American International Group Inc Beats Q3 Analyst EPS Estimates; Revenues Miss (AIG)

American International Group Inc (AIG) released its third quarter earnings results on Thursday after the closing bell, posting earnings that beat analyst expectations, while revenues missed.

AIG’s Q3 Performance in Brief
- Revenues came in at $8.43 billion, a drop from the $8.75 billion reported a year ago. Analysts had expected AIG’s revenues to come in at $8.63 billion.
- Net after-tax operating income came in at $1.4 billion, or $0.96 per share; analysts had expected EPS to come in at $0.94.
- Growth in insurance operating income rose 38% from a year prior to $2.2 billion.
- Investors should note that net income attributable to AIG for the quarter exceeded after-tax operating income attributable to AIG largely due to valuation allowance releases associated with deferred tax assets from capital loss carryforwards, partially offset by a $260 million after-tax increase to litigation reserves related to legacy crisis matters.

CEO Commentary
CEO and President Robert H. Benmosche commented, “AIG's solid performance this quarter underscores the strong fundamentals of our businesses, and builds upon the momentum that we generated in the first half of this year. Our insurance operations reported improved pre-tax operating profits this quarter from the third quarter of 2012, and we continue to remain optimistic about the future.”

AIG’s Dividend
AIG pays a quarterly dividend of $0.10 per share, or $0.40 annualized. AIG is set to pay its next dividend on December 19, 2013 to shareholders of record on December 5, 2013, with an ex-dividend date of December 3, 2013.

AIG reinstated a dividend of 10 cents on September 26, 2013. Prior to that, AIG had not paid a dividend since September of 2008.

Shares Slip
American International Group shares slipped 0.62% during Thursday’s session. Year-to-date, the stock is up 42.46%

Twitter Is Sued Even Before Its IPO Hits the Market

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Soeren Stache, dpa/AP NEW YORK -- Twitter Inc. was sued for $124 million Wednesday by two companies that said the social media darling defrauded it into pushing forward with a doomed private sale of its shares to stoke investor interest for its initial public offering. In a lawsuit filed in U.S. District Court in Manhattan, Precedo Capital Group and Continental Advisors accused Twitter of using the aborted sale as a means to give the money-losing company a $10 billion market valuation and higher IPO price. "Twitter never intended to complete the offering on behalf of Twitter stockholders, in the private market, thereby causing substantial damages to the plaintiffs in the loss of commissions, fees and expenses, as well as through their business reputation," the lawsuit said. The financial firms seek $24.2 million of compensatory damages, $100 million of punitive damages, and other remedies. Jim Prosser, a spokesman for Twitter, didn't immediately respond to a request for comment. The lawsuit comes as anticipation builds for Twitter's IPO, widely considered the most highly awaited since Facebook Inc. (FB) went public in May 2012. Last week, the San Francisco-based company said it would offer its shares at between $17 and $20 each, valuing the company at up to about $11 billion. Twitter was holding its first large investor lunch in New York on Wednesday. Institutional investors who met with Twitter this week say they are optimistic about its upcoming IPO and see it as a more conservative offering than Facebook's splashy IPO. Like many Silicon Valley start-up companies, Twitter has paid employees and contractors using private stock. According to the lawsuit, it was worried about repeating some problems afflicting Facebook's $16 billion offering. In particular, the lawsuit said Twitter sought to avoid the potential for excess supply of company shares by controlling the buyers and sellers of those shares in the private market. Precedo, an Arizona-based broker dealer, and Continental, a Luxembourg financial adviser, said they were contacted by GSV Asset Management, an approved buyer of Twitter stock, about marketing a fund that could only purchase Twitter shares. GSV allegedly had negotiated an agreement with Twitter in which it would arrange the sale of up to $278 million of shares owned by employees and others, in blocks of $50 million. Precedo and Continental said they lined up commitments for the first $50 million block, and set up road shows in the United States, Europe and Asia where GSV managing partner Matthew Hanson disclosed material non-public information about Twitter. But they said Twitter eventually blocked the sale after learning that Precedo and Continental had attracted investors willing to pay $19 a share, considerably above the $17 or less offered in other private market transactions. The firms now say Twitter "never intended" to allow the private stock sales to go forward. "Twitter's intention was to induce Precedo Capital and Continental Advisors to create an artificial private market wherein Twitter could maintain that a private market existed at or about $19 per share for the Twitter stock," they said. The case is Precedo Capital Group Inc. v. Twitter Inc., U.S. District Court, Southern District of New York, No. 13-07678.

Volcano’s Earnings Fizzle, Shares Plunge 15%

Instead of an eruption, Volcano (VOLC) got an earnings-induced collapse instead.

Associated Press

Medical-device maker Volcano said its third quarter profit would miss Wall Street forecasts, and 2013 sales would also disappoint. And 2014? Well, that didn’t look too exciting other.

JPMOrgan analyst Christopher Pasquale and team have had enough:

We are downgrading VOLC shares to Neutral from Overweight following the company's negative 3Q preannouncement and disappointing initial 2014 growth outlook Monday after the close. While we continue to see significant long-term potential for Volcano's technologies, we are concerned by persistent headwinds to its core IVUS franchise and slowing FFR growth. With our conviction in a pipeline-driven reacceleration reduced and visibility into meaningful new growth drivers unlikely for several quarters, we are moving to the sidelines.

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Canaccord Genuity’s Jason Mills and Jeffrey Chu also cut Volcano to Hold–just a quarter after upgrading it–and even today’s drop might not make it worth buying. They explain why:

Our upgrade of VOLC last quarter was predicated on the improving trends in the core IVUS business, FFR continuing as a long-term growth engine, and the potential material gross margin expansion. While Q3 results included pockets of good news, adverse trends predominated.
While US IVUS rebounded modestly, driven by peripheral IVUS (+40% Y/Y), IVUS and FM results in Japan were very disconcerting to us (-19%, +8%, respectively), and portend share loss, in our estimation. Also, while we still expect significant gross margin expansion long term, it seems we may have to wait longer than expected.

In sum, we would not aggressively buy weakness unless the stock is over-penalized on these results – i.e. below $20.

While shares of Volcano have dropped 15% to $20.74, large-cap medical device companies are having a solid day. Boston Scientific (BSX) has gained 1.4% to 11.74, St. Jude Medical (STJ) has risen 0.9% to $48.13 and Medtronic (MDT) has ticked up 0.1% to $57.73.

Apple Confirms Decline in Earnings Even If Above Estimates

Apple Inc. (NASDAQ: AAPL) has now reported its quarterly earnings report, which was also the end of the technology giant’s fiscal year as well. Earnings came in at $8.26 per share (EPS) on sales of $37.5 billion. Estimates were down to $7.93 EPS from $8.67 EPS a year ago. Revenue was expected to be $36.84 billion, which would have been 2.4% sales growth from a year ago.

Apple’s quarterly net income was $7.5 billion. Gross margin came in about 37%. Apple had previous offered up guidance for this quarter of 36% to 37% margins on sales of $34 billion to $37 billion.

Tim Cook gave guidance of $55 billion to $58 billion in revenue this coming quarter versus estimates of $55.65 billion. The guidance was also shown in a range of 36.5 percent and 37.5 percent for gross margin. Apple’s cash, cash equivalents, and securities added up to almost $147 billion at the end of the September quarter.

International sales accounted for 60% of revenue in this last quarter. Unit sales were as follows:

33.8 million iPhones, a record, and compared to 26.9 million in the year-ago quarter; 14.1 million iPads, compared to 14 million in the year-ago quarter; and 4.6 million Macs, compared to 4.9 million in the year-ago quarter.

Tim Cook showed that Apple generated a whopping $9.9 billion in cash flow from operations in the last quarter. The company also returned $7.8 billion in cash to shareholders through dividends and share repurchases.

Apple shares closed up 0.7% at $529.88 against a 52-week range of $385.10 to $603.00. Its 50-day moving average was $492.48 and 200-day moving average was $451.86 according to stockcharts.com ahead of he closing price on Monday going into earnings. Shares are indicated down around 3% around $513 in the after-hours trading session.

Tweets on Twitter updated below at 5:20 p.m. EST:

Source: Twitter @jonogg

Earnings season focus shifts to revenue, capex

SAN FRANCISCO (MarketWatch) — Expect a heightened focus on revenue and corporate capital expenditure spending as earnings season reaches its midpoint this week.

Last week, the Dow Jones Industrial Average (DJIA)  finished up 1.1%, the S&P 500 Index (SPX)   gained 0.9% to finish at a new record close of 1,759.77, and the Nasdaq Composite Index (COMP)  advanced 0.7% after a peak earnings week.

On the surface, results from the biggest U.S. companies appear relatively strong, and that's helped support stock gains.

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Will the U.K. experience another house price bubble and is European growth having an impact on unemployment? Sara Sjolin and Nina Bains discuss the data releases for next week. Photo: Bloomberg

With nearly half the S&P 500 and more than two-thirds of the Dow industrials having already reported quarterly results, the current earnings season is looking to be the best of the year in terms of how companies are beating expectations. And S&P 500 earnings are on their way to setting a new record high.

"What's occurring is that U.S. corporations are benefitting from being the best house in a bad neighborhood," said Brian Belski, chief investment strategist at BMO Capital Markets. Much of that has to do with corporate America stripping away costs in a challenging global revenue environment, Belski said.

A wave of earnings beats last week significantly bumped up the percent of companies topping forecasts. After this past week, 75% of S&P 500 companies have topped the earnings consensus this season, compared with the four-year average of 73%, according to John Butters, senior earnings analyst at FactSet. Prior to last week's reports, the earnings beat rate had been running at 69%.

This will be a "Dow-a-day" week of quarterly results with Merck & Co. (MRK)  on Monday, Pfizer Inc. (PFE)  on Tuesday, Visa Inc. (V)  on Wednesday, Exxon Mobil Corp. (XOM)  on Thursday, and Chevron Corp. (CVX)  on Friday.

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Apple and LinkedIn prepare to release earnings reports. The Federal Reserve's two-day meeting ends on Wednesday with a policy statement. The Container Store prepares an IPO. Laura Mandaro has everything you need to know about the week ahead in the markets.

Plus, more than 120 companies on the S&P 500 report next week with notable releases from Apple Inc. (AAPL) and Biogen Idec Inc. (BIIB)  on Monday; Gilead Sciences Inc. (GILD)  and Allergan Inc. (AGN)  on Tuesday; Starbucks Corp. (SBUX)  , General Motors Co. (GM) , and Comcast Corp. (CMCSA)  on Wednesday; along with MasterCard Inc. (MA)  and ConocoPhillips (COP)  on Thursday.

And Nasdaq stock Facebook Inc. (FB)  reports Wednesday.

Easier to beat

Some strategists, however, are less than impressed with earnings. Earnings beats have become a less significant metric because the results compare with lowered expectations. In late June, analysts on average forecast earnings-per-share growth for the third quarter would be around 6% year-over-year. By the time earnings season started, they had trimmed that growth outlook to less than 1%. The beats don't "seem to be all that clean," said Tobias Levkovich, chief U.S. strategist at Citi Research, in a recent note.

