US Airways-American settlement: What it means for fares

The big question for passengers: Will the US Airways-American merger lead to higher fares?

NEW YORK (CNNMoney) In 2014, US Airways and American Airlines will be merged. Whether that means higher fares for fliers isn't completely clear.

According to the Justice Department, the antitrust settlement it reached with the airlines Tuesday will mean that many customers will end up seeing lower fares. That's because the deal included greater access for low-cost carriers such as JetBlue Airways (JBLU, Fortune 500) and Southwest Airlines (LUV, Fortune 500) to the limited number of landing and take-off slots at Reagan National Airport in Washington and New York's LaGuardia.

"Competition is kind of a magic potion here," said Bill Baer, assistant attorney general for antitrust. "When airlines are going head to head on routes, they tend to respond to each other."

Baer said Justice agreed to the deal because it would do more to lower fares than would have been achieved by simply blocking the proposed merger.

But officials with American (AAMRQ, Fortune 500) and US Airways (LCC, Fortune 500) said Tuesday they are not worried about greater competition from bargain airlines. US Air CEO Doug Parker said Tuesday that low-cost carriers were already offering strong competition on prices nationwide, and the slots the combined airlines agreed to give up did not change that dynamic.

The two airlines had been arguing that the combination would help, not hurt, passengers by providing them with a stronger combined network.

Various studies of the impact of recent mergers on airfares suggest the impact has been fairly limited.

A PricewaterhouseCoopers study found that airfares are up less than 2% a year since 2004, a period that includes four major airline mergers. The fares rose at a slower rate than t! he rise in jet fuel and labor costs during the same period.

Seth Kaplan, managing partner of industry trade publication Airline Weekly, said there are very few airports like Reagan National and LaGuardia, which have limited capacity and slots. Upstart carriers can enter most other markets if the merged American Airlines tries to hike fares too high.

"If the combined American starts to charge a fortune to fly from Charlotte to Dallas, someone else is going to jump in there," Kaplan said. He also said that while American and US Airways might be the only carriers now flying non-stop flights on some routes, there are plenty of other airlines that will serve the two cities involved with connecting flights.

"The typical impact of the merger is that someone who might have four or five connecting options will now have three or four," he said.

Kaplan said mergers do help airlines improve profitability, both by cutting costs and also because they are able to charge somewhat higher fares on some of their routes.

But he said the lower fares that passengers enjoyed before the latest round of mergers resulted in several airline bankruptcies. American parent AMR filed for bankruptcy itself in 2011 and has yet to emerge.

Kaplan said the greater access to New York and Washington for Southwest and JetBlue will help fares in those markets, but won't make a significant difference elsewhere in the country.

  Airline stocks fly high in 2013

And while US Airways and American are also giving up gates at Boston's Logan, Chicago's O'Hare, Dallas' Love Field, Los Angeles and Miami airports, those divestitures are far more limited.

"If the merger had gone through the way the airlines originally wanted, rather than how! Justice ! demanded, fares nationally would have gone up a bit but not skyrocketed," said Kaplan. "Now with this deal, if you average it all out, fares will now go up nationally by a couple of dollars less."

Discover Financial Services (DFS) Profit Drops, Misses Expectations

NEW YORK (TheStreet) -- Discover Financial Services (DFS) reported third-quarter earnings of $1.20 on revenue of $2.06 billion, just shy of Thomson Reuters-recorded expectations of $1.21 a share on $2.07 billion in revenue. In the year-ago quarter, the direct banker and payment services operator posted earnings of $1.24 a share.

Total loans saw a 5% quarterly improvement to $62.7 billion. Credit card loans accounted for $50.4 billion of the total, up 4% on the year-ago quarter.

"Discover's card loan growth continues to exceed industry growth while charge-offs achieved new record lows," said Chairman and CEO David Nelms.

However, an increased provision for loan losses of $333 million dragged on profitability. Discover increased its reserves by $197 million over the year-ago quarter, mainly on lower expectations certain debts would be recovered. In extended trading, shares shed 1.9% to $52.73, contributing to the 0.39% loss realized throughout Monday. TheStreet Ratings team rates Discover Financial Services INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation: "We rate Discover Financial Services (DFS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated." You can view the full analysis from the report here: DFS Ratings Report Written by Keris Alison Lahiff.

Twitter Reveals Long-Awaited IPOÂ Plans

Twitter revealed its confidential IPO filing today, clearing the way for one of largest and most hyped IPOs since Facebook.

The filing reveals that the company is still growing, but is losing money. It also provides some insight into which of the major insiders will be making a sizable wealth from the IPO.

Twitter's revenue was $253.6 million in the first half of this year, up from $122.4 million in the year-ago period. However, the company had a net loss of $69.3 million in the first half, compared to a net loss of $49.1 million in the year-ago period.

In 2012, Twitter had revenue of $316.9 million, up from $106.3 million in 2011. Net loss was $79.4 million, compared to a net loss of $164.1 million in 2011.

In the first half of 2013, advertising made up 87% of the company's revenue, compared to 85% in the year-ago period. Ad rates were down 46% sequentially in its most recent quarter, my colleague Rob Hof notes, driven by an increase in ad inventory. Its main three products now are: Promoted Tweets, Promoted Accounts and Promoted Trends.

One question investors will be asking is about Twitter's international growth. Overall revenue per timeline view is $0.80 in the quarter ending in June. However it is $2.17 per timeline view in the U.S., while it is just $0.30 in the rest of the world. That's an issue Twitter will have to address, since its user base internationally is larger and growth is faster there as well: there were 49.2 million MAUs in the US (up 35% year-over-year) and 169.1 MAUs (47%) in the rest of the world.

While Twitter did not say exactly how much it plans to raise in the IPO, it listed an estimate of $1 billion. The company also did not list its estimated price range yet but that is typically added closer to the actual IPO pricing.

Twitter, which plans to trade under the ticker "TWTR," has 215 million monthly active users and about 500 million Tweets per day, the company says. In its most recent quarter, Twitter had 218.3 million average monthly active users in the three months ending June 30, which is up 44% from the year-ago period.

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Mobile is a big part of Twitter's story and the company says 75% of users accessed Twitter through a mobile device in the quarter ending June 30. More than 65% of ad revenue was from mobile devices.

In describing what the company does, Twitter says: "Twitter is a global platform for public self-expression and conversation in real time. Our platform is unique in its simplicity: Tweets are limited to 140 characters of text. This constraint makes it easy for anyone to quickly create, distribute and discover content that is consistent across our platform and optimized for mobile devices. As a result, Tweets drive a high velocity of information exchange that makes Twitter uniquely 'live.'"

The major individual shareholders who stand to make a killing on the IPO are Twitter cofounder Ev Williams with 12.0% (who is now a billionaire), Twitter cofounder Jack Dorsey with 4.9% and Twitter CEO Dick Costolo with 1.6%.

