Week In FX Europe – Central Banks Dominate Forex Trade Action

The ECB has finally grabbed the markets attention. Draghi's words this week have certainly hooked investor's interest for next month's meeting. Asset class should be expecting greater volatility right up to the next rate announcement and press conference.

Are investors being led down a similar path they took in March when Draghi vocally tried to undermine the EUR's strength? This time seems different as Draghi dropped very strong hints at possible policy action in June.

Focusing on three sets of possibilities while expressing the Bank's serious “concerns about the strength of the currency” has the market anticipating a refi rate cut at that meeting. It's clear that Draghi has abandoned previous ECB president's belief that the ECB never “pre-commits” – he noted if needed, that the committee had laid the foundation for action in June.

His fighting words have created a unique problem for Euro policy makers – Draghi has made it hard for the ECB not to come up monetary action on June 5th. A large percentage of the market has interpreted his comments this week as a sign for action. It's a reasonable assumption, but by no means a given. The question remains, what exactly will the ECB do?

There were no surprises from the Bank Of England. It left main interest rates (+0.5%) and the total size of its bond buying unchanged (£375m) at their first meeting since unemployment tumbled past a benchmark (+6.9% vs. +7%) that Carney and company had set out nine-months ago.

Attention now turns to the Inflation Report (May 14th) and the minutes of last weeks meeting (May 21st). Both should provide greater insight into UK's rate outlook. The market will also get a better insight to the dove/hawk scale.

After Draghi Talk EUR and Yields Fell – MarketPulse Can the ECB Talk Down The EUR? – MarketPulse S&P Revises Portugal Rating to Stable – MarketPulse UK Output Almost At Pre-Crisis Levels – MarketPulse Russian Victory Parade Timing Will Rub Ukraine The Wrong Way – MarketPulse Ukraine Refuses Russian Gas Price Hike – MarketPulse UK Manufacturing Grows 1.4 Percent in First Quarter – MarketPulse Pro-Russian Rebels Ignore Putin Command to Postpone Referendum – MarketPulse EUR – ECB Holds Rates at 0.25 Percent Despite Deflation Fears – MarketPulse GBP – Bank of England Holds UK Rates at 0.5 Percent – MarketPulse British House Prices Slow Slightly – MarketPulse Euro Bonda Fall On Ukraine Optimism – MarketPulse Greece Biggest Bank Confident on Economic Recovery – MarketPulse OECD Urges ECB To Act Soon to Avoid Deflation – MarketPulse Russian Banks Could Face 30 Percent Tax in US if Turmoil Continues – MarketPulse UK Service Sector Rises Reaffirms Recovery Trend – MarketPulse Italy Plans To Reduce Public Debt By Privatization – MarketPulse Group of Seven Agree to Find Alternative to Russian Energy – MarketPulse

WEEK AHEAD

 

* GBP Employment Change
* GBP Bank of England Inflation Report
* JPY Gross Domestic Product
* EUR Euro-Zone Consumer Price Index
* EUR Euro-Zone Gross Domestic Product
* EUR Euro-Zone Consumer Price Index
* USD Consumer Price Index

 

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Forex Economics Markets

Originally posted here...

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Apple Inc. May Release Smaller Version of iPhone 6 in August (AAPL)

According to reports made by Reuters, Apple (AAPL) may be releasing a smaller version of the iPhone 6 in August.

The company may release a 4.7-inch screen version of the new iPhone in August, a month before it is rumored to release its 5.5-inch-5.6-inch version.

Reuters noted that people directly involved with AAPL’s supply chain confirmed that there will be both a 4.7-inch and 5.5-inch version of the new phone. By offering a larger version of the phone, AAPL hopes to attract Android customers who prefer a larger screen.

Apple shares were down $3.89, or 0.66% during pre-market trading Friday. The stock is is up 4.81% YTD.

AAPL Dividend Snapshot

As market close on May 8, 2014

Click here to see the complete history of AAPL dividends.

Lorillard - Smoking Up Higher in 2014

Tobacco companies have always offered high dividends, and are associated with strong balance sheets. Lorillard (LO) is one such company. Despite hailing from an unhealthy industry the company is poised to continue raising its safely maintained dividends. It will find plenty of tobacco huffers in the developing world, if it can build out its international presence. Below is some insight into the company.

The firm is a leader in e-cigarettes, electronic nicotine delivery systems that simulate the smoking experience and give people a healthy injection of nicotine. Lorillard's flagship cigarette Newport is by far the most popular brand of mentholated cigarettes.

Lorillard produces cigarettes for both the premium and discount segments of the domestic cigarette market. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year and expanding profit margins.

