Federal Reserve prolongs stimulus

Ben Bernanke's top goal -- substantial improvement in the job market -- is still eluding him.

NEW YORK (CNNMoney) Call it QE-Indefinitely.

There's still no end in sight for the Federal Reserve's stimulus program -- known as quantitative easing -- after the central bank met this week and decided to continue buying $85 billion in bonds each month.

In a statement released after the conclusion of its policy meeting, the Fed pointed to fiscal policy (a.k.a. government spending cuts, the shutdown and debt ceiling debate) as "restraining economic growth."

While the Fed continued to characterize the overall economy as expanding at a "moderate pace" -- the same as at its prior meeting -- it did downgrade its assessment of the housing market slightly.

"The housing sector slowed somewhat in recent months," the statement said.

The central bank has been buying $85 billion in bonds every month since September 2012, and has said it will continue to do so until the job market improves "substantially." The program is now nearing $1 trillion in total, yet that goal remains elusive.

Sure, the unemployment rate, at 7.2% is slightly lower than it was, but so too is the country's labor participation rate. Only 63% of Americans ages 16 and over either have a job or are looking for one -- the lowest level since 1978.

Meanwhile, hiring is stuck in slow motion, averaging 185,000 news jobs added in each of the last 12 months. Overall, not much has changed in the job market since last year.

What about 'tapering'?

Investors had previously thought the Fed would begin slowing its stimulus plan by now, in a gradual wind-down process dubbed "tapering." Fed Chairman Ben Bernanke said as much back in June, when he remarked "We anticipated that it would be appropriate to begin t! o moderate the monthly pace of purchases later this year."

But Bernanke has also said the Fed's decision will depend on the economic data.

That's been a problem since the October government shutdown delayed some economic reports and is expected to muddle some of the data in the coming months, and the debt ceiling standoff could still resurface early next year, weighing on the economy once again.

Add in the Fed's leadership transition, as Bernanke's term ends in January, and Fed watchers largely think the central bank has to wait until at least its March 2014 meeting, before making any major policy changes.

"I don't think Federal Reserve Board members would feel very comfortable about beginning the tapering process until we're closer to 200,000 jobs added each month. We're a long way from there -- in fact we're moving in the wrong direction," said Mark Zandi, chief economist for Moody's Analytics.

  Why there isn't a bond bubble

Others even predict the job market weakness will persist so long, the Fed might opt to continue bond purchases at full strength, through at least June.

If these predictions come true, this round of QE is likely to total more than either of its two predecessors: QE1 totaled $1.5 trillion and the second round of stimulus added up to about $600 billion.

What does this mean for interest rates?

Before the Great Recession, the Fed's main tool was its short-term interest rate. Lowering the rate made it cheaper to borrow money, which aimed to stimulate the economy.

But the central bank has already kept that rate near zero since December 2008, and that's one reason it is resorting to more unconventional policies like quantitative easing.

The hope is by buyin! g all the! se bonds, the Fed will lower long-term interest rates too. Mortgage rates are one noticeable area where consumers may notice the effect.

The average rate on a 30-year mortgage fell as low as 3.4% in April, but then started rising during the summer, as investors predicted the Fed would cut back on stimulus. Now that the Fed is standing pat, the rate has been falling again, and as of last week, it was 4.1%.

The longer the Fed continues QE, the lower rates could fall.

Not everyone is happy...

QE remains a controversial policy. At every meeting this year, Kansas City Fed President Esther George has been voicing concerns that the Fed could be overstimulating the economy and even risk inflating a bubble.

She voted against the decision, citing "the risks of future economic and financial imbalances."

She was the only dissenter among the Fed's 10 voting members.

Hot Gold Companies To Watch For 2014

Tuesday, July 16, 2013

A largely tame inflation report, a positive looking Industrial Production reading, and strong earnings reports from Goldman Sachs (GS) and Johnson & Johnson (JNJ) provide the backdrop for today�� trading action. Earnings and economic data aside, the market is looking forward to the Bernanke testimony to Congress tomorrow, likely his last one as the Fed Chairman. The Fed Chairman's comments last week were instrumental in easing QE related worries and he will likely be aiming for another do-no-harm type of performance tomorrow.

On the earnings front, the Goldman Sachs and JNJ reports were quite strong, while Coke (KO) came short of expectations on case-volume weakness. Including these three reports, we now have Q2 reports from 36 S&P 500 companies that combined account for 11.8% of the index�� total market capitalization.

Total earnings for these 36 companies are up +19.2% from the same period last year, with 58.3% beating expectations. On the revenue side, we have a growth rate of +8.7% and 44.4% of the companies are coming ahead of top-line expectations. Of this morning�� reports, Goldman and JNJ beat on the top- and bottom-lines, while Coke met EPS expectations, but missed on the top-line. The Q2 results thus far compare favorably with the 4-quarter average for the same set of 36 companies in terms of earnings and revenue growth rates, but a bit soft in terms of earnings and revenue beat ratios.

Hot Gold Companies To Watch For 2014: Golden Star Resources Ltd(GSS)

Golden Star Resources Ltd., a gold mining and exploration company, through its subsidiaries, engages in the acquisition, exploration, development, and production of gold properties. It owns and operates the Bogoso/Prestea gold mining and processing operation that covers approximately 40 kilometers of strike along the southwest-trending Ashanti gold district in western Ghana; and the Wassa open-pit gold mine located to the east of Bogoso/Prestea in southwest Ghana. The company also has an 81% interest in the Prestea underground gold mine located in Ghana. In addition, it holds interests in various gold exploration projects in Ghana, Sierra Leone, Burkina Faso, Niger, and Cote d?Ivoire, as well as holds and manages exploration properties in Brazil in South America. The company was founded in 1984 and is based in Littleton, Colorado.

Advisors' Opinion:

• [By Rich Duprey]

  Clash of the titans
  When bears are raging on the gold bullion market, it's not surprising to see gold stocks getting mauled as well. Golden Star Resources (NYSEMKT: GSS  ) was the biggest loser in the sector, losing a quarter of its market cap on no company-specific news, though a report last Friday indicated that a large number of hedge funds had recently dumped their positions in the mid-tier miner. Yet it wasn't all that much better among the majors, either, as Barrick Gold (NYSE: ABX  ) fell almost 13% and Kinross Gold (NYSE: KGC  ) was down 14%.

• [By Sean Williams]

  Golden Star Resources (NYSEMKT: GSS  )
  It's simple physics: The bigger they are, the harder they fall. When gold prices nosedived earlier this week, gold miners with historically higher operating costs took the brunt of the hit. For the most part, that meant that development-stage miners, and those operating in Africa, where labor and political costs make cost-effective mining a challenge, took it on the chin. Possibly no stock was hammered more than Golden Star Resources, a gold miner in Ghana, which lost about one-quarter of its value on Monday alone.

Hot Gold Companies To Watch For 2014: Iamgold Corporation(IAG)

IAMGOLD Corporation, together with its subsidiaries, engages in the exploration, development, and production of mineral resource properties worldwide. It primarily explores for gold, silver, zinc, copper, niobium, diamonds, and other metals. The company holds interests in eight operating gold mines, a niobium producer, a diamond royalty, and exploration and development projects located in Africa and the Americas. Its advanced exploration and development projects include the Westwood project in Canada; and the Quimsacocha project, which consists of 3 mining concessions covering an aggregate area of approximately 8,030 hectares in Ecuador. The company was formerly known as IAMGOLD International African Mining Gold Corporation and changed its name to IAMGOLD Corporation in June 1997. IAMGOLD Corporation was founded in 1990 and is based in Toronto, Canada.

Advisors' Opinion:

• [By Holly LaFon]

  He increased his holdings in gold companies in the fourth quarter accordingly. Gold stocks he found attractive in the fourth quarter are: Novagold Resources (NG), Randgold Resources (GOLD), Iamgold Corp. (IAG), Barrick Gold Corp. (ABX), Agnico Eagle (AEM) and International Tower Hill (THM).

• [By Rich Duprey]

  IAMGOLD (NYSE: IAG  ) still has an interest in the�Quimsacocha gold mine it sold to INV Metals last year, which has an indicated mineral resource estimated at 3.3 million ounces gold. China's�Ecuacorriente is also pursing a major copper project at Panantza-San Carlos, and International Minerals will seek out gold and silver at Rio Blanco.

• [By Daniel Putnam]

  The second factor working in gold stocks��favor is that analysts are growing optimistic again. Yesterday, HSBC put out a bullish note on gold and upgraded Agnico Eagle Mines (AEM), Yamana Gold (AUY), Barrick Gold, Iamgold (IAG), and Goldcorp. Most gold stocks are ranked ��old��or ��uy��(as opposed to ��trong Buy�� by the majority of analysts, meaning that there�� plenty of room for continued positive news flow on this front.

