Pimco Total Return cuts mortgages securities to near 4-year low

BY JENNIFER ABLAN
Posted on Fri May 9, 2014 6:52pm EDT
Article from http://www.reuters.com/

(Reuters) - The Pimco Total Return Fund, the world's largest bond fund, cut its holdings of U.S. mortgage securities for a third straight month in April to its lowest level since July 2010 on continued bets that the Federal Reserve will conclude bond purchases this year, data from the firm's website showed on Friday.

The fund, which has $230 billion in assets and is managed by Pimco co-founder Bill Gross, cut its mortgage holdings to 19 percent last month from 23 percent in March. The fund kept its holdings of U.S. government-related securities unchanged in April at 41 percent, Pimco said on its website.

Newport Beach, California-based Pacific Investment Management Co said its holdings of U.S. government-related securities may include nominal and inflation-protected Treasuries, Treasury futures and options, and interest rate swaps.

On March 7, Gross tweeted that investors should, "Sell what the Fed has been buying because they won't be buying them when Taper ends in October" In his latest Investment Outlook report, Gross said investors should "look to different areas of risk taking if you need higher returns."

The Federal Reserve, which has been buying mortgage-backed securities and U.S. Treasuries in order to drive down long-term borrowing costs and spur economic growth, on April 30 voted to pare its monthly asset purchases to $45 billion, in its fourth straight $10 billion cut.

Pimco Total Return's asset allocation is important because Pimco manages $1.94 trillion and is one of the world's largest bond managers. Pimco is a unit of European financial services company Allianz SE.

Pimco increased its U.S. credit holdings to 12 percent in April from 10 percent the previous month and increased its emerging markets holdings to 7 percent last month from 6 percent in March.

The fund has increased its non-U.S. developed market holdings all year, with its stake at 11 percent in April. Pimco's "other" securities category -- which the firm said may include municipals, convertibles, preferreds, and Yankee bonds -- remained at 5 percent of the portfolio's allocation.

Perhaps the most dramatic change to the Pimco Total Return Fund last month was its reduction in its effective duration to 4.73 years in April from 4.97 years in March. Duration is a measure of a bond's price sensitivity to yield changes. Effective duration stood at 4.71 percent in February.

In his April letter to investors, Gross emphasized underweighting duration and maintained his position on favoring shorter-maturing debt. He said fixed-income securities maturing in five to 30 years are "at risk" given reduced bond buying from the Federal Reserve.

Gross said: "While PIMCO agrees with Janet Yellen that such normalization will be a long time coming (the 12th of Never?), probabilities suggest that as the Fed completes its Taper, the 5-30 year bonds that it has been buying will have to be sold at higher yields to entice the private sector back in."

Pimco Total Return showed 5 percent exposure to money market and net cash equivalents in April, unchanged from the previous month. It defines the class as liquid investment grade securities with duration of less than one year.

(Reporting by Jennifer Ablan; Editing by Chizu Nomiyama and Leslie Adler)

JENNIFER ABLAN
Posted on Fri May 9, 2014 6:52pm EDT
Article from http://www.reuters.com/

What Questions Should Be Asked of Berkshire This Year?

Berkshire Coverage

Morningstar's Gregg Warren, who will be on the analyst panel at this year's meeting, details the questions he hopes Buffett and Munger will address.

By Greggory Warren, CFA | 05-02-14 | 06:00 AM

Article from http://news.morningstar.com/articlenet

The main focus of  Berkshire Hathaway's (BRK.A) (BRK.B) annual meeting is the question-and-answer segment that Warren Buffett and Charlie Munger hold, where the two men have for a number of years fielded questions from a trio of financial journalists and from shareholders themselves (via a lottery). Starting in 2012, Berkshire included in the Q&A segment a panel of three sell-side insurance analysts who cover the company's stock.

The analyst panel remains in place, but has been tweaked in subsequent years to include just one insurance analyst from the sell-side--which is Jay Gelb of Barclays this year--one generalist analyst from the buy-side--with Jonathan Brandt of Ruane, Cunniff & Goldfarb, the investment firm behind the  Sequoia (SEQUX) fund, returning this year--and what was supposed to be an analyst/investor who is bearish on Berkshire. As Buffett was unable to find an "accredited bear" this year, an invitation was extended to Morningstar in its capacity as an independent research firm. We continue to favor the inclusion of the analyst panel in the Q&A segment (and not just for purely selfish reasons), as we believe that it helps to focus the discussion during the meeting on more company-specific topics.

While we reserve the right to hold some of our questions closer to the vest, as we are likely to get six to eight questions in during the Q&A segment. As we need to have a bevy of questions ready in the event that other panelists (or shareholders) touch on topics we are hoping to address, we thought we would preview some of the questions that are likely to be brought up this year.

Future Acquisitions and Investments

Acquisitions have historically been a major part of Berkshire's business and value creation, a trend that we expect to continue. Given that the company has a meaningful amount of cash on its balance sheet, which is currently generating near-zero return, we believe it is imperative that Berkshire puts capital to work in more profitable investment opportunities. Furthermore, as the firm grows ever larger, acquisitions will need to be large enough to move the needle in terms of maintaining a lower cash position overall, as well as being additive to profitability.

•     With the equity markets trading at/near their all-time highs (which has an impact on valuations for both publicly traded and private companies) where are you seeing the most value right now?
•     Do you expect to keep diversifying away from insurance, and is the trend of acquiring more cyclical businesses (like BNSF, MidAmerican, Marmon, and Lubrizol) going to continue?
•     Do you still prefer acquiring privately held business over public companies? Are there more or fewer private owners looking to sell their businesses now that the economy has stabilized? Are private companies large enough to move the needle for a firm as big as Berkshire?
•     Do you expect future acquisitions to be more like the Heinz deal, where Berkshire lent its name and capital to the transaction rather than taking the lead position from an equity perspective?
•     Do you expect bolt-on deals, which were meaningful in 2013, to become more prominent in the years ahead, limiting the amount of cash that works its way up to Berkshire for reinvestment?
•     Given the difficulties that you (or your successors) may face finding deals that not only add value but are also large enough to be meaningful, should Berkshire be broken up at some point?

Investment Portfolio, Style and Responsibilities

The investment portfolio in Berkshire's insurance operations is rather substantial, composed of $115.5 billion of equities, $42.6 billion of cash and cash equivalents, $28.8 billion of fixed-income securities, and $12.3 billion of other investments, which include the preferred stock of Wrigley,  Dow Chemical (DOW), and  Bank of America (BAC), as well as the warrants to purchase Bank of America's common stock. The company's investment in Heinz, which includes a 50% equity stake in the now-private firm, as well as $8 billion worth of 8% preferred stock, is accounted for on the equity method, but still remains an important investment for the firm.

Since Buffett started to transfer responsibilities for the investment portfolio over to his two lieutenants (Ted Weschler and Todd Combs) the two have gone from managing around $3 billion each in early 2012 to managing more than $7 billion each earlier this year. While this represents just 10% of Berkshire's equity portfolio, we feel that it does not reflect the contribution that both men have made to the firm in just the past couple of years--more than we had even envisioned a few short years ago. Their investment performance, from what we can tell, has also been pretty good since they came on board, and we believe that Buffett has also included the two managers in some of Berkshire's nontraditional investments lately, like the firm's dealing with Media General, as well as the partnership with 3G Capital to purchase Heinz. That said, what their full responsibilities end up being, and how much flexibility they ultimately have with the large legacy positions that Berkshire holds in names like  Wells Fargo (WFC),  Coca-Cola (KO), American Express (AXP), and  IBM (IBM) remains to be seen.

