Carbon Motors’ only super cop car goes to auction

INDIANAPOLIS — No matter what it sells for, it will always be the $7 million car.

Crowds ooh'ed and ah'ed when the vehicle was unveiled, but today the high-tech police car prototype that Carbon Motors Corp. used to woo investors — including government officials who awarded the company $7 million in public grants — is all the bankrupt start-up has left.

STORY: Feds reject loan for police car maker Carbon Motors
STORY: Automakers' competition fierce for law-enforcement fleets

And now, it's going on the auction block.

The vehicle isn't likely to fetch anywhere near the amount state and local governments invested — nor is it likely to put much of a dent in the $21.7 million the company owes private vendors and investors.

But that doesn't mean it wouldn't be a nice catch for a wealthy high-end car collector.

Carbon Motors, which once promised to bring 1,300 jobs to the economically challenged city of Connersville, Ind., received permission last week from a federal bankruptcy court in Indianapolis to put its high-tech car up for auction.

Proceeds from the sale will be used to repay the company's private creditors.

“ It's a prototype created solely for sales purposes and not to be driven on public streets. The likely interested parties would be collectors of cars that would only be driven on private streets.”

— Henry Efroymson, Carbon Motors' bankruptcy attorney

Those creditors don't include the Indiana Economic Development Corporation, which gave the company $2 million in grant money, or the city of Connersville, which awarded Carbon Motors $5 million through a regional grant program funded with riverboat casino revenue from Lawrenceburg, Ind. That's because government officials put few requirements on the grant money, and later waived some of those requirements.

Needless to say, the auction isn't stirring much excitement in Connersville.

"It's a shame," said David Devor, a former Fayette County, Ind., commission! er. "That won't make a dent in what they took us for."

He compared the vehicle to a bottle of snake oil.

"That's exactly what they were," he said. "Snake oil salesmen."

According to court records, the so-called E-7 vehicle is being housed somewhere in California. The company's other remaining assets are described as "nominal" and include maintenance tools and a trade show booth, court records show.

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Indianapolis-based Key Auctioneers will conduct the auction, which is scheduled for Jan. 23. The auction company said in court filings it will market the vehicle to "very well moneyed collector car enthusiasts."

And at least one well-known collector — late-night talk show host Jay Leno — has already expressed interested, said Henry Efroymson, Carbon Motors' bankruptcy attorney.

"There are a number of different guys out there who like to collect these type of cars," said Efroymson.

The E-7 was supposed to be the first car of its kind — a vehicle built especially for law enforcement. According to the company, the E-7 can run on bio-diesel fuel and features an automatic license-plate-recognition system, touch-screen computers, shotgun mounts, and cutaway seats that make room for a police officer's heavy belt. It has a top speed greater than 150 mph and can go from zero to 60 in 6.5 seconds, according to the company.

But the vehicle isn't likely to appeal to the average driver — it's not street legal.

"It's a very unusual motor vehicle," Efroymson said. "It's a prototype created solely for sales purposes and not to be driven on public streets. The likely interested parties would be collectors of cars that would only be driven on private streets."

No starting bid price has been set, but the auctioneer is authorized to spend up to $20,000 to market the car. Carbon Motors plans to pay those expenses with the sale proceeds.

“It's a shame.! That won! 't make a dent in what they took us for.”

— David Devor, former Fayette County, Ind., commissioner

Carbon Motors filed for Chapter 7 bankruptcy in June, listing $21.7 million in liabilities and $18,976 in assets. Creditors include German car company BMW, which provided the vehicle's platform, and Troy, Mich.-based Inteva Products. Those suppliers say Carbon Motors owes them more than $3 million combined.

Carbon Motors was founded by former Ford Motor Co. executive William Santana Li and former police officer Stacy Dean Stephens. In 2009, they announced their decision to locate their start-up in Connersville, a city once nicknamed "Little Detroit" that had been ravaged by factory closings. Thousands of the town's 13,000 residents gathered to welcome the company and take in the shiny high-tech police car.

But the company never built another car and the 1,300 jobs it promised never materialized.

In the meantime, Carbon Motors blew through the $7 million in public money. An Indianapolis Star investigation found some of that money was spent on upgrades to the building Carbon Motors leased from the city, but most of it was spent on vehicle engineering, salaries for company executives, and travel expenses that included stays at high-end hotels across the country. Carbon Motors also used $11,500 to pay a Connersville councilman as a "contract employee," even as he voted on issues related to the company.

Carbon Motors announced it would build a high-tech E-7 police cruiser in Connersville, Ind., in 2009.(Photo: Charlie Nye, The Indianapolis Star)

Now, the only thing left of any real value is the company's sole concept vehicle.

Then-Indiana Gov. Mitch Daniels, who supported the proj! ect, and ! Li, the company's CEO, have blamed the failure on the U.S. Department of Energy's rejection of the company's request for a $310 million loan.

The regional grant program that provided most of the money has since become part of an FBI criminal investigation, though the bureau has not identified any targets.

Connsersville Mayor Leonard Urban said he thinks his city should get the car in exchange for its investments.

"It ought to be given to the city of Connersville to auction off so we can recoup some of what we gave them," he said. "Or it ought to be in a museum here."

Asked what the display description would say, he answered: "Lesson learned."

About the car

Name: E-7

Engine: Forced induction diesel

Top speed: Greater than 150 mph

Acceleration: 0-60 mph in 6.5 seconds

Special features: Integrated sirens, automatic license-plate-recognition system, touch-screen computers, shotgun mounts, rear-hinged back doors, and cutaway seats that make room for a police officer's heavy belt.

Source: Carbon Motors Corp.

10 Best Bank Stocks To Watch For 2014

Not much, say the folks at Capital Economics.

REUTERS

Sure the S&P 500 has gained 0.4% to 1,750.96 at 12:55 p.m., and traded another new high today. But there are reasons to doubt the benchmark’s ability to head much higher, writes Capital Economics’ Jessica Hinds. Three of them in fact. She writes:

Tuesday�� jobs data make it less likely that the Fed will start reducing its purchases in December. And the central bank�� balance sheet will continue to expand even after it eventually begins to taper, which might lend some ongoing support to equity prices. However, it is still only a matter of time before unconventional monetary stimulus ends.

What�� more, the S&P 500 has risen a long way since early 2009, with the result that the cyclically-adjusted price/earnings ratio has more than doubled to a level that is well above its long-run average. Profit margins are also stretched and long overdue a cyclical correction. These headwinds should cap the upside for US equities over the next year.

10 Best Bank Stocks To Watch For 2014: U.S. Bancorp(USB)

U.S. Bancorp, a financial services holding company, provides various banking and financial services in the United States. It generates various deposit products, including checking accounts, savings accounts, money market savings, and time certificates of deposit accounts. The company originates a portfolio of loans comprising commercial loans and lease financing; commercial real estate; residential mortgage; and retail loans consisting of credit cards, retail leasing, home equity and second mortgages, and other retail loans. It also offers wholesale lending, equipment finance, small-ticket leasing, depository, treasury management, capital markets, foreign exchange, and international trade services to middle market, large corporate, commercial real estate, and public sector clients. In addition, U.S. Bancorp provides telebanking and automated teller machine (ATM) services, as well as cash management services. The company, through other subsidiaries, provides trust, private banking, financial advisory, investment management, retail brokerage services, insurance, and custody and fund services; and payment services, including consumer and business credit cards, stored-value cards, debit cards, corporate and purchasing card services, consumer lines of credit, and merchant processing. U.S. Bancorp primarily serves individuals, estates, foundations, business corporations, and charitable organizations. It operates a network of approximately 3,031 banking offices and 5,310 ATMs. The company was founded in 1863 and is headquartered in Minneapolis, Minnesota.

Advisors' Opinion:

• [By Travis Hoium]

  Solar financing gets bigger
  There were a couple of big announcements in solar financing this week. Sunrun said it has closed on $630 million worth of residential solar financing, backed by US Bancorp (NYSE: USB  ) and JPMorgan Chase (NYSE: JPM  ) . There's been a rush to solar by big banks this year, and this is just the latest investment they've made. US Bancorp has been investing in residential solar for years, but this is the first such investment by JPMorgan, an important shift for the company. �

• [By David Hanson]

  It is widely accepted that the United States economy is trudging along and making a steady recovery. However, it's clear that businesses and consumers are not eager to return to a lifestyle dependent on credit and loans. U.S. Bancorp (NYSE: USB  ) and Wells Fargo (NYSE: WFC  ) both reported weak loan demand during their first-quarter earnings releases.

• [By Jane Edmondson]

  In addition, there are multiple competitive offerings at nearly all Green Dot retail partner locations. There have also been aggressively promoted new prepaid offerings from big banks such as JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), US Bancorp (USB) and Wells Fargo (WFC). The big banks hope to leverage their existing customer base in order to gain market share.

• [By Robert Eberhard]

  U.S. Bancorp (NYSE: USB  ) has released its first-quarter earnings, and overall things look pretty good for the large regional bank. It earned $1.43 billion, or $0.73 per share, right in line with analysts' expectations. Nevertheless, shares have been down as much as 2.6% this morning, prompting a deeper look into that earnings release. Here are three reasons investors may not be that pleased with the big Minnesota-based bank.

10 Best Bank Stocks To Watch For 2014: Federal National Mortgage Association (FNMA.OB)

Federal National Mortgage Association (Fannie Mae) is a government-sponsored enterprise (GSE) chartered by the United States Congress to support liquidity and stability in the secondary mortgage market, where mortgage-related assets are purchased and sold. The Company�� activities include providing market liquidity by securitizing mortgage loans originated by lenders in the primary mortgage market into Fannie Mae mortgage-backed securities (Fannie Mae MBS), and purchasing mortgage loans and mortgage-related securities in the secondary market for its mortgage portfolio. Fannie Mae operates in three business segments: Single-Family business, Multifamily Business (formerly Housing and Community Development (HCD)) and Capital Markets group. Its Single-Family Credit Guaranty and Multifamily businesses work with its lender customers to purchase and securitize mortgage loans customers deliver to the Company into Fannie Mae MBS.