"Moreover, a good number [of companies] have made or topped forecasts on lower than expected tax rates or one-time items, suggesting that results were not necessarily comprised of high quality beats," Levkovich noted. "Accordingly, it is challenging to argue that the reporting season has been all that good when some detailed insight is applied."

RBC Capital Markets Enlarge Image The average quarterly earnings surprise.

Also, corporations giving outlooks for the fourth quarter continue to be negative, which places pressure on analysts to lower their estimates. About 86% of fourth-quarter earnings outlooks (49 out of 57 companies on the S&P 500) have been negative, meaning the forecast falls below the current Wall Street consensus, according to Butters. Over the past five years, on average, about 63% of companies giving a quarterly earnings outlook provided one that's below the consensus.

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Top Safest Companies To Own In Right Now: Petroleo Brasileiro S.A.- Petrobras(PBR)

Petroleo Brasileiro S.A. primarily engages in oil and natural gas exploration and production, refining, trade, and transportation businesses. The company?s Exploration and Production segment involves in the exploration, production, development, and production of oil, liquefied natural gas (LNG), and natural gas in Brazil. This segment supplies its products to the refineries in Brazil, as well as sells surplus petroleum and byproducts in domestic and foreign markets. Its Supply segment engages in the refining, logistics, transportation, and trade of oil and oil products; export of ethanol; and extraction and processing of schist, as well as holds interests in companies of the petrochemical sector in Brazil. The Gas and Energy segment involves in the transportation and trade of natural gas produced in or imported into Brazil; transportation and trade of LNG; and generation and trade of electric power. In addition, the segment has interests in natural gas transportation and d istribution companies; and thermoelectric power stations in Brazil, as well engages in fertilizer business. The Distribution segment distributes oil products, ethanol, and compressed natural gas in Brazil. The International segment involves in the exploration and production of oil and gas, as well as in supplying, gas and energy, and distribution operations in the Americas, Africa, Europe, and Asia. Further, the company involves in biofuel production business. Petroleo Brasileiro was founded in 1953 and is based in Rio de Janeiro, Brazil.

Advisors' Opinion:

• [By Tyler Crowe]

  While there are some disadvantages to being a national oil company, there are also some pretty cushy perks as well. Thanks to its position in Brazil, Petrobras (NYSE: PBR  ) just got some big relief as a court ruling determined that it is not obligated to pay an outstanding tax bill of $3.45 billion. This should be a huge help as the company looks to make big gains in production in the upcoming years thanks to the pre-salt formation in offshore Brazil.

Top Safest Companies To Own In Right Now: Fluor Corporation(FLR)

Fluor Corporation, through its subsidiaries, provides engineering, procurement, construction, maintenance, and project management services worldwide. Its Oil & Gas segment offers design, engineering, procurement, construction, and project management services to upstream oil and gas production, downstream refining, chemicals, and petrochemicals industries. This segment also provides consulting services comprising feasibility studies, process assessment, and project finance structuring and studies. The company?s Industrial & Infrastructure segment offers design, engineering, procurement, and construction services to the transportation, wind power, mining and metals, life sciences, manufacturing, commercial and institutional, telecommunications, microelectronics, and healthcare sectors. Its Government segment provides engineering, construction, logistics support, contingency response, management, and operations services to the United States government focusing on the Departme nt of Energy, the Department of Homeland Security, and the Department of Defense. The company?s Global Services segment offers operations and maintenance, small capital project engineering and execution, site equipment and tool services, industrial fleet services, plant turnaround services, temporary staffing services, and supply chain solutions. Its Power segment provides engineering, procurement, construction, program management, start-up and commissioning, and operations and maintenance services to the gas fueled, solid fueled, plant betterment, renewables, nuclear, and power services markets. The company also offers unionized management and construction services in the United States and Canada. Fluor Corporation was founded in 1912 and is headquartered in Irving, Texas.

Advisors' Opinion:

• [By The Energy Report]

  JH: One of the areas where the U.S. for decades has been the leading technological power is in small nuclear reactors. We've used them on our aircraft carriers and on our nuclear submarines safely and efficiently. The U.S. has an advantage in understanding small modular nuclear reactors. One of the companies that we have followed for a long time that's working on that is Babcock & Wilcox Co. (BWC). There's also Fluor Corp. (FLR), which is working on small modular nuclear reactors. President Obama and the Department of Energy are funding research on the implementation of small modular nuclear reactors.

• [By Louis Navellier]

  If we look at the sector using Portfolio Grader, we see that many of the big names in the group like Flour (FLR), Granite Construction (GVA) and KBR incorporated (KBR) are rated ��ell.��The anticipated spending for both government and private industry simply hasn�� materialized, and the companies are not seeing revenue or profit growth.

• [By Rich Duprey]

  South America has become an unsettled region to mine in. Newmont Mining (NYSE: NEM  ) had its Peruvian Conga project brought to a short stop over environmental concerns, while Vale (NYSE: VALE  ) recently abandoned an Argentinean project because of the country's policies.�Costs for Pascua-Lama have ballooned over the past decade and now stand at about $8.5 billion, putting it at risk of becoming an albatross around the miner's neck even before the court decision. Barrick even resorted to bringing in engineering specialist Fluor (NYSE: FLR  ) to expand the scope of its project management before the court order.

• [By Louis Navellier]

  Fluor Corporation (FLR) is one of the world�� leading heavy construction and engineering firms. I don’t want to imply that this is a bad company because it is actually a very good one. However, Fluor has divisions including Oil & Gas, Industrial Infrastructure, Government, Global Services and Power. Virtually all of them are seeing limited spending as a result of the global slowdown and reduced government spending around the world. The stock is up more than 23% this year, but earnings are actually down on flat revenues. Analysts have been lowering their estimates for the rest of this year as well as 2014, and the stock is currently rated as a by Portfolio Grader. When the economy recovers, I expect will see this company’s fundamentals improve substantially … but until that happens investors should avoid the stock.

Best Tech Stocks To Buy For 2014: Goldman Sachs Group Inc.(The)

The Goldman Sachs Group, Inc., together with its subsidiaries, provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. Its Investment Banking segment offers financial advisory, including advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense, risk management, restructurings, and spin-offs; and underwriting securities, loans and other financial instruments, and derivative transactions. The company?s Institutional Client Services segment provides client execution activities, such as fixed income, currency, and commodities client execution related to making markets in interest rate products, credit products, mortgages, currencies, and commodities; and equities related to making markets in equity products, as well as commissions and fees from executing and clearing institutional client transactions on stock, options, and fu tures exchanges. This segment also engages in the securities services business providing financing, securities lending, and other prime brokerage services to institutional clients, including hedge funds, mutual funds, pension funds, and foundations. Its Investing and Lending segment invests in debt securities, loans, public and private equity securities, real estate, consolidated investment entities, and power generation facilities. This segment also involves in the origination of loans to provide financing to clients. The company?s Investment Management segment provides investment management services and investment products to institutional and individual clients. This segment also offers wealth advisory services, including portfolio management and financial counseling, and brokerage and other transaction services to high-net-worth individuals and families. In addition, it provides global investment research services. The company was founded in 1869 and is headquartered in New York, New York.

Top Safest Companies To Own In Right Now: Under Armour Inc.(UA)

Under Armour, Inc. develops, markets, and distributes performance apparel, footwear, and accessories for men, women, and youth primarily in the United States, Canada, and internationally. It offers products made from moisture-wicking synthetic fabrics designed to regulate body temperature and enhance performance regardless of weather conditions. The company provides its products in three fit types: compression (tight fitting), fitted (athletic cut), and loose (relaxed) extending across the sporting goods, outdoor, and active lifestyle markets. Its footwear offerings comprise football, baseball, lacrosse, softball, and soccer cleats; slides; performance training footwear; and running footwear. The company also provides baseball batting, football, golf, and running gloves, as well as licenses bags, socks, headwear, custom-molded mouth guards, and eyewear that are designed to be used and worn before, during, and after competition. Under Armour sells its products through retai l stores, as well as directly to consumers through its own retail outlets and specialty stores, Website, and catalogs. The company was founded in 1996 and is headquartered in Baltimore, Maryland.

Advisors' Opinion:

• [By Nicole Seghetti]

  Running-apparel and shoe makers Nike (NYSE: NKE  ) and Under Armour (NYSE: UA  ) are also likely beneficiaries of the race. Nike not only holds an enviable spot as the global market leader, but it also boasts the right strategy and investments to sustain its top position. Meanwhile, newer kid on the block Under Armour has evolved into a major player in the global athletic footwear and apparel market.

• [By Cole Campbell]

  Under Armour (NYSE: UA  ) has performed tremendously in the stock market since it first went public in 2005, and it looks to sustain its rapid rate of growth over the coming years. With a market cap that is roughly one-tenth of its rival Nike's, Under Armour has plenty of room to grow and increase its market share in the athletic apparel and footwear market. The company continues to innovate by introducing new products and materials, such as its recent "Alter Ego" line of shirts that have sold extremely well.

• [By WALLSTCHEATSHEET.COM]

  Under Armour is without a doubt a long-term winner, but the stock market is too hot right now for any real conviction, especially since Under Armour is trading at 49 times earnings. Nike wouldn�� be the best safe haven in a bear market, but it would be safer than Under Armour. That said, for investors who are capable of withstanding a hit and willing to purchase more on the way down if the stock gets hit, Under Armour is a long-term OUTPERFORM. This should be a safe long-term approach since Under Armour is highly likely to grow in the coming decades. It�� certainly not going anywhere.

• [By Steve Symington]

  Back in February, up-and-coming performance-apparel specialist Under Armour (NYSE: UA  ) raised some eyebrows when it filed a lawsuit against its biggest competitor and global powerhouse Nike (NYSE: NKE  ) .

Amazon, Microsoft surge; leading tech gains

Bloomberg Enlarge Image A worker at an Amazon.com fulfillment center in Goodyear, Arizona.

SAN FRANCISCO (MarketWatch) — Microsoft Corp. and Amazon.com flexed their muscles Friday and the two tech heavyweights helped the tech sector withstand losses from the likes of Apple Inc. and close the week out on an upbeat note.

Also getting attention was Twitter Inc. (TWTR) after the micro-blogging company late Thursday set a price range of $17 to $20 a share for its IPO, which reportedly could take place in early November.

/quotes/zigman/12633936 COMP 3,943.36, +14.40, +0.37%

The action helped push the Nasdaq (COMP)  up by 14 points to close at 3,943. The Philadelphia Semiconductor Index (COMP)  rose 0.4% and the Morgan Stanley High-Tech Index (MSH)  also closed with a small gain.

Investors gave high marks to Microsoft (MSFT) , sending its shares up 6% to close at $35.73 a day after the tech giant reported better-than-expected fiscal first-quarter results. Microsoft said it earned $5.24 billion, or 62 cents a share, on revenue of $18.53 billion. During the year-ago period, Microsoft earned $4.7 billion, or 53 cents a share, on $16 billion in sales.