•     From an individual-style perspective, we've heard that Combs is more like Munger and that Weschler is more like Buffett. Can you point to instances where this is the case, and perhaps highlight areas where your investment styles might differ?
•     Based on reports we've seen in the papers over the past couple of years, it looks like both Weschler and Combs have been involved in transactions at Berkshire that go beyond the scope of portfolio management. What roles to you expect the two men to fill longer-term, and how much will those responsibilities overlap with the capital-allocator-in-chief role that the next CEO is expected to fill?
•     As Combs' and Weschler's responsibilities continue to grow and evolve, do you foresee a time (before you retire) when they will be managing the entire insurance portfolio? Will they be allowed to touch large legacy positions like Wells Fargo, Coca-Cola, American Express, and IBM?
•     What inferences can we make about Berkshire's decision to abstain from the vote on Coca-Cola's controversial equity compensation plan, even though Buffett is on the record saying that the plan was excessive? Is this a sign that Berkshire will be less confrontational than it has been in the past with management teams (with the best example of this type of intervention being Buffett's push to keep Coke from buying Quaker Oats, the maker of Gatorade, back in 2000)?
•     How should investors think about the tax liability that is embedded in the large unrealized capital gains that currently in its stock portfolio? Should those be deducted from Berkshire’s valuation?
•     Berkshire has been willing to take a nontraditional approach in some of its investment decisions of late, partnering with 3G Capital to buy Heinz and swapping assets with both  Phillips 66 (PSX) and  Graham Holdings (GHC) in tax-advantaged deals. Should we expect more deals like this, given that the markets are trading at/near all-time highs and Berkshire's portfolio chock full of holdings with meaningful unrealized capital gains?

Excess Cash on the Balance Sheet

Berkshire's sizable cash position continues to grow through the normal course of its business, and despite making investments and funding acquisitions through the course of the past two years the firm still closed out 2012 and 2013 with more than $45 billion in cash and cash equivalents on its books. While Buffett does like to keep $20 billion on hand as a backstop for the insurance business, which we believe is prudent, the firm is still carrying more than $20 billion in excess cash, earning relatively little in an environment of historically low interest rates. If the firm cannot find a better use for the cash, we believe that Buffett should rethink his policy of retaining all of Berkshire's earnings and perhaps pay out a one-time dividend. While Buffett laid out his thinking on (as well as his opposition to) a dividend in last year's annual letter, we expect questions on his thinking during this year's meeting.

•     In the past, you've alluded to keeping around $20 billion in cash on hand as a backstop for the insurance business. What is the level of cash Berkshire should feel comfortable holding beyond that level? In your view, how much excess cash does the company currently have?
•     Is it better for investors to think about this excess cash as being allocated to potential future deals--or to use a private-equity phrase, as "dry powder"--rather than as capital that can readily be returned to investors? And, if so, what is the opportunity cost to Berkshire and its shareholders for keeping so much cash on hand?
•     Critics argue that with Berkshire's large cash balances earning near zero returns in a historically low interest rate environment, and the firm having trouble allocating all of its excess cash into value- enhancing deals, that the firm should return the capital to shareholders. While Berkshire does have a share repurchase program in place, the stock is nowhere near the levels that would satisfy Berkshire's repurchase criteria. Although your thoughts on dividends are fairly well known, should Berkshire reconsider its policy of retaining all of its earnings and perhaps pay a one-time dividend? Couldn't Berkshire institute a dividend in order to soak up some of the excess cash flow even if most of the cash can be used for profitable investments?
•     What factors went into the decision to finally repurchase shares of Berkshire Hathaway? Does this signal to investors a relative lack of alternative investment opportunities?

Succession Planning

With Buffett turning 84 later this year, and Munger passing his 90th birthday at the beginning of 2014, succession has become an increasingly important concern for long-term investors. Buffett has stated that he wants his three roles--chairman, CEO, and investment manager--to be split upon his retirement from the firm. He has previously announced that his son, Howard, would likely become nonexecutive chairman, and we gained a little more clarity into the plan for the investment side of the business when Combs and Weschler were hired, with both men taking on responsibility for managing an ever-increasing portion of the portfolio. That said, questions still remain about who will step into the CEO role, with Buffett only noting that Berkshire's board of directors has a candidate in mind to replace him as chief executive, and that this person is "an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire." Buffett has also noted that the board has "two superb back-up candidates" in mind, in the event that the first pick for the CEO role is not available.

•     What is the timeline for CEO succession? Will the next chief executive be named before you step down or be announced concurrently with your departure?
•     What characteristics should the ideal replacement CEO possess? What is the board doing to ensure that the three candidates you've mentioned in the past get the exposure they need to Berkshire's operating companies to handle the responsibilities of the job once you depart?
•     Will the next CEO be limited in the decisions he/she can make? Are certain actions likely to be completely off the table? Will he/she be allowed to break up the company if he/she feels it is in the best interests of shareholders?                        

Thoughts on the Economy and Regulation

While not economic prognosticators in the traditional sense, Buffett and Munger are typically probed for their opinion on the state of the U.S. and global economies. Following Buffett's well-publicized bullish stance on stocks and the U.S. economy during the depths of the financial crisis--including an editorial in The New York Times about "buying American," in mid-October 2008--the Oracle of Omaha has been solidly behind the long-term viability of the U.S. economy. Given where we are today, we'd like to see if his thesis has evolved. We would also note that many of Berkshire's noninsurance businesses are economically sensitive, and are exposed to a fair amount of regulation, so getting their take on key issues is always valuable.

•    Could you summarize your view of the current economic climate based on the results you're seeing from Berkshire's operating subsidiaries? More specifically, what are you hearing from the managers of the "Powerhouse Five"--BNSF, MidAmerican, Iscar, Lubrizol, and Marmon--that runs contrary to what we're seeing in the headlines?
•     Is the so-called reregulation of railroads the greatest threat to the industry, or is this just a perpetual threat to industry pricing power that investors have to learn to tolerate? How did you get comfortable with this dynamic before you invested in a U.S. railroad?
•     Distributed generation, a method of generating electricity on a small scale from renewable and nonrenewable energy sources, has been described as the largest threat to utilities. MEHC owns three large regulated utilities--MidAmerican, PacifiCorp, and NV Energy. Do you perceive distributed generation as a meaningful threat to the utility business model and utility moats? How will utilities need to adapt? How will MidAmerican adapt?
•     What is the more serious threat to long-term economic growth: inflation or deflation? Do you believe either of these states are enough of a concern in the near- to medium-term that investors should start taking action now to avoid a potential fallout down the road?
•     Have your expectations for inflation changed much over the past year? If so, has that change entered into your own capital allocation plans or the decision-making at Berkshire's subsidiaries?
•     How do you view the prospects for the domestic economy versus international markets? How does that view change when we split the discussion between developed and emerging markets?

Greggory Warren, CFA | 05-02-14 | 06:00 AM
Article from http://news.morningstar.com/articlenet

Ringgit in Longest Losing Streak Since March on U.S. Taper Bets

By Elffie Chew April 22, 2014
Bloomberg News

Malaysia’s ringgit dropped for a third day, its longest losing streak in a month, as improving U.S. data added to speculation the Federal Reserve will end stimulus this year.

The Bloomberg U.S. Dollar Spot Index, which tracks the greenback against 10 major counterparts, reached a two-week high before data tomorrow that economists forecast will show new home sales in the world’s largest economy rose last month. A report yesterday showed the Conference Board’s index of leading indicators posted the biggest advance in four months in March. The ringgit was the worst performer among Asia’s 11-most traded currencies today after the Indonesian rupiah.

“Recent data showed the U.S. economy is improving and that has reinforced expectations that the Fed may end its bond purchases this year,” said Wong Chee Seng, a currency strategist at AmBank Group in Kuala Lumpur. “That has also helped lift sentiment on the dollar.”