The Company obtains funds to suppo rt its business activities by issuing a variety of debt securities in the domestic and international capital markets. Fannie Mae acquires funds to purchase mortgage-related assets for its mortgage portfolio by issuing a variety of debt securities in the domestic and international capital markets. It also makes other investments. Fannie Mae conducts its business in the United States residential mortgage market and the global securities market. It conducts business in the United States residential mortgage market and the global securities market. During the year ended December 31, 2011, the Company��

Single-Family Business

Single-Family business includes mortgage securitizations, mortgage acquisitions, credit risk management and credit loss management. Single-Family business works with the Company�� lender customers to provide funds to the mortgage market by securitizing single-family mortgage loans into Fannie Mae MBS. Its Single-Family business also works with its Capital Markets group to facilitate th! e! purchase of single-family mortgage loans for the Company�� mortgage portfolio. Fannie Mae�� Single-Family business prices and manages the credit risk on its single-family guaranty book of business, which consists of single-family mortgage loans underlying Fannie Mae MBS and single-family loans held in its mortgage portfolio. Single-Family business and Capital Markets group securitize and purchase primarily single-family fixed-rate or adjustable-rate, first lien mortgage loans, or mortgage-related securities backed by these types of loans.

The Company securitizes or purchases loans insured by Federal Housing Administration (FHA), loans guaranteed by the Department of Veterans Affairs (VA), and loans guaranteed by the Rural Development Housing and Community Facilities Program of the Department of Agriculture, manufactured housing loans, reverse mortgage loans, multifamily mortgage loans, subordinate lien mortgage loans and other mortgage-related securities. I ts Single-Family business securitizes single-family mortgage loans and issues single-class Fannie Mae MBS. Fannie Mae�� Single-Family business securitizes loans solely in lender swap transactions, in which lenders deliver pools of mortgage loans to the Company, which are placed immediately in a trust, in exchange for Fannie Mae MBS backed by these loans. Generally, the servicing of the mortgage loans held in its mortgage portfolio or that backs its Fannie Mae MBS is performed by mortgage servicers on the Company�� behalf. Lenders who sell single-family mortgage loans to Fannie Mae service these loans for the Company. For loans it owns or guarantees, the lender or servicer must obtain its approval before selling servicing rights to another servicer.

Fannie Mae�� mortgage servicers collect and deliver principal and interest payments, administer escrow accounts, monitor and report delinquencies, perform default prevention activities, evaluate transfers of own ership interests, respond to requests for partial releas! es o! f s! ecurit! y, and handle proceeds from casualty and condemnation losses. Its mortgage servicers are the primary point of contact for borrowers and perform implementation of its homeownership assistance initiatives, negotiation of workouts of troubled loans, and loss mitigation activities. Mortgage servicers also inspect and preserve properties and process foreclosures and bankruptcies.

Multifamily Mortgage Business

Multifamily business works with the Company�� lender customers to provide funds to the mortgage market by securitizing multifamily mortgage loans into Fannie Mae MBS. Through its Multifamily business, Fannie Mae provides liquidity and support to the United States multifamily housing market principally by purchasing or securitizing loans that finance multifamily rental housing properties. It also provides some limited debt financing for other acquisition, development, construction and rehabilitation activity related to projects that complement this business. Fannie Mae�� Multifamily business also works with its Capital Markets group to facilitate the purchase and securitization of multifamily mortgage loans and securities for Fannie Mae�� portfolio, as well as to facilitate portfolio securitization and resecuritization activities.

The Company�� multifamily guaranty book of business consists of multifamily mortgage loans underlying Fannie Mae MBS and multifamily loans and securities held in Fannie Mae�� mortgage portfolio. Revenues for Fannie Mae�� Multifamily business are derived from a variety of sources, including guaranty fees received as compensation for assuming the credit risk on the mortgage loans underlying multifamily Fannie Mae MBS and on the multifamily mortgage loans held in its portfolio and on other mortgage-related securities; transaction fees associated with the multifamily business, and other bond credit enhancement related fees. As with the servicing of single-family mortgages, multifamily mortgage servicing is performed by the ! lenders !! who sell ! the mortgages to the Company. Fannie Mae�� Multifamily business is organized and operated as an integrated commercial real estate finance business.

Capital Markets

Capital Markets group's primary business activities include mortgage and other investments, mortgage securitizations, structured mortgage securitizations and other customer services, and interest rate risk management. Capital Markets group manages the Company�� investment activity in mortgage-related assets and other interest-earning, non-mortgage investments. It funds its investments primarily through proceeds the Company receives from the issuance of debt securities in the domestic and international capital markets. Its business activity is focused on making short-term use of its balance sheet rather than long-term investments. Activities Fannie Mae is undertaking to provide liquidity to the mortgage market include whole loan conduit, early funding, real estate mortgage investment c onduit (REMICs) and other structured securitizations and dollar roll transactions. Whole loan conduit activities include its purchase of both single-family and multifamily loans principally for the purpose of securitizing them. During the year ended December 31, 2010, it was engaged in dollar roll activity. A dollar roll transaction is a commitment to purchase a mortgage-related security with a concurrent agreement to re-sell a similar security at a later date or vice versa.

Fannie Mae�� Capital Markets group is engaged in issuing both single-class and multi-class Fannie Mae MBS through both portfolio securitizations and structured securitizations involving third party assets. Its Capital Markets group creates single-class and multi-class Fannie Mae MBS from mortgage-related assets held in its mortgage portfolio. Fannie Mae�� Capital Markets group may sell these Fannie Mae MBS into the secondary market or may retain the Fannie Mae MBS in its investment portf olio. The Company�� Capital Markets group cr! eates sin! gle-c! lass and ! multi-class structured Fannie Mae MBS, for its lender customers or securities dealer customers, in exchange for a transaction fee. The Company�� Capital Markets group provides its lender customers and their affiliates with services that include offering to purchase a range of mortgage assets, including non-standard mortgage loan products; segregating customer portfolios to obtain optimal pricing for their mortgage loans, and assisting customers with hedging their mortgage business.

Although the Company�� Capital Markets group�� business activities are focused on short-term financing and investing, revenue from its Capital Markets group is derived primarily from the difference, or spread, between the interests it earns on its mortgage and non-mortgage investments and the interest it incurs on the debt the Company issues to fund these assets. Its Capital Markets revenues are primarily derived from the Company�� mortgage asset portfolio. Capital Markets gro up funds its investments primarily through the issuance of a variety of debt securities in a range of maturities in the domestic and international capital markets. Investors in the Company�� debt securities include commercial bank portfolios and trust departments, investment fund managers, insurance companies, pension funds, state and local governments, and central banks.

The Company competes with Freddie Mac, FHA and Ginnie Mae.

Best Cheap Companies To Own In Right Now: Western Alliance Bancorporation (WAL)

Western Alliance Bancorporation (WAL) is a bank holding company. The Company provides full-service banking and lending to locally owned businesses, professional firms, real estate developers and investors, local non-profit organizations, high net worth individuals and other consumers through its three wholly owned subsidiary banks (the Banks): Bank of Nevada (BON), operating in Southern Nevada; Western Alliance Bank (WAB), operating in Arizona and Northern Nevada, and Torrey Pines Bank (TPB), operating in California. In addition, the Company�� non-bank subsidiaries, Shine Investment Advisory Services, Inc. (Shine) and Western Alliance Equipment Finance (WAEF), offer an array of financial products and services to small to mid-sized businesses and their proprietors, including financial planning, custody and investments, and equipment leasing nationwide. It operates in four segments: Bank of Nevada, Western Alliance Bank, Torrey Pines Bank and Other.

The Company provides a range of banking services, as well as investment advisory services, through its consolidated subsidiaries. As of December 31, 2011, WAL owned an 80% interest in Shine. As of December 31, 2011, the Company owned a 24.9% interest in Miller/Russell & Associates, Inc. (MRA), an investment advisor. MRA provides investment advisory services to individuals, foundations, retirement plans and corporations.

Lending Activities

Through the Company�� banking segments, the Company provides a variety of financial services to customers, including commercial real estate loans, construction and land development loans, commercial loans, and consumer loans. Loans to businesses consisted 89.2% of the total loan portfolio at December 31, 2011. Loans to finance the purchase or refinancing of commercial real estate (CRE) and loans to finance inventory and working capital that are additionally secured by CRE make up the majority of its loan portfolio. These CRE loans are secured by apartment buildings, professional of! fices, industrial facilities, retail centers and other commercial properties. As of December 31, 2011, 49% of its CRE loans were owner-occupied. Owner-occupied commercial real estate loans are loans secured by owner-occupied nonfarm nonresidential properties for which the primary source of repayment (more than 50%) is the cash flow from the ongoing operations and activities conducted by the borrower who owns the property. Non-owner-occupied commercial real estate loans are commercial real estate loans for which the primary source of repayment is nonaffiliated rental income associated with the collateral property.

Construction and land development loans include multi-family apartment projects, industrial/warehouse properties, office buildings, retail centers and medical facilities. Commercial and industrial loans include working capital lines of credit, inventory and accounts receivable lines, mortgage warehouse lines, equipment loans and leases, and other commercial loans. Commercial loans are primarily originated to small and medium-sized businesses in a variety of industries. Consumer loans are generally offered at a higher rate and shorter term than residential mortgages. Its consumer loans include home equity loans and lines of credit, home improvement loans, credit card loans, and personal lines of credit. As of December 31, 2011, its loan portfolio totaled $4.68 billion, or approximately 68.4% of its total assets.