Microsoft said its results were boosted by sales of cloud services and its business applications. Rick Sherlund, of Nomura Equity Research, also cited Microsoft's $400 million in revenue from Surface tablet sales as an a upbeat sign for the company, especially at a time when the PC market is declining.

"Any less of a drag from the PC business and related consumer shift to tablets and notebooks is good news," Sherlund said.

Amazon (AMZN)  surged by almost 10%, to end the week at $363.39 a share after the Internet-retailing leader cut its third-quarter loss from a year ago and reported better-than-expected sales figures.

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Twitter set its price range for its initial public offering at $17 to $20 a share, how there are echoes of the tech bubble in the long-dated forecasts underpinning Tesla Motors' valuation, plus a look at today's market action.

Raymond James analyst Aaron Kessler used Amazon's results as the basis for upgrading his rating on the company's stock to strong by from market perform. Kessler cited Amazon's revenue momentum and continuing growth in the U.S. among the reasons for his stock upgrade.

Online social-gaming company Zynga Inc. (ZNGA)  climbed more than 5% to $3.73 in the wake of the social-gaming company posting better sales than analysts had forecast, and cutting its loss from a year ago. It was the first full quarter of results for Zynga since former Microsoft executive Don Mattrick became the company's chief executive.

Other gains came from Pandora Media Inc. (P) , Oracle Corp. (ORCL) and Hewlett-Packard Co. (HPQ) . 

Apple (AAPL) , meanwhile, fell by 1% to close at $525.96 in advance of the iPad maker's quarterly results, due after the close of trading Monday.

Decliners also included Facebook Inc. (FB) , Google Inc. (GOOG)  and Yahoo Inc. (YHOO) . 

Hong Kong stocks edge lower on banks, energy

LOS ANGELES (MarketWatch) -- Hong Kong stocks inched lower early Friday, with mainland Chinese banks and energy shares among the weak spots. The Hang Seng Index (HK:HSI) lost 0.1% to 22,824.44, with the Hang Seng China Enterprises Index down 0.4%, even as the Shanghai Composite (CN:SHCOMP) rose 0.1%. Concerns about the fiscal health of the top mainland lenders loomed again over the shares, with Bank of China Ltd. (HK:3988) (BACHY) down 0.9%, Bank of Communications Co. (HK:3328) (BKFCF) 1.3% lower, and China Construction Bank Corp. (HK:939) (CICHF) off 0.7%. In the energy sector, Cnooc Ltd. (HK:883) (CEO) gave up 0.9% after posting a 17% gain in third-quarter revenue but not reporting its profit for the period. Its peers also lost ground, as China Petroleum & Chemical Corp. (HK:386) (SNP) and PetroChina Co. (HK:857) (PTR) fell 1% apiece. On the upside, China Unicom Hong Kong Ltd. (HK:762) (CHU) added 1.6% after announcing a gain of more than 50% for its quarterly profit compared to a year earlier. Rival China Mobile Ltd. (HK:941) (CHL) advanced 0.8%, while China Telecom Corp. (HK:728) (CHA) was flat.

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Read the full story:
Asian shares mostly lower; techs struggle in Seoul

Silk Road drug bust could lift value of bitcoins

WASHINGTON – The price of the bitcoin digital currency has rebounded, following a drop on Wednesday in response to the FBI's take down of the Silk Road narcotics-for-sale website.

Here's a fascinating twist: the demise of Silk Road could actually elevate the bitcoin's steadily ascending stature as a globally-accepted currency every bit as legit as government-guaranteed greenbacks.

That was the buzz among tech security, financial and law enforcement experts who assembled in the nation's capitol for the annual VISA Security Summit.

"It may well be that the demise of the Silk Road will help remove a bit of tarnish from Bitcoin's public image," observes cybersecurity blogger Brian Krebs.

The value of one bitcoin slipped as low as $110, but rebounded to $129, following the court appearance in San Francisco of Ross Ulbricht, 29, allegedly known as "Dread Pirate Roberts" or "DPR," Silk Road's alleged creator and operator.

Prior to news breaking about Ulbricht's arrest, a bitcoin was worth $140.

Bitcoins were launched in early 2009 in response to the collapse of the global economy. It's creator is a brilliant, mysterious programmer known only by the pseudonym Satoshi Nakamoto.

Nakamoto sought to create a global currency free of ties to any precious metals or .government guarantees. So he devise currency tied to a predictable rate asset: high-end mathematical computations.
Nakamoto issued the first bitcoin with a value at less than a penny. Approximately every 10 minutes, more coins would be issued through a lottery-like process to anyone who could solve a complex math problem. The idea was to release a finite number of bitcoins over a 20 year time span.

The idea caught on. A group of followers dedicated powerful computers to compete in the lottery and legitimate online exchange arose where bitcoins now can be reliably exchanged for U.S. dollars, euros and other currencies.

Bitcoins have become a main form of currency among online gamers looking to! purchase weapons and special powers. And bitcoins have gained a small, but steadily growing following of merchants; you can buy pizza with bitcoins, for instance.

Bitcoins have also come into play as a safe haven for financiers tied to fluctuating currencies of third world nations.

Last March, the U.S. Treasury issued guidance indicated the same money-laundering rules that make it illegal to use money orders to transfer illegal profits applies to virtual currencies.

But one of bitcoins' big attractions is that it is both legal and free from traditional forms of banking fees and manipulations by politicians and banking officials, says Mercedes Turnstall, an attorney who specializes in consumer financial services at Ballard Spahr.

Supporters of virtual currency seek a payment method separated from the vagaries of the established financial services sector. Consider what might l happen to the U.S. dollar if Congress fails to raise the nation's debt limit later this month.

"What they are trying to do is make an online equivalent to paper currency that can be run anonymously," Turnstall says. "The point is to have freedom of currency, and not have many of the traditional obligations that come into play."

Exchanged anonymously across the Internet, bitcoins are perfect for criminal transactions. But the same is true of hundred dollar bills hand-delivered in a valise.

"The US has a long tradition of currency battles dating back to the Civil War and states issuing their own currencies," says Turnstall. "We've had the gold, silver and mixed currency standards, but most of that died down in the 1880s … for 130 years we haven't thought about currency."

But with a bitcoin's value, relative to the dollar, steadily gaining traction, you may consider the currency discussion revived.

40 Years of Toil to Secure the Oil

Forty years ago Americans received a wake-up call about energy security. The events of October 1973 had a tremendous effect on the American psyche and would shape US energy policy for decades.

Global crises and resulting policy shifts certainly pose extra risks for energy investors. By understanding the past we can better anticipate the future and have a better sense of what works and what doesn’t.

When President Richard Nixon took office in 1969, concerns about energy were not high on the list of American priorities. That situation would change dramatically during Nixon’s presidency. US oil production had increased at a fairly steady pace for over 100 years, and in November 1970 would reach 10 million barrels per day (bpd). Today that mark still stands as the all-time high for US oil production.

Beginning in 1971, the Nixon administration began a series of price-control measures designed to combat rising inflation. By the summer of 1972, there were long lines at gasoline stations in some regions as shortages of gasoline were dealt with by rationing. (Many people associate the gas lines with the embargo that followed, not realizing that they were already happening as a result of the price controls.)

In October 1973, in retaliation for the West’s support of Israel in the Yom Kippur War, the Arab members of the Organization of Petroleum Exporting Countries (OPEC) producers’ cartel stopped supplying the US and Western Europe. US oil production had already begun to decline, and the US was unable to make up the supply shortage caused by the embargo. This resulted in a supply/demand imbalance. Oil prices quadrupled in a very short period of time, contributing to a deep global recession.

The embargo set US energy policy on a path that still guides us 40 years later. Every president since Nixon has placed energy security high on the list of presidential priorities, but each! administration has attempted to deal with the problem in different ways.

In response to the oil embargo, Nixon instituted additional price controls and began rationing oil to states. On Nov. 7, 1973, he announced Project Independence, which promoted conservation and alternative energy initiatives with the goal of ending the reliance on oil imports by 1980.

That same month, Nixon increased funding for mass transit, and authorized the Trans-Alaska Pipeline by signing legislation that disposed of legal challenges from the project’s opponents. Soon after, the 55-miles-per-hour speed limit was mandated nationwide to conserve fuel.

Gerald Ford was nominated to serve as vice president under Nixon on Oct. 12, 1973, less than a week before the Arab oil embargo began, so he too was molded by the crisis that followed.

When Ford became president in August 1974 following Nixon’s resignation, he maintained energy independence as a high priority.  “Our growing dependence upon foreign sources [of petroleum] has been adding to our vulnerability for years and years, and we did nothing to prepare ourselves for such an event as the embargo of 1973,” Ford said in his first State of the Union address.

President Ford proposed a number of initiatives designed to reduce growing dependence on foreign oil. He promoted expanded use of coal and nuclear power to shift electricity production away from oil, the development of synthetic fuels and oil shale resources, and tax credits to help homeowners with the cost of insulation. He set forth goals to reduce oil imports by 1 million bpd by the end of 1975 and by 2 million bpd by the end of 1977.

But Ford faced a hostile Congress that sometimes openly questioned the political legitimacy of his presidency, since he had not been elected. He therefore had a difficult time getting some of his proposals passed.

Ford did have some lasting energy policy successes. In December 1975, the Strategic Petroleum Reserve (S! PR) was e! stablished when the Energy Policy and Conservation Act (EPCA) was passed by Congress. The law was designed “to reduce the impact of severe energy supply interruptions” such as the OPEC embargo. The fuel efficiency of autos improved quickly following adoption of the Corporate Average Fuel Economy (CAFE) standards in 1978. A 2002 study by the National Academy of Sciences concluded that motor vehicle fuel usage was 14 percent lower in 2002 than it would have been in the absence of fuel efficiency standards.

Despite these efforts, by the time Jimmy Carter took over as president in 1977, oil imports had increased by 370 percent from Nixon’s first year in office. Oil consumption was at an all-time high, and domestic production was down 14 percent from the 1970 peak.

Only three months into office, Carter delivered a major speech in which he predicted that energy security would get progressively worse through the end of the century. But Carter underestimated the potential for production increases. At the time of his speech, the world consumed 60 million bpd. Carter noted that production declines of existing fields meant that just to maintain production at 1977 levels would require “the production of a new Texas every year, an Alaskan North Slope every nine months, or a new Saudi Arabia every three years.” Despite Carter’s skepticism, global oil production continued to expand and is now 50 percent higher than during his presidency.

One of President Carter’s lasting energy legacies was the creation of the Department of Energy in 1977. Other Carter proposals were advanced with the Energy Security Act (ESA) of 1980. Included within the ESA were programs to increase the production of gasohol (gasoline/ethanol blends) via loan guarantees for biomass and alcohol fuels projects, marking the introduction of ethanol into the fuel supply.

