Obama’s Budget Drops Plan to Limit Social Security Increases

Feb. 20 (Bloomberg) — President Barack Obama plans to drop his proposal to reduce cost-of-living adjustments for Social Security and other benefit programs in his next budget.

The so-called chained-CPI formula was part of a bid by the president to engage in deficit-reduction negotiations with Republicans. It wasn’t adopted after a standoff over taxes and spending. It also was criticized by many congressional Democrats and some of Obama’s political allies.

Josh Earnest, a White House spokesman, said today that the proposal remains on the table if talks with Republicans on a long-term deficit reduction plan resume.

Obama also is proposing $56 billion in spending, evenly split between domestic programs and defense, for what it calls an “Opportunity, Growth and Security Initiative.” It is mostly a collection of proposals that Obama has made previously on research, education, manufacturing, energy efficiency and training that were never acted upon by Congress.

Earnest said the programs would be “fully paid for” through a combination of spending cuts elsewhere and closing tax loopholes. He declined to give specifics before the March 4 release of the administration’s 2015 fiscal year spending plan.

Obama previously announced he will ask Congress to approve a $1 billion Climate Resilience Fund as part of the budget to help federal, state and local governments prepare for the effects of climate change.

Debt Negotiations

Imposing a revised formula on Social Security payments and other programs with cost-of-living adjustments was part of the president’s offer to Republicans in negotiations on a so-called grand bargain to control U.S. debt levels. He included it in the budget sent to Congress last year and the nonpartisan Congressional Budget Office said in November that it would save $162.5 billion over 10 years.

Obama abandoned the proposal a day after 117 House Democrats, led by Representative Allyson Schwartz of Pennsylvania, urge the president to drop the plan.

Obama’s decision shows that he “has no interest in doing anything, even modest, to address our looming debt crisis,” Brendan Buck, spokesman for House Speaker John Boehner said. “With three years left in office, it seems the president is already throwing in the towel.”

Earnest put the blame on Republicans for the breakdown of budget negotiations, saying they have refused to consider raising revenue by eliminating “loopholes that benefit only the wealthy and the well connected. So that is an unfortunate policy choice that Republicans themselves have made.”

Shrinking Deficit

Last year’s federal deficit of $680 billion was the lowest in five years. The deficit as a share of the economy will shrink to a seven-year low in the 12 months ending Sept. 30, according to projections earlier this month by the Congressional Budget Office. The projected gap is down from 9.8 percent of GDP in 2009, the widest in records dating back to 1974.

On the Social Security program, Obama is “willing to do some things that he doesn’t personally support in his ideal budget,” said Gene Sperling, director of the National Economic Council, a White House unit that coordinates administration policy.

The offer was an attempt to revise costly entitlement programs and show Republicans of a good faith effort to reach a “grand bargain” budget deal, which failed. “We did not see reciprocity” from Republicans, Sperling said in a Politico interview earlier today.

White House spokesman Jay Carney said Feb. 18 the budget coming early next month would achieve “additional deficit reduction that addresses our medium- and long-term challenges through a balanced approach.”

He said Obama sought Social security savings to show “a willingness to compromise” on the budget but it’s was a position “we haven’t seen demonstrated thus far by Republicans.”

Learning to embrace the informal economy

Slum, squatter, informal economy: For many, these words summon images of squalid cityscapes, grinding poverty and criminal activity.

And when economists and politicians talk about global development, they often insinuate that the informal economy is an unruly obstacle to be removed or at least tamed. Perhaps most damning of all is the tendency to link the informal economy with work that is "dangerous and morally compromising" — hinting that the people who work in it are, as a rule, both dangerous and morally compromised.

It is this very perception that journalist Robert Neuwirth wants to change. His first book, Shadow Cities (2005), looked at the squatter communities in cities around the world that more than 1 billion people call home. His most recent effort, Stealth of Nations (2011), took him to Nigeria, China, Brazil and Paraguay to get to know some of the 1.8 billion people, according to the OECD, who make their living in the oft-vilified informal economy.

Neuwirth grew up in Queens and, after studying philosophy in college, became a community organizer because, as he says, "I knew I had to get out of the ivory tower and do something in the world." Organizing also allowed him to act on convictions that would eventually fuel his forays into the informal world, namely that people on society's margins ought to have a voice.

He eventually found his way into journalism and was writing about New York City's housing market when, in the mid-'90s, he came across a single fact that gave him pause: The world's squatter population (at that point) numbered about 600 million — or more than one in 10 of the total global population.

