Skill-vs.-Luck Investing Has Risky Effects

NEW YORK (TheStreet) --TheStreet.com alum Barry Ritholtz recently shared a post from investment manager Bob Seawright that explored the difference between skill and luck when to comes to investing. Seawright invoked something called the Wyatt Earp effect where Earp famously survived countless gunfights and while history looks back at Earp as having been very skilled, luck also had to play a very large role.

Seawright continues that Bill Miller's streak of beating the S&P 500 for 15 years in a row as he managed the Legg Mason Value Trust (LMVRX) was by Miller's own account "an accident of the calendar."

Understanding the difference between skill and luck is crucial. When a long, lucky streak is confused with skill it can lead to overconfidence which can then lead to increased risk taking. In managing the Legg Mason Value Trust Miller took big risks despite the above quote attributed to him by Seawright.

He had very large positions financial stocks including Fannie Mae and Freddie Mac going into the financial crisis which he did not sell causing his fund to fare far worse with a 73% drop compared to the S&P 500's 56% decline. Overconfidence is a behavior that repeats in stock market history. One recent anecdotal example came during the internet bubble and subsequent tech wreck. As high-flying internet stocks rose, legions of day trading shops were opened around the country so that newly minted traders could quit their regular jobs and easily click their way to wealth as internet stocks kept growing to the sky. What many thought was easily acquired day trading skill turned out to be luck that soon went bad ultimately leading the first 50% decline of the preceding decade. Recent signs of similar overconfidence could include 3D printing stocks. Like the internet, 3D printing is likely to be life changing. Going into mid-November 3D Systems (DDD)was up 120% and ExOne (XONE) was up 120% from its IPO in February. Both stocks were hit very hard last week; DDD was down 9% and XONE was down 14%. XONE is down 25% from its high this summer but that did not dissuade Voxeljet (VJET)from its IPO one month ago. After rocketing to a 106% gain in just 18 trading days, it then fell 47% from its high last week.

After a few months of "skillful" trading, luck may have run out on the group... at least for the time being.

The conclusion drawn by Seawright is the need focus on process in order to achieve investment success to which I would add the word discipline. When you can truly accept the role luck plays in investing it then becomes much easier to focus on process and when you know you have a process that can lead to long-term investment success it makes it easier to remain disciplined to your chosen process.

By remaining disciplined you will create your own luck.

This is especially true in 2013 as the year winds down to an end. If you adhere to some sort of investment strategy other than indexing then you have likely lagged behind the S&P 500's 27% gain. Just as Bill Miller realized he would not beat the market every year, neither can anyone else. If your investment strategy has lagged behind the S&P 500 index you might be tempted to switch to indexing because of how well it did this year. Doing so would be an undisciplined disregarding of process. Through most of the last decade no one wanted to touch indexing with a ten-foot pole as the S&P 500 endured a volatile round trip to nowhere; from March 10, 2000 to May 9, 2007 the index was unchanged. Indexing was no worse back then as today, it just so happens that indexing has beaten most other strategies this year after lagging so many strategies before. Giving up on a strategy because of impatience once is likely to be repeated in the future which results in repeatedly chasing what was hot last year which will inhibit investment success. If your equity portfolio is up 10 or 20%, your process is not broken, 2013 just one of those years where your process wasn't the best performer and that is ok because no process can be the best performer every year. No positions

Investing in Companies Developing Promising Immunotherapy Drugs for Melanoma (BMY), (ONCS), (MRK), (INO), (AMGN)

Melanoma is on the rise. Yearly there are 68,000 new cases of melanoma diagnosed in the U.S. and an estimated 9,180 people will die from advanced melanoma. From 1970 to 2009, diagnoses have increased by 800%.While Melanoma accounts for less than 5% of skin cancer cases, it is responsible for more than 80% of skin cancer-related deaths. However, those numbers are lowering as several immunotherapies gained approved by the U.S. Food and Drug Administration (FDA) and a number of other immunotherapies are in various stages of clinical development to treat metastatic melanoma.

Companies like Bristol-Myers Squibb (BMY), Merck (MRK), Amgen (AMGN) and Roche (RHBBY) have all been developing treatments for late stage metastatic melanoma. There are also small companies that are developing novel delivery systems that enable the cancer drugs to better target the tumors, like Inovio Pharmaceuticals (INO) and OncoSec (ONCS).

While therapies to treat melanoma are looking like a crowded field, one must remember even with competition these new drugs could be worth billions to the drug makers if successful. Below are a number of companies that are developing immunotherapies that have the potential be the next billion dollar blockbuster drug or delivery system to treat melanoma.

BRISTOL - MYERS SQUIBB'S YERVOY EXTENDS LIVES

There can be no better headline for a drug company when its new cancer drug is said to "extend the lives of patients by as much as 10 years." And that's what the headlines for Bristol's immunotherapy drug ipilimumab (Yervoy) touted after results of the first long term study of 1,800 patients from 12 trials showed the treatment had a positive effect on long-term survival. 22% of the patients were still alive three years after treatment, and 17% were alive after seven years, after which there were no deaths, and the longest recorded survival was 9.9 years. The findings showed patients reach a plateau in survival that starts at about three years and extends until at least 10 years.

By targeting the CTLA-4 protein receptor on T-cells within the immune system, Yervoy is designed to fight cancer by removing molecular brakes that prevent immune system cells from destroying tumors. While Yervoy has only been effective in shrinking tumors in just over 10% of the patients, the patients who found the drug effective did live longer due to the immune system ability to adapt and keep up with mutations in the tumor. In phase 3 trials, melanoma patients treated with Yervoy saw median overall survival of 10 months, compared to 6.4 months for patients in the control group. Importantly, more than 20% of patients in the trial lived more than two years, versus just 14% of untreated patients. And one in ten patients lived at least four years.

Sales of Yervoy have risen of 33% year-over-year, as 50% of the stage IV melanoma patients are given the drug. Sales in the last quarter were $238 million and expected to grow as Yervoy is also being tested for other indications such as for stomach, lung, ovarian and prostate cancer. And while Yervoy did not meet the main goal in a prostate cancer trial, it did show positive results for progression-free survival, showing the treatment to be effective in less advanced prostate cancer, particularly in cases where the cancer hadn't spread to other organs., Bristol sees Yervoy eventually carving out market share in the treatment for prostate cancer, and additional phase 3 test are expected to produce data on patients with early stage prostate cancer in 2015.

Another immunotherapy drug that has shown great promise for Bristol is nivolumab, an anti-PD1 monoclonal antibody. Research has shown that interactions between PD-1 and the ligands PD-L1 or PD-L2 can lead to antitumor immune suppression; and nivolumab is designed to interrupt the interaction which then allows T cells to fight the cancer. Nivolumab is considered a breakthrough melanoma therapy as a result of its long term results from a Phase I study, showing that the drug demonstrated durable responses among a significant group of patients with Stage IV melanoma. Close to 33% of the patients in the study experienced tumor shrinkage, compared to 10% for Yervoy.

Nivolumab is also in trials in combination with Yervoy to treat melanoma. The study consists of 52 patients, and 82% given the combination were alive after a year, a higher percentage than patients given Yervoy alone. The study demonstrated that adding anti-PD1 drugs could double or triple the survival results. Nivolumab is in 6 late-stage studies, and has fast-track status in place for melanoma, lung cancer, and kidney cancer.

