US judge revives Dexia lawsuit vs JPMorgan over mortgage claims

Posted by DewRoc | Posted in Business | Posted on 21-05-2013-05-2008

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Fri May 17, 2013 4:23pm EDT

* Judge says lacked jurisdiction to hear case

* 99 pct of potential $774 mln damages had been tossed

* Dexia lawsuit returned to NY state court where it began

May 17 (Reuters) – A federal judge has revived a closely
watched lawsuit accusing JPMorgan Chase & Co of
misleading Belgian-French bank Dexia SA into buying
more than $1.6 billion of troubled mortgage debt.

Citing a recent federal appeals court decision, U.S.
District Judge Jed Rakoff in Manhattan said he had lacked
jurisdiction when he threw out much of the lawsuit on April 2.
That ruling dismissed claims for all but $5.7 million of the
roughly $774 million of damages that Dexia sought.

In his new ruling, the judge directed that the Dexia case be
moved to the New York state court where it was originally filed.

Dexia and JPMorgan representatives did not immediately
respond to requests for comment.

The lawsuit is one of many accusing banks of trying to boost
profit by packaging low-quality mortgages into seemingly safe
securities, while hiding the risks or failing to ensure that the
loans were underwritten properly.

Dexia alleged it was fraudulently misled about the quality
of 65 residential mortgage-backed securities certificates it
bought from 51 offerings between 2005 and 2007 by JPMorgan, Bear
Stearns Cos and Washington Mutual Inc. JPMorgan bought Bear and
most of WaMu in 2008.

The case gained notoriety after emails and other materials
were disclosed that suggested that the defendant banks had been
selling RMBS they knew were toxic.

JPMorgan argued that all of the alleged misstatements in
Dexia’s complaint were located in a prospectus or prospectus
supplement, and that there was no showing that alleged fraud
caused any of the alleged losses.

The case is Dexia SA/NV et al v. Bear Stearns & Co et al,
U.S. District Court, Southern District of New York, No.
12-04761.

© 2011 REUTERS (www.reuters.com)

The Financial Benefits of Moving Back Home

Posted by DewRoc | Posted in Business | Posted on 20-05-2013-05-2008

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Many college graduates won’t be scrolling through Craigslist ads and Facebook

posts for new roommates this spring. That’s because they already know theirs—Mom and Dad.

Although the economy is on the mend, a still-tight job market in many areas and a load of student debt will force many 20-somethings to move back home this spring—and stay for a while. And they’ll be joining plenty of last year’s graduates who still can’t afford to move out on their own.

Paulo Buchinho

But financial experts say young adults can use a return to the family nest as an opportunity to focus on paying off debt and start a savings plan for both the short and long term.

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“Because you’re not paying rent [or are paying low rent to your parents], it’s a chance to make sure you quickly get on the right financial foot,” says Alexa von Tobel, founder of LearnVest.com, an online provider of financial-planning services and education for young adults.

The first thing you should do is sit down with your parents and discuss what will be expected of you—financially or otherwise, says Meg Jay, a psychologist in Charlottesville, Va., and author of “The Defining Decade: Why Your Twenties Matter, and How to Make the Most of Them.” You need to agree on which bills you’ll pay, how you’ll handle any debt (say, student loans and credit cards), how much you’ll set aside for savings and, of course, a timetable for when you will eventually move out. This allows you to take ownership of your finances and develop responsible habits even if you’re not yet financially independent. Plus, being on the same page as your parents will help minimize any household tension.


How you go about this will, of course, depend on your employment situation. If you’ve landed a job right after graduation, you should start paying for your personal expenses—cellphone bill, car payment, insurance and gas among them—as well as aggressively paying down any debt.

John Schuller returned home after graduating from Illinois State University in December in order to save money. He started working at a Chicago immigration firm in February and pays for expenses including a gym membership and motorcycle registration and insurance. He will soon start making student-loan payments as well.

Working young adults also should contribute to the household budget in some fashion. Mr. Schuller, 22, says he puts gas in the family car and fixes household appliances that are on the fritz. At a recent family outing for breakfast near his home in Darien, Ill., he picked up the tab.

If you’re moving back home to attend graduate school, the rules should still apply—in some form. Sarah Bialecki moved back home to Monroe, Mich., after graduating from Central Michigan University in spring 2011, to pursue a graduate degree in occupational therapy. The 23-year-old works part-time as a switchboard operator to pay for her personal expenses, such as gas, textbooks, food and tuition, not covered by federal student loans.

And if you’re returning home without a job, your No. 1 task should be to find one. “You need to get a job—any job,” says Harlan Cohen, syndicated advice columnist and author of books for young adults and parents. This includes landing part-time or summer work while you actively network and look for a full-time spot.

Once you have a handle on your expenses, start saving—a lot. Start by building up emergency savings equivalent to three to six months of your take-home pay (or if you’re not working full-time, your expenses), says Kimberly Foss, a wealth adviser in Sacramento, Calif.

Then start thinking long term. If your employer offers a 401(k) retirement saving plan, contribute at least enough to get a company match, if there is one. Also, open up a Roth individual retirement account (maximum contribution for 2013 is $5,500).

And what if you’ve been doing all of these things for a year or so, and still can’t afford to leave the nest? Try an enforced savings plan with your parents, says Ms. Foss. Pay your parents a set amount each month to cover, say, rent, utilities and groceries. Have them set aside the money until there’s enough saved up for you to move out.