This, Neuwirth says, sent his head spinning. "I just thought, 'Donald Trump is so not the story. What's going on in New York City is not the story. What's happening to one in 10 people on the planet is the story.'"

He eventually quit his job working for a business trade magazine. After that, the pieces for Squatter Cities came together pretty quick! ly, and within a year he had a book deal.

Immersing himself in research convinced Neuwirth that the dominant narratives about slums and street markets need changing. "People get pinned with labels based on their material conditions rather than who they are and what they're trying to do," he told me. "This is the majority of the workers of the world — are we going to call all of them criminals?"

Neuwirth has developed a deep respect for the ingenuity and sheer pluck he's encountered in the world's slums and street markets, and he paints a decidedly different portrait of the workers he has met and the system in which they operate. Where a police officer might see an unlicensed street vendor or an economist a competition-threatening smuggler, Neuwirth sees determined, entrepreneurial men and women striving for decent lives in places where aboveboard jobs are in short supply.

In Stealth of Nations, for example, we meet Jandira, a street vendor in São Paulo who used the profits from her cake and coffee stand to buy a house and two cars and send her kids to private school. Her story is the kind Neuwirth delights in telling because he hopes it will help change people's perception of the informal economy and the people who drive it.

Neuwirth doesn't even like the phrase "informal economy," choosing instead to refer to the world his subjects inhabit as System D. The D stands for débrouillard(e), French for a resourceful or ingenious person, and as he frames it, with an insistent edge in his voice, it refers to "real people doing real things that have real value."

As such, Neuwirth argues that governments should look for ways to engage these people and their businesses and provide them with security and tools to grow, rather than, say, bulldozing the markets where they operate without warning. And since Neuwirth first started exploring the world of System D, the idea that it has something to contribute and ought to be engaged has caught on. Countries from Indonesia to Zimbabwe ha! ve acknow! ledged that most of their workers operate within System D, and even a regional powerhouse like South Africa saw more job growth in the informal sector than the formal economy during the last quarter of 2013.

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But not everyone is convinced. In his review of Stealth of Nations, economist Marc Levinson points out that even if Neuwirth's arguments about the value of System D for creating wealth at the individual level might be true, they are much less convincing at the societal level. "Prosperity requires capital accumulation to finance investment in factories, power grids, highways and the like. System D simply cannot accomplish such things," Levinson argues.

In response, Neuwirth points out that the formal systems we encourage people to join are themselves often corrupt. He recalls an instance from his time in Nigeria, when he asked a group of merchants why they didn't band together and pave the road near their market themselves. To his surprise, the merchants said that paving the road would be futile because the government would simply rip up the paving — looking at their action as an intolerable usurpation of local government authority.

Another obstacle for those who try to make a living in System D is their lack of legal protection. Gaining such protection, however, is a lot easier when one is recognized as part of a legitimate group within society — and official recognition is what Neuwirth's subjects have been loath to seek.

This, Neuwirth says, is the 21st-century challenge for the squatters and street markets he has come to respect: "They have to take the risk and go public. Public in a way that interacts with politics." But as the proportion of the population in System D continues to rise — the OECD estimates that two-thirds of the world's workers will be in the informal economy by 2020 — perhaps the sheer number of people inv! olved wil! l diminish that sense of risk.

In the meantime, Neuwirth will keep telling their stories. Having studied informal housing and informal trade, Neuwirth is planning a book on informal governance that would round out his trilogy of informality. And while he can articulate a number of steps that governments might take to embrace the entrepreneurialism that's thriving in informal sectors, his more immediate hope for his work is that it persuades those with influence to stop treating squatters and street hawkers like criminals.

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After all, Neuwirth insists, the vast majority are people making homes and sustaining livelihoods even in the absence of laws that protect their right to do so — a far cry from "dangerous" or "morally compromising." What's called for is an attitude shift no more radical than recognizing that the human struggle to build a life stretches across boundaries of class, geography and, sometimes, formal legitimacy.

Ozy.comis a USA TODAY content partner providing general news, commentary and coverage from around the Web. Its content is produced independently of USA TODAY.

E-Cigarettes Are Smoking the Competition

NEW YORK (TheStreet) -- Part 1 of 4

Electronic cigarettes, commonly called e-cigarettes, are becoming more and more common. From relative obscurity five years ago, e-cigarettes have grown to $500 million in sales in 2012, and over $1.5 billion in 2013. The growth in the market is expected to continue, with e-cigarettes sales expected to top traditional cigarettes sales within the next decade.

