Shared work spaces grow in popularity

DETROIT -- For years, Rob Cousineau and his partners operated their video editing company, Get Super Rad, from their homes. Earlier this year, they decided a more grown-up place was in order and moved to Venture Park, a shared working space in Royal Oak.

They wanted the benefits and amenities of an office without the high cost — or long-term commitment — so they could work around other young, creative entrepreneurs.

The coworking space, which was a hotel years ago, offers a variety of options, from small enclosed offices with lofts to what looks like a table at a coffee shop. In fact, in one large room, Venture Park is building a coffee bar to create a social atmosphere.

"You ever talk to people who are so excited about what they are doing it inspires you?" Cousineau, 30, asked. "That's what it's like to work at Venture Park."

The trend of coworking — putting several, small independent companies and professionals under the same roof — has been growing in the past five years. It has been driven largely by technology, enterprising 20-somethings and, in Michigan, workers who started small businesses or started to freelance after being downsized.

Deskmag, an online magazine about coworking, publishes an annual Global Coworking Survey that estimated there are more than 110,000 people working in nearly 2,500 spaces worldwide, an increase of 83% from last year.

"In some ways this is a trend of going back to the workplace," said Margaret Williams, the interim dean of Wayne State University's School of Business Administration. "A lot of it is driven by the millennial generation and their affinity for social connections."

Coworking allows entrepreneurs who might otherwise toil alone at home — or set up temporary digs at a coffee shop table — to have a permanent business address, access to a conference room and also to socialize with office mates.

"Coworking is all about bringing flexibility to an office, and that appeals to entrepreneurs," said Derek Tur! ner, director of business development at Grand Circus in Detroit. Grand Circus, which opened this year, offers about 40 offices on a daily, weekly and monthly rate. "They don't always know where their company will be in two years."

At the same time, coworking helps separate personal and professional spaces, said Todd Luhtanen, the founder of Metro Work Spaces in Livonia. One entrepreneur, he said, even opened an office there at his wife's request. Luhtenan said an office lends a small business gravitas and credibility.

"You do not want to bring someone into your basement, den or living room for a meeting," he said.

Jacob Zuppke, a managing partner of Venture Park, said he and his partners stumbled on the space they are developing now when seeking offices for his digital marketing agency, Traffic Digital Agency. The spaces rent on a month-to-month basis with utilities, and amenities such as hot coffee are included.

Venture Park also offers professional services, such as access to attorneys, at a discounted rate.

Still, Cousineau said, even though they moved into an office, they didn't want it to feel like one. To keep it fun, they hung a stuffed wild boar head wearing a cap on the wall, and they've covered the shelves with action figures and other toys from their youth.

"It's good to be surrounded by forward-thinking people," he said. "It makes work fun."

SWOT Analysis of Rio Tinto and BHP Billiton

What are the most important factors affecting companies in the mining industry today? David O'Hara of The Motley Fool UK, highlights the strengths, weaknesses, opportunities, and threats affecting these two mining giants.

Rio Tinto

Rio Tinto (LSS: RIO) (NY:RIO) has a £65bn market capitalization, making it the 24th largest UK-listed company.

Strengths

Rio's greatest strength is its history and track record. This helps provide considerable assurance to any authority considering applications for mining licenses.

Weaknesses

Rio Tinto is what economists call a "price taker." It has no influence on the price of products that it produces. This brings extra risk to its profits, and limits the rating that the market will award the shares.

Opportunities

Last month, Rio Tinto sold its stake in the Clermont mine for over $1bn. This was part of a strategy to concentrate its operations on larger mines. The divestment will enable the company to dedicate more management time to higher margin activities. Further disposals could provide more help to increase profitability.

Threats

As a price taker, Rio Tinto is vulnerable to changes in the global economy. The shares have fallen back in the last couple of years amid fears for the Chinese economy. If China does stumble, Rio Tinto's profits could fall hard.