Performance Report Card

LO stated net sales of $1.689 billion for the fourth quarter, signaling an increase of 1.4% year-on-year. LO registered an EPS of $0.82 for the recent fourth quarter, meaning an increase of $0.03 year-on-year, missing consensus estimates by about 0.47%. The company has been increasing its prices to maintain robust margins; for example LO increased net prices by 4% in the quarter. LO's gross margin was unchanged year-on-year, at 52%. However, analysts are expecting a 10.8% growth rate in the next five years.

Furthermore, LO also has a lower PEG of 1.4, indicating relatively cheaper growth as compared to its peers. Also, analysts are expecting a robust next five-year growth rate of 10.8%, which is higher than its competitors' average of 8%.

Lorillard on March 10 announced a quarterly dividend hike of 12% to 61.5 cents a share. That works out to an annualized yield of 4.5%, well above the S&P 500's 1.9%.

Annual earnings per share have steadily grown the past five years, and analysts expect an 11% gain this year and 9% the next.

Lorillard purchased the blu eCig brand for $135 million in 2012 and has developed it already into a product that generated $230 million last year, with sales that rose 38% in the fourth quarter alone. Volumes continued rising in the first quarter even though revenues fell due to the introduction of lower-priced rechargeable kits, and they still command a 45% share of the market.

e-Cigarettes

Electronic cigarettes, or e-cigarettes, represent a huge market opportunity for the tobacco companies. E-cigarettes are battery-operated devices that deliver nicotine to users in aerosol form. The innovative devices do not contain most of the harmful chemicals found in traditional cigarettes and do not produce smoke.

The company undertook strong brand-building initiatives for its Blu eCigs, which included advertisement campaigns on national television, the launch of low-priced rechargeable kits, and expanding the retail distribution network to over 127,000 outlets. Blu e-Cigarettess already have 49% share of the electronic cigarette market in the U.S., which shows potential for future growth. On the other hand, its competitor Reynolds American (RAI)'s leading e-cigarette, Vuse, captures just 2% of the market.

Economic Downturns

The tobacco industry is heavily taxed and due to steep cigarette price increases, some consumers have switched from premium brands to value or deep-discount brands. Cost-conscious consumers may stop smoking or downgrade to a value-priced brand during economic slumps, but most consume the same brands at the same or slightly lower level. As a result, Lorillard and other similar companies generally experience less of a decrease in revenues during recessions than the economy as a whole.

To End

Lorillard has been one of the more successful cigarette companies in the U.S. in terms of sales during the past few years. Indeed, while the cigarette industry as a whole has seen the volume of cigarettes sold decline as smokers kick the habit, Lorillard's cigarette sales have continued to expand, bucking the wider industry trend.

It is the best positioned among its peers to benefit from consumers trading up to premium brands as disposable income rises, and an opportunity to bring the proportion of premium volume up to levels similar to what it has in developed markets. Considering the company's pricing power and exposure to growing emerging markets, Lorillard has bright prospects. Therefore, for investors in search of opportunities with current and future growth potential, it provides a great investment.

Tobacco companies pay generous dividends to shareholders because they rarely have investment opportunities to grow in the industry. As long as Lorillard's top line continues to grow and cash flow remains strong, it will provide impressive shareholder rewards. The company certainly carries regulatory and market risk, but has managed to grow its business over time and is enjoying high margins. Lorillard is well positioned for the long term and should produce strong returns for shareholders.

Currently 5.00/512345 Rating: 5.0/5 (1 vote)

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What Makes a Nonbank SIFI? GOP Lawmakers Demand Answers

Republican members of the House Financial Services Committee told Securities and Exchange Commission Chairwoman Mary Jo White, Fed Chairwoman Janet Yellen and Treasury Secretary Jacob Lew on Friday to provide them with documents and answers by May 16 on how the Financial Stability Oversight Council and the Financial Stability Board determines which nonbanks will be determined to be global systemically important financial institutions (G-SIFIs).

In a letter to the three members of FSOC, the GOP committee members — which included its chairman, Rep. Jeb Hensarling, R-Texas, as well as the chairman of the committee’s capital markets subcommittee, Rep. Scott Garrett, R-N.J. — said that because the FSB is in the process of “examining certain U.S. companies for possible designation as G-SIFIs,” the lawmakers want to “fully understand the process the FSB uses to designate G-SIFIs, and that we understand the current state of these deliberations,” as they have “concerns that decisions are being made that could have significant impact on the U.S. economy."

The GOP lawmakers also stated that they have three “broader concerns” about the FSB and FSOC: the lack of transparency and due process in the designation of firms as systemically important; the types of firms that are being considered for designation and why; and the consequences of designation on individual companies, industries and the economy as a whole.

Said the lawmakers: “Both FSB and FSOC appear to take a ‘we-know-it-when-we-see-it’ approach to identifying firms that pose a risk to financial stability. In particular, there do not appear to be clear rules or criteria to determine when a nonbank financial institution qualifies as a ‘systemic risk” to the U.S. or global financial system.”