How can investors profit from this trend?

There are a number of ways to take advantage of the growth in the e-cigarette market. Investors who seek exposure to e-cigarettes can buy into the larger tobacco companies. They are now entering the market, following on the heels of smaller start-ups. Lorillard (LO) ($48.00 at market close on Friday, Feb. 14), Altria (MO) ($35.57 at last close) and Reynolds American (RAI) ($48.21 at last close) are all major cigarette companies. But for now, e-cigarettes are a very small portion of their overall revenues. Smaller companies such as Vapor (VPCO:OTC, $5.78 at market close on Friday, Feb. 14), Victory Electronic Cigarettes (ECIG:OTC, $13.50 at last close) and mCig (MCIG:OTC BB, 33 cents at last close) offer pure play access to e-cigarettes. In addition, mCig offers access to investing in the legalization of marijuana -- though it is also a penny stock, and inherently very risky. What Are E-Cigarettes? An e-cigarette is a battery-operated alternative nicotine delivery system. E-cigarettes have a replaceable inhaler cartridge containing vegetable glycerin and/or polyethylene glycol, flavoring and nicotine. With every inhalation, a sensor triggers a "vaporizer" to heat a small amount of liquid flavoring. The liquid turns to vapor and is drawn into the user's mouth and then lungs. The vaping technology of e-cigarettes does not burn anything. The liquid mixture is simply vaporized. The vapor does not contain the harmful additives found in true smoke from hookahs or cigarettes. The replaceable cartridges come with different nicotine levels. Each is equivalent to 2 packs of cigarettes. HowStuffWorks has created a visual on the anatomy of an e-cigarette.

Stock quotes in this article: ECIG, LO, MCIG, MO, RAI, VPCO 

Market Size

Electronic cigarettes' sales are growing wildly, from almost nothing five years ago to roughly $500 million in 2012 and over $1.5 billion in 2013. E-cigarettes are now for sale at the 75% of tobacco retailers that carry at least one e-cigarette brand.

The growth in the market is expected to continue. Wells Fargo and Bloomberg estimate that e-cigarette sales will surpass traditional cigarettes within the next decade. The U.S. tobacco industry is a $90 billion industry. The most optimistic scenario puts the U.S. e-cigarette market at over $80 billion in 10 years, representing a 47% compound annual growth rate and a global opportunity for $300 billion in 10 years. Even more conservative estimates are rosy. Assuming no-growth in the overall tobacco market size and 50% cannibalization of tobacco cigarettes sales, e-cigarette sales could reach $45 billion in 10 years, representing almost 40% growth per year. Using a more conservative estimate that e-cigs would take 25% of total traditional cigarette sales, the e-cigarette industry could reach $20 billion over the next decade, or a compound annual growth rate of over 30% per year for the next decade. Part 2 of this 4-part article on e-cigarettes will arrive at TheStreet tomorrow. Stay tuned.

At the time of publication, the author held no positions in any of the stocks mentioned. Follow @hashapi This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Stock quotes in this article: ECIG, LO, MCIG, MO, RAI, VPCO  Harris Shapiro, the founder of TFST Publishing LLC., the publisher of The Focused Stock Trader, and is a contributor to TheStreet. He has been a stock broker, investment banker, and CEO of 2 micro-cap companies. His newsletter ended 2013 with 85 profitable trades out of 95 recommendations, for an annualized return of 265%. The service combines fundamental analysis, technical analysis and focus on the industry groups that are in the spotlight among investors. Shapiro has been involved in the small-cap market for 50 years. He currently covers such diverse industries as Robotics, 3D Printing, Solar Energy, Wearable Computing and similar categories that most services do not cover till the Public Companies become mid-cap stocks or larger.