The ringgit depreciated 0.4 percent to 3.2640 per dollar as of 11:50 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched a two-week low of 3.2644 earlier and is headed for its longest period of losses since March 21.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, climbed 15 basis points, or 0.15 percentage point, to 6.64 percent.

Bond Risk

The Fed started to trim its bond-purchase program this year in $10 billion increments as the U.S. economy picks up. The nation’s gross domestic product will increase 2.8 percent this year, more than the 1.9 percent pace in 2013, according to April estimates from the Washington-based International Monetary Fund.

The cost of insuring Malaysian sovereign bonds fell to the lowest level since April 10. Five-year credit-default swaps retreated one basis point to 99.6 yesterday, according to data provider CMA. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

Malaysia’s 10-year government notes were little changed, with the yield on the 4.181 percent securities maturing in July 2024 at 4.09 percent, data compiled by Bloomberg show.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

Story: Pimco's Bill Gross Picks Up the Pieces

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Simon Harvey, Amit Prakash

3 Reasons Why You Can't Compare Collectibles To Other Investments

Kathryn Tully, Contributor
2/26/2013 @ 12:24PM
Article from http://www.forbes.com/sites/

This weekend, Teresa Levonian Cole wrote in the Financial Times about an upcoming report by real estate company Knight Frank that charts the investment performance of different luxury collectibles, such as fine art, watches, stamps, wine and classic cars, global real estate markets and other assets. The report’s findings are accompanied by an impressive FT graphic, which shows, among other things, that if you had owned classic cars in the 10 years up to the third quarter of 2012, you could have made 395%. Says Cole:

“With an astonishing growth of 395 per cent (according to the HAGI Classic Car Index), that sector has outperformed any other investment, with the single exception of gold (434 per cent).”

Cole says that high-net-worth buyers are supporting these collectibles markets, who typically invest less than 4% of their portfolios, hopefully after they’ve got their retirement covered. Nevertheless, listing the investment potential of different collectibles alongside global real estate markets, and the gold market no less, suggests that they are some sort of equivalent investment.

Here are three reasons why they are not:

1) Gold is a commodity and my gold is worth exactly the same as your gold. If an investor wants to sell gold right now, he or she can do so, at the spot price offered by an exchange. By contrast, the collectibles markets mentioned in this report are neither liquid or uniform, while some objects are unique and like no other.

So how much, for example, a 1oo-year-old ruby and diamond brooch can be sold for depends, among other things, on current tastes, its condition, its history and how many buyers are interested in that particular item, if at all. Is a collector that sells his or her estate jewelry collection today going to make anything like a 140% return over 10 years? Maybe or maybe not.

2) The collectibles indices on which this report’s results are based include a selection of data about these markets, but not all the data, mostly because these aren’t transparent markets where all the sales information is available. Instead, indices are based on the successful sales of the most coveted items among those collectibles, or even more dubiously, on the appraised value of the most expensive items in that market, which tells you nothing about realized investment gains at all.  In some cases, they represent just a tiny subsection of the overall market.

Of course, plenty of bond or equity indices also track sub-sectors, but that’s a lot more useful when the information is readily available for you to compare the performance of an index with the rest of the market. In the case of many collectibles, no one knows how the whole market performs, and when you only focus on the strongest part of any market, you are likely to skew the results.

The FT article acknowledges that these statistics about collectibles ‘can easily be skewed by anomalites’, but the anomalous example given here is that the investment return on classic cars could be misleading because classic cars were particularly cheap in the 1970s, not the fact that many of these indices are based on a fraction of the transactions in that market.

3) The comparisons in this report between the markets for various collectibles and luxury residential real estate markets such as Paris, London and New York appear more meaningful on the face of it. After all, real estate is also an illiquid and pretty singular investment that can involve high transaction costs, maintenance and taxes. But real estate transactions are publicly recorded, so all the data is available here.  Meanwhile, the scale of the high-end residential real estate market, like commodities, is huge compared with many of the collectibles markets listed here. Someone who is looking for investment diversification by selling his or her New York apartment, for example, is not going to be able to reinvest that cash in rare stamps.

Perhaps this last point is obvious, but put all this together and you can see why comparing niche collectibles to real estate or commodities really is astonishing, but not remotely helpful to investors.

Kathryn Tully, Contributor
2/26/2013 @ 12:24PM
Article from http://www.forbes.com/sites/

J.C. Penney analyst on Q1 earnings: 'We knew it was bad'

DBJ Confidential
Danielle Abril
Staff Writer-
Dallas Business Journal
Article from http://www.bizjournals.com/dallas/blog/
May 16, 2013, 6:14pm CDT

While there were no major surprises in J.C. Penney Co. Inc.’s first quarter earnings released May 16, analysts said there are indicators that the retailer’s financial situation could improve.

“If management can execute, there is cash to make it to the end of the year,” Morningstar Inc. analyst Paul Swinand said about the leadership team, including CEO Mike Ullman. “Hopefully the third and fourth quarters pick up.”

“They’re in a much better position than just a few weeks ago," said Rick Snyder, senior retail analyst at New York-based Maxim Group LLC.

J.C. Penney (NYSE: JCP) reported a $348 million loss in the first quarter, with sales down about 16.4 percent. Total debt was reported at $3.83 billion.

This comes after the Plano-based retailer spent $1 billion to rebrand the company under ousted CEO Ron Johnson and drew $850 million from a revolving line of credit.

“The earnings are slightly worse (than expected)," Swinand said. “But we knew it was bad.”

J.C. Penney also reported an operating cash flow of $752 million and investing cash flow of $196 million. The company’s cash and cash equivalents were reported at $821 million.

“They borrowed $850 million, and they had $821 million on the balance sheet,” Snyder said. “That’s pretty easy math. They literally ran out of cash.

“They need to turn cash flow positive very quickly,” he said, adding that it’ll be interesting to see how they handle stocking stores for back to school and the holidays.

Snyder believes the second quarter will be much more telling about the retailer’s future. Regardless of the numbers, he sees some hope.

“One thing I see is customers coming back,” said Snyder, who visits the store weekly, “but … how deeply do they have to discount to bring customers back? What is the gross margin, and how do sales taxes offset gross margin?

“This is just a fascinating case study in history.”

J.C. Penney will hold a shareholders meeting May 17.

Danielle Abril
Staff Writer-
Dallas Business Journal
Article from http://www.bizjournals.com/dallas/blog/
May 16, 2013, 6:14pm CDT

Debt fears dog solar power suppliers

Renewable energy companies must repay US$3.5 billion this year, giving investors worries about another default in the sector

Wednesday, 15 May, 2013 [Updated: 05:58]
Article from http://www.scmp.com/business/companies/article/

Renewable energy companies from the mainland and Hong Kong need to repay US$3.5 billion of debt this year, prompting global investors to fret that another issuer will follow Suntech Power into default.

Solar, wind, hydro and nuclear companies also have the equivalent of US$5.3 billion of notes due next year. The 2014 yuan bonds of LDK Solar, which failed to fully repay US$23.8 million of convertible notes last month, slid to a seven-month low of 34 yuan (HK$43) per 100 yuan face value this week, pushing the yield to 220 per cent.

The debt pile includes US$766.5 million of dollar-denominated convertible bonds in solar companies whose shares have slumped 88 per cent from their 2007 high, making the equity option unattractive for investors.

Suntech, once the world's biggest solar panel maker, defaulted on a US$541 million equity-linked bond in March, while LDK Solar must settle a US$240 million loan unless it spins off a subsidiary by June 3, filings show.

Bryan Collins, a fixed-income portfolio manager at Fidelity Worldwide Investment, said: "For the solar companies, it's a function of too much debt and poor market dynamics leading to an inability to refinance.