—Email: lindsay.gellman@wsj.com

© 2011 Wall Street Journal (www.wsj.com)

Abortion Doctor Convicted of Murder

Posted by DewRoc | Posted in Business | Posted on 19-05-2013-05-2008

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PHILADELPHIA—A doctor who performed abortions was convicted Monday of first-degree murder in the deaths of three babies who were killed with scissors after they were born alive.

In a case where the grisly details only compounded the emotional debate over abortion, Kermit Gosnell also was convicted of involuntary manslaughter in the 2009 sedation-overdose death of a 41-year-old woman during an abortion procedure. Dr. Gosnell was found not guilty on a third-degree-murder charge in the woman’s death, and he was acquitted of first-degree murder of a fourth baby.

MCT/Zuma Press

Kermit Gosnell leaving a Philadelphia courthouse after his conviction.

Dr. Gosnell, 72 years old, faces a possible death sentence when the jury reconvenes next week to consider sentencing.

Foes and supporters of abortion rights have seized on Dr. Gosnell’s case. Antiabortion activists said charges that the doctor and members of his staff severed babies’ spinal cords showed the violence inherent in terminating pregnancies. Such groups have sought to draw attention to abortions later in pregnancy, an issue they believe could sway Americans who generally support abortion rights but also believe there are at least some instances in which abortion should be illegal.

“The few inches that separate a child in the womb from a child outside the womb should never determine whether its intentional ‘demise’ is permitted by law or whether a ‘right’ to kill it no longer exists,” said Marjorie Dannenfelser, president of the Susan B. Anthony List, a group that focuses on electing antiabortion women lawmakers.

Some supporters of abortion rights have blamed curbs on abortion funding and abortions later in pregnancy for driving vulnerable women to Dr. Gosnell, whose small West Philadelphia clinic was shut down in 2010. His clinic had a reputation for performing late-term abortions that other Philadelphia-area clinics wouldn’t, according to a 2011 grand-jury report recommending charges against Dr. Gosnell.

“In Pennsylvania and many other states with restrictive laws, women face incredible barriers that affect their ability to obtain quality care,” said Nancy Stanwood, board chairwoman-elect of Physicians for Reproductive Health. “Gosnell preyed on low-income women who had few options to obtain the care they needed. His practice was illegal, unethical and unsafe.”

Dr. Gosnell also was convicted of several counts of performing abortions beyond the 24-week gestation limit under Pennsylvania law, and other charges. He had initially been charged in the deaths of seven babies but was acquitted of three of the murder counts, after his lawyer argued there was insufficient evidence the babies were born alive.

The case first came to light when city and federal agencies were investigating reports of illegal prescription-drug activity at the clinic, the Women’s Medical Society. During that probe, detectives were told that the 41-year-old woman, Karnamaya Mongar, had died during an abortion procedure in 2009. In a 2010 raid, federal and city law-enforcement officers discovered conditions at the clinic that prosecutors said were unsanitary, such as blood on the floor and fetal remains being stored in containers and in freezers.

The case prompted the Pennsylvania Legislature to tighten regulations governing inspections of abortion clinics by state health authorities. The clinic hadn’t been inspected for more than a decade before the 2010 raid.

During more than five weeks of testimony in the Philadelphia Court of Common Pleas, more than 50 witnesses were called by prosecutors to testify, including clinic workers who said Dr. Gosnell allowed his clinic to become unsanitary and that he didn’t properly supervise staff. In a closing argument last month, Assistant District Attorney Edward Cameron told jurors the case was “about getting justice” for Ms. Mongar and for “those four babies who ended up dead.”

Mr. Cameron showed jurors some of the equipment from the clinic, which he said was substandard, and showed a picture of one of the babies who was killed after being born alive. He noted that clinic workers, including some who have pleaded guilty to murder charges, testified they saw some babies move and heard a baby make a sound before their spinal cords were severed.

Dr. Gosnell’s lawyer, John McMahon, had disputed the allegations. He said fetuses were injected with a drug designed to cause fetal demise before labor was induced. He noted some clinic workers testified the babies didn’t appear to be alive after birth. Mr. McMahon said movement in babies’ limbs could have been because of postmortem spasms.

“Those babies were not alive, that’s the evidence,” he said.

Dr. Gosnell didn’t testify, and his lawyer didn’t call any witnesses. When the verdict was read, Dr. Gosnell showed little visible reaction. Afterward Mr. McMahon said Dr. Gosnell was disappointed over the conviction, but he added, “The jury has spoken.” The Philadelphia district attorney’s office declined to comment.

Bernard W. Smalley, an attorney representing the family of Ms. Mongar, said, “I think justice was done today.” He has filed a wrongful-death lawsuit against Dr. Gosnell, which is pending.

Antiabortion activists following the case have focused particularly on questions about babies born alive in the course of induced abortions, renewing a campaign around the issue more than a decade after they secured a 2002 federal law that set out legal rights for infants delivered with signs of life in the course of an attempted abortion.

The legislation had bipartisan support at the time, including from lawmakers who favor abortion rights but who gained assurances that the law wouldn’t be used to undermine abortion laws or to interfere with physicians’ judgments about how to treat premature babies.