Bristol is an $85 billion market cap company, and has seen its stock rise over 58% YTD. The stock closed on Thur. Nov. 14th at $52.74, slightly below its 52 week high. On Nov. 6th analysts at Leerink Swann raised its price target from $49.00 to $58.00, while earlier Credit Suisse placed a $55.00 price target on the stock. Sales of Yervoy are expected to reach $1.1 billion by year's end. The company posted $4.1 billion in 3rd quarter revenue, up 9%. Though the company has lost patents on two of its most successful drugs, both Yervoy and nivolumab are expected to make up for the lost revenue as peak sales are estimated at $6 billion. Analysts also predict Yervoy will become Bristol's top selling drug by 2016.

MERCK DEVELOPING A BETTER DRUG – BUT LATE OUT OF THE STARTING GATE

While it has not been the best year for Merck (MRK) as the company restructures, it may have found its future billion dollar drug in its investigational anti-PD-1 lambrolizumab (formerly known as MK-3475). Like Bristol's nivolumab, lambrolizumab has seen positive results in its ongoing phase IB expansion study where the drug demonstrated significant antitumor activity and good response rates as well as a tolerable toxicity profile in patients with melanoma. Lambrolizumab achieved a response rate of 38% in advanced melanoma patients, and as high as 52% with patients on the highest dose tested, higher numbers than Bristol's drug.

The trial focused on 135 patients with advanced and unresectable melanoma, with 48 patients having been previously treated with Yervoy. In the trial, lambrolizumab produced durable responses in 81% of patients who responded to the drug. The overall median progression-free survival among the patients enrolled in the trial was greater than 7 months. A global phase II study of lambrolizumab is currently open for enrollment, and a phase III study comparing two different dosing regimens of lambrolizumab with Yervoy in patients who have not previously received Yervoy is planned.

Lambrolizumab received the FDA's Breakthrough Therapy Designation earlier this year and is currently in eight clinical trials testing a number of different cancers including melanoma, non-small cell lung, bladder, colorectal, gastric, head and neck, and triple negative breast. Additional trials are planned as monotherapy or in combination with other cancer therapies.

Pharmaceutical analyst Tim Anderson at Bernstein Research expects lambrolizumab can generate peak sales of $3 billion. Unfortunately, Mr. Anderson is not as excited about the near term prospects for Merck. His concerns were two fold, the first was the mounting generic competition Merck is facing or soon will face on a third of its drug franchises. The second is its lengthy process to overhaul its R&D operations, as Mr. Anderson commented, "While the company is embarking upon a series of maneuvers to 'fix' R&D, this will likely take years to accomplish,"
Merck is a $138 Billion market cap company. The stock is up 15% YTD, closing on Thur. Nov 14th at $47.82 per share, 5% below its 52 week high. In October the company announced 8,500 more jobs will be cut in addition to the 7,500 previously announced, making the total job cuts about 20% of the company's workforce and shaving $2.5 billion annually by 2015. The company announced results for the third quarter; globally Sales were $11.0 Billion, a decrease of 4% from $11.49 billion for same period last year. EPS came in at $0.38, a drop from $0.56 same quarter the previous year. However, I believe that the long term prospects for Merck are very good given the restructuring and its focus on immunotherapies for cancer. And while it could be a rocky road for the next year, Merck in one's portfolio for the long term should be a wise investment.

ONCS DEVELOPING A DELIVERY SYSTEM FOR TODAY'S CANCER FIGHTING DRUGS

OncoSec Medical is a small company that is developing what might be a billion dollar delivery system, called reversible electroporation, for medicines targeted at solid tumors. Electroporation uses an electrical pulse to create temporary openings or pores in cancer cells, then clinically proven chemotherapeutics or gene-based cytokines are injected into the open pores at doses lower than what would normally be delivered systemically. The electric pulse is removed and the pores close trapping the cancer fighting medicine within the tumor cells. With this targeted approach and opening pores of a tumor the patient experiences less surrounding tissue damage, and in the case of a chemotherapeutic is able to administer 1/20th of a traditional chemotherapy dose.

In a Phase I study with melanoma patients ImmunoPulse was found to be potentially safe and well tolerated plus data displayed best-in-class results as 90% of the lesions treated elicited an immune reaction that resulted in a response. This immune reaction also resulted in a 53% objective response rate in patients who had other cancerous lesions that were not treated with ImmunoPulse. A Phase II safety and efficacy trial with late-stage metastatic melanoma is being conducted in collaboration with the University of California San Francisco. This open-label, multi-center Phase II trial will enroll approximately 25 patients with advanced-stage, cutaneous, in-transit malignant melanoma.

Last month the company announced positive preliminary animal data on ImmunoPulse. The study was conducted using a single tumor model where a total of forty mice were treated with either ImmunoPulse alone, or in combination with anti-CTLA4, anti-PD1 or both at varying concentrations. Results indicate that all treatment groups showed 100% regression of treated lesions in all mice, and that no mice died as a result of toxicity from treatment. The results from this initial study demonstrate that ImmunoPulse in combination with anti-CTLA4 or anti-PD1 is safe and effective. The company, with these positive results, intends to continue testing combination in more aggressive melanoma models that will support further evaluation in humans.

Dr. Richard Heller, professor at Old Dominion University, where the study was conducted commented on the results: "Results are encouraging and indicate that using gene electrotransfer to deliver plasmid IL-12 into tumors can be an effective and safe delivery tool. Additional studies are being conducted to demonstrate that the combination may lead to immune responses against distant untreated lesions in mice. We will investigate the anti-tumor response and plan to present these findings in the near future"

OncoSec is small; it has a market cap of $25.11 million, YTD the stock is up almost 25% closing on Thurs Nov. 14th at $0.274. At this time OncoSec is not generating revenue but it's developing a delivery system that Inovio Pharmaceuticals has already proved larger drug companies such as Merck and Roche are interested in testing. With small development companies one looks for future potential of the product as an indicator of possible future stock performance. Inovio, though having a more extensive product line, is a good example of a future indicator as its stock is up 268% YTD. I like that OncoSec, like Inovio, is developing a delivery system not a new drug and may just be able to enhance the already proven drugs that these companies have invested billions in.

CONCLUSION

Immunotherapies for cancer could be a real game changer for drug manufacturers, patients and investors. Leerink Swann issued a review from analysts Howard Liang and Seamus Fernandez which concludes that 50% of all cancer treatment could involve immunotherapy within the next decade. Andrew Baum analysts at US bank Citigroup sees immunotherapies having the potential of becoming the biggest drug class in history. "We believe this market will generate sales of up to $35 billion over the next 10 years and be used in some way in the management of up to 60 percent of all cancers."

In the short term Merck has a more rocky road ahead than Bristol as the company restructures, but I see both companies as strong long term investments. OncoSec is a risky investment, but if using Inovio's stock run as an example, it could also be a very rewarding investment.

America's Richest (and Poorest) Cities

Median household income in the United States remained relatively unchanged between 2011 and 2012, after falling 7% from the start of the recession. While the nation continues to recover based on other measures, it is not exactly encouraging news.