The lawmakers went on to argue that there is still no “universally accepted definition of a ‘systemic risk,’” adding that once a designation is made neither FSOC nor the FSB provides steps the companies can take to have the designation revoked.

“The overall lack of transparency and due process injects needless uncertainty and instability into our financial markets,” the lawmakers wrote.  

---

Related on ThinkAdvisor:

Investing in This Growing Fast Food Chain Is a Good Idea

Fast food chains are much in vogue these days since they offer food at comparatively cheap prices as compared to restaurants. Hence, cost-conscious people prefer to walk up to retailers such as Burger King Worldwide (BKW) and McDonald's Corporation (MCD) who offer value meals which are pocket friendly. However, there are various other factors, such as weather and consumer confidence, which affect sales at such stores. Burger King Worldwide reported its first quarter numbers last week, which were mixed.

Into the Numbers

Revenue for the quarter plunged 26% to $240.9 million, over last year's quarter. The drop in revenue was mainly because of unfavorable currency movements as well as due to the strategy of refranchising adopted by the company. Since the company is moving from owned restaurants to franchised ones, revenue has taken a hit.

Nonetheless, if we exclude the effects of refranchising and currency headwinds, the top line has actually grown 6% over last year. The growth was driven by comparable store sales growth of 2% and new stores added to its network.

The retailer's strategy of franchising has benefited the bottom line since it lowered costs and expanded margins. Hence, earnings surged 19% over last year, clocking in at $0.20 per share. Also, the retailer has shifted to more chicken-oriented products since beef prices are on the rise. It recently added chicken burgers to its menu.

The Secret to Success

The burger company managed to register growth in organic revenue and earnings despite the problems of severe weather conditions and lower consumer confidence mainly because of its strategic moves. It now focuses on three key areas, namely, remodelling of stores, improvements in the menu and expansion into new markets.

Burger King added a host of new items to its menu in order to boost its sales. It introduced four new products during the quarter, which attracted customers. The addition of the Rodeo Burger and Rodeo Chicken Sandwich drove sales higher since it was a part of King Deals Value Menu which has products for $1.

Also, the company offers value-oriented meals for cash-strapped customers. Further, its introduction of low-calorie fries, called Satisfries, have become very popular since people are becoming highly health conscious. In fact, the food retailer also plans to enter the breakfast segment with the introduction of wraps and sandwiches. This should prove to be advantageous since the breakfast market has been growing largely in the U.S. However, it will face stiff competition from a number of players, including McDonald's, one of the leading players in the breakfast segment.

The retailer has also adopted the strategy of remodelling its stores in order to increase sales. The stores which have been remodeled have witnessed sales growth of 15% to 20%. Therefore, the fast food chain plans to continue to remodel its stores in the U.S. with a target of 40% of its total stores to be done by 2015.

Moreover, Burger King plans to expand its geographical footprint. After adding 670 new outlets in fiscal 2013, the retailer plans to continue to expand into new regions of France and India in 2014.

Takeaway

Therefore, the company looks good to go with so many initiatives under its sleeve. Although the first quarter was not as expected, its focus on three key areas should be fruitful. Moreover, the company has lowered its costs significantly by opting for a refranchising model. These factors together make Burger King an interesting pick. Prudent investors should take note of this growing company.

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How to Avoid 6 Common Retirement Planning Pitfalls