Some states also have renewed a push to pass legislation echoing the federal requirement. Florida lawmakers passed a measure in April to give infants delivered with signs of life during or immediately after an attempted abortion “the same rights, powers, and privileges as any other child born alive in course of natural birth.”

Write to Peter Loftus at peter.loftus@dowjones.com and Louise Radnofsky at louise.radnofsky@wsj.com

A version of this article appeared May 14, 2013, on page A1 in the U.S. edition of The Wall Street Journal, with the headline: Abortion Doctor Convicted Of Murder in Baby Deaths.

© 2011 Wall Street Journal (www.wsj.com)

Firms Get Hand With Twitter, Facebook

Posted by DewRoc | Posted in Business | Posted on 19-05-2013-05-2008

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Sylvester Chisom began paying a consultant last summer to blog on Twitter, post status updates on Facebook and run marketing campaigns on both sites for his auto-detailing business.

David Buckner

Sylvester Chisom, front, and Arthur Shivers pay a consultant to market their auto-detailing business on Facebook and Twitter.

He thinks the service, which costs $450 a month, is worth it. “It’s just better having somebody else dedicated to thinking of stuff to put up,” says Mr. Chisom, co-owner of Showroom Shine Express Detailing LLC in St. Louis.

Some small-business owners, overwhelmed by the time commitment required of marketing their products and services via social media, are hiring consultants to lend a hand. But the price of such support can vary widely based on the extent of work involved, and many entrepreneurs with already meager resources for marketing and advertising may need to think carefully before taking on the extra cost.

The start-up 3 Green Angels, for example, charges clients a $400 fee to organize Twitter parties — real-time discussions on specific topics. Everywhere LLC, another specialty firm in Atlanta, charges clients up to $20,000 to arrange three streaming video press conferences led by popular bloggers.

Other agencies simply tack on social-media support as part of a package of advertising and public-relations services. Red Square Agency Inc., in Mobile, Ala., charges clients around $200 an hour, and ThinkInk LLC charges $10,000 to $20,000 a month for the integrated services.

Showroom Shine’s Mr. Chisom says he’s received several inquiries from potential customers who said they learned about his company through a recent promotion on Facebook. Revenue and traffic to his company’s Web site are up slightly from this time last month, he adds.

But Jonathan Zadok, co-owner of the Coffee Groundz LLC in Houston, says he wouldn’t pay another firm to blog on behalf of the four-year-old café.

Imelda Bettinger

The Coffee Groundz prefers to use its general manager, J.R. Cohen, to promote the café.

“The idea with Twitter is that you get close to an immediate response,” he says. With an in-house person handling it, “there’s no middle man that has to go check with the company,” he says.

Mr. Zadok says last fall Coffee Groundz’s general manager, J.R. Cohen, set up profiles for the café on Twitter and Facebook. Customers started tweeting orders and special requests such as booth reservations, and in-store events promoted on the sites drew crowds three times as large as those previously advertised through signs and other traditional means.

Mr. Cohen, 31 years old, says he simultaneously posts blog entries on Twitter, Facebook and his employer’s Web site three times a day, often from his BlackBerry. He receives text-message and email alerts whenever messages are posted to Coffee Groundz’s feed so he can respond, if necessary, in a timely manner.

Mr. Cohen taught himself how to use Twitter and Facebook in about a month despite being someone who’s “not tech savvy at all,” he says. He estimates he devotes no more than 30 minutes a day to managing his employer’s presence on social media. “That’s really all you need,” he says.

Larry Chiagouris, professor of marketing at Lubin School of Business at Pace University, says it makes sense for some companies to pay for help to quickly learn social-media basics. But to use sites like Twitter and Facebook effectively, he says small firms typically need to be in control to show they are legitimate and sincere. “Unless a third party lives with you a long time, they can’t do that very well,” he says.

Some small-business owners say they are paying only for training and will eventually take full responsibility for managing their companies’ day-to-day presence on social media. Still, others say they need continuous support for handling certain tasks and promotions because they lack the necessary manpower and expertise.

Back of the House USA LLC, a St. Petersburg, Fla., provider of back-office support to solo entrepreneurs, falls into the latter category. Founder Erik Vonk says he and the firm’s 12 employees are getting “technical guidance” in using social media from consultants at Everywhere. But he adds that any opinions expressed on the sites “are ours.”

Back of the House has been paying Everywhere a monthly retainer since the spring and expects the social-media training to wrap up late next month. Afterward, Everywhere’s consultants will continue to help the firm take advantage of social media by organizing special promotions, monitoring what’s being said about the company and more.

The service is costing Back of the House between $5,000 and $15,000 a month (Mr. Vonk declined to be more specific).

So far Mr. Vonk says the investment is paying off. “I’m learning enormous amounts about how social media work, where to find the right software, how to search, what lingo to use, etc.,” he says.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

© 2011 Wall Street Journal (www.wsj.com)

Colleges Dangle Tuition Deals

Posted by DewRoc | Posted in Business | Posted on 18-05-2013-05-2008

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A growing number of liberal-arts colleges are supplementing their glossy brochures touting ivy-covered libraries and great-books seminars with more pecuniary pitches: Buy seven semesters, get one free. Apply today, get $2,500 cash back. Free classes after four years.