House Approves Debt-Ceiling Hike Without Conditions

Pete Marovich/Bloomberg via Getty ImagesHouse Speaker John Boehner of Ohio. WASHINGTON -- It was once the backbone of the House Republican majority -- the hard-line stand that brought President Barack Obama to the negotiating table and yielded more than $2 trillion in deficit reduction. On Tuesday, it abruptly vanished, the victim of Republican disunity and a president determined not to bargain again. During the summer budget negotiations in 2011, House Speaker John Boehner had insisted that any increase in the nation's borrowing limit be matched dollar for dollar with spending cuts. It became the "Boehner Rule," a mantra of fiscal discipline. And while it didn't always live up to its tit-for-tat formula, it helped drive budget talks and kept deficit reduction at the fore of the Republican agenda. But there are limits to Republican power, and on Tuesday inevitability finally caught up to the speaker. Boehner let Congress vote on a measure to extend the nation's borrowing authority for 13 months without any spending conditions -- a "clean bill" that was an unequivocal victory for Obama. It passed 221-201, with only 28 Republican votes. The Senate still has to approve the extension, but that's considered a mere formality in the Democratic-controlled chamber. Boehner's retreat hardly came as a surprise. Conservative lawmakers had failed to back a couple of proposed attachments aimed at Obama and his fellow Democrats. One would have approved the Keystone XL oil pipeline and the other would have repealed a provision of the health care law. Either of those faced unified Democratic opposition, so Boehner would have needed 218 Republican votes to pass it in the House. But conservatives were either determined to vote against the debt ceiling increase, no matter what, or found the provisions too small a price for their vote. "When you don't have 218 votes, you have nothing," Boehner said. Starting last year, Obama has steadfastly refused to negotiate over giving the Treasury Department the authority to borrow the money it needs to pay bills like Social Security benefits, payments on government debt and checks for federal workers. For Boehner, however, not all was lost. He placed the burden of extending Treasury's borrowing authority -- not a politically popular vote -- on the Democrats, and most members of his party got to vote no. What's more, the decision helped remove a potentially damaging diversion. Republican allies in the business community have long pleaded with Republicans not to play brinkmanship with the nation's credit. Last year's threat of default, followed by a partial government shutdown over stalled budget talks, harmed Republicans in the eyes of the public. Instead, Boehner and his leadership team have decided to keep the political focus on Obama's health care law, which they have targeted as the Achilles' heel for Democrats in this election year. It was the second time in two weeks that Boehner swept away an issue that threatened to overshadow the GOP attention on health care. He had outlined principles on how to achieve an overhaul of immigration law. But faced with a conservative outcry, Boehner last week deep-sixed the issue, declaring that immigration legislation this year was a long shot. "Boehner's thinking here is we have to pick the smarter fight," said Kevin Madden, a Republican strategist and former senior congressional leadership aide. "The smarter fight is Obamacare. If we get dragged into a protracted fight over the debt limit, like the one we saw over the government shutdown, it provides a distraction over the bigger issues the party can litigate." Conservative, tea party-aligned groups immediately objected to Boehner's decision, calling it a capitulation and demanding that Republicans vote against the debt ceiling increase. "When we heard that House leadership was scheduling a clean debt ceiling increase, we thought it was a joke," Andy Roth of the conservative Club for Growth wrote in an email to congressional offices. "Something is very wrong with House leadership, or with the Republican Party." But among lawmakers, the reaction was muted. When Boehner announced his decision in a private meeting with Republicans, one participant described the reaction as resigned silence. And during scheduled debate on the House floor, Rep. Dave Camp, the chairman of the tax-writing Ways and Means Committee, was the only Republican to speak, reluctantly giving his support for allowing Treasury to borrow more money. "While I believe that we must increase our debt limit, I'm clearly not satisfied that there are no provisions that would help us address the long-term drivers of this debt," he said, before becoming one of the 28 Republicans who voted for the measure. This all could change if Republicans win control of the Senate in November. Republicans would then control Congress and Obama might have little recourse but to accept some Republican demands. A Republican victory in the fall, Madden said, would mean "the most recent electoral mandate would be favorable to the Republican bargaining position."

Prepare Now for When the New MyRA Becomes "TheirRA"

In his recent State of the Union Address, President Obama unveiled something new: a retirement savings account to "help" Americans build a nest egg, coining it the "MyRA."

Something immediately felt wrong about the proposal... but I couldn't put my finger on it.

So I researched the new MyRA and found details to help you understand just how it works.

But I also saw some potential dangers there that you need to prepare for now...

What MyRA Really Means

Like most government programs, getting to their essence can take some sifting. So I've distilled here what I think are the principal components of MyRA.

Individuals earning up to $129,000 and couples earning up to $191,000 are eligible if their employers offer the account; The minimum initial contribution is $25, then at least $5 through payroll deductions; The maximum contribution is $5,500 per year ($6,500 if over 50 years of age); Once the balance reaches $15,000 or has existed 30 years, it must be rolled into a Roth IRA; Total contributions to a person's IRAs cannot exceed $5,500 annually; Like a Roth IRA, withdrawals will grow and be redeemable tax-free; Principal can be redeemed any time, but earnings withdrawn before age 59 ½ are taxable and subject to 10% penalty; and Only one investment available: Treasury bonds paying variable interest-rate return MyRA Is Set to Lose the Inflation Battle

Essentially, the MyRA is like a Roth IRA that your employer opens for you, allowing for low individual contribution requirements.