For the more experienced and conservative companies, they will refinance well in advance but, for convertible bonds especially, I think they issue on the hope some will be converted to equity

"For the more experienced and conservative companies, they will refinance well in advance but, for convertible bonds especially, I think they issue on the hope some will be converted to equity."

While shares of the biggest solar companies have rallied 43 per cent this year as near-zero interest rates in the United States, Europe and Japan burnish the appeal of riskier assets, they plunged for four of the past five years.

Suntech's stock has slid to 63 US cents from a high of US$47.81 in August 2008 after the bonds were sold. The Chinese solar issuers with dollar convertibles maturing this year all booked losses last year or are expected to have done so.

JA Solar's shares have fallen 95 per cent since the company sold its notes in 2008, while China Sunergy slid 93 per cent and Trina Solar lost 58 per cent of its value.

JA Solar, whose convertible bonds mature today, is prepared to repay the debt, its chief operating officer Xie Jian has said. The company had 3.03 billion yuan of cash and cash-equivalent assets at the end of last year.

China Sunergy had US$183 million of cash or near cash assets as of December 31 last year, and is slated to repay US$1.5 million of convertible debt on June 15.

The company's bonds were quoted at 71.9 cents on the dollar as of May 13, according to BCP Securities.

Trina Solar, based in Changzhou, owes US$83.6 million and had US$807 million in cash at the end of last year. Its chief financial officer, Terry Wang, said this week that it, too, would tap its cash pile to pay off the debt.

This article first appeared in the South China Morning Post print edition on May 15, 2013 as Debt fears dog solar power suppliers

Wednesday, 15 May, 2013 [Updated: 05:58]
Article from http://www.scmp.com/business/companies/article/

The Experts: Should You Keep Cash in Your Portfolio?

May 9, 2013, 12:20 p.m. ET
Article from http://online.wsj.com/article/SB10001424127887324744104578471740280677464.html

Besides keeping some in an emergency fund, should the average investor have an allocation to cash and cash equivalents in an investment portfolio? The Wall Street Journal put this question to The Experts, an exclusive group of industry and thought leaders who engage in in-depth online discussions of topics from the print Report. This question relates to a recent article that discussed the merits of keeping cash in a stock fund's portfolio and formed the basis of a discussion in The Experts stream on Wednesday, May 8.

 The Experts will discuss topics raised in this month's Wealth Management Report and other Wall Street Journal Reports. Find the finance Experts online at WSJ.com/WealthReport.

Also be sure to watch three wealth-management thought leaders—Morningstar's Director of Personal Finance Christine Benz (@Christine_Benz), American Association of Individual Investors Vice President Charles Rotblut (@CharlesRotblut) and Portfolio Solutions Founder Rick Ferri (@Rick_Ferri)—speak about succeeding as a do-it-yourself investor in a video chat that aired on Monday, May 6.

Michelle Perry Higgins: In a Word, Absolutely.

In my opinion, absolutely. My rule of thumb for investors is that if you think you may need the funds within the next three years, then those dollars should probably be left in cash or cash equivalents. For example, if you plan to tap into your portfolio within the next few years for a home purchase, college or income needs, my advice would be to keep the funds in cash and call it a day. You can't afford to risk losing money in the stock or bond market with dollars you might actually need to have in hand within a few years. The stock market is notoriously good at tempting you to move out of cash and up the risk curve.

Michelle Perry Higgins (@RetirementMPH) is a financial planner and principal at California Financial Advisors.

Matt Hougan: In a Word, No.

No. Put your money to work.

Matt Hougan (@Matt_Hougan) is president of ETF analytics and global head of editorial for IndexUniverse LLC.

Tom Brakke: Cash Lets You Respond to Opportunities

For investors who take a fully passive approach, it's probably not necessary. I think everyone else should have higher levels of cash today than they generally do.

That may seem counterintuitive given the low rates on cash, but cash provides flexibility during times when markets come under pressure. Being fully invested sounds great, but it prevents you from responding to opportunities.

Central banks around the world have driven the returns on cash to zero, and have caused distortions in the prices of more volatile assets. No one knows whether those policies will lead to nirvana or catastrophe, although we will undoubtedly end up somewhere in between those extremes. Sacrificing a little upside by holding extra cash right now is a good trade for having a cushion if this grand experiment goes awry.

(If you want to read a longer article on this topic, check out "Cash as Trash, Cash as King, and Cash as a Weapon," from the CFA Institute.)

Tom Brakke (@researchpuzzler) is a consultant, writer and investment adviser who specializes in the analysis of investment decision making and the communication of investment ideas.Rick Ferri: Cash Doesn't Earn a Thing

Cash isn't a good investment because after taxes and inflation, it doesn't earn anything. Today, it's actually a bad investment because inflation is higher than the return on cash.

Cash outside an emergency fund is useful if you have a large liability coming up. For example, your high-school senior is heading off to college and you're footing the bill. Personally, I'm stashing cash this year to pay higher taxes next April.

The only other reason to hold cash is if you're trying to time the markets. Good luck with that. I don't do it, which is one reason I have enough money to pay my taxes.

Rick Ferri is founder of Portfolio Solutions LLC and the author of six books on low-cost index fund and ETF investing. His blog is RickFerri.com.

Rafael Pardo: Liquidity Will Keep You From Robbing Peter to Pay Paul

Yes. As its name suggests, your emergency fund is intended (and should only be used) for emergencies, such as covering living expenses after the loss of a job. Once you deviate from this principle and begin raiding your emergency fund for nonemergency purposes (robbing Peter to pay Paul, as it were), you could find yourself in a heap of trouble. For example, an unforeseen investment opportunity is not an emergency, and yet that opportunity may be too good to pass up. To avoid the dilemma of foregoing the opportunity (and thus missing out on a potential gain) or seizing it (and thus potentially and irreversibly depleting your emergency fund), an allocation to cash in your investment portfolio will give you the liquidity to avail yourself of such an opportunity. And in doing so, you won't compromise the cushion you have built with your emergency fund to safeguard against unforeseen contingencies.

Rafael Pardo is the Robert T. Thompson professor of law at Emory University, where he specializes in bankruptcy and commercial law.

George Papadopoulos: You Need Some Cash for When Opportunity Knocks

I always like to have some cash lying around to take advantage of opportunities that may arise suddenly. Market corrections will always occur; you just never know when. With dividends and capital-gain distributions taken in cash and new cash added to portfolios, we find there is usually at least 5% sitting in cash. This cash came in handy in late 2008, of course. It is always easier to rebalance portfolios when you have available cash as it reduces or eliminates your need to sell a position, which increases transactions costs. The last thing we will do is make market timing calls and "go to all cash."

George Papadopoulos (@feeonlyplanner) is a fee-only wealth manager in Novi, Mich., serving affluent individuals and families.

Sheryl Garrett: Don't Think of Cash as an Investment

Put cash in your saving account and investments in your portfolio. The only cash that you may need in your investment portfolio is money to fund distributions, to enable you to take advantage of opportunities, or maybe you've simply met your objective or it's matured and you're awaiting reinvestment. Otherwise, cash is not an investment, and should not be included in your investment portfolio.

Sheryl Garrett (@SherylGarrett) is founder of the Garrett Planning Network Inc.

Greg McBride: Cash Becomes More Important With Age

An allocation to cash makes sense for many investors, regardless of age, as a way to diversify your portfolio, but is increasingly important as investors get closer to retirement. Particularly now, investors may opt for a little more cash at the expense of fixed income, given the nosebleed valuations in government bonds. Even for ultra-aggressive investors, a modest cash allocation gives you some investing ammunition when short-term market volatility reveals attractive bargains.

Greg McBride (@BankrateGreg) is a senior financial analyst and vice president for Bankrate.com, providing analysis and advice on personal finance.