Schools are adjusting their marketing to attract students at a time when families are struggling to foot the bill for college. Some of the most aggressive offers come from the most financially vulnerable schools: midtier, private institutions heavily dependent on tuition and in regions with shrinking pools of college-bound high-school seniors.

Alma College in Alma, Mich., started this past fall promising free classes for those who need to stay longer than four years. It also is offering a $2,500 stipend to pursue an internship or research project to attract students from outside the school’s traditional central-Michigan recruiting base, says President Jeff Abernathy.

At least two-dozen private colleges froze tuition this past fall. Others are going further. Spring Arbor University in Michigan agreed in February to pick up a portion of the tab for future students who land low-paying jobs after graduation; that offer will apply to those working 30 hours a week and earning up to $37,000. Students who started last fall at Union College in Barbourville, Ky., will receive their eighth semester tuition-free if they maintain a 3.5 grade-point average.

—Douglas Belkin

and Melissa Korn

The Wall Street Journal

Refund Delay

The nation’s biggest tax preparer bungled more than 600,000 returns, delaying refunds by as much as six weeks, according to the Internal Revenue Service.

H&R Block

improperly filed Form 8863, used to claim educational credits, leaving a mandatory field blank. The snafu affects about 10% of the 6.6 million tax returns containing Form 8863, IRS spokeswoman Michelle Eldridge says. Those taxpayers may have to wait six more weeks before they receive their refunds, she says, adding that the IRS is hoping to reduce that wait time.

H&R Block confirms there is an issue with tax returns filed before Feb. 22 because the IRS changed the way it processes some of the yes or no questions on the form. While in previous years leaving a field blank to indicate “No” on certain questions was acceptable, the IRS is now requiring preparers to enter an “N.” H&R Block says it’s working with the IRS to clear these errors.

—Jonnelle Marte

MarketWatch.com

Cheaper Tablet

Amazon.com


has pared the price of its large-screen Kindle Fire HD tablets by as much as 20%. The online retailer said the 8.9-inch Kindle Fire HD with 4G wireless capability will start at $399, down from $499. The price of the Wi-Fi only version was cut by $30 to $269.

—Greg Bensinger

WSJ.com

Hiring Plans

Wrangling over fiscal policy in Washington hasn’t dimmed American employers’ hiring outlook.

Managers report positive hiring plans for the second quarter, according to a national survey from temporary-staffing firm ManpowerGroup. The firm’s seasonally adjusted “Net Employment Outlook” for the next quarter came in at 11%, up from 10% during the year-ago period but down one percentage point from the first quarter of 2013. The second quarter’s 11% outlook compares with a -2% reading recorded for the second and third quarters of 2009, when the recession was ending.

Manpower surveyed more than 18,000 employers in 13 sectors in the 50 states, Puerto Rico and the District of Columbia.

—Brenda Cronin

Real Time Economics Blog

WSJ.com—The Aggregator, edited by Cristina Lourosa-Ricardo, features news and commentary from The Wall Street Journal and other publications. Email: cristina.lourosa@wsj.com

© 2011 Wall Street Journal (www.wsj.com)

Willing to Wait

Posted by DewRoc | Posted in Business | Posted on 17-05-2013-05-2008

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Chuck Royce has had this problem before. Returns fall behind the pack, and money starts to flow out of his actively managed Royce Pennsylvania

Mutual Fund into equity-index funds, bonds, and most recently, exchange-traded funds.

The senior fund manager, 73 years old and regarded as a top small-cap investor, blames the Federal Reserve and its quantitative-easing program for distorting values in the stock market. With assets of $6.5 billion, Royce Pennsylvania (ticker: PENNX) isn’t seriously threatened by the mild outflows over the past year; it’s mostly frustrated.

“Active managers earn their fees building a long-term performance record through time arbitrage,” says Royce, who created his fund firm, Royce & Associates, after acquiring a shell fund in 1972. “Value investors succeed not by chasing relative returns, but by embracing the fundamentals of value investing, finding the strongest, highest-quality companies at the best possible prices,” he says. By time arbitrage, he means the ability to discern long-term value—buying a stock before the market reflects that value.

Jennifer Altman for Barron’s

“This market and the wide availability of credit rewards the overleveraged operation,” says Royce.

But now, nobody wants to pay for quality, as exemplified by the popular “risk on” trades. “This market and the wide availability of credit rewards the overleveraged operations that have made excessive use of debt,” he notes. “It’s taken us awhile to understand the destructive effects of quantitative easing.”

FOR NEW YORK-BASED ROYCE, investing has always been about following a discipline. Those investors so eager to bolt for funds posting better returns should consider whether their new portfolio managers can match Royce’s 30-year record of 11.54% a year as of the end of the first quarter, versus 9.39% for the Russell 2000, or the 11.18% a year he’s managed over the past 10 years through May 8, better than 80% of all small-cap funds.

Investors, however, often are more interested in recent history. (Royce has been managing small-cap funds longer than Russell has had its small-cap index.) In the short term, Royce hasn’t done as well. For the year through May 8, the fund’s 11.22% gain is worse than 81% of the small-cap funds tracked by Morningstar. Year over year, Royce posted a 19.75% rise, well behind the Russell 2000′s 24.17% gain. The fund’s expense ratio is 0.9%.