BHP Billiton

BHP Billiton (LSS:BLT) (NY:BBL) is significantly larger than Rio and is the tenth largest company in the FTSE 100.

Strengths

BHP's key strength is its diversity. No single commodity is responsible for more than one third of BHP revenues. While iron ore is its biggest product by revenue, a similar contribution is made by coal, copper, and petroleum/potash—each is responsible for around one sixth of all sales.

Weaknesses

Like Rio Tinto, BHP Billiton trades in volatile commodities markets. This makes financial management more difficult, as the company has little certainty over its future cash flows.

Opportunities

Although much media attention is dedicated to the troubles of European economies, emerging economies are growing fast. The industry expects that within a decade, African economies could become significant consumers of metals. A new source of demand will be welcomed by an industry that has become dependent on Chinese appetite.

Threats

Major miners are all at risk of increased government regulation. A change in the rules can quickly undermine the economic case for extraction. Energy prices can also move fast and have a material impact on margins.

It appears that there is little to choose between the companies. If I wanted to get some mining exposure in my portfolio, I would likely buy both.

Read more from The Motley Fool UK here...

Obamacare, Medicare Maze: What Advisors Need to Know

The difficulties users of the federal health care website, HealthCare.gov, are experiencing is the subject of hearings on Capitol Hill and much gnashing of teeth among politicians and pundits, but what practical steps can financial advisors take to help affected clients?

“I’d take the old-fashioned approach,” says Dr. Katy Votava of GoodCare.com, a niche practice that handles health care issues for financial advisors and consumers looking to lower their coverage costs. “Pick up the phone and call the 800 number on HealthCare.gov and ask them who in your area is a ‘navigator.’”

“Every state,” Votava says in a phone interview with ThinkAdvisor, “has community organizations available to talk to people face to face. They’ll let you know who in your county and zip code to call and make an appointment with because right now none of [the exchanges] are working great. Call early and get on a list for an appointment.”

Some advisors may assume that health care issues are not part of their job, or perhaps that it only becomes an issue once their clients are old enough to become eligible for Medicare. But the expense involved and the difficulties clients encounter with health care at every stage of their lives make health care an issue that advisors should have on their radar, Votava argues.

(Check out Top 10 Cheapest States for Long-Term Care Costs on ThinkAdvisor.)

“First of all, know it’s an issue. Put it on your annual planning agenda; just start to ask about it and find out where your clients are at,” says Votava, who says she founded GoodCare 10 years ago when she noticed that no one was helping advisors help their clients with the unique planning issues surrounding health care.

“Second, plan for health care costs in retirement as a separate line item in the budget,” she advises, noting that health care inflation is two to four times CPI, and therefore assets meant to cover these costs should have a higher growth target.

“Third, know where to go to get some questions answered.”

That, Votava says, is where GoodCare comes in:

“We do training for advisors, we do webinars so that advisors know how to incorporate health care in planning and refer when they need to. We look at the total picture of a person’s health and medications to help them find the best coverage for the best price on an hourly basis.”

So if an advisor has a large segment of clients transitioning to Medicare or under-65-year-olds who are seeking coverage on the Obamacare state exchanges, the fee-for-service consulting firm will speak to the group or produce webinars that help clients know how to shop for coverage.

“More and more advisors are saying, ‘Wow, that’s a real value-add for my clients,’” she says.

Advisors who thinks that Medicare alone, and not Obamacare, are issues for clients, should think again, the GoodCare founder says.

“On any given snapshot of a day, most people have health insurance. But tomorrow that can change. People are changing jobs. Sometimes people move. Children grow up and go out into the workplace. People in their 20s looking for jobs don’t have health insurance.

“Most of it really is transitions,” she adds. “We’d love to talk with people ahead of time to plan, but most of the time we don’t. [Instead] it’s ‘I’m getting divorced’ or ‘I’m losing my COBRA.’”

