Twitter's Forgotten Upside

Many critics are claiming that Twitter's (NYSE: TWTR  ) current market valuation of $22 billion is far too high. In light of the fact that the company saw a near 73% increase in share price during its first day being publicly traded , the prevailing mantra is that Twitter is overvalued. Newspapers and blogs are disseminating this mindset left and right, but in the wake of such negative publicity it seems as though Twitter's upside has been forgotten.

Common critique
One reason many investors consider Twitter a bad investment is because the organization has posted consistent losses and projects losses for the foreseeable future. When compared to peers like Facebook (NASDAQ: FB  ) or LinkedIn (NYSE: LNKD  ) , Twitter is behind the curve in terms of financial position for its age. Currently, Twitter is seven years old. It took Facebook only five years to first turn its first profit and it took LinkedIn just four. Furthermore, both companies were first movers in a now-crowded space.

Twitter's net losses, however, are largely due to heavy investment in research & development (R&D). In the first half of this year alone, the company spent $111 million on R&D, more than 44% of the revenue generated during this time . This means one of two things: Either Twitter does not have a sustainable competitive advantage, or it is crafting new features that will enhance the company's already popular product. If the latter proves true, the company could be poised to see great growth.

Growth of smartphone usage
Consider Apple's recent introduction of the iPhone 5c. The mentality behind this product launch was to make inroads into a previously untapped market segment. Furthermore, other organizations like Samsung and Nokia are also crafting smartphones for low-end segments. Even the U.S. Government is setting up a program to distribute smartphones to the economically disadvantaged . As a result, more than 1.4 billion people now own smartphones worldwide, a 44% increase from last year .

This is great news for Twitter investors. As smartphones become more ubiquitous, Twitter can expect to see a rapid increase in monthly active users (MAUs). Currently, Twitter's monthly active user base stands at 230 million, a 39% increase over last year's numbers ; 76% of these users accessed the site via some mobile platform .

This is largely due to the fact that Twitter is optimized for mobile devices. In today's world, people want information quickly and they want it delivered to them in a succinct format. Twitter offers this in spades. By forcing users to condense thoughts to 140 characters, the company ensures that only the content most meaningful and relevant to an intended idea is displayed.

As Twitter's monthly active user count continues to increase, the company can expect its revenue to do the same. Right now, Twitter is currently making $1.80 per user by selling ads and it increased its revenue by 106% since last year . This growth is likely to continue as the company attracts more and more users.

Why you should invest
Ultimately, Twitter has the potential to grow at a quick rate. If it can decrease its spending on R&D, it will be poised to start turning profits. As smartphone usage becomes more prevalent, Twitter usage will increase, and advertising revenues will go up. Likewise, profits will continue to expand as Twitter adapts and proves its concept. In the midst of negative publicity, this upside shouldn't be forgotten.

More compelling ideas from The Motley Fool
This incredible tech stock is growing twice as fast as Google and Facebook, and more than three times as fast as Amazon.com and Apple. Watch our jaw-dropping investor alert video today to find out why The Motley Fool's chief technology officer is putting $117,238 of his own money on the table, and why he's so confident this will be a huge winner in 2013 and beyond. Just click here to watch!

Hot Undervalued Companies To Own In Right Now

 

GM's French Connection Goes Sour

The success of new Opel models like the Mokka SUV, a sibling of GM's Buick Encore, has GM thinking that the long-troubled Opel might be able to succeed on its own. Photo credit: General Motors Co.

Analysts were surprised when General Motors  (NYSE: GM  ) took a 7% stake in French automaker PSA Peugeot Citroen (NASDAQOTH: PEUGY  ) early in 2012. It was clear what troubled Peugeot got out of the deal -- some cash, and a lifeline -- but what was in it for GM?

GM executives hoped that Peugeot and GM's German subsidiary, Opel, could do some parts-sharing and joint development deals -- deals that could help GM end years of losses at Opel. But Peugeot turned out to be a very troubled company, and GM balked when the Peugeot family suggested that the Detroit giant buy out their stake.

That led to a very messy situation, involving the French government, tough unions -- and now, a Chinese automaker riding to the "rescue." In this video, Fool contributor John Rosevear looks at the latest developments with GM's French connection -- and explains why GM shareholders might be better off if the whole deal goes sour.

The "no choice" auto revolution is coming. Are you ready?
An under-the-radar auto company has giants such as Ford, GM, and Toyota clamoring for access to its revolutionary technology. Many forward-thinking car enthusiasts are plowing money into this little-known stock... because they know it holds a key to the explosive profit power of the coming "no-choice fuel revolution." Luckily, there's still time for you to get on board if you act quickly. All the details are inside an exclusive report from The Motley Fool. Click here for the full story!

Fed continues to cut stimulus by $10B

The Federal Reserve agreed Wednesday to continue to pare its economic stimulus despite a slowdown in job growth last month.

In a statement after a two-day meeting, the Fed said it will buy $65 billion a month in Treasury bonds and mortgage-backed securities, down from $75 billion. In December, Fed policymakers took their first step in tapering the program begun in September 2012, reducing the bond-buying from $85 billion a month.

The purchases are intended to hold down long-term interest rates and spur the economy and labor market.

FIRST TAKE: Fed action won't cheer markets

FED STATEMENT: Full text

DAVID MARSH: Tests loom for Janet Yellen

In its statement, the Fed noted that since its last meeting "labor market indicators were mixed" and the housing recovery "slowed somewhat." But it added that household spending and business investment "advanced more quickly in recent months." Policymakers also cited the labor market's "cumulative progress" since the Fed began the bond-buying and the improved outlook.

Fed Chairman Ben Bernanke told reporters last month that the Fed would continue to trim the purchases generally in $10 billion increments, assuming economic reports meet Fed projections. Bernanke said the bond-buying likely would be halted by the end of the year.

Employers added only 75,000 jobs last month, down sharply from a 200,000-plus monthly pace since last August. That raised questions about whether the Fed would hold off on tapering this month. But economists cited Labor Department data that indicated much of the decline was due to severe weather that temporarily kept workers at home.

The unemployment rate last month fell to 6.7% from 7%, edging closer to the 6.5% the Fed has identified as a threshold for when it could begin to consider raising its benchmark short-term interest rate. That rate has been near zero since the 2008 financial crisis.

Top 5 Sa! fest Stocks To Own Right Now

But the Fed reiterated Wednesday that it will likely keep the short-term rate near zero "well past" the time that unemployment falls below 6.5%.

The Fed agreed to reduce its purchases of Treasury bonds to $35 billion a month from $40 billion, and its purchases of mortgage-backed securities to $30 billion from $35 billion. The vote was unanimous. Boston Fed chief Eric Rosengren, who dissented to the start of tapering last month, is no longer a voting member of the Fed's policymaking committee.

Despite the weak jobs report, the economy generally has accelerated recently, with economic growth in the second half of 2013 estimated to exceed 3%. Meanwhile, some Fed policymakers have said the risks of the bond-buying, such as eventual high inflation and asset bubbles, have risen.

The meeting was the last for Bernanke, whose second four-year term ends Jan. 31. Bernanke is credited with helping lead the nation from the financial crisis and recession with a series of bold moves to pump cash into the economy. Fed Vice Chair Janet Yellen will succeed him, becoming the first woman to head a major central bank.

Orange? Pink? Ford Mustang has colorful past

If you're buying a new Ford Mustang, there's a good chance you'll order it in black. It's the most popular color right now. But it wasn't always that way.

Over the years, the iconic pony car has been offered in just about every hue imaginable, whether it was color-shifting "Mystichrome" or Playboy Pink. As the new Mustang is about to get launched and Mustang marks 50 years, Ford is recapping a little bit of the car's lore in colors.

Since Mustang is one of a handful of car models sold largely on emotion, color is important.

"Our Mustang owners are passionate about their cars, and the exterior paint color they choose invokes an emotional response to the vehicle," says Melanie Banker, the model's marketing manager. "Mustang owners buy a vehicle in School Bus Yellow or Grabber Blue because it reflects what they want their Mustang to say to the world about them."

When it comes to Mustang colors, there is no end to the little-known facts.

For instance, Mustang fans certainly know brown was once popular. There were three shades of the earth-tone in the 1970s, but it has not been offered since 2000, Ford says. Green and yellow have fallen from favor as well, except on special editions.

Hot Financial Stocks For 2015

Pink? For 1967, Ford offered Mustang in two shades: Dusty Rose or Playboy Pink.

Over the years, red has been the top choice of all -- noting the car's sporty nature. One out of five Mustangs sold over the past half-century were red, followed by blue and silver. Black didn't come to the top three most popular colors in any given year until 1994. But it has been there every year since then.

While white is the most popular car color among all vehicles sold in the U.S., it's doesn't curry much excitement for Mustang owners. Only one of 10 Mustangs are sold in white.

Lockheed Martin (LMT) to Furlough 3,000 on Government Shutdown

Top Gold Stocks To Own For 2015

NEW YORK (TheStreet) -- Lockheed Martin (LMT) may be the latest casualty of the government shutdown as the defense contractor announced it will furlough 3,000 employees Monday, October 7. The company expects that number to grow if the shutdown is prolonged.

The shutdown, stretching into its fourth day on Friday, is a result of a stalemate among Congressional leaders to agree on a new budget.

"I'm disappointed that we must take these actions and we continue to encourage our lawmakers to come together to pass a funding bill that will end this shutdown," CEO Marillyn A. Hewson said in a statement.