• [By Tom Stoukas]

  Air France led airlines lower, falling 4 percent to 7.30 euros. International Consolidated Airlines Group SA (IAG) lost 1.9 percent to 270.7 pence while Deutsche Lufthansa AG slid 2.1 percent to 15.75 euros.

Top Canadian Stocks To Own For 2014: Claude Resources Inc.(CGR)

Claude Resources Inc. engages in the acquisition, exploration, and development of precious metal properties, as well as production and marketing of minerals in Canada. It primarily explores for gold in northern Saskatchewan and northwestern Ontario. The company holds interests in the Seabee gold mine located at Laonil Lake, northern Saskatchewan; and the Madsen property that consists of 6 contiguous claim blocks totaling approximately 10,000 acres, located in the Red Lake Mining District of northwestern Ontario. It also holds interest in the Amisk Gold project, which covers an area of 13,800 hectares in the province of Saskatchewan. The company was founded in 1980 and is based in Saskatoon, Canada.

Hot Gold Companies To Watch For 2014: Northgate Minerals Corporation(NXG)

Northgate Minerals Corporation, together with its subsidiaries, engages in exploring, developing, processing, and mining gold and copper deposits in Canada and Australia. Its principal producing assets include 100% interests in the Fosterville and Stawell Gold mines in Victoria, Australia; and the Kemess South mine located in north-central British Columbia, Canada. The company was formerly known as Northgate Exploration Limited and changed its name to Northgate Minerals Corporation in May 2004. Northgate Minerals Corporation was founded in 1919 and is headquartered in Toronto, Canada.

Hot Gold Companies To Watch For 2014: First Majestic Silver Corp.(AG)

First Majestic Silver Corp. engages in the production, development, exploration, and acquisition of mineral properties with a focus on silver in Mexico. The company owns interests in La Encantada Silver Mine comprising 4,076 hectares of mining rights and 1,343 hectares of surface land located in Coahuila; La Parrilla Silver Mine consisting of mining concessions covering an area of 69,867 hectares; and San Martin Silver Mine comprising approximately 7,841 hectares of mineral rights and approximately 1,300 hectares of surface land rights located in Jalisco. It also holds interests in Del Toro Silver Mine consisting of 393 contiguous hectares of mining claims and an additional 129 hectares of surface rights located in Zacatecas; Real de Catorce Silver Project comprising 22 mining concessions covering 6,327 hectares located in San Luis Potosi state; and Jalisco Group of Properties consisting of mining claims totalling 5,240 hectares located in Jalisco. The company was founded in 1979 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• [By Doug Ehrman]

  Despite the weakness seen in precious metals a few weeks ago, silver has been relatively stable ever since mid-April, with the iShares Silver Trust (NYSEMKT: SLV  ) trading in a dollar-wide range ever since. With the presidents of the Chicago and Philadelphia Federal Reserve banks��releasing conflicting statements, turmoil may be just around the corner. Miners like Pan American (NASDAQ: PAAS  ) and First Majestic (NYSE: AG  ) are still facing operating challenges, while silver streaming darling Silver Wheaton (NYSE: SLW  ) struggles as well.

• [By Doug Ehrman]

  While many precious-metals companies have been in a slump of late, there is one that belongs perpetually in your portfolio: Silver Wheaton (NYSE: SLW  ) . The company is not like other miners -- including Pan American Silver (NASDAQ: PAAS  ) and First Majestic (NYSE: AG  ) -- in that it has a unique business plan that insulates it against many of the vagaries of the mining business. Moreover, because silver will always have a significant industrial demand component, even with the heightened volatility you see in the silver market, maintaining exposure to silver is appropriate.

• [By Doug Ehrman]

  It is no secret that precious metals companies have been taking a pounding for some time now. The SPDR Gold Trust (NYSEMKT: GLD  ) and iShares Silver Trust (NYSEMKT: SLV  ) , the gold and silver ETFs, have been hard hit and operating companies like First Majestic (NYSE: AG  ) and Barrick Gold (NYSE: ABX  ) have been hit even harder. Through all of these struggles, and in some cases because of them, one precious metals company continues to look attractive for the long term: Silver Wheaton (NYSE: SLW  ) .

• [By Doug Ehrman]

  In terms of individual companies, there are several good choices, but these can behave very differently. Pan American Silver (NASDAQ: PAAS  ) , for example, missed revenue expectations and beat earnings expectations in its last earnings release. But despite the beat, EPS shrank considerably from a year earlier on a GAAP basis. The stock has been fairly flat ever since. Conversely, First Majestic (NYSE: AG  ) reported strong revenue growth and a small bump in profits, sending the stock higher since the announcement. First Majestic reported increased cash costs and tightening margins, largely driven by lower silver prices. Each of these companies faces pressure from increasing production costs and environmental concerns.

Hot Gold Companies To Watch For 2014: Goldman Sachs Group Inc.(The)

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

Hot Gold Companies To Watch For 2014: Thompson Creek Metals Company Inc.(TC)

Thompson Creek Metals Company Inc., through its subsidiaries, engages in mining, milling, processing, and marketing molybdenum products in the United States and Canada. The company?s principal properties include the Thompson Creek Mine and mill in Idaho; a metallurgical roasting facility in Langeloth, Pennsylvania; and a joint venture interest in the Endako Mine, mill, and roasting facility in British Columbia. It also holds interests in development projects comprising the Davidson molybdenum property and the Berg copper-molybdenum-silver property located in northern British Columbia; the Howard?s Pass property, a lead and zinc project situated in the Yukon territory-northwest territories border; and the Maze Lake property, a gold project located in the Kivalliq district of Nunavut. The company produces molybdenum products, primarily molybdic oxide and ferromolybdenum, as well as soluble technical oxide, pure molybdenum tri-oxide, and high purity molybdenum disulfide. As o f December 31, 2010, its consolidated recoverable proven and probable ore reserves totaled 462.2 million pounds of contained molybdenum in the Thompson Creek Mine and the Endako Mine. The company was formerly known as Blue Pearl Mining Ltd. and changed its name to Thompson Creek Metals Company Inc. in May 2007. Thompson Creek Metals Company Inc. is based in Denver, Colorado.

Advisors' Opinion:

• [By Selena Maranjian]

  Beaten-down companies that you think are likely to recover strongly are also good candidates. Molybdenum miner Thompson Creek Metals (NYSE: TC  ) , for example, sports average annual losses of 35% over the past five years, and carries substantial debt, but molybdenum's long-term outlook is promising, with price increases likely, and the company has a promising gold and copper mine on track to start producing by the end of the year. Freeport-McMoRan Copper & Gold (NYSE: FCX  ) is another major molybdenum player, with considerable operations in other metals, as well -- along with new investments in oil and gas production.

• [By Selena Maranjian]

  The biggest new holdings are Chesapeake Energy�puts, and shares of Discovery Communications. Other new holdings of interest include Halcon Resources (NYSE: HK  ) , and Thompson Creek Metals (NYSE: TC  ) . Oil and gas company Halcon, operating in the promising Bakken region, as well as Texas's productive Eagle Ford shale region, among others, is expected to grow by 30% annually over the coming years. It recently reported 2012 net daily production 128% higher than year-ago levels, and proven reserves up 417%. Halcon was recently one of my colleague Joel South's top two energy holdings, and analysts at Stifel recently upped its rating�from Hold to Buy.

Hot Gold Companies To Watch For 2014: Newmont Mining Corporation(Holding Company)

Newmont Mining Corporation, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. The company?s assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. As of December 31, 2009, it had proven and probable gold reserves of approximately 93.5 million equity ounces and an aggregate land position of approximately 27,500 square miles. The company was founded in 1916 and is headquartered in Greenwood Village, Colorado.

Does The Street Have Level 3 Communications Figured Out?

Level 3 Communications (NYSE: LVLT  ) is expected to report Q2 earnings on July 31. Here's what Wall Street wants to see:

The 10-second takeaway
Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Level 3 Communications's revenues will expand 0.2% and EPS will remain in the red.

The average estimate for revenue is $1.59 billion. On the bottom line, the average EPS estimate is -$0.07.

Revenue details
Last quarter, Level 3 Communications booked revenue of $1.58 billion. GAAP reported sales were 0.6% lower than the prior-year quarter's $1.59 billion.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
Last quarter, non-GAAP EPS came in at -$0.13. GAAP EPS were -$0.36 for Q1 against -$0.66 per share for the prior-year quarter.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Recent performance
For the preceding quarter, gross margin was 60.1%, 150 basis points better than the prior-year quarter. Operating margin was 9.8%, 150 basis points better than the prior-year quarter. Net margin was -4.9%, 380 basis points better than the prior-year quarter.

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Looking ahead

The full year's average estimate for revenue is $6.39 billion. The average EPS estimate is -$0.21.

Investor sentiment
The stock has a two-star rating (out of five) at Motley Fool CAPS, with 1,815 members out of 1,948 rating the stock outperform, and 133 members rating it underperform. Among 221 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 194 give Level 3 Communications a green thumbs-up, and 27 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Level 3 Communications is hold, with an average price target of $24.20.