It’s not the first time Royce has had to struggle for acceptance. The Columbia Business School grad couldn’t land a position at a top investment bank or in an elite training program, so he took a post at what’s now JPMorgan Chase in its correspondent bank-relations group. It happened to be near the equity-research department. “I guess I wagged my tail enough, so I got accepted into research,” he says. He analyzed utility stocks but left with a friend when they got the chance to buy the moribund Pennsylvania fund that a small brokerage firm wanted to shed.

Mike Karstens, founder of Karstens Investment Counsel in Omaha, Neb., and a longtime holder of Royce Pennsylvania, says he doesn’t worry about one or two years of underperformance. He has been slowly adding to his Royce holdings of late, and says, “All great managers have periods of underperformance.”

A recent study supports Royce’s view of high-quality small-caps. Furey Research Partners, an institutional boutique based in Newport Beach, Calif., found that over a 10-year period ended March 31, 2013, the least-leveraged firms in the Russell 2000 gained 48%, while the most highly levered gained only 1.9%. Leverage was measured as net debt divided by equity. The performance record is reversed over the short term. For the year ended March 31, 2013, the least-levered companies in the index gained 5.4%, while the most levered gained 15.8%.

Royce’s recipe is to buy stocks based on balance-sheet quality, returns on capital, and earnings stability. Ideally, he can buy the stocks at prices between 30% and 50% below Royce’s estimate of intrinsic value.

Royce Pennsylvania

Total Returns*
1-Yr 3-Yr 5-Yr
PENNX 19.75% 13.41% 6.57%
Russell 2000 24.17% 15.68% 7.69%
% of
Top-10 Holdings Ticker Portfolio**
Oil States International OIS 1.1%
Reliance Steel & Aluminum RS 1.0
Federated Investors FII 0.9
Helmerich & Payne HP 0.9
Ethan Allen Interiors ETH 0.8
Lincoln Electric Holdings LECO 0.8
Unit Corporation UNT 0.7
Kennametal KMT 0.7
National Instruments NATI 0.7
SEI Investments SEIC 0.7
Total: 8.3%
*All returns are as of May 8; three- and five-year returns are annualized.

** As of 3/31.

Source: Royce Funds; Morningstar; Russell

The fund manager buys slowly into seasoned small-caps that are having trouble meeting quarterly earnings guidance. A recent example was women’s clothier Ascena Retail Group

(ASNA). Its shares dropped almost 20%, to $16.50, between Nov. 28 and Jan. 16, following a poor profit report. Much of the weakness was due to Hurricane Sandy and its aftereffects. “Sooner or later, the distortions will work out of the system, and then quality will show itself,” says Royce.

He compares today with tech’s zenith: “Right now, we’re working our way through a bubble of fear, a mirror to how it was in the 1990s, when we were in a bubble of greed.” During the earlier period, Royce’s returns also lagged, and he lost customers to soaring Internet and tech funds.

One of Royce’s favorites these days has been hit dead-center by the Fed’s policies. Prolonged ultralow short-term rates have hurt Federated Investors

(FII), which runs about $280 billion in money-fund assets, about 10% of the industry’s total. Since the crisis, Federated’s stock has bounced between $14.73 and $28, versus a precrisis high of $36.73. The firm has been forced to subsidize fee income to stem more money-fund outflows. Even a half-point rise in short rates would add as much as 37.5 cents to Federated’s earnings per share, says an analyst.

Another pick is Tulsa, Okla.-based Unit Corporation

(UNT), which has a clean balance sheet and a history of solid returns on invested capital. But the stock has ranged between $36 and $62, well below its precrisis high of $88. Royce believes the market has applied a “conglomerate” discount to the company because it operates in three discrete parts of the energy business.

Royce finds these companies with the help of several experienced portfolio managers. Whitney George has spent 21 years working with Royce; Buzz Zaino is a turnaround expert who looks for bargains; Charlie Dreifus analyzes companies’ accounting integrity and is a disciple of Baruch College’s accounting guru Abe Briloff; and Jay Kaplan tracks top-performing small-caps. Royce is well known for its collegial atmosphere and low turnover.

Investors can also get the benefit of the team’s skills through the closed-end Royce Value Trust

(RVT).

One of money management’s toughest tests is sticking to a strategy that, in the short term, is underperforming. Morningstar has dubbed Royce’s recent returns “uninspiring,” and one of its analysts notes that Royce has been hurt by avoiding bank stocks, utilities, and real-estate investment trusts. But if you think the Fed will raise rates in the next year or two and that a high-quality balance sheet will count for more, then Royce could be a wise bet.

E-mail:
editors@barrons.com

© 2011 Wall Street Journal (www.wsj.com)

Nikkei falls for 2nd straight day, investors cautious over recent steep rise

Posted by DewRoc | Posted in Business | Posted on 17-05-2013-05-2008

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Thu May 16, 2013 8:07pm EDT

TOKYO, May 17 (Reuters) - The Nikkei share average fell for
a second day on Friday as caution over the recent steep rises
continued to spur profit-taking, while a pullback in Wall Street
soured investor sentiment.
    The Nikkei shed 0.8 percent to 14,914.31, while the
broader Topix dropped 0.6 percent to 1,238.26.

© 2011 REUTERS (www.reuters.com)

Why Italy Looks Cheap

Posted by DewRoc | Posted in Business | Posted on 16-05-2013-05-2008

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You would have to be crazy to invest in the Italian stock market, right?