But if that's what you want, you can already set up your own Roth IRA with a no-fee, no-minimum account requirement at discount brokers like TD Ameritrade or E*Trade. And then your investment options are practically limitless.

In his speech, Obama said that "MyRA guarantees a decent return with no risk of losing what you put in." So let's look at the underlying investment a little more closely.

Your MyRA contributions would go into a variable interest rate bond investment, comparable to the Government Securities Fund in the Thrift Savings Plan (TSP) for federal employees.

That fund's recently been paying 2.5%, which admittedly is way better than the 1% you can get from the highest yielding savings accounts. And that looks OK, until you consider... inflation.

Right now official U.S. inflation has been 1.5% through the 12 months ended December 2013. If instead we look at a truer inflation rate, like the more realistic one calculated by ShadowStats, the emerging picture is altogether different.

Shadowstats finds inflation running at 5%, rather than the more benign "official" 1.5%. At 5% inflation, MyRA investors will be losing 2.5% annually.

With interest rates near all-time historic lows, odds are rates will go higher, not lower. And as interest rates rise, the MyRA could find it increasingly challenging to offer an attractive return to investors.

You've Just Become the Government's New Lender

It's no secret that the United States is running out of buyers for its bonds.

China, the largest foreign owner, has been reducing its purchases and has repeatedly said it has enough. Nations worldwide engaged in their own quantitative easing are busy buying their own bonds. Now, the Fed itself has begun the tapering process.

As the U.S. debt and deficits continue to balloon, the government is desperate for a new source of funding. Obama's proposed MyRA looks to Americans to buy up its "junk bonds."

In fact, new demand for bonds is so badly needed, it's easy to see how the MyRA could eventually move from voluntary to mandatory.

Account holders would automatically contribute through payroll deductions, funding the government's IOUs. And those won't pay out for decades until retirement.

This sounds a lot like another government scheme from which Americans can't opt out: Social Security.

Eventually, the need to fund a mushrooming debt could lead to compulsory government bond buying in retirement accounts. At first, it might be 10% to 20% of all new contributions, then perhaps 10% to 20% of existing balances. With over $5 trillion in U.S. retirement accounts, it's easy to see how a mandate for 20% (or more) directed into Treasuries will help extend and pretend.

Consider that Japan's debt to GDP ratio is 140%, already way above the 100% level considered problematic. This is possible in large part because so much of the national debt is held by its own citizens rather than foreigners.

So it's not a huge stretch to imagine America heading down the same path.

Eventually, retirement accounts could even be at risk of partial or even outright confiscation as debt levels become increasingly unsustainable. A desperate government will look to take desperate actions.

If you think I'm exaggerating, consider what's happened elsewhere.

In just the last five years, there have been government confiscations of retirement assets in no fewer than six countries, including Argentina and Poland, as I alluded to in a November article.

In that piece, I said:

Back in January 2010, Bloomberg BusinessWeek reported, "The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged."

Then in February this year, the Washington Times reported: "Consumer Financial Protection Bureau director Richard Cordray recently mentioned these [401(k)] accounts in a recent interview, stating 'That's one of the things we've been exploring and are interested in, in terms of whether and what authority we have.'"

As follow-up, I mentioned that the International Monetary Fund (IMF) was considering the potential of a "'capital levy' - a one-off tax on private wealth - as an exceptional measure to restore debt sustainability."

And if you think this could never happen in the good ol' U.S. of A., consider that back in 1933, President Roosevelt seized privately held gold by signing into law Executive Order 6102.

FDR's official motive was to "provide relief in the existing national emergency in banking, and for other purposes." Desperate times, desperate measures.

The Best Way to Keep Your Retirement Yours

What can you possibly do to protect yourself? Here's where thinking "outside the box" is vital.

The alternatives are simple, but they do require some effort and planning.

There are updates to some key points I've alluded to in the past: there are three basic things to do, and they apply equally to both good and bad times.