Looking for alternatives to Level 3 Communications? It takes more than great companies to build a fortune for the future. Learn the basic financial habits of millionaires next door and get focused stock ideas in our free report, "3 Stocks That Will Help You Retire Rich." Click here for instant access to this free report.

Add Level 3 Communications to My Watchlist.

Treasury Reports Rare Surplus in June of $116.5 Billion

The Treasury Department announced a June surplus of $116.5 billion, according to a report (link opens as PDF) released today, the largest for a single month in five years. However, the country remains in deficit for the fiscal year to date.

After May's deficit clocked in at $139 billion, a one-time $66 billion rescue repayment from Fannie Mae and Freddie Mac helped boost June's numbers significantly. Still, removing the one-time payment, the country still managed to pull itself out of the red with a $50.5 billion surplus.

While overall June receipts (inflow) totaled $287 billion, total outlays came in at just $170 billion after May's $336 billion in spending.

Source: Treasury Department

Through the first nine months of the budget year, the deficit has totaled $509.8 billion, according to the Treasury. That's $394.4 billion lower than the same period the previous year. The Congressional Budget Office forecasts the annual deficit will be $670 billion when the budget year ends on Sept. 30. If correct, that would be well below last year's deficit of $1.09 trillion and the lowest since President Barack Obama took office. It would still be the fifth-largest deficit in U.S. history.

-- Material from The Associated Press was used in this report.

link

Dow's Fireworks-like Gains Go Up in Smoke

Early in trading, it was looking like the day off for yesterday's Independence Day holiday had given the market some much-needed rest. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) shot up like a firework by over 100 points. But now that traders have gotten settled in, the index has lost most of that exciting momentum -- sitting at a 15-point gain as of 11:30 a.m. EDT. With just hours left in the trading week and plenty of news to influence investors one way or the other, don't expect a smooth ride into the close this afternoon.

The situation 
Though this week was full of employment data, most investors have been anticipating this morning's Employment Situation report from the Bureau of Labor Statistics. Well, it didn't disappoint. Over 200,000 new jobs were added in the private sector in June, marking the 40th consecutive month of job additions. Year to date, the economy has added over 1.2 million new jobs, and last month was the second month of higher labor market participation.

This news is great for the recovering economy, which has needed more hiring in addition to the slowing of layoffs in order to fully gain momentum. But with the Fed specifically targeting improvements in the labor market, some investors may see this week's positive jobs data as a sign that tapering of the current stimulus policy is near -- this may be the reason that the Dow is struggling to keep its gains from earlier in trading.

For those investors who are solely concerned with the Fed's next step (not highly recommended for Foolish investors), there was some more "good" news for you in this morning's report. Though new-job creation has pressed onward, the overall unemployment rate remained steady at 7.6%. This keeps the Fed's target of 6.5% well below the job market's current outlook and wards off any pressing fears of the nearing cutbacks.

Financials
The Dow's financial components are the true winners this morning, as Bank of America (NYSE: BAC  ) , JPMorgan (NYSE: JPM  ) , and American Express (NYSE: AXP  ) lead the index's gainers. Better employment figures work directly in favor for these firms, as more income leads to more spending, borrowing, and saving. American Express has already been reaping the benefits of its cardholders' higher-income status, since that demographic has been increasing its spending in the last six months. Both Bank of America and JPMorgan offer credit cards, but have a wider spread of the market and can't claim the same benefit as AmEx.

Of course, the steady unemployment rate also points to continued low interest rates, which will continue to drive new mortgage business to the banks as homebuyers race to get new loans at historically low rates. And as inventory of homes continues to fall, prices will rise with the demand. Though Wells Fargo (NYSE: WFC  ) has been the king of new mortgage originations, both B of A and JPMorgan will seek to claim larger slices of the market as the new business enters the scene. For bank investors, the scene that unfolds will show the strengths of the individual banks at a time when the conditions are right for new opportunities.

Many investors are terrified about investing in big banking stocks after the crash, but the sector has one notable standout. In a sea of mismanaged and dangerous peers, it rises above the rest as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

Don't Get Too Worked Up Over MeadWestvaco's Earnings

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on MeadWestvaco (NYSE: MWV  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, MeadWestvaco burned $291.0 million cash while it booked net income of $167.0 million. That means it burned through all its revenue and more. That doesn't sound so great. FCF is less than net income. Ideally, we'd like to see the opposite.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at MeadWestvaco look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

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MeadWestvaco's issue isn't questionable cash flow boosts, but items in that suspect group that reduced cash flow. Within the questionable cash flow figure -- here a negative-- plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) constituted the biggest reversal. Overall, the biggest drag on FCF came from capital expenditures.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

Can your retirement portfolio provide you with enough income to last? You'll need more than MeadWestvaco. Learn about crafting a smarter retirement plan in "The Shocking Can't-Miss Truth About Your Retirement." Click here for instant access to this free report.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

Add MeadWestvaco to My Watchlist.

Why TCP Capital Is Poised to Outperform

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, business development company TCP Capital (NASDAQ: TCPC  ) has earned a coveted five-star ranking.

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

TCP facts

Market Cap	$344.1 million
Trailing-12-Month Revenue	Best Heal Care Companies To Invest In Right Now $57.0 million
Management	Chairman / CEO Howard Levkowitz President / COO Rajneesh Vig
Dividend Yield	8.8%
Alternatives	American Capital Main Street Capital MCG Capital

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

On CAPS, all 18 members who have rated TCP believe the stock will outperform the S&P 500 going forward.

Just last week, one of those Fools, All-Star drbat, succinctly summed up the TCP bull case for our community:

TCPC has been growing its portfolio, NAV, earnings, and sustainable dividends, currently yielding 9% (or 9.6% including special dividends), in a prudent manner by keeping leverage lower than most, and investing in safer types of investments with variable rates ready to take advantage of any potential rate increases. The current valuations of TCPC are lower to average compared to most BDCs. Given the favorable risk profile and decent dividend, I would price TCPC with higher-than-average NAV multiples (also using the recently reported NAV of $15.14) and average P/E multiples giving it a target price of $20.

If you want market-topping returns, you need to put together the best portfolio you can. Of course, despite its strong five-star rating, TCP may not be your top choice.

If that's the case, we've compiled a special free report for investors called "The 3 Dow Stocks Dividend Investors Need," which uncovers a few other juicy income opportunities. The report is 100% free, but it won't be around forever, so click here to access it now.

3 MLPs With Big-Time Distribution Increases

Distributions are incredibly important to master limited partnerships -- they are the reason many investors buy in, and ultimately what drive the market performance for this asset class. As news of distribution increases trickle in for the third quarter, Fool.com contributor Aimee Duffy takes a look at the payouts from Genesis Energy (NYSE: GEL  ) , Plains All American Pipeline (NYSE: PAA  ) , and Memorial Production Partners (NASDAQ: MEMP  ) , as all three MLPs are leading the way with the biggest distribution increases.

Top Cheap Companies To Buy Right Now

Nine More Lucrative Dividends
Dividend stocks can make you rich. It's as simple as that. Over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

Regurgitated Private Equity, Billions in Secondaries

Most investors generally think that private equity firms exit most of their investments by initial public offerings or by outright resale of a whole company. There is actually another private equity exit strategy, and that is the secondaries market for pieces of prior private equity deals.

The Carlyle Group LP (NASDAQ: CG) announced this week that its AlpInvest Partners reached $4.2 billion for its secondaries program. The AlpInvest Secondaries Fund V closed at its cap with $750 million raised. In a sense we would consider this regurgitated private equity where one private equity firm acquires stakes of existing companies from other private equity sellers. Generally these are thought of as stakes of a company which were involved in a private equity syndicate that have come for sale by one of the prior buyers, but is also very common is that some of the limited partners of a syndicate (or effectively the private equity clients) are looking to exit certain positions.

The news that the AlpInvest Secondaries Program has reached $4.2 billion is far more than we would have assumed. Many of these deals are never really discussed because the stake sales are not exactly being filed for sale at the SEC and the books are generally not being shown to the public. This $750 million raised was listed as the hard cap and was above the initial target of $500 million, bringing in 18 new investors which included sovereign wealth funds, public pensions, corporate pensions, insurance companies, asset managers, and foundations from around the world.

The secondaries market in private equity is rather large, but the public often never gets to hear about it. This will show you just how large it is: AlpInvest said that it has committed $9.1 billion through some 84 transactions in secondaries in the past 11 years.

Do not take the term “regurgitated” as a bad meaning here because it is merely for simplification. This secondaries effort for private equity brings both investment and liquidity solutions to private equity investors and the partners. It is a much needed sector of private equity, particularly during parts of the business cycle when the IPO markets and M&A markets are not going very strong.