The nation's largest cities have followed a similar pattern. Income for most of the 366 metropolitan areas measured by the U.S. Census Bureau are flat in the last year, and many are still down significantly compared to 2008. According to the Census Bureau, Brownsville, Texas replaced McAllen, Texas as the country's poorest metro area. San Jose, Calif. took the top spot as the wealthiest metro area, replacing Washington, D.C. 24/7 Wall St. reviewed the metropolitan areas with the highest and lowest median incomes in the U.S.

Click here to see the 10 richest cities

Click here to see the 10 poorest cities

While income levels and poverty rates are not identical measures, low income and high poverty tend to go hand in hand. All 10 of the poorest metropolitan areas have higher percentages of residents living below the poverty rate, compared to the national figure of 15.9%. In Brownsville, the poverty rate is more than 36%, the highest in the nation.

According to Brookings Institution fellow Elizabeth Kneebone, one of the key determinants of income levels in a city are the kinds of jobs available. This includes jobs in technology, finance, high-skill manufacturing and professional services. Indeed, the wealthiest metropolitan areas have among the highest concentrations of these types of jobs.

Nationally, 10.9% of the population is employed in professional services like scientific and management roles. In places like Washington, D.C., and San Jose, it is much closer to 20% of the population. The low-income cities have far fewer residents in these occupations.

At least due in part to this, low income areas tend to have a much smaller percentage of residents with post-secondary education. Nationally, just under 30% of the adult population has at least a bachelor's degree. In poorer places like Dalton, Ga., and Lake Havasu, Ariz., barely one in 10 adults have a bachelor's degree. Conversely, in each of the five wealthiest metro areas, the rate is well over 40%.

For the wealthy cities, Kneebone explained, "It's like a virtuous cycle: wealthier cities high have the industry and the jobs that attract highly educated workers, and if you have a highly educated workforce, you can attract those types of jobs into the region." Residents in the poorest cities face the opposite situation.

In the poorest areas, residents are much more likely to be employed in occupations that are low-skill, low-pay and require only modest education.

Not all agree that self-perpetuating poverty is a problem in these cities. Dr. Richard Burkhauser, a professor of public policy at the Cornell University, explained that people are always able to leave these places. "It's certainly true that if you don't move around, your chance of getting out of poverty is much tougher than if you move." However, a major theme in American history is that generations leave poor places and find jobs elsewhere, explained Burkhauser.

While income has not improved significantly in most of the nation's metropolitan areas, there are exceptions. Notably, San Jose's median household income grew by roughly $5,000 in a single year. Brookings senior research analyst and associate fellow Alec Friedhoff noted that the city's improvement isn't surprising considering it is one of most tech-heavy metro areas in the country. "High tech areas have really bounced back quickly, and San Jose was the one that bounced back the fastest," he noted.

Based on data from the U.S. Census Bureau's 2012 American Community Survey (ACS), 24/7 Wall St. identified the U.S. metropolitan statistical areas (MSAs) with the highest and lowest median household incomes. Based on Census Bureau treatment, median household income for all previous years is adjusted for inflation. We considered poverty, median home value and health insurance from the Census Bureau's ACS. We also reviewed unemployment data provided by the Bureau of Labor Statistics. Unemployment rates listed are full-year averages for 2012 and not monthly rates. All ranks are out of the 366 U.S. metropolitan areas measured in the ACS, except for unemployment rates, which are out of 372 areas measured by the BLS.

These are America's richest (and poorest) cities.

Morningstar: State Pensions Complex, Lack Transparency

Who’s watching your client’s pension? At the state level, who knows?

A new report from Morningstar notes the “inherent challenge” in understanding and studying the current state of …well, state pensions, mainly due to their complexity, weak disclosure requirements, and their sheer number. In addition, pension accounting is filled with assumptions, which leads to a lot of uncertainty. Morningstar does add that this might be about to change, however.

“During the last few years, there has been a lot of negative attention focused on pensions, but new standards approved by the Governmental Accounting Standards Board could spark some significant changes,” Rachel Barkley, municipal credit analyst for Morningstar, said in a statement. “We’ve seen the funded levels of state pension plans continue to decline during the last year, albeit modestly."

She noted the bankruptcy filings of San Bernardino, Calif., and Detroit may have significant effects on the national level.

Morningstar’s municipal credit analysts found that based on two key funding metrics, Wisconsin had the strongest-funded state pension plan system while Illinois had the weakest among all 50 states, for the second year in a row. However, in a break from past reports, the Chicago-based research firm analyzed Puerto Rico as well, and found it ranked as the weakest among all the pension systems evaluated by Morningstar.

The two key metrics were:

“On the upside, recent data indicate that long-term investment returns are generally in line with assumptions used by most pension plans,” Barkley added. “Additionally, in recent years most states have implemented some level of pension reforms.”

Additional key conclusions from Morningstar’s review include:

---

Check out these related stories on ThinkAdvisor:

Top Analyst Downgrades and Stocks to Sell: Abercrombie, TASER, Tiffany and More

It is a pre-holiday week, interest rates have risen and many headwinds are in the air. Wall Street analysts are still issuing upgrades and downgrades. Each and every morning we peruse dozens of research notes to find the gems for investors looking for stocks to buy and stocks to sell. Investors frequently get to see the analyst upgrades and Buy ratings from Wall Street firms, but often do not get to see when to sell or avoid a company. These are this Wednesday’s top analyst downgrades and cautious research notes from Wall Street.

Abercrombie & Fitch Co. (NYSE: ANF) was maintained as Hold at Argus, but the firm lowered its earnings estimates for this year and next year.

Aerovironment Inc. (NASDAQ: AVAV) was maintained Neutral but its 2014 earnings estimates were cut by almost half after the company signaled order delays in its earnings report.

Douglas Dynamics Inc. (NYSE: PLOW) was downgraded to Underperform from an already cautious Neutral rating at Credit Suisse, and the target price is $14, versus a current $14.72 share price.

TASER International Inc. (NASDAQ: TASR) was downgraded to Neutral from Overweight at J.P. Morgan.

Tiffany & Co. (NYSE: TIF) was downgraded to Neutral from Buy at Citigroup.

Here are Wednesday’s top analyst upgrades. Also, if you have grown worried about a possible market crash, here are five strategies hedge funds use to stay in the market while lowering their risk.

How returns, liquidity & risk play role in asset allocation

Flashback to the start of 2008: the markets are roaring and everyone�s who�s been left out of the equity ride up is rushing to enter. Cut -- to the start of 2009: equity is worse than a four-letter bad word by now.

Nobody can get it right 100% of the time; and, at both these times, the investor would have been protected with the asset allocation approach � taken out profits when his weightage of equity shot up beyond his risk-taking ability; and entered when no one dared to even look towards the markets in 2009.

Look at the whole picture

The allocation to debt is met for the salaried class through regular deductions and investment in the employee provident fund (EPF) scheme; and others create their safety net through Public Provident Fund, bank deposits, Post Office deposits, National Savings Certificates and the like. We all spend more time on analyzing why we made a loss of 10% on one share, even when that share is a miniscule proportion of one�s total financial assets. The focus needs to move away from making a profit in every transaction to having a suitable risk-adjusted return portfolio.