Lockheed Martin says an employee will be furloughed if their work takes place in a closed government facility, if their role requires government inspection, or if the company has received a stop-work order. Boeing (BA) said it also anticipates "limited" furloughs as of next week, according to Bloomberg. And United Technologies (UTX), a supplier of helicopters to the U.S. military, says it could see as many as 5,000 workers furloughed if the shutdown stretches into November. Shares of Lockheed Martin Corp stock were down today by $0.33 (0.27%) as of the close of trading. By the end of trading, 2.49 million shares changed hands compared to its average daily volume of 1.59 million shares. The stock ranged in price between $121.52 to $123.41 after opening the day at $123.40 as compared to the previous trading day's close of $122.83. Overall, Lockheed Martin Corp lagged the S&P 500 which was up 0.71%.  TheStreet Ratings team rates Lockheed Martin Corp as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation: "We rate Lockheed Martin Corp (LMT) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, notable return on equity and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated." Highlights from the analysis by TheStreet Ratings Team goes as follows: Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 41.27% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LMT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year. Lockheed Martin Corp has improved earnings per share by 10.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Lockheed Martin Corp increased its bottom line by earning $8.34 vs. $7.86 in the prior year. This year, the market expects an improvement in earnings ($9.46 vs. $8.34). The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Aerospace & Defense industry and the overall market, Lockheed Martin Corp's return on equity significantly exceeds that of both the industry average and the S&P 500. The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Aerospace & Defense industry average. The net income increased by 10% when compared to the same quarter one year prior, going from $781 million to $859 million. LMT, with its decline in revenue, underperformed when compared the industry average of 8.6%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share. You can view the full analysis from the report here: LMT Ratings Report Written by Keris Alison Lahiff.

Police nab U.K. cybercrime's "Mr Big" after bank heist

Fraudsters drained £1.3 million from Barclays accounts by remotely accessing a branch computer system.

LONDON (CNNMoney) Police have arrested eight men, including the alleged "Mr. Big" of British cybercrime, after robbers took remote control of a bank's computers to siphon off £1.3 million ($2 million).

The police linked the theft at Barclays (BCS) to another attempt to steal money from a Santander (SAN) branch in London, which led to the arrest of 12 men last week.

"The size and sophistication of the operation has shocked us and we're actually having to draft in more resources to deal with the amount of evidence that we've recovered," said detective superintendent Terry Wilson.

"This was a highly-organized criminal network," said Wilson. "All criminal networks have a head and we very much believe we have now apprehended our 'Mr Big' as part of this operation."

The story dates back at least to early April when a man pretending to be an IT engineer gained access to computers at a Barclays branch in London after convincing staff he was there to fix a fault.

Police say he installed a keyboard, video and mouse (KVM) switch that allowed him to gain remote access to the bank's computer system.

The next day, Barclays spotted a £1.3 million theft from its accounts and the investigation began. This incident was a carbon copy of the Santander plot, though that attempted theft failed.

Police made the arrests linked to the Barclays plot on Thursday and Friday, and traced the fraudsters' "control center" to a home in central London.

They are still in the process of seizing property, cash, jewelry, drugs, thousands of credit cards and personal data in relation to the case. The eight men were arrested on suspicion of stealing and defrauding banks.

  High-tech sex workers in Silicon Valley

Of the 12 men arrested last week, four were charged with conspiracy to steal, while the others were bailed but face further investigation.

Alex Grant from Barclays' fraud prevention unit said the bank was able to recover the money on the same day the theft was detected, meaning no customers suffered losses.

Technical Forecast for USD/JPY

 

USDJPY recovered above support at 98.76/70 & has beaten resistance at 99.15 as we look to 99.45/50 for a selling opportunity with stops above 99.75. We can then try shorts again at 99.95/100.05 with stops above 100.20.

 

Below 99.15 however keeps the market under pressure for a retest of 98.76/70. A low for the day is likely at this good support but longs need stops below yesterday’s low at 98.43. Just be aware that if we continue lower perhaps later in the week we should test support at 98.25/20. Any longs here need stops below 4 month trend line support at 98.05.

Top 5 Companies To Buy Right Now

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Top Consumer Companies To Buy Right Now

Nomura Securities analysts initiated coverage on Symantec Corporation (SYMC) early on Wednesday, giving the stock a “Neutral” rating because its upside is already priced into its current valuation.

The analysts see shares of SYMC reaching $29, which suggests a 14.6% upside to the stock’s Tuesday closing price of $25.30.

Nomura Securities analyst Frederick Grieb commented, “In the early innings of a classic turnaround story, but upside largely priced In. We initiate coverage of Symantec (SYMC) with a Neutral rating and a 12-month target price of $29. Symantec is a leading vender in the security and storage markets, but has struggled to grow market share post its 2005 acquisition of VERITAS. The company has faced competitive pressures in its core markets, with ‘freemium’ antivirus software pressuring the consumer business, while the storage business has been challenged by enterprise migration to Windows and Linux from Solaris and UNIX. Despite these headwinds, we are launching coverage of Symantec with a Neutral rating, as we believe management will be able to improve the business by increasing margins (perhaps to +33%) and longer-term organic growth through a combination of simplifying management structures and a better strategy to incentivize the sales force. However, given the stock�� 33% increase YTD, due in part to multiple expansion (P/E up 18% YTD), we believe much of the upside from this turnaround is already baked in. FY14E EPS starts at $1.2; FY15E EPS starts at $2.18.”

Top Consumer Companies To Buy Right Now: Beige Holdings Ltd (BEG)

Beige Holdings Limited (Beige) is a contract manufacturer and distributor of cosmetics, soaps, household products, toiletries, laundry soaps and allied bath and body care products for South African and international markets. It operates in two segments: outsource manufacturing and packaging. The majority of Beige�� products are produced for Southern Africa-based customers, comprising a range of companies, such as Johnson & Johnson, Unilever, Reckitt Benkiser, Colomer, Johnson Diversy, Novartis and Janssen Cilag, and fast moving consumer goods (FMCG) companies, including Tiger Brands, Adcock Ingram, Avon-Justine, Incolabs, Thebe Medicare and Enaleni, and retailers, such as Woolworths, Clicks, Dischem, Edgars, Foschini, Truworths and Pick'n Pay. With effect from October 1, 2009, Beige acquired 61.41% of Herbal and Homeopathic (Pty) Ltd, which is a contract manufacturer in South Africa, supplying more products to its customer base.

Top Consumer Companies To Buy Right Now: A.s. Roma(ASR.MI)

A.S. ROMA S.P.A. owns and operates a football club. The company was founded in 1927 and is based in Rome, Italy. A.S. ROMA S.P.A. operates as a subsidiary of NEEP Roma Holding spa.

Hot Value Stocks To Buy For 2015: Monster Beverage Corp (MNST)

Monster Beverage Corporation, formerly Hansen Natural Corporation, incorporated on April 25, 1990,is a holding company. The Company develops, markets, sells and distributes alternative beverage. The alternative beverage category combines non-carbonated ready-to-drink iced teas, lemonades, juice cocktails, single-serve juices and fruit beverages, ready-to-drink dairy and coffee drinks, energy drinks, sports drinks, and single-serve still water (flavored, unflavored and enhanced) with new age beverages, including sodas that are considered natural, sparkling juices and flavored sparkling beverages. It has two reportable segments, namely Direct Store Delivery (DSD), whose principal products comprise energy drinks, and Warehouse (Warehouse), whose principal products comprise juice-based and soda beverages. The DSD segment develops, markets and sells products primarily through an exclusive distributor network, whereas the Warehouse segment develops, markets and sells products primarily directly to retailers. Corporate and unallocated amounts that do not relate to the DSD or Warehouse segments specifically, have been allocated to Corporate and Unallocated.

During the year ended December 31, 2012, it continued to expand its existing product lines and flavors and further develop its distribution markets. In particular, it continued to focus on developing and marketing beverages that fall within the category generally described as the alternative beverage category. During the year ended December 31, 2012, it introduced a number of new products, including Monster Rehab Tea + Orangeade + Energy, a non-carbonated energy drink with electrolytes, Monster Energy Zero Ultra, a carbonated energy drink which contains zero calories and zero sugar, bermonster Energy Brew, a non-alcoholic energy drink, manufactured using a brewed fermentation process, Hansen�� Coconut Water, in original and tropical flavors, packaged in re-sealable Tetra Prisma boxes, Peace Tea Cranberry, Pink Lemonade and Texas-Style Sweet ! Tea, ready-to-drink iced teas, Monster Cuba-Lima, a carbonated lime flavored non-alcoholic energy drink, Monster Energy Dub Edition Baller�� Blend, a carbonated punch + energy drink and Monster Energy Dub Edition Mad Dog, a carbonated punch + energy drink.

DSD Segment

Monster Energy Drinks offers products under the Monster Energy drink product line: Monster Energy, Lo-Carb Monster Energy, Monster Energy Assault, Monster Khaos, Monster M-80 (named Ripper in certain countries), Monster MIXXD, Monster Energy Absolutely Zero, Monster Energy Import and Import Light, Monster Energy Dub Edition Baller�� Blend, Monster Energy Dub Edition Mad Dog, M3 Monster Energy Super Concentrate energy drinks, bermonster Energy Brew, Monster Energy Zero Ultra and Monster Cuba-Lima.

Java Monster Coffee + Energy Drinks - A line of non-carbonated dairy based coffee + energy drinks. It offers products under the Java Monster product line: Java Monster Kona Blend, Java Monster Loca Moca, Java Monster Mean Bean, Java Monster Vanilla Light, Java Monster Irish Blend and Java Monster Toffee. Monster Energy Extra Strength Nitrous Technology Energy Drinks - A line of carbonated energy drinks containing nitrous oxide. It offer products under the Monster Energy Extra Strength Nitrous Technology product line: Super Dry, Anti Gravity and Black Ice.