Many other private equity firms use the secondaries markets as well. The Blackstone Group LP (NYSE: BX) was shown earlier this month by PEHub to have launched a sixth fund which was targeting $3.5 billion to $4 billion. That is even after a deal earlier this year to acquire Credit Suisse’s private equity efforts.

5 Best Value Stocks To Own Right Now

Many more firms participate in this market as well.

Sex As A Religion? Ask The IRS

For generations, churches have been exempt from income taxes. What's more, all 50 states and the District of Columbia give them a pass on property taxes. Ever since our founding fathers, it's hands-off for federal income taxes, property taxes and more.

And despite the separation of church and state, the IRS is involved in determining what's a legitimate religion. If you've been following the IRS problems over the last year, you might think the beleaguered tax agency isn't always objective. The norm is for a putative church to ask the IRS for a ruling that it qualifies.

But unlike other exempt organizations, a church need not apply for an IRS ruling. See FAQs About Applying For Tax Exemption. A blessed tax exemption is worth a lot. And it occasionally leads to controversy. For example, the IRS refused to recognize Scientology as a church for decades.

Then, after multiple years of litigation and administrative harangues, in 1993, the IRS abruptly ruled Scientology was a church after all.  The New York Times claimed the IRS reversed 30 years of precedent to grant Scientology Section 501(c)(3) status. Although the IRS eventually relented about Scientology, some believe the IRS gave up too easily and should never have recognized the organization.

Sometimes, though, self-declared churches are hard to take too seriously. Take a spin on religion offered by a group promoting orgies as religious fulfillment. There was established liturgy and dogma–something the IRS likes to see–and it appeared to be written seriously enough.

The organization's "clergy" hoped it would lead to an IRS ruling that they qualified as a church. From what I could tell though (based solely on reading the material), all they did during "services" was engage in wild sex. The dogma said it was supposed to energize their religious "icon" at the center of the room church.

Perhaps it did. Wisely, though, this group decided not to ask the IRS for a ruling. In tax law as in life, don't ask the question if you can't stand the answer. Yet the tax treatment of churches is serious business.

People are encouraged to tithe and donate with tax deductions. That encourages churches to grow bigger and wealthier. In debt-ridden and cash-strapped Europe, the Catholic Church is a treasure trove arguably ripe for the tax collector. There has even been talk of taxing such sacred institutions, at least for property taxes.

Much of the discussion leads back to what constitutes a legitimate church. Churches reap a vast array of tax advantages. Among them are special limits on IRS audit powers. See Special Rules Limiting IRS Authority to Audit a Church. With church status being so desirable, how does the IRS police it?

The term "church" is not defined in the tax code. See IRS Publication 1828, Tax Guide for Churches and Religious Organizations. Yet the IRS looks for:

5 Best Growth Stocks To Watch Right Now

Focus Financial Partners said Monday that the private equity firm Centerbridge Capital Partners would be investing $216 million in the partnership, which includes 25 independent wealth management firms.

The arrangement should close in the third quarter, with Focus partners and management retaining a majority of their ownership in the company. Focus Financial Partners’ investors, Summit Partners and Polaris Ventures, will continue as shareholders. 

“The independent RIA industry is a growing, $3.2 trillion market that continues to attract fiduciary-minded wealth managers," said Rudy Adolf (left), founder and CEO of Focus, in a press release. "As a market leader, Focus is excited about Centerbridge’s investment in the company as it further validates our model and the growth potential of our company and the industry as a whole.”

5 Best Growth Stocks To Watch Right Now: Crocs Inc.(CROX)

Crocs, Inc. and its subsidiaries engage in the design, development, manufacture, marketing, and distribution of footwear, apparel, and accessories for men, women, and children. The company primarily offers casual and athletic shoes, and shoe charms. It also designs and sells a range of footwear and accessories that utilize its proprietary closed cell-resin, called Croslite. The company?s footwear products include boots, sandals, sneakers, mules, and flats. In addition, it provides footwear products for the hospital, restaurant, hotel, and hospitality markets, as well as general foot care and diabetic-needs markets. Further, the company offers leather and ethylene vinyl acetate based footwear, sandals, and printed apparels principally for the beach, adventure, and action sports markets; and accessories comprising snap-on charms. The company sells its products through the United States and international retailers and distributors, as well as directly to end-user consumers th rough its company-operated retail stores, outlets, kiosks, and Web stores primarily under the Crocs Work, Crocs Rx, Jibbitz, Ocean Minded, and YOU by Crocs brand names. As of December 31, 2010, it operated 164 retail kiosks located in malls and other high foot traffic areas; 138 retail stores; 76 outlet stores; and 46 Web stores. Crocs, Inc. operates in the Americas, Europe, and Asia. The company was formerly known as Western Brands, LLC and changed its name to Crocs, Inc. in January 2005. Crocs, Inc. was founded in 1999 and is headquartered in Niwot, Colorado.

Advisors' Opinion:

• [By Chris Hill]

  Visa (NYSE: V  ) and Under Armour (NYSE: UA  ) hit new all-time highs. General Motors (NYSE: GM  ) appears to be turning the corner in Europe. And second-quarter profits for Crocs (NASDAQ: CROX  ) fell a whopping 43%. In this installment of Investor Beat, Motley Fool analysts David Hanson and Jason Moser discuss four stocks making moves on Thursday.

5 Best Growth Stocks To Watch Right Now: Buffalo Wild Wings Inc.(BWLD)

Buffalo Wild Wings, Inc. engages in the ownership, operation, and franchise of restaurants in the United States. The company provides quick casual and casual dining services, as well as serves bottled beers, wines, and liquor. As of July 26, 2011, it had 773 Buffalo Wild Wings locations in 45 states in the United States, as well as in Canada. The company was founded in 1982 and is headquartered in Minneapolis, Minnesota.

Advisors' Opinion:

• [By Andrew Marder]

  I've come to loathe precedents. Nothing is more annoying than someone telling you that their favorite new book is the next Harry Potter�or that the movie they just saw is going to be the next Godfather. So it shouldn't be a surprise that I'm not overly keen on the selling of Noodles & Company (NASDAQ: NDLS  ) as the next Panera (NASDAQ: PNRA  ) or Chipotle (NYSE: CMG  ) or Buffalo Wild Wings (NASDAQ: BWLD  ) . Instead, maybe we can judge the business on its merits, instead of on the success of restaurants that came before it.

Top Value Stocks To Own Right Now: CNO Financial Group Inc. (CNO)

CNO Financial Group, Inc., through its subsidiaries, engages in the development, marketing, and administration of health insurance, annuity, individual life insurance, and other insurance products for senior and middle-income markets in the United States. The company markets and distributes Medicare supplement insurance, interest-sensitive and traditional life insurance, fixed annuities, and long-term care insurance products; Medicare advantage plans through a distribution arrangement with Humana Inc.; and Medicare Part D prescription drug plans through a distribution and reinsurance arrangement with Coventry Health Care. It also markets and distributes supplemental health, including specified disease, accident, and hospital indemnity insurance products; and life insurance to middle-income consumers at home and the worksite through independent marketing organizations and insurance agencies. In addition, the company markets primarily graded benefit and simplified issue life insurance products directly to customers through television advertising, direct mail, Internet, and telemarketing. It sells its products through career agents, independent producers, direct marketing, and sales managers. CNO Financial Group, Inc. has strategic alliances with Coventry and Humana. The company was formerly known as Conseco, Inc. and changed its name to CNO Financial Group, Inc. in May 2010. CNO Financial Group, Inc. was founded in 1979 and is headquartered in Carmel, Indiana.

Advisors' Opinion:

• [By David Fried, Editor, The Buyback Letter]

  Insurance holding company CNO Financial Group (CNO) and its insurance subsidiaries��rincipally Bankers Life and Casualty Company, Washington National, and Colonial Penn Life Insurance Company��erve pre-retiree and retired Americans.

• [By Vanin Aegea]

  I have heard many people comment about the insurance policies for cars, houses, life, assets, etc. The arguments always revolve around the same issue: Is it really necessary? What are the chances to be hit by a Hurricane, or to meet a sudden death? Well, nobody really knows. Some individuals however, sleep better when they know a policy backs their life investments. Here, I will look into three insurance companies that concentrate on different policies, or geographies. These are: China Life (LFC), and Conseco (CNO).

5 Best Growth Stocks To Watch Right Now: Eastern Insurance Holdings Inc.(EIHI)

Eastern Insurance Holdings, Inc., through its subsidiaries, provides workers compensation insurance and reinsurance products in the United States. The company?s Workers Compensation Insurance segment provides traditional workers compensation insurance coverage products, including guaranteed cost policies, policyholder dividend policies, retrospectively-rated policies, deductible policies, and alternative market products to employers. This segment distributes its workers? compensation products and services through its independent insurance agents primarily in Pennsylvania, Delaware, North Carolina, Maryland, Indiana, and Virginia. Its Segregated Portfolio Cell Reinsurance segment offers alternative market workers compensation solutions comprising program design, fronting, claims administration, risk management, segregated portfolio cell rental, asset management, and segregated portfolio management services to individual companies, groups, and associations. Eastern Insurance Holdings, Inc. is headquartered in Lancaster, Pennsylvania.