Investment Activities

All of the Company�� investment securities are classified as available-for-sale (AFS) or held-to-maturity (HTM). As of December 31, 2011, the Company had an investment securities portfolio of $1.48 billion, representing approximately 21.7% of its total assets. As of December 31, 2011, its investment securities portfolio consisted of the United States Government sponsored agency securities, Municipal obligations, Adjustable-rate preferred stock, Mutual funds, Corporate bonds, Direct the United States obligation and government-! sponsored! enterprise (GSE) residential mortgage-backed securities, private label residential mortgage-backed securities, Community Reinvestment Act (CRA) investments, Trust preferred securities, Private label commercial mortgage-backed securities, and Collateralized debt obligations.

Sources of Funds

The Company offers a variety of deposit products, including checking accounts, savings accounts, money market accounts and other types of deposit accounts, including fixed-rate, fixed maturity retail certificates of deposit. As of December 31, 2011, the deposit portfolio consisted of 27.5% non-interest bearing deposits and 72.5% interest-bearing deposits. Non-interest bearing deposits consist of non-interest bearing checking account balances. In addition to its deposit base, it has access to other sources of funding, including Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) advances, repurchase agreements and unsecured lines of credit with other financial institutions.

Financial Products and Services

In addition to traditional commercial banking activities, the Company offers other financial services to customers, including Internet banking, wire transfers, electronic bill payment, lock box services, courier, and cash management services. Through Shine, a full-service financial advisory firm, the Company offers financial planning and investment management.

Advisors' Opinion:

• [By Investment Biker]

  Investment Summary: This article is on Western Alliance Bancorporation (WAL), a growth-oriented commercial lender in the Southwest. The banks looks set to improve profitability supported by economic recovery in Last Vegas, industry-leading revenue performance and operating leverage supported by expense control. The credit profile of the bank looks excellent with limited exposure to residential mortgage and well poised to grow its loan portfolio by 20% annually over the next 3 years. It is also well set on a path to credit recovery with improving fundamentals that justifies premium valuation going forward.

10 Best Bank Stocks To Watch For 2014: Northern Trust Corporation(NTRS)

Northern Trust Corporation, through its subsidiaries, provides asset servicing, fund administration, asset management, and fiduciary and banking solutions for corporations, institutions, families, and individuals worldwide. The company offers corporate and institutional services, including global master trust and custody, trade settlement, and reporting; fund administration; cash management; investment risk and performance analytical services; investment operations outsourcing; and transition management and commission recapture services. It also provides personal financial services, such as personal trust, investment management, custody, and philanthropic services; financial consulting; guardianship and estate administration; brokerage services; and private and business banking services, as well as customized products and services. In addition, the company offers active and passive equity and fixed income portfolio management, as well as alternative asset classes comprisin g private equity and hedge funds of funds, and multi-manager products and advisory services. Further, it engages in fund administration, investment operations outsourcing, and custody business that provides specialized services to a range of funds, which include money-market, multi-manager, exchange-traded funds, and property funds for on-shore and off-shore markets. Additionally, the company provides administrative and middle-office services consisting of trade processing, valuation, real-time reporting, accounting, collateral management, and investor servicing. Northern Trust Corporation was founded in 1889 and is based in Chicago, Illinois.

Advisors' Opinion:

• [By Holly LaFon]

  In the fourth quarter, Yacktman�� biggest additions to his holdings were Research In Motion (RIMM) and Avon Products (AVP). He also surprised followers by venturing into financials, with new positions in Goldman Sachs (GS), Bank of America (BAC), State Street Corp. (STT) and Northern Trust Corp. (NTRS).

• [By Selena Maranjian]

  Northern Trust (NASDAQ: NTRS  )

  To earn their high scores, the companies above engaged in a variety of good practices, including applying their human rights policy to their suppliers and vendors, and committing to quantifiable targets and goals.

10 Best Bank Stocks To Watch For 2014: Banco Bradesco SA (BBD)

Banco Bradesco S.A. (the Bank), incorporated on November 5, 1943, is commercial bank. The Bank offers a range of banking and financial products and services in Brazil and abroad to individuals, large, midsized and small companies and local and international corporations and institutions. It operates in two segments: the banking, and the insurance, pension and capitalization bonds. Its products and services encompass banking operations, such as loans and advances and deposittaking, credit card issuance, purchasing consortiums, insurance, leasing, payment collection and processing, pension plans, asset management and brokerage services. The main services it offers through Bradesco Expresso are receipt and submission of account applications; receipt and submission of account applications; Social Security National Service (INSS) benefit payments; checking and savings account deposits, and receipt of consumption bills, bank charges and taxes. In May, 2011, the Bank acquired Banco do Estado do Rio de Janeiro S.A. (BERJ).

Banking

The Banking segment includes deposit-taking with clients, including checking accounts, savings accounts and time deposits; loans and advances (individuals and companies, real estate financing, microcredit, onlending BNDES funds, rural credit, leasing, among others); credit cards, debit cards and pre-paid cards; management of receipts and payments; asset management; services related to capital markets and investment banking activities; intermediation and trading services; custody, depositary and controllership services; international banking services, and purchasing consortiums.

The Bank offers a variety of deposit products and services to our customers through its branches, including Non-interest bearing checking accounts, such as Easy Account, Click Account, Academic Account and Cell Phone Bonus Account; traditional savings accounts; time deposits, and deposits from financial institutions. As of December 31, 2011, it had 43.4 million savings a! ccounts. It offers its customers certain additional services, such as identified deposits and real-time banking transfers. Its loans and advances to customers, consumer credit, corporate and agricultural-sector loans, totaled R$263.5 billion as of December 31, 2011.

The Bank�� loan portfolio consists of short-term loans, vehicle financings and overdraft loans on checking accounts. It also provides revolving credit facilities and traditional term loans. As of December 31, 2011, it had outstanding advances, vehicle financings, consumer loans and revolving credit totaling R$58.0 billion, or 22.0% of its portfolio of loans and advances. Banco Bradesco Financiamentos (Bradesco Financiamentos) offers direct-to-consumer credit and leasing for the acquisition of vehicles and payroll-deductible loans to the public and private sectors 'in Brazil. Supported by BF Promotora de Vendas Ltda. (BF Promotora), and using the Bradesco Financiamentos brand, the Bank operates through its network of correspondents in Brazil, consisting of retailers and dealers selling light vehicles, trucks and motorcycles, to offer financing and/or leasing for vehicles. Through Bradesco Promotora brand, it offer payroll-deductible loans to social security retirees and pensioners, public-sector employees, military personnel and private-sector companies sponsoring plans, and other aggregated products (insurance, capitalization bonds, cards, purchasing consortiums, and others).

As of December 31, 2011, the Bank had 63,156 outstanding real estate loans. As of December 31, 2011, the aggregate outstanding amount of its real estate loans amounted to R$15.9 billion, representing 6% of its portfolio of loans and advances. As of December 31, 2011, it had 69,491 microcredit loans outstanding, totaling R$62.8 million. Its BNDES onlending portfolio totaled R$35.4 billion as of December 31, 2011.

The Bank provides traditional loans for the ongoing needs of its corporate customers. It had R$85.8 billion of outstand! ing other! local commercial loans, accounting for 32.5% of its portfolio of loans and advances as of December 31, 2011. It offers a range of loans to its Brazilian corporate customers, including short-term loans of 29 days or less; guaranteed checking accounts and corporate overdraft loans; discounting trade receivables, promissory notes, checks, credit card and supplier receivables, and a number of other receivables; financing for purchase and sale of goods and services; corporate real estate financing, and investment lines for acquisition of assets and machinery. As of December 31, 2011, the Bank had R$11 billion in outstanding rural loans, representing 4.2% of its portfolio of loans and advances. The Bank conducts its leasing operations through its primary leasing subsidiary, Bradesco Leasing and also through Bradesco Financiamentos.

The Bank offers electronic solutions for receipt and payment management solutions, which include collection and payment services and online resource management enabling its customers to pay suppliers, salaries, and taxes and other levies to governmental or public entities. The global cash management concept provides solutions for multinationals in Brazil and/or domestic companies operating abroad. It manages third-party assets through mutual funds; individual and corporate investment portfolios; pension funds, including assets guaranteeing the technical provisions of Bradesco Vida e Previdencia, and insurance companies, including assets guaranteeing the technical provisions of Bradesco Seguros.

The Bank�� subsidiaries Bradesco S.A. CTVM and Agora S.A. CTVM (or Bradesco Corretora and Agora Corretora, respectively) trade stocks, options, stock lending, public offerings and forwards. They also offer a range of products, such as Brazilian government securities (under the Tesouro Direto program), BM&F trading, investor clubs and investment funds.

The Bank offers a range of international services, such as foreign exchange transactions, foreign tr! ade finan! ce, lines of credit and banking. As of December 31, 2011, its international banking services included New York City, a branch and Bradesco Securities Inc., its subsidiary brokerage firm, or Bradesco Securities United States, and its subsidiary Bradesco North America LLC, or Bradesco North America; London, Bradesco Securities U.K., its subsidiary, or Bradesco Securities U.K.; Cayman Islands, two Bradesco branches and its subsidiary, Cidade Capital Markets Ltd., or Cidade Capital Markets; Argentina, Banco Bradesco Argentina S.A., its subsidiary, or Bradesco Argentina; Banco Bradesco Luxemburgo S.A. its subsidiary, or Bradesco Europe; Japan, Bradesco Services Co. Ltd., its subsidiary, or Bradesco Services Japan; in Hong Kong, its subsidiary Bradesco Trade Services Ltd, or Bradesco Trade, and in Mexico, its subsidiary Ibi Services, Sociedad de Responsabilidad Limitada, or Ibi Mexico.