Beyond just debt and equity

Asset allocation is a way to reduce risks but it goes beyond the accepted debt and equity allocation. The starting point of reducing risks is to spread your assets across different countries and currencies. While we all believe that India is the place to invest in for the long-term, we do understand that in case of a war-like situation on India�s borders, the price of all assets � debt and equity, as well as real estate � will fall.

The liquidity factor

Assets can also be classified based on their liquidity. Why investors like property as an asset class is that there is no price ticker and a �Fill it; shut it; forget it� approach works. However, you may have realized during 2008 that the value of this asset was just on paper (even if you wished to assign a discount to it), as there were just no transactions taking place. And you cannot manage your daughter�s wedding expenses from a piece of paper that will gain value only on her first wedding anniversary.

�How much sugar do you take in your tea?�

This is a question I have often asked my prospective clients, and I get a straight-forward answer almost always. My logical mind wants to ask two questions instead: What is the size of the cup? What is the size of the spoon? When your cup of worries is huge (for example, in 2008), the spoon (of investments) that you dip into your equi-�tea� definitely needs to be larger.

How your financial planner will address asset allocation

There are three key factors that need to be considered and communicated correctly: financial objectives (returns required), liquidity requirements (a factor of the time horizon for investments) and risk profile (what is the loss the investor can bear). 

Let us assume that fixed deposit rates for 3 years or more are at 7.5% pa, or 5% pa post-tax. If 86% of the total funds are invested in deposits, the portfolio will be capital protected at the end of three years.

If the period of investment is 10 years, only 61% of the funds need to be locked into fixed deposits. The incremental benefit of investing the �riskable� funds in equity will be huge, and you do not want to miss this opportunity.

Disclaimer: While we have made efforts to ensure the accuracy of our content (consisting of articles and information), neither this website nor the author shall be held responsible for any losses/ incidents suffered by people accessing, using or is supplied with the content.

A 'Forever Stock' Stock Every Investor Should Own

Whenever I need inspiration for a new stock idea, I think about Levi Strauss.

Yes, Levi Strauss -- the man who invented blue jeans.

As a scrappy European immigrant to the land of opportunity, Strauss went West during the California Gold Rush in the mid-1800s seeking his fortune. But he didn't go as a prospector. Instead, Strauss made his first fortune selling pickaxes, shovels and other supplies to 49ers in search of gold. His second and much larger fortune was made when he decided to make pants out of tent canvas, dye them blue with indigo and sell the durable outerwear to would-be gold miners.

Simply put, Strauss was an expert in finding trends and profiting from them.

This kind of savvy reminds me of a company I've followed for more than a decade now. I'm talking about Senior Housing Properties Trust (NYSE: SNH), a real estate investment trust (REIT).

And I like this company particularly now, because it's seizing a huge opportunity to make a lot of money.

Let me explain.

Every day in the United States, 10,000 people turn 65. As those people get older and need more care, they'll need somewhere to go. Senior Housing manages a $5.3 billion portfolio consisting of nearly 400 properties that include senior-living centers, skilled-nursing facilities, medical office buildings and wellness centers across 40 U.S. states. 

Obamacare Headwinds? Fuggedaboutit
Considering the rapidly changing landscape of U.S. health care, it's easy to see why Senior Housing could face significant headwinds at first glance. After all, the largest portion of the nation's aging population still heavily relies on government subsidies such as Social Security and Medicare to help pay for senior lifestyle and care facilities. In this sense, a health care REIT would likely be negatively affected by slow government pay and the fiscal uncertainty of federal entitlements.

But that's not the case with Senior Housing. About 94% of Senior Housing's net operating income comes from private-pay properties. This means tenants pay out of their own pockets, rather than relying on a government subsidy or voucher system. So the company's dependence to government reimbursement (and the uncertainty that comes with it) is extremely limited. In addition, about 32% of the properties are multi-discipline medical office buildings with blue-chip health care tenants such as Stryker (NYSE: SYK), Boston Scientific (NYSE: BSX) and Quest Diagnostics (NYSE: DGX).

Strike Gold With The Golden Years
The U.S. population of 85-plus is growing at a much faster rate than the rest of the country's population, according to the U.S. Census Bureau. By 2025, the population of 85-plus is projected to grow by 25%. By comparison, the under-85 population should grow just 15% over the same period. Over the next four years, the 85-plus population is expected to grow 10% larger than it is today -- twice as fast as the under-85 population.

 

These undeniable demographic trends and the stock's consistent performance make Senior Housing a great addition to any retirement portfolio. It's already a core holding in many of my clients' portfolios.

The company has been expanding quickly. This past year, Senior Housing raised more than $650 million in capital market transactions and gained access to a $750 million unsecured credit facility. Despite this fast growth, it's been able to keep its balance sheet less leveraged than many REITs', with a debt-to-capital ratio of just 37%.

In addition, the company has performed consistently through the years. In addition to a growing stock price, Senior Housing has steadily raised the dividend from $1.20 a share in 2000 to a recent $1.56 a share, which brings the yield to just over 6%. Add that to capital appreciation, and you have a compounded annual return of 47% during the past 13 years. Not bad for a "lost decade" of investing...

The fact that REITs are required by law to pay 90% of their income as dividends to shareholders -- regardless of whether their share price goes up or down -- makes this an even sweeter deal.

Risks to Consider: Although the lion's share of Senior Housing is private pay -- which implies relatively affluent tenants -- tougher economic conditions or external circumstances such as inflation, could affect the company's pool of qualified prospects in the senior lifestyle and assisted-living segment. In addition, as part as their different tax structure, REITs don't pay income taxes. This means their dividends are usually fully taxable.

Action to Take --> I see Senior Housing as a long-term holding, especially if you are building a retirement, income-focused portfolio. This doesn't mean the stock can't perform well in the short term. Based on favorable long-term demographics and the company's history of consistency, a 12-month price target of $29 is completely reasonable.

P.S. -- Stocks like Senior Housing Properties are similar to a special group of securities we call "Forever" stocks. These are world-dominating companies that pay investors a fat dividend, dig a deep moat around their business to fend off competitors and buy back massive amounts of stock, boosting the value for the rest of the shares. They're solid enough stocks to buy, forget about and hold "Forever." To learn more about these stocks -- including some of their names and ticker symbols -- click here.

Broadcom Introduces Powerful Chip for Low-End Androids

Broadcom (NASDAQ: BRCM  ) introduced the first quad-core HSPA+ processor with 5G Wi-Fi, near-field communication, GPS, and indoor positioning. The company said the BCM23550 processor is designed for high performance entry-level phones, and is built for the Android 4.2 Jelly Bean mobile operating system. 

The company said the new processor is a "turnkey solution" that will allow smartphone makers to quicken production of full-feature 3G smartphones, because the chip works with current smartphone designs that have similar-sized Broadcom chips.

In a press release, Broadcom's Vice President of Product Marketing and Mobile Platform Solutions, Rafael Sotomayor, said, "By combining the performance benefits of a quad-core solution with high-end features like 5G WiFi, globally certified NFC technology, and advanced indoor positioning technology, the platform offers device manufacturers a flexible and cost-effective path to address the affordable smartphone segment."

Some of the chips' main features include:

Quad 1.2GHz A7 CPU  21 Mbps (megabits per second) of HSPA+ downstream connectivity, with 5.8 Mbps upstream Dual HD display support  VideoCore IV high-performance graphics Full 1080 HD camcorder and playback HD voice support Near-field communication support 5G Wi-Fi technology  Broadcom expects production of the new chip begin in Q3 2013, and is sampling the chip right now.