Apart from ever-present gaps in coverage, there are also the oft ignored, but bread-and-butter, issues of costs.

“We find that people are sometimes paying too much,” Votava says, offering the example of a wealthy client unhappy about the high health care costs his family of four incurred. GoodCare suggested they move from a high-premium plan to a high-deductible health savings account.

“Now they’re saving $7,000 in premiums a year”—money that can now be invested she says. “They were under-saving for retirement because they were overspending for health care.”

And it’s not just clients but advisors who themselves are typically small businesses who may not be taking advantage of opportunities to lower health care costs.

“Most companies, small or large, can offer just one health plan; in the exchanges run by the state, they’ll have more options,” she says.

To lower advisors or clients’ health care costs, GoodCare first looks at their health status and the medications or health care providers they see.

Thus armed, GoodCare then finds the best prices in the health care marketplace, making sure key providers are “in network” and that needed medications are more affordable Tier 1 rather than Tier 3 options on that plan. A key mistake people make is looking carefully at premiums but not at benefits, Votava says.

The consultancy firm also regularly deals with esoteric cases, for example people who want to retire overseas or even expatriate professionals working abroad.

In the latter case a person must be aware that eligibility for Medicare requires the need to contribute to Social Security for at least 40 quarters, or 10 years.

Clients needing this sort of expertise should also be aware of reciprocal arrangements the U.S. has with some countries in terms of accessing health and retirement benefits; the quality of medical care in a foreign country, which may influence decisions about whether or not to pay Medicare premiums; and whether clients want to preserve their rights to rejoin Medicare at a later stage of their life if they move back to the U.S.

-- Check out this related story on ThinkAdvisor: Top 10 Cheapest States for Long-Term Care Costs: 2013