Major institutional shareholders with more than 5% of the company–the exact amount is not revealed in the filing–are Rizvi Traverse, Spark Capital, Benchmark, Union Square Ventures and DST. Benchmark, however, apparently owns about 6.7%, according to the filing.

Twitter,  with 200 million users, has raised hundreds of millions of dollars from investors including Union Square Ventures, Charles River Ventures, Spark Capital, SV Angel, Chris Sacca, Benchmark Capital, Institutional Venture Partners, Insight Venture Partners, T. Rowe Price, Morgan Stanley, DST Global and Kleiner Perkins Caufield & Byers.

Underwriters on the deal are Goldman Sachs, Morgan Stanley, JP Morgan, BofA Merrill Lynch and Deutsche Bank Securities.

Last month, Twitter announced in a Tweet that it had confidentially filed its documents with the SEC for an IPO. But the company did not publicly reveal the S-1 filing until today.

Under SEC rules established in the JOBS Act passed last year, so-called "emerging growth companies" can initially file their S-1′s confidentially if their annual revenue is less than $1 billion. Companies do not have to make their IPO filings public until 21 days before the company goes on its "road show" to pitch to investors on Wall Street. The confidential filing implied that Twitter's annual revenue is less than $1 billion and today's filing confirms that.

Is Ford Worth Investing In?

With shares of Ford Motor (NYSE:F) trading around $15, is F 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

Ford is a producer of cars and trucks. The company also engages in other businesses, such as financing vehicles. Ford operates in two sectors, automotive, and financial services. Through its sectors, Ford provides a wide range of vehicles, vehicle parts, and services to a multitude of consumers and companies worldwide. The company's products saw declining demand in the past several years as gasoline prices took a major toll on pockets. Ford is now revolutionizing its vehicles in order to compete on the world stage. Look for Ford to fuel a recovery in the American automobile industry and provide highly demanded vehicles, parts, and services.

It seems that Ford's response to tightening fuel economy standards has been to take a cue from the military. The automakers' next-generation F-150, the classic Ford pickup that has driven the company's business for decades, will shed up to 750 pounds in its next incarnation, said Mark Fields, who is rumored to be the company's next CEO. That's a roughly 15 percent weight reduction from the current F-150 model, Bloomberg reports.

T = Technicals on the Stock Chart Are Mixed

Ford Motor stock has been coasting higher over the past several months. However, the stock is currently pulling back and may need time to stabilize before heading higher. 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, Ford Motor is trading below its rising key averages, which signal neutral to bearish price action in the near-term.

(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Ford Motor options	29.96%	70%	68%

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

	Put IV Skew	Call IV Skew
January Options	Steep	Average
February Options	Steep	Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bearish 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 Mixed 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 Ford Motor’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Ford Motor look like and more importantly, how did the markets like these numbers?

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	-69.00%	15.38%	14.29%	-88.17%
Revenue Growth (Y-O-Y)	11.84%	14.71%	10.37%	5.34%
Earnings Reaction	1.37%	2.53%	-0.22%	-4.64%

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

P = Weak Relative Performance Versus Peers and Sector

How has Ford Motor stock done relative to its peers, General Motors (NYSE:GM), Toyota Motor (NYSE:TM), Tesla Motors (NASDAQ:TSLA), and sector?

	Ford Motor	General Motors	Toyota Motor	Tesla Motors	Sector
Year-to-Date Return	27.99%	49.52%	30.65%	345.00%	37.05%

Ford Motor has been a poor relative performer, year-to-date.

Conclusion

Ford is a well-established vehicle products and services producer distributed in a multitude of countries across the globe. The company’s next-generation F-150, the classic Ford pickup that has driven the company's business for decades, will shed up to 750 pounds in its next incarnation. The stock has been rising higher in recent years, but is now pulling back. Over the past four quarters, earnings have been mixed while revenues are increasing which has left investors with mixed feelings. Relative to its peers and sector, Ford has been a poor year-to-date performer. WAIT AND SEE what Ford Motor does this quarter.

Amazon Expands PBS Shows on Prime Instant Video

Today, Amazon.com (NASDAQ: AMZN  ) said it has signed a multiyear deal with PBS to add hundreds of additional PBS episodes to its Amazon Prime online streaming service. 

Amazon will add episodes from shows like NOVA, Masterpiece, and Ken Burns documentaries, as well as kids shows Caillou, Arthur, Daniels Tiger's Neighborhood, Dinosaur Train, and Wild Kratts.

In a press release, Amazon's director of digital video content acquisition, Brad Beale, said, "This deal is exciting for Prime members and particularly for those with families -- this new deal combined with the recently announced Viacom deal brings some of the most popular kids programming to Prime Instant Video, making it the perfect place for the whole family to catch up on all their favorites." 

Jason Seiken, general manager of PBS Digital, said, "Giving viewers access to our library of past programs through digital platforms like Prime Instant Video complements our broadcast service and is an important part of our strategy to reach new audiences."

The deal comes after PBS and Amazon worked out an arrangement back in January for Amazon to become the exclusive video subscription service for all current and future seasons of Downton Abbey.

Amazon Prime Instant Video has more than 41,000 movies and TV episodes available to users with a Prime membership -- which includes free two-day shipping from Amazon's website, unlimited video streaming, and access to the Kindle lending library for $79 per year.

Credit Suisse’s Top Energy Stock Picks for 2014

While 2013 was a solid year for the energy sector, it could not keep pace with the overall blistering rise in the S&P. The energy team at Credit Suisse is positive on the year ahead, but they see some clear changes in the overall picture. The biggest one will be the overall volume of oil available. They are think that investing in energy may be volatile in 2014, but they see the top stocks in the sector going higher from current levels.

The Credit Suisse analysts have focused in on four important themes that may affect the energy sector in 2014. Their top stocks to buy reflect a close eye on these themes and the changing landscape in the world.

In 2014, oil markets may need to adjust to the wildcard of rising volumes out of Libya, Iran and Iraq. Any improvement in Middle East relations could up the ante in terms of supply. The U.S. service market is oversupplied at the low end, though high-tech providers can generate good terms. The top players should be able to remain on top. The majors are still one year away from a demonstrable payoff from their $250 billion investment programs. Big winners from 2013 are fully valued and investors may need to shift to other energy names. The analysts specifically mention the master limited partnerships and the refining stocks.

Here are the top energy stocks to buy from Credit Suisse for 2014.

Chevron Corp. (NYSE: CVX) is the only major domestic integrated on the Credit Suisse list. The company has benefited greatly in 2013 from record oil and natural gas production in the United States. The company may be looking to expand domestic production by acquiring one of the top exploration and production stocks. Investors are paid a solid 3.4% dividend. The Credit Suisse price target is $140. The Thomson/First Call estimate is $135. Chevron closed Thursday at $123.22.

Phillips 66 (NYSE: PSX) is a refiner that the Credit Suisse team is still very positive on. The Department of Defense declared this week that it granted a $292 million contract to Phillips 66 for aviation turbine fuel or jet fuel. Under this contract, Phillips 66 is to deliver jet fuel for 14 months, until April 30, 2015. According to the Pentagon, Phillips 66 knocked down 25 other firms for this job. Shareholders are paid a 2.2% dividend. The Credit Suisse price target for the stock is $80, and the consensus is at $79.50. Phillips 66 closed Thursday at $72.92.