The ESA also included the US Synthetic Fuels Corporation Act, which established the Synthetic Fuels Corporation (SFC! ) —! a government-funded corporation with the purpose of developing a synthetic liquid fuels industry. But technical challenges and cost overruns ultimately doomed the SFC to failure, leading many critics to argue that the government should leave the energy business to the markets.

President Ronald Reagan pursued a dramatically different approach from President Carter. As if to emphasize that point, he removed from the White House the solar panels installed by Carter. He also accelerated the phase-out of the price controls on domestic oil production, let the tax credit on solar power expire, abolished the US Synthetic Fuels Corporation, and repealed the Crude Oil Windfall Profits Tax Act that had been signed into law by Carter.

Reagan was a strong supporter of domestic drilling, pushing to open more federal land to exploration and development. He unsuccessfully advocated drilling in parts of the Arctic National Wildlife Refuge (ANWR). Reagan was also an advocate of nuclear energy, signing several industry-friendly laws. Nuclear production overtook hydropower to become the second largest provider of electricity in the US behind coal while Reagan was in office.

The Gulf War was the defining energy event of President George Bush’s administration, but there were other noteworthy developments. Due to environmental concerns, in 1990 Bush signed an executive moratorium banning offshore oil developments outside of the western Gulf of Mexico and certain parts of Alaska. The ban covered the North Atlantic, Pacific Coast, New England, Mid-Atlantic, and the eastern Gulf of Mexico, and lasted until it was overturned during George W. Bush’s second term as president.

The elder Bush also signed into law the Energy Policy Act of 1992 (EPAct), addressing energy efficiency standards for buildings and appliances, and promoting energy conservation as well as the use of alternative energy vehicles.

President Bill Clinton’s two terms in office corresponded with oil prices that ! were both! lower and less volatile than those in the 1980s, and thus the goal of energy independence got pushed off the front burner.

Still, there were some significant energy initiatives during the Clinton years. The Partnership for a New Generation of Vehicles (PNGV) was founded by the Clinton administration in 1993 as a venture between the US government and major automobile makers including Chrysler, Ford, and General Motors. The purpose of the program was to develop vehicles with a fuel efficiency of up to 80 miles per gallon.

The three major domestic automakers all built hybrid concept cars capable of achieving at least 72 mpg. However, the program was cancelled following Clinton’s presidency by the George W. Bush administration. This highlights one of the biggest challenges in energy policy. Energy projects often take many years before they bear fruit, but many of them don’t survive political shifts. This is one of the biggest reasons US energy policy often seems dysfunctional.

The Clinton presidency marked the end of 12 years of Republican rule, and Clinton’s priorities on energy and the environment sharply differed in some areas from those of Reagan and Bush. For example, Reagan was a proponent of developing the oil reserves in ANWR, but Clinton vetoed a bill from the Republican-majority House that would have allowed drilling in ANWR.

The George W. Bush presidency was extremely eventful in terms of energy developments. Among the events occurring during his two terms in office were the September 11 terrorist attacks followed by a war with Afghanistan, another war in the Persian Gulf, major hurricanes that interrupted supplies and caused record gasoline price spikes, an almost uninterrupted increase in the price of oil, and passage of some major pieces of energy legislation that led to a massive expansion of biofuel production.

Bush initially talked up a hydrogen economy, and later promoted ethanol made from switchgrass as a motor fuel. Noteworthy during ! Bush&rsqu! o;s two terms were the Renewable Fuel Standard (RFS) in 2005 and its expanded version, the RFS2 in 2007. These pieces of legislation dramatically increased the size of the corn ethanol industry in the US by mandating increasing volumes of ethanol in the fuel supply. But domestic oil production would decline during all eight years of the Bush presidency.

An oil production turnaround was in the works, however. As the fracking revolution began to bear fruit, domestic production declines began to slow. By the first year of President Barack Obama’s administration, domestic production had begun to increase, and has now increased during every year of his term. That has not happened since Lyndon B. Johnson was president. If the trend continues, energy security may once more fade as a national priority.

But it is important not to forget the lessons of history. OPEC has lost some power, but the organization still supplies more than half of the world’s crude oil imports. So even though OPEC’s contribution to US oil supplies is declining, the cartel hasn’t lost its short-term ability to influence global prices.

That’s why we must continue to enact programs that bring America’s oil supply and demand into balance, despite the occasional boondoggle and miscalculation.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

How To Add 6% Income To Your Portfolio Without Sacrificing Growth

Until the last year or so, I haven't been a fan of preferred stocks, unless they were convertible or had a good chance of being redeemed with a capital gain. Yields available on well-chosen common stocks, real estate investment trusts (REITs) and master limited partnerships (MLPs) were high enough to beat preferred returns, factoring in modest growth in the price of the non-preferreds.

That's not the case anymore. Yields on utilities, REITs, etc., are mostly down in the 4%-5% range, and MLPs also have tax-related inconveniences. Hence, I've revisited preferreds lately and am finding some good buys. I don't expect to get rich from them, but I do expect not to end up in the poorhouse.

The problem with most preferred stocks is the specter of inflation. The dividends that seem high now won't seem so high if we can get 7% on a one-year CD five years from now. That is always a possibility that has to be taken into consideration.

However, with the Fed's interest-rate suppression still in force, we just need to own some gold as a hedge, and we can be covered on both ends of the deflation-inflation spectrum. I think it's much wiser to position ourselves that way than to try to make a bet on one outcome or the other. Will we get a Japan-like several-decades-long period of no growth, or a Weimar Republic decent into the chaos of hyperinflation? Your guess is as good as mine.

Warren Buffett and Jeremy Grantham both think total market returns for the rest of the decade will be in the mid-single digits, albeit with a lot of ups and downs. Today we with discuss a strategy with which we should get a good combination of growth and above-average income, plus the added benefit of low volatility in our personal cash flow.

Numbers Don't Lie (government numbers excluded)

We often hear that buying stocks with dividends that grow is more important than buying stocks with dividends that are high, but don't grow. In principle, I agree with that. We are also told that the big multinationals in the S&P 500 continually grow their dividends. The statistics show that's true. But being a math kind of guy I ran some numbers to see how long it takes for lower dividends to catch up to the total returns for stocks with higher ones, such as the preferreds I'll recommend today. To say I was shocked at the results is an understatement.

The S&P 500 has had an average dividend of 2.66% for the last 10-years. (The median is lower at 2.38%.) The historical average dividend growth rate is about 5.1%.

Of the preferred stocks I'll recommend, the lowest current yield at today's price is 6.36%. In terms of just dividends, it would take a typical S&P stock 32 years to return the same amount of total dividends if it grew at the historical 5.1% average. This, of course, ignores the present value of money, which is highly unlikely to maintain value over those decades. In terms of present value, you could probably tack on another five or so years to recover.

In addition, I looked at the total return of the S&P over 10 and 20 years with dividends reinvested. In this scenario, after 10 years the index returns finally break even with the lowest paying of the preferreds recommended here, and outperforms it at a widening margin after that. However, returning to the present value issue, we should note that the dollar has lost 13.8% of its value over the last 10 ten years. This again boosts the relative real (inflation adjusted) returns of the preferred shares.

If you're planning on living longer than 10 or 15 years, this presents a dilemma. Take the money now while its present value is assured, or take it later and hope dividend growth keeps up with inflation?

My solution to this conundrum is a kind of barbell approach. On one side of the bar you have the higher-paying preferred stock. On the other you have the common stock that is likely to overtake the preferred in 10 years or so—maybe sooner if you've picked a stock with above-average growth prospects. The result is a pair of stocks that will provide higher, surer current income than the common stock alone, and a higher total return over 15 or 20 years than the preferred alone.

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Three Great Barbell Buys

First up today is a preferred stock from one of my favorite companies. We've owned the common and two classes of the preferred stock in our portfolios for quite some time and we're very happy with the results. The preferred is Seaspan Corp. 7.95% Series D Cumulative Redeemable Perpetual Preferred Shares (SSW-PD). At its recent price of $25.30 it yields 7.86% (simple rate of return). The shares are redeemable by the company on January 30, 2018. If they are redeemed on that date, the compounded annualized rate of return will be 6.8%. Ex-dividend dates are: January 30, April 30, July 30 and October 30.

The common stock, Seaspan Corp. (SSW) recently sold for $24.87 and yields slightly more than 5%. The dividend has grown nicely over the last few years.

Boeing Wins Contracts for F-18 Parts, Satellite Surveillance

Best Bank Stocks To Own Right Now

As the week wound down, Boeing (NYSE: BA  ) claimed a pair of contract wins from the Pentagon on Thursday, worth nearly $20 million combined.

The larger award, for $10.9 million, was an option exercise on a cost-plus-award-fee contract to provide logistical support, analysis, and Type III anomaly support for the Space Based Space Surveillance Block 10 System. SBSS is a satellite-based system for tracking debris, spacecraft, and other space objects beyond Earth's atmosphere and free from interference from weather, atmosphere or time of day. Ball (NYSE: BLL  ) Aerospace built the satellite itself and its sensors, while Boeing has overall responsibility for the system. The current contract option runs through Dec. 20.

Boeing's smaller contract win was a $9 million firm-fixed-price delivery order against a previously issued Basic Ordering Agreement, whereby Boeing will supply 30 retrofit kits, including radomes for the AN/APG-79 active electronically scanned array radar, for installation aboard Navy F/A-18 E/F aircraft. Work on this contract should be complete by January 2016.

Analyzing Investments With Solvency Ratios

Solvency ratios are primarily used to measure a company's ability to meet its long-term obligations. In general, a solvency ratio measures the size of a company's profitability and compares it to its obligations. By interpreting a solvency ratio, an analyst or investor can gain insight into how likely a company will be to continue meeting its debt obligations. A stronger or higher ratio indicates financial strength. In stark contrast, a lower ratio, or one on the weak side, could indicate financial struggles in the future.

A primary solvency ratio is usually calculated as follows and measures a firm's cash-based profitability as a percentage of its total long-term obligations:

After Tax Net Profit + Depreciation

Long-Term Liabilities

Commonly Used Solvency Ratios

Solvency ratios indicate a company's financial health in the context of its debt obligations. As you might imagine, there are a number of different ways to measure financial health.

Debt to equity is a fundamental indicator of the amount of leverage a firm is using. Debt generally refers to long-term debt, though cash not needed to run a firm's operations could be netted out of total long-term debt to give a net debt figure. Equity refers to shareholders' equity, or book value, which can be found on the balance sheet. Book value is a historical figure that would ideally be written up (or down) to its fair market value. But using what the company reports presents a quick and readily available figure to use for measurement.

Debt to assets is a closely related measure that also helps an analyst or investor measure leverage on the balance sheet. Since assets minus liabilities equals book value, using two or three of these items will provide a great level of insight into financial health.

More complicated solvency ratios include times interest earned, which is used to measure a company's ability to meet its debt obligations. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest expense from long-term debt. It specifically measures how many times a company can cover its interest charges on a pretax basis. Interest coverage is another more general term used for this ratio.