Why TICC Capital Is Poised to Outperform

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, closed-end asset manager TICC Capital Corp. (NASDAQ: TICC  ) has earned a respected four-star ranking.

With that in mind, let's take a closer look at TICC and see what CAPS investors are saying about the stock right now.

TICC facts

Headquarters (founded)	Greenwich, Conn. (2003)
Market Cap	$523.3 million
Industry	Asset management
Trailing-12-Month Revenue	$74.8 million
Management	CEO Jonathan Cohen (since 2003) COO Saul Rosenthal (since 2003)
Return on Equity (average, past 3 years)	14.2%
Cash / Debt	$60.2 million / $390.1 million
Dividend Yield	11.7%

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 97% of the 292 members who have rated TICC believe the stock will outperform the S&P 500 going forward.   

Just yesterday, one of those Fools, All-Star arisktaker, tapped TICC as a particularly attractive income opportunity:

[C]urrently paying an 11.69% dividend. Closed-end investment company. Provides capital to non-public, small & medium-sized, technology companies. Company also has warrants of other equity instruments [in] some of the companies it lends to. No insider purchases or sales in the last 12 months. Should do well in a recovering economy.

If you want market-thumping returns, you need to put together the best portfolio you can. Of course, despite a strong four-star rating, TICC may not be your top choice. If that's the case, we've compiled a special free report for investors called "Secure Your Future With 9 Rock-Solid Dividend Stocks," which uncovers several other juicy income opportunities. The report is 100% free, but it won't be around forever, so click here to access it now.

First Niagara Declares a Pair of Dividends

First Niagara Financial (NASDAQ: FNFG  ) will return money to two separate classes of its stockholders. The company has declared quarterly dividends for its common shares and its class B preferreds, both of which will be paid on May 15 to shareholders of record as of May 3.

The common stock payout is to be $0.08 per share, while that for the class B preferred is $0.539063 apiece.

The amount of the former matches the banking group's previous five quarterly distributions, the most recent of which was handed out in February.

The common stock dividend annualizes to $0.32 per share. That yields 3.4% at First Niagara Financial's current market price of $9.37.

More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

KEELEY Small Cap Value Fund Comments on Sanchez Energy

Sanchez Energy (SN) proved to be the largest detractor during the quarter, falling over 30 percent and costing the Fund 40 basis points of performance. Although the company issued $300 million in senior notes during the quarter for an acquisition that doubled its Eagle Ford Shale acreage, there appeared to be no fundamental reason for the decline. We remain committed to the sector and continue to believe our companies are well positioned for the secular growth opportunities that we think lie ahead.From John Keeley (Trades, Portfolio)'s KEELEY Small Cap Value Fund Q3 2014 Commentary.Also check out: John Keeley Undervalued Stocks John Keeley Top Growth Companies John Keeley High Yield stocks, and Stocks that John Keeley keeps buying

Currently 0.00/512345 Rating: 0.0/5 (0 votes)

Subscribe via Email Subscribe RSS Comments Please leave your comment:
More GuruFocus Links

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

MORE GURUFOCUS LINKS

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

SN STOCK PRICE CHART 17.07 (1y: -40%) $(function(){var seriesOptions=[],yAxisOptions=[],name='SN',display='';Highcharts.setOptions({global:{useUTC:true}});var d=new Date();$current_day=d.getDay();if($current_day==5||$current_day==0||$current_day==6){day=4;}else{day=7;} seriesOptions[0]={id:name,animation:false,color:'#4572A7',lineWidth:1,name:name.toUpperCase()+' stock price',threshold:null,data:[[1383544800000,28.46],[1383631200000,28.36],[1383717600000,27.84],[1383804000000,25.76],[1383890400000,26.97],[1384149600000,27.6],[1384236000000,26.08],[1384322400000,26.43],[1384408800000,26.22],[1384495200000,26.58],[1384754400000,25],[1384840800000,25.15],[1384927200000,25.63],[1385013600000,27.11],[1385100000000,27.35],[1385359200000,25.8],[1385445600000,26.55],[1385532000000,25.71],[1385704800000,25.67],[1385964000000,25.52],[1386050400000,26.16],[1386136800000,26.01],[1386223200000,25.34],[1386309600000,24.3],[1386568800000,23.85],[1386655200000,24.01],[1386741600000,23.43],[1386828000000,23.95],[1386914400000,23.48],[1387173600000,23.35],[1387260000000,23.14],[1387346400000,23.26],[1387432800000,23.5],[1387519200000,23.73],[1387778400000,23.66],[1387864800000,23.87],[1388037600000,23.77],[1388124000000,25.2],[1388383200000,24.25],[1388469600000,24.51],[1388642400000,23.85],[1388728800000,24.22],[1388988000000,24.27],[1389074400000,24.72],[1389160800000,23.95],[1389247200000,25.25],[1389333600000,25.61],[1389592800000,24.61],[1389679200000,25.05],[1389765600000,25.16],[1389852000000,26.6],[1389938400000,26.07],[1390284000000,26.55],[1390370400000,27.31],[1390456800000,26.83],[1390543200000,26.27],[1390802400000,26.23],[1390888800000,27.3],[1390975200000,26.71],[1391061600000,27.3],[1391148000000,27.49],[1391407200000,26.94],[1391493600000,27.69],[1391580000000,27.55],[1391666400000,27.73],[1391752800000,28.86],[1392012000000,28.38],[1392098400000,29.66],[1392184800000,31.72],[1392271200000,31.88],[1392357600000,31.98],[1392703200000,29.74],[1392789600000,28.72],[1392876000000,28.79],[1392962400000,29.29],[1393221600000,30.75],[1393308000000,30.59],[1393394400000,29.55],[1393480800000,29.46],[1393567200000,29.79],[1393826400000,29.1],[1393912800000,30.25],[1393999200000,29.54],[1394085600000,29.15],[139417200

Seniors: That Offer for Free Medical Supplies Is a Total Scam

Jupiterimages

If you get a pre-recorded call offering free medical equipment or medical supplies, watch out. You could be the latest target of a new scam targeting seniors as Medicare open enrollment nears. One version of the con involves a call offering a "free" deal for an alarm system or medical supplies -- if you pay a low monthly charge. In another variation, the call is supposedly confirming a shipment of medicine or medical devices that your physician has sent to you. But -- as the Better Business Bureau warned on Friday -- they're scams. What the callers are after is your personal information, or for you to agree to be billed for handling fees or other incidental charges. Naturally, no matter what you agree to, you'll never receive those medical products. So if you bite on the free offer, you'll end up paying -- either with money or a headache. Variations of the scam have been around for a while, but the most recent version is tied to Medicare's open enrollment, which runs Oct. 15. through Dec. 7. Other versions could aim at non-seniors. What You Should Do