Men Dominate Couples’ Advisor Relationships

Men may be limiting their partner’s financial success without realizing it, a study released Tuesday by Fidelity found.

Just 42% of couples interact equally with their financial advisor, and men are 58% more likely to be the primary contact.

The 2013 Couples Retirement Study surveyed more than 800 couples who work with a financial advisor. Respondents were at least 25 years old and, if not married, in a long-term committed relationship living with their significant other.

Women, especially young women, were more than twice as likely as men to say they were not the primary contact in their advisor relationship. More than 30% of all women said their significant other drove the advisor relationship; 41% of Gen Y women agreed, compared with 33% of Gen X women and 28% of boomer women.

“Men reported that they are afraid of leaving their partners financially unprepared should they need to manage the finances themselves,” Jylanne Dunne, senior vice president of practice management and consulting for Fidelity Institutional Wealth Services, said in a statement. “What they may not realize is that by driving their households’ relationship with their financial advisors, they could be unintentionally turning this fear into reality. The good news is that there are simple steps couples can take to attempt to align their financial future and prepare for a smooth transition – and advisors can play a critical role in that process.”

According to Brian Nelson, vice president of practice management for National Financial, Fidelity’s clearing division, women aren’t unwilling to take the lead in their family’s financial strategy. Indeed, only 15% of women said they weren’t interested in interacting with their advisor.

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“According to the study, women are interested in working with an advisor, but they say they hand over the reins because they trust their partner,” he said in a statement.

The study found 53% of women said trust in their significant other was their reason for letting them lead the relationship with their advisor. However, a third of women said it was because their partner had a personal relationship with their advisor.

“This may not only create instability for the family, but also for the advisor-client relationship," Nelson said. "While our study found that eight in 10 women do not intend to fire their advisor upon their partner’s death, when reality hits and there is no relationship in place, many do. An advisor’s bond with both members of a couple can be key to bridging this gap between intent and reality.”

Another reason men are taking the lead in financial relationships, inadvertently or not, is a lack of confidence in their partner’s ability to make sound financial decisions. More than half of women said they were confident their significant other could handle the responsibility, while just 43% of men agreed.

When asked about their own confidence in their ability to handle financial decisions, Fidelity found respondents’ concerns weren’t unwarranted. Just 45% of women said they were confident they could assume full financial control.

Interestingly, despite most respondents saying they communicate well on financial issues, the study found couples were more comfortable talking to their advisor about financial matters than they were talking to each other. Forty-three percent, in fact, said they would rather talk to their advisor about long-term planning issues, like retirement and estate planning and wills, than to their partner.

Women are less likely to be involved in long-term planning issues overall. Although the percentage of women who say they are the primary decision maker in long-term retirement decisions has doubled since 2011, just 19% of women said they fill this role. About a quarter said they were the primary decision maker for day-to-day financial decisions.

According to Fidelity, a good number of couples need help aligning their long-term goals. Almost 40% of pre-retiree couples disagree about what they want in retirement, and 36% don’t agree or haven’t talked about where they’ll live in retirement. Thirty percent don’t even agree on the primary beneficiary on life insurance and retirement accounts.

Advisors should pay especially close attention to female partners who don’t work. Those clients are significantly more likely to have financial concerns, the study found. Nonworking women were significantly more likely than working women to worry about building an emergency savings account and covering day-to-day expenses. Their biggest concern was saving for retirement, an issue 70% of nonworking women said they worried about, compared with 57% of working women.

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Read more on ThinkAdvisor about working with couples.

Retailers With Stingy Return Policies

It's bound to happen. As you unwrap your gifts there probably will be at least one you don't like. Maybe it will be a sweater three sizes too big, the same "World's Greatest Dad" tie you got last year, or a "Gone Fishin'" plaque (even though you don't fish). Whatever it may be, you better hope that it came from a store with a good return policy.

SEE ALSO: 5 Reasons Your Gift Will Be Returned

Some retailers really do make it easy for consumers by giving them a year or more to return purchases they're not satisfied with (see Retailers With Generous Return Policies). However, most retailers offer a 30-day window for refunds or exchanges. There are a few, though, that give consumers even less time to bring back items or have strict requirements for issuing refunds.

Some merchants have adopted strict policies in an effort to curb return fraud, which costs retailers billions of dollars a year, according to the National Retail Federation. In particular, retailers are trying to head off "wardrobing" -- the practice of buying, using and then returning a product (usually clothing or electronics) for a refund.

These five retailers have particularly stingy return policies, based on our research and a comparison of retailers' policies by Cheapism.com. The descriptions below highlight the key points of retailers' policies. For more detailed information, visit their Web sites.

Barnes & Noble gives customers just 14 days to return items with a receipt for a refund. However, the bookstore extended its policy for the holidays to allow returns until January 31, 2014, for purchases made between November 11 and December 31. It will not accept returns for Nook books and magazines. And returns with a gift receipt will be refunded in the form of a gift card.

Best Buy won't let you return or exchange products after 15 days, unless you're a Best Buy Elite member (which gives you 30 days) or Elite Plus member (which gives you 45 days). However, gift purchases made between November 3 and December 31 can be returned through January 15, 2014. The original receipt, gift receipt or packing slip is required for all refunds and exchanges. And you'll have to show a photo ID to return an item in-store. Best Buy requires identification because it tracks returns and exchanges to identify customers who frequently bring back purchases.

GameStop limits returns to seven to 30 days, depending on the item, and requires a receipt for all exchanges and returns. Unopened new merchandise can be returned for a refund or exchange within 30 days. Opened items can only be exchanged for identical items within 30 days. And pre-owned products must be returned within seven days for a refund or 30 days for an exchange for the identical item. Customers with a gift receipt can exchange an item or receive a gift card of equal value.

Gilt has a relatively short return window and a complicated policy. For starters, this members-only shopping site allows only sized items -- clothing, footwear and belts -- to be returned for a refund. Handbags, toys, ties and other non-sized items aren't eligible for return. Customers have 21 days to return eligible items, which must be unused and in their original packaging. Items priced at $199.99 or less can be returned for Gilt credits. Items priced at $200 or more can be returned for Gilt credits or a refund minus $7.95 for return shipping. On its Web site, Gilt justifies its return policy as a trade-off for "instant insider access to top designer labels and coveted products at a significant discount."

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Overstock.com will give customers a full refund if they return new, unopened items within 30 days of delivery. However, the online retailer will issue only a partial refund if an item has been opened or shows signs of wear. According to Cheapism.com, this policy seems punitive compared with other retailers that impose similar restrictions on only a select few product categories. Overstock also will issue a reduced refund when returns are initiated after 30 days or are received at its processing facility 45 days after delivery. On its Web site, the company defends its 30-day return window because "products devalue over time." Overstock has, however, extended its policy to give customers more time to return holiday purchases. Returns for purchases made November 1 through December 31 must be initiated by January 31.