The Bank�� Brazilian foreign-trade related business consists of export and import finance. In addition to import and export finance, its customers have access to a range of services and foreign exchange products, such as purchasing and selling travelers checks and foreign currency paper money; cross border money transfers; advance payment for exports; accounts abroad in foreign currency; cash holding in other countries; collecting import and export receivables; repaid cards with foreign currency (individual), and structured foreign currency transactions through its foreign units.

Insurance, pension plans and capitalization bonds

The Bank offers insurance products through a number of different entities, which it refers to collectively as Grupo Bradesco Seguros. It offers life, personal accident and random events insurance through its subsidiary Bradesco Vida e Previdencia. It offers health insurance policies through Bradesco Saude and its subsidiaries for small, medium or large companies. It provides automobile, property/casualty and liability products through its subsidiary Bradesco Auto! /RE. It a! lso offers certain automobile, health, and property/casualty insurance products directly through its Website.

10 Best Bank Stocks To Watch For 2014: Signature Bank (SBNY)

Signature Bank (the Bank) is a full-service commercial bank with 25 private client offices located in the New York metropolitan area serving the needs of privately owned business clients and their owners and senior managers. The Bank offers a variety of business and personal banking products and services through the Bank, as well as investment, brokerage, asset management and insurance products and services through its wholly owned subsidiary, Signature Securities Group Corporation (Signature Securities), a licensed broker-dealer and investment adviser. Through Signature Securities, it also purchases, securitizes and sells the guaranteed portions of the United States Small Business Administration (SBA) loans. The Bank offers a variety of deposit, escrow deposit, credit, cash management, investment and insurance products and services to its clients. As of December 31, 2011, the Bank maintained approximately 78,000 deposit accounts, 6,900 investment accounts, 8,600 loan accounts and 14,300 client relationships. In April 2012, it formed a new subsidiary, Signature Financial, LLC.

The Bank offers a range of products and services oriented to the needs of its business clients, including deposit products, such as non-interest-bearing checking accounts, money market accounts and time deposits; escrow deposit services; cash management services; commercial loans and lines of credit for working capital and to finance internal growth, acquisitions and leveraged buyouts; permanent real estate loans; letters of credit; investment products to help better manage idle cash balances, including money market mutual funds and short-term money market instruments; business retirement accounts, such as 401(k) plans, and business insurance products, including group health and group life products. It offers a range of products and services oriented to the needs of its high net worth personal clients, including interest-bearing and non-interest-bearing checking accounts, with optional features, such as debit/ autom! ated teller machine (ATM) cards and overdraft protection and, for its clients, rebates of certain charges, including ATM fees; money market accounts and money market mutual funds; time deposits; personal loans, both secured and unsecured; mortgages, home equity loans and credit card accounts; investment and asset management services, and personal insurance products, including health, life and disability.

Lending Activities

The Bank�� commercial and industrial (C&I) loan portfolio is consisted of lines of credit for working capital and term loans to finance equipment, company owned real estate and other business assets, along with commercial overdrafts. Its lines of credit for working capital are generally renewed on an annual basis and its term loans generally have terms of 2 to 5 years. The Bank�� lines of credit and term loans typically have floating interest rates, and as of December 31, 2011, approximately 61% of its outstanding C&I loans were variable rate loans. As of December 31, 2011, funded C&I loans totaled approximately 15% of its total funded loans. The Bank�� real estate loan portfolio includes loans secured by commercial and residential properties. It also provides temporary financing for commercial and residential property. As of December 31, 2011, funded real estate loans totaled approximately $5.74 billion, representing approximately 80% of its total funded loans. It issues standby or performance letters of credit, and can service the international needs of its clients through correspondent banks. As of December 31, 2011, its commitments under letters of credit totaled approximately $235.7 million. Its personal loan portfolio consists of personal lines of credit and loans to acquire personal assets. As of December 31, 2011, its consumer loans totaled $11.8 million, representing less than 1% of its total funded loans.

Investment and Asset Management Products and Services

Investment and asset management products and services are ! provided ! through the Bank�� subsidiary, Signature Securities. Signature Securities is a licensed broker-dealer. Signature Securities is an introducing firm and, as such, clears its trades through National Financial Services, Inc., a wholly owned subsidiary of Fidelity Investments. Signature Securities is also registered as an investment adviser in New York, New Jersey, Pennsylvania and Florida. It offers an array of asset management and investment products, including the ability to purchase and sell all types of individual securities, such as equities, options, fixed income securities, mutual funds and annuities. The Bank offers transactional, cash management type brokerage accounts with check writing and daily sweep capabilities. It also offers retirement products, such as individual retirement accounts (IRAs) and administrative services for retirement vehicles, such as pension, profit sharing, and 401(k) plans to its clients. Signature Securities offers wealth management services to its high net worth personal clients. Together with its client and their other professional advisors, including attorneys and certified public accountants, it develops a financial plan that can include estate planning, business succession planning, asset protection, investment management, family office advisory services, bill payment, art and collectible advisory services and concentrated stock services.

Sources of Funds

The Bank offers a variety of deposit products to its clients. Its business deposit products include commercial checking accounts, money market accounts, escrow deposit accounts, lockbox accounts, cash concentration accounts and other cash management products. Its personal deposit products include checking accounts, money market accounts and certificates of deposit. The Bank also allows its personal and business deposit clients to access their accounts, transfer funds, pay bills and perform other account functions over the Internet and through ATM machines. As of December 31, 2011, it main! tained ap! proximately 78,000 deposit accounts representing $11.70 billion in client deposits, excluding brokered deposits.

Insurance Services

The Bank offers its business and private clients an array of individual and group insurance products, including health, life, disability and long-term care insurance products through its subsidiary, Signature Securities. The Bank does not underwrite insurance policies. It only acts as an agent in offering insurance products and services underwritten by insurers.

10 Best Bank Stocks To Watch For 2014: Commonwealth Bank of Australia (CBA)

Commonwealth Bank of Australia (the Bank) is engaged in the provision of a range of banking and financial products and services to retail, small business, corporate and institutional clients. The Bank is a provider of integrated financial services, including retail, business and institutional banking, superannuation, life insurance, general insurance, funds management, broking services and finance company activities. Its operating segments include Retail Banking Services, Business and Private Banking, Institutional Banking and Markets, Wealth Management, New Zealand, Bankwest and Other. Its retail banking services include home loans, consumer finance, retail deposits and distribution. Its business and private banking include corporate financial services, regional and agribusiness banking, local business banking, private bank and equities and margin lending. The Bank and its subsidiaries ceased to be a substantial holder in Ten Network Holdings Limited, as of September 12, 2012. Advisors' Opinion:

• [By Toshiro Hasegawa]

  Commonwealth Bank of Australia (CBA) fell 1.1 percent to A$73.73. Singapore Telecommunications Ltd. (ST) retreated 1.1 percent to S$3.78 today after posting earnings.

10 Best Bank Stocks To Watch For 2014: Ampco-Pittsburgh Corporation(AP)

Ampco-Pittsburgh Corporation and its subsidiaries manufacture and sell custom-engineered equipment in the United States and internationally. It operates in two segments, Forged and Cast Rolls, and Air and Liquid Processing. The Forged and Cast Rolls segment produces forged hardened steel rolls used in cold rolling for the producers of steel, aluminum, and other metals; and cast iron and steel rolls for hot and cold strip mills, medium/heavy section mills, and plate mills. The Air and Liquid Processing segment manufactures finned tube and plate finned heat exchange coils for the commercial and industrial construction, as well as for process and utility industries; custom air handling systems used in commercial, institutional, and industrial buildings; and a line of centrifugal pumps for the refrigeration, power generation, and marine defense industries. The company was founded in 1929 and is based in Pittsburgh, Pennsylvania.

Advisors' Opinion:

• [By Rhonda Abrams]

  David Packard, left, and Bill Hewlett in 1996 in front of the Palo Alto, Calif., garage where they founded Hewlett-Packard Co.(Photo: AP)

  If you're considering going into business with someone, sit down and ask your potential partner the following questions:

• [By AP 6:27 p.m. EDT October 19] LONG BEACH, Calif. (AP) ��The oil production technique known as fracking is more widespread and frequently used in the offshore platforms and man-made islands near some of California's most populous and famous coastal communities than state officials believed.

10 Best Bank Stocks To Watch For 2014: Itau Unibanco Holding SA (ITUB.N)

Itau Unibanco Holding S.A., incorporated on September 9, 1943, is a bank in Brazil. The Company has four operational segments: Commercial Banking, Itau BBA, Consumer Credit and Corporate and Treasury. Commercial banking, including insurance, pension plan and capitalization products, credit cards, asset management and a variety of credit products and services for individuals, small and middle-market companies). Itau BBA includes corporate and investment banking. Consumer credit includes financial products and services to its non-accountholders. Corporate and treasury includes the results related to the trading activities in its portfolio, trading related to managing currency, interest rate and other market risk factors, gap management and arbitrage opportunities in domestic and foreign markets. It also includes the results associated with financial income from the investment of its excess capital.

On October 24, 2010, Itau Unibanco completed the integration of customer service locations throughout Brazil. In total, 998 branches and 245 customer site branches (CSB) of Unibanco were redesigned and integrated as Itau Unibanco customer service locations, thus creating a network of approximately 4,700 units in the country under the Itau brand. The Company is a financial holding company controlled by Itau Unibanco Participacoes S.A. (IUPAR). As of December 31, 2010, it had a network of 3,747 service branches throughout Brazil. As of December 31, 2010, it operated 913 CSBs throughout Brazil. As of December 31, 2010, it operated 28,844 automated teller machines (ATMs) throughout Brazil.