Employer Doesn't Offer a Pension? You Could Build Your Own

Alamy Pensions from private employers are increasingly uncommon. Among Fortune 1000 companies, a 2014 report from Towers Watson reveals, 35 percent offer a pension, compared to 59 percent a decade ago. If your employer won't help you out with a pension, the financial industry lets you to create your own. Using an insurance product known as a deferred-income annuity contract, you can set up a future stream of income for yourself. Let's take a look at how these annuities work. The Do-It-Yourself Pension The idea of the deferred-income annuity is simple. In exchange for an upfront premium payment, the insurance company agrees to pay you monthly income. Yet unlike an immediate annuity, a deferred-income annuity involves waiting -- typically 10 to 20 years -- before the insurance company starts making monthly payments. Historically, customers buying annuities have tended to be older, and so most of the attention for deferred-income annuities was to give those already at retirement age an opportunity to guarantee ample income if they lived beyond their life expectancy. According to a recent Barron's survey, a $200,000 upfront payment from a 60-year-old man could ensure annual income of more than $72,000 beginning at age 80. More recently, life insurance companies have realized that potential buyers in mid-career could use deferred-income annuities to set up predictable retirement income. Now, customers in their 50s or even their 40s have the opportunity to buy deferred income annuities that will start paying out at age 65. Again using the $200,000 example, a deferred income annuity bought by a 55-year-old man could provide $21,000 in annual income. The same premium for an annuity bought at age 45 would create annual income of $32,000. Of course, most people don't have $200,000 to spend on an annuity in the middle of their careers. But insurance companies have reduced their minimum investments on such annuities, selling them for as little as a $5,000 premium payment and inviting regular repeat purchases as part of a longer-term retirement plan. What to Watch Out for In general, if you die before you reach the target age, your survivors won't be entitled to any of your initial premium payment. Some annuities have add-ons that allow for heirs to receive something from the insurance company if that happens, but those options will reduce your monthly income if you live long enough for the annuity to pay out. Like many annuity products, deferred-income annuities don't automatically adjust payouts for inflation. If your insurer offers inflation-adjusted payouts, you'll typically start out with a much lower initial monthly payment. Nevertheless, investing a portion of your retirement savings in such an annuity takes away some of the uncertainties involved in retirement planning. Rather than hoping that the stock market will cooperate with the timing of your retirement, you can lock in a guaranteed monthly income in advance. For many, that peace of mind will be worth the potential downsides of this strategy.

Goldman Sachs Lines Up Its Next Victim: Ecuador

Unbowed by fines and new regulations, Goldman Sachs (NYSE: GS) has simply looked elsewhere for fresh victims.

In a deal that barely registered with the mainstream media, Ecuador's central bank agreed earlier this week to swap half of its gold reserves - worth $580 million - with Goldman in exchange for liquid assets.

The Ecuadorian central bank thinks it's going to earn $16 million to $20 million in profit over the three-year duration of the deal. Of course, the details of the transaction, such as the fees and interest rate that Goldman is charging, were not disclosed.

And as we all know, the devil is in the details - particularly when you're dealing with a Wall Street pirate like Goldman Sachs.

"They've invited the wolf to dinner without realizing they're on the menu," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "There's no doubt that Goldman will come out the winner. We just don't know exactly how they plan to do it."

Goldman Sidesteps Washington... Again

Fitz-Gerald said that the Ecuador gold deal matters because it's telling us that Goldman and its nefarious brethren on Wall Street have not changed their behavior one iota in the wake of the 2008 financial crisis for which they were mostly to blame.

What's more, he said that U.S. politicians who believe that efforts like the 2010 Dodd-Frank Act have put a lid on Wall Street's bad behavior are dreaming.

"Washington thinks they have this thing under control," Fitz-Gerald said. "All they've done is just a slap on the wrist. The Big Banks have just reconstituted their business elsewhere, where they don't have the same regulatory burden. If you think anything has changed in New York, you're sadly mistaken."

And whatever Ecuador is saying publicly, that it was willing to make any kind of deal with the likes of Goldman Sachs indicates that the country is in serious trouble.

That much is obvious to everyone.

"It does raise a red flag," Bianca Taylor, a sovereign analyst at Loomis Sayles, told Bloomberg News. "Whenever a country needs to sell or monetize its gold reserves, it's definitely a signal that the sovereign is strapped for cash."

Maybe Ecuador genuinely believes that swapping its gold with a shark like Goldman will work out for the best, but history says otherwise...

The Damning Track Record of Goldman Sachs (NYSE: GS)

One thing that anyone should know entering into a deal with Goldman Sachs is that they will come out on the short end. Goldman plays to win.

And it's more than willing to bend the rules in its favor. Just look at what Goldman did last spring...

GS made several moves to manipulate gold prices, advising investors to sell while snapping up the yellow metal as people followed their advice and prices dropped.

Goldman does much the same thing with stocks, mostly through its Conviction Buy List.

"The truth is that Goldman Sachs and the rest of the big banks on Wall Street invariably 'blow up' customers to make money for themselves," said Money Morning Capital Wave Strategist Shah Gilani. "And not only do big banks like Goldman run roughshod over their customers and clients, they manipulate markets, industries, economies, and countries to fatten their already gigantic bonus pools and personal fortunes."

Yes, countries. Ecuador wouldn't be the first nation to be seduced by Goldman's promise of rescue from a financial pickle.

Last fall, Goldman tried a similar stunt with Venezuela.

Like Ecuador, Venezuela is strapped for cash and thought it could use its gold reserves to obtain some extra liquidity.

The deal that was negotiated would have swapped 1.45 million ounces of Venezuelan gold - to be held for seven years by the Bank of England - in exchange for $1.6 billion from Goldman.

But the gold at that time was worth $1.8 billion, representing an immediate 10% profit for GS. In addition, Venezuela would have paid about 8% a year for the loan. And the gold collateral was to be subject to margin calls, adding more uncertainty.

Recognizing that Goldman probably did not have Venezuela's best interests at heart, the South American nation backed away from the deal before signing anything. Good for them.

But then there's the tragedy that was Greece.

Goldman Sachs Makes Greece Pay

Greece made a deal with Goldman back in 2001 to borrow about 2.8 billion euros disguised as a derivative so it would not show up as new debt and draw the ire of European Union regulators.

Right off the bat Greece owed 600 million euros more than it had borrowed. But things got much worse very quickly.

Because of how the derivative was structured, the drop in U.S. bond yields following the Sept. 11 attacks created huge paper losses for Greece. Goldman kindly offered to revise the deal to help out the struggling nation.

The inflation-based swap Goldman proposed went into effect in 2002. But then bond yields fell, driving Greece's losses on the deal to an appalling 5.1 billion euros.

Chalk up another victory for Goldman, which pocketed a fortune. Greece, on the other hand, was one step closer to a sovereign debt crisis that rippled out across Europe and was felt around the world.

It's a tale the Ecuadoran central bank should have brushed up on before shaking hands with anyone from Goldman.

"Greece is just another example of a poorly governed client that got taken apart," Satyajit Das, a risk consultant and author of "Extreme Money: Masters of the Universe and the Cult of Risk," told Bloomberg News. "These trades are structured not to be unwound, and Goldman is ruthless about ensuring that its interests aren't compromised - it's part of the DNA of that organization."

How do you think Ecuador will fare in its deal with Goldman Sachs? Share your thoughts on Twitter @moneymorning or Facebook.

You may recall that the unbridled greed of the Big Banks was also a primary force behind the subprime mortgage crisis. Amazingly, with the wounds from the last housing crisis still fresh, Wall Street is making a new gamble that threatens a $1 trillion mortgage meltdown...