Manisha Thakor: Keep Cash If You'll Use It Within the Next Seven Years

Whether or not you should be holding cash depends upon how you define your "investment portfolio." My personal rule of thumb is that money you know with certainty that you'll need to spend in the next seven years should not be invested in stocks or bonds. Rather it should be parked for safe keeping in cash equivalents (money-market funds, CDs, T-bills, etc.). The reason is that this frees you up to take full advantage of the risk/reward characteristics inherent in equity investing. In plain English, you can swing a little harder because you know you have a cash safety net. So if your definition of your "investment portfolio" is the sum total of funds that you have at your disposal to save and invest, then yes, there absolutely is a place. I also think cash is a fine parking place while you are trying to decide what you want to do, as rushed decisions can easily backfire.

However, if by contrast you are referring to your IRA or your 401(k) as your investment portfolio and you are not within seven years of planning to take distributions, then I prefer to see portfolios fully invested. The way I would temper the inevitable volatility that comes with investing is to take my "risk" on the equity side and using high quality municipals or treasurys (not corporates) on the fixed income side as a buffer. The idea of keeping some "cash on the sidelines" to put to work when opportunities arise to me sounds an awful lot like market timing—something that I view as strikingly close to gambling given it's long statistical history of failure.

Manisha Thakor (@ManishaThakor) is founder and chief executive of Santa Fe, N.M.-based MoneyZen Wealth Management LLC.

Larry Zimpleman: Leave Your Allocation at 5% or Less

Unless you are a very conservative investor, I would keep the allocation to cash and cash equivalents to a modest amount—say roughly 5% or less. The primary reason for keeping a cash allocation would be to try to move into and out of the market (i.e. market timing). Studies show consistently that market timing is rarely, if ever, successful. The best approach is to set a long-term asset allocation strategy and stay true to that (unless either your time frame for drawing on the assets changes or your tolerance for risk changes).

Larry D. Zimpleman is chairman, president and chief executive of Principal Financial Group.

Eleanor Blayney: Why and Where You Should Keep Cash

Yes and no. As we CFP professionals love to say, "It depends."

It depends on why and where you are holding this nonemergency cash. It also depends on what else you may be holding—namely, debt.

Take the "why" first. Many of us have short-term financial goals, like saving for a significant vacation in three years, or putting a deposit on a home in the next two years. These kinds of goals—assuming a time frame of five years or less—are suitably held in cash or equivalents in an account separate from emergency money. Keep the two separate so that you can be religious about never tapping the emergency fund except for bona fide, "oh-crap" emergencies. If you mingle the short-term money with the emergency money, before you know it you'll be raiding the emergency fund for things like new furniture or that pesky annual insurance premium you forgot to budget into this month's cash flow.

Now for the "where." It makes little sense to hold cash or cash equivalents in your qualified retirement portfolio, assuming you are not close to retirement or in the withdrawal stage. The primary reason to hold cash is for its liquidity. When you know you're going to need X-dollars in the near future, you want to be invested in something certain to be nominally worth X dollars at that time. Cash in a qualified retirement account loses all the benefits of its liquidity when you cannot withdraw it without paying a penalty.

Finally, consider your liabilities. It rarely makes sense to hold cash at today's negligible interest rates, when you have debt at rates that are more than 2% or 3% of what the cash is earning. If the cash is not needed in the short term (see "why" above), then the smarter investment move is to pay down or off the higher rate debt.

Eleanor Blayney (@EleanorBlayney) is consumer advocate of the Certified Financial Planner Board of Standards.

Charles Rotblut: Think About Your Time Frame

The answer depends on when you intend to spend the cash. If you have a big purchase (e.g. a house, a car, college tuition, etc.) within the next few years, then holding cash or a cash equivalent makes sense. It can also make sense for retirees to hold a few years of anticipated withdrawals in cash to fund withdrawals.

Money not needed for the long term should be allocated to a mixture of stocks and bonds. If a security or fund is sold and you are hoping to reinvest the proceeds at lower prices, set a deadline for doing so. For example, if you think stock prices will dip over the summer, set a deadline to invest the cash no later than Aug. 31. This gives you some flexibility, but will prevent you from staying in cash too long.

Charles Rotblut (@charlesrotblut) is a vice president with the American Association of Individual Investors.

Terrance Odean: How's Your Tolerance for Risk?

Besides the emergency fund, most investors should not hold a large portion of their investment portfolio in cash for liquidity purposes. Investors with higher risk aversion or shorter investment horizons may want to hold a portion of their portfolio in low-risk or risk-free assets (e.g., T-bills).

Terrance Odean is the Rudd Family Foundation professor and chair of the finance group at the Haas School of Business at the University of California, Berkeley.



May 9, 2013, 12:20 p.m. ET
Article from http://online.wsj.com/article/SB10001424127887324744104578471740280677464.html

The One Safe Investment and Why You Never Hear About It

BY: ZVI BODIE
Making Sense -- May 10, 2013 at 4:40 PM EDT
Article from http://www.pbs.org/newshour/rundown/2013/05/the-one-safe-investment-and-why-you-never-hear-about-it-from-financial-advisors.html

Economist Zvi Bodie, perhaps the country's foremost expert on pension finance, insists that every American at least consider an investment that financial advisors almost never mention.

Photo by Peter Gridley/Getty Images.

A note from Paul Solman: Zvi Bodie has influenced my thinking about financial economics for 20 years. He has also been my trusted -- and extremely wise -- financial advisor for most of that time. And we have featured him often in stories about America's pension crisis on PBS NewsHour: corporate pension sleight-of-hand and public pension mismanagement, though my favorite Bodie appearance came when he helped us explain the housing Crash of '08, many months before the eventual Lehman collapse.

I regularly beseech Zvi to contribute to this page. Occasionally, he deigns to do so. Today is one of those occasions.

Zvi Bodie: Recently, Paul Sullivan wrote in his Wealth Matters column about financial advisors' increasing interest in technology. He raises two questions about expanded use of technology: Will it help advisers do their job better? And will it be better for clients or confuse and frustrate them? A friend asked me how I would answer those questions. I thought Making Sense readers might be interested too.

Remember the old saw about computer forecasting models? GIGO -- Garbage In, Garbage Out. Technology can make good advice more accessible and less costly, but it cannot turn bad advice into good advice. If the technology is designed to pitch some investment service that is not in the best interest of clients, employing sophisticated technology and interactive software will only serve to deceive the client more efficiently. Fancy software is not a substitute for trustworthiness and good science.

Let me give an example to make clear what I mean. As many of you know if you've read earlier posts of mine on I Bonds or how to pick a financial advisor, I recommend that for people concerned about preserving the purchasing power of their savings, an investment program should start with the purchase of US Treasury Series I Savings Bonds, of which you can purchase up to $10,000 per year per person.

To quote the Treasury Department's write-up online, which I urge everyone to read in full:

"You can cash them in after one year. But if you cash them in before five years, you lose the last three months of interest. (If you cash in an I Bond after 18 months, you get the first 15 months of interest.)"

I Bonds provide the ultimate in long-run liquid financial security to residents of the U.S. An investor in these bonds cannot lose any money or any purchasing power for up to 30 years, despite either inflation or deflation. They provide a return at least equal to the rate of inflation and, often, have paid a "premium" of interest above and beyond inflation.

At the moment, because of historically low interest rates, that premium is zero, but it is reset every six months. If, in September (or the following March or a year from September, etc.), new I Bonds do offer a premium, you can sell the current ones and use the money to buy the new ones. The U.S. Treasury started issuing I Bonds in 1998, and over the intervening 15 years technological improvements have made it easier than ever for people of modest means to purchase them online through TreasuryDirect.gov and keep track of their increasing value, a value that by the terms of the bonds keeps pace with inflation.