-Presso Monster Coffee + Energy Drinks - A line of non-carbonated dairy based coffee + energy drinks. It offers products under the X-Presso Monster coffee + energy drinks product line: X-Presso Monster Hammer and X-Presso Monster Midnite.

Monster Rehab Tea + Energy Drinks - A line of non-carbonated energy drinks with electrolytes. It offers products under the Monster Rehab drink line: Monster Rehab Tea + Lemonade + Energy, Monster Rehab Rojo Tea + Energy, Monster Rehab Green Tea + Energy, Monster Rehab Protean + Energy and Monster Rehab Tea + Orangeade + Energy.

Worx Energy Energy Shots - A line of energy suppleme! nts which! contains zero calories and zero sugar. It offers products under the Worx Energy energy shot product line: Original Formula and Extra Strength.

Peace Tea Iced Teas - A line of ready-to-drink iced teas. It offers products under the Peace Tea product line: green tea, imported Ceylon tea, sweet lemon tea, razzleberry tea, cranberry tea, pink lemonade tea, Texas-style sweet tea and Caddy Shack tea + lemonade.

Warehouse Segment

Hansen�� brand sodas have been a natural soda brand on the West Coast of the United States for more than 30 years and are made with natural flavors. Hansen�� brand sodas, sweetened with cane sugar, and Hansen�� Diet Sodas, sweetened with Splenda no calorie sweetener and Acesulfame-K, contain no preservatives, sodium, caffeine or artificial colorings. It offers sodas under the Hansen�� brand name: Hansen�� Sodas, Hansen�� Diet Sodas and Hansen�� Natural Mixers, as well as Hansen�� Sparkling Waters, in a variety of flavors.

Its Blue Sky products contain no preservatives, artificial sweeteners, caffeine (other than its Blue Sky energy drinks) or artificial coloring and are made with sugar and natural flavors. It offers products under the Blue Sky product line: Blue Sky Natural Soda, Blue Sky Zero Calorie Sodas (sweetened with Truvia brand stevia extract, an all natural sweetener), Blue Sky Premium Sodas, Blue Sky Organic Natural Sodas, Blue Sky Seltzer Waters, Blue Sky Blue Energy drinks, Blue Sky Zero Calorie Blue Energy drinks, Blue Sky Caf Energy drinks and Blue Sky Recover Energy drinks.

Its original Hansen�� energy drinks compete in the functional beverage category, namely, beverages that provide a benefit in addition to simply delivering refreshment. It offers products under the Hansen�� energy drink product line: Hansen�� Natural Energy Pro, Hansen�� Energy Diet Red and Hansen�� Natural Stamina Pro.

Its fruit juice product line includes Hansen�� Natural Apple Juice, Ha! nsen�� ! Natural Grape Juice, White Grape Juice, Pineapple Juice, Apple Grape Juice, Apple Strawberry Juice, Orange Juice, Cranberry Juice, Cranberry-Apple Juice, Cranberry-Grape Juice, Ruby Red Grapefruit Juice, and Organic Apple Juice. In March 2012, it added Hansen�� Natural Apple Orange Pineapple Juice which contains 100% juice as well as 120% of the United States Recommended Daily Allowances (the USRDA) for vitamin C. It also offer Hansen�� Natural Lo-Cal juice cocktails, a line of all natural, low-calorie cocktails in four flavors. The Lo-Cal juice cocktails are sweetened with Truvia sweetener. Hansen�� juice products compete in the shelf-stable juice category.

It offers a number of aseptically packed boxed juice products, including its dual-branded multi-vitamin 100% juice line, which itsell in conjunction with Costco Wholesale Corporation (Costco) through Costco stores. It offers its Hansen�� Natural line of multi-vitamin 100% juices to other customers. These multi-vitamin juices contain eleven essential vitamins and six essential minerals and are available in a variety of flavors. In February 2012, it added Hansen�� Natural Organic Apple Juice, a 100% USDA Certified Organic Apple Juice with 100% of the USRDA for vitamin C.

Its Hansen�� Junior Juice product line is a 100% juice line targeted at toddlers and preschoolers. These juices have added calcium and all flavors contain 100% of the daily recommended allowance of vitamin C. It also offers organic juices as well as Hansen�� Organic Junior Water, a lightly flavored reduced calorie beverage, both of which contain 100% of the daily recommended allowance of vitamin C. In addition, it offers Junior Juice Coconut Water Twist, a line of fruit and coconut water juices containing 100% of the daily recommended allowance of vitamin C.

Its Hubert�� Lemonade is a line of premium ready-to-drink lemonades. Hubert�� Lemonade is sweetened with cane sugar and Truvia sweetener. Hubert�� Lemonade i! s all nat! ural and contains no preservatives, artificial sweeteners, caffeine, or artificial colorings. It offers products under the Hubert�� Lemonade product line: Strawberry Lemonade, Limeade, Mango Lemonade, Honey Lemonade, Raspberry Lemonade and Original Lemonade. It added Cherry Limeade and Blackberry Lemonade flavors to the product line in February 2012 and October 2012, respectively. In July 2012, it introduced 4-count multi-packs of select flavors.

Hubert�� Half & Half is sweetened with cane sugar and Truvia sweetener, and contains no preservatives, artificial sweeteners, or artificial colorings. Its Fruit and Tea Stix product line is an all-natural, low-calorie powder drink mix line, sweetened naturally with Truvia sweetener. Its Angeleno Aguas Frescas is a line of premium ready-to-drink aguas frescas. Angeleno Aguas Frescas are sweetened with cane sugar and real fruit juice and contain no preservatives, artificial sweeteners, caffeine, or artificial colorings. It offers flavors under the Angeleno Aguas Frescas product line: Mango, Melon, Pineapple, Jamaica (Hibiscus) and Tamarindo. Its Hansen�� Natural PRE products include a line of prebiotic and probiotic digestive wellness ready-to-drink beverages and powder drink mixes, containing specially formulated blends by Jarrow Formulas. PRE prebiotic ready-to-drink beverages are sweetened with either cane sugar or stevia. PRE probiotic powder drink mixes are sweetened with cane sugar and stevia. In March 2012, it introduced Hansen�� Natural Coconut Water, a line of premium 100% Coconut Waters available in Pure and Tropical flavors.

The Company competes with TCCC, PepsiCo, Inc. (PepsiCo), The Dr. Pepper Snapple Group, Inc. (the DPS Group), Red Bull Gmbh, Kraft Foods, Inc., GlaxoSmithKline plc, Nestle Beverage Company, Tree Top Inc. (Tree Top), Ocean Spray Cranberries Inc. (Ocean Spray), Red Bull, Rockstar, Full Throttle, No Fear, Amp, Adrenaline Rush, NOS, Venom, Redline, 180, Red Devil, Rip It, Xenergy, 5-Hour Energy ! Shots, Mi! O Energy, Stacker 2, VPX Redline Energy Shots, Red Bull, Rockstar, Burn, V-Energy, Lucozade, Adrenaline Rush, Power Play, Mother, Hell, Shock, Tiger, Boost, Gladiator, TNT, Shark, Hot 6, Nalu, Battery, Bullit, Flash Up, Black, Non-Stop, Bomba, Semtex, Starbucks Frappuccino, Starbucks Double Shot, Starbucks Double Shot Energy Plus Coffee , other Starbucks coffee drinks, Rockstar Roasted, Seattle�� Best, illy issimo coffee, Full Throttle Coffee, Arizona, Lipton, Snapple, Nestea, Xing Tea, Honest Tea, Gold Peak Tea, Fuze Tea, the DPS Group, Cott Corporation and National Beverage Corporation, Jones Soda Co., Crystal Geyser, J.M. Smucker Company, Reeds, Inc., Zevia, Tree Top, Mott��, Martinelli��, Welch��, Ocean Spray, Tropicana, Minute Maid, Langers, Apple , Eve, Seneca, Northland, Juicy Juice, Old Orchard, Calypso, Simply Lemonade, Minute Maid, Cabana, Tropicana, Newman�� Own, Vita Coco, ZICO and O.N.E.

Advisors' Opinion:

• [By Steve Symington]

  Shares of Monster Beverage (NASDAQ: MNST  ) rose nearly 5% Monday after the company's board of directors approved a $200 million share repurchase program. As management stated recently, the company had already used every penny of the $250 million it authorized for share repurchases less than five months ago, so it looks like they were just itching to continue increasing shareholders' slice of the pie.

• [By Rich Duprey]

  Of course, beverage makers don't do themselves any favors when they join the litigation frenzy. Monster Beverage (NASDAQ: MNST  ) previously sued rival Redline for failing to keep consumers "amped to the max" for seven hours as they claimed.

Top Consumer Companies To Buy Right Now: Summer Infant Inc.(SUMR)

Summer Infant, Inc., through its subsidiaries, engages in the design, marketing, and distribution of branded juvenile health, safety, and wellness products primarily in North America and the United Kingdom. It offers products in various product categories, including nursery audio/video monitors, safety gates, durable bath products, bed rails, nursery products, booster and potty seats, bouncers, travel accessories, high chairs, swings, feeding products, car seats, and nursery furniture, as well as infant thermometers, related health and safety products, cribs, baby gear, swaddling blankets, and bottles. The company sells its products principally under the Summer Infant, Carter?s, and Disney brand names through mass merchant retailers and specialty retailers, as well as directly to consumers. Summer Infant, Inc. is headquartered in Woonsocket, Rhode Island.