Alamy So you say you're already contributing to a 401(k) or some other type of retirement account? Congratulations -- you're working on making your future self very happy. That's because the secret to retirement savings is that you can't make up for lost time. And if you're making progress, you want to make sure that you're doing retirement right ... right? Knowing just how much to save is one of the hardest financial challenges there is. You might try a calculator, or talk to a financial planner to figure out your big picture. In the meantime, you should avoid missteps that might crack your nest egg. That's why we asked several certified financial planners to pinpoint common pitfalls they -- and how you might avoid them. 1. Having No Clue How Much You Need to Save for Retirement More than half of Americans haven't calculated how much they'll need to save for retirement, according to the 2014 Retirement Confidence Survey conducted by the Employee Benefit Research Institute. But in much the same way you should have a figure in mind when you're saving for a car or house, knowing your long-term retirement goal can help you figure out a savings plan to reach it. Seeing such a large number may feel overwhelming, but it could also light a fire under you too. "If you see you need $2 million for retirement, that could jump-start savings," says Kevin O'Reilly, principal of Foothills Financial Planning in Phoenix. Just remember that you do have compound growth to help you build your investment -- and the younger you are, the more time is on your side. An online retirement calculator can help give you an idea of the amount you may need in retirement, based on factors like how much you have saved so far and various estimated expenses. Just be honest and meticulous when entering the information, or else it's "garbage in, garbage out," cautions Erika Safran, founder of Safran Wealth Advisors in New York. Many retirement calculators use a replacement ratio when doing their calculations, which is simply the percentage of your current income that you think you'll need to have for retirement. An 85 percent replacement ratio is a good rule of thumb. 2. Having No Clue How Much You Might Spend in Retirement Do you keep a budget? If you don't know where your money goes today, you may be more clueless about where it could go in the future. "I think it's a good idea even prior to retirement to keep a log of spending," O'Reilly says. "I get people who have no idea what they're spending on daily expenses." The LearnVest Money Center can help you keep tabs on your spending because it records and categorizes your daily financial transactions. If you'd prefer to use old pen and paper, write down every regular expenditure you have, including dining, groceries, utilities, clothing, car maintenance and fuel, entertainment, your children's needs, medical bills, travel and your mortgage. The more you can track, the better. Then go through that list and try to predict which of those costs might increase and decrease in retirement. For example, you may have your mortgage paid off by the time you retire, and smaller costs, like regular dry cleaning for work attire, could shrink significantly. On the flip side, maybe you'll travel more after you're done working, or spend more time on the golf course. The sum of these costs can help give you an idea of how much you'll be spending in the future. Don't forget to factor in inflation, and consider some real-time experimentation. "I've seen people test-drive their [projected retirement] budget for a while before retirement, to make sure it's realistic," says Joseph Hearn, vice president of Teckmeyer Financial Services in Omaha and author of the Intentional Retirement blog. 3. Underestimating the Cost of Health Care Only 36 percent of Americans have thought about how much they'll need for health-related expenses in retirement, according to AARP's 2013 Health Care Costs Survey. And why should they worry -- won't Medicare take care of those bills once they turn 65? Not so fast. Research by Fidelity shows that a 65-year-old couple retiring in 2013 will need approximately $220,000 to cover medical bills throughout their retirement -- beyond whatever Medicare pays for. Most dental care costs and eye examinations, for example, are not covered by Medicare. And most importantly, the government won't foot the bill for long-term care -- and the median annual cost of a private nursing home room is nearly $84,000. AARP's health care costs calculator lets you plug in data such as your age, weight and information about health issues, and estimates out-of-pocket expenses you'll incur after you retire. 4. Responding Rashly to Market Volatility When the economic weather grows stormy, it may seem natural to distrust the markets and dash to the nearest safe money harbor. "The mistake people make is to convert [some of their 401(k) holdings] to cash" during a crisis, says Safran. "But cash doesn't provide any growth." O'Reilly recalls a client who insisted on sitting on a fortune in cash because of the 2008 crash but missed out on the resurgence that followed. "That particular decision has probably cost him several hundred thousand dollars," he says. "Many people sold their stock after the crash and guaranteed losses by never getting back in the market to enjoy the gains. They bought high and sold low." 5. Not Being Truly Diversified One of the best protections against market volatility is diversification. The three basic asset classes within a retirement portfolio are stocks, bonds and cash. But more diversity is often better. You may have stocks spanning a variety of sectors -- technology, health care and financial services, for instance -- but if all those are U.S.-based stocks, you're not as diversified as you think. If you're not sure how to allocate your portfolio, talking to a financial planner can help. For an example of asset allocation, see this sample portfolio from LearnVest's Start Investing bootcamp. 6. Ignoring Fees The financial institutions that handle 401(k)s for employers often charge a fee, sometimes called an expense ratio, to cover such things as administrative costs, customer service and online transactions. Some take a flat fee, while others take a percentage of a given account. Either way, how much the fee adds up to -- as well as its very existence -- often puzzles retirement savers. "Finding out what the fee is can be hard to tackle," O'Reilly says. The fee's consequences, however, can have a monumental effect on your earnings. According to Department of Labor calculations, a 1 percent hike in a 401(k) fee can, over a 35-year period, reduce your account balance by 28 percent. A general rule is to look for low-cost index funds in a retirement account, because these fees typically fall between 0.1 percent and 0.2 percent. O'Reilly believes that a fee of up to 0.5 percent is reasonable. You may have to dig for the fine print to figure out what you're paying.

SIP by SIP take big leap

As a rational investor, we always want to invest in those instruments from where we get maximum returns with minimum risk. Unfortunately there is no such instrument available in the world, that is why we get attracted to risky instrument like equity to get maximum returns.

Actually to earn maximum returns with maximum risk doesn�t mean you win all the time and earn that return.  As risk attached with such an instrument is risk of default, which is the biggest risk as compared to the returns we earned.

So now what is the solution to this problem?  Does it mean that we should avoid such good return instruments?