After all, the country is plunged into yet another political crisis. It is struggling through its longest recession since World War II. Italy’s national debts are among the largest in the world, both in absolute terms and in relation to gross domestic product, and bond markets consider the country’s debt to be risky.

[image]

The Wall Street Journal

Yet successful investing is often counterintuitive. Research shows that the greatest investment gains over the long term typically accrue to those who buy stocks when they are inexpensive.

And that tends to be at times of financial distress, political uncertainty, or both.

If you have the patience and the appetite for risk, Italian stocks today look like an intriguing investment.

The FTSE MIB index of Italian stocks is down 8% in U.S. dollar terms so far this year, underperforming the 2% rise in the broader European markets, as measured by the Euro Stoxx index, and the 8% rise in the MSCI World index, which tracks global markets.

Italy has largely been left behind by the world-wide rally that began in March 2009. At 15339, the FTSE MIB is barely one third of the peak seen in 2007 and is up only about a fifth from the 2009 lows.

In comparison, the MSCI World index has doubled from its lows, in U.S. dollar terms, and today is about 15% below the 2007 peak.

How cheap is Italy? It trades at less than 11 times forecast per-share earnings for the next 12 months, according to data provider FactSet. That is far below the average of about 15 times seen over the past 25 years. It is also much lower than the world average of 13 times forecast earnings.

What’s more, Italy’s dividend yield, meaning annual dividends divided by the stock price, is above 4%, compared with just 2.7% for the world overall. That is a sign that Italian stocks are inexpensive in relation to company profits, and means investors collect more income from the stocks.

Credit Suisse

recently concluded that Italy was the cheapest market in Europe by a significant margin on a number of measures designed to show long-term value, such as comparing stock prices with companies’ net asset values.

Analysts at SG Securities agree. European strategist Paul Jackson calculated Italy is the cheapest market in a region itself underpriced.

While many experts point to Italy’s problems, some contend that the financial situation isn’t as bad as it appears.

“It’s not going bust, and the economy is going to recover over the summer,” says Holger Schmieding, chief economist for Berenberg Bank, a private bank in Hamburg with about $30 billion under management. “The political situation is a mess, but it is usually a mess, and the country will live with it.” Mr. Schmieding says the banks, despite recent debt losses, are in reasonable shape.

The iShares MSCI Italy Capped Exchange-Traded Fund is the only pure-play Italian fund available to retail investors. It has annual expenses of 0.51%, or $51 for every $10,000 invested, and a dividend yield of 3%. About 28% of the fund is invested in financial stocks, and another 22% in Italy’s most valuable company, oil-and-gas giant Eni.

Leila Heckman, managing director of Roosevelt Investment Group, an investment firm in New York with $4.4 billion under management, likes the fund and holds it in client portfolios. She says Italy looks like a cheap market and over the long run those tend to pay off well. This is the simplest low-cost way to invest, she adds.

U.S. investors also can buy individual Italian stocks on U.S. exchanges, but this is a different proposition. An individual stock’s performance is mainly tied to that of the company and its industry, rather than the national market. Strategists suggest looking for high-quality companies, including multinationals, whose stocks may be trading cheaply simply because they are based in Italy.

Eni is Italy’s version of Exxon Mobil,

and it is far cheaper, trading at 1.2 times net asset value, compared with 2.5 times for the U.S.-based blue chip. That might present an opportunity. If Italian stocks come back into favor, Eni investors could get an uplift.

Edward Smith, global strategist at investment firm Collins Stewart in London, with $15 billion under management, highlights northern Italian firm Danieli & C. Officine Mecchaniche, which makes equipment for steel mills. Mr. Smith says the company’s balance sheet is rock solid, most of its sales are outside Italy, and the stock trades at less than nine times forecast per-share earnings.

“They’ve been unfairly tarnished with the Italian equity-risk premium,” he says.

Still, funds offer the simplest way to invest—and the latest political developments in Rome suggest the situation over there is complicated enough.

Write to Brett Arends at brett.arends@wsj.com

A version of this article appeared March 30, 2013, on page B6 in the U.S. edition of The Wall Street Journal, with the headline: Why Italy Looks Cheap.

© 2011 Wall Street Journal (www.wsj.com)

How 3 Companies Built Twitter Strategies

Posted by DewRoc | Posted in Business | Posted on 16-05-2013-05-2008

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Who would have thought typing such short messages could be so tricky?

By now, even the stodgiest companies have found their way onto Twitter. They have discovered it isn’t just another marketing channel with a funny name, it’s more like a conversation they need to join or risk losing influence over how consumers view them or their brands.

The service, which lets users send 140-character texts, or “tweets,” to people who have signed up to follow them, has proved to be an effective way to reach younger consumers and to help build a brand.

[CORPTWEET]

But there’s a flip side. The nearly six-year-old medium has become a very public complaint line, and ill-considered tweets or hacked Twitter accounts have caused plenty of embarrassment.

In March Chrysler Group LLP cut ties with an agency that handled its Twitter account after the agency sent a tweet that read: “I find it ironic that Detroit is known as the #motorcity and yet no one here knows how to f— drive.”

Kenneth Cole Productions Inc. apologized after making a joke on its Twitter page suggesting the Egyptian protesters who toppled the country’s government earlier this year were really clamoring for the company’s fashions. “Millions are in uproar in #Cairo. Rumor is they heard our new spring collection is now available online” the tweet read.