You might wonder why a bond that pays, at the moment, only the rate of inflation, is a good investment. The answer is simple. Compare it to an equivalent investment, issued by the very same U.S. Treasury, that is not inflation-protected. The equivalent would be a six-month Treasury "bill." It is paying less than 1/100th of a percent at the moment. Since inflation is running at 1.8 percent right now and an I Bond automatically pays you the inflation rate, the I Bond would seem to be rather obviously the debt instrument of choice.

Yet despite their clear value as a safe and liquid anchor for any investment portfolio, few clients of investment advisors even know of the existence of I Bonds. Bona fide advisors who are truly fiduciaries serving the best interest of their clients would inform them about I Bonds, direct them to the U.S. Treasury's TreasuryDirect.gov website, and assist them in setting up accounts for themselves and their children. To the best of my knowledge, no major investment advisory firm in the U.S. does this.

When the chief financial officer of a West Coast nonprofit followed my counsel on this page (see "How to Find a Financial Advisor, Step by Step") he asked the several financial advisors he auditioned if I Bonds were part of their advice. He told Paul Solman that not one of the advisors said they were. That is not a function of their mastery -- or lack of mastery -- of technology. It can only be explained in terms of self-interest or ignorance. There is no profit margin in advising clients to purchase I Bonds. And of course, if you don't know about them, how can you suggest them?

Instead of practicing prudence, however, investment advisors tend to deploy the latest innovations in digital technology to promote the products of those with an even greater incentive to steer you wrong -- members of the financial services industry. That industry specializes in pushing the product with the highest profit margin, stocks. The content of financial services materials is often deceptive and in some cases flatly contradicts what financial economists recommend as sound.

As I have shown repeatedly on this website and Making Sense broadcasts, no matter how broadly diversified a portfolio of stocks, conventional bonds, and cash may be, it cannot offer the protection afforded by I Bonds. The proposition that the risk of stocks diminishes with the length of one's time horizon is a fallacy, as is the notion that stocks are a hedge against the risk of inflation. I figure it's about time for every American to be told -- or in the case of the Making Sense audience, told again -- about I Bonds.

Zvi Bodie appeared in this 2011 story on assumptions used for public pension funds.

Zvi Bodie is a professor of management at Boston University. His books include "The Future of Life Cycle Saving" and "Investing and Foundations of Pension Finance." For more, see his website. Zvi's videos are on his YouTube Channel.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. 

ZVI BODIE

Making Sense -- May 10, 2013 at 4:40 PM EDT

Article from http://www.pbs.org/newshour/rundown/2013/05/the-one-safe-investment-and-why-you-never-hear-about-it-from-financial-advisors.html

Edward Jones column: Investors can learn from swimmers' diets

Published: May 8, 2013 9:04 PM
From: http://www.stevenspointjournal.com/article/

Summer isn’t here yet, but it’s getting close. And for many people, the arrival of summer means it’s time for swimming at the local pool or lake. If you’re just a casual swimmer, you probably don’t have to adjust your diet before jumping in. But that’s not the case with competitive swimmers, who must constantly watch what they eat and drink, particularly in the days and hours preceding their races. While you might not ever have to concern yourself with your 400-meter individual medley “splits,” you can learn a lot from swimmers’ consumption patterns — particularly if you’re an investor.

For starters, to sustain energy and stamina for a relatively long period of time, competitive swimmers need to eat easy-to-digest carbohydrates such as whole wheat, whole grains, apples and bananas. When you invest, you want to build a portfolio that is capable of “going the distance.” Consequently, you need investments that provide carbohydrate-type benefits — in other words, investments with the potential to fuel a long-term investment strategy. Such a strategy usually involves owning a mix of high-quality stocks, bonds, government securities and certificates of deposit. By owning these vehicles, in proportions appropriate for your risk tolerance and time horizon, you can help yourself make progress toward your financial goals — and lessen the risk of running out of energy “mid-stream.”

Of course, competitive swimmers have to be diligent not just in what they do eat but also in what they don’t. That’s why they avoid sweets, such as sodas and desserts, when it’s close to race time. These items do not provide lasting energy — in fact, they actually sap energy once the sugar wears off. As an investor, you, too, need to avoid the temptation of “sweets” in the form of high-yield or “hot” investment vehicles. You might find some of these investments to be alluring, but you will need to carefully weigh the extra risks involved. For many people, these types of investments might not provide the long-term stability needed to help maintain a healthy, productive investment portfolio.

While what swimmers eat, or don’t eat, is important to them, their drinking habits are also crucial. The competitive environment — warm pool water, high air temperatures and high humidity — can quickly lead to dehydration, so swimmers need to drink sizable amounts of water and sports drinks before and during practice. And you, as an investor, need your own type of liquidity, for at least two reasons. First, you need enough cash or cash equivalents to take advantage of new investment opportunities as they arise; without the ability to add new investments, your portfolio could start to “dehydrate.” Second, you need enough liquid investments — specifically, low-risk vehicles that offer preservation of principal — to create an emergency fund, ideally containing six to 12 months’ worth of living expenses. Without such a fund, you might be forced to dip into long-term investments to pay for unexpected costs, such as a major car repair, a new furnace or a large bill from the dentist.

So the next time you see competitive swimmers churning through their lanes, give a thought as to the type of diet that is helping propel them along — and think of the similarities to the type of “fueling” you’ll need to keep your investment strategy moving forward.

This article was written by Edward Jones for use by your local Edward Jones financial adviser. Glenn Helminiak of Edward Jones Investments can be reached at 715-344-0337, or visit his office at 2817 Post Road, Suite A, Whiting.

Published: May 8, 2013 9:04 PM
From: http://www.stevenspointjournal.com/article/

TCS, Infosys, Wipro & HCL Tech build $8 billion cash chest

PTI Apr 21, 2013, 02.08PM IST
From http://articles.economictimes.indiatimes.com/

NEW DELHI: The country's four top IT firms -- TCS, Infosys, Wipro and HCL Technologies -- have seen their combined cash chest swell to a whopping $ 8 billion (Rs 43,200 crore), even as the overall business trends remain sluggish for the entire sector.

While TCS and HCL Tech managed to post strong financial numbers for the quarter ended March 31, 2013, the results were mostly disappointing from Infosys and Wipro.

However, all the four companies have maintained a strong cash balance as on March 31, 2013.

Tata group's IT arm, N Chandrasekaran-led TCS ( Tata Consultancy Services) closed the latest fiscal with total cash and cash equivalents of USD 1.24 billion with an increase of USD 100 million during the year ended March 31, 2013.

Its closest rival, S D Shibulal-led Infosys also saw its cash balance soar by $300 million to a humongous $4.34 billion at the end of fiscal year 2012-13.

Azim Premji-led Wipro, which posted slowest sequential growth in revenues in the quarter ended March 31 among the four companies, also managed to end the fiscal with cash and cash equivalents of $1.56 billion.

HCL Technologies, the country's fourth largest IT firm, ended January-March quarter with cash and cash equivalents, (including deposits) of $762 million, a sharp rise from $398 million at the end of March, 2012.

TCS has posted annual revenue of more than Rs 50,000 crore for 2012-13, as against about Rs 39,000 crore of Infosys and Wipro's Rs 34,500 crore.

HCL Tech follows a financial year of July-June and its total income in the last fiscal ended July 30, 2012 stood at about Rs 9,000 crore. In the quarter ended March 31, 2013 -- the third quarter of the current fiscal 2012-13, it posted total income of over Rs 3,000 crore.

PTI Apr 21, 2013, 02.08PM IST

From http://articles.economictimes.indiatimes.com/

The Best Portfolio Balance

Greg McFarlane, provided by

Wednesday, April 11, 2012

Article from San Francisco Chronicle

There isn't one. Wasn't that easy? 