Hold on��I know we all are anxious to know the answer!

Of course it is not a good idea to avoid such risk associated instruments because ultimately they may  give good returns.

Hence to over come this situation and get the best returns, you  can invest in such instruments by the way of SIP (Systematic Investment Plans) in Mutual Funds. It does not mean that with  SIP in Mutual Funds you win all the time or  SIP gives me more return than direct equity.

Wait��Definitely SIP may not give higher returns as happens in case of direct equity,  but certainly SIP will give returns and you will not lose money. Lets see how.  So my advice to you is that don�t play with your hard earned money because  though at the time of investing we accept the risk,  but it is upsetting to lose money when it actually happens.  This way  even SIP may not give us absolute highest return but as compared to the risk (we are taking through SIP) returns are good, provided you choose good Mutual Fund and your holding period is for the long-term.

So it is like if you want healthy investment then you must complete the full dose of SIP ( your entire tenure )  to reduce the symptoms of market  fluctuations.

Our in-house research at  Apnapaisa for Nifty reveals that if we have invested in Nifty through monthly SIP for 10 years at any time between January 1995 to November  2011, the  lowest return was 9.02% and for Mutual Fund the lowest return was 16.98%. So does it mean we can earn this much return? No, we may earn more return than that because for Nifty�s 10 year monthly SIP average is 17.97% and for Mutual Fund it is 27%.

We may earn such handsome returns in long-term provided that while choosing Mutual Fund we have taken professional advice and have got it reviewed by a professional. So what is the advantage of investing long term? Investment should be made for a longer tenure  only because we do not know index will move in which direction.  Every economy goes through its ups and downs and markets move accordingly, and it is not a short term phenomenon.  To overcome  such market movements,  our investment cycle should be long term.

This way like for our body�s fitness, regular exercise is important and not just exercising once in a while.  For youngsters,  heavy exercise instruments  like equity Mutual Funds may work well but for not so young yoga  like instruments say  Debt Mutual Funds, MIP and FMP are good.

Still if  you want to  invest through direct equity for higher returns then �Best of Luck� but  if you start investing through SIP then Party to banti hai dost!

The author is a research analyst at Apnapaisa.com. ApnaPaisa is India's leading price comparison site for financial products such as loans, credit cards and insurance plans. Author can be reached at www.facebook.com/apnapaisa

Detroit bankruptcy costs hit $36 million

Lawyers representing the city of Detroit outside of bankruptcy court.

NEW YORK (CNNMoney) The first six months of Detroit's bankruptcy case cost taxpayers $36 million in fees and expenses for lawyers and consultants, according to a court filing late Tuesday.

The report by the independent fee examiner accounts for costs incurred from the city's initial filing on July 18, 2013 through the end of last year. The city spent $13 million during the first three months of the proceedings, and Tuesday's filing shows bills from lawyers and other consultants jumped 61% in the last quarter of the year.

The city's fee examiner Robert Fishman said in his report that the costs, while substantial, were reasonable and in line with the complexity and quality of the services provided.

The largest payments went to Jones Day, the bankruptcy law firm representing the city in court. It has billed the city $16.6 million in fees through the end of last year, and another $734,000 in expenses. That combined bill accounts for just less than half of the city's total costs so far.

Kevyn Orr, the emergency manager appointed last year by Michigan Gov. Rick Snyder to oversee the city's finances, is a former partner at Jones Day. He has said the firm is charging the city at less than it normally would. Top partners at the firm billed the city at a rate of $825 an hour, according to the filing, while documents indicate that Jones Day partners have billed $1,000 an hour in other bankruptcy cases.

Jones Day's fees jumped 58% in the fourth quarter, because that's when the bankruptcy court held a hearing on whether the city would be allowed to use the bankruptcy process to shed billions in debt and restructure its finances.

The first two quarters of 2014 should also prove costly, since the city, it! s lawyers and consultants have been negotiating with various unions, pension funds and banks to reach cost-cutting settlements.

Restructuring firm Conway MacKenzie had the second largest bill, charging the city $5.3 million in fees and $17,000 in expenses through the end of last year. Its top partners billed at a rate of $425 an hour.

  Detroit tries to rise again

The report does not cover all the expenses of the bankruptcy process. For example, the bill for work that accounting firm Ernst & Young has performed since the start of the bankruptcy has yet to be finalized.

And the report does not include the $275,000 annual salary that Orr is being paid, or the salaries of other members of the emergency manager's staff, because those are being paid by the state of Michigan, not the city.

Finally, there is no estimate on the cost of time spent by city employees on the bankruptcy case, or on what the city paid auction house Christie's to appraise the value of all the artwork in the Detroit Institute of Arts, the city-owned museum. The bill for fee examiner Robert Fishman bill is also not included in the report.