Top Consumer Companies To Buy Right Now: Beghelli Spa(BE.MI)

Beghelli S.p.A engages in the production and sale of emergency lighting equipment in the fields of energy savings. The company also offers electronic domestic, industrial, and urban safety and security systems. In addition, it provides general lighting equipment; home automation systems; and tele assistance, and urban safety and security solutions. The company was founded in 1982 and is based in Monteveglio, Italy.

Top Consumer Companies To Buy Right Now: Stoneridge Inc.(SRI)

Stoneridge, Inc., together with its subsidiaries, engages in the design and manufacture of engineered electrical and electronic components, modules, and systems for the medium and heavy-duty truck, automotive, agricultural, and off-highway vehicle markets primarily in North America and Europe. The company operates in two segments, Electronics and Control Devices. The Electronics segment produces electronic instrument clusters, electronic control units, and driver information systems, as well as electrical distribution systems, principally wiring harnesses and connectors for electrical power and signal distribution. Its products collect, store, and display vehicle information, such as speed, pressure, maintenance data, trip information, operator performance, temperature, distance traveled, and driver messages related to vehicle performance. In addition, this segment?s power distribution systems regulate, coordinate, and direct the operation of the electrical system within a vehicle. The Control Devices segment designs and manufactures products that monitor, measure, or activate a specific function within the vehicle. This segment?s product lines include sensors, which are employed in a range of vehicle systems, such as the emissions, safety, power train, braking, climate control, steering, and suspension systems; switches that transmit signal to activate or deactivate selected functions; and electromechanical actuator products, which enable original equipment manufacturers to deploy power functions in a vehicle. Stoneridge, Inc. was founded in 1965 and is headquartered in Warren, Ohio.

Advisors' Opinion:

• [By Patricio Kehoe]

  As the U.S. automobile industry recovers, auto parts suppliers are expecting to see increasing sales volumes. Particularly firms such as Delphi Automotive (DLPH) and Stoneridge Inc. (SRI), which specialize in electronic components, expect to make large profits. Increasingly electrified vehicles, higher demand for hybrid and electric powertrain vehicles and stricter governmental emissions regulations should drive revenue growth for these firms in coming years.

• [By Seth Jayson]

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

Top Consumer Companies To Buy Right Now: Zongshen Pem Pwr Systems Inc(ZPP.TO)

Zongshen PEM Power Systems Inc., together with its subsidiaries, engages in manufacturing and selling environmentally friendly gas motorbikes, electric motorcycles, electric bicycles, and other e-vehicles and parts. The company sells its products through dealers primarily in China, as well as in other regions, including Africa, South America, and Asia. The company is headquartered in Vancouver, Canada. Zongshen PEM Power Systems Inc. is a subsidiary of Zongshen Industrial Group Co. Ltd.

Top Consumer Companies To Buy Right Now: Polo Ralph Lauren Corporation(RL)

Ralph Lauren Corporation, together with its subsidiaries, engages in the design, marketing, and distribution of lifestyle products. The company offers men?s, women?s, and children?s clothing; and accessories comprising footwear, eyewear, watches, jewelry, hats, and belts, as well as leather goods, including handbags and luggage. It also provides products for homes, including bedding and bath products, furniture, fabric and wallpaper, paint, tabletop, and giftware; and fragrance products for women men. In addition, the company licenses its products, such as men?s sportswear, men?s tailored clothing, men?s underwear and sleepwear, eyewear, fragrances, cosmetics, and color and skin care products. It offers its products under the Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren Women?s Collection, Black Label, Blue Label, Lauren by Ralph Lauren, RRL, RLX, Rugby, Ralph Lauren Childrenswear, American Living, Chaps, and Club Monaco brand names. Ralph Lauren sells its products to department stores, specialty stores, and golf and pro shops; full-price retail stores, factory retail stores, and concessions-based shop-within-shops; and online through RalphLauren.com and Rugby.com. As of April 3, 2010, it operated 179 full-price retail stores and 171 factory stores worldwide, as well as 281 concessions-based shop-within-shops and 2 e-commerce Websites. The company was formerly known as Polo Ralph Lauren Corporation and changed its name to Ralph Lauren Corporation in August 2011. Ralph Lauren Corporation was founded in 1967 and is based in New York, New York.

Advisors' Opinion:

• [By Shauna O'Brien]

  Piper Jaffray reported on Wednesday that it has downgraded Ralph Lauren Corp (RL) to “Neutral.”

  The firm has cut its rating on RL from “Overweight” to “Neutral,” and has lowered its price target on the company from $200 to $170. This new price target suggests a 6% upside from the stock’s current price of $159.64.

  An analyst from the firm noted: ��s we think about the RL stock (not the company) over the next 6-12 months, we are stepping to the sidelines, moving our rating from OW to Neutral ($170 PT). To be clear, we view RL as a core holding for the longer-term oriented investor (2 yrs+) as we believe global growth initiatives in China, accessories & the prospects for accelerated sq-ftage (Polo stores in Europe) will create margin expansion opportunities over time. That said, in the absence of a compelling apparel spending environment and with a multi-year investment cycle underway, we believe earnings upside could be more limited. We believe money flow will favor equities but expect investors will pay up for visibility in beat & raise stories as we navigate through the evolving global retail landscape.��/p>

  Ralph Lauren shares were down 92 cents, or 0.57% during Wednesday morning trading. The stock is up 7% YTD.

• [By WWW.MARKETWATCH.COM]

  NEW YORK (MarketWatch) -- Ralph Lauren Corp. (RL) said Wednesday that its fiscal second quarter profit fell to $205 million, or $2.23 a share, from $214 million, or $2.29 a share. Total revenue rose to $1.92 billion from $1.86 billion. Analysts surveyed by FactSet were looking for profit of $2.20 a share on sales of $1.91 billion. The company raised the bottom end of its full-year sales forecast to a range of 5% to 7%, from a prior projection of 4% to 7%. It also raised its quarterly dividend by 12.5% to 45 cents a share. Its shares rose 2.5% in premarket trading.

• [By Jonathan Yates]

  Luxury goods companies such as Ralph Lauren (NYSE: RL), Michael Kors (NASDAQ: KORS) and Mercedes Benz (OTC: DDAIF) count on China for increasing sales. And among the most desired items by Chinese consumers are handbags and other accessories from Coach Inc (NYSE: COH).

Top Consumer Companies To Buy Right Now: Pinnacle Foods Inc (PF)

Pinnacle Foods Inc., incorporated on July 28, 2003, is a manufacturer, marketer and distributor of branded food products in North America. The Company operates in three segments: the Birds Eye Frozen Division, the Duncan Hines Grocery Division and the Specialty Foods Division. The Birds Eye Frozen Division and the Duncan Hines Grocery Division, which collectively represent its North America Retail operations, include the brands. Its brand portfolio enjoys household penetration in the United States, where its products can be found in approximately 85% of U.S. households. Its products are sold through supermarkets, grocery wholesalers and distributors, mass merchandisers, super centers, convenience stores, dollar stores, drug stores and warehouse clubs in the United States and Canada, as well as in military channels and foodservice locations. On June 24, 2011, the Company completed the sale of its Watsonville, California facility which had been recorded as an asset held for sale.

Birds Eye Frozen Division

The Company�� Birds Eye Frozen Division includes its steamed and non-steamed product offerings, with a 27.0% market share, making Birds Eye the recognized frozen vegetables brand in the United States. Birds Eye was the Company to capture a nationwide market share with a product that enables consumers to conveniently steam vegetables in microwaveable packaging.

Duncan Hines Grocery Division

Duncan Hines is the division�� brand and includes cake mixes, ready-to-serve frostings, brownie mixes, muffin mixes, and cookie mixes. During the fiscal year ended September 23, 2012, the Company added two additional items to the line. In February 2012, the Company introduced a line of frosting products, Duncan Hines Frosting Creations, which uses a patent pending frosting system to allow consumers to customize their frosting into one of 12 different flavors. The Company also offers a complete line of shelf-stable pickle products that we market and distribute n! ationally, primarily under the Vlasic brand, and regionally under the Milwaukee�� and Wiejske Wyroby brands. In 2012, the Company introduced Vlasic Farmers Garden, artisan-quality pickle line.

Specialty Foods Division

The Company�� snack products primarily consist of Tim�� Cascade, Snyder of Berlin and Husman��. These direct store delivery brands have local awareness and hold market share positions in their regional markets. The Company also manufactures and distributes certain products, mainly in the frozen breakfast, canned meat, and pie and pastry fruit filling categories, through food service channels. The Company also manufactures and distributes certain private label products in the canned meat, shelf-stable pickles and frozen seafood. As part of its ongoing strategic focus over the last several years, the Company has deemphasized the food service and private label businesses for the benefit of its higher margin branded food products.

Advisors' Opinion:

• [By Jacob Roche]

  Recently, Pinnacle Foods (NYSE: PF  ) held its initial public offering, priced at $20 per share, at the high end of the expected range. The IPO brought in a net $627 million for the company, and the stock has continued to trade up a bit. Now that the typical IPO dust is settling, however, it may be worth taking a look.

Top Consumer Companies To Buy Right Now: Sino Grandness Food Ind Gp Ltd (JS5.SI)

Sino Grandness Food Industry Group Limited, an investment holding company, engages in the production and sale of canned vegetables and fruits primarily in Europe, the United States, and the People�s Republic of China. The company offers canned asparagus, canned long beans, canned mushrooms, sweet corn, artichoke, and bamboo shoots; and fruits, such as lychees, pineapples, peaches, apricots, and mandarin oranges. It also provides bottled juices, including mixed-fruit and vegetable-fruit juices. The company sells its products through distributors and retailers. Sino Grandness Food Industry Group Limited was founded in 1997 and is headquartered in Shenzhen, the People�s Republic of China.