Solvency Versus Liquidity Ratios

The solvency ratio measures a company's ability to meet its long-term obligations as the formula above indicates. Liquidity ratios measure short-term financial health. The current ratio and quick ratio measure a company's ability to cover short-term liabilities with liquid (maturities of a year or less) assets. These include cash and cash equivalents, marketable securities and accounts receivable. The short-term debt figures include payables or inventories ! that need to be paid for. Basically, solvency ratios look at long-term debt obligations while liquidity ratios look at working capital items on a firm's balance sheet. In liquidity ratios, assets are part of the numerator and liabilities are in the denominator.

What Do These Ratios Tell an Investor?

Solvency ratios are different for different firms in different industries. For instance, food and beverage firms, as well as other consumer staples, can generally sustain higher debt loads given their profit levels are less susceptible to economic fluctuations. In stark contrast, cyclical firms must be more conservative because a recession can hamper their profitability and leave less cushion to cover debt repayments and related interest expenses during a downturn. Financial firms are subject to varying state and national regulations that stipulate solvency ratios. Falling below certain thresholds could bring the wrath of regulators and untimely requests to raise capital and shore up low ratios.

Acceptable solvency ratios vary from industry to industry, but as a general rule of thumb, a solvency ratio of greater than 20% is considered financially healthy. The lower a company's solvency ratio, the greater the probability that the company will default on its debt obligations. Looking at some of the ratios mentioned above, a debt-to-assets ratio above 50% could be cause for concern. A debt-to-equity ratio above 66% is cause for further investigation, especially for a firm that operates in a cyclical industry. A lower ratio is better when debt is in the numerator, and a higher ratio is better when assets are part of the numerator. Overall, a higher level of assets, or of profitability compared to debt, is a good thing.

Industry-Specific Examples

A July 2011 analysis of European insurance firms by consulting firm Bain highlights how solvency ratios affect firms and their ability to survive, how they put investors and customers at ease about their financial health and how the regulatory environment comes into play. The report details that the European Union is implementing more stringent solvency standards for insurance firms since the Great Recession. The rules are known as Solvency II and stipulate higher standards for property and casualty i! nsurers, and life and health insurers. Bain concluded that Solvency II "exposes considerable weaknesses in the solvency ratios and risk-adjusted profitability of European insurers." The key solvency ratio is assets to equity, which measures how well an insurer's assets, including its cash and investments, are covered by solvency capital, which is a specialized book value measure that consists of capital readily available to be used in a downturn. For instance it might include assets, such as stocks and bonds, that can be sold quickly if financial conditions deteriorate rapidly as they did during the credit crisis.

A Brief Company Example

MetLife (NYSE:MET) is one of the largest life insurance firms in the world. A recent analysis as of October 2013 details MetLife's debt-to-equity ratio at 102%, or reported debt slightly above its shareholders' equity, or book value, on the balance sheet. This is an average debt level compared to other firms in the industry, meaning roughly half of rivals have a higher ratio and the other half have a lower ratio. The ratio of total liabilities to total assets stands at 92.6%, which doesn't compare as well to its debt-to-equity ratio because approximately two-thirds of the industry has a lower ratio. MetLife's liquidity ratios are even worse and at the bottom of the industry when looking at its current ratio (1.5 times) and quick ratio (1.3 times). But this isn't much of a concern given the firm has one of the largest balance sheets in the insurance industry and is generally able to fund its near-term obligations. Overall, from a solvency perspective, MetLife should easily be able to fund its long-term and short-term debts, as well as the interest payments on its debt.

Advantages and Disadvantages of Relying Solely on These Ratios

Solvency ratios are extremely useful in helping analyze a firm's ability to meet its long-term obligations; but like most financial ratios, they must be used in the context of an overall company analy! sis. Inve! stors need to look at overall investment appeal and decide whether a security is under or overvalued. Debt holders and regulators might be more interested in solvency analysis, but they still need to look at a firm's overall financial profile, how fast it is growing and whether the firm is well-run overall.

Bottom Line

Credit analysts and regulators have a great interest in analyzing a firm's solvency ratios. Other investors should use them as part of an overall toolkit to investigate a company and its investment prospects.

Rieder: Snowden reporter leaving the Guardian

Glenn Greenwald, the journalist who broke so many of the stories about government surveillance leaked by former National Security Agency contractor Edward Snowden, has been a nightmare for the Obama administrations.

Now he's leaving the Guardian, the British newspaper where he published those articles, to pursue what he calls a "once-in-a-career dream journalistic opportunity."

News of Greenwald's departure was broken by the website BuzzFeed. The journalist, who is also a lawyer, says he's not ready to provide specifics. "Because this news leaked before we were prepared to announce it, I'm not yet able to provide any details of this momentous new venture, but it will be unveiled very shortly," he said in a statement.

But whatever the particulars, it's probably safe to anticipate that his new news operation will specialize in hard-edged, investigative reporting fueled by a liberal agenda.

In an interview with BuzzFeed, Greenwald indicated he didn't plan to be playing small ball. He said his new organization would be "a very well-funded… very substantial new media outlet." He won't say where the money is coming from until the official announcement.

And he will clearly be the man, building the operation from scratch. "My role, aside from reporting and writing for it, is to create the entire journalism unit from the ground up by recruiting the journalists and editors who share the same journalistic ethos and shaping the whole thing — but especially the political journalism part — in the image of the journalism I respect most," he said.

Greenwald, who lives in Rio de Janeiro, says he'll continue to do so. But while some of the staff will be based there as well, he says the news outlet's main outposts would be in New York City, Washington, D.C. and San Francisco.

Greenwald, known for his crusading liberal approach, had nothing but good things to say about the Guardian. The two seemed a perfect fit, since the British news outlet is also known for its activist, le! ft-leaning approach.

"My partnership with the Guardian has been extremely fruitful and fulfilling: I have high regard for the editors and journalists with whom I worked and am incredibly proud of what we achieved," Greenwald said.

Right back atya, the Guardian responded. "Glenn Greenwald is a remarkable journalist and it has been fantastic working with him," spokeswoman Jennifer Lindenauer said. "Our work together over the last year has demonstrated the crucial role that responsible investigative journalism can play in holding those in power to account. We are of course disappointed by Glenn's decision to move on, but can appreciate the attraction of the new role he has been offered. We wish him all the best."

Greenwald, who began his journalism career with the pioneering online magazine Salon, has had an enormous impact on the political climate in the United States. His stunning disclosures of massive government collection of email and phone data of ordinary Americans with absolutely no connection to terrorism shook lawmakers and ordinary citizens alike.

RIEDER: Time to rein in NSA surveillance

At first the conventional wisdom in Washington was that this was no huge deal. Much of the initial outrage focused on leaker Snowden rather than the stunning information he had leaked.

But that soon changed as new details continued to emerge. In July, the House came close to passing a measure to block the NSA's wholesale collection of telephone records. Before Snowden and Greenwald, such a close vote, or even a vote at all, would have been unimaginable.

In September, four senators introduced legislation to rein in the NSA. And even staunch defenders of the snooping like Sen. Dianne Feinstein, D-Calif., chairman of the Senate Intelligence Committee, say that reforms are in order.

Greenwald is aggressive, passionate and fearless. It will be fascinating to watch his new venture take shape.

Homebuilders Hit, Better Times Ahead?

Homebuilders have been hit hard in recent months and they’re building on those losses today.

Reuters

The Wall Street Journal reports that homebuilders have had to resort to all kinds of incentives to boost sales. It reports:

Home builders have boosted cash incentives and upgrades to lure buyers, as sales flag in some markets due to rising prices and higher mortgage rates.

The incentives, which can run into the tens of thousands of dollars, are intended to soften the sticker shock that has put the cost of buying a newly built home out of reach for some families.

Upgrades can include free appliances, blinds, premium flooring or garage-door openers. Also growing in popularity are financial carrots such as paying buyers’ closing costs, covering some of their down payment or paying to reduce their mortgage’s interest rate for a year or two.

“I think there is a weakness in the market right now,” said Mark Ward, managing partner of ForeverHome LLC, a closely held home builder in Raleigh, N.C., set to construct roughly 400 homes this year. “Everybody’s giving more incentives today than they were in the summer.”

KBW, however, notes that October is typically a tough month for homebuilding stocks. “Historically, builders tend to underperform in Oct. followed by outperformance in Nov.-Jan. (in anticipation of Spring orders),” write Jade Rahmani and team. They expect that to happen this year.

DR Horton (DHI) has fallen 2.5% to $18.19, while PulteGroup (PHM) has dropped 2% to $15.80, Lennar (LEN) has declined 2.1% to $34.10, KB Home (KBH) is off 2.3% at $16.59 and Toll Brothers (TOLL) is down 1.9% at $30.89.

What The National Debt Means To You

The national debt level has been a significant subject of U.S. domestic policy controversy. Given the amount of fiscal stimulus that has been pumped into the U.S. economy over the past couple of years, it is easy to understand why many people are starting to pay close attention to this issue. Unfortunately, the manner in which the debt level is conveyed to the general public is usually very obscure. Couple this problem with the fact that many people do not understand how the national debt level affects their daily life, and you have a center piece for discussion.

National Debt vs. Budget Deficits
Before addressing how the national debt affects a people and a nation, it is first important to understand what the difference is between the federal government's annual budget deficit, and the country's national debt. Simply explained, the federal government generates a budget deficit whenever it spends more money than it brings in through income generating activities such as taxes. In order to operate in this manner, the Treasury Department has to issue treasury bills, treasury notes and treasury bonds to compensate for the difference. By issuing these types of securities, the federal government can acquire the cash that it needs to provide governmental services. The national debt is simply the net accumulation of the federal government's annual budget deficits.

A Brief History of U.S. Debt
Debt has been a part of this country's operations since its economic founding. However, the level of national debt spiked up significantly during President Ronald Reagan's tenure, and subsequent presidents have continued this upward trend. Only briefly during the heydays of the economic markets in the late 1990s has the U.S. seen debt levels trend down in a material manner.

From a public policy standpoint, the issuance of debt is typically accepted by the public, so long as the proceeds are used to stimulate the growth of the economy in a manner that will lead to the country's long-term prosperity. However, when debt is raised simply to fund public consumption, such as proceeds used for Medicare, Social Security and Medicaid, the use of debt loses a significant amount of support. When debt is used to fund economic expansion, current and future generations stand to reap the rewards. However, debt used to fuel consumption only presents advantages to the current generation.

Evaluating National Debt
Because debt plays such an integral part of economic progress, it must be measured appropriately to convey the long-term impacts it presents. Unfortunately, evaluating the country's national debt in relation to the country's gross domestic product (GDP) is not the best approach. Here are three reasons why debt should not be assessed in this manner.

GDP is too complex to make a relative comparison of an acceptable national debt level. In theory, GDP represents the total market value of all final goods and services produced in a country in a given year. Based on this definition, one has to calculate the total amount of spending that takes place in the economy in order to estimate the country's GDP. One approach is the use of the Expenditure Method, which defines GDP as the sum of all personal consumption for durable goods, nondurable goods and services; plus gross private investment, which includes fixed investments and inventories; plus government consumption and gross investment, which includes public-sector expenditures for services such as education and transportation, less transfer payments for services such as social security; plus net exports, which are simply the country's exports minus its imports. Given this broad definition, one should realize that the components that make up GDP are hard to conceptualize in a manner that facilitates a meaningful evaluation of the appropriate national debt level. As a result, a debt-to-GDP ratio may not fully indicate the magnitude of national debt exposure.