U.S. Poverty Rate Stuck at 15% - a Record 46.5 Million People

Alamy WASHINGTON -- The nation's poverty rate remained stuck at 15 percent last year despite America's slowly reviving economy, a discouraging lack of improvement for the record 46.5 million poor and an unwelcome benchmark for President Barack Obama's recovery plans. More than 1 in 7 Americans were living in poverty, not statistically different from the 46.2 million of 2011 and the sixth straight year the rate had failed to improve, the Census Bureau reported Tuesday. Median income for the nation's households was $51,017, also unchanged from the previous year after two consecutive annual declines, while the share of people without health insurance did improve but only a bit, from 15.7 percent to 15.4 percent. "We're in the doldrums, with high poverty and inequality as the new normal for the foreseeable future," said Timothy Smeeding, an economics professor at the University of Wisconsin-Madison who specializes in income inequality. "The fact we've seen no real recovery in employment and wages means we've just flatlined." Mississippi had the highest share of its residents in poverty, at 22 percent, according to rough calculations by the Census Bureau. It was followed by Louisiana, New Mexico and Arkansas. On the other end of the scale, New Hampshire had the lowest share, at 8.1 percent. The last significant decline in the national poverty rate came in 2006, during the Bush administration and before the housing bubble burst and the recession hit. In 2011, the rate dipped to 15 percent from 15.1 percent, but census officials said that change was statistically insignificant. For the past year, the official poverty line was an annual income of $23,492 for a family of four. The Census Bureau's annual report offers a snapshot of the economic well-being of U.S. households for 2012, when the unemployment rate averaged 8.1 percent after reaching an average high of 9.6 percent in 2010. Typically, the poverty rate tends to move in a similar direction as the unemployment rate, so many analysts had been expecting a modest decline in poverty. The latest census data show that the gap between rich and poor was largely unchanged over the past year, having widened since 2007 to historic highs. Signs of Improvement On Monday, Obama called attention to what he described as economic improvements -- the nation's gross domestic product did rise by 2.8 percent last year -- and said congressional Republicans would reverse recent gains if they took uncompromising stands in connection with looming budget deadlines. Some GOP conservatives have been demanding a delay of Obama's new health care law as the price for supporting continued federal government spending. The House is also expected to consider a bill this week that would cut food stamps for the poor by an estimated $4 billion annually -- 10 times the size of cuts passed by the Democratic Senate -- and allow states to put broad new work requirements in place for recipients. "This lack of improvement in poverty is disappointing and discouraging," said John Iceland, a former Census Bureau chief of the poverty and health statistics branch who is now a Penn State sociology professor. "This lack of progress in poverty indicates that these small improvements in the economy are not yet being equally shared by all." Ron Haskins, a senior fellow at the Brookings Institution who specializes in poverty, agreed. "Everything's on hold, but at a bad level; poverty and income did not change much in 2012," he said. "So child poverty is still too high and family income is still too low. The recession may be over, but try to tell that to these struggling families. Don't expect things to change until the American economy begins to generate more jobs." What Doesn't Count in Those Numbers: Quite a Lot The official poverty level is based on a government calculation that includes only income before tax deductions. It excludes capital gains or accumulated wealth, such as home ownership. As a result, the rate takes into account the effects of some government benefits, such as unemployment compensation. It does not factor in noncash government aid such as tax credits and food stamps. David Johnson, the chief of the Census Bureau's household economics division, estimated that unemployment benefits helped keep 1.7 million people out of poverty. If non-cash government aid were counted in the official formula, the earned income tax credit would have lifted another 5.5 million people above the poverty threshold. Counting food stamps would have boosted 4 million people, lowering the poverty rate to 13.7 percent. The slight dip in Americans without health coverage meant 48 million people were without insurance. The drop was due mostly to increases in government coverage, such as Medicaid and Medicare. The number of people covered by employer-provided health insurance remained flat. The decline in the uninsured was modest compared to a bigger drop in 2011, which occurred due to increased coverage for young adults under the new health care law. Because the main provisions of the Affordable Care Act don't take effect until 2014, the latest census numbers offer a baseline number of uninsured by which increased coverage and effectiveness of the law will be measured. Many conservative Republicans remain committed to repealing the law. Starting next year, the government will offer tax credits for people without access to job-based health insurance to buy private coverage through new markets, called exchanges, in each state. Open enrollment starts Oct 1. The new health care law also expands Medicaid to cover millions more low-income people, but so far only 24 states plus Washington, D.C., have gone along with the expansion. The Congressional Budget Office estimates that by next year, the health law will reduce the number of uninsured in the U.S. by about 25 percent. By 2017, it is projected that 92 percent of eligible Americans will have health insurance, a 10 percentage point increase from today's level.

Alternatives & Volatility: One Firm’s Winning Approach

Alternative-investment strategies can benefit client portfolios. But some managers’ high minimums restrict access for smaller investors.

That restriction has led to the emergence of mutual funds that invest with alternative-strategy managers -- with lower account minimums.

A logical progression for fund providers was to create multi-manager funds.

These funds increase diversification by allocating assets among managers and strategies. Investors apparently find this approach attractive.

According to Morningstar data, 17 multi-alternative funds launched in 2012. Plus, the category’s growth has been strong in early 2013: Assets in multi-alternative open-end funds grew from $17.97 billion in January to $20.11 billion by April 30, the Chicago-based research group says.

Jeremy DeGroot (left), chief investment officer of Litman Gregory Asset Management in Orinda, Calif. (near San Francisco) and manager of the Litman Gregory Masters Alternative Strategies Fund recently shared his insights on alternatives with ThinkAdvisor.

The Litman Gregory fund (MASFX, MASNX) has $587 million in assets allocated across four mangers and strategies: Loomis Sayles (strategic-alpha fixed income); Water Island Capital (arbitrage strategy); DoubleLine (opportunistic income) and FPA (contrarian opportunity). 

Why did you selecting these managers and strategies?

The selection of managers and strategies was driven by what we are trying to accomplish with this fund.