An April tweet on American Express Co.’s

account that urged support of Planned Parenthood was sent after the account was compromised, the company said.

In the age of Twitter, companies have to engage with their customers on the public social platform. But there are some high-profile ways things can go wrong, Elizabeth Holmes reports on The News Hub. Photo: Getty Images.

This week AMR Corp.’s

American Airlines found itself caught in a public spat after actor Alec Baldwin vented on Twitter after being removed from an American flight. “Flight attendant on American reamed me out 4 playing WORDS W FRIENDS,” Mr. Baldwin tweeted, referring to a Scrabble-like online game.

American replied via Twitter asking for his contact information. A day later, American tweeted, “UPDATE: Facts about yesterday’s removed passenger” along with a link to a statement giving a less-flattering account of the passenger’s behavior without mentioning Mr. Baldwin’s name. Mr. Baldwin deactivated his Twitter account after the incident and apologized to his fellow passengers.

Companies are adopting a variety of strategies for navigating Twitter’s pitfalls. One of the biggest issues is how many people to trust with a company’s account, known as its handle. Spread the authority too thin, and the burden can be overwhelming. Authorize too many people, and the risk of mishaps multiplies. Here’s how three very different companies—Southwest Airlines Co.,

Whole Foods Market Inc.

and Best Buy Co.—are approaching the task:

Southwest Airlines

About 10 people have a hand in Southwest’s Twitter account, fielding questions about lost baggage, delayed flights and misplaced drink coupons.

Southwest started its account, @SouthwestAir, in 2007, initially placing it under the advertising division, but later moving it the public-relations department, where it was handled by social-media specialist Christi McNeill.

Ms. McNeill soon found she lacked the knowledge to answer some tweeted questions, such as the ticket counter’s opening time at a specific airport, or the authority to quickly resolve other matters, such as refund requests.

“I was a traffic cop of information,” Ms. McNeill said. “Can you imagine if you called into an airline and the person who answered the phone had to ask someone else for the answer?”

This year the airline’s communications department teamed up with its customer-relations team to recruit and train employees to answer questions on Twitter. At least one person from each unit monitors the account from about 5 a.m. to 11 p.m. central time, roughly matching Southwest’s flight schedule. The team is on call in the event of bad weather or service disruptions.

If someone tweets a complaint to @SouthwestAir, the reply may come from Whitney Bartels, via her account @SouthwestWhit. “So sorry to hear about your [lost] luggage. Have you filed a claim? Any progress yet?” she recently tweeted to an upset customer.

Southwest’s Twitter feed reflects its casual culture. That temporarily changed in April, when the fuselage on a Southwest plane ruptured in midflight. The carrier’s earlier tweets joking bout April Fool’s Day, quickly gave way to serious statements about the incident and Web links on how to rebook flights.

Using a modified version of the company’s social-media crisis plan, which covers how best to communicate and what to say in the event of an emergency, Ms. McNeill says, “We shifted our tone to be a little bit more corporate.”

“Enjoy the wifi!” Ms. McNeill tweeted to a customer before the incident. Shortly afterward, she got more serious, tweeting, “Southwest Airlines responds to loss of pressurization event on flight from PHX to SMF,” with a link to a Southwest statement about the event. She continued to provide updates.

Whole Foods

The upscale grocer has put its Twitter account, @WholeFoods, in the hands of a single employee, Michael Bepko, its global online community manager. Mr. Bepko says he spends about a third of his day on Twitter, monitoring mentions of Whole Foods, tackling shoppers’ questions and posting recipes.

“They’re easy, they’re delicious…serve a roast with the most!” he tweeted recently along with a link to a recipe for Italian pot roast.

Whole Foods launched its Twitter account in June 2008 and now has more than 2.1 million followers. Mr. Bepko, who took the reins about a year ago, says his goal is broader engagement with customers. Many of the chain’s stores now have separate accounts to answer local questions. In November, Whole Foods began a weekly Twitter chat, for an hour every Thursday, to discuss topics such as holiday menu planning, with its followers.

Mr. Bepko says he spends about 90% of his time talking to individual shoppers. Most of their inquiries are basic, such as when a Whole Foods will come to their neighborhood. Others, he says, require more research. Occasionally a customer will make an unusual complaint, about a dog outside a store, for example, or a bug in a bag of salad.

“Sorry to hear about this. Did you mention it to the store where the salad was purchased?” he replied to the bug complaint.

Mr. Bepko checks the company’s Twitter feed many times a day. “The online community doesn’t recognize office hours—nor should they,” he says. If a questioner has a request on Friday evening, “waiting until Monday is just not good enough.”

Best Buy

The electronics retailer has employed an army of associates to handle its various Twitter feeds. The main account, @BestBuy, sends its own tweets but also incorporates some from its more-specialized handles, such as @BestBuy_Deals, @GeekSquad and @BBYNews.

The Twitter arm of Best Buy’s help desk, which publishes under the handle @Twelpforce, exemplifies the company’s more-is-more approach to the medium. Tweets to the desk are answered by one of the roughly 3,000 Best Buy employees who have signed up for the task since the handle was launched two years ago, according to Gina Debogovich, who oversees U.S. social-media activity for Best Buy.