Therefore, an approach that is easier to interpret is simply to compare the interest expense paid on the national debt outstanding in relation to the expenditures that are made for specific governmental services such as education, defense and transportation. When debt is compared in this manner, it becomes plausible for citizens to determine the relative extent of the burden placed by debt on the national budget.

GDP is very difficult to accurately measure. While the national debt can be precisely measured by the Treasury Department, economists have different views on how GDP should actually be measured. The first issue with measuring GDP is that it ignores household production for services such as house cleaning and food preparation. As a country develops and becomes more modern, people tend to outsource traditional household tasks to third parties. Given this change in lifestyle, comparing the GDP of a country today to its historical GDP is significantly flawed, because the way people live today naturally increases GDP through the outsourcing of personal services.

Moreover, GDP is typically used as a metric by economists to compare national debt levels among countries. However, this process is also flawed because people in developed countries tend to outsource more of their domestic services than people in non-developed countries. As a result, any type of historical or cross-border comparison of debt in relation to GDP is completely misleading.

The second problem with GDP as a measurement tool is that it ignores the negative side affects of various business externalities. For example, when companies pollute the environment, violate labor laws or place employees in an unsafe working environment, nothing is subtracted from GDP to account for these activities. However, the capital, labor and legal work associated with fixing these types of problems are captured in the calculation of GDP.

The third problem with using GDP as a measurement tool is that GDP is greatly impacted by technological advances. Technology not only increases GDP, but also improves the quality of life for all people. Unfortunately, technological advances do not take place in a uniform manner each year. As a result, technology may skew GDP upward during certain years, which in turn may make the relative national debt level look acceptable, when in fact it is not. Most ratios must be compared based on their change through time, but GDP fluctuations result in errors of calculation.

The National Debt is not paid back with GDP. The national debt has to be paid back with tax revenue, not GDP, although there is a correlation between the two. Using an approach that focuses on national debt on a per capita basis gives a much better sense of where the country's debt level stands. For example, if people are told that debt per capita is approaching $40,000, it is highly likely that they will grasp the magnitude of the issue. However, if they are told that the national debt level is approaching 70% of GDP, the magnitude of the problem will not be properly conveyed.

Comparing the national debt level to GDP is akin to a person comparing the amount of their personal debt in relation to the value of the goods or services that they produce for their employer in a given year. Clearly, this is not the way one would establish their own personal budget, nor is it the way that the federal government should evaluate its fiscal operations.

How the National Debt Affects Everyone
Given that the national debt has recently grown faster than the size of the American population, it is fair to wonder how this growing debt affects average individuals. While it may not be obvious, national debt levels directly affect people in at least five direct ways.

First, as the national debt per capita increases, the likelihood of the government defaulting on its debt service obligation increases, and therefore the Treasury Department will have to raise the yield on newly issued treasury securities in order to attract new investors. This reduces the amount of tax revenue available to spend on other governmental services, because more tax revenue will have to be paid out as interest on the national debt. Over time, this shift in expenditures will cause people to experience a lower standard of living, as borrowing for economic enhancement projects becomes more difficult.

Second, as the rate offered on treasury securities increases, corporations operating in America will be viewed as riskier, also necessitating an increase in the yield on newly issued bonds. This in turn will require corporations to raise the price of their products and services in order to meet the increased cost of their debt service obligation. Over time, this will cause people to pay more for goods and services, resulting in inflation.

Third, as the yield offered on treasury securities increases, the cost of borrowing money to purchase a home will also increase, because the cost of money in the mortgage lending market is directly tied to the short-term interest rates set by the Federal Reserve, and the yield offered on treasury securities issued by the Treasury Department. Given this established interrelationship, an increase in interest rates will push home prices down, because prospective home buyers will no longer qualify for as large of a mortgage loan, since they will have to pay more of their money to cover the interest expense on the loan that they receive. The result will be more downward pressure on the value of homes, which in turn will reduce the net worth of all home owners.

Fourth, since the yield on U.S. Treasury securities is currently considered a risk-free rate of return and as the yield on these securities increases, risky investments such as corporate debt and equity investments will lose appeal. This phenomenon is a direct result of the fact that it will be more difficult for corporations to generate enough pre-tax income to offer a high enough risk premium on their bonds and stock dividends to justify investing in their company. This dilemma is known as the crowding out effect, and tends to encourage the growth in the size of the government, and the simultaneous reduction in the size of the private sector.

Fifth, and perhaps most importantly, as the risk of a country defaulting on its debt service obligation increases, the country loses its social, economic and political power. This in turn makes the national debt level a national security issue.

The Bottom Line
The national debt level is one of the most important public policy issues. When debt is used appropriately, it can be used to foster the long-term growth and prosperity of a country. However, the national debt must be evaluated in an appropriate manner, such as comparing the amount of interest expense paid to other governmental expenditures or by comparing debt levels on a per capita basis.

Hot Oil Stocks To Invest In Right Now

Oil and gas MLP LINN Energy (NASDAQ: LINE  ) has become a battleground stock this year. Vicious short-sellers have called the company's accounting aggressive, if not erroneous. Further, those who are negative on LINN assess its worth as low as $5.50 a unit. Needless to say, it's been a rough year for investors in LINN, especially after it was disclosed that the SEC would now be looking into its books.�

One of LINN's 19,000 producing oil and natural gas wells. (Photo courtesy of LINN Energy)

I firmly believe that LINN will successfully navigate the SEC inquiry, which once resolved should end the attacks against the company. In anticipation of that happening, I want to take advantage of the weakness created to add to my position in the company. In fact, I can point to two other major reasons why I think LINN and its affiliate LinnCo (NASDAQ: LNCO  ) are both compelling values worth buying today.

Hot Oil Stocks To Invest In Right Now: Access Midstream Partners LP (ACMP)

Access Midstream Partners, L.P., formerly Chesapeake Midstream Partners, L.L.C. (Partnership), incorporated on January 21, 2010, owns, operates, develops and acquires natural gas, natural gas liquids (NGLs) and oil gathering systems and other midstream energy assets. The Company is focused on natural gas and NGL gathering. The Company provides its midstream services to Chesapeake Energy Corporation (Chesapeake), Total E&P USA, Inc. (Total), Mitsui & Co. (Mitsui), Anadarko Petroleum Corporation (Anadarko), Statoil ASA (Statoil) and other producers under long-term, fixed-fee contracts. On December 20, 2012, the Company acquired from Chesapeake Midstream Development, L.P. (CMD), a wholly owned subsidiary of Chesapeake, and certain of CMD's affiliates, 100% of interests in Chesapeake Midstream Operating, L.L.C. (CMO). As a result of the CMO Acquisition, the Partnership owns certain midstream assets in the Eagle Ford, Utica and Niobrara regions. The CMO Acquisition also extended the Company's assets and operations in the Haynesville, Marcellus and Mid-Continent regions.

The Company operates assets in Barnett Shale region in north-central Texas; Eagle Ford Shale region in South Texas; Haynesville Shale region in northwest Louisiana; Marcellus Shale region in Pennsylvania and West Virginia; Niobrara Shale region in eastern Wyoming; Utica Shale region in eastern Ohio, and Mid-Continent region, which includes the Anadarko, Arkoma, Delaware and Permian Basins. The Company's gathering systems collect natural gas and NGLs from unconventional plays. The Company generates its revenues through long-term, fixed-fee gas gathering, treating and compression contracts and through processing contracts.

Barnett Shale Region

The Company's gathering systems in its Barnett Shale region are located in Tarrant, Johnson and Dallas counties in Texas in the Core and Tier 1 areas of the Barnett Shale and consist of 25 interconnected gathering systems and 850 miles of pipeline. During the year! ended December 31, 2012, average throughput on the Company's Barnett Shale gathering system was 1.195 billion cubic feet per day. The Company connects its gathering systems to receipt points that are either at the individual wellhead or at central receipts points into which production from multiple wells are gathered. The Company's Barnett Shale gathering system is connected to the three downstream transportation pipelines: Atmos Pipeline Texas, Energy Transfer Pipeline Texas and Enterprise Texas Pipeline. Natural gas delivered into Atmos Pipeline Texas pipeline system serves the greater Dallas/Fort Worth metropolitan area and south, east and west Texas markets at the Katy, Carthage and Waha hubs. Natural gas delivered into Energy Transfer Pipeline Texas pipeline system serves the greater Dallas/Fort Worth metropolitan area and southeastern and northeastern the United States markets supplied by the Midcontinent Express Pipeline, Centerpoint CP Expansion Pipeline and Gulf South 42-inch Expansion Pipeline. Natural gas delivered into Enterprise Texas Pipeline pipeline system serves the greater Dallas/Fort Worth metropolitan area and southeastern and northeastern the United States markets supplied by the Gulf Crossing Pipeline.

Eagle Ford Shale Region

The Company's gathering systems in its Eagle Ford Shale region are located in Dimmit, La Salle, Frio, Zavala, McMullen and Webb counties in Texas and consist of 10 gathering systems and 618 miles of pipeline. During 2012, gross throughput for these assets was 0.169 billion cubic feet per day. The Company connects its gathering systems to central receipt points into which production from multiple wells is gathered. The Company's Eagle Ford gathering systems are connected to six downstream transportation pipelines, which include Enterprise, Camino Real, West Texas Gas, Regency Gas Service, Eagle Ford Gathering and Enerfin. The Company processes gas at Yoakum or other Enterprise plants and transports residue to Wharton residue header w! ith conne! ctions to numerous interstate pipelines.

Haynesville Shale Region

The Company's Springridge gas gathering system in the Haynesville Shale region is located in Caddo and DeSoto Parishes, Louisiana, in one of the core areas of the Haynesville Shale and consists of 263 miles of pipeline. During 2012, average throughput on the Company's Springridge gathering system was 0.359 billion cubic feet per day. The Company connects its gathering system to receipt points that are at central receipt points into which production from multiple wells is gathered. The Company's Springridge gathering system is connected to three downstream transportation pipelines: Centerpoint Energy Gas Transmission, ETC Tiger Pipeline and Texas Gas Transmission Pipeline. The Company's Mansfield gas gathering system in the Haynesville Shale region is located in DeSoto and Sabine Parishes, Louisiana, in one of the areas of the Haynesville Shale and, as of December 31, 2012, consist of 304 miles of pipeline. During 2012, average throughput on the Company's Mansfield gathering system was 0.720 billion cubic feet per day. The Company connects its gathering system to receipt points that are at central receipt points into which production from multiple wells is gathered and treated. The Company's Mansfield gathering system is connected to two downstream transportation pipelines: Enterprise Accadian Pipeline and Gulf South Pipeline. Natural gas delivered into Enterprise Accadian pipeline can move to on-system markets in the Midwest and to off-system markets in the Northeast through interconnections with third-party pipelines. Natural gas delivered into Gulf South pipeline can move to on-system markets in the Midwest and to off-system markets in the Northeast through interconnections with third-party pipelines.

