PROCTER & GAMBLE STOCK RISES ON EARNINGS REPORT

Proctor & Gamble (PG) released their fiscal second quarter results today, reporting revenue and earnings that beat out analysts’ estimates.  The company reported second quarter revenue of $22.2 billion compared to forecasts of $21.91 billion and core earnings per share of $1.22, compared to analyst forecasts of $1.11 per share.  Revenue increased 6.95% from $20.74 billion in the previous quarter. Net income increased 44.28% from $2.81 billion in the previous quarter.  Trading opened at $71.75 and quickly set a new 52 week high of $73.25.  This is good news for the world’s largest consumer products manufacturer, maker of household products including Tide and Pampers. 

According to Wall Street Cheat Sheet, “Our second quarter results were at the high end of our expectations on the top-line and well ahead of forecast on operating profit, earnings per share and cash flow,” said Chairman, President, and Chief Executive Officer, Bob McDonald. “Global market share trends improved as we continued to implement our growth strategy and made very good progress against our productivity and cost savings goals. Our strong first half results have enabled us to raise our sales, earnings and share repurchase outlook for the fiscal year, while we strengthen investments in our innovation and marketing programs.”

Summary and Guidance from MarketWatch

• Organic sales increased three percent for the quarter, at the top end of the guidance range.
• Organic sales growth was broad-based, with all business segments increasing by two percent or more versus the prior year.
• Core net earnings per share increased by 12 percent to $1.22.
• Core gross margin increased 110 basis points due to the impact of higher pricing and manufacturing cost savings, partially offset by unfavorable geographic and product mix. Reported gross margin, including non-core restructuring charges, increased 80 basis points.
• Core and reported selling, general and administrative expenses (SG&A) as a percentage of net sales was unchanged, as enrollment reductions and productivity savings were offset by higher pension and employee benefit costs. Non-core charges in SG&A were in line with the prior year level.
• Core operating profit increased seven percent. Reported operating profit, including non-core charges, increased 68 percent.
• Operating cash flow was $3.8 billion for the quarter. The Company repurchased $1.4 billion of shares during the quarter and returned $1.6 billion of cash to shareholders as dividends. 

P&G is estimating net and organic sales growth in the range of three percent to four percent for the January - March quarter. Foreign exchange is expected to be neutral to sales growth. 

The Company expects March quarter core EPS in the range of $0.91 to $0.97, down three percent to up three percent compared to prior year core EPS of $0.94. On an all-in basis, P&G is forecasting earnings per share in the range of $0.90 to $0.96, an increase of 10 percent to 17 percent versus prior year diluted EPS of $0.82. Prior year all-in results included $0.13 of non-core costs, primarily related to restructuring charges. Current year all-in EPS guidance includes non-core restructuring charges of $0.01 per share.

APPLE - DOWN BUT NOT OUT

Apple Inc. (AAPL) stock dropped sharply Monday closing at $501.75, down $18.55.  Tuesday morning opening was $$498.30 and as of 11am EDT it is currently trading around $489 per share.  Shares hit a record high of $705.07 on September 19, 2012.

The Wall Street Journal reported Sunday evening that Apple had cut orders for iPhone 5 parts last month by roughly 50 percent, signaling a lower demand in the device than they had predicted.  This comes at a time when the company is facing increased competition from other smartphone makers who have eroded Apple’s market share.  In the last quarter of 2011 Apple held 23 percent of the worldwide smartphone market share.  During third quarter 2012 Apple’s market share had dropped to 14.6 percent.  Samsung Electronics has overtaken Apple as the dominant smartphone manufacturer with 31.3 percent market share in the third quarter 2012, up from 8.8 percent in 2010.