Delamaide: More grief in mortgage debacle

WASHINGTON — One of the enduring scandals of the 2008 financial crisis was the government's half-hearted effort to provide relief to distressed homeowners while generously bailing out banks and allowing those who presided over the disaster to collect multimillion-dollar bonuses.

And now a new report adds another grievance to this catalog of woe. The Government Accountability Office last week detailed how federal regulators botched an effort to rectify the sloppy and sometimes fraudulent foreclosures by the banks, which drove millions of families from their homes.

In cutting short an Independent Foreclosure Review before it was completed, the GAO found, bank regulators may have underestimated the extent of errors, so that the $3.9 billion in cash compensation the banks were ordered to pay to homeowners was lower than it might have been.

The review and settlement covered 4.4 million cases in 2009 and 2010 where widespread errors, resulting in part from robo-signing of unverified documents, were made in home foreclosures.

Moreover, the report found, an additional requirement of $6 billion in foreclosure prevention relief by the 15 banks involved — actions such as loan modifications designed to keep more people in their homes — was fulfilled in part by measures the banks had already taken and in any case were never fully vetted by the regulators.

The top Democrat on the House Financial Services Committee, Maxine Waters of California, was quick to criticize the regulators.

"I'm troubled by the recent GAO report," Waters, one of the four lawmakers who asked the GAO to investigate, said in a statement, "which shows that … regulators claimed $6 billion dollars of settlement payments that never truly occurred."

Waters also faulted the settlement for failing to ensure that foreclosure victims received compensation commensurate with the harm done, because the early end to the review left regulators with insufficient data to determine individual cash payouts.

T! he independent consultants had completed review of fewer than 15% of the cases when the IFR was shut down in early 2013. The consultants had already collected $1.9 billion while working at a snail's pace to get through the reviews.

In negotiating the subsequent settlement for cash compensation, regulators projected an error rate of 6.5%. However, the GAO found that some of the consultants had found error rates as high as 27% or 16%, while others reported no error rate because they did not complete any reviews.

Nonetheless, the GAO found that "that the final negotiated amount generally fell within a reasonable range" given the assumptions about harm done. Whether a $300 payment, which is what some of the eligible victims received, would be deemed reasonable by those who lost their homes is another issue.

The GAO report came down hardest on procedural shortcomings in the foreclosure prevention part of the settlement, faulting regulators for not setting up a system to verify the banks' claims about their policies.

"Without specific procedures, regulators cannot assess implementation of the principles and may miss opportunities to protect borrowers," the report said.

The lack of structure and specific objectives in the settlement also meant that banks had considerable leeway in what they counted toward fulfilling their portion of the $6 billion agreement.

For instance, they could credit the full amount of a mortgage benefiting from relief rather than just the amount of relief provided. The report used a hypothetical example to show how this technique alone could result in relief to a third as many borrowers.

The GAO also criticized the lack of transparency on the processes used to determine the cash compensation. The methods of categorizing borrowers and the compensation they were entitled to remain murky as decisions were made with insufficient data.

As a result, a chance was lost to boost confidence in the regulatory process — one of the points of the whol! e exercis! e.

"In the absence of information on the processes," the GAO said, "regulators face risks to public confidence in the mortgage market, the restoration of which was one of the goals of the file review process."

The GAO recommended that the regulators, the Office of the Comptroller of the Currency and the Federal Reserve, adopt more rigorous testing of the foreclosure prevention measures and provide additional communication about the compensation process. As of March, according to the Federal Reserve, over 3.6 million checks worth $3.2 billion, or about 84% of the overall settlement, had been deposited.

The regulators, apparently unfazed by the report, were noncommittal in their responses. They are totally on top of reviewing compliance with foreclosure prevention, they claimed in letters attached to the report, and as for more transparency on the criteria for compensation, they'll give that some thought.

In Congress, Waters renewed her call for her committee chairman, Rep. Jeb Hensarling, R-Texas, to hold hearings on the foreclosure review and settlement. Last month, Rep. Elijah Cummings of Maryland, the ranking Democrat on the House Committee on Oversight and Government Reform, asked his chairman, Rep. Darrell Issa (R-Calif.), to hold hearings on foreclosures after his staff's review of OCC documents indicated a high error rate.

So while the new GAO report documents another sorry chapter in the mortgage debacle, it is not likely to be the end of the story.

Darrell Delamaide has reported on business and economics from New York, Paris, Berlin and Washington for Dow Jones news service, Barron's, Institutional Investor and Bloomberg News service, among others. He is the author of four books, including the financial thriller Gold.