Marcellus Shale Region

Through Appalachia Midstream, the Company operates 100% of and own an approximate average 47% interests in 10 gas gathering systems that consist of approximately 5! 49 miles ! of gathering pipeline in the Marcellus Shale region. The Company's volumes in the region are gathered from northern Pennsylvania, southwestern Pennsylvania and the northwestern panhandle of West Virginia, in core areas of the Marcellus Shale. The Company operates these smaller systems in northeast and central West Virginia, southeast Pennsylvania, northwest Maryland, north central Virginia, and south central New York. During 2012, gross throughput for Appalachia Midstream assets was just over 1.8 billion cubic feet per day. The Company's Marcellus gathering systems' delivery points include Caiman Energy, Central New York Oil & Gas, Columbia Gas Transmission, MarkWest, NiSource Midstream, PVR and Tennessee Gas Pipeline. Natural gas is delivered into a 16-inch pipeline and delivered to the Caiman Energy Fort Beeler processing plant where the liquids are extracted from the gas stream. The natural gas is then delivered into the TETCo interstate pipeline for ultimate delivery to the Northeast region of the United States. Natural gas delivered into Central New York Oil & Gas 30-inch diameter pipeline can be delivered to Stagecoach Storage, Millennium Pipeline, or Tennessee Gas Pipeline's Line 300. In Columbia Gas Transmission lean natural gas is delivered into two 36-inch interstate pipelines for delivery to the Mid-Atlantic and Northeast regions of the United States. Natural gas is delivered into a MarkWest pipeline for delivery to the MarkWest Houston processing plant where the liquids are extracted from the gas stream. In NiSource Midstream natural gas is delivered into a 20-inch diameter pipeline and delivered to the MarkWest Majorsville processing plant where the liquids are extracted from the rich gas stream. In PVR natural gas is delivered into the 24-inch diameter Wyoming pipeline and the Hirkey Compressor Station. In Tennessee Gas Pipeline natural gas is delivered into this looped 30-inch diameter pipeline (TGP Line 300) at three different locations can be received in the Northeast at points along th! e 300 Lin! e path, interconnections with other pipelines in northern New Jersey, as well as an existing delivery point in White Plains, New York.

Niobrara Shale Region

The Company's gathering systems in the Niobrara Shale region are located in Converse County, Wyoming and consist of two interconnected gathering systems and 79 miles of pipeline. During 2012, average throughput in the Company's Niobrara Shale region was 0.013 billion cubic feet per day. The Company connects its gathering systems to receipt points,which are either at the individual wellhead or at central receipts points into which production from multiple wells are gathered. The Company's Niobrara gathering systems are connected to two downstream transportation pipelines: Tallgrass/Douglas Pipeline and North Finn/DCP Inlet Pipeline. Natural gas delivered into Tallgrass/Douglas pipeline is sent to the Tallgrass processing facility; after processing, natural gas is delivered to Cheyenne Hub, Rockies Express Pipeline, or Trailblazer Pipeline through Tallgrass Interstate Gas Transmission.

Utica Shale Region

The Company's gathering systems in the Utica Shale region are located in northeast Ohio and consist of 67 miles of pipeline. The Company's Utica gathering systems are connected to two downstream transportation pipelines: Dominion East Ohio (Blue Racer) and Dominion Transmission, Inc.

Mid-Continent Region

The Company's Mid-Continent gathering systems extend across portions of Oklahoma, Texas, Arkansas and Kansas. Included in the Company's Mid-Continent region are three treating facilities located in Beckham and Grady Counties, Oklahoma, and Reeves County, Texas, which are designed to remove contaminants from the natural gas stream.

Anadarko Basin and Northwest Oklahoma

The Company's assets within the Anadarko Basin and Northwest Oklahoma are located in northwestern Oklahoma and the northeastern portion of the Texas Panhandle and consist of appro! ximately ! 1,578 miles of pipeline. During 2012, the Company's Anadarko Basin and Northwest Oklahoma region gathering systems had an average throughput of 0.457 billion cubic feet per day. Within the Anadarko Basin and Northwest Oklahoma, the Company is focused on servicing Chesapeake's production from the Colony Granite Wash, Texas Panhandle Granite Wash and Mississippi Lime plays. Natural gas production from these areas of the Anadarko Basin and Northwest Oklahoma contains NGLs. In addition, the Company operates an amine treater with sulfur removal capabilities at its Mayfield facility in Beckham County, Oklahoma. The Company's Mayfield gathering and treating system gathers Deep Springer natural gas production and treats the natural gas to remove carbon dioxide and hydrogen sulfide to meet the specifications of downstream transportation pipelines.

The Company's Anadarko Basin and Northwest Oklahoma systems are connected to a transportation pipelines transporting natural gas out of the region, including pipelines owned by Enbridge and Atlas Pipelines, as well as local market pipelines such as those owned by Enogex. These pipelines provide access to Midwest and northeastern the United States markets, as well as intrastate markets.

Permian Basin

The Company's Permian Basin assets are located in west Texas and consist of approximately 358 miles of pipeline across the Permian and Delaware basins. During 2012, average throughput on the Company's gathering systems was 0.076 billion cubic feet per day. The Company's Permian Basin gathering systems are connected to pipelines in the area owned by Southern Union, Enterprise, West Texas Gas, CDP Midstream and Regency. Natural gas delivered into these transportation pipelines is re-delivered into the Waha hub and El Paso Gas Transmission. The Waha hub serves the Texas intrastate electric power plants and heating market, as well as the Houston Ship Channel chemical and refining markets. El Paso Gas Transmission serves western the United ! States ma! rkets.

Other Mid-Continent Regions

The Company's other Mid-Continent region assets consist of systems in the Ardmore Basin in Oklahoma, the Arkoma Basin in eastern Oklahoma and western Arkansas and the East Texas and Gulf Coast regions of Texas. The other Mid-Continent assets include approximately 648 miles of pipeline. These gathering systems are localized systems gathering specific production for re-delivery into established pipeline markets. During 2012, average throughput on these gathering systems was 0.031 billion cubic feet per day.

The Company competes with Energy Transfer Partners, Crosstex Energy, Crestwood Midstream Partners, Freedom Pipeline, Peregrine Pipeline, XTO Energy, EOG Resources, DFW Mid-Stream, Enbridge Energy Partners, DCP Midstream, Enterprise Products Partners Inc., Regency Energy Partners, Texstar Midstream Operating, West Texas Gas Inc., TGGT Holdings, Kinderhawk Field Services, CenterPoint Field Services, Williams Partners, Penn Virginia Resource Partners, Caiman Energy, MarkWest Energy Partners, Kinder Morgan, Dominion Transmission (Blue Racer), Enogex and Atlas Pipeline Partners.

Hot Oil Stocks To Invest In Right Now: Devon Energy Corporation(DVN)

Devon Energy Corporation, together with its subsidiaries, engages in the acquisition, exploration, development, and production of natural gas and oil in the United States and Canada. It also involves in transporting oil, gas, and natural gas liquids (NGL); and processing natural gas. The company owns oil and gas properties in the mid-continent area of the central and southern United States; the Permian Basin in Texas and New Mexico; the Rocky Mountains area of the United States; and the onshore areas of the Gulf Coast, principally in south Texas and south Louisiana. It also owns oil and gas properties in the provinces of Alberta, British Columbia, and Saskatchewan, Canada. In addition, the company offers marketing and midstream services, including marketing of gas, crude oil, and NGL, as well as constructing and operating pipelines, storage and treating facilities, and natural gas processing plants. As of December 31, 2010, it had 2,042 million barrel of oil equivalent of proved developed reserves. The company sells its gas production to various customers, such as pipelines, utilities, gas marketing firms, industrial users, and local distribution companies; crude oil production to refiners, remarketers, and other companies; and NGL production to customers in petrochemical, refining, and heavy oil blending activities. Devon Energy Corporation was founded in 1971 and is headquartered in Oklahoma City, Oklahoma.

Advisors' Opinion:

• [By Matt DiLallo]

  Others in the industry are taking a slightly different route as the trend has seen many shifting to higher return oil and NGL projects. Both Chesapeake and SandRidge are on a well-known journey to boost liquids production; however, both used a lot of debt to get there. Devon Energy (NYSE: DVN  ) on the other hand has an excellent balance sheet with over $7 billion in cash. It's reduced its debt by 34% since 2003 while also reducing its share count by 20% since 2004. It done this despite still being a heavy natural gas producer which still represents 61% of production. Devon represents what investors now want in a production and�exploration�company as it has a cash rich balance sheet, ample liquids cash flow and solid partners to develop its more prospective acres. �

• [By Tyler Crowe]

  The potential gain in operational costs is so great that even oil companies are jumping on board. Devon Energy's� (NYSE: DVN  ) �new Oklahoma City headquarters was meticulously designed to reduce energy consumption by 20% and overall water use by 2.4 million gallons a year. (At that rate, the company will have enough water to�hydraulically�fracture a new well once every two years.)

5 Best Low Price Stocks To Watch Right Now: Magnum Hunter Resources Corp (MHR)

Magnum Hunter Resources Corporation (Magnum Hunter), incorporated in June 1997, is an independent oil and gas company engaged in the exploration for and the exploitation, acquisition, development and production of crude oil, natural gas and natural gas liquids, primarily in the states of West Virginia, Ohio, Texas, Kentucky and North Dakota and in Saskatchewan, Canada. The Company is also engaged in midstream operations, including the gathering of natural gas through its ownership and operation of a gas gathering system in West Virginia and Ohio, named as its Eureka Hunter Pipeline System. The Company�� portfolio includes Marcellus/Utica Shales in West Virginia and Ohio, the Eagle Ford Shale in south Texas, and the Williston Basin/Bakken Shale in North Dakota and Saskatchewan, Canada. As of December 31, 2011, its proved reserves were 44.9 million barrels of oil equivalent and were approximately 48% oil. In August 2012, the Company closed on the acquisition of 1,885 net mineral acres located in Atascosa County, Texas. With this acquisition, the Company has approximately 7,278 gross acres and 5,212 net acres located in Atascosa County, Texas.

On May 3, 2011, it acquired NuLoch Resources Inc. In April 2011, Triad Hunter, its wholly owned subsidiary, acquired certain Marcellus Shale oil and gas properties located in Wetzel County, West Virginia. On April 13, 2011, it acquired NGAS Resources, Inc. In February 2012, Triad Hunter acquired leasehold mineral interests located primarily in Noble County, Ohio.