Own and invest in hard assets like gold, silver, energy, and real estate. You can buy physical precious metals; you can buy physically backed ETFs; you can own quality resource equities, including your own home; and you can own income-producing properties and land. Assets in non-retirement accounts are more difficult to expropriate. Hold plenty of cash. Cash is king, despite the risks of inflation. Hold it as a bank balance, but watch FDIC deposit insurance limits, and consider diversifying into other currencies. Be sure, however, to hold some physical cash as well, as this could be crucial during a "bank holiday." Hold assets internationally. This is largely the same as in owning hard assets, as above, but in another country. Consider opening a foreign bank account. It's not easy for Americans - thanks to FATCA - but holding something outside your country of residence makes it tougher for a desperate government to grab.

Remember, as government debt grows to even more unmanageable levels, and interest rates cause most government income to service the debt, they will become increasingly desperate.

Sidestep the trap.

Don't let your MyRA become Uncle Sam's.

Baird Grabs Wells Fargo Team as FSC Adds Morgan Stanley Reps

Baird said early Monday that it added an advisor team and branch manager from Wells Fargo with a total of about $275 million in client assets, as well as a branch manager from UBS. Meanwhile FSC Securities, part of the Advisor Group of AIG-owned independent broker-dealers, says that it’s recruited a breakaway team from Morgan Stanley that manages roughly $300 million in assets.

Baird, which is employee owned and based in Milwaukee, said the Gollier, Henning & Waters Group in Kansas City, Mo., includes three advisors: Frederick Gollier, Michael “Hamp” Henning and Christopher Waters. The three reps have yearly fees and commissions of about $1.7 million and client assets of $215 million.

Henning was named branch manager of the office, which includes nine advisors. Overall, Baird has more than 700 employee reps.

“We are very pleased to have Fred, Hamp, Chris and Denise [Terry] join our team in Kansas City,” said Steve Stroker, managing director and a regional director in Baird’s Private Wealth Management group, in a press release. “Their deep expertise drawn from many years of industry experience, along with their emphasis on client service and teamwork, make them an excellent addition to our firm.”

Gollier has been in the financial services industry since 1970, when he began his career with A.G. Edwards (which was part of Wachovia, when Wells Fargo (WFC)  bought the bank in 2008). Henning entered the business in 1999 at A.G. Edwards, while Waters joined Paine Webber in 1985.

Also moving to Baird from Wells Fargo is Lawrence Magid. He will work in Baird’s Dallas office. The 26-year industry veteran has some $60 million in client assets and yearly production of $565,000.

Coming to Baird from UBS (UBS) as a nonproducing branch manager is Carl Chaput. He will lead an office of 20 professionals in Reston, Va.

“We are very excited Carl has joined Baird as our branch manager in Reston,” said Bill Johnson, regional director for Baird’s Private Wealth Management group, in a statement. “With his leadership and recruiting skills, Carl will help Baird increase its presence in the Washington DC area by attracting advisors who embrace Baird’s client-focused culture and who desire to work for a well-managed, privately held, employee-owned firm.”

At UBS, Chaput had recently served as complex director for the WFA in Virginia. He began his career as a financial advisor with the former Dean Witter Reynolds Securities before becoming an assistant branch manager in one of Morgan Stanley’s Boston offices.

FSC Recruits Morgan Stanley Team

IBD FSC Securities said Monday that it had recruited a team of advisors from Morgan Stanley (MS): Cherrington Brotsky Conscious Capital comes on board with close to $300 million in client assets under management in Bluffton, S.C.

“We chose to partner with FSC for a number of reasons, including their open and flexible platforms that will allow us to grow our business, add advisors, and better serve our clients,” said Libby Cherrington, managing director of Cherrington Brotsky, in a press release.

“Coming from a wirehouse, we were very impressed with the cutting-edge technology FSC offers its advisors,” she added. “I’m confident that we will grow our practice, expand our services to our existing clients, and attract new clients to our firm thanks to our partnership with FSC.”

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Cherrington has more than 23 years of industry experience, and Brostsky has 20-plus years.

“At FSC we provide advisors with all the support, tools and technology they need to focus on what they do best – serving their clients. We have invested heavily in our platforms over the past several years to get us to where we can not only compete with any independent broker-dealer, but with the wirehouses as well,” said FSC President & CEO Jerry Murphy, in a statement.

Murphy added, “We are thrilled that Libby Cherrington, Michael Brotsky, and their team have decided to join us, and we are committed to making their transition to the independent space easy and successful for them and their clients.” 

FSC included 1,261 affiliated reps as of Dec. 31.