First, obviously we wanted highly skilled managers who we strongly believed have the ability to add significant alpha over time and generate strong risk-adjusted returns.

And we wanted strategies that would be complementary and provide diversity to the overall fund portfolio.

Finally, fees were important since our objective has been to deliver a quality fund at a reasonable fee level.

Our assessment of the managers and strategies was based on our qualitative due diligence and our quantitative analysis of their track records.

Important to us was the willingness to be opportunistic from a tactical standpoint-- specifically a willingness to increase or reduce risk based on their assessment of risk/reward trade-offs.

But we also wanted to create a fund that is not highly correlated with stocks and bonds, and that we believe would be relatively low risk compared to stocks and also on an absolute basis in terms of downside performance. Both of these objectives are very important.

We didn’t want a low-risk fund that wouldn’t have the potential to generate much return or, conversely, a fund that would turn out to be too volatile.

With respect to risk management we sought to hire managers who met two criteria: First, they each would have a different investment approach and/or investment universe that collectively would result in a portfolio that we believed would not be highly correlated to the stock market and the bond market and would have a low equity beta.

Second, we were only interested in managers who we believed would run a low risk portfolio by virtue of their investment approach or investment universe, and/or because of their risk mindset.

And at the overall fund portfolio level, we wanted a mix of managers and strategies that we did not believe would be highly correlated with each other.

How has the fund performed to date?

The fund’s performance since inception has been strong on an absolute and risk-adjusted basis and also relative to its Morningstar Multialternatives peer group category. We have also been pleased with the performance relative to the risk and return objectives we set at the time the fund was launched 20 months ago.

Through May 31, the average annual return since inception has been 10.6%. The standard deviation has been only 3.3%, even lower than we have targeted (in the 4% to 8% range).

This compares to 11.4% for the S&P 500 standard deviation and 2.6% for the Barclays Aggregate Bond Index.

The fund’s annualized Sharpe Ratio through March 31 is 3.1 compared to 1.0 for the bond index and 2.2 for the stock index.

Have those returns been in line with your expectations?

So far we’d say the fund has met or exceeded our expectations.

The fund’s annual volatility has actually been below our expected range of 4% to 8% and close to the bond market’s.

We’ve also been generally pleased with the performance of the fund during the several short stock-market down drafts we’ve experienced since it was launched in fall of 2011.

For example, the fund’s worst drawdown during that 20-month period is only 1.8% compared to 9.6% for the S&P 500. Its equity beta has been very low at 0.1.

The fund’s 10.6% annual return has been somewhat higher than we would expect, especially given the fund’s very low equity exposure during what has been a strong return environment for stocks. 

We’ve been pleased that it has significantly out-returned its Morningstar Multialternative peer group by 10.6% compared to 4.0%, while exhibiting almost identical volatility.

***

For direct insights on the role of ETFs in client portfolios from multiple experts—including Rick Ferri, Ron Delegge, Skip Schweiss and more—we invite you to register for AdvisorOne’s premiere advisorcentric Virtual ETF Summit, which starts July 23 (and get multiple hours of CFP Board CE).

 

 

 

 

 

 

1 Thing to Watch at Macquarie Infrastructure

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

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

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

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

Over the past 12 months, Macquarie Infrastructure generated $180.8 million cash while it booked net income of $5.1 million. That means it turned 17.5% of its revenue into FCF. That sounds pretty impressive.

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

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

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

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

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

With 63.2% of operating cash flow coming from questionable sources, Macquarie Infrastructure investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 20.3% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 20.7% of cash from operations.

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

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

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

Add Macquarie Infrastructure to My Watchlist.

Why Altria Is Poised to Bounce Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, tobacco giant Altria (NYSE: MO  ) has earned a coveted five-star ranking.