Commercial banking

The commercial banking segment offers a range of banking services to a diversified base of individuals and companies. Services offered by the commercial banking segment include insurance, pension plan and capitalization products, credit cards, asset management, credit products and customized products and solu tions. The commercial banking segment comprises the special! i! zed areas and products, such as retail banking (individuals); public sector banking; personnalite (banking for high-income individuals); private banking (banking and financial consulting for wealthy individuals); very small business banking; small business banking; middle-market banking; credit cards; real estate financing; asset management; corporate social responsibility fund; securities services for third parties; brokerage, and insurance, private retirement and capitalization products.

The Company�� credit products include personal loans, overdraft protection, payroll loans, vehicles, credit cards, mortgage and agricultural loans, working capital, trade note discount and export. Its investments products include pension plans, mutual funds, time deposits, demand deposit accounts, savings accounts and capitalization plans. Its services include insurance (life, home, credit/cash cards, vehicles, loan protection, among others), exchange, brokerage and others. Its core business is retail banking, which serves individuals with a monthly income below R$7,000. In October 2010, it completed the conversion of branches under the Unibanco brand to the Itau brand and as of December 31, 2010, it had over 15.2 million customers and 4,660 branches and CSBs. Its public sector business operates in all areas of the public sector, including the federal, state and municipal governments (in the executive, legislative and judicial branches). As of December 31, 2010, it had approximately 2,300 public sector customers. Itau Personnalite�� focus is delivering financial advisory services by its managers, who understand the specific needs of its higher-income customers; a portfolio of exclusive products and services; special benefits based on the type and length of relationship with the customer, including discounts on various products and services. Itau Personnalite�� customer base reached more than 600,000 individuals as of December 31, 2010. Itau Personnalite customers also have access to Itau Unibanco! ne! twor! k of ! branches and ATMs throughout the country, as well as Internet banking and phone.

Itau Private Bank is a Brazilian bank in the global private banking industry, providing wealth management services to approximately 17,951 Latin American clients as of December 31, 2010. The Company serves its customers��needs for offshore wealth management solutions in major jurisdictions through independent institutions in the United States through Banco Itau Europa International and Itau Europa Securities , in Luxembourg through Banco Itau Europa Luxembourg S.A. , in Switzerland through Banco Itau Suisse , in the Bahamas through BIE Bank & Trust Bahamas and in Cayman through Unicorp Bank & Trust Cayman. As of December 31, 2010, it had over 565 very small business banking offices located throughout Brazil and approximately 2,500 managers working for over 1,235,000 small business customers. Loans to very small businesses totaled R$5,981 million as of December 31, 2010. As of Dece mber 31, 2010, it had 374 small business banking offices located nationwide in Brazil and nearly 2,500 managers who worked for over 525,000 companies. Loans to small businesses totaled R$28,744 million as of December 31, 2010.

As of December 31, 2010, it had approximately 115,000 middle-market corporate customers that represented a range of Brazilian companies located in over 83 cities in Brazil. The Company offers a range of financial products and services to middle-market customers, including deposit accounts, investment options, insurance, private retirement plans and credit products. Credit products include investment capital loans, working capital loans, inventory financing, trade financing, foreign currency services, equipment leasing services, letters of credit and guarantees. The Company also carries out financial transactions on behalf of middle-market customers, including interbank transactions, open market transactions and futures, swaps, hedging and arbitrage transactions. It also offers its middle-ma! rket cus!! tomers co! llection services and electronic payment services. The Company is able to provide these services for virtually any kind of payment, including Internet office banking. It charges collection fees and fees for making payments, such as payroll, on behalf of its customers.

The Company is engaged in the Brazilian credit card market. Its subsidiaries, Banco Itaucard S.A. (Banco Itaucard) and Hipercard Banco Multiplo S.A. (Hipercard), offers a range of products to 26 million customers as of December 31, 2010, including both accountholders and non-accountholders. As of December 31, 2010, it had approximately R$16,271 million in outstanding real estate loans. As of December 31, 2010, it had total net assets under management of R$291,748 million on behalf of approximately 2.1 million customers. The Company also provides portfolio management services for pension funds, corporations, private bank customers and foreign investors. As of December 31, 2010, it had R$184,496 mill ion of assets under management for pension funds, corporations and private bank customers. As of December 31, 2010, the Company offered and managed about 1,791 mutual funds, which are mostly fixed-income and money market funds. For individual customers, it offered 154 funds to its retail customers and approximately 287 funds to its Itau Personnalite customers. Private banking customers may invest in over 600 funds, including those offered by other institutions. Itau BBA�� capital markets group also provides tailor-made mutual funds to institutional, corporate and private banking customers.

The Company provides securities services in the Brazilian capital markets. Its services also include acting as transfer agent, providing services relating to debentures and promissory notes, custody and control services for mutual funds, pension funds and portfolios, providing trustee services and non-resident investor services, and acting as custodian for depositary receipt programs. The Company also provides brokerage ! services ! to i! nternatio! nal customers through its broker-dealer operations in New York, through its London branch, and through its broker-dealers in Hong Kong and Dubai. Its main lines of insurance are life and casualty (excluding Vida Gerador de Benefucio Livre), extended warranties and property. Its policies are sold through its banking operations, independent local brokers, multinational brokers and other channels. As of December 31, 2010, it had 9.9 million in capitalization products outstanding, representing R$2,620 million in liabilities with assets that function as guarantees of R$2,646 million. The Company distributes these products through its retail network, Itau Personnalite and Itau Uniclass branches, electronic channels and ATMs. These products are sold by its subsidiary, Cia. Itau de Capitalizacao S.A.

Itau BBA

Itau BBA is responsible for its corporate and investment banking activities. As of December 31, 2010, Itau BBA offered a portfolio of products and ser vices to approximately 2,400 companies and conglomerates in Brazil. Itau BBA�� activities range from typical operations of a commercial bank to capital markets operations and advisory services for mergers and acquisitions. As of December 31, 2010, its corporate loan portfolio was R$ 76,584 million. In investment banking, the fixed income department was responsible for the issuance of debentures and promissory notes that totaled R$18,888 million and securitization transactions that amounted to R$4,677 million in Brazil in 2010. In addition, Itau BBA advised 35 merger and acquisition transactions with an aggregate deal volume of R$16,973 million in 2010.

Itau BBA is also active in Banco Nacional de Desenvolvimento Economico e Social (BNDES) on-lending to finance large-scale projects, aiming at strengthening domestic infrastructure. In consolidated terms, total loans granted by Itau BBA under BNDES on-lending represented more than R$9,010 million in 2010. Itau BB A focuses on the products and initiatives! in the i! nternation! al busine! ss unit, such as structuring long-term, bilateral and syndicated financing, and spot foreign exchange. In addition, in 2010 Itau BBA continued to offer a large number of lines of credit for foreign trade.

Consumer Credit

As of December 31, 2010, its portfolio of vehicle financing, leasing and consortium lending consisted of approximately 3.8 million contracts, of which approximately 71.1% were non-accountholder customers. The personal loan portfolio relating to vehicle financing and leasing reached R$60,254 million in 2010. The Company leased and financed vehicles through 13,706 dealers as of December 31, 2010. Sales are made through computer terminals installed in the dealerships that are connected to its computer network. Redecard S.A. (Redecard) is a multibrand credit card provider in Brazil, also responsible for the capturing, transmission, processing and settlement of credit, debit and benefit card transactions. As of December 31, 2010, the Com pany held approximately 50% interest in Redecard�� capital stock.

The Company competes with Bradesco, Banco do Brasil S.A. (Banco do Brasil), Banco Santander, Caixa Economica Federal (CEF), BNDES, HSBC, Banco Citibank S.A, Banco de Investimentos Credit Suisse (Brasil) S.A., Banco JP Morgan S.A., Banco Morgan Stanley S.A., Banco Merrill Lynch de Investimentos S.A., Banco BTG Pactual S.A., Banco Panamericano S.A, Citibank S.A., Banco GE Capital S.A. and Banco Ibi S.A.

10 Best Bank Stocks To Watch For 2014: Australia and New Zealand Banking Group Ltd (ANZ.AX)

Australia and New Zealand Banking Group Limited (ANZ) provides a range of banking and financial products and services to retail, small business, corporate and institutional clients. The Company conducts its operations in Australia, New Zealand and the Asia Pacific region. It also operates in a range of other countries, including the United Kingdom and the United States. The Company operates on a divisional structure with Australia, International and Institutional Banking (IIB), New Zealand, and Global Wealth and Private Banking. As of September 30, 2012, the Company had 1,337 branches and other points of representation worldwide, excluding automatic teller machines (ATMs). In September 2012, it sold its remaining shareholding in Visa Inc.

Four Things That the Debt Ceiling Deal Failed to Fix

While everyone in Washington right now is patting themselves on the back in the wake of Wednesday's debt ceiling deal, the reality is that it does little to address the nation's deepest budget issues.

True, the Band-Aid agreement will fund the U.S. government through Jan. 15 and lift the debt limit through Feb. 7.

But all it means is that Congress has just 90 days to take meaningful action on the problems that led to the government shutdown and debt ceiling fight in the first place.

If it doesn't, 2014 could be a very troubling year for both Washington and the U.S. economy.

Just look at these four disastrous problems the debt ceiling deal fails to fix...

What the Debt Ceiling Deal Failed to Fix

1) The National Debt Is Still Rising

Some commentators argued during the shutdown that having a debt ceiling makes no sense. Some even argued that a U.S. president should have unilateral power to raise the debt ceiling as needed.