Having a range of workers participate lets the company tap many areas of expertise, Ms. Debogovich says. Questions tend to be about items a customer is interested in purchasing. “There is no right answer often,” she says.

To be part of @Twelpforce and other social-media outlets, Best Buy requires employees to enroll via a website that verifies their employment status and lays out terms and conditions. The company uses an internal video and its publicly available social-media policy, which prohibits such things as sharing nonpublic financial data and customers’ personal information, to explain what it calls its healthy usage guidelines to the @Twelpforce participants.

“Remember, your responsibility to Best Buy doesn’t end when you are off the clock,” the policy says.

Best Buy’s chief executive, Brian Dunn, tweets from his own handle, @BBYCEO. His musings range from sports topics to support for veterans. Sometimes customers use his account for complaints.

A customer recently tweeted Mr. Dunn to complain about the customer service at Store #310. He replied the same day with his personal email address and a request that the tweeter send him contact information. “We will be in touch. I want us to make it better,” he tweeted.

Write to Elizabeth Holmes at elizabeth.holmes@wsj.com

© 2011 Wall Street Journal (www.wsj.com)

Firms Get Hand With Twitter, Facebook

Posted by DewRoc | Posted in Business | Posted on 15-05-2013-05-2008

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Sylvester Chisom began paying a consultant last summer to blog on Twitter, post status updates on Facebook and run marketing campaigns on both sites for his auto-detailing business.

David Buckner

Sylvester Chisom, front, and Arthur Shivers pay a consultant to market their auto-detailing business on Facebook and Twitter.

He thinks the service, which costs $450 a month, is worth it. “It’s just better having somebody else dedicated to thinking of stuff to put up,” says Mr. Chisom, co-owner of Showroom Shine Express Detailing LLC in St. Louis.

Some small-business owners, overwhelmed by the time commitment required of marketing their products and services via social media, are hiring consultants to lend a hand. But the price of such support can vary widely based on the extent of work involved, and many entrepreneurs with already meager resources for marketing and advertising may need to think carefully before taking on the extra cost.

The start-up 3 Green Angels, for example, charges clients a $400 fee to organize Twitter parties — real-time discussions on specific topics. Everywhere LLC, another specialty firm in Atlanta, charges clients up to $20,000 to arrange three streaming video press conferences led by popular bloggers.

Other agencies simply tack on social-media support as part of a package of advertising and public-relations services. Red Square Agency Inc., in Mobile, Ala., charges clients around $200 an hour, and ThinkInk LLC charges $10,000 to $20,000 a month for the integrated services.

Showroom Shine’s Mr. Chisom says he’s received several inquiries from potential customers who said they learned about his company through a recent promotion on Facebook. Revenue and traffic to his company’s Web site are up slightly from this time last month, he adds.

But Jonathan Zadok, co-owner of the Coffee Groundz LLC in Houston, says he wouldn’t pay another firm to blog on behalf of the four-year-old café.

Imelda Bettinger

The Coffee Groundz prefers to use its general manager, J.R. Cohen, to promote the café.

“The idea with Twitter is that you get close to an immediate response,” he says. With an in-house person handling it, “there’s no middle man that has to go check with the company,” he says.

Mr. Zadok says last fall Coffee Groundz’s general manager, J.R. Cohen, set up profiles for the café on Twitter and Facebook. Customers started tweeting orders and special requests such as booth reservations, and in-store events promoted on the sites drew crowds three times as large as those previously advertised through signs and other traditional means.

Mr. Cohen, 31 years old, says he simultaneously posts blog entries on Twitter, Facebook and his employer’s Web site three times a day, often from his BlackBerry. He receives text-message and email alerts whenever messages are posted to Coffee Groundz’s feed so he can respond, if necessary, in a timely manner.

Mr. Cohen taught himself how to use Twitter and Facebook in about a month despite being someone who’s “not tech savvy at all,” he says. He estimates he devotes no more than 30 minutes a day to managing his employer’s presence on social media. “That’s really all you need,” he says.

Larry Chiagouris, professor of marketing at Lubin School of Business at Pace University, says it makes sense for some companies to pay for help to quickly learn social-media basics. But to use sites like Twitter and Facebook effectively, he says small firms typically need to be in control to show they are legitimate and sincere. “Unless a third party lives with you a long time, they can’t do that very well,” he says.

Some small-business owners say they are paying only for training and will eventually take full responsibility for managing their companies’ day-to-day presence on social media. Still, others say they need continuous support for handling certain tasks and promotions because they lack the necessary manpower and expertise.

Back of the House USA LLC, a St. Petersburg, Fla., provider of back-office support to solo entrepreneurs, falls into the latter category. Founder Erik Vonk says he and the firm’s 12 employees are getting “technical guidance” in using social media from consultants at Everywhere. But he adds that any opinions expressed on the sites “are ours.”

Back of the House has been paying Everywhere a monthly retainer since the spring and expects the social-media training to wrap up late next month. Afterward, Everywhere’s consultants will continue to help the firm take advantage of social media by organizing special promotions, monitoring what’s being said about the company and more.

The service is costing Back of the House between $5,000 and $15,000 a month (Mr. Vonk declined to be more specific).

So far Mr. Vonk says the investment is paying off. “I’m learning enormous amounts about how social media work, where to find the right software, how to search, what lingo to use, etc.,” he says.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

© 2011 Wall Street Journal (www.wsj.com)