But hang onto those shares because as CNBC is reporting, Jefferies’ senior technology analyst Peter Misek puts the situation into perspective.  "We look at it as a little bit of a letdown obviously. It's not great that this happened. We thought this device would be the biggest seller of all time and in fact we think around 50 million units sold in Q4, which would make it the biggest selling electronics product of all time in a quarter," Misek said. "But there were hopes that it would be better than that. There were hopes that in Q1 that sales would be flat and instead what we're getting is a seasonally type decline in Q1." Misek expects first quarter iPhone builds to be between 35 million and 40 million.  Jefferies is expecting Apple’s stock to reach $800 per share, in part due to their substantial cash reserves. "If we look at the full year out, we think that the company can do somewhere around $50 of earnings, remember they have $100 per share of cash. By the end of next year they'll have somewhere around $150 per share of cash," Misek said. "So what you are doing is you are actually buying a stock that effectively is $400 and we think at $50 earnings for the year that it is a cheap valuation."  Apple also has new product launches planned for this year and may be making a deal with China’s largest cellular phone carrier, China Mobile.

What all of this shows us is that Apple simply overestimated demand for the iPhone 5 and is now adjusting their component purchases.  However they still reached a milestone sales number for fourth quarter 2012.  Therefore the drop in price is most likely due to skittish and uninformed investors dumping their shares at the slightest hint of trouble.  We do not believe that now the time to sell Apple stock; on the contrary it looks to be a good time to buy.

AIG BAILS ON BAILOUT SUIT

When the United States government rescued the world’s largest insurance conglomerate from bankruptcy in September 2008 to the tune of $182 billion in public taxpayer funds no one foresaw the possibility that anyone with a financial interest in American International Group (AIG) would consider it anything other than a blessing.  However as the saying goes, no good deed goes unpunished.

Former AIG Chairman and CEO Hank Greenburg whose Star International company owned roughly 12 percent of AIG prior to the bailout and now holds an approximately 9 percent stake has filed multiple lawsuits against the government alleging that the bailout was unfair to the company’s shareholders and that the 14 percent interest rate charged by the Federal Reserve was punitive and unfair.  Greenburg also alleges that the 2008 deal which furnished the government with a sizable percentage of ownership in the company equates to unlawful seizure without just compensation in violation of the constitution.  His lawsuit is seeking approximately $25 billion in damages.

Had the government sat back and watched AIG go bankrupt, it’s highly likely that their shareholders would have lost most or all of their financial interest in the company so it’s hard to see how the bailout was unfair to them.  A 14 percent interest rate can hardly be considered excessive or punitive when many American’s pay higher rates on their credit cards each month.  In addition, it is also very hard to conceive how $182 billion and avoidance of bankruptcy can be considered unjust compensation for the ownership stake the government received.  Lastly, it’s not like the government forced the company into this deal.  AIG was given the option and they accepted, plain and simple.   

In what has become a PR nightmare for AIG, Greenburg has been attempting to convince the company’s board of directors to join his lawsuit.  This idea has caused renewed outcries across traditional and social media outlets including everything from political cartoons satirizing the idea, comparing it to the possibility of a drowning victim suing the lifeguard who rescued him, to much more vulgar and personal attacks against current AIG CEO Robert Benmosche.  For AIG to accept the bailout and then turn around and sue their rescuer is the epitome of looking a gift horse in the mouth.

To AIG’s credit however they have reportedly declined Greenburg’s demands to join his lawsuits and they appear to be genuinely grateful for their continued existence as a result of the bailout.  On Wednesday January 9 2013, CEO Robert Benmosche stated that they had declined Greenburg’s demands but that the company had a legal and fiduciary duty to at least review the proposal.  The fact that they have declined to be a party to the suit and have refused to allow Greenburg to prosecute the claims on their behalf is an indication that the company may truly be on the right track.