30-year mortgage rises to 4.48%

WASHINGTON — Average U.S. rates for fixed mortgages crept higher this week but remained low by historical standards.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan increased to 4.48% from 4.47% last week. The average on the 15-year fixed loan rose to 3.52% from 3.51%.

Mortgage rates peaked at 4.6% in August on expectations that the Federal Reserve would reduce its $85 billion-a-month in bond purchases. Those purchases push mortgage and other long-term rates lower and encourage borrowing and spending. On Dec. 18, the Fed finally decided the economy was strong enough to allow it to reduce the monthly purchases by $10 billion.

Mortgage rates are sharply higher than they were a year ago when the 30-year fixed rate was 3.35% and the 15-year was 2.65%.

The Commerce Department reported Tuesday that new-home sales dipped 2.1% in November to a seasonally adjusted 464,000. But stronger figures for the previous three months suggested that housing may be regaining strength after a summer lull.

The National Association of Realtors said last week that the number of people who bought existing homes in November fell for a third straight month. Higher rates and the lingering effects of the partial government shutdown in October may have deterred some sales.

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Still, the government said builders broke ground on homes at a seasonally adjusted annual rate of 1.09 million homes and apartments in November. That was the fastest pace since February 2008 and was 23% higher than in October.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.

The average fee for a 30-year mortgage was 0.7 point. The fee f! or a 15-year loan was 0.7 point.

The average rate on a one-year adjustable-rate mortgage slipped to 2.56% from 2.57% last week. The fee was 0.5 point.

The average rate on a five-year adjustable mortgage rose to 3% from 2.96%. The fee was 0.4 point.

Delta raises fares during peak holiday season

Just in time for the peak holiday travel season, Delta Air Lines has increased fares by $4 to $10 roundtrip across most domestic routes.

Several airlines had matched the increase of 1 p.m. ET, though it was no guarantee that the hike would stick.

Regardless, this marks the 12th time this year that airlines have tried to raise fares. But they have not been as successful as they have been in the past.

Only three fare hikes have stuck this year, two of them initiated by Delta.

"Domestic airlines have had little success raising base airfares in 2013 as consolidation and the transition to 90% load factors continue," says Rick Seaney, CEO of FareCompare.com, which tracks fares.

The last time an airline was able to raise fares in December was 2010 when oil prices were in the low $90s, Seaney says.

Last year, there were 15 attempts to raise fares, and seven were successful.

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In 2011, there were 22 attempts, and nine stuck.

So far, American -- including merger partner US Airways -- and United had matched on many routes, according to FareCompare. Alaska Airlines had matched on routes on which it codeshares with Delta.

Typically, air fare increases don't succeed unless low-cost carriers such as Southwest Airlines participate.

Seaney says there has been "no activity as yet from Southwest or JetBlue" on matching the increase.

"Historically US Airways has not scuttled many hikes so I don't believe the newly minted American will change this dynamic much," Seaney says in a note about the latest fare hike. "It will be interesting to see how much leverage Southwest Airlines potential lack of participation has in scuttling domestic hikes given the culmination of four years of consolidation."

In particular, Seaney says he wonders whether the big airlines American, Delta and United will "tiptoe around Southwest" or if they'll "be forced to rollbac! k or completely disregard" the attempt.

Will Recent News Hurt BP Stock?

With shares of BP (NYSE:BP) trading around $46, is BP an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

BP is an integrated oil and gas company. The firm provides its customers with fuel for transportation, energy for heat and light, lubricants, and the petrochemicals products used to make items like paints, clothes, and packaging. It operates in two business segments: exploration and production, and refining and marketing. BP provides energy products to consumers and companies worldwide. Without the oil and gas products provided, many consumers and businesses would not be able to operate on a daily basis.

BP said fourth-quarter profit fell from a year earlier as output declined and refining margins weakened. Profit adjusted for one-time items and inventory changes dropped to $2.8 billion from $3.9 billion a year earlier, the London-based company said in a statement. That matched the average estimate of 12 analysts surveyed by Bloomberg. BP follows Royal Dutch Shell Plc and Exxon Mobil Corp., the two biggest oil companies by market value, in reporting lower earnings as the cost of drilling rises, refining profits slump, and oil prices stagnate. Chief Executive Officer Bob Dudley has sold less profitable fields in the wake of the 2010 Gulf of Mexico spill and focused on profit margins rather than volume targets. "Capital discipline is central to BP's strategy," Dudley said in a statement. That's "making the right investment choices, sticking to our capital limits, and actively managing our portfolio in pursuit of long-term value."