Advisors' Opinion:

• [By Lauren Pollock]

  ProAssurance Corp.(PRA) agreed to acquire Eastern Insurance Holdings Inc.(EIHI) for about $205 million, expanding the insurance company’s casualty insurance offerings. Eastern Insurance is a domestic casualty insurance group specializing in workers’ compensation products and services, among other things. ProAssurance plans to pay $24.50 in cash for each outstanding Eastern share, a 16% premium over Monday’s closing price.

5 Best Growth Stocks To Watch Right Now: Thoratec Corporation(THOR)

Thoratec Corporation engages in the development, manufacture, and marketing of proprietary medical devices used for circulatory support. The company?s primary product lines include ventricular assist devices, such as HeartMate II, an implantable left ventricular assist device consisting of a rotary blood pump to provide intermediate and long-term mechanical circulatory support (MCS); and HeartMate XVE, an implantable and pulsatile left ventricular assist device for intermediate and longer-term MCS. Its ventricular assist devices also comprise Paracorporeal Ventricular Assist Device, an external pulsatile ventricular assist device, which provides left, right, and biventricular MCS approved for bridge-to-transplantation (BTT), including home discharge, and post-cardiotomy myocardial recovery; and Implantable Ventricular Assist Device, an implantable and pulsatile ventricular assist device designed to provide left, right, and biventricular MCS approved for BTT comprising hom e discharge, and post-cardiotomy myocardial recovery. The company also provides CentriMag, an extracorporeal full-flow acute surgical support platform that offers support up to 30 days for cardiac and respiratory failure. In addition, it offers PediMag and PediVAS extracorporeal full-flow acute surgical support platforms designed to provide acute surgical support to pediatric patients. The company sells its products through direct sales force in the United States, as well as through a network of distributors internationally. Thoratec Corporation was founded in 1976 and is headquartered in Pleasanton, California.

Advisors' Opinion:

• [By Brian Pacampara]

  What: Shares of medical device company Thoratec (NASDAQ: THOR  ) sank 12% today after its quarterly results missed Wall Street expectations. �

3 Obamacare Stocks That Could Be Perfect for Your IRA

Peanut butter and jelly; thunder and lightning; IRAs and Obamacare. Three somewhat unrelated pairings, yet perfect complements to one another, as I'll demonstrate.

Source: Tax Credits, Flickr.

October is perhaps an inauspicious time to be talking about individual retirement accounts, but we're basically at the halfway point of fiscal 2013 when it comes to making a contribution to your IRA -- the cutoff date being April 15, 2014. Have you maxed out your contribution yet, or have you been twiddling your thumbs on the sidelines?

Have you contributed?
IRAs are one of the truly few and great tools the individual long-term investor has to use the power of compounding gains and dividends to their advantage. History has proved time and again that letting your winners ride and feeding off dividends are a solid path to long-term outperformance and a comfortable retirement.

There are two types of unique IRAs for investors to choose from: traditional IRAs and Roth IRAs. Technically, you don't have to choose at all and can actually contribute to both as long as you don't surpass the annual contribution limit, which is capped at $5,500 in 2013 -- which is also the first time the IRA contribution limit has been increased since 2008.

A traditional IRA allows investors to deduct up to $5,500 on their taxes annually (depending on their adjusted gross income); however, all long-term gains will eventually be taxable once withdrawals begin after age 59 1/2. By contrast, a Roth IRA gives investors no upfront tax benefits; however, all stock gains remain exempt from taxation thereafter on any withdrawals after age 59 1/2.

The two caveats to either IRA: All non-qualifying withdrawals before age 59 1/2 will result in a 10% penalty, so it's often best to let your money compound in good long-term businesses than to attempt to take the money and run, and contribution limits depend on income -- higher-income earners often have little or zero contribution capability, so it's always best to check what's best for your situation.

Obamacare and IRAs: two peas in a pod
Now that you have a better understanding of your IRA choices and how they can affect your tax situation in the near term and long term, let's have a look at a few ways the recent health-reform law known as Obamacare – officially the Patient Protection and Affordable Care Act -- can be beneficial to those looking to contribute to their IRA.

Simply put, I believe Obamacare and IRAs have an opportunity to be as complementary as bacon is to eggs. With the individual mandate being fully implemented this upcoming January, and Medicaid expanding to millions of new lower-income individuals and families, a number of incredible opportunities are opening up for investors to benefit over the long run. Here are three companies to consider for your IRA to take advantage of this health-care industry shift:

Xerox (NYSE: XRX  )
Why Xerox? Because Xerox is involved in everything from processing Medicaid claims for the entire state of California, to collecting electronic-health record reimbursements for individual states, and even the design of Nevada's state-run health exchange. Considering that California is expanding its Medicaid program to include up to 1.4 million newly insured people, Xerox could be primed to see its IT-processing and service demand shoot through the roof.

Xerox is also much more than just Obamacare. It recently signed a five-year, $100 million deal with the Texas Department of Transportation to provide toll processing and invoicing. Xerox has moved well beyond its printing roots of just 10 years ago. Whether or not Obamacare is even a success, its IT-services business, along with its 2.2% dividend yield, could provide all the spark long-term investors are looking for.

WellPoint (NYSE: WLP  )
Initially, I thought insurers were getting the short end of the stick when Obamacare was unveiled because of the medical-loss ratio cap of 80%. However, insurers such as WellPoint, the company behind Blue Cross Blue Shield, look poised to benefit in a big way regardless of whether Obamacare lives up to expectations.

Under Obamacare, WellPoint is poised to gain a significant number of new government-sponsored members with its agreement to purchase Amerigroup last year for $4.5 billion. Although Medicaid patients don't come with the best margins, their sheer growth in numbers will add noticeably to WellPoint's bottom line.

But even if Obamacare proved to be unsuccessful or were repealed, WellPoint should still be among the leaders in pricing power and margins. As one of the larger insurers in the industry and with a focus on small businesses, WellPoint is able to utilize its premium pricing power better than nearly all of its competitors. That's also the reason WellPoint boasts a respectable 1.7% yield, which is more than I can say for some of its peers.

Walgreen (NYSE: WAG  )
Finally, what better way to take advantage of more doctor visits and prescriptions than with a drugstore/pharmacy company like Walgreen!

Walgreen is already one of Obamacare's top promoters, teaming up with WellPoint to put out LearnAboutReform.com, a website dedicated to educating the public about Obamacare. The assumption would be that as health insurance coverage expands, more people who wouldn't have gone to the doctor will get preventative checkups and prescriptions. Walgreen's pharmacy business is what drives loyal consumers, so Obamacare could be a gigantic growth boost for the company.

However, like Xerox and WellPoint before it, Walgreen would also be just fine sans Obamacare. Walgreen's $6.7 billion, 45% stake in Alliance Boots gives it European and rapidly growing Asia-Pacific exposure, and Walgreen was already in line to benefit from a rapidly aging baby boomer population whether or not Obamacare was enacted. Tack on a 38-year streak of dividend increases and a 2.3% yield, and you have a very intriguing IRA candidate.

These are Obamacare's biggest beneficiaries
Obamacare is rewriting the rules for the health-care industry, and in the process of doing so, it's creating massive opportunities for investors to get ridiculously rich. How? By investing in a handful of specific health-care stocks. In this free report, our analysts walk you through these opportunities and the companies that are positioned to exploit them. The informational edge contained in it is invaluable, but can only be exploited profitably while the rest of the market remains in the dark. To access this free report instantly, simply click here now.

How To Profit From Resurgent Global Car Sales

Since the summer, we've advocated transitioning out of overvalued defensive sectors such as consumer staples in favor of cyclical groups such as industrials and consumer-discretionary names that stand to benefit from a strengthening U.S. economy.

Although the length of the government shutdown will affect U.S. economic growth in the fourth quarter, recent data points reinforce our confidence in this weighting and macro outlook.

Consider, for example, the recent strength exhibited by the Institute for Supply Management's (ISM) U.S. Manufacturing Purchasing Managers Index (PMI), and indicator has a long track record of signaling major inflection points in the domestic economy.

(Click to enlarge)

Source: Bloomberg

This index is based on a survey of managers at manufacturing companies. Readings greater than 50 indicate an expansion in manufacturing activity; PMI values less than 50 correspond with a contraction. As a rule of thumb, investors should be wary of a recession when the manufacturing PMI drops to 45 or 46.

Although PMI often spikes to between 55 and 60 when the economy springs to life after a recession, readings in this range are rare this far into a recovery. In this light, the September PMI value of 56.2 suggests that the U.S. economy has finally accelerated after muddling through period of subpar growth in 2011 and 2012.