When all was said and done, the United States Treasury ended up with a 92 percent stake in AIG, the last of which was sold in mid-December.  AIG now again rests completely in the hands of private investors.  AIG has completely paid back their debt to the government, with interest amounting to $22.7 billion in profits, and has been running television ads publicly thanking the American people for their trust and support.  AIG’s stock lost half of its value during 2011 but gained more than 50 percent during 2012.  On Wednesday AIG stock closed at $35.76

How to Choose an Mutual Fund

Funds that belong to the investors collected for investing in bonds, stocks and money are pooled by a mutual fund. They allow investors to diversify their holdings. Money managers operate these funds, and use them for capital investment to create income for the owners. The portfolio structure of mutual funds depends on the initial objectives of an investment.

Investors don’t require individual trades and purchases. Therefore, they are able to add bonds, securities etc. at a much lower price. Here are some tips on choosing the right mutual fund for your nest egg.

1. Select your financial institution

You’ll need to purchase mutual funds through a financial institution. Research and referrals can help you decide which institution to go for. You can also compare savings account rates if you want both savings and mutual funds account. Competitive fee structures are offered by online investment management firms, while banks and credit unions are also an option. Services of financial advisors are also available.

2. Know the risks and goals

The market can shift at any time, and you should know your risk toleration limit before making an investment decision. The goals would depend on whether you’re going for short-term or long-term investment. For your nest egg, long-term investment may be a better option. You can examine the past performance of mutual funds by looking at the statistics such as returns and see the stock index to have an idea. However, past performance doesn’t guarantee future returns.

3. Invest in different types

You can consider investing in both managed funds and index funds. Index funds come with minimum fees as they aren’t managed actively, and perform with the index. Actively managed funds have high fees are they are selected by managers who believe they’ll perform well. Diversification can be achieved by investing in both types. Avoid investing in very large mutual funds as they’re prone to lose responsiveness to market changes.

4. Keep the fees in check

There are three costs related to mutual funds; the fees on purchase, fees as a percentage of the investment and fees of mutual fund managers for the portfolio. The mutual fund turnover fee gets deducted automatically from the net asset value, and investors may not be informed about them. If your financial institution has card offers for mutual fund purchase, the fees can vary, and it’s recommended that you keep an eye on the charges.

Through these tips, you’ll be able to choose a mutual fund that suits your needs.

How to Choose Your Bank

Choosing a bank is harder than it used to be. It wasn’t so long ago that, for the most part, banks all seemed pretty much equal. Today, though, we know better. We all saw what happened during the financial crisis of 2008 and nobody wants to go through that again. It’s only natural to want to find a great bank, like one of Brian F Prince’s companies. But what if there isn’t one of those where you live? How do you choose?

The first thing you need to do when trying to choose a bank is figure out what you want and need from your bank. Do you want a small town family feel? Do you prefer corporate ambivalence? Do interest rates matter? Do you want something locally owned? Do you need a bank that will work with someone trying to rebuild their credit or financial stability? Do you have a lot of money that needs to be taken care of? Are you starting from scratch with next to nothing? How quickly do you want to grow your money? All of these questions are important and require honest answers if you want to be able to narrow down your choices even a little bit.

Make sure you check out the background of every bank that you are thinking of partnering with. There are plenty of ways that you can do this. A quick glance through the Better Business Bureau is one way. There are also lots of websites out there that are dedicated to ranking banks on a variety of criteria. Talk to other people who bank there and see what they think about it. Do a news search to find out how that particular bank handled the economic crisis. Was it one of the banks that got bought up and merged, or was it one of the banks that did the buying up?

Know what a good bank really does. A good bank is one that you can access easily—not just in terms of location but in terms of your own finances. A good bank isn’t going to charge you through the nose to use their services. Some annual fees are, sadly, par for the course these days but the fee should be reasonable. A great bank will offer you methods of offsetting those fees. For example, Wells Fargo offers free checking to anybody who uses their debit cards more than ten times in a month.

The best way to find the best bank for you is to simply start doing your research. Pay a visit to each bank you’re thinking of working with and talk to a representative there about what you need and what that bank can offer you. Pay attention to how you feel while you are there. Do you feel comfortable and safe or do you feel pressured and intimidated?