Worker output rises at best pace in 4 years

WASHINGTON — U.S. workers boosted their productivity from July through September at the fastest pace since the end of 2009, adding to signs of stronger economic growth.

The Labor Department said Monday that productivity increased at a 3% annual rate in the third quarter. That's up from an initial estimate of 1.9% and much stronger than the 1.8% rate from April through June.

Productivity rose because economic growth was much stronger than previously estimated in the third quarter. Productivity is the amount of output per hour of work.

Labor costs fell in the third quarter, evidence that inflation will remain low.

Higher productivity enables companies to pay employees more without sparking inflation. But greater productivity can also slow hiring if it shows companies don't need more workers to boost output.

However, productivity growth has been mostly flat over the past year. That's because the gains from the past six months have been offset by declines in previous six months.

Worker productivity is improving along with economic growth. Hiring has accelerated since the summer and wages are gradually rising. The economy grew a 3.6% annual rate in the third quarter, much faster than the 2.8% rate previously estimated.

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But productivity gains have slowed in the past three years after jumping in the aftermath of the recession. Worker productivity grew just 1.5% in 2012 and 0.5% in 2011. Those gains followed much healthier increases of 3.3% in 2010 and 3.2% in 2009. But productivity improved because companies ramped up output after having laid off many workers during the Great Recession.

The Federal Reserve monitors productivity and labor costs for any signs that inflation could pick up. Mild inflation has allowed the Fed to keep short-term interest rates at record lows and to buy bonds to try to keep long-term rates down. Fed officials meet! Tuesday and Wednesday to assess their stimulus policies.

3 New Ways Getting Married Can Raise Your Taxes

One peculiar aspect of American tax law is that getting married can dramatically affect a couple's total tax bill. Many couples, especially those in which one person earns the vast majority of the couple's income, benefit from the tax treatment on married couples. But many others, especially two-income families where each spouse's earnings are roughly equivalent, can end up paying a whole lot more in tax -- a phenomenon known as the marriage penalty.

The tax compromise that lawmakers agreed to at the beginning of 2013 made several substantial changes to the tax laws, and a few of those changes actually made the marriage penalty worse for some couples, especially high-income couples where both spouses work and have considerable income. Let's look at these three provisions and how much they'll boost the marriage penalty's impact in 2013 and beyond.

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1. The new Obamacare tax.
Obamacare created two new taxes: a 0.9% tax on wages and other earned income for high-income earners, and a 3.8% tax on investment income. For both taxes, the threshold is $200,000 for single filers and $250,000 for married couples.

So if two single people each earned $200,000, they wouldn't be subject to the Obamacare tax at all. But if they got married, then $150,000 of their total income of $400,000 would get taxed, with an additional tax liability of $1,350. Similar situations with investment income could lead to a much larger marriage penalty, as the investment tax rate is more than quadruple the rate for wages. Investors in dividend-oriented ETFs Vanguard High Dividend Yield (NYSEMKT: VYM  ) , SPDR S&P Dividend (NYSEMKT: SDY  ) , and iShares DJ Select Dividend (NYSEMKT: DVY  ) should therefore take care to consider tax-favored investment vehicles for their investments.

2. New high-income tax brackets.
The marriage penalty has existed in tax brackets for a long time. The bottom two tax brackets don't include a marriage penalty, as they're designed so that the amount of income married couples can earn is exactly twice what singles can earn to stay within a given bracket. But for the 25% tax brackets and above, the married brackets kick in at far less than twice the single amounts, with the 35% bracket kicking in at exactly the same amount for singles and couples.

The tax compromise created a new 39.6% bracket that kicks in for high-income taxpayers. The way the law was drafted, that 39.6% rate applies to single filers making more than $400,000 and joint filers with income above $450,000. What that means is that if two unmarried people each make $400,000, they won't be subject to the new provision, with taxes topping out at 35%. But if those two people get married, then an additional $350,000 in income will get taxed at the higher rate. In this example, a couple would pay more than $16,000 in additional taxes solely because of the marriage penalty in the tax brackets.

Similar provisions affect capital gains tax rates, with a higher 20% maximum rate applying above the income threshold compared with 15% below it. With the S&P 500 (SNPINDEX: ^GSPC  ) having set record highs during the past week, capital gains could be substantial for those selling off or rebalancing holdings in their portfolios.

3. Reductions in itemized deductions and personal exemptions.
The tax compromise brings back provisions that reduce the amount that high-income taxpayers can deduct for personal exemption allowances and on itemized deductions. Again, the thresholds at which these provisions kick in include a marriage penalty, with singles above $250,000 of adjusted gross income and couples over $300,000 not being able to reduce their taxable income by the full amount of their exemptions and deductions.

Here, the impact of the marriage penalty could mean that every penny of personal exemptions is taken away, even if none of them would be removed if the couple remained unmarried. Similarly, reductions in itemized deductions could increase their tax bill by more than $2,375 at top rates.

Why a marriage penalty?
The policy reason put forth for allowing a marriage penalty tends to be that couples can live more cheaply than singles. But with no rules preventing unmarried taxpayers from living together and reaping the same living-cost savings, it'll be interesting to see how many couples choose not to tie the knot in order to save on their tax bills going forward.

Saving for retirement is a key element of minimizing taxes and providing for your financial future. The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

Gold dips but finds support as stocks drop

LOS ANGELES (MarketWatch) — Gold took another turn lower in electronic trade Thursday, but the damage was minimal as prices found some support from those turning away from equities ahead of a possible reduction to the Federal Reserve's monetary stimulus.

AFP/Getty Images

Midday in East Asia, gold for February delivery (GCG4)  was trading down $3.80, or 0.3%, at $1,253.40 an ounce. March silver (SIH4)  shed 6 cents, or 0.3%, to $20.30 an ounce.

A day earlier, gold futures had backed away from a three-week high to finish lower for the first time in three sessions as a U.S. budget deal helped dull the precious metal's appeal.

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Standard Bank's Walter de Wet said that the potential agreement eliminates "another hurdle to economic growth" and increases the chances of a stimulus taper this month. "From a tactical perspective," he said, "we still believe that gold should be sold into rallies."

The Federal Reserve is set to convene a pivotal meeting next week to discuss the next move in its bond-buying plan.

Elsewhere in metals trading, January platinum (PLF4)   fell 60 cents to $1,385.10 an ounce, while March palladium (PAH4)  lost $1.05 to $737.50 an ounce.

High-grade copper for March delivery (HGH4)  gave up a penny to $3.29 a pound.

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Facebook Finally Joins the Prized S&P 500 Index

Facebook, Inc. (NASDAQ: FB) is getting the wish that many index investors have been hoping would happen. In fact, many index traders were expecting that Facebook would be added to the S&P 500 index a year ago. The S&P Indices group announced late on Wednesday that Facebook will replace the Teradyne Inc. (NYSE: TER) in the S&P 500. It was also announced that Facebook shares will replace The Williams Companies Inc. (NYSE: WMB) in the S&P 100. The Williams Company will remain in the S&P 500.