Top Consumer Companies To Buy Right Now: British/Swiss Franc(UN)

UNILEVER N.V. operates as a fast-moving consumer goods company in Asia, Africa, Europe, and the Americas. It offers personal care products, including skin care and hair care products, deodorants, and oral care products under the brand names of Axe, Brylcreem, Dove, Fissan, Lifebuoy, Lux, Pond's, Radox, Rexona, Signal & Close Up, Simple, St Ives, Sunsilk, TRESemm� Vaseline, and VO5. The company also provides home care products comprising laundry tablets, powders and liquids, soap bars, and various cleaning products under the Cif, Comfort, Domestos, Omo, Radiant, Sunlight, and Surf brand names. In addition, it offers food products consisting of soups, bouillons, sauces, snacks, mayonnaise, salad dressings, margarines and spreads, as well as cooking products, such as liquid margarines. The company markets its food products under the brand names of Becel/Flora, Bertolli, Blue Band, Rama, Hellmann?s, Amora, and Knorr. Further, it provides refreshment products, which include ice cream, tea-based beverages, weight-management products, and nutritionally enhanced staples under the brand names of Heartbrand, Lipton, and Slim?Fast. UNILEVER N.V. sells its products through its own sales force, as well as through independent brokers, agents, and distributors to chain, wholesale, co-operative and independent grocery accounts, food service distributors, and institutions. The company, formerly known as Naamlooze Vennootschap Margarine Unie, was founded in 1927 and is based in Rotterdam, the Netherlands. Unilever N.V. is a subsidiary of The Unilever Group.

Advisors' Opinion:

• [By MONEYMORNING.COM]

  Own a giant, global player in consumer goods that has a diversified array of household brand-name products that are sold all over the world and that pays a fat dividend. Unilever N.V. (ADR) (NYSE: UN) is one.

• [By Reuters]

  Toby Talbot/AP NEW YORK -- A voluntary effort by the world's largest food and beverage companies to remove billions of calories from the products they sell in the United States to help combat the nation's obesity epidemic has far exceeded its five-year goal, according to an independent evaluation released Thursday. In May 2010, 16 of the nation's biggest food and beverage companies, from Coca-Cola (KO) to Kraft Foods Group (KRFT), pledged to remove 1 trillion calories from the U.S. marketplace by 2012 and 1.5 trillion by 2015, compared with a 2007 baseline. In fact, as of 2012 they sold 6.4 trillion fewer calories, found an analysis by researchers at the University of North Carolina at Chapel Hill. "Reports like this, and the fact that they exceeded their commitment by fourfold, really shows that you can make progress in giving American families more healthy options," said Larry Soler, president of the Partnership for a Healthier America, a non-profit chaired by first lady Michelle Obama. The group was formed in 2010 to work with the private sector on anti-obesity strategies. At the time, critics said the Partnership relied too heavily on the good will of the industry and couldn't replace the role of tighter regulation on how food is manufactured and marketed. Such voluntary efforts by industry "are not a magic bullet," said Jeff Levi, executive director of Trust for America's Health, a non-profit policy group. "Particularly with kids, there is a role for regulation" in reducing demand for unhealthy, high-calorie fare. It isn't clear yet how the companies accomplished the dramatic calorie reduction, said UNC public health researcher Barry Popkin, who led the analysis funded by the Robert Wood Johnson Foundation, the nation's largest public health philanthropy. Some of the decline may have come from the recession, as financially strapped families cut back on junk food. When the pledge was announced, companies said they would substitute lower-calorie pro

Top Consumer Companies To Buy Right Now: China New Borun Corporation (BORN)

China New Borun Corporation, through its subsidiaries, engages in the production and distribution of corn-based edible alcohol in the People�s Republic of China. Its edible alcohol products are primarily sold as ingredients to producers of baijiu, which a grain-based alcoholic beverage to further blend them into finished products that are sold under various brand names in retail stores, bars, banquet halls, restaurants, and other locations. The company also produces distillers dried grains with solubles (DDGS) feed, corn germ, crude corn oil, and liquid carbon dioxide as by-products during the production of edible alcohol. The company was founded in 2000 and is based in Shouguang, the People's Republic of China. China New Borun Corporation is a subsidiary of King River Holding Limited.

Advisors' Opinion:

• [By James E. Brumley]

  With a market cap of only $60 million and practically no trading volume until last month, odds are good you and most of your trading friends have ever even heard of China New Borun Corp. (NYSE:BORN). That doesn't mean it can't become a good trading opportunity, however. In fact, BORN has become a good trading opportunity, especially this week.

Top Consumer Companies To Buy Right Now: Darford Intl Inc(WUF.V)

Darford International Inc. engages in the manufacture and distribution of dog treats and food primarily in Canada and the United States. The company also undertakes private label manufacturing contracts of pet treats. It sells its products under Darford brand name through wholesale distribution and retail partners. The company is headquartered in Vernon, British Columbia.

Top Consumer Companies To Buy Right Now: Bassett Furniture Industries Incorporated(BSET)

Bassett Furniture Industries, Incorporated, together with its subsidiaries, engages in the manufacture, marketing, import, and retail of branded home furnishings in the United States. The company operates in three segments: Wholesale, Retail, and Investments and Real Estate. The Wholesale segment engages in the design, manufacture, sourcing, sale, and distribution of furniture products and accessories to a network of 89 Bassett Home Furnishings stores, including independently-owned and company-owned retail stores; and independent furniture retailers. This segment is also involved in wood and upholstery operations. The Retail segment operates 39 licensee-owned stores and 49 company-owned and operated stores in Alabama, Arizona, Arkansas, Connecticut, California, Delaware, Florida, Georgia, Illinois, Maryland, Massachusetts, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New York, North Carolina, South Carolina, Ohio, Tennessee, Texas, and Virginia. The Investments a nd Real Estate segment consists of retail real estate related to licensee stores; equity investments in Zenith Freight Lines, LLC; and investments in marketable securities; investment in the Fortress Value Recovery Fund I, LLC. Bassett Furniture Industries, Incorporated was founded in 1902 and is based in Bassett, Virginia.

Top Consumer Companies To Buy Right Now: Phillips-Van Heusen Corporation(PVH)

PVH Corp. designs and markets branded dress shirts, neckwear, sportswear, footwear, and other related products worldwide. The company?s Calvin Klein Licensing segment licenses Calvin Klein Collection, ck Calvin Klein, and Calvin Klein brands for sportswear, jeanswear, underwear, fragrances, eyewear, men?s tailored clothing, women?s suits and dresses, hosiery, socks, footwear, swimwear, jewelry, watches, outerwear, handbags, leather goods, home furnishings, and accessories; and to operate retail stores. Its Wholesale Dress Furnishings segment markets dress shirts and neckwear principally under the ARROW, Calvin Klein, ck Calvin Klein, Calvin Klein Collection, IZOD, Eagle, Sean John, Donald J. Trump Signature Collection, Kenneth Cole New York, Kenneth Cole Reaction, JOE Joseph Abboud, DKNY, Tommy Hilfiger, Elie Tahari, J. Garcia, and MICHAEL Michael Kors brands. The company?s Wholesale Sportswear and Related Products segment offers sportswear, including men?s knit and w oven sport shirts, sweaters, bottoms, swimwear, boxers, and outerwear principally under the IZOD, Van Heusen, ARROW, Geoffrey Beene, Timberland, and Calvin Klein brands; and women?s sportswear, including knit and woven sport shirts, sweaters, bottoms, and outerwear under the IZOD brand. Its Retail Apparel and Related Products segment provides men?s dress shirts; neckwear and underwear; men?s and women?s suit separates; men?s and women?s sportswear, including woven and knit shirts, sweaters, bottoms, and outerwear; men?s and women?s accessories; sportswear; and men?s fragrance. The company?s Retail Footwear and Related Products segment offers casual and dress shoes for men, women, and children; and apparel and accessories. The company was formerly known as Phillips-Van Heusen Corporation and changed its name to PVH Corp. in June, 2011. The company was founded in 1881 and is headquartered in New York, New York.

Advisors' Opinion:

• [By Sean Williams]

  Other, more obscure, ways of playing the watch sector are through large designer brands that focus more of apparel than the accessories aspect of the business. PVH (NYSE: PVH  ) , the company behind such brands as Calvin Klein and Tommy Hilfiger, have ridden accessories sales higher in even the slowest of growth environments. In fact, PVH announced a deal to acquire Warnaco Group for $2.9 billion late last year with the specific purpose of acquiring the remaining Calvin Klein interests it didn't already own, presumably to gain access to consumers' seemingly insatiable appetite for brand-name goods.�

Top Consumer Companies To Buy Right Now: Nestle SA (NESN)

Nestle SA is a Swiss Company engaged in the nutrition, health and wellness sectors. It is the holding company of the Nestle Group, which comprises subsidiaries, associated companies and joint ventures throughout the world. It has such business units as Food and Beverage, Nestle Waters and Nestle Nutrition. It is also active in the pharmaceutical sector. It divides its products into Powdered and liquid beverages, Water, Milk products and Ice cream, Nutrition, Prepared dishes and cooking aids, Confectionery, PetCare and Pharmaceutical products. In February 2011, the Company acquired CM&D Pharma Ltd. Advisors' Opinion:

• [By Chad Fraser]

  These are the first significant moves made by the Caira, a former executive at Nestle SA (NYSE: NESN) who helped expand that company’s hot and cold beverage division.

• [By Celeste Perri]

  Nestle SA (NESN) is selling Givaudan (GIVN) SA shares worth $1.27 billion at yesterday�� closing price to institutional investors, winding down its stake in the world�� largest flavorings maker.