Tripadvisor Inc (TRIP) Earnings Report: What Traders Need to Know (TZOO, OWW, EXPE & PCLN)

The Q1 2014 Tripadvisor Inc (NASDAQ: TRIP) earnings report is due after the market closes on Tuesday, May 6th, with investors and traders alike who follow either the stock or large cap Priceline Group Inc (NASDAQ: PCLN), mid cap Expedia Inc (NASDAQ: EXPE) and small caps Travelzoo Inc (NASDAQ: TZOO) and Orbitz Worldwide, Inc (NYSE: OWW) should be paying attention to it. Aside from the Tripadvisor Inc earnings report, it should be said that Travelzoo Inc released 1Q 2014 earnings on April 17th and Expedia Inc released earnings last Thursday while the Q1 2014 Orbitz Worldwide earnings report is due today before the market opens and the Priceline Group Inc earnings report is due out on Thursday, May 8, at 9:30AM EDT. However, Tripadvisor Inc is a little different from these other travel booking companies as its main focus is to provide travel advice or reviews written by real travelers (which obviously leads to travel bookings that they make money on).

What Should You Watch Out for With the Tripadvisor Inc Earnings Report?

First, here is a quick recap of Tripadvisor Inc's recent earnings history:

Earnings HistoryMar 13Jun 13Sep 13Dec 13

EPS Est	0.46	0.49	0.45	0.21
EPS Actual	0.50	0.52	0.45	0.21
Difference	0.04	0.03	0.00	0.00
Surprise %	8.70%	6.10%	0.00%	0.00%

 

Last February, Tripadvisor Inc reported higher than expected revenue and in-line fourth quarter profits as a large amount of purchased TV ads weighed down profits, but website traffic also surged 50% from the third quarter. RBC Capital analyst Mark Mahaney then upgraded the stock to Outperform from Sector Perform, saying its 2014 outlook is "robust" and that the company can generate new revenue streams going forward as it has proven that it provides value for marketers.

This time around and according to Yahoo! Finance analyst estimates page, the consensus expects Tripadvisor Inc to report 1Q 2014 revenues of $282.94M and EPS of $0.55 with the EPS consensus being the same over the past 90 days ago.

As for recent news, Tripadvisor Inc just got into the Airbnb and vacation rental hype last Thursday by acquiring Vacation Home Rentals, a Massachusetts-based vacation rentals website that features more than 14,000 properties around the world, for an undisclosed sum. So investors should expect some questions about that during the earnings call along with plenty of questions regarding the strength of the travel market or the economy in general.

What do the Tripadvisor Inc Charts Say?

The latest technical chart for Tripadvisor Inc shows the stock hit a 52 week high around the $110 level only to touch below the $80 level late last month:

However, Tripadvisor Inc has also outperformed other travel stocks since its IPO and as the economy has gotten stronger since the end of the financial crisis:

And for reference, here are the latest technical charts for Priceline Group Inc, Expedia Inc, Travelzoo Inc and Orbitz Worldwide, Inc:

What Should Be Your Next Move?

I would not expect any big positive or negative surprises with the Q1 2014 Tripadvisor Inc earnings report. But if you are invested in any online travel stock like Expedia, Travelzoo, Priceline Group and Orbitz Worldwide, it might be a good idea to pay attention to what is reported and to listen in on the Tripadvisor Inc earnings call.

Why I Like Facebook and These 6 Other New-Media Stocks

On May 17, 2012, Facebook (FB) raised $16 billion in one of the largest and messiest initial public offerings of all time. The shares, which originally sold for $38 each, fell within a few weeks to $26 and by September to $18. On news of strong revenue gains, Facebook soared to $72 in early March, then started to drop again. The question for current shareholders is whether to hang on -- and for noninvestors, whether to take the plunge.

See Also: Biggest Mistakes Investors Make

Facebook isn't the only new-media tech stock that had been soaring until a vicious correction began in March. The same holds for shares of other companies whose livelihood is linked to the Internet. Twitter (TWTR) has nearly doubled in the five months since its IPO raised about $2 billion. Shares of TripAdvisor (TRIP), the world's largest online travel company, have jumped from $30 on October 31, 2012, to $86 today. Among large online businesses, Amazon.com (AMZN) has quintupled over the past five years, and Netflix (NFLX) has quintupled in just a year and a half. (Prices and returns are as of April 4; stocks in boldface are those I recommend.)

The problem with assessing such stocks is that the usual valuation standards don't apply. Twitter and Yelp have never made money. Amazon's price-earnings ratio, based on projected 2014 profits, is 167. The forward P/E for LinkedIn is 105; for Trip­Advisor, 40; for Facebook, 45; and for Netflix, 83. The P/E for Standard & Poor's 500-stock index is just 16.

Many Internet companies are growing so fast that measures of value, such as P/Es, are meaningless, and it's nearly impossible to predict earnings for a fledgling high-tech company. Still, we can guess.