Related Articles:

Bloomberg News:
Goldman Secret Greece Loan Shows Two Sinners as Client Unravels Bloomberg News:
Goldman Gets Ecuador Gold as Correa Steps Up Cash Hunt

5 rookie investing mistakes to avoid

Investors are their own worst enemies sometimes. As market participants, we often struggle with the pitfalls of fear and greed. These two emotions have the potential to inflict more damage to a portfolio than anything found lurking in economic reports or quarterly conference calls. However, beginners can mitigate risk by avoiding some common mistakes.

The cost of having emotions play a role in your portfolio is expensive. According to DALBAR's latest Quantitative Analysis of Investor Behavior, the average investor earns significantly less than major benchmarks. Over the past 10 years, investors in equity funds earned an average of 5.9% per year, compared to an average gain per year for the Standard & Poor's 500 of 7.4%. The gap is even larger when looking at the previous 20 years. Sensible investing strategies, such as dollar-cost averaging, can contribute to this performance gap, but imprudent action is still far too common.

"Through QAIB, we have learned that the greatest losses occur after a market decline. Investors tend to sell after experiencing a paper loss and start investing only after the markets have recovered their value," explained the report. "The devastating result of this behavior is participation in the downside while being out of the market during the rise."

Let's take a look at five rookie investing mistakes that should be avoided.

1. Investing before you are ready

Daily advertising tells us that we should start investing immediately in order to give our investments more time to grow. However, there are a few basic steps people should take before walking down Wall Street. You need to make sure you have saved up an emergency fund of at least a couple months of expenses. This should be kept in a readily accessible account, something boring like a savings account. The liquidity will help ensure you aren't forced to conduct any unwelcome selling in your investment portfolio.

High-interest debt should also be paid off before you begin investing. If yo! u're carrying around credit card debt with an interest rate of 15%, the national average, you can essentially make a 15% return (risk free) by devoting your dollars to the debt, instead of stocks. The one exception that is widely agreed upon: If you have a 401(k) plan with an employer match, you should take advantage of the free money as soon as possible while you build your savings fund and pay down debt.

2. Not having a plan

You need to know why you are investing. In other words, what financial goals do you want to accomplish with your money? These vary among different people, but your financial goals should be clear, measurable, and attainable. They should also recognize constraints.

Without a plan, investors risk being lured into flavor-of-the-month investments. Far too often, investors will rush into funds with the highest rating — after the over-sized gains have already been realized. As the chart above shows, funds tend to underperform their benchmarks after receiving high ratings. In fact, five-star rated funds from Morningstar have the biggest gap over 36 months following the high rating.

Individuals shouldn't worry about every headline they come across on a daily basis, but they should take some time to review their portfolios throughout the year. On a semiannual or quarterly basis, make a 30-minute appointment with yourself or spouse to consider how your portfolio is performing and if you are on track to meet your financial goals

3. Trying to time the market

Unless you're a day trader, you should not be trying to time the market. With the rise of smartphones and tablets, investors are constantly plugged into financial markets, but that doesn't mean you should always be doing something with your portfolio. The Average Joe is typically better off with a diversified portfolio built for the long term. Trying to time the market can be disastrous, especially when it comes to stocks.

As the chart above shows, $10,000 invested between Dec. 31, 1993, and Dec! . 31, 201! 3, would have grown to $58,332 if it was constantly invested in the S&P 500. If you missed the 10 best days during that period, the investment would have grown to only $29,111, almost half of the amount if you simply left the money untouched. Critics rightly point out that missing the worst days in the market is even better for a portfolio, but that is a dangerous strategy for most investors.

Even if you rightly time the market and avoid the worst days, you are then left with the agonizing decision of when to get back into the market. You need to know yourself and your limitations when investing.

4. Expecting too much

The past few years have been extraordinary for the stock market, but investors need to make sure their long-term financial goals don't depend on lofty expectations being sustained over a long period. Since the Dow Jones industrial average made its low of 6,470 on March 6, 2009, the index has rallied about 10,000 points. It has also managed to rally for five consecutive years to make fresh inflation-adjusted highs. The S&P 500, which also made its record low of 666.79 on March 6, 2009, has surged more than 170% over the same period.

This type of performance is not typical. Between 1926 and 2012, stocks have an average annual return of nearly 10%. However, inflation-adjusted returns are only 6.7%. Depending on your tax situation, stocks have returned 4.5% after taxes and inflation. Cash is the worst place to be over the long term, as it has returned only 0.5% after inflation and a negative 0.8% after taxes and inflation. Bonds have returned 5.4% over the same period, but only 2.3% after inflation. Distorting the results even more, bond returns are skewed by their thirty-year bull market that drove interest rates straight down to all-time lows.

5. Making investments more complicated

Humans have a tendency to make life more complicated than necessary. The same is true about investing. There is already plenty of risk that comes along with investing, b! ut many p! eople complicate matters by using leverage.

"When leverage works, it magnifies your gains. Your spouse thinks you're clever, and your neighbors get envious," explained Warren Buffett in his 2010 shareholder letter. "But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade — and some relearned in 2008 — any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people."

Leveraged exchange-traded funds are a relatively new financial product that most long-term investors should avoid. They are like regular ETFs laced with greed and impatience, and attempt to deliver multiples of the performance of an underlying index or benchmark they track. Leveraged ETFs seek to magnify returns by using some of Wall Street's favorite financial drugs: derivatives, futures contracts, and swaps. They can also come with higher fees. When it doubt, keep your investing strategy simple and steer clear of complicated vehicles that are more designed to benefit the people selling them.

MORE: Is the housing market filled with 1,000 mini bubbles?

MORE: 3 depressing charts about your taxes

MORE: Do Americans trust the stock market?

Wall St. Cheat Sheet is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.

Microsoft issues fix for Internet Explorer…

SAN FRANCISCO — Microsoft issued a fix on Thursday for a security flaw in Internet Explorer that led the Department of Homeland Security to suggest users change browsers until the problem was solved.

The fix updates the computers of all users of the Windows operating system who have automatic updates turned on, the company said on its security response page.

For those that don't have the updates enabled, "now is the time," wrote Dustin Childs, with the response communications team at Microsoft.

To turn it on, users should click on the "Check for Updates" button on the Windows Update portion of the Control Panel.

"For those manually updating, we strongly encourage you to apply this update as quickly as possible following the directions in the released security bulletin," Childs said.

The fix is surprising because it also includes code for the Windows XP operating system, which Microsoft officially stopped supporting on April 8.

Because the security flaw came to light so close to the end of Microsoft support of the still-popular operating system, the decision was made to aid consumers, said Adrienne Hall, general manager with the company's Trustworthy Computing section.

"Of course, we're proud that so many people loved Windows XP, but the reality is that the threats we face today from a security standpoint have really outpaced the ability to protect those customers using an operating system that dates back over a decade," she said.

"This is why we've been encouraging Windows XP customers to upgrade to a modern, more secure operating system like Windows 7 or Windows 8.1," she said.

The Internet Explorer security flaw allows hackers to get around security protections in the Windows operating system. A computer can then be infected when the user visits a compromised website.

The security update was pushed out to consumers' computers through a function in the Windows operating system called Windows Update.