Finally: remember that, for the most part, banking isn’t permanent. You don’t have to commit the rest of your life to this institution. If one doesn’t work for you, you can simply move over to a different bank that does.

Rare New Boon for Investors

Lynas scores Malaysia plant license is the just the latest among a host of news regarding the mining of rare earths elements. While many investors have focused on the benefits offered by investing in gold and silver in an economy that remains anything but certain, rare earths are beginning to attract attention around the world as a possible new avenue for safe haven investing.

Rare Earths Mining Background 

Although many people may not realize it, rare earths elements play a significant role in modern industry and technology. Numerous rare earths elements can be found in a host of products modern consumers use every day. Uses of rare earths elements include everything from hybrid cars to smartphones. Despite their widespread and ever increasing use, the supply of rare earths elements has remained significantly uncertain for many years.

This has largely been due to the stronghold China has held on the rare earths mining industry for decades. Until Lynas received the temporary operating license to mine rare earths elements in Malaysia, China accounted for 95% of the production of rare earths elements in the world. Lynas has estimated it will be able to reach a 22,000 metric ton production capacity by the end of 2013.

Although the demand for rare earths elements has continued to increase during the last few years due to amplified industrial use, the supply of these essential elements has remained stagnant. In fact, China even began to reduce export quotas two years ago. Following a diplomatic dispute with Japan, the export of rare earths from China to Japan was even temporarily suspended. The continued tightening of production by China instigated increased concern in the industry and eventually led to the entrance of several mining companies, including Lynas, into the rare earths processing sector.

Increased Production Offers New Investment Opportunities 

In light of increased production, a number of investors are now beginning to view the potential of rare earths as financial tools. Gold and silver have long served as a hedge against inflation and as tools for asset protection and growth. It is now widely believed that the new investment opportunities in rare metals and earths could serve investors in the same regard. The demand for rare earths is expected to continue climbing each year as much as 12%. Investors looking for a safe haven investment opportunity could well find that rare earths elements are just the investment tool they are seeking.

Festival of Frugality

Welcome to a Festival of Frugality. This is a blog carnival that shares financial resources so what better place to share it than here.

Here are my favorite articles:
JP presents No. You Don't Need to Buy Life Insurance for Your Children posted at My Family Finances.

Daisy presents Planning For Homebuying posted at Add Vodka.

Suba presents Brown Bag It: Tips For Making Cheap Lunch posted at Broke Professionals.

Aloysa presents How Much Money Are We Supposed to Spend on Friends? posted at My Broken Coin.

Miranda Marquit presents Four Extreme Lifestyle Choices That Save Money posted at Bargaineering.

Evan presents Increasing My Annual Income 10% posted at My Journey to Millions.

Steve presents Is it OK to get a discount if you are good looking? posted at Canadian Personal Finance.

CF presents Fiverr should be called fourer posted at The Outlier Model.