Let's do the math for Facebook. The consensus of experts is that earnings will roughly double in 2014, to $3.3 billion, or $1.26 per share, on $11.4 billion in revenues. That's serious money. Let's assume that earnings growth will slow to a more sustainable 30% annually for the next five years. In 2019, then, Facebook's profits would be $4.68 per share. The stock currently trades at $57. Let's say that, as an investor, you would be happy to see Facebook double in value in five years. By 2019, the price would be $114, or 24 times that year's earnings. That sounds reasonable.

Of course, no one has the foggiest idea whether Facebook's profits will really grow 30% a year. The same holds for projections of earnings growth at somewhat more-established Internet companies, such as Amazon and Netflix. But the history of Google (GOOG) may be instructive. The stock went public in August 2004 at $85 per share. The company earned $5.20 per share in 2005 and $36.05 in 2013. That's an annual compounded growth rate of about 28%. So assuming Facebook grows as fast as Google did, investors should feel comfortable buying at current prices. But this analysis, with all its assumptions, tells you only that Facebook does not appear wildly overpriced. There are other, relatively subjective questions you need to answer before you invest in a fast-growing Internet company.

Is the business based on a good idea? This is crucial. Mark Zuckerberg created the social network, an online web of interests and information that binds friends, relatives and like-minded folks across thousands of miles. He built his brand quickly and powerfully. The only obstacle was figuring out how the company would make money. But Zuckerberg found the solution: sell advertising. Facebook's revenues have risen from $2 billion in 2010 to $8 billion in 2013, and they are expected to approach $15 billion in 2015. Facebook's latest breakthrough has been its ability to sell a growing number of ads on mobile devices.

Do you trust the leadership? So far, so good: Zuckerberg and his crew haven't made any major mistakes -- with the stock up, the disastrous IPO is forgiven -- and they are showing more appetite for experimentation than, say, Microsoft. So far this year, Facebook has announced it intends to purchase WhatsApp, a mobile-messaging application, for $19 billion and Oculus, a maker of virtual-reality headgear for gamers, for $2 billion. Investors have reacted to these incredibly expensive deals with skepticism. Facebook's stock dropped by nearly 20% in three weeks in March. The $21 billion for the two purchases represents more than one-eighth of Facebook's market capita­lization (shares times price), and you might conclude that Facebook's leadership is getting bored with running only Facebook -- or maybe worried about the growth prospects of a business that already has 1.2 billion monthly active users. But I am more sanguine. Building an Internet business requires taking risks, and buying other companies to get not just patents and products but also talent and ideas for future growth seems worth the risk.

Does the company have a significant edge on the competition? There's evidence that Facebook is losing some of its cool factor among younger users. Twitter is still far behind Facebook in users, but it is a serious competitor. For online advertising in general, the main competitor is Google, whose revenues are about seven times greater than Facebook's, even though its market cap is only about two and a half times larger. Facebook's main global competitor is China's Tencent Holdings (TCEHY) and its mobile-messaging app WeChat. The field is clearly becoming more crowded, but Facebook's brand remains strong.

Does the company have room to grow? All of the online social-networking and information-services firms are only scratching the surface. As users get more used to trading some of their privacy for such benefits as being offered goods and services geared directly to them, the Internet advertising market could explode. The potential is huge.

Facebook is not the only Internet business that receives positive answers to all four questions. I particularly like Twitter, with more than 240 million monthly users. It is young and risky, as evidenced by the range of 2014 earnings estimates by 30 analysts -- from a gain of 16 cents per share to a loss of 19 cents. Twitter has about one-sixth the market cap of Facebook, which means it's got room to run. I'm also fond of TripAdvisor, which is breaking out of the travel pack, and Open­Table (OPEN), the innovative online restaurant-reservation service. I continue to be a fan of Amazon, which, like Twitter, took a hit after earnings did not meet expectations. The shares have sunk about 15%, presenting a buying opportunity. And no serious stock portfolio is complete without Google and Netflix.

If you prefer an exchange-traded fund, you'll be well served by First Trust Dow Jones Internet Index (FDN), which charges annual expenses of 0.60%. Top holdings are Amazon, at 7.2% of assets; Facebook, 6.2%; eBay (EBAY), 5.8%; Priceline.com (PCLN), 5.6%; and Google, 5.0%. Also top-notch is PowerShares Nasdaq Internet (PNQI), with the same expense ratio, the same five biggest stocks and similar returns.

Sure, you should have bought all these Internet stocks a few years ago. But I'm convinced it's the dawn of a new technology era. Well, maybe it's 10:30 a.m., but it's certainly far from sunset.

James K. Glassman is a visiting fellow at the American Enterprise Institute, where he is affiliated with the new Center for Internet, Communications and Technology Policy. He owns none of the stocks mentioned.