But they seem to miss the point that the debt ceiling isn't the problem - it's the rising levels of debt that Congress continues to rack up at a record pace. Yes, we have to pay our bills, but every now and then we have to be reminded of just how out of control those bills have become. The limit on the borrowing authority acts as a reminder and should have spurred some conversation about how the United States will bring its long-term liabilities under control.

That didn't happen this week.

The U.S. national debt is on pace to reach $20 trillion by the end of the decade, which means that if interest rates rise to 5%, the nation will need to pay $1 trillion a year just to service the debt.

The national debt has increased by 55% since President Obama took office. This translates into an unbelievable $123,000 per American worker, according to a recent Harvard University Institute of Politics study. This also translates into $53,000 in debt for every man, woman, and child in the country.

However, any time Congress attempts to take a bite out of the bloated budget, an interest group pops up and cries foul. Cutting budgets derived from other people's money is much harder for career politicians than finding new ways to spend that money.

At the moment, there is no plan to curb spending, despite all of the claims about reduced deficits and budgets. The national debt will continue to climb, which means we'll slam into the debt ceiling again in just three months.

But instead of directing his attention to the debt problems, President Obama has already said he wants to focus on immigration reform.

No wonder the Chinese ratings agency downgraded the United States this week.

But that's just the start of the fiscal problems facing this country...

2) Never-Ending Gridlock

Congress just kicked the can down the road for a few months, meaning that in January we're going to experience yet another debt ceiling fight.

The only difference is that the national debt will be higher, and any promises to cut long-term entitlement programs (the real source of economic insolvency in the United States) will be undermined by hyperbolic rhetoric designed to demonize anyone calling for reductions in Medicare or Medicaid.

And even if lawmakers do make a few token cuts to government spending, it will only encourage companies and contractors to put even greater effort toward grabbing a piece of a shrinking pie.

That inevitably will lead to more lobbying, which will only increase the partisan divide as bought-and-sold politicians fight for more of a smaller budget on behalf of their patrons.

3) Moving Money Around Is Not Economic Growth

We used to build things in this country... companies, bridges, skyscrapers, and industries...

Now we just reach into one another's pocket and pretend that growth exists.

Government doesn't create jobs, no matter how many times our elected leaders try to claim otherwise. The only way to pay off the debt over the long term is to take in more revenue as a result of increased economic development.

Unfortunately, the United States' limited growth over the last few years has been driven heavily by government investment and spending - that is, using taxes and borrowed money to drive growth - as well as by the U.S. Federal Reserve's extraordinary attempts to pump money into the feeble recovery.

As a nation that imports far more than it exports, the United States and its citizenry continue to assume large debts in order to sustain its standard of living.

The United States would be better served by fixing its tax code, encouraging economic development, and embracing both new and old industries with job growth potential (see the shale boom).

Otherwise, the nation's inability to produce and have robust domestic trade, exacerbated by its mounting debt, will start to affect national security and reduce global political leverage.

4) We Need to Fix the U.S. Labor Force

The United States can't improve its financial condition with a lackluster workforce incapable of keeping up with major economic trends.

Yet that's what we have now, and there is no plan in place to fix it.

Right now more than 3 million job openings exist in the United States. Each job would help build economic growth, provide tax revenue, and improve the lives of workers, coworkers, and families.

But many of these jobs go unfilled for a lack of qualified applicants, which ultimately is an indictment of the U.S. education system, which is failing to provide workers with the skills they need to compete in a 21st century global economy.

The United States spends more money on education than any other country on a per-student basis. But instead of coming up with ideas to make education a better match for the needs of the job market, Washington bureaucrats just want to spend even more money.

That's the easy solution - until the costs become unsustainable.

We require total educational reform to improve the U.S. economy over the long-term.

The longer we wait to fix the education system, the longer this nation will find itself plagued with economic inequality, stagnation, and uncertainty.

Many of those who lack needed skills will have no choice but to seek aid from the government, further bloating the welfare state, dragging down economic growth, and adding to the national debt.

The bottom line: The U.S. government cannot keep borrowing and spending indefinitely. It's just a matter of time before the nation either is forced to default on select debts or is forced to drastically inflate its currency to water down its obligations.

In a better world, Washington would just get out of the way and let business and industry grow across the nation, which would actually allow us to make some headway on the debts we've already run up.

Unfortunately, that won't happen anytime soon - if ever.

One more thing about the debt ceiling deal - it may not prevent a downgrade of the U.S. credit rating from Fitch. They warned the day before the debt ceiling deal that they were considering a downgrade. Here's why it's still a strong possibility...

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SAC to close London office, cuts 6 U.S. money managers

Steven A. Cohen Bloomberg

SAC Capital Advisors plans to shut down its London office as the $14 billion hedge fund firm founded by Steven A. Cohen scales back in the face of insider-trading allegations by U.S. prosecutors.

SAC will close down the U.K. office by the end of the year, President Tom Conheeney wrote in a memo sent to employees Tuesday. SAC employs more than 50 people in London, according to a person with direct knowledge of the matter. The firm this week cut six investment professionals in the U.S., Mr. Conheeney wrote.

“As our negotiations with the government have unfolded, it has become clear to us that the outcome the government is demanding is likely to have a greater-than-first-anticipated impact on the firm,” he wrote. “We have concluded that we must operate as a simpler firm and reduce our capital allocations.”

Money managers have been leaving SAC's U.K. office after a U.S. grand jury indicted the firm in July

Rethinking Retirement: Tips for older job searc…

"Retirement job" seems like an oxymoron. And yet a growing number of Americans say that they plan to continue to work during their retirement years.

Unfortunately, finding employers willing to hire them is not easy.

"The elephant in the workplace is still age bias," says Tim Driver, founder and CEO of RetirementJobs.com. "Because of the Baby Boomers and the lower birth rates of younger people, job supply and demand will eventually favor mature workers. But that is still some time off."

The demand for older workers has only declined during the recession as many of them have lost their jobs. Last year, the unemployment rate of Americans 65 and older was 6.2%, up from 3.1% in 2007, says AARP Public Policy Institute, based on Bureau of Labor Statistics.

"It's not easy for an older unemployed worker to find a job, nor is it easy for an older retiree to return to the workforce," says Sara Rix, senior strategic policy adviser at the AARP Public Policy Institute. "In this economy the employer is going to say, 'I can get two younger workers for the same price as one older worker.'"

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In March, 51% of job seekers 55 and older were unemployed for 27 weeks or longer, compared with 41.7% of those ages 25 to 54, according to the AARP Public Policy Institute's analysis of the federal Current Population Survey.

Many unemployed older Americans who are cash-strapped and need to keep earning money cannot be rehired because they have not kept up their skills. Others want to find a new career that would give them more flexibility and help them stay engaged and make a difference in life.

At least there are a number of programs and websites aimed at helping older job seekers. A program called the Plus 50 Initiative was launched by the American Association of Community Colleges in 2008. "We started doing personal enrichment classes, volunteeri! ng activities and workforce training," says Mary Sue Vickers, director for the Plus 50 Initiative.

But because of the economic collapse, the program decided to focus only on workforce training. "It helps meet the needs of adults 50 and older, and it increases their prospects in high-demand fields," Vickers says.

Dory Brinker, who lives in Brewster, Mass., has decided to go to the Cape Cod Community College to study human services alcohol and drug abuse counseling. She seldom thinks about her age until she is in the classroom and the other students are 50 years younger than she is.

Brinker will turn 70 in October. Over the years the former teacher has also raised three children and owned a nursing school. She always wanted to get a master's degree and Ph.D. "But when the kids were growing up, I got too busy," she says.

Now she works part time at a shelter for families who are recovering from alcohol or drug abuse. And when she finishes the program at the community college, she plans to go on for a college degree. "I love school," she says. "The job means a lot to me and I'm not sitting home bored."

Brinker found out about the shelter through people she knew. But for most older Americans, jobs don't just fall into their laps. "Typically, they have to pound the pavement, or today's equivalent, which is sending out loads and loads of résumés," Rix says.

In part, older workers have a harder time finding work because they are less efficient in networking and using social media. And many employers believe that older workers lack creativity and are generally unwilling to learn new things, says an Urban Institute 2012 report.

Seniors need to better use job-search tools and know what type of employers are most likely to hire older job seekers. The Plus 50 Initiative at community colleges has focused on health care, education and social service because that will increase their job prospects in high-demand fields, Vickers says.

Currently, workers who were 65 and ! older ten! d to work in retail, professions, education and health services, says AARP, based on the 2012 Current Population Survey. Fewer worked for the information sector, which includes telecommunications.

The one industry category where age bias doesn't exist is elder care, Driver says. His firm has launched a separate service where families can find high-quality certified elder care providers.

And to make the job search easier for older Americans, RetirementJobs.com has a certified age-friendly employer program. About 100 major companies have been identified as among the best places for employees above age 50. And AARP has a program for the best employers for workers over 50.

The Plus 50 Incentive can help older Americans improve themselves and make major career changes. For many years, Patricia Zimmer, who lives in St. Louis, was a stay-at-home mom who home-schooled her children. She is now 58, the kids are grown and she is divorced.

Recently Zimmer started the patient care technician program at St. Louis Community College. "It is something that I had wanted to do for 20 years," she says." I'm also doing it out of necessity. But I wanted to do something that would stretch me."

As Baby Boomers approach retirement age they realize that they may be living well into their 80s or 90s. And many of them don't want to spend 30 years sitting on their porch. But they probably don't want to continue doing the same job they've had for 20 or 30 years.