Readers should be reminded here that there are multiple times more funds and benchmarks based against the S&P 500, and it is actually the biggest benchmark of most equity funds.

Teradyne will replace Scholastic Corp. (NASDAQ: SCHL) in the S&P MidCap 400, and Scholastic will replace Lincoln Education Services Corp. (NASDAQ: LINC) in the S&P SmallCap 600. Lincoln Education Services currently ranks 600th in the S&P SmallCap 600 and is no longer representative of the small cap market space.

Facebook shares closed down 1.7% at $49.38 on Wednesday and were seen up 3.6% at $51.15 or so in the after-hours reaction. Its 52-week range is $22.67 to $54.83 and the consensus analyst price target from Thomson Reuters is listed as $58.52 as of now.

With a $121 billion market cap, investors will have to consider the real free float here rather than the full market value. Several other index changes were made as well, but this is the big one.

Mark Zuckerberg just became 3% richer, and he didn’t even have to announce a product or make a presentation.

Can Wal-Mart Break Higher?

With shares of Wal-Mart (NYSE:WMT) trading around $80, is WMT 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

Wal-Mart operates retail stores in various formats around the world. The company aims to price items at the lowest price every day. Wal-Mart operates in three business segments: the Walmart U.S. segment, the Walmart international segment, and the Sam's Club segment. It manages retail stores, restaurants, discount stores, supermarkets, super centers, hypermarkets, warehouse clubs, apparel stores, Sam's Clubs, neighborhood markets, and other small formats, as well as Walmart.com and SamsClub.com. Through its retail channels, Wal-Mart is able to provide a variety of products and services at affordable prices to consumers and companies worldwide.

Wal-Mart executives are feeling the heat from an investigation by the U.S. Department of Justice over possible violations of the Foreign Corrupt Policies Act. Reuters reports that Wal-Mart is paying for lawyers for as many as 30 executives targeted by the DoJ over suspicion of bribery and other misconduct in Mexico, Brazil, China, and India.

T = Technicals on the Stock Chart Are Strong

Wal-Mart stock has made positive progress in recent quarters. The stock is currently surging higher as it trades near highs for the year. 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, Wal-Mart 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 Wal-Mart options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Wal-Mart options	15.06%	56%	54%

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

	Put IV Skew	Call IV Skew
December Options	Flat	Average
January Options	Flat	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 minimal 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 Wal-Mart's stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Wal-Mart look like and more importantly, how did the markets like these numbers?

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	5.56%	Top 10 Cheap Stocks To Invest In 2014 5.93%	4.59%	11.14%
Revenue Growth (Y-O-Y)	1.66%	1.68%	1.04%	3.86%
Earnings Reaction	0.22%	-2.60%	-1.70%	1.51%

Wal-Mart has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Wal-Mart's recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Wal-Mart stock done relative to its peers, Target (NYSE:TGT), Costco (NASDAQ:COST), Kohl's (NYSE:KSS), and sector?

	Wal-Mart	Target	Costco	Kohl's	Sector
Year-to-Date Return	17.43%	7.03%	23.09%	27.45%	19.75%

Wal-Mart has been an average relative performer, year-to-date.

Conclusion

Wal-Mart is a retail company that provides a variety of products and services to consumers and companies worldwide. The company's executives are feeling the heat from an investigation by the U.S. Department of Justice over possible violations of the Foreign Corrupt Policies Act. The stock has made some progress in recent quarters and is currently surging higher. Over the last four quarters, earnings and revenues have been increasing. However, investors have had conflicting feelings about Wal-Mart's recent earnings announcements. Relative to its peers and sector, Wal-Mart has been an average year-to-date performer. Look for Wal-Mart to continue to OUTPERFORM.

Three must-dos to maximize retirement goals

There was a day when retirement was guaranteed by a company pension and a gold watch. Employees would even spend decades with the same company. Unfortunately, that day is long gone. In fact, retirement is no longer a guarantee by any stretch of the imagination, as the majority of individuals are now responsible for their own retirement planning.

Americans have plenty to worry about when it comes to retirement. With pension plans becoming extinct, running out of money to live comfortably is the most common concern. According to a recent survey from Merrill Lynch, nearly 40 percent of adults age 50 and older fear they will run out of money in retirement. Making matters worse, only a third of older adults feel prepared for retirement if everything goes as expected, and less than a quarter feel prepared if one spouse dies or is forced to retire early for health issues.

While a comfortable retirement may feel out of reach in today's economy, there are three vital ways to improve your chances and decrease the likelihood of financial woes.

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1. Make goals

Considering the long-term status of Social Security, individuals have more responsibility than ever to create their own financial goals for retirement. "As the government is moving more and more retirement income onto the private sector and individuals, you need to look at having a million dollars in your retirement plan at the time you're going to start drawing down on it," Anton Bayer, founder of Up Capital Management, said in a phone interview. "That sounds like a big number, but it's a real number. If you can do better than that, terrific."

Mr. Bayer, who has been a Certified Financial Planner since 1985, reminds clients that accumulating the first $100,000 is a brutal up-hill battle that takes years. However, retirement savings build much faster after the initial $100,000 as the power of compound return takes effect on a portfolio. Writing down your goals and! financial plan also make the process easier.

2. Perform quarterly check-ups

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. "I recommend people take their quarterly statement and make a 30 minute appointment with yourself or spouse," explains Mr. Bayer. "Go to a coffee shop, or somewhere outside of the house, and sit down to review the statement. This is hopefully going to be a million-dollar account so take it seriously. This applies to even a $600 account. It's the process that you want to instill."

There are six questions to consider when performing a quarterly check-up:

• Did you make any progress with the account balance?

• What is your rate of return?

• Are your current allocations working for you?

• What is your current balance and future contribution amounts?

• How is your performance given your fund options?

• How does your portfolio stack up against the broad market?

Mr. Bayer adds that, "It's very important to look at what's not working. The irony of human behavior is that when things are really bad, people like to ignore their statements. That's absolutely the wrong thing to do."

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3. Take advantage

When it comes to saving for retirement, every dollar counts. Individuals should remember to take advantage of 401k plans when available. "The 401k plan is by far the most efficient savings account available to Americans. In fact, there's almost no history of something like this available to the average American willing to contribute a small amount of their paycheck," explains Mr. Bayer. "For many participants, their employer is providing some type of a matching contribution. It's a paycheck by paycheck, year by year benefit that if they're offering, you want that. Any free money that can be put into your account, you need to take advantage of it! ."

! APPLE: Headed for $600 a share?

If you're young, you can take advantage of Father Time by starting to save for retirement as soon as possible. Individuals age 50 or older can take advantage in their 401k plan by contributing an extra $5,500 on top of the normal $17,500 contribution limit.

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Follow McWhinnie on Twitter: @Mr_Eric_WSCS.