T = Technicals on the Stock Chart Are Mixed

BP stock has not made significant progress in recent years. The stock is currently pulling back and may need time to consolidate. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, BP is trading between its rising key averages which signal neutral price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of BP options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
BP options	19.23%	60%	58%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
March Options	Average	Average
April Options	Average	Average

As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on BP’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for BP look like and more importantly, how did the markets like these numbers?

	2013 Q4	2013 Q3	2013 Q2	2013 Q1
Earnings Growth (Y-O-Y)	-25.74%	-33.55%	-233.67%	192.30%
Revenue Growth (Y-O-Y)	-28.21%	-50.71%	-0.74%	10.06%
Earnings Reaction	0.52%*	4.98%	-3.20%	2.28%

BP has seen decreasing earnings and revenue figures over the last four quarters. From these numbers, the markets have not been too happy about BP’s recent earnings announcements.

* As of this writing

P = Excellent Relative Performance Versus Peers and Sector

How has BP stock done relative to its peers, Chevron (NYSE:CVX), Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDSA), and sector?

	BP	Chevron	Exxon Mobil	Royal Dutch Shell	Sector
Year-to-Date Return	-4.69%	-10.60%	-11.00%	-4.49%	-6.69%

BP has been a relative performance leader, year-to-date.

Conclusion

BP is an oil and gas company that supplies energy products and services worldwide. The company said fourth-quarter profit fell from a year earlier as output declined and refining margins weakened. The stock has not made significant progress in recent years and is currently pulling back. Over the last four quarters, earnings and revenues have been decreasing, which has displeased investors. Relative to its weak peers and sector, BP has been a relative year-to-date performance leader. WAIT AND SEE what BP does this quarter.

Can Bank of America Continue to Outperform?

With shares of Bank of America (NYSE:BAC) trading around $16, is BAC an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Bank of America is a financial institution serving individual consumers, small- and middle-market businesses, corporations, and governments with a range of banking, investing, asset management, and other financial and risk management products and services. With its banking and various non-banking subsidiaries throughout the United States and international markets, the company provides a range of banking and non-banking financial services and products through several business segments: consumer and business banking, consumer real estate services, global banking, global markets, global wealth, investment management, and other.

The U.S. government has raised the amount it is seeking in penalties from Bank of America Corp. to $2.1 billion after a jury found the bank was liable for fraud over defective mortgages sold by its Countrywide unit. The request in a court filing late on Wednesday for $2.1 billion was based on gross revenue generated by the fraud, the government said. The Justice Department had previously asked for $863.6 million. The initial request was based on gross losses it said government-sponsored mortgage finance companies Fannie Mae and Freddie Mac incurred on loans purchased from Countrywide Financial Corp in 2007 and 2008.

T = Technicals on the Stock Chart Are Strong

Bank of America stock has been flying higher in recent quarters. The stock is currently trading near highs for the year and looks set to continue this path. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Bank of America is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Bank of America options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Bank of America options	25.77%	43%	41%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
February Options	Flat	Average
March Options	Flat	Top 10 Healthcare Equipment Companies To Watch In Right Now Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Bank of America’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Bank of America look like and more importantly, how did the markets like these numbers?

	2013 Q4	2013 Q3	2013 Q2	2013 Q1
Earnings Growth (Y-O-Y)	866.67%	20.00%	68.42%	233.30%
Revenue Growth (Y-O-Y)	364.48%	-1.52%	3.46%	4.13%
Earnings Reaction	2.26%	2.24%	2.80%	-4.72%

Bank of America has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Bank of America’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Bank of America stock done relative to its peers, JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), and sector?

	Bank of America	JPMorgan Chase	Wells Fargo	Citigroup	Sector
Year-to-Date Return	8.32%	-4.04%	1.34%	-8.03%	-1.60%

Bank of America has been a relative performance leader, year-to-date.

Conclusion

Bank of America is a bank and financial services giant that operates in a recovering financial industry, the backbone of the United States economy. The U.S. government has raised the amount it is seeking in penalties from Bank of America to $2.1 billion. The stock has been exploding to the upside in recent quarters and is currently trading near highs for the year. Over the last four quarters, earnings and revenue figures have been have been increasing. However, investors have had conflicting feelings about recent earnings announcements. Relative to its peers and sector, Bank of America has been a year-to-date performance leader. Look for Bank of America to OUTPERFORM.