They have a different mindset, and they will be creating a new retirement job world. "We're only a little way into this phenomenon," Driver says. "It is playing itself out before our eyes. And the more it happens, the more culturally accepted it is for someone with gray hair to be in an office cubicle."

Pitfall of working for Amazon: Mental illness?

It's just about that most wonderful time of the year: for holiday shoppers, and for Amazon, which CNN last month reported would be hiring 70,000 seasonal workers to beef up the staffing at its more than 40 U.S. fulfillment centers.

Last year, thousands of these workers were converted to full-time employees, making it a good gig if you can get it, right?

Not according to a BBC investigation, which had an undercover reporter work the night shift in a U.K. Amazon warehouse. He showed what he filmed to Michael Marmot, a leading job stress expert.

Marmot's conclusion: The working conditions were "all the bad stuff at once." He continued: "The characteristics of this type of job, the evidence shows increased risk of mental illness and physical illness."

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The 23-year-old reporter worked as a "picker"; a handset would flag an item for him to retrieve and place on a trolley in the 800,000-square-foot space. He was given 33 seconds per product, with his handset counting down the clock each time; it beeped if he made an error, and also sent data to his managers.

The reporter said that in one 10.5-hour night shift, he walked "or hobbled" almost 11 miles, noting afterward, "I'm absolutely shattered."

Amazon described the picking job as "similar to jobs in many other industries and does not increase the risk of mental and physical illness," and noted that new hires are told some positions can be physically demanding.

Meanwhile, Reuters reports that German workers at two Amazon centers are today striking for better pay. (Who isn't likely to complain about Amazon? Its top reviewers, who get major freebies.)

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

Budget Battles Boost Generics

We’re now into day 15 of the US government shutdown, as House Republicans stubbornly try to defund Obamacare. No matter what sort of deal is eventually struck, health care costs aren’t likely to come down any time soon. And that’s good news for generic drug makers.

Dr. Reddy’s Laboratories (NYSE: RDY) is one of the biggest players in generic drugs, offering more than 200 off-brand medications in the areas of cardiovascular disease, pain management and oncology, among others. In fact, this India-based company has become one of the largest makers of generics in the world, helping to drive more than 20 percent annual compounded earnings growth at the company over the past decade.

Drug spending is a major cost center for the government, with more than $325 billion worth of pharmaceuticals purchased last year. Less expensive but just as effective generic medications accounted for nearly 84 percent of those prescriptions, as physicians try to treat lifestyle-related diseases without breaking the bank.

In the emerging markets, health care spending is experiencing a similar explosion, as incomes have grown and standards of living improve. It is estimated that there are now at least 350 million people suffering from diabetes around the world, as obesity becomes a growing concern in virtually every region.

According to data from the International Diabetes Foundation, India and China are running neck and neck for the most sufferers of diabetes. They’re followed by the US, which falls into third place with an estimated 30 million diabetes patients alone, to say nothing of other lifestyle related illnesses such as heart disease.

As life expectancies continue to lengthen both in the US and abroad, other age-related ailments such as dementia will also become a growing concern.

That’s why pharmaceuticals account for the lion’s share of growing health c! are spending, with drug sales expected to reach USD550 billion annually by 2020. The only way both national governments and patients can cope with those rising costs is to continue relying on less expensive but just as effective generic drugs.

Generic drugs are typically equivalent to a branded original in terms of efficacy, but often cost less than a third than the original. As a result, emerging market consumers who typically pay for medications out of their own pockets are increasingly opting for generic drugs while in the US, insurance companies are steering consumers in that direction.

While Dr. Reddy’s products are becoming increasingly popular in the US, where it offers generic versions of drugs such as Plavix and Lipitor, the bulk of its sales are in emerging markets.

The company benefits from the fact that, thanks to its home location of India, it can manufacture its products at an extremely low cost. Its gross margin typically runs in excess of 50 percent, as drug utilization rates continue to increase even as overall spending may be in decline.

The company also invests heavily in research and development, spending between 6 percent and 7 percent of its annual revenues on developing generic versions of popular drugs while also coming up with novel products of its own. It is increasingly working in areas where there is little existing competition to introduce new drugs, an advantage that will drive the company’s long-term profitability.

The company is now pushing its geographic reach, working to grow its presence in fast growing markets such as China by expanding its sales force and working with local regulators to help smooth the approval process.

With the recent budget battle in the US reflecting growing concerns over rising health care costs, companies such as Dr. Reddy’s will continue to grow earnings at an above-average pace. That’s a major reason why Dr. Reddy’s, which has more than doubled its earnings over the past ! three yea! rs, has outperformed major indexes over the past the year, even as consumer staple and health care stocks have increasingly become laggards in the market.

Shiller vs. Fama: Which Nobel Winner Comes Out on Top?

Eugene Fama and Robert Shiller (along with Lars Peter Hanson) received the Nobel Prize in Economics last month for their contributions to understanding asset prices.

But as was frequently noted at the time, Fama and Shiller have very different views on the nature of markets.

Fama, famously, is associated with efficient market hypothesis (EMH) and sees markets as rational, whereas Shiller is noted for his acceptance of a market riddled with behavioral biases.

While both economists are identified with portfolio approaches linked to value investing, Research Afffiliates' head of equity research, Dr. Vitali Kalesnik, teases out the differences between these approaches — and weighs in on the side of Shiller.

Indeed, in the Southern California-based firm’s November “Fundamentals” newsletter, Kalesnik’s research contribution compares two model value portfolios — helpfully labeled the Eugene Portfolio and the Robert Portfolio — that deliver returns that are miles apart.

Here’s where it is helpful to understand that not everything that is called value is the same. While value investors share a lot in common — both look for stocks with low price-to-fundamentals stock ratios and both agree that value stocks “co-move” with one another.

That said, Fama and Shiller differ in their interpretations of the pricing mechanism, and Kalesnik attempts to show that the implications are profound.

Both would agree that that buying low and selling high is a rewarding strategy. But to Fama, the basis for value’s superiority is risk. Investors are simply being rewarded for assuming more risk.

To Shiller, value investors are being compensated for cleverly exploiting an irrational market’s mispricing of securities.

The Kalesnik paper wonkishly detours to note that empirical studies have disproven various explanations for the source of value stocks’ risk. Neither default risk nor illiquidity explain the performance of value stocks, so it remains an open question what makes this group of stocks more risky, according to the Fama model; current explanations center on hard-to-model systemic or catastrophic risk.

In any event, assuming these two value approaches imply very different portfolios, the Research Affiliates paper tests a Eugene Portfolio that is long risky stocks and short safe stocks, but which is indifferent to book-to-market ratios.

The Robert Portfolio is long cheap stocks (those having high book-to-market ratios) and short expensive stocks (with low B/M ratios), but is indifferent to risk.

Kalesnik and fellow researchers, in a separate study he cites, simulated these two strategies in 23 developed countries spanning many decades and found the Eugene Portfolio generated annualized average performance of 0.79%, which actually implies a negative alpha of -1.74%.

In contrast, the Robert Portfolio yielded an average annual return of 7.61% with a positive alpha of 3.01%. What’s more, Robert’s strategy worked in 100% of the countries under study.

The implication is that it is mispricing (rather than some poorly understood systemic risk) that drives value’s premium returns, and it is specifically book-to-market characteristics that are useful in predicting returns.

Value investors should therefore be much more interested in a tech stock with high fundamentals-to-price ratios, even though it tends to co-move with its fellow “growth” stocks, than a classic “value” stock that co-moves with its ilk but which is priced as an expensive company.

Think an out-of-favor Dell over a much beloved Berkshire Hathaway.

As Kalesnik puts it, “if (as is the case) mispricing and not risk is responsible for value returns, then we can construct more efficient and powerful strategies to extract the value premium”—through cheap stocks that swim with the growth family.

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Check out Gundlach on Shiller CAPE Fund: ‘A Better Mousetrap’ on ThinkAdvisor.

Portability election emerges as new locus of estate planning

Though the estate tax exemption has been set at $5.25 million, a new area of estate planning is emerging for clients: portability election.

Congress made the election of portability of a deceased spouse's unused exclusion amount permanent as part of the American Taxpayer Relief Act of 2012. Right now, that amount is $5.25 million per person or $10.5 million for a married couple.

In short, if one spouse dies in 2013 after making taxable transfers of $3 million and has no taxable estate, his leftover $2.25 million in exclusion can pass to his surviving spouse, who will have $7.5 million in exclusions to use for lifetime gifts or for transfers when she dies. The executor must make the portability election in a timely manner after the first spouse dies on the estate tax return.

With the exclusion being set at $5.25 million per person, it's easy for affluent clients whose estates don't quite hit that level to write off creating estate plans or building trusts.

But even those in-between clients benefit from establishing trusts in select scenarios, noted Samuel A. Donaldson, a law professor at Georgia State University. He was a speaker Thursday at the National Association of Estate Planners & Councils' annual conference in Las Vegas.

“The question for the client with a combined $4 million estate is now, do you need a trust? In many situations, an outright transfer is perfectly fine,” Mr. Donaldson said.

“But you can do a trust for old-fashioned nontax reasons — you use a trust where there is an absence of trust,” he added.

Indeed, smaller estates may still need protection from creditors or the client may fear that the surviving spouse will be unwilling or unable to manage the assets — or there may be family members who are spendthrifts. In those cases, a trust — even if the estate is small enough to escape estate taxes — may still be warranted, Mr. Donaldson said.

For married couples who have an estate that's bigger than the $5.25 million amount but smaller than the combined exclusion of $10.5 million, some situations may call for a credit shelter trust.

For example, a 45-year-old couple has an $8 million estate and seeks planning. Flexibility in the trust should come first, as the couple still has a long and uncertain future ahead — namely, nobody knows who will die first, when it will happen and how much the trust assets will appreciate in the future.