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

Is US Airways Enticing After Recent News?

With shares of US Airways (NYSE:LCC) trading around $22, is LCC 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

US Airways operates and owns passenger and freight airline carriers. Consumers and companies across the nation are now looking to travel at an increasing rate, and since air travel is quicker and less expensive, it is becoming a common transportation method for many. As costs decrease and flights become more efficient, look for business and retail customers to fly more than ever.

Friday is the last day that shares of AMR Corp. (AAMRQ.PK) and US Airways will trade separately before the newly merged airline, American Airlines Group, will begin trading on the Nasdaq under the ticker AAL on Monday. The merger will bring AMR Corp. out of bankruptcy, and a recent report from the Wall Street Journal found that for those who bought shares of the struggling company when it was at its lowest, AMR Corp. represents one of the best investments in the last several years. Shares of the new American Airlines Group are expected to open trading at around the same price as US Airways trades on Friday. US Airways shares were trading at $21.93 at the time of writing on Wednesday.

T = Technicals on the Stock Chart Are Strong

US Airways stock has been surging higher in the past several years. However, the stock is currently pulling back. 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, US Airways 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 US Airways options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
US Airways options	49.45%	53%	51%

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
December Options	Flat	Average
January Options	Flat	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 Mixed 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 US Airways’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for US Airways look like and more importantly, how did the markets like these numbers?

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	-16.13%	-9.09%	-7.14%	63.41%
Revenue Growth (Y-O-Y)	9.11%	2.96%	3.45%	3.90%
Earnings Reaction	-2.50%	2.49%	5.02%	1.48%

US Airways has seen decreasing earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have optimistic US Airways’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has US Airways stock done relative to its peers, Southwest Airlines (NYSE:LUV), Delta Air Lines (NYSE:DAL), United Continental (NYSE:UAL), and sector?

	US Airways	Southwest Airlines	Delta Air Lines	United Continental	Sector
Year-to-Date Return	64.52%	76.95%	134.90%	58.47%	67.64%

US Airways has been an average relative performer, year-to-date.

Conclusion

US Airways is an airline that operates passenger and freight planes. Friday is the last day that shares of AMR Corp. and US Airways will trade separately before the newly merged airline, American Airlines Group, will begin trading on the Nasdaq under the ticker AAL on Monday. The stock has exploded higher in 2013, but is currently pulling back. Over the last four quarters, earnings have been decreasing while revenues have been rising, which has produced optimistic investors. Relative to its peers and sector, US Airways has been an average year-to-date performer. Look for US Airways to OUTPERFORM.

Alec Baldwin and MSNBC have parted ways

UPDATE:

MSNBC and Matthew Hiltzik, a representative of Alec Baldwin, have released a statement: "We are jointly confirming that Up Late will not continue on MSNBC."

MSNBC has also released a statement that clarifying that it is a "mutual parting and we wish Alec all the best."

EARLIER POST:

Maybe this is what he meant when he said he wasn't sure if his MSNBC show would ever come back.

Page Six originally reported that Baldwin had been fired.

Alec Baldwin has been fired by MSNBC, reports Page Six, citing "sources." His weekly show, Up Late With Alec Baldwin, was originally pulled off the air for two weeks following an incident in which Baldwin fired a homophobic slur at a photographer.

"The decision has been made. He's gone," an insider at the cable channel tells Page Six. "The (parent company) Comcast guys have decided. Word is spreading through the building."

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However, Variety reports that Baldwin was not fired, but that the sides "mutually" agreed to end the show.

A source tells Page Six his "diva-like behavior toward co-workers" contributed to his removal. Baldwin's demands allegedly include a humidifier because he claimed the air at 30 Rock was too dry, and the actor alienated staffers when he demanded a separate makeup room that was being used by a woman with cancer who is sensitive to hairspray.

"I don't give a (expletive) if she has cancer or not, I want that (expletive) makeup room," he allegedly said.

Baldwin might be out of a job, but it could work out well for him. He did, after all, say he was thinking about quitting show business.

Can Goldman Sachs Continue to Move Higher?

With shares of Goldman Sachs (NYSE:GS) trading around $168, is GS 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

Goldman Sachs is engaged in investment banking, securities, and investment management. It provides a range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments, and high net worth individuals. The company operates in four segments: investment banking, institutional client services, investing and lending, and investment management. Through its segments, Goldman Sachs provides valuable investment services to consumers and companies worldwide.

A former Goldman Sachs trader who pleaded guilty to fraudulently building an unauthorized $8.3 billion futures trade should repay $118 million to his former employer to cover its losses and spend about three years in prison, federal prosecutors said.

T = Technicals on the Stock Chart Are Strong

Goldman Sachs stock has made significant progress in the last several quarters. The stock is currently surging higher and looks set to continue. 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, Goldman Sachs 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 Goldman Sachs options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Goldman Sachs options	20.91%	70%	68%

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

	Put IV Skew	Call IV Skew
December Options	Flat	Average
January Options	Flat	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 very 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 Goldman Sachs’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Goldman Sachs look like and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	1.05%	107.87%	9.44%	203.29%
Revenue Growth (Y-O-Y)	-19.51%	0.21%	1.42%	52.69%
Earnings Reaction	-2.42%	-1.69%	-1.61%	4.05%

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

P = Excellent Relative Performance Versus Peers and Sector

How has Goldman Sachs stock done relative to its peers, JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Morgan Stanley (NYSE:MS), and sector?

	Goldman Sachs	JPMorgan Chase	Citigroup	Morgan Stanley	Sector
Year-to-Date Return	32.78%	28.66%	31.83%	63.00%	32.09%

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

Conclusion

Goldman Sachs is a bellwether in the financial sector that strives to provide valuable financial products and services to consumers and businesses around the world. A former Goldman Sachs trader who pleaded guilty to fraudulently building an unauthorized $8.3 billion futures trade should repay $118million to his former employer. The stock has been moving higher in recent years and is currently trading near highs for the year. Over the last four quarters, earnings and revenues have been on the rise. However, investors have had conflicting feelings about Goldman Sachs's earnings announcements. Relative to its peers and sector, Goldman Sachs has been a relative performance leader year-to-date. Look for Goldman Sachs to OUTPERFORM.

Two Plays on Cholesterol

Industry experts say the new guidelines for treating high cholesterol could double the number of people on medications to lower their cholesterol, suggests Diane Alter in Money Morning.

Statin drugs are already a profitable niche in the drug market. But the biggest winners will be makers of lower-priced generics. Those include Mylan Labs (MYL) and Teva Pharmaceuticals (TEVA).

Mylan Labs, a leading global generic and specialty pharmaceutical company, received final FDA approval for the cholesterol medicine fluvastatin, the first generic version of Norvatis AG's widely-prescribed Lescol capsules, in 2012.

The product is approved for both heredity and non-familial high cholesterol. It's also approved for the secondary prevention of cardiovascular disease. Latest figures available put sales of Lescol at around $27.9 million.