In the same manner, there isn't one diet that fits everyone. Depending on your body fat makeup and what you're trying to accomplish (increasing endurance, building muscle, losing weight), the proportions of protein, fat and carbohydrates you should consume can vary widely. 

Balancing Act

Thus it goes for balancing your portfolio. A former client of mine once stated that her overriding investment objective was to "maximize my return, while minimizing my risk." The holy grail of investing. She could have said "I want to make good investments" and it would have been just as helpful. As long as humans continue to vary in age, income, net worth, desire to build wealth, propensity to spend, aversion to risk, number of children, hometown with its concomitant cost of living and a million other variables, there'll never be a blanket optimal portfolio balance for everyone. 

That being said, there are trends and generalities germane to people in particular life situations; many investors don't balance in anything approaching the right mix. Seniors who invest like 20-somethings ought to, and parents who invest like singles should, are everywhere, and they're cheating themselves out of untold returns every year. 

Fortune Favors the Bold

If you recently graduated college - and was able to do so without incurring significant debt - congratulations. The prudence that got you this far should propel you even further. (If you did incur debt, then depending on the interest rate you're being charged, your priority should be to pay it off as quickly as possible, regardless of any short-term pain.) But if you're ever going to invest aggressively, this is the time to do it. Yes, inclusive index funds are the ultimate safe stock investment, and attractive to someone who fears losing everything. (The S&P 500's minimal returns over the last 13 years is a testament to its "safety.") Still, why not incorporate a little more unpredictability into your investments, in the hopes of building your portfolio faster? 

So you put it all in OfficeMax stock last January, and lost three-quarters of it by the end of the year. So what? How much were you planning on amassing at this age anyway, and what better time to dust yourself off and start again than now? It's hard to overemphasize how important is to have time on your side. As a general rule of life, you're going to make mistakes, and serendipity is going to smile on you once in a while. Better to get the mistakes out of the way early if need be, and give yourself a potential cushion. "Fortune favors the bold" isn't just an empty saying, it's got legitimate meaning.

Retirement Years

Fortune doesn't favor the reckless, however. If you're past retirement age and think that going long on mining penny stocks on the TSX Venture Exchange will make you wealthy beyond measure, well, hopefully at least one of your children has a comfortable couch for you to sleep on.

Start with the three traditional classes of securities - in decreasing order of risk (and of potential return), that's stocks, bonds and cash. (If you're thinking about investing in esoteric like credit default swaps and rainbow options, you're welcome to sit in on the advanced class.) The traditional rule of thumb, and it's an overly simple and outdated one, is that your age in years should equal the percentage of your portfolio invested in bonds and cash combined. (Which is why George Beverly Shea has -3% of his portfolio in stocks.) 

It's unlikely that there is someone on the planet who celebrates his birthday every year by going to his investment advisor and saying, "Please move 1% of my portfolio from stocks to bonds and cash." Besides, life expectancy has increased since that axiom first got popular, and now the received wisdom is to add 15 to your age before allocating the appropriate portion of your portfolio to stocks and bonds. 

That the rule has changed over the years should give you an idea of its value. The logic goes that the more life you have ahead of you, the more of your money should be held in stocks (with their greater potential for growth than bonds and cash have.) What this neglects to mention is that the more wealth you have, irrespective of age, the more conservative you can afford to be. The inevitable corollary might be less obvious, and more dissonant to cautious ears, but it goes like this: the less wealth you have, the more aggressive you need to be. 

The Bottom Line

Investing isn't a hard science like chemistry, where the same experiment under the same conditions leads to the same result every time. Investing's most exciting chapters are still being written, and the one that states that there are exactly three possible portfolio components needs to be put through the shredder. Real estate is neither stock, bond nor cash equivalent, and the same goes for precious metals. The former can increase your wealth rapidly with sufficient leverage, and the latter can maintain your wealth regardless of whether inflation or deflation besets the underlying currency that you conduct transactions in. As for the best portfolio balance, it's the one that fits the criteria you determine, but only when you assess your unique situation and regard your capacity for risk and reward with the utmost frankness.

Article from San Francisco Chronicle

Be aware of potential Fed policy issues

11:00 PM, Apr. 7, 2012 

Article from Daily World

On March 26, Ben Bernanke, Federal Reserve chairman, reaffirmed the Fed's desire to continue to keep interest rates low for the foreseeable future.

Annual price inflation is currently about 3 percent and 90-day Treasury Bills yielding about 0.10 percent, it appears investors will continue to confront negative real returns on cash equivalent investments for some time.

The Fed has a dual mandate: maximum employment and price stability.

Based on recent actions, the Fed has clearly chosen to pursue maximum employment at the expense of investors who rely on cash and cash equivalent assets: Treasury Bills, CDs and money market accounts.

Sarah Raskin, who serves on the Fed's board of governors recently said in a speech that —» Instead, the bulk of household wealth is held in stocks, retirement accounts, business equity and real estate" and that "for these other types of assets, rates of return depend primarily on the strength of the economy and how fast the economy is growing.

Thus, these returns should be supported, over time, by the accommodative monetary policy that we have in place."

To put the quote in context, she said in the speech that less than seven percent of household assets were in short-term instruments.

To translate her quote, "Don't worry, buy stocks." It appears Ms. Raskin is not very concerned that stocks, business equity, and real estate are much riskier than cash equivalents.

It is true that these assets have provided rates of return that have outpaced inflation over time; however, they have done so with more volatility.

In essence, the Fed is trying to encourage (force) savers to speculate with their savings.

Economic research shows that 15 percent annual price inflation is not unlikely by 2014, depending on monetary velocity and future Fed policy.

Therefore, as bad as low interest rates are for savers, it could get worse.

Current Fed policies have left investors with a trade-off — accept negative real returns on cash equivalent securities or take a chance by increasing portfolio allocation toward stocks.

It is prudent to have domestic stocks, foreign stocks, real estate, and gold (riskier assets) in one's portfolio.

However, these more volatile asset classes should be offset with short-term bonds and other cash equivalents, which are intended to provide a hedge against short-term price inflation.

Investor's best defense against price inflation remains a portfolio allocated across various asset classes according to needs, risk tolerance, and investment horizon.

One should be careful to reach for yield by overweighting high yielding stocks or below-investment-grade bonds.

Craig C. Le Bouef, MBA, CPA/PFS, CFP, Shareholder of Going, Sebastien, Fisher, & Le Bouef, LLP, Certified Public Accountants, Registered Investment Advisors, and Consultants, 2811 South Union, Opelousas, LA. Website: www.goingcpa.com. E-mail: craig@goingcpa.com

Article from Daily World

Eurasian Minerals Announces Agreement to Sell the Sisorta JV Gold Property in Turkey for Gold Bullion and a Royalty Interest

April 03, 2012 14:32 ET

Article from Market Wire

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 3, 2012) - Eurasian Minerals Inc. (TSX VENTURE:EMX)(NYSE Amex:EMXX) (the "Company" or "EMX") is pleased to announce the execution of an Option Agreement (the "Agreement") with respect to the Sisorta gold property located in north-central Turkey. The Option Agreement is between EBX Madencilik A.Ş. ("EBX Turkey"), a Turkish corporation that controls the Sisorta property pursuant to a joint venture between its owners ("Sellers," described below), and Çolakoğlu Ticari Yatirim A.Ş. ("Çolakoğlu"), a privately owned Turkish company. EBX Turkey is a joint venture owned 51% by a subsidiary of ASX listed Chesser Resources Limited ("Chesser") and 49% by a subsidiary of EMX, and they are the "Sellers" under the Agreement. The obligations of EBX Turkey and the "Sellers" under the Agreement will be guaranteed by Chesser and EMX.