Revving Up for Growth

After suffering through one of the most trying periods in its history, U.S. automakers have emerged financially stronger and stand to benefit from a number of tailwinds in the domestic market.

At the end of 2012, the median age of passenger vehicles still on the road in the U.S. touched a record high of 11.4 years, compared to about 9 years a decade earlier. This trend stems from the 2007-09 financial crisis and Great Rece! ssion, when sales of new cars and trucks collapsed from a pre-crisis range of between 15 and 18 million vehicles to less than 10 million at the height of the downturn.

(Click to enlarge)

Source: Bloomberg

Faced with the worst economic downturn since the 1930s, Americans put off purchasing new cars for a few extra years. Although total miles driven by passenger vehicles has declined by about 15 percent from pre-crisis levels, the average U.S. driver still puts between 12,000 and 14,000 miles on his or her car each year. Most vehicles have a useful life of 150,000 miles to 200,000 miles; the rising age of the U.S. automobile fleet implies that many of these cars will need to be replaced in coming years.

Not only should a strengthening U.S. economy and declining unemployment rate support the ongoing recovery in sales of new cars and trucks, but the rising price of used cars-up more than 20 percent since their 2008 low-should also encourage this trend.

(Click to enlarge)

Source: Bloomberg

The uptick in the price of used cars makes new vehicles more attractive to prospective buyers and limits the extent to which automakers need to discount the latest models to drive sales.

At the same time, a secular shift is under way in the types of vehicles that consumers prefer. Concerns about rising gasoline prices have boosted demand for fuel-efficient compact and midsized cars such as the Ford (F) Fusion, the Nissan (NSANY.OB) Altima and the Honda (HMC) Accord. All three models have sold well this year.

!
(Click to enlarge)

Source: Bloomberg

And although U.S. automobile inventories have ticked up from their 2008-09 low, the supply of new cars on dealers' lots is modest relative to pre-crisis norms. A glut of new cars usually forces dealers to discount aggressively, a trend that crimps automakers' profit margins. This headwind has yet to emerge in the current cycle.

(Click to enlarge)

Source: Bloomberg

Credit availability and affordability have also improved dramatically, which should continue to fuel sales of new cars. Although interest rates have ticked up slightly this year, the cost of financing the purchase of a new vehicle remains near a record low. Favorable lease terms have also attracted buyers; leasing agreements now account for more than one-quarter of all new-automobile sales.

(Click to enlarge)

Source: Bloomberg

Whereas the U.S. media tends to focus exclusively on the domestic automobile market, growing demand for new passenger vehicles in China and other emerging markets represent an important upside driver for carmakers.

Despite slowing economic growth in China, sales of new cars and trucks have remained robust in the world's largest automobile market, growing about 12 percent from a year ago through the first seven months of 2013.

This powerful, secular growth trend appears to have legs. China, for example, averaged 58 passenger vehicles per 1,000 people at the end of 2010, compared to almost 800 cars per 1,000 people in the US.

(Click to enlarg! e)

Source: Bloomberg

Pole Position

The only major U.S. automaker to avoid bankruptcy during the Great Recession, Ford Motor Company boasts the best-positioned product lineup to take advantage of improving automobile sales in the U.S. and long-term demand growth in China and other emerging markets.

Up until a few years ago, the carmaker had faced unwieldy (and increasingly underfunded) pension obligations as the legion of retired workers grew. These other post-employment benefits (OPEB) included generous health care packages for retirees and their spouses that lasted for the remainder of their lives.

The Big Three U.S. automakers-General Motors Company (GM), Ford Motor Company and Chrysler-in 2007 inked a new collective bargaining agreement with United Automobile Workers (UAW), the union that represents industry workers. This contract enabled the carmakers to shift their long-term health care liabilities into Voluntary Employee Beneficiary Associations (VEBA), trusts managed by a board of independent and UAW-appointed members.

Not only did this deal protect retirees' benefits against potential bankruptcy among the Big Three, but the agreement also effectively shifted these unfunded OPEB costs from the automakers' balance sheets.

Subsequent negotiations paved the way for a series of deals that established a two-tiered compensation structure whereby Ford Motor Company's new hires are paid on a lower scale than veteran workers. Second-tier employees start at $15.00 per hour and could earn up to about $20.00 per hour, while the hourly wage of longer-tenured autoworkers tops out at about $28.00 per hour.

Many of the new workers that the carmaker has hired this year to ramp up production of the popular Ford Fusion model are entry-level, second-tier workers that earn a lower hourly wage. In aggregate, tier-two employees account for as much as 20 percent of Ford Motor Company's workforce-a significant cost saver that enables the firm to better compete with f! oreign ca! rmakers.

Ford Motor Company won't need to worry about renegotiating this advantageous contract until the current deal with the UAW expires in 2015.

Although playing hardball with the union has enabled Ford Motor Company to lower its cost structure, our bullish investment thesis reflects a number of other company-specific developments.

For one, the restructuring plan designed and implemented under CEO Alan Mulally has simplified the firm's operations dramatically by reducing excess manufacturing capacity and paring its extensive portfolio of brands.

This so-called One Ford initiative involved the US$2.3 billion sale of Jaguar and Land Rover to Tata Motors (TTM) and the US$1.6 billion divestment of Volvo to Geely Automobile Holdings (GELYF.PK). After selling the majority of its stake in Mazda Motor Corp (MZDAY.PK) and discontinuing Mercury, Ford Motor Company's portfolio consists of its eponymous mass-market brand and the higher-end Lincoln.

Under Mulally's leadership, Ford Motor Company has rationalized the number of production platforms-each of which included unique parts or were specific to individual countries-to five core platforms that account for 80 percent of the firm's models. Management plans to transition the company to nine shared platforms that represent about 99 percent of the carmakers' automobiles.

This strategic move should improve the auto company's economies of scale by enabling the firm to negotiate quantity discounts on parts and minimizing costly factory retooling. Equally important, Ford Motor Company will be able to adjust production to meet changes in consumer taste and demand.

The use of common platforms has also allowed the carmaker to accelerate the introduction of new models. Over the next three years, Ford Motor Company will update each of its major models, keeping the average age of the car designs in its showroom at about 2.3 years-well under the industry average of about 2.7 years. As newer designs usually sell better and co! mmand hig! her prices than legacy models, the carmaker's commitment to maintaining a fresh product lineup should also bolster the firm's profit margins.

And Ford Motor Company's new lines of fuel-efficient cars, especially the Fiesta and Fusion, have proved popular with consumers. In July 2013, the average Ford Fusion sat on a lot for only 31 days before selling, an impressive sales rate that prompted the automaker to add 1,400 workers to the production plant in Flat Rock, Mich., that builds the car.

Outside the US, the carmaker has a number of initiatives under way to grow its sales in China, where the company plans to double its product lineup by year-end and continues to remodel and refresh its showrooms. Management expects its dealer network in China to expand to more than 900 locations by 2015 from 600 by the end of 2013. Robust demand for Ford Motor Company's new models in the second quarter bolstered the U.S. automaker's share of this key growth market by 150 basis points from a year ago, to 4.3 percent.

Ford Motor Company has also put its financial house in order, using the free cash flow generated by its increasingly popular lineup of cars and light trucks to reduce debt and return capital to shareholders. The carmaker has amassed a about $25 million in gross cash and has access a $10 billion unsecured revolving line of credit-in line with management's goal of maintaining $20 billion to $30 billion in excess liquidity as a safeguard against another downturn.

This company's strong balance sheet and improving growth prospects prompted the firm to double its dividend in the first quarter to $0.10 per share, equivalent to an indicated yield of 2.4 percent at the stock's current quote.

Ford Motor Company has also deployed some of its excess cash is to pay down its unfunded pension liability. Management addressed these obligations in a July 24 conference call to discuss second-quarter results, noting that the company has completed about 60 percent of the lump-sum program and i! ndicating! the this funding shortfall could be eliminated as soon as next year.

The company continues to reduce the risk of its pension portfolio, reducing its exposure to equities in favor of steadier, fixed-income securities. Although Ford Motor Company doesn't update its pension liability each quarter, the firm contributed $2.8 billion in the first half of 2013 and plans to allocate $5 billion this year. The carmaker should also benefit from the recent uptick in the benchmark U.S. interest rates; the company can assume a higher return when calculating its liabilities, effectively reducing its need to contribute capital to the plan.

Unfunded pension liabilities have weighed on Ford Motor Company and have been the subject of considerable discussion during quarterly conference calls. Resolving the firm's unfunded liability would be a significant upside catalyst for the stock.

Valuation

With a price-to-forward-sales ratio of 0.46, Ford Motor Company has one of the lowest multiples in the S&P 500; however, the stock's current price-to-sales ratio is in line with the 0.44 times sales that the shares fetched in the 1990s.

Fortunately, several factors suggest that the company should command a higher valuation in coming years.

