12 earnings call, AOL announced that it had approved another $100 million repurchase program, which we believe the company intends to return in 2013. Given that in its 10-K the company does not expect the ASR to be completed until 2Q13, we believe the vast majority of the $100 buyback will have to be completed in the second half of 2013, providing a bid for AOL shares in the market and thus potentially creating a catalyst for shares. AOL has proven its commitment to capital returns, reducing its share count nearly 30% in the last 3 years, and we believe the company remains committed to doing so in the future.

The Surprising Reason Dropbox Should Go Public Now

Some of the best companies around are still private: Evernote, SpaceX, Twitter, and, of course, Dropbox, the file-sharing service that's ostensibly surrounded by Google's (NASDAQ: GOOG  ) Drive, Microsoft's (NASDAQ: MSFT  ) SkyDrive, and Apple's (NASDAQ: AAPL  ) iCloud.

More than anything else, the flexibility to handle work as well as personal files deftly has made Dropbox popular. What we didn't know is just how popular. But then Strategy Analytics released a report that found it to be the second-most-popular "locker" for digital music and movies, trailing only iCloud.

Is now the time for Dropbox to go public? Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova answers this question and more in the following video. Please watch, and then weigh in using the comments box below.

Interested in more information about Apple's cloud aspirations? The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, has the skinny on the various reasons to buy or sell Apple right now.Click here to get his latest thinking on the stock and what opportunities are left for Apple (and your portfolio) going forward.

EU Seeks Extra Funding of $14 Billion for 2013

BRUSSELS (AP) -- The European Union's executive arm is certain to upset several of its 27 member states as it is seeking 11.2 billion euros ($14.4 billion) in additional funding, mainly to pay outstanding bills from last year.

Britain, France, Italy, and others will have to find more than a billion euros each at a time when they are trying to trim high deficits through spending cuts or tax raises and their economies are struggling.

The European Commission, the bloc's executive arm, said Wednesday that, in addition to its 2013 budget of 133 billion euros ($170 billion), it needs 9 billion euros to meet obligations funding projects in Europe's less developed economic areas. It needs another 2.2 billion euros for other expenses, excluding administrative costs, which are set to stay flat.

The EU's members must approve the budget by qualified majority. They pay a share of the budget according to their economic strength. If the amended budget is passed, Germany will face an additional bill of 2.2 billion euros, France 1.7 billion euros, Britain 1.6 billion euros, and Italy 1.3 billion euros.

The financial burden might ultimately be somewhat lower because most of the additional EU funds will pay or co-finance projects in the member states. But the money often goes to local entities there, with the central government on the hook to pay Brussels' budget.

The European Commission and the European Parliament are adamant about the need for the additional financing, insisting it's not about expanding the EU's coffers but about honoring the bloc's payments for previously approved projects.

"You order a meal in a restaurant knowing its price, you eat it, then you complain when the bill arrives?" the EU Budget Commissioner's spokesman, Patrizio Fiorilli, wrote in a post on Twitter.

By law, the EU is not allowed to run a deficit. The initial budget shortfall of 2012 was estimated to total 16 billion euros but shifting funds between budget years brought the figure down to about 11 billion euros, according to the latest estimates. The extra funds would just barely put it back in the black.

The EU Parliament is threatening to hold up the bloc's entire 960 billion euros ($1.3 trillion) budget for the years 2014-2020 unless member states accept to pay the outstanding bills.

"At a time when the EU is suffering from a credibility deficit, no one would take us seriously if we were to decide on the budget for the next seven years without being able to pay the bills for the current year," said Alain Lamassoure, Chairman of the European Parliament's Budget Committee of the center-right majority caucus.

The EU's multi-annual budget was hammered out in a round-the-clock summit of the EU's 27 leaders. It foresees the first spending cuts in the bloc' history. The European Parliament has overwhelmingly rejected the proposal and said it wouldn't start negotiations before last year's bills will be paid for.