A New Essay from George Soros - Fallibility, Reflexivity and the Human Uncertainty Principle

I am honored that the editors of the Journal of Economic Methodology have created this special issue on the subject of reflexivity and have invited me, as well as a distinguished group of scholars, to contribute.

Of course I did not discover reflexivity. Earlier observers recognized it, or at least aspects of it, often under a different name. Knight (1921) explored the difference between risk and uncertainty. Keynes (1936, Chapter 12) compared financial markets to a beauty contest where the participants had to guess who would be the most popular choice. The sociologist Merton (1949) wrote about self-fulfilling prophecies, unintended consequences, and the bandwagon effect. Popper spoke of the 'Oedipus effect' in the Poverty of Historicism (1957, Chapter 5).

My own conceptual framework has its origins in my time as a student at the London School of Economics in the late 1950s. I took my final exams one year early, so I had a year to fill before I was qualified to receive my degree. I could choose my tutor, and I chose Popper whose book TheOpen Society and Its Enemies (1945) had made a profound impression on me.

In Popper's other great work Logik der Forschung (1935), which was published in English as The Logic of Scientific Discovery (1959), he argued that the empirical truth cannot be known with absolute certainty. Even scientific laws cannot be verified beyond a shadow of a doubt: they can only be falsified by testing. One failed test is enough to falsify, but no amount of conforming instances is sufficient to verify. Scientific laws are always hypothetical in character, and their validity remains open to falsification.

While I was reading Popper I was also studying economic theory, and I was struck by the contradiction between Popper's emphasis on imperfect understanding and the theory of perfect competition in economics, which postulated perfect knowledge. This led me to start questioning the assumptions of economic theory. I replaced the postulates of rational expectations and efficient markets with my own principles of fallibility and reflexivity.

After college, I started working in the financial markets where I had not much use for the economic theories I had studied in college. Strangely enough, the conceptual framework I had developed under Popper's influence provided me with much more valuable insights. And while I was engaged in making money I did not lose my interest in philosophy.

I published my first book, The Alchemy of Finance, in 1987. In that book, I tried to explain the philosophical underpinnings of my approach to financial markets. The book attracted a certain amount of attention. It has been read by many people in the hedge fund industry, and it is taught in business schools. But the philosophical arguments in that book and subsequent books (Soros, 1998, 2000) did not make much of an impression on the economics departments of universities. My framework was largely dismissed as the conceit of a man who has been successful in business and therefore fancies himself as a philosopher. With my theories largely ignored by academia, I began to regard myself as a failed philosopher – I even gave a lecture entitled 'A Failed Philosopher Tries Again.'

All that changed as a result of the financial crisis of 2008. My understanding of reflexivity enabled me both to anticipate the crisis and to deal with it when it finally struck (Soros, 2008, 2009). When the fallout of the crisis spread from the USA to Europe and around the world it enabled me to explain and predict events better than most others (Soros, 2012). The crisis put in stark relief the failings of orthodox economic theory (Soros, 2010). As people have realized how badly traditional economics has failed, interest in reflexivity has grown.

Thus, this issue of the Journal of Economic Methodology is timely. Economics is in a period of intellectual flux and while some economists will cling to ideas of market efficiency and rationality to their final days, many others are eager to pursue alternative approaches.

In this essay, I will articulate my current thinking. In Section 2, I shall explain the concepts of fallibility and reflexivity in general terms. In Section 3, I will discuss the implications of my conceptual framework for the social sciences in general and for economics in particular. In Section 4, I will describe how my conceptual framework applies to the financial markets with special mention of financial bubbles and the ongoing euro crisis. I will then conclude with some thoughts on the need for a new paradigm in social science.

Fallibility and reflexivity Jump to section Introduction Fallibility and reflexivity Philosophy of social science Financial markets Conclusion

I have a peculiar problem in explicating my conceptual framework. The framework deals with the relationship between thinking and reality, but the participants' thinking is part of the reality that they have to think about, which makes the relationship circular. Circles have no beginning or end, so I have to plunge in at an arbitrary point. That makes my ideas less clear when I put them into words than they are in my own mind. I am not the only one affected by this difficulty but I feel obliged to warn the reader that this section will be more convoluted and less elegant than it ought to be; the rest of the paper is not affected.

My conceptual framework is built on two relatively simple propositions. The first is that in situations that have thinking participants, the participants' views of the world never perfectly correspond to the actual state of affairs. People can gain knowledge of individual facts, but when it comes to formulating theories or forming an overall view, their perspective is bound to be either biased or inconsistent or both. That is the principle of fallibility.

The second proposition is that these imperfect views can influence the situation to which they relate through the actions of the participants. For example, if investors believe that markets are efficient then that belief will change the way they invest, which in turn will change the nature of the markets in which they are participating (though not necessarily making them more efficient). That is the principle of reflexivity.

The two principles are tied together like Siamese twins, but fallibility is the firstborn: without fallibility there would be no reflexivity. Both principles can be observed operating in the real world. So when my critics say that I am merely stating the obvious, they are right – but only up to a point. What makes my propositions interesting is that they contradict some of the basic tenets of economic theory. My conceptual framework deserves attention not because it constitutes a new discovery, but because something as commonsensical as reflexivity has been so studiously ignored by economists. The field of economics has gone to great lengths to eliminate the uncertainty associated with reflexivity in order to formulate universally valid laws similar to Newtonian physics. In doing so, economists set themselves an impossible task. The uncertainty associated with fallibility and reflexivity is inherent in the human condition. To make this point, I lump together the two concepts as the human uncertainty principle.

Fallibility

The complexity of the world in which we live exceeds our capacity to comprehend it. Confronted by a reality of extreme complexity, we are obliged to resort to various methods of simplification: generalizations, dichotomies, metaphors, decision rules, and moral precepts, just to mention a few. These mental constructs take on a (subjective) existence of their own, further complicating the situation.

The structure of the brain is another source of fallibility. Recent advances in brain science have begun to provide some insight into how the brain functions, and they have substantiated David Hume's insight that reason is the slave of passion. The idea of a disembodied intellect or reason is a figment of our imagination. The brain is bombarded by millions of sensory impulses, but consciousness can process only seven or eight subjects concurrently. The impulses need to be condensed, ordered, and interpreted under immense time pressure; mistakes and distortions cannot be avoided. Brain science adds many new insights to my contention that our understanding of the world in which we live is inherently imperfect.

Fallibility pervades our attempts to understand both natural and social phenomena, but it is not fallibility that distinguishes the social from the physical sciences. Rather, as will be discussed further in Section 3, the distinction comes from the fact that in social systems fallible human beings are not merely scientific observers but also active participants in the system themselves. That is what makes social systems reflexive.

Reflexivity

The concept of reflexivity needs some further explication. It applies exclusively to situations that have thinking participants. The participants' thinking serves two functions. One is to understand the world in which we live; I call this the cognitive function. The other is to make an impact on the world and to advance the participants' interests; I call this the manipulative function. I use the term 'manipulative' to emphasize intentionality.

The two functions connect the participants' thinking (subjective reality) and the actual state of affairs (objective reality) in opposite directions. In the cognitive function, the participant is cast in the role of a passive observer: the direction of causation is from the world to the mind. In the manipulative function, the participants play an active role: the direction of causation is from the mind to the world. Both functions are subject to fallibility.

When both the cognitive and manipulative functions operate at the same time they may interfere with each other. How? By depriving each function of the independent variable that would be needed to determine the value of the dependent variable. The independent variable of one function is the dependent variable of the other, thus neither function has a genuinely independent variable – the relationship is circular or recursive. It is like a partnership where each partner's view of the other influences their behavior and vice-versa.

Lack of an independent criterion of truth

If the cognitive function operated in isolation, without any interference from the manipulative function, it could produce knowledge. Knowledge is represented by true statements. A statement is true if it corresponds to the facts – that is what the correspondence theory of truth tells us. But if there is interference from the manipulative function, the facts no longer serve as an independent criterion because the statement may be the product of the manipulative function.

Consider the statement 'It is raining.' That statement is true or false depending on whether it is, in fact, raining. And whether people believe it is raining or not cannot change the facts. The agent can assess the statement without any interference from the manipulative function and thus gain knowledge.

Now consider the statement 'I love you.' The statement is reflexive. It will have an effect on the object of the affections of the person making the statement and the recipient's response may then affect the feelings of the person making the statement, changing the truth value of his or her original statement.

Self-reference

Reflexivity has some affinity with the Liar's Paradox, which is a self-referential statement. 'This sentence is false' is paradoxical. If the sentence is true, it means it is false, but if it is false, it means it is true. Bertrand Russell resolved the paradox by putting self-referential statements into a separate category and declaring them to be meaningless.

Following Russell, an important school of philosophy, logical positivism, banned self-referential statements. Ludwig Wittgenstein carried this program to its logical conclusion in his Tractatus Logico-Philosophicus and in the end he concluded that he had embarked on an impossible task. In practice, it is impossible to avoid either self-referential or reflexive statements. Consequently, the cognitive function cannot produce all the knowledge agents need to make decisions; they have to act on the basis of imperfect understanding. While the manipulative function can make an impact on the world, outcomes are unlikely to correspond to expectations. There is bound to be some slippage between intentions and actions, and further slippage between actions and outcomes. Since agents base their decisions on inadequate knowledge, their actions are liable to have unintended consequences. This means that reflexivity introduces an element of uncertainty both into the agents' view of the world and into the world in which they participate.