First and foremost, the complete transformation of the U.S. auto industry should find favor among investors. The unfunded liabilities, inefficient manufacturing practices, excessive debt and bloated cost structures no longer plague the Big Three.

From 1997 to 2000, U.S. automobile sales stood at similar level to today. At the time, shares of Ford Motor Company traded at roughly 11 times to 12 times earnings, compared to the stock's current price to earnings level of less than 10. At a valuation of 12 times next year's estimated earnings, Ford Motor Company would be worth $21.00 per share. Given the company's improving profitability and the recovery in U.S. car sales, the carmaker's shares could be due for a major rerating.

U.S. automaker! s aren't ! the only way to gain exposure to the secular trends that are driving car sales. Roger Conrad and I will host a free webinar on Oct. 15, 2013, to discuss our favorite stocks and investment themes for 2014, including an industrial name that stands to benefit from the resurgence in global automobile sales and the ongoing push for improved fuel efficiency.

Source: How To Profit From Resurgent Global Car Sales

Disclosure: I am long F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Does Sirius XM Radio Support a Bullish Run?

With shares of Sirius XM Radio (NASDAQ:SIRI) trading around $3, is SIRI 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

Sirius XM Radio broadcasts its music, sports, entertainment, comedy, talk, news, traffic, and weather channels in the United States on a subscription fee basis through its two satellite radio systems. Subscribers can also receive music and other channels over the Internet, including through applications for mobile devices. Audio entertainment has always pleased consumers and is a medium that is growing in popularity. Sirius XM Radio is looking to expand its audio entertainment channels to every audio medium possible, which will surely translate to rising profits.

Shares are up recently after Sirius XM Radio' board confirmed an additional $2 billion stock repurchase. The satellite radio provider announced that it will pay for the repurchases through available cash, future cash flow from operations, and future borrowings. Sirius XM Radio can purchase the shares on the open market or in privately negotiated transactions, including potential arrangements with Liberty Media (NASDAQ:LMCA) and its affiliates, from which the company also said that it will repurchase $500 million shares.

T = Technicals on the Stock Chart Are Strong

Sirius XM Radio stock has been flying higher in the last couple of years. The stock is currently trading near highs for the year and looks poised 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, Sirius XM Radio 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 Sirius XM Radio options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Sirius XM Radio Options	40.57%	93%	90%

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
October Options	Flat	Average
November 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 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 Sirius XM Radio's stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Sirius XM Radio 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)	-95.83%	0.00%	104.80%	-50.00%
Revenue Growth (Y-O-Y)	12.23%	11.52%	13.87%	13.74%
Earnings Reaction	2.71%	5.86%	1.26%	0.35%

Sirius XM Radio has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been pleased with Sirius XM Radio's recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has Sirius XM Radio stock done relative to its peers, Pandora (NYSE:P), CBS (NYSE:CBS), Cumulus Media (NASDAQ:CMLS), and sector?

	Sirius XM Radio	Pandora	CBS	Cumulus Media	Sector
Year-to-Date Return	35.64%	169.60%	46.04%	97.00%	87.07%

Sirius XM Radio has been a poor relative performer, year-to-date.

Conclusion

Sirius XM Radio provides audio entertainment and information via subscription services to a growing listener base. A recent buyback has investors excited about the company. The stock has been surging higher in recent years and is now trading near highs for the year. Over the last four quarters, earnings have been mixed while revenues have been rising which has left investors pleased about the company. Relative to its peers and sector, Sirius XM Radio has been a weak year-to-date performer. Look for Sirius XM Radio to OUTPERFORM.

European Stocks Advance as Investors Weigh U.S. Shutdown

European stocks climbed, rebounding from their biggest decline in a month, as investors assessed the impact of a partial shutdown of the U.S. government.

Telecom Italia SpA rose 5.2 percent after Goldman Sachs Group Inc. reinstated its buy rating on the shares. Vestas Wind Systems A/S gained 6.8 percent after Bank of America Corp. raised its price forecast on the Danish maker of wind turbines. Unilever slid to its lowest price in 10 months as the world's second-largest consumer-goods maker said sales growth slowed in the third quarter.

The Stoxx Europe 600 Index added 0.8 percent to 312.86 at the close of trading, its biggest rally in three weeks, after a report showed that manufacturing activity in the euro area expanded for a third month in September. The equity benchmark fell by the most since Aug. 30 yesterday as U.S. politicians failed to agree on a compromise budget and Silvio Berlusconi pulled his ministers out of Italy's coalition government.

"For the moment, the shutdown looks more like noise rather than something that makes a fundamental difference for growth," Nicola Marinelli, who helps oversee $180 million as portfolio manager at Glendevon King Ltd. in London, said by phone. "If you look at the historical performance of equity indices in previous cases of government shutdown and debt-ceiling standoffs, the data show no clear trend and that equity markets can actually rebound."

National benchmark indexes advanced in every western-European market except for Britain. Germany's DAX added 1.1 percent, while France's CAC 40 Index increased 1.3 percent. The U.K.'s FTSE 100 slipped less than 0.1 percent.

Government Shutdown

The Stoxx 600 gained 8.9 percent in the three months through September, its largest quarterly rally in four years, as a report showed that the euro-area economy escaped from recession and the Federal Reserve decided against reducing its monthly asset purchases.

U.S. lawmakers in Washington missed a midnight deadline to reach a compromise to continue funding the government. The shutdown will put as many as 800,000 federal employees out of work today, closing national parks and halting some government services. The Democrat-controlled Senate earlier voted 54-46 against a funding bill from the Republican-controlled House of Representatives because it made major changes to President Barack Obama's health-care legislation.

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The parties had no immediate plans for further negotiations. Some lawmakers expressed concern that the shutdown could lead to a deadlock over the need to raise the nation's debt limit to avoid a default. The U.S. will run out of money to pay all of its bills at some point between Oct. 22 and Oct. 31 unless Congress increases the federal government's borrowing authority, according to the Congressional Budget Office.

Rallying Stocks

The S&P 500 has risen 11 percent on average in the 12 months following a government shutdown, according to data compiled by Bloomberg on the 12 instances since 1976. That compares with an average return of 9 percent over 12 months.

Asian equities advanced after the Bank of Japan's Tankan index, which surveys confidence among the nation's large manufacturers, climbed more than economists had estimated. The quarterly gauge rose to 12 in September, its highest level since 2007. Separately, China's official measure of factory activity increased for a third month.

A report from Markit Economics showed that its euro-zone factory index fell to 51.1 in September, matching the preliminary estimate and the median forecast of 31 economists surveyed by Bloomberg News. Readings greater than 50 mean that manufacturing activity increased.

Telecom Italia

Telecom Italia climbed 5.2 percent to 64.2 euro cents, its highest price since May. The telecommunications operator would gain enough funds to improve its domestic business if it sells at least 4 billion euros ($5.4 billion) of shares or its stake in Tim Participacoes SA (TIMP3) in Brazil, according to Goldman Sachs.

Vestas jumped 6.8 percent to 148.50 kroner. Bank of America raised its price estimate to 180 kroner from 150 kroner, predicting that the company will pay off almost all its debt by 2015, earlier than the consensus forecast.

Wolseley Plc (WOS) added 3.1 percent to 3,296 pence, its largest gain in more than five weeks. The world's biggest distributor of plumbing and heating products said so-called trading profit in the 12 months through July climbed to 725 million pounds ($1.2 billion) from 665 million pounds a year earlier. Analysts had predicted earnings of 704 million pounds, according to the average of 20 estimates compiled by the company. Wolseley proposed a special dividend payout of 300 million pounds.

Brintellix Approval

H. Lundbeck A/S rose 2.6 percent to 123.30 kroner, its highest price in 14 months. The U.S. Food and Drug Administration approved Brintellix, which is marketed by Denmark's second-biggest drugmaker and Takeda Pharmaceutical Co., as a treatment for people with depression.

Unilever (UNA) slipped 2.8 percent to 27.94 euros after saying sales growth slowed as trading in emerging markets deteriorated at a faster rate. Underlying group sales for the three months will rise 3 percent to 3.5 percent, the maker of Lipton tea and Dove soap said late yesterday in a statement. That compares with 5 percent growth in both the first half and second quarter.

A gauge of commodity producers declined 0.9 percent as gold fell 2.9 percent and silver dropped 4.2 percent. Fresnillo Plc and Randgold Resources Ltd., which mine precious metals, lost 5 percent to 924.5 pence and 2.5 percent to 4,338 pence, respectively.

Thursday's Top News Headlines

Here are today's top news headlines from Fool.com. Check back throughout the day as this list is updated, and follow us on Twitter at TMFBreaking.