Mylan maintains one of the industry's broadest and highest-quality product portfolios, which are regularly bolstered by an innovative and healthy product pipeline.

According to Thomson/First Call; of the ten analysts that follow the stock, three rate Mylan a Buy, one an Overweight, three an Outperform, one a Market Perform, one a Perform, and one an Average on shares. Daily volume averages around three million, and shares are on an upward trajectory.

Meanwhile, Teva Pharmaceuticals received FDA approval, in 2006, to sell a generic version of Merck's blockbuster cholesterol drug Zocor.

Simvastatin versions were initially priced about 30% less than Zocor. Over the next year, prices plunged as much as 90%, from $3 a pill, to about $0.30 a dose.

The falling price saved insurers and patients billions, and cost Merck a similar amount. It also advanced Teva's bottom line. Presently, simvastatin sits at Number Nine on the list of Top 20 Generic Drugs Worldwide.

Latest figures show the drug generated $1.64 billion in sales for Teva. That number will unquestionably grow under the new recommendations. Shares of the Israel-based company boast a market cap of $36 billion and 4% yield.

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A Buying Opportunity for Puerto Rico Bank Stocks

NEW YORK (TheStreet) -- Key economic figures expected this week could lead to an "over-reaction" to the downside for Puerto Rico bank stocks, which could create a buying opportunity for investors, according to KBW analyst Brian Klock

The partial shutdown of the federal government during the first half of October delayed the collection of data for the Government Development Bank of Puerto Rico (GDB), and the release of the bank's Economic Activity Inex (EAI) for September and October.

"We believe there could be weakness in the Puerto Rico bank stocks, as we believe the y/y comparisons are still tough, but we anticipate the m/m trends to stabilize," Klock wrote in note to clients on Sunday.  "We will be more focused on the m/m trends and would be buyers of [Popular, Inc. (BPOP), First Bancorp (FBP) and OFG Bancorp (OFG)] if the shares are weak on a larger y/y EAI decline," he added.

The EAI has traditionally been closely correlated with the island territory's gross domestic product.  Puerto Rico remains mired in a long and painful recession, and a year-over-year decline of over 5.5% could cause a negative reaction among investors, according to Klock.

The analyst would expect an over-reaction from investors in the above scenario, because "the EAI has over-estimated the absolute level of the decline in GNP in the past," and because he belives the Puerto Rico Planning Board's estimate of a decline in GDP of 0.80% for fiscal 2014 is "more realistic than the -5-6% y/y trend shown by the EAI."

Klock rates Popular "outperform," with a price target of $34.  Popular's stock closed at $28.58 Friday.  The shares have returned 37% this year and trade for 0.8 times tangible book value, according to Thomson Reuters Bank Insight, and for 10.4 times the consensus 2014 earnings estimate of $2.75.  The consensus 2015 EPS estimate is $2.81.

Popular still owes the government $935 million in bailout funds received through the Troubled Assets Relie! f Program, or TARP, in December 2008.  Klock in a client note on Nov. 15 wrote that he expected the bank's full repayment of TARP to be "a near-term event," possibly before the end of 2013.  The analyst added that "potential accretion" to his 2013 EPS estimate of $1.77 could be "as much as $0.51 or 18%."

Klock also has an "outperform" rating on OFG Bancorp, with a price target of $20.  OFG closed at $17.20 Friday.  The shares have returned 30% this year and trade for 1.3 times tangible book value and for 9.4 times the consensus 2014 EPS estimate of $1.83.  The consensus 2015 EPS estimate is $2.28.

KBW trails the consensus, with a 2014 EPS estimate for OFG Bancorp of $1.71, however, the firm is ahead of the consensus with a 2015 EPS estimate of $2.35.

Klock on Monday reiterated his "market perform" rating for First Bancorp, with a price target of $7.  First Bancorp's shares closed at $6.38 Friday, returning 39% year-to-date.  The shares trade for 1.2 times tangible book value, and for 12.3 times the consensus 2014 EPS estimate of 52 cents.  The consensus 2015 EPS estimate is 58 cents.

The following chart shows the year-to-date performance of all three stocks, relative to the S&P 500 :

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email. Follow @PhilipvanDoorn

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

Krawcheck: The market giveth, the government taketh away

Sallie Krawcheck, a former executive at Bank of America Corp. and Citigroup Inc., called government fines and charges levied on the largest U.S. banks a tax on excess profits.

“There is a cost of overearning in which some of that money gets paid back to the government in fines,” Ms. Krawcheck said Wednesday at The Year Ahead: 2014, a two-day conference sponsored by Bloomberg in Chicago.

The six biggest U.S. lenders have piled up more than $100 billion in legal costs since the financial crisis, including settlements and lawyers’ fees, data compiled by Bloomberg show. JPMorgan Chase & Co., which posted three years of record profit through 2012, reached a $13 billion settlement tied to mortgage bond sales yesterday. The firm still faces criminal probes that range from possible bribery in Asia to its relationship with Ponzi scheme operator Bernard Madoff.

“We can talk about whether it’s a fine for wrongdoing, we can also talk about it as a tax on over-earning,” Ms. Krawcheck said about JPMorgan’s accord. “It really has implications for the industry as you look to other banks and what they are potentially going to pay.”

Ms. Krawcheck was Citigroup’s chief financial officer and head of strategy, and later ran the bank’s wealth management division until late 2008, when she was replaced by current chief executive Michael L. Corbat. She joined Bank of America in August 2009 to run wealth management before being ousted amid a management shakeup in September 2011.

Ms. Krawcheck didn’t see executives acting ille

Pershing Square takes stakes in Fannie, Freddie

NEW YORK (AP) — Activist investor Bill Ackman's company has disclosed stakes in government-controlled mortgage giants Fannie Mae and Freddie Mac.

In regulatory filings on Friday, Pershing Square Capital Management said that it has a 9.98% stake in Fannie Mae and a 9.77% stake in Freddie Mac.

On Friday, Fannie Mae's shares surged 9% to $3.34 in afternoon trading. Freddie Mac's shares jumped 7.2% to $3.11.

Ackman's company invests in and bets against a wide range of businesses. In August, Ackman resigned from J.C. Penney's board and sold Pershing's entire 18% stake in the department store operator as part of a deal to resolve a public dispute between himself and the Plano, Tex.-based company.

In October, Ackman reduced his short position, a bet that the stock price will fall, against nutritional supplement maker Herbalife. Ackman had taken massive short positions on the company's stock, meaning his fund would make money if the shares decline

Earlier in November, Fannie Mae and Freddie Mac reported strong third-quarter earnings on the back of a recovering housing market. The government rescued Fannie and Freddie at the height of the financial crisis in September 2008, when both veered toward collapse under the weight of losses on risky mortgages. Together, the companies received taxpayer aid totaling $187 billion.

The gradual rebound of the housing market has made Fannie and Freddie profitable again. Their repayments of the government loans have helped make this year's federal budget deficit the smallest in five years.

The two companies don't directly make loans to borrowers. They buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. That helps make loans available.