While self-reference has been extensively analyzed by the Vienna school with which Popper was associated, reflexivity has received much less attention. This is strange because reflexivity has an impact on the real world, while self-reference is confined to the universe of statements. In the real world, the participants' thinking finds expression not only in statements but also, of course, in various forms of action and behavior. That makes reflexivity a much broader phenomenon than self-reference: it connects the universe of thoughts with the universe of events. Bertrand Russell analyzed the Liar's Paradox in a timeless fashion. But reflexive systems are dynamic and unfold over time as the cognitive and manipulative functions perpetually chase each other. Once time is introduced, reflexivity creates indeterminacy and uncertainty rather than paradox.

Reflexive feedback loops between the cognitive and manipulative functions connect the realms of beliefs and events. The participants' views influence but do not determine the course of events, and the course of events influences but does not determine the participants' views. The influence is continuous and circular; that is what turns it into a feedback loop. As both the cognitive and manipulative functions are subject to fallibility, uncertainty is introduced into both the realms of beliefs and events. The process may be initiated from either direction, from a change in views, or from a change in circumstances.

Objective and subjective aspects of reality

Reflexive feedback loops have not been rigorously analyzed and when I originally encountered them and tried to study them, I ran into various difficulties. The main source of the trouble was that thinking is part of reality and the relationship of a part to the whole is very difficult to describe. The fact that thinking is not directly observable adds further complications; consequently, the definition of reflexivity will be much more complicated than the concept itself. The idea is that there is a two-way feedback loop connecting thinking and reality. The main feedback is between the participants' views and the actual course of events. But what about a direct two-way interaction between the various participants' views? And what about a solitary individual asking herself who she is and what she stands for and changing her behavior as a result of her own internal reflections?

To resolve these difficulties, I propose distinguishing between the objective and subjective aspects of reality. Thinking constitutes the subjective aspect. It takes place in the privacy of the participants' minds and is not directly observable; only its material manifestations are. The objective aspect consists of observable events. In other words, the subjective aspect covers the participants' thinking and the objective aspect denotes all observable facts, whether in the outside world or inside the brain.

Free will versus determinism

There is only one objective reality, but there are as many different subjective views as there are thinking participants. The views can be divided into different groups such as doubters and believers, trend followers and contrarians, Cartesians and empiricists – but these are simplifications and the categories are not fixed. Agents may hold views that are not easily categorized; moreover, they are free to choose between categories and they are free to switch. This is what is usually meant by free will but I consider free will a misnomer. People's views are greatly influenced but not determined by external factors such as the views of others, heredity, upbringing, and prior experiences. So, reality is halfway between free will and determinism.

Reflexivity can connect any two or more aspects of reality, setting up two-way feedback loops between them. We may then distinguish between two kinds of reflexivity: reflexive relations, like marriage or politics, which connect the subjective aspects of reality, and reflexive events, like the fiscal cliff or the euro crisis, which connect the subjective and objective aspects. In exceptional cases, reflexivity may even occur within a single subjective aspect of reality, as in the case of a solitary individual reflecting on his own identity. This may be described as self-reflexivity.

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When reality has no subjective aspect, there can be no reflexivity. In other words, the presence or absence of reflexivity serves as a criterion of demarcation between social and natural phenomena – a point I will discuss in detail in the next section.

Let me illustrate the difficulties in analyzing the relationship between thinking and reality with the help of a diagram. Figure 1 describes the roles of the cognitive and manipulative functions, fallibility, and intentionality. Together this might be thought of as a reflexive system.

 

 

View larger version(59K)   Figure 1 A reflexive system.

 

I have indicated the presence of multiple participants, and therefore multiple subjective realities. Nevertheless, the diagram is inadequate because it would require three dimensions to show the multiple participants interacting with each other as well as with the objective aspect of reality.

Continue reading: http://www.tandfonline.com/doi/full/10.1080/1350178X.2013.859415

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SPY STOCK PRICE CHART 184.18 (1y: +24%) $(function() { var seriesOptions = [], yAxisOptions = [], name = 'SPY', display = ''; Highcharts.setOptions({ global: { useUTC: true } }); var d = new Date(); $current_day = d.getDay(); if ($current_day == 5 || $current_day == 0 || $current_day == 6){ day = 4; } else{ day = 7; } seriesOptions[0] = { id : name, animation:false, color: '#4572A7', lineWidth: 1, name : name.toUpperCase() + ' stock price', threshold : null, data : [[1358834400000,149.13],[1358920800000,149.37],[1359007200000,149.41],[1359093600000,150.25],[1359352800000,150.07],[1359439200000,150.66],[1359525600000,150.07],[1359612000000,149.7],[1359698400000,151.24],[1359957600000,149.53],[1360044000000,151.05],[1360130400000,151.16],[1360216800000,150.96],[1360303200000,151.8],[1360562400000,151.77],[1360648800000,152.02],[1360735200000,152.15],[1360821600000,152.29],[1360908000000,152.11],[1361253600000,153.25],[1361340000000,151.34],[1361426400000,150.42],[1361512800000,151.89],[1361772000000,149],[1361858400000,150.02],[1361944800000,151.91],[1362031200000,151.61],[1362117600000,152.11],[1362376800000,152.92],[1362463200000,154.29],[1362549600000,154.5],[1362636000000,154.78],[1362722400000,155.44],[1362978000000,156.03],[1363064400000,155.68],[1363150800000,155.91],[1363237200000,156.73],[1363323600000,155.83],[1363582800000,154.97],[1363669200000,154.61],[1363755600000,155.69],[1363842000000,154.36],[1363928400000,155.6],[1364187600000,154.95],[1364274000000,156.19],[1364360400000,156.19],[1364446800000,156.67],[1364533200000,156.67],[1364792400000,156.05],[1364878800000,156.82],[1364965200000,155.23],[1365051600000,155.86],[1365138000000,155.16],[1365397200000,156.21],[1365483600000,156.75],[1365570000000,158.67],[1365742800000,158.8],[1366002000000,155.12],[1366088400000,157.41],[1366174800000,155.11],[1366261200000,154.14],[1366347600000,155.48],[1366606800000,156.17],[1366693200000,157.78],[1366779600000,157.88],[1366866000000,158.52],[1366952400000,158.24],[1367211600000,159.3],[1367298000000,159.68],[1367384400000,158.28],[1367470800000,159.75],[1367557200000,161.37],[1367816400000,161.78],[1367902800000,162.6],[1367989200000,163.34],[1368075600000,162.88],[1368162000000,163.41],[1368421200000,163.54],[1368507600000,165.23],[1368594000000,166.12],[1368680400000,165.34],[1368766800000,166.94],[1369026000000,166.93],[1369112400000,167.17],[1369198800000,165.93],[1369285200000,165.45],[1369371600000,165.31],[1369630800000,165.31],[1369717200000,166.3! ],[1369803600000,165.22],[1369890000000,165.83],[1369976400000,163.45],[1370235600000,164.35],[1370322000000,163.56],[1370408400000,161.27],[1370494800000,162.73],[1370581200000,164.8],[1370840400000,164.8],[1370926800000,163.1],[1371013200000,161.75],[1371099600000,164.21],[1371186000000,163.18],[1371358800000,163.18],[1371445200000,164.44],[1371531600000,165.74],[1371618000000,163.45],[1371704400000,159.4],[1371790800000,159.07],[1372050000000,157.06],[1372136400000,158.58],[1372222800000,160.14],[1372309200000,161.08],[1372395600000,160.42],[1372654800000,161.36],[1372741200000,161.21],[1372827600000,161.28],[1372914000000,161.28],[1373000400000,163.02],[1373259600000,163.95],[1373346000000,165.13],[1373432400000,165.19],[1373518800000,167.44],[1373605200000,167.51],[1373864400000,168.16],[1373950800000,167.53],[1374037200000,167.95],[1374123600000,168.87],[1374210000000,169.17],[1374469200000,169.5],[1374555600000,169.14],[1374642000000,168.52],[1374728400000,168.93],[1374814800000,169.11],[1375074000000,168.59],[1375160400000,168.59],[1375246800000,168.71],[1375333200000,170.66],[1375419600000,170.95],[1375678800000,170.7],[1375765200000,169.73],[1375851600000,169.18],[1375938000000,169.8],[1376024400000,169.31],[1376283600000,169.11],[1376370000000,169.61],[1376456400000,168.74],[1376542800000,166.38],[1376629200000,165.83],[1376888400000,164.77],[1376974800000,165.58],[1377061200000,164.56],[1377147600000,166.06],[1377234000000,166.62],[1377493200000,166],[1377579600000,163.33]

Sales of Newly Built Homes Tumble as Mortgage Rates Rise

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Daniel Acker/Bloomberg via Getty Images WASHINGTON -- Sales of new single-family homes in America fell sharply in July to their lowest level in nine months, casting a shadow over the country's housing recovery. Sales dropped 13.4 percent to an annual rate of 394,000 units, the Commerce Department said Friday. The government also revised sharply lower its estimate for home sales in June. While government housing data is often subject to large revisions, the reading was well below expectations. The median forecast in a Reuters poll of analysts was for a 490,000-unit sales pace. Mortgage rates have surbed since May on bets that the Federal Reserve feels that the U.S. economy has strengthened enough for the central bank to wind down a major stimulus program. Most analysts expect the Fed will begin reducing monthly bond purchases in September. The program aims to lower interest rates to make it easier for businesses to expand and take on new workers. The housing market, which has been a major drag on America's economy since the 2007-09 recession, appeared to turn a corner early last year when home prices began to rise. Last month, the median price for a new home sale rose to $257,200, up from $237,400 in the same month of 2012. Construction of new homes has accelerated during the last year, and the inventory of new homes for sale increased by 4.3 percent in July from June. At July's sales pace it would take 5.2 months to clear the houses on the market, up from 4.3 months in June. A supply of six months is normally considered as a healthy balance between supply and demand.