The Sisorta JV project, located in the Eastern Pontides mineral belt, is a volcanic-hosted, near-surface, epithermal gold deposit with a NI 43-101 mineral resource at a 0.4 g/t cutoff of 91,000 indicated gold ounces from 3,170,000 tonnes averaging 0.89 g/t, and 212,000 inferred gold ounces from 11,380,000 tonnes averaging 0.58 g/t (please see Company news release dated June 16, 2009). Near-surface, oxide mineralization represents 76% of the indicated gold ounces, and 73% of the inferred gold ounces, thereby establishing the property's potential for a small scale, open pit mining operation.

The Agreement requires Çolakoğlu to make an up-front payment of 100 troy ounces of gold bullion, or its cash equivalent, and to undertake a US $500,000 work commitment over the first year. After the first year, Çolakoğlu can exercise an option to purchase the property for an additional 7,900 troy ounces of gold, or its cash equivalent, with the payments binding on exercise of the option, but staged over a period of four years after option exercise. In addition to the gold payments that will total 8,000 troy ounces, the Sellers will also receive a 2.5% Net Smelter Return (NSR) royalty for any production from the property.

Overview of Commercial Terms. Upon Çolakoğlu's execution of the Agreement and initial payment of 100 troy ounces of gold bullion or its cash equivalent, the Sellers shall grant Çolakoğlu an option to purchase all of the Seller's shares in EBX Turkey. Çolakoğlu has the right to exercise its option during a 60-day period after the first anniversary of the Agreement subject to the following terms: 1) spend US $500,000 in exploration work on the property within the option year, 2) deliver notice that it will exercise the option to purchase the shares, and 3) deliver 900 troy ounces of gold bullion, or its cash equivalent, to the Sellers. Once the option is exercised, and in consideration for the shares in EBX Turkey, Çolakoğlu will:

Grant to the Sellers a 2.5% NSR royalty from the Sisorta property;

Agree to reconvey the shares in EBX Turkey or the Tenement to Sellers or their designees if Çolakoğlu decides to abandon the Sisorta property; and

On the first through third anniversaries of option completion, make guaranteed payments to the Sellers of 1,500 troy ounces of gold bullion, or its cash equivalent, and on the fourth anniversary guarantee the delivery of 2,500 troy ounces of gold bullion, or its cash equivalent.

In summary, after Çolakoğlu has fulfilled all of the option agreement obligations to acquire the Sisorta property, it will have paid 8,000 troy ounces of gold bullion, or the cash equivalent, timed over a period of five years. Further, Çolakoğlu shall pay EBX Turkey a 2.5% NSR royalty from any production on the property. EMX's share of this will comprise 3,920 troy ounces of gold bullion and a 1.225% NSR Royalty.

EMX and the Prospect Generation Business Model. The Sisorta property is an excellent example of EMX's execution of the prospect generation business model. EMX's in-country exploration expertise in Turkey allowed the identification and timely acquisition of Sisorta in early 2004. Later in 2004, EMX entered into a joint venture with Barrick Gold Corporation ("Barrick") that included cash payments and exploration expenditures that added value to the Sisorta project. Barrick exited the joint venture prior to earning-in, and subsequently a "Farm-In Agreement" was executed with Chesser in October, 2007. Chesser earned a 51% property interest in 2009 by spending US $4 million, paying EMX a total of US $400,000, and issuing 3 million Chesser shares to EMX. Chesser's exploration expenditures advanced the project through drill delineation of the NI 43-101 resource, and set the stage for the deal with Çolakoğlu. The Çolakoğlu Agreement is structured to develop further value with the initial in-ground spending requirements, and to provide an on-going revenue stream denominated in terms of gold ounces over the next five years, as well as providing an organically generated royalty asset to the benefit of EMX.

About Eurasian Minerals Inc. Eurasian Minerals is a global gold and copper exploration company utilizing a partnership business model to explore the world's most promising and underexplored mineral belts. EMX currently has projects in ten countries on four continents, and generates wealth via grassroots prospect generation, strategic acquisition, royalty growth and merchant banking.

Dr. Mesut Soylu, P.Geo., a Qualified Person as defined by National Instrument 43-101 and consultant to the Company, has reviewed and verified the technical information contained in this news release.

Forward-Looking Statement

Some of the statements in this news release contain forward-looking information that involves inherent risk and uncertainty affecting the business of Eurasian Minerals Inc. Actual results may differ materially from those currently anticipated in such statements.

The NYSE Amex, TSX Venture Exchange and the Investment Industry Regulatory Organization of Canada do not accept responsibility for the adequacy or accuracy of this release.

Contact Information

Eurasian Minerals Inc.

David M. Cole

President and Chief Executive Officer

(303) 979-6666

dave@eurasianminerals.com

www.eurasianminerals.com

Eurasian Minerals Inc.

Valerie Barlow

Corporate Secretary

(604) 688-6390

(604) 688-1157 (FAX)

valerie@eurasianminerals.com

Article from Market Wire

2nd UPDATE: Devon: No Interest In Acquisitions, Despite Abundant Cash

April 4, 2012, 2:54 p.m. ET

Article from The Wall Street Journal

--Devon plans to prioritize oil projects development over acquisitions

--Company expanding footprint in new U.S. shale oil regions

--Possible new joint venture could include assets in Cline Shale in West Texas

(Updates with analyst comment in the seventh paragraph and additional information about expected new joint venture in the 11th paragraph)

 By Isabel Ordonez 

 Of DOW JONES NEWSWIRES 

HOUSTON (Dow Jones)--Devon Energy Corp. (DVN) is not planning to make acquisitions, despite having an abundance of cash, the company's top executive said Wednesday.

"People think we need to do an acquisition to grow. We don't," Chief Executive John Richels told analysts in a presentation. "We have no interest in acquiring assets."

Richels spoke in an effort to soothe concerns of some investors who believe the company is likely to make a dilutive acquisition with the $7.1 billion cash it has in hand. Richels said he and his management team haven't thought "for five minutes" to make a large acquisition, he added.

Devon plans to invest its cash in ways that make financial sense for the company, such as increasing its capital expenditure for production and exploration projects that have significant potential to yield oil, Richels said.

Oklahoma City's Devon said it plans to spend $6.1 billion to $6.5 billion this year, up $1 billion from its original budget. The company expects to spend $7.8 billion in exploration and production projects by 2016.

Devon also expects a compound annual production growth for oil from 2012 to 2016 between 16% and 18%. Oil and gas output is expected to increase to 340 million barrels of oil equivalent from the 255 million barrels of oil equivalent it expects to produce in 2012, the company said.

Oil and natural-gas liquids are expected to represent half of Devon's production by 2016, said Jon Wolff, an analyst at International Strategy & Investment Group.

The company's projections assume WTI oil prices of $105 a barrel and natural gas prices of $2.75 a million British thermal units this year. Devon assumes WTI crude prices will be around $95 a barrel and gas prices at $4.40 a MMBtu by 2016.

On the exploration side, Devon said it has identified a number of new promising shale oil areas where it plans to increase its footprint. The company said plans to drill 15 wells in the oil-rich Cline Shale in West Texas where it has 500,000 acres. Devon is also building a "significant" position of 250,000 acres in an additional undisclosed shale oil formation, the company said.

Devon expects an additional joint venture transaction in 2013 that will be about half the size of the deal it recently announced with China Petroleum & Chemical Corp. (0386.HK), better known as Sinopec. In February, both companies entered into a $2.5 billion deal for a one-third stake in five U.S. shale oil and gas fields.

Potential areas that could be included in the new joint venture would be the Devon's assets in the Cline shale as well as Devon's undisclosed oil play, the company said.

Devon's shares were recently up 27 cents at $71.44.

-By Isabel Ordonez, Dow Jones Newswires; 713-547-9207; isabel.ordonez@dowjones.com

Article from The Wall Street Journal