Eagle Ford Shale Properties

Eagle Ford Shale is located in Gonzales, Lavaca, Atascosa and Fayette Counties, Texas. The Eagle Ford Shale properties are held primarily by its wholly owned subsidiary, Eagle Ford Hunter, Inc. As of February 27, 2012, the Company�� Eagle Ford Shale properties included approximately 54,000 gross (24,000 net) acres primarily targeting the Eagle Ford Shale oil window, principally in Gonzales and Lavaca Counties, Texas. As of December 31! , 2011, proved reserves attributable to the Eagle Ford Shale properties were 5.4 million barrels of oil equivalent, of which 94% were oil and 24% were classified as proved developed producing, and 5.4 million barrels of oil equivalent. As of February 27, 2012, its Eagle Ford Shale properties included 18 gross (10 net) productive wells, of which it operated 14.

Williston Basin Properties

The Williston Basin is spread across North Dakota, Montana and parts of southern Canada. The basin produces oil and natural gas from a range of producing horizons, including the Madison, Bakken, Three Forks/Sanish and Red River formations. As of February 27, 2012, the Company�� Williston Basin properties included approximately 413,003 gross (122,561 net) acres. As of December 31, 2011, proved reserves attributable to the Williston Basin properties were 8.9 million barrels of oil equivalent, of which 94% were oil and 42% were classified as proved developed producing, and 8.8 million barrels of oil equivalent. As of February 27, 2012, the Williston Basin properties included approximately 288 gross (98.9 net) productive wells.

The Williston Hunter United States property acreage is located in Divide and Burke Counties, North Dakota, with its primary production from the Bakken Shale and Three Forks/Sanish formations. As of February 27, 2012, its Williston Hunter United States properties included approximately 36,355 net acres in the Williston Basin in North Dakota. As of February 27, 2012, the Williston Hunter United States properties included approximately 105 gross (9.5 net) productive wells. The Company�� Williston Hunter Canada property is located primarily in Enchant, near Vauxhall, Alberta, Canada, at Balsam near Grande Prairie, Alberta, Canada and at Tableland, near Estevan, Saskatchewan, Canada. As of February 27 2012, the Williston Hunter Canada properties included approximately 107,270 gross acres (79,693 net acres). At December 31, 2011, the Williston Hunter Canada prope! rties inc! luded approximately 65 gross productive wells. As of December 31, 2011, Williston Hunter Canada had 41,797 gross (32,944 net) acres of land that is prospective for Bakken and Three Forks/Sanish oil in the Tableland field. The Enchant property consists of 10,720 acres. As of December 31, 2011, 48 wells (44.1 net) were producing on this acreage. As of December 31, 2011, the Company owned approximately 43% average interest in 15 fields located in the Williston Basin in North Dakota consisting of 151 wells, and approximately 15,000 gross (6,450 net) acres.

Appalachian Basin Properties

The properties acquired in the NGAS acquisition are held by its wholly owned subsidiary, Magnum Hunter Production, Inc. As of February 27, 2012, its Appalachian Basin properties included a total of approximately 484,412 gross (412,323 net) acres, located primarily in the Marcellus Shale, Utica Shale and southern Appalachian Basin. At December 31, 2011, proved reserves attributable to its Appalachian Basin properties were 29.9 million barrels of oil equivalent, of which 27% were oil and 59% were classified as proved developed producing, and 30.2 million barrels of oil equivalent. As of February 27, 2012, the Appalachian Basin properties included approximately 3,112 gross (2,257 net) productive wells, of which we operated approximately 88%.

As of February 27, 2012, it had approximately 58,426 net acres in the Marcellus Shale area of West Virginia and Ohio. The Company�� Marcellus Shale property is located principally in Tyler, Pleasants, Doddridge, Wetzel and Lewis Counties, West Virginia and in Washington, Monroe and Noble Counties, Ohio. As of February 27, 2012, the Company operated 33 vertical Marcellus Shale wells and 16 horizontal Marcellus Shale wells. As of February 27, 2012, approximately 63% of its leases in the Marcellus Shale area were held by production.

Other Properties

The Company�� East Chalkley field is located in Cameron Parish, Louisiana.! The fiel! d consists of approximately 714 gross acres (443 net acres). This developmental project is an exploitation of bypassed oil reserves remaining in a natural gas field located at depths between 9,300 and 9,400 feet. As of February 27, 2012, the Company operated the East Chalkley field and owned an approximately 62% working interest and an approximately 42.7% net revenue interest in the field. Other properties of the Company are located in Nacogdoches, Colorado, Lavaca, Bee, Fayette and Wharton Counties, Texas and Desoto Parish, Louisiana. As of February 27, 2012, these properties consisted of an aggregate of approximately 7,050 gross (1,188 net) acres.

Advisors' Opinion:

• [By Matt DiLallo]

  It's been a tough year for investors of Magnum Hunter Resources (NYSE: MHR  ) . As I write this, shares are down about 18% on the year, though shares had been down by more than 37% after the company�announced that it was ditching its auditor. While the stock has slowly recovered, the company has three major action items to accomplish if it wants to win back investors.

• [By Matt DiLallo]

  I recently took a deeper look at three important numbers from Magnum Hunter Resources (NYSE: MHR  ) long-delayed annual report. Today, I want to drill down even deeper into the report (which can be accessed�here���link opens a PDF), and look at some areas that investors often overlook when considering an energy stock. In this case, I want to look at the company's "hidden" assets.

• [By Selena Maranjian]

  The biggest new holdings are Diana Shipping�and Newport. Other new holdings of interest include energy concern Magnum Hunter Resources (NYSE: MHR  ) . The stock is has significant short interest, with many concerned about its significant debt and a delay in the filing of its year-end report (which is expected to be filed by the end of June). Meanwhile, the company has been shifting attention from low-priced natural gas toward oil and liquids, and is diversifying across several promising shale fields, such as the Utica.

Hot Oil Stocks To Invest In Right Now: Halliburton Company(HAL)

Halliburton Company provides various products and services to the energy industry for the exploration, development, and production of oil and natural gas worldwide. It operates in two segments, Completion and Production, and Drilling and Evaluation. The Completion and Production segment offers production enhancement services, completion tools and services, cementing services, and Boots & Coots. Its production enhancement services include stimulation and sand control services; completion tools and services comprise subsurface safety valves and flow control equipment, surface safety systems, packers and specialty completion equipment, intelligent completion systems, expandable liner hanger systems, sand control systems, well servicing tools, and reservoir performance services; cementing services consist of bonding the well and well casing, while isolating fluid zones and maximizing wellbore stability, and casing equipment; and Boots & Coots include well intervention services , pressure control, equipment rental tools and services, and pipeline and process services. The Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation, and wellbore placement solutions that enable customers to model, measure, and optimize their well construction activities. Its services comprise fluid services, drilling services, drill bits, wireline and perforating services, testing and subsea services, software and asset solutions, and integrated project management and consulting services. The company serves independent, integrated, and national oil companies. Halliburton Company was founded in 1919 and is headquartered in Houston, Texas.

Advisors' Opinion:

• [By Tyler Crowe and Aimee Duffy]

  It has been a long process cleaning up the 1,100 miles of coastline that was contaminated during the spill. BP and rig operator Transocean (NYSE: RIG  ) combined have spent almost $20 billion in litigation and cleanup costs. In this video, Fool.com contributors Tyler Crowe and Aimee Duffy look at how BP, Transocean, and the third party involved in Macondo spill, Halliburton (NYSE: HAL  ) have fared after the spill.

• [By The Specialist]

  As stated in my most recent article on BP, I believe the economic damage from this settlement could potentially bring BP (and maybe even Halliburton (HAL) and Transocean (RIG) who are also being sued) to its knees. As such, I find it important to track the growing claims on the website maintained by the third party administrator and updated each business day to get insight on this. For a more detailed background on my thoughts and analysis on the settlement and how it could affect BP, please see my first article here and follow up article here. My tracking of data has shown that the economic settlement claims have been quickly accelerating in both average claim amount and total value of claims each week, with the data in the table toward the bottom of the article. In addition, I have added this week's data as of the date and time of the writing of this article, and the prorated claims have jumped another 18% this week over last week again with again a very high average claim amount. When Friday's data comes out, that final week over week percentage change may differ materially.

• [By Sara Murphy]

  The industry has noticed the benefits of recycling and has seen the rising legislative tide, and is beginning to adopt frac water recycling more broadly. Oil-field services companies Halliburton (NYSE: HAL  ) and Baker Hughes (NYSE: BHI  ) are truly pushing ahead with this strategy, and have reaped early success. Halliburton has introduced its H2O Forward suite of CleanWave and CleanStream technologies in both the Permian and Bakken regions, with reported savings in the range of $500,000-$700,000. To compete with this, Baker Hughes has designed its H2prO offering, which has been tested in the Permian Basin.

Hot Oil Stocks To Invest In Right Now: Encana Corporation(ECA)

Encana Corporation and its subsidiaries engage in the exploration for, development, production, and marketing of natural gas, oil, and natural gas liquids. The company owns interests in resource plays that primarily include the Greater Sierra, Cutbank Ridge, Bighorn, and Coalbed Methane resource plays located in British Columbia and Alberta, as well as the Deep Panuke natural gas project offshore Nova Scotia in Canada. It also holds interests in resource plays comprising the Jonah in southwest Wyoming, Piceance in northwest Colorado, Haynesville in Louisiana, and Texas resource play, including east Texas and north Texas. The company serves primarily local distribution companies, industrials, energy marketing companies, and other producers. Encana Corporation was founded in 1971 and is headquartered in Calgary, Canada.

Advisors' Opinion:

• [By David Smith]

  The process, which was first used in Colorado, and has found its way to Pennsylvania, has already been responsible for some amazing statistics: Encana (NYSE: ECA  ) has drilled 51 Piceance shale wells in northwestern Colorado from a single pad. And Devon Energy (NYSE: DVN  ) �has completed 36 wells from a single pad in the Marcellus shale. Obviously, these companies -- among others -- are already benefiting from this staggering advancement.

• [By Richard Zeits]

  Earlier this year, after almost a year of active but unsuccessful marketing of a Mississippian Lime Joint Venture and following several mixed test results, Encana Corporation (ECA) designated its ~320,000 net Mississippian Lime acres in Kansas for sale. In July, Encana followed with a decision to divest its remaining acreage in Osage County in Oklahoma, including seven producing wells.

Hot Oil Stocks To Invest In Right Now: Vecta Energy Corp (VER)

Vecta Energy Corporation is engaged in the exploration for, and the acquisition, development and production of oil, natural gas and natural gas liquids. The Company has non-operated interests in three areas: the foothills of Alberta, northeast BC and the Brewster area in central Alberta. The Company has interest in the Brewster area of west central Alberta (in townships 42, 43 and 44; range 12-13, W5). These lands are prospective in the Belly River formation at depths of 1,500 to 2,000 meters, as well as deeper zones including Nordegg, Rock Creek, Ellerslie, Ostracod, Falher and Notikewin. A total of six wells have been drilled on Company acreage. The 102/01-26-043-13 W5 well is producing 350 to 400 thousand cubic feet of natural gas with liquids. The 15-11-043-13 W5 well is producing of 350 to 400 thousand cubic feet of natural gas with liquids.