IIFCL's Rs 200cr tax free bonds issue to open on Monday

According to the CBDT notification, the company proposed to raise upto Rs 10,000 crore through issue of bonds in the year 2012-13. Out of which, IIFCL already raised Rs 785 crore on a private placement basis in two tranches and Rs 2,883.88 crore through public issue of tax free secured redeemable non-convertible bonds of tranche I.

Coupon rate for retail investors, NRIs and HUFs (which are applying for an amount aggregating up to Rs 10 lakh across all series of bonds in each tranche issue) will be 7.36 percent in case of series I, 7.52 percent in series II and 7.58 percent in series III. Coupon rate for other investors will be 6.86 percent in series I, 7.02 percent in series II and 7.08 percent in series III.

Redemption of bonds will take place at the end of 10 years, 15 years and 20 years from the deemed date of allotment for series I, series II and series III, respectively. IIFCL will make interest payment on bonds on annual basis.

Bids can be made for minimum of 5 bonds across all series of bonds and in multiples of one bond thereafter. The issue will close on March 15, 2013.

Credit rating agencies namely Brickworks, ICRA and CARE assigned AAA (stable) rating for this debt programme.

Bonds are proposed to be listed on Bombay Stock Exchange.

The book running lead managers to the issue are SBI Capital Markets Limited, A K Capital Services Limited, Axis Capital Limited, ICICI Securities Limited and Kotak Mahindra Capital Company Limited.

Jim Cramer's 6 Stocks in 60 Seconds: MWV DECK DKS PETM URI HTZ (Update 1)

Check out Jim Cramer's latest trading recommendations on "Action Alerts Plus".

NEW YORK (TheStreet) -- Here's what Jim Cramer had to say on CNBC's "Squawk on the Street" Wednesday.

Bank of America/Merrill Lynch upgraded MeadWestvaco (MWV) to a buy based on optimism about the company's restructuring efforts. Cramer added that "it's a very cheap stock." MWV jumped 4.8% to $37.38.

Jefferies says Deckers Outdoor (DECK) is actually doing well while other rating agencies have argued the opposite. "I agree with Jefferies," Cramer announced. DECK rose 45 cents to $83.04.

Credit Suisse upgraded Dick's Sporting Goods (DKS) to buy from hold. Cramer said some investors began to worry about the company because retail stocks have been getting hammered lately. That is not the case for DKS, according to Credit Suisse.  DKS was 2.1% higher at $56.39. UBS downgraded PetSmart (PETM) to hold from buy. Cramer thinks the management turmoil has a created "a bit of a nightmare. I don't know if you want to get in front of that." PETM fell 2.4% to $65.48. "United Rentals (URI) is on fire," Cramer said. He said people are now renting their farm and construction equipment from the company rather than buying it because they are still skittish over the longer term. Jefferies raised its 12-month price target to $100. URI rose 3.6% to $81.68. Goldman Sachs downgraded Hertz Global Holdings (HTZ) to hold from buy based on earnings potential, but raised its price target. "On an earnings basis, it's not as attractive as sum-of-the-parts," Cramer said. HTZ fell 2.2% to $26.70. To sign up for Jim Cramer's free Booyah! newsletter, with all of his latest articles and videos, please click here. -- Written by Bret Kenwell in Petoskey, Mich. Follow @BretKenwell

Stock quotes in this article: MWV, DECK, DKS, PETM, URI, HTZ 

France...Economy & Presidency

 

This afternoon at 16:30 CET the President of France, François Hollande, will hold a press conference where he intends to unveil a new programme for the economy. It is to be framed as a more business friendly approach, a partnership between the state and enterprise. One has lost count how many times that mantra has been trotted by global politicians; rarely has such an agenda sown seeds for success.

 

Of course, this afternoon many journalists will be in attendance, however, the questions they will really wish to ask will be more suited to the gossip columns as against the financial pages.

Here I wish to consider the economy as against the salacious tittle-tattle of the tabloids.

 

Regular readers will know that I am radically pro the free market and oppose all forms of socialism. In that light ever since the French elections of 2012…May for President and June for the National Assembly Spotlight has railed against the sheer folly of the agenda being proposed by the incoming administration and government.

 

Growth in 2013 may be recorded at 0.2% rising to 0.8% at best this year. The latest PMI reading was just 47…i.e. contraction, the level of Debt:GDP 92.7% and unemployment at 11%.  Throughout 2012 and H1 2013 the President assured the rest of the Eurozone that the nation would achieve the target budget deficit of -3.0% by the end of last year. Instead it is -3.5% and France had to beg an extension until 2015 from its European peers.

 

There has been no incentive for creative entrepreneurs to set up a business when they are threatened with a tax of 68% on any profits they may make if their venture were sold to another company. Business are bullied as left wing dogma has repeatedly failed to recognise that both French and international corporations have to compete on a global stage and therefore cost control is an essential tool of the trade. Holding key management hostage (Goodyear) when a plant is threatened with closure does nothing to attract new incoming capital.

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If one indexed the DAX and the CAC 40 at the end of 2011 as starting on level terms i.e. 1:1, then the fatigue of France is shown in that at the end of last week the DAX:CAC ratio had risen to 2.23:1…there is little more that needs to be said.

 

If the President, this afternoon marks a shift away from his socialist,  anti-business agenda then surely the markets must recognise it as the acceptance that the manifesto that he ran for office on has crumbled and is to be judged a failure. Why now, when in his 20th month in Élysée Palace has it dawned on him that socialism is a fine idea until one has to ask who will pay. Clearly it is the French people that paying for this "Grande folie".

 

However, the posturing policies look set to continue as one mooted proposal is a "Responsibility Pact". Under this initiative, corporations will qualify for tax rate reductions provided they promise to hire more workers.

 

The cut in taxes would lift corporate profitability as the cost burden would be reduced, however, the first step in re-energising industry is for the existing spare capacity to set to work. Rather than hiring more workers immediately, the existing workforce needs to raise its productivity. In short, whilst trapped inside the fixed rate fetter of the Euro, France has to undertake an internal devaluation. Then, and only then can more workers be hired. The addition of new personnel has to be targeted at achieving an economic goal…not fulfilling a political pipe dream.  Only through efficient free enterprise will the level of French unemployment start to fall. If the dead hand of the state is not rolled back, unemployment will simply keep rising.

 

It is not our care to be drawn into commenting on the President's private life. After all, the highest office in the French Republic appears to have  "une affaire de coeur" as part of the history. What we look for is,  as a politician will President Hollande prove up to the task of delivering an economic recovery in the Eurozone's second largest economic power. We hope the answer is yes…however the sad truth we actually think he is not. Any deviation from the well-trodden left wing path that has been followed since May/June 2012 will bring about a backlash from politicians that are even further left in their view. They have supported the President thus far and any appearance of selling out on workers' rights in favour of corporate profits will be attacked by the unions.

 

President Hollande still has, in theory, 40 months in which to make something of his Presidency. Sadly we anticipate that the policy script issued this afternoon will be light-weight and blown off course when the protest of the left becomes vocal and takes to the street. Within one year from now we believe that it will become clear that within the Eurozone, France is not the second best it is simply the least worst.

 

 

 

Stephen Pope

 

 

 

Does Kraft Foods Support All-Time High Prices?

With shares of Kraft Foods (NASDAQ:KRFT) trading around $57, is the company an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Kraft Foods operates food and beverage businesses in North America. The company manufactures and markets food and beverage products, including convenient meals, refreshment beverages and coffee, cheese, and other grocery products. Kraft Foods’s product categories span breakfast, lunch and dinner meal occasions, both at home and in foodservice locations. It sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, drug stores, gasoline stations, value stores, and other retail food outlets. Food and beverage products are essential for the daily lives of consumers, so it is clear the demand will always be there. Now, as consumers and countries around the world see development, Kraft Foods’ products will see increasing demand as the affordability makes them viable options.

T = Technicals on the Stock Chart are Strong

Kraft Foods stock has seen a consistent uptrend since its initial public offering just last year. The stock has seen a powerful run this year that has taken it to all-time high prices. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Kraft Foods is trading above its rising key averages, which signals neutral to bullish price action in the near-term.

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(Source: Thinkorswim)

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

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Kraft Foods Options	18.3%	56%	54%

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

	Put IV Skew	Call IV Skew
June Options	Flat	Average
July Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Kraft Foods’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Kraft Foods look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	-7.32%	-71.02%	12.86%	N/A
Revenue Growth (Y-O-Y)	2.09%	-10.74%	2.95%	0.95%
Earnings Reaction	5.1%	0%	N/A	N/A

Kraft Foods has seen mixed earnings and revenue figures over the last few quarters. From these figures, the markets have been happy with Kraft Foods’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

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How has Kraft Foods stock done relative to its peers, ConAgra Foods (NYSE:CAG), Hillshire Brands (NYSE:HSH), General Mills (NYSE:GIS), and the sector?

	Kraft Foods	ConAgra Foods	Hillshire Brands	General Mills	Sector
Year-to-Date Return	26.57%	18.58%	25.76%	21.47%	19.79%

Kraft Foods has been a relative performance leader, year-to-date.

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Conclusion

Kraft Foods provides essential food and beverage products to many consumers and businesses looking for quality and affordable items. The stock has surged higher since its initial public offering that occurred just last year to all-time high prices. Over the last few quarters, earnings and revenue numbers have been mixed, which has kept investors in the company happy. Relative to its peers and sector, Kraft Foods has been a year-to-date performance leader. Look for Kraft Foods to OUTPERFORM.