Best of the rest:
A Blinkin presents The Ideal Budget for a Single Guy Age 24 posted at Funancials.
Eddie presents The Cold Hard Truth On Being a Personal Finance Blogger - What I Learned In Less Than 2 Years! posted at Finance Fox.
MR presents Is A Roth IRA One Of The Best Protection Against High Future Tax Rates? posted at Money Reasons.
Passive Income Earner presents Is RIM a Good Investment? posted at The Passive Income Earner.
Jon the Saver presents Lack of Liquidity May Be Why You Don't Feel Rich posted at Free Money Wisdom.
Jen presents Preparing Our Finances 4 Home Ownership posted at Master the Art of Saving.
Amanda L Grossman presents My Advice to a Person Budgeting for the First Time posted at Frugal Confessions.
YFS presents 2 Home Buying Tips That People Never Tell You! posted at Your Finances Simplified.
SBB presents Is Budgeting Worth Your Time? posted at Simple Budget Blog.
Miss T. presents 8 Ways to Save Money on Groceries without Coupons posted at Prairie Eco Thrifter.
Beating Broke presents Take an Off Season Fall Vacation and Save Big posted at Beating Broke.
Peter presents Spend Money to Slash Your Budget posted at Bible Money Matters.
Paul Vachon presents Deciding When to Retire posted at The Frugal Toad.
Melissa presents The Best Things to Buy at Garage Sales (and What to Skip) posted at Bargaineering.
Echo presents 35 Ways To Save Money posted at Boomer & Echo.
SB presents How to Manage financial Accounts posted at One Cent at a Time.
Rebecca presents Frugal ways to give back posted at Doggone Thrifty.
Jim presents The Best Things to Buy at Garage Sales (and What to Skip) posted at Bargaineering.
Mama Squirrel presents Funky Doll Sofa, Almost Free (Tutorial) posted at Dewey's Treehouse.

Thanks to everyone that submitted their posts. Maybe I will do this again sometime.

Tricky Times for Baby Boomers

The Baby Boomer generation is known for their careful financial planning, frugal savings and determination to experience a relaxing retirement that is free from financial worry. However, the current financial situation has introduced new concerns regarding a boomer’s financial planning. While many people have already retired, others are just entering retirement and discovering that several common life events can suddenly pose a challenge to their financial plans. 

For this reason, it is important to be aware of several major life events that can cause a boomer to need to make changes in their financial strategy so that they can continue to live out their retirement in peace.

Selling a Business 

Self-employed Baby Boomers who are entering retirement must first contend with selling their business. This can be particularly tricky as the legalities of business sales are often complicated. However, legal fees are often expensive and can easily take a large chunk out of the profits that can be gained from selling a business. For this reason, boomers are encouraged to learn as much as they can about the selling process and carefully research real estate agents and lawyers before making any major decisions. Staying involved throughout the selling process is vital to emerging from a business sale with a substantial profit.

Divorce

No one ever wants to imagine that divorce can happen to them, but after the kids leave the nest many boomers are discovering that their marriage has come to an end. Splitting assets during a divorce, coupled with legal fees, can wreak havoc on a person’s retirement plans. 

For this reason, it is important to seek out the advice of people such as Walter Wisniewski Paragon Capital financial planner who have dedicated their careers to helping people to plan for their financial future. Because divorce is often an emotional time, it can be difficult for a boomer to think clearly about their financial plans. Therefore, a qualified financial planner can be an important asset to ensure that a person’s financial affairs are in order throughout the entire divorce process.

Losing a Spouse 

Divorce is not the only hardship that can occur within a person’s relationship during retirement. Baby Boomers must also face the concern of losing a spouse. When a spouse dies, grief can cloud financial judgment. If the surviving spouse was financially dependent upon their other half, then there is also the concern about how the estate will be divided. 

For this reason, boomers are encouraged to plan for their estates before a crisis has occurred. A qualified financial planner can help to ensure that a legal will has been established that will designate how possessions should be distributed in the event of the loss of a spouse.

Medical Bills and Lawsuits 

Finally, as boomers begin to make their way into retirement age, health can become a major concern. Even in the event of a minor illness or injury, medical bills can quickly skyrocket and begin to deplete a person’s savings. In order to avoid a person’s retirement funds being depleted by medical bills and lawsuits, boomers should look into purchasing the best insurance plans that they can afford. Long-term insurance plans can offer excellent packages that will ensure that unexpected problems do not become a financial burden.

While Baby Boomers have planned their entire lives for their retirement, it is possible that they may need to make a few changes to their financial plans if they experience a major life event. Because medical mishaps, divorce or the loss of a spouse could occur to anyone without warning, it is best to be prepared before they ever happen. For this reason, a qualified financial planner can be a Baby Boomer’s best ally when planning for their post-retirement financial future.