The fix is coming outside of Microso! ft's usual monthly security update cycle, said Hall.

"The security of our products is something we take incredibly seriously, so the news coverage of the last few days about a vulnerability in Internet Explorer has been tough for our customers and for us," she wrote on a Microsoft tech blog.

"This means that when we saw the first reports about this vulnerability we said fix it, fix it fast, and fix it for all our customers. So we did."

That's a big deal, said Trey Ford, a strategist with Rapid7, a Boston-based computer security firm.

"Major vendors like Microsoft, Oracle, Adobe and others have highly structured software-testing workflows that are expensive in terms of time and resources," he said. "To interrupt a scheduled development cycle for an emergency patch, or 'out of band' release, is a noteworthy event, where a vendor is placing the public good ahead of their development and delivery life cycle."

The security flaw was first publicized on Saturday by FireEye, a Milpitas, Calif.-based computer security company. They observed a known hacking group launching "spearfishing attacks" against some of their customers, said Darien Kindlund, director of threat research.

Someone within the targeted company would get an e-mail with a link to a website the attackers controlled (the spear thrown to the fish.) "The victim would click on the link, and simply by going to the page, their system would be compromised," Kindlund said.

The attacks appeared to have been mainly done for industrial espionage, targeting intellectual property or corporate secrets, Kindlund said.

Because of that, it appears the group wasn't interested in the computers of regular consumers.

However, in many such cases, the computer code necessary to carry out the attack is dispersed relatively quickly to less sophisticated groups simply looking to steal credit card information.

Because Microsoft released its patch so quickly, that doesn't appear to have had time to happen, Kindlu! nd said.

First Take: Facebook, Apple draw line under tech…

SAN FRANCISCO — Two of Silicon Valley's biggest champions drew an emphatic line under the six-week slide in tech stocks Wednesday, and underscored that the future of the entire industry is in mobile technology.

Apple knocked it out of the park with typically solid financial results — although its plan to buy back $30 billion in stock and issue a 7-for-1 stock split signals an overture to please investors amid signs its torrid growth is slackening after a decade.

And Facebook tore it up in after-hours trading after its latest bust-out quarter.

Facebook blew away analyst estimates largely because 1 billion of its members are viewing the social-network via handheld devices, which elevated its mobile ad sales. Nearly 60% of its ad revenue is mobile-related.

Apple, which maintains strong iPhone and iPad sales in the U.S. despite a withering assault from Samsung Electronics, leans heavily on those devices. It reported a profit of $10 billion on the sale of 43 million iPhones, though iPad shipments slipped to 16 million. It is likely to unfurl larger-screen iPhones and new iPad models in the second half of this year, possibly along with an iWatch, to keep its fiscal train rolling.

Though impressive, the results still didn't meet Apple's lofty bar of expectations and could put pressure on CEO Tim Cook to hasten the company's entry into new product categories, such as wearables, which he has strongly hinted at.

Games maker Zynga, the company behind FarmVille, also reported better-than-expected results. It is betting its future on mobile versions of that game and other titles after its desktop business went wobbly. (Its rival, King.com, went public this year on the popularity of its mobile game, Candy Crush Saga.)

We'll have to see how Zynga fares in upcoming quarters. But if the results for Apple and Facebook are any indication, the future looks bright and profitable.

Mobile devices are driving the industry because consumers are spending more time on their smar! tphones, tablets and wearables — three hours a day vs. two hours and 20 minutes a year ago, according to eMarketer.

More importantly, that is where the revenue is going. Mobile ad spending is expected to vault 75%, to $31.5 billion, this year worldwide, according to eMarketer.

"People are flocking to mobile," says Cathy Boyle, an analyst at eMarketer. "Increasingly, it has become part of their daily routine."

In other words, mobile is the present and the future.

How to Take Full Advantage of Your 401(k)

Getty Images With all the doom-and-gloom reports of workers having to delay retirement, it's important to highlight good news when it comes. People who participate in a 401(k) plan have a good shot at being able to pay for retirement, according to "The Role of Social Security, Defined Benefits and Private Retirement Accounts in the Face of the Retirement Crisis," by Jack VanDerhei of the Employee Benefit Research Institute. Check it out: "Assuming current Social Security benefits are not reduced, between 83 and 86 percent of workers with more than 30 years of eligibility in a voluntary enrollment 401(k) plan are simulated to have sufficient 401(k) accumulations that, combined with Social Security retirement benefits, will be able to replace at least 60 percent of their age-64 wages and salary on an inflation-adjusted basis." Further, the study claims that a large portion of today's workforce is better prepared for retirement than in 2003, despite the 2008 financial crisis. The study might give us reason to believe that we're pointed in the right direction, but you still have work to do, whether or not you have 30 years remaining until retirement. So before you pat yourself on the back for a job well done -- or think the study means you can set your 401(k) plan on autopilot and coast to retirement -- seize this opportunity to take full advantage of your retirement savings efforts. Here are five things you can do to optimize your existing endeavors: 1. Remove Social Security benefits from your retirement needs calculations. Social Security benefits are provided by the federal government, and the solvency of the program is in question. Most acknowledge the issues of Social Security, but clear action to address those issues is lacking so far. We're left with a situation in which it's difficult to predict your future Social Security benefits. The most practical thing you can do is hope for the best, but plan for the worst. In this case, it means disregarding Social Security benefits when determining your retirement savings goal. Consider any future benefits you may receive as icing on the cake. 2. Save as much as you can for as long as you can. A major assumption of the EBRI study is that people who can participate in an employer-provided retirement plan will participate. So whether you're 22 or 52, rich or poor, employed at your dream job or just working to get by, start participating in your 401(k) plan the moment you're eligible. Are you only able to afford a small contribution each month? Do you worry it's not enough to make a difference? Think again. Thanks to the power of compounding, a small contribution today can grow to a significant amount of money over time, because the earnings themselves have the potential to earn a return year after year. If you're already contributing to a 401(k), make a plan for increasing your contribution amount on an incremental basis. Start with 1 percent annual increases (up to the current Internal Revenue Service limit of $17,500 per year, with an additional $5,500 if you're age 50 or over), which would translate to an additional $41.67 per month in pretax income for someone earning $50,000 annually. It won't make a huge dent in your take-home pay, but trust me when I say you'll feel the difference once you retire. 3. Refrain from taking 401(k) loans or distributions. You might think that taking just one 401(k) loan couldn't possibly hurt your nest egg, but you'd be wrong. With "just" one $20,000 loan at an interest rate of 5 percent, even paying the loan back on time means you could lose $16,649 in potential returns. The damage gets worse if, like more than 66 percent of 401(k) investors who leave their employers, according to a 2013 study by New York Life Retirement Services, you fail to pay back the loan and instead take a distribution on the amount. Your potential loss could rise to $399,204, plus you'll be subject to income taxes and (if under age 59 1/2) a 10 percent early withdrawal penalty. Your 401(k) account isn't meant to be a piggy bank you can tap into whenever you like. Forget about 401(k) loans and develop a strategy to help you make ends meet or afford large purchases without jeopardizing your financial future. 4. Take full advantage of your company match, if offered. Check with your human resources department to find out if your employer offers matching 401(k) contributions, and if so, make sure you're contributing enough to take full advantage of the match. If you don't, you're leaving "free" money on the table.