Pfizer to Sell Manufacturing Facility to UPM

Royal Gold Declares Q3 Dividend

SEC Settles With Nasdaq Over Facebook IPO

O'Reilly Automotive Raises Share Buyback Program by $500 Million

Mondelez International Signs "Mobile Only" Deal With Google

Royal Caribbean Orders 3rd Quantum-Class Cruise Ship

Berkshire's MidAmerican Energy to Buy NV Energy

Paccar, Navistar Score Sale Based on Trucker Preferences

$80 Million Nuance Acquisition to Boost Auto Connectivity

MasTec Acquires Canadian Oil and Gas Construction Firm for $103 Million in Cash

Initial Jobless Claims up 2.9%

DISH Network Tops Sprint Bid for Clearwire by $1 per Share

Q1 GDP Growth Estimate Drops to 2.4%

Mortgage Rates Spike Sharply

McDonald's CEO: I Lost Weight by Being More Active

Corporate Profits Fall 7.9%

Homebuying Contracts Hit 3-Year High

Pentagon Awards Contracts for Electronic Warfare, GPS Landing Systems

Report: April Foreclosures Drop 16%

Big Expansion of Tesla Supercharger Network on the Way

Medtronic Wins FDA Approval for New Device

Elan Says Bid Undervalues It by as Much as $8.30 a Share

EMC Ups Buyback, Initiates Dividend

Ohio Congressmen on IRS: "How High Up Did It Go?"

House approves bill to streamline insurance licensing

The House of Representatives today overwhelmingly passed legislation that would make it easier to obtain licenses to sell insurance in multiple states.

The bill, approved 397-6, would create the National Association of Registered Agents and Brokers as a clearinghouse for nonresident-insurance-agent and broker licensing. Financial advisers who already are registered in one state could join the organization to become licensed to sell insurance in all other states.

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Currently, advisers must make those applications state by state. The bill would allow states to maintain their regulatory authority over insurance.

The House passed NARAB legislation in the previous Congress, but it died in the Senate last year.

Adding to the current momentum for the issue, the

Precious Metals & Miners Flash Short-Sell Signal

It has been a bumpy ride for precious metal investors over the past couple of years and it unfortunately I do not think its over just yet.

The good news is that the bottom has likely been put in for gold, silver and gold miners BUT the recent rally in these metals and miner looks to be coming to an end. While we could see another pop in price over the next week or so the price, volume and momentum see to be stalling out.

What does this mean? It means we should expect short term weakness and lower prices over the next month or two.

Below are three charts I posted several months ago on my free stockcharts list. These forecast were based off simple technical analysis using cycles, Fibonacci and price patterns. As you can see we are not trading at my key pivot level which I expect selling pressure to start to increase and eventually overpower the buyers sending the prices lower.

Gold Trading Weekly Chart:

Here you can see that gold is technically in a bear market when viewing it on the weekly chart. If you were to pull up a daily chart you would likely notice how the price of gold is trading at a key resistance level on the chart and has reached its full flag measured move.

What does this mean? It means the odds are pointing to lower prices for gold in the next few weeks. Keep in mind though I do feel as though a major bottom has been put in place for the precious metals sector. So buyers are likely to step back in around the $1300 area.

Silver Trading Weekly Chart:

Silver has a little bit different looking chart but the same analysis applies here as it did in gold.

Gold Miners Trading Monthly Chart:

Gold miners may have bottomed on this monthly investing timeframe chart but the daily chart which you will see next clearly shows short term weakness has started.

Gold Miners Trading Daily Chart:

This daily chart really shows my thinking for miners and the overall precious metals sector as a whole. The recent weakness in gold miners to the down side point to distribution of shares. This is very negative for the price of physical gold and silver as gold mining stocks tend to lead physical metals.

The yellow box shows a possible major stage 1 basing pattern forming. If this is the case, then we will have a great opportunity in the coming months when the precious metals down trend completes a reversal and start heading higher.

How to Trade Precious Metals & Gold Miners Conclusion:

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In short, I think that staying in cash or shorting metals is the play for the next couple weeks. After that anything can happen and until price breaks down or finally completes the basing pattern and confirms a market bottom I would be very cautious trading here.

In the last week members of my trading newsletter took profits on our short SP500 trade and we closed a long trade in natural gas for a quick 6.5% gain. Join our community of traders and have your money on the right side of the market!

Chris Vermeulen
www.GoldAndOilGuy.com

A 5-Point Plan to Keep Apple Great

NEW YORK (TheStreet) -- With the option of replacing Tim Cook with an entrepreneurial and innovative CEO like Jack Dorsey off the table, here are five things, in no particular order, Apple (AAPL) can and should do to ensure it remains the greatest company in the world.

1. As I discussed earlier this year, Apple should protect its image and pull its products from soulless third-party retailers such as Walmart (WMT), Best Buy (BBY) and Target (TGT).

Buying Apple products should be an experience, similar to the one Apple's own retail stores provide. Brands that do little more than compete on price shouldn't be hawking iPads and iPhones down the aisle from bars of soap and boxes of cereal. It's bad enough that Apple lets these stores carry its products, it's even worse when it gives them permission to offer discounts.

Cook should view it as an embarrassment that, out of the gate, Walmart can discount iPhone 5s by 10 bucks. And he should put a stop to it. 2. Create new retail partnerships with higher-end names, but not electronics chains. Get the most high-end Apple devices in places such as Restoration Hardware (RH), Michael Kors (KORS) and Whole Foods Market (WFM). Nothing labeled "Apple" belongs anywhere within in spitting distance of inferior smartphones and tablets or Sharp television sets and such. It's all so hokey. It dilutes the image Apple should be obsessive over controlling and maintaining. 3. Never compromise on price. While it's great to see Tim Cook decide against going "cheap" with iPhone 5c -- in the spirit of iPad mini pricing -- trade-in programs and other gimmicks have no place at Apple. And find a way to sue people who go out and do them on their own. Vigorously defend your high-end image. Brands such as Porsche don't have to defend their images because, unlike Apple, they never compromised them in the first place. If anybody wants cheap they can buy an iPod Shuffle or iPhone 4S. 4. Give iWork away for free. To everybody. This seems to contradict the focus on preserving the high-end image, but it's not. Apple is not a leader in productivity software, but it could be. Microsoft's (MSFT) foothold with Office is too strong and Google's (GOOG) push with its cloud-based offerings is too aggressive. Apple needs to come harder at Microsoft than it did Tuesday. Before Apple makes iWork free across all iOS devices -- old and new -- it needs to improve the software. From there, it can make a proper consumer and enterprise push. If you think this is pie-in-the-sky thinking, consider what Apple did to Blackberry (BBRY). People who defended the artist formerly known as RIM to the death claimed Blackberry would never lose with businesses because of security. They said the IT guys would never let iOS in. My response was simple: IT guys are losers. The CEO and other executives give them orders. It's their job to implement management's wishes. End of story. That's what happened as the "bring your own device" movement took hold and Apple wiped out Blackberry. Just read the comments from the story where I claimed Apple could kill Office. They're loaded with people impressing themselves and their closest friends with their knowledge of IT. And they're making the same type of proclamations Blackberry people made as Apple was eating its lunch. Lofty technical statements that mean absolutely zilch in the real world. Microsoft will lose with businesses. Windows and Office will die. The only question is how will Google and Apple split the market. Or will Apple take any of it at all? If I'm Tim Cook I make it my mission in life to destroy Microsoft much in the same way Steve Jobs destroyed Research in Motion.

5. Conquer the living room.

Wouldn't it be something if Apple not only eliminated the Microsoft Office advantage, but took the one other thing Steve Ballmer actually has going for himself, Xbox, and beat that to shreds as well.

Microsoft has done an abysmal job at marketing Xbox. With the number of units sold, it's a travesty so many people still view Xbox as a weed-smoking, I live in my parent's basement gamer's toy. It doesn't matter how many people actually use Xbox as a broad family entertainment platform; the ether doesn't see it that way. This provides an opening for Apple.

While Apple could very easily go at it on its own, it would be interesting to see it make some big acquisitions in the gaming space, both console and mobile. Zynga (ZNGA) or privately-held Kabam come to mind. Or, better yet, convince Microsoft to spin Xbox off -- as it should anyway -- and sell it to Apple. Pipe dreams. Admittedly. So make inroads in gaming -- as Apple has with 64-bit processing on iPhone 5S -- and follow through, not with a smartwatch, but with a combined Apple television set and set-top box controlled by and synced with your iPhone and/or iPad. If Apple is working with cable/satellite and content companies on anything, it shouldn't be about licensing programming. A waste of time. The talks should focus on how to work out a structure where the old media subsidizes the cost of a full-fledged Apple TV, like the wireless carriers do with iPhone, and sells them in Apple Stores and online. Protect the image. Never go cheap. Kill Microsoft. Neutralize Google. And conquer the living room. If I'm Tim Cook, these are the things on my office cork board. Follow @rocco_thestreet --Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is a columnist and TheStreet's Director of Social Media. Pendola makes frequent appearances on national television networks such as CNN and CNBC as well as TheStreet TV. Whenever possible, Pendola uses hockey, Springsteen or Southern California references in his work. He lives in Santa Monica.