Ackman's disclosure came two days after another investment firm, Fairholme Capital Management, offered to buy Fannie and Freddie's core businesses from the government in a $52 billion deal.

Miami-based Fairholme, led by Bruce Berkowitz! , made the proposal to the Federal Housing Finance Agency, which oversees Fannie and Freddie.

Fairholme said it would lead a group of investors to buy the mortgage-bond guarantee businesses of the two companies. The firm said that would be sufficient to back about $1 trillion in new mortgages.

The Obama administration is seeking to wind down Fannie and Freddie though it's unclear whether the Fairholme proposal would fit with the administration's plan. Government officials have said previously that a small group of investment firms taking on such a large risk of mortgage defaults would open the possibility of the government having to bail out the firms if they failed.

The goal of the Obama plan is to replace Fannie and Freddie with a system that would put the private sector, not the government, primarily at risk for the loans. That would spread the risk over numerous companies. The government would still be involved, both in oversight and as a last-resort loan guarantor. The White House also wants a guarantee that private lenders will make sure homeowners have access to 30-year fixed mortgages.

China's Upcoming Economic Moves With David Riedel

David Riedel of Riedel Research Group, which focuses on equity research across key global emerging markets, discussed why he believes China's economy needs to invest in a better safety net on CNBC's Squawk Box Monday morning. 

"The demographics of China absolutely demand it," said Riedel regarding China's development of a stronger safety net. 

"They've got more people retiring. It's the fastest aging [population] in the world." 

As leaders in China are meeting in talks on what many believe to be about advancing significant economic reform, and their growth rates continue to stir conversation, many are wondering how the country plans to move forward with ensuring economic stability across a diverse set of expanding classes. 

Riedel is confident that if the safety net is there, then the people of China can be more "consumer orientated," which he thinks is what the country truly needs. 

"They are gonna manage this transition towards a more domestically orientated, consumption-focused economy, which is going to mean slower percentage growth rates because of the law of large numbers," said Riedel. 

Related: Coca-Cola to Invest Over $4 Billion in China

According to Riedel, some of the major talking points will be on the development of rural economies, land ownership, which he notes is a big deal for China, and "a continued focus on urbanization." 

Despite growth plans etched out over years, changes can be made that could push things either the left or the right, Riedel said, while including that some developments will include increased freedom of mobility among workers and increased land ownership by "peasants."  

He thinks that the chances of opening up Chinese markets to more foreign investors is low since they're able to adequately meet their own needs and are comfortable maintaining control of their domestic economy. Riedel said that the impact of the 2008-2009 "developed world downturn" on China's economy reinforces their decision not to open out to outsiders. 

Jason Cunningham had no position with the mentioned entities while writing this article. Visit Jason on Twitter at @JasonCunningham and @Benzinga.

Posted-In: China CNBC CNBC's Squawk Box David Riedel Riedel Research GroupCNBC News Emerging Markets Politics Global Economics Markets Media General Best of Benzinga

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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How do investors benchmark their bond funds?

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A: There are two way to look at it. One is that when you invest in a bond fund the worst thing you should do is to look at historical return because these return already come in and they is no guarantee that this fund will deliver similar kind of return. Unlike equity, in a bond you need to look at simple thing that what is the current portfolio maturity and what is the current portfolio yield and if you invest in that product and have that kind of maturity yield and if you stay invested in that fund for that period then yield minus expenses you are going to get it.

If you look at liquid right now, liquid fund have a 60 days maturity, current portfolio yield is 10 percent plus, 25 bps expenses, you are going to get 9.75 to 10 percent for next 60 days. Similarly if you look at accrual products, which are one year plus kind of products where current yield is anything between 11 to 11.5 and 12 percent. You take 1.5 percent expenses, 10 percent plus kind of return you get, suppose you stay invested for one year period, so that is a way one need to look at.

Technically I can answer you that it has to be benchmark against the bond index and all that which for a normal investor doesn't matter. I think the real benchmark for a bond is to look at company FDs. If you have one year company FD, if you have three year company FD and you have product which is one year maturity or three year maturity then that product yield to maturity (YTM) has to be higher than the bank deposit.

Wall Street focus shifts from politics to data

NEW YORK — With the stroke of President Obama's pen, the major storyline on Wall Street will shift from "political risk" to plain old everyday market risk.

Once Obama signs off on the congressional bill that will reopen the government and extend the debt ceiling through early 2014, the "Will the U.S. default?" narrative that's been trending on Wall Street will give way to more traditional market-moving themes such as:

• Will Google's earnings top estimates?

• When will the Federal Reserve start tapering its bond purchases?

• How's the economy holding up?

The market cheered the apparent end of the budget impasse Wednesday. The Dow Jones industrials rose 206 points to 15,374. The broad market saw a $275 billion paper gain, Wilshire Associates says.

STOCKS: Dow jumps more than 200 points on debt deal

DEBT DEAL: Congress passes deal to raise debt ceiling, reopen government

But since the market "never priced in the bad scenario, it's unlikely to storm away to the upside," says Rod Smyth, chief investment strategist at RiverFront Investment Group.

With political gridlock done for now, Wall Street money managers and analysts can get back to evaluating asset prices based on such things as corporate earnings, home sales and consumer confidence, says Doug Cote, chief investment strategist at ING U.S. Investment Management. "Now the focus will be on business fundamentals," he says.

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Here's what investors will be watching:

• The economy. The big question is how much has the more-than-two-week government shutdown hurt the economy? says Nicholas Sargen, chief investment officer at Fort Washington Advisors.

Investors will closely analyze fresh economic releases, including those issued by the federal government, which stopped compiling and reporting key data during the 16-day shutdown.

Econom! ists have cut fourth-quarter GDP growth estimates to 2% from 2.3%, BlackRock says. But this "drag" isn't enough to do "lasting damage" to the economy, argues Sargen. He likens the disruption to a "natural disaster," a one-time event the economy will overcome.

ECONOMY: Political uncertainty keeps slowing economy's rise

By avoiding default, the market will be spared the "tail-risk scenario of a 2014 global recession," Smyth adds.

• Corporate earnings. The third-quarter profit reporting season is underway, but has been overshadowed by the debt showdown. "What I'm looking for," Cote says, "is another quarter of positive year-over-year growth."

Analysts are expecting profit growth of 3.1%, S&P Capital IQ says.

Cote expects "corporate profits to continue to drive stocks higher." But he says he'll be listening to CEO guidance about the future to determine if the political paralysis puts estimated fourth-quarter profit growth of 9.2% in jeopardy.

• The Fed. The central bank opted not to start dialing back its market-friendly bond-buying program in September, citing the fiscal impasse in Washington. The negative hit to growth will likely sideline the Fed even longer, pushing back their first taper to December at the earliest, analysts say.

"The Fed will still be there to lube the economy," says Sargen.

If there's a negative, it's that the budget deal is temporary, and divided lawmakers will return to the bargaining table, setting the market up for more political gridlock in 2014, Sargen warns.