Portability might make sense in the future, but the credit shelter trust might also make sense to protect the descendants of the spouse who dies first. Further, without a credit shelter trust, the surviving spouse could remarry and the new spouse may end up in line to receive the entirety of the estate, Mr. Donaldson explained.

A provision in the estate ! planning document can allow for the option of a credit shelter trust for any amount of the estate that the surviving spouse will disclaim in the future. “You don't have to make the decision until the death of the first spouse,” Mr. Donaldson said.

Finally, for the largest clients, strategies such as the zeroed-out wealth transfer and the transfer of partnership interests to a grantor trust can mitigate the effect of estate and other taxes.

One thing worth considering is whether states will recognize portability elections with respect to state-level estate taxes and how that might affect the estate plan itself.

“To my knowledge, there are maybe one or two states that recognize portability elections with respect to the state estate tax,” Mr. Donaldson said. “Most are saying 'no, we'll take that revenue for free.'”

Intuit Inc. (INTU) Q1 Earnings Preview: What To Watch?

Intuit Inc. (NASDAQ: INTU) is slated to report its first quarter financial results on Nov.21. The company will host a conference call on the same day at 1.30 Pacific Time to discuss the operating performance.

Intuit makes tax preparation and payroll processing softwares. The company's key products include include QuickBooks, Quicken and TurboTax. Founded in 1983, Intuit had revenue of $4.2 billion in its fiscal year 2013. The company has approximately 8,000 employees with offices in the United States, Canada, the United Kingdom, India and other locations.

Wall Street expects Intuit to report a loss of 10 cents a share, according to analysts polled by Thomson Reuters. In the same period last year, it reported a loss of 3 cents a share. Intuit projects GAAP and non-GAAP net loss per share of 10 to 11 cents for the August to October period.

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The company's results have managed to beat Street view thrice in the past four quarters. However, the consensus loss estimate has widened from 2 cents in the past 90 days, indicating analysts have a bearish stance on the company's earnings prospects for the quarter.

Quarterly sales are expected to fall 6.8 percent to $603 million from $647 million in the same quarter last year. Intuit sees first-quarter revenue of $595 million to $605 million, growth of 6 to 8 percent.

Intuit has built an impressive franchise for financial management software focused on small business and individuals, with high recurring revenues, strong financial management and shareholder friendly cash use (buybacks and dividends).

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Weakness in tax is being offset by ongoing strength in small business where Intuit aims to be the "small business OS," and the acquisition of Demandforce would help the company in gaining more SMB business.

Intuit covers 5 million out of 29 million small business! es in U.S. and about 1 percent of 600 million small businesses worldwide. It processes less than 1 percent of the $2 trillion in commerce managed through QuickBooks (QB). This underscores the huge market available in front of Intuit.

The Street would be focusing on competition around QuickBooks and the uptake of the next generation of QuickBooks Online. QBO was re-written from scratch starting 2 years ago, using JavaScript and HTML5, and features an entirely modern Cloud stack that is more open to partners, including Square that was announced recently.

Investors will look at how tax trends are faring and how the company is coping with the current situation and what it is expecting for the future periods. Tax season can be volatile especially due to Congress delays around funding/budgets.

International business should be another focus point as the company is in early stages of exploring countries beyond U.S. and Canada.

"While int'l revs have been stuck at <5% of revs, we may see it break out during the next 5 years," UBS analyst Brent Thill wrote in a note to clients.

The previous quarter's results were marred by higher costs that weighed on margins and the profits. So, the Street would welcome any improvement in cost reductions.

The market may want some color on the competition in payment processing space, and how Intuit is faring against leading payroll solution provider Paychex Inc. (NASDAQ:PAYX) in the SMB arena.

Investors will want an update on management's full year outlook. It forecasts revenue of $4.440 billion to $4.525 billion, growth of 6 to 8 percent, GAAP EPS of $3.11 to $3.19 (growth of 10 to 13 percent) and non-GAAP EPS of $3.52 to $3.60 (growth of 10 to 13 percent).

For the fourth quarter, Intuit reported a net loss of $16 million or 5 cents a share, compared with a net profit of $4 million or 1 cent a share last year. Excluding items, the company reported adjusted profit of $1 million or breakeven earnings per share for the quarter. Mou! ntain Vie! w, California-based company's revenue for the quarter grew 12 percent to $634 million.

INTU stock is up 16 percent since its last quarterly report and 19 percent this year. Shares of the company, which trade at 18 times its forward earnings, have traded between $55.54 and $73.94 during the past 52-weeks.

Extreme bull: S&P 500 to top 2,000 by spring

The S&P 500 could hit 2,000 sometime within the next six months and tapering by the Federal Reserve might not begin until March.

Those are a few of the predictions by a team of portfolio managers at asset management firm Neuberger Berman, which held a media briefing Wednesday on the company's outlook for 2014. The general sentiment: Things are looking good — really good — for investors in the New Year. Here's a few conclusions from today's event:

Stay bullish on U.S. investments. Eli Salzmann, a portfolio manager for U.S. large cap value strategies, said the firm has been bullish since June 2012, and he doesn't expect the stance to change anytime soon. He is expecting “mini-hyper growth” at the start of 2014. “I think the first half of next year will surprise everyone on the upside,” he said. “We're not in the beginning of the game. We're in the sixth or seventh inning, but we're going to go higher.”

Fact Check: Most Americans Still Have Free Checking Accounts

NEW YORK (LowCards.com) -- When the economic downturn hit five years ago, many analysts predicted free checking accounts would become a thing of the past. After all, regulations such as the CARD Act and Dodd-Frank bill cut some of the revenue streams of financial institutions, and many people thought banks would have to make up for this revenue with additional fees.

But the majority of Americans still enjoy a free checking account.

According to a survey conducted by the American Bankers Association, 55% of bank customers are not being charged a fee for their checking account.

The figures from the annual survey have hovered around that number for the past few years: 59% had a free checking account in 2011, and 53% in the 2010 survey. Also see: We're Getting More Confused by Credit Card Terms and Reward>> On the flip side, the findings show that almost half of Americans are now paying for a checking account. In fact, 14% pay $10 or more each month. Here are some tips to possibly avoid a fee on your checking account: Shop around for a different bank if your current bank continues to charge you a monthly fee on your account. Be aware of your minimum balance. Many banks offer free checking if you keep at least a certain balance in your account. Make sure you are above this threshold. Sign up for email and text alerts to update you when your balance dips below a certain level. Also see: What the CFPB Has Accomplished in its First 2 Years>> Check into making direct deposits. Some banks offer free checking if your paycheck is deposited automatically. Have multiple accounts at your bank. Your bank wants as much of your business as possible and may offer free services for multiple accounts. Use your bank's ATMs when making withdrawals. The survey of 1,000 adults was conducted in July for the ABA by Ipsos Public Affairs, an independent market research firm.

Australia’s Central Bank Must Go It Alone

Australia may be on the other side of the globe, but the US Federal Reserve’s dithering over monetary policy since early May has had an outsize influence on the country’s exchange rate. While US investors enjoyed having their gains in Australian equities enhanced by a relatively strong Australian dollar, now that the resource boom has peaked, it’s imperative that the currency weaken in order to boost the competitiveness of the country’s exports.

The Aussie had been trading above parity with the US dollar for much of 2011 and 2012, and finally fell below this key threshold in early May, as Federal Reserve Chairman Ben Bernanke indicated that the central bank was thinking seriously about how to curtail its extraordinary stimulus, otherwise known as quantitative easing. As the market prepared for a September taper, which, of course, never came to pass, the Aussie fell as low as USD0.89 in late August.

With just a couple press conferences, Bernanke had inadvertently engineered a decline in the Aussie that the Reserve Bank of Australia (RBA) failed to achieve on its own, despite seven rounds of interest rate cuts. The RBA has since cut rates again, in August, bringing its short-term cash rate to 2.5 percent, an all-time low.

Nevertheless, movement in the Aussie as of late continues to be largely correlated with traders’ shifting expectations regarding the Fed’s monetary policy (and to a lesser extent the strength of the Chinese economy). President Barack Obama’s nomination of Janet Yellen to succeed Bernanke as head of the central bank may have even extended the timetable for when the Fed starts to wind down its $85 billion per month bond-purchasing program.

As Bernanke’s key deputy at the Fed, Yellen is known to share his dovish stance toward monetary policy. In appearing before the US Senate’s Banking Committee on Thursday, she said there was no set time for a taper, though it obviously can’t continue indefinitely. She acknowledged that the market’s swift reaction to Bernanke’s comments in the late spring had forced the Fed to defer its taper, but also said the Fed shouldn’t be a prisoner of the market. If confirmed, Yellen can be expected to mirror Bernanke’s approach to policymaking, even if their personal style differs.

That means the Aussie likely has a base of support at current levels, which earlier this month the RBA characterized as “uncomfortably high.” The currency recently traded near USD0.937, down about 11.6 percent from its year-to-date high in January, but up 5.3 percent since August. According to a Bloomberg survey of economists, the Aussie is expected to trade at USD0.89 next year, while bottoming around USD0.87 in 2016-17.

The RBA says there’s a chance the exchange rate could remain near current levels over the next couple years, though a softening resource sector could lead to declining capital inflows, which would help depreciate the currency. But it notes that the currency is largely beholden to the monetary policies of the central banks of the world’s larger economies. That means the RBA will have to continue cutting rates to undermine the currency, since it won’t be getting any outside help from its central bank peers.

Though our gains are no longer being enhanced by the currency effect, a weakening Aussie should help our companies compete in the global markets. And we expect that performance to ultimately flow through to higher share prices for our recommendations, which should more than offset the modest decline in the currency.