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

Altria facts

Headquarters (founded)	Richmond, Va. (1919)
Market Cap	$71.3 billion
Industry	Tobacco
Trailing-12-Month Revenue	$17.5 billion
Management	Chairman/CEO Martin Barrington President/COO David Beran
Return on Capital (average, past 3 years)	25.7%
Cash/Debt	$3.8 billion/$13.9 billion
Dividend Yield	4.9%
Competitors	Altadis Lorillard  Reynolds American

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

On CAPS, 96% of the 8,968 members who have rated Altria believe the stock will outperform the S&P 500 going forward.

Just last week, one of those Fools, TMFInnovator, succinctly summed up the Altria bull case for our community:

- Incredibly strong brand. Marlboro has been around since the 1920's and is the best selling cigarette brand in the world.
-Stickiness. Even though cigarettes are commodities, consumers are extremely brand loyal and almost always buy the same type.
-Pricing Power. Even though Altria is restricted to the US (Philip Morris International has the international rights) where cigarette volumes have been in constant decline, they still manage to raise revenues every year. How: pricing power. ...

Altria pays a 5% dividend, has strong brand and pricing power, and is largely immune to technological disruption. All of these advantages help explain why it has been THE BEST performing stock of the past fifty years.    

Altria has been the best-performing stock of the past 50 years, but as the number of smokers in the U.S. continues to steadily decline, is Altria still a buy today? To find out whether everyone's love-to-hate dividend stock is a savvy investment choice or a hazard to your portfolio, simply click here now for access to The Motley Fool's premium research report on the company.

Costly Risk In New Oil Exploration

Over the past few years, the large Western oil majors have been plagued by projects running substantially over budget, and taking much longer to complete than initially estimated. These hurdles are part of the broader challenge facing oil companies -- how to cope with the end of the era of "easy oil." Let's take a closer look at one project -- the Kashagan oil field -- that epitomizes these challenges.

A primer on Kashagan
Kashagan is a vast untapped oil field in Kazakhstan with massive hydrocarbon potential. Yet, despite its operators -- a consortium of companies including ExxonMobil (NYSE: XOM  ) , Eni, and Royal Dutch Shell -- having plowed more than $30 billion into the project over the past decade, the field has yet to produce a single drop of oil. 

Exploration in the region first began in the early 1990s after the dissolution of the Soviet Union, and was led by companies including Eni, Exxon, Shell, Total SA, Statoil, BP (NYSE: BP  ) , and BG Group. While initial prospecting pointed to a potential 10-billion barrels of recoverable oil, it also made clear some of the most daunting challenges that drillers would have to overcome in order to exploit Kashagan's resources.

Technical and other challenges
For starters, the reservoir lies about 12,000 feet below the northeast Caspian Sea, which freezes for several months during the year. Since this tends to damage or destroy typical offshore drilling equipment, operators are forced to construct concrete drilling blocks, which don't come cheap. In addition to these weather-related challenges, Kashagan's development has been beset by difficult supply routes and clashes with local government officials.

Delays and other issues
As a result, its operators have repeatedly failed to meet deadlines and start-up dates. Last year, Eni said Kashagan would start up in March this year -- a deadline it later pushed back to June. But that target won't be panning out, either. Earlier this month, Eni pushed the deadline even further out to October this year.

According to a spokesman for the North Caspian Operating Company, the reason for Kashagan's numerous delays has to do with the overwhelming technical complexity of the project, as well as its operators' vigilant approach to development, which they've adopted to minimize problems like oil and gas leaks. 

Due to the delays, cost overruns, and uncertainties, one initial partner in the project, ConocoPhillips (NYSE: COP  ) , even decided to back out. The company recently announced that it is looking to sell its 8.4% stake in the venture, which Kazakhstan has the right to buy. The Kazakh government will decide by July 2 how it wishes to proceed. 

Kashagan's implications for oil companies
Kashagan highlights the grave difficulties facing the large Western oil companies in an era where fields of "easy oil" have already been tapped, or are zealously guarded by national oil companies.

As Steve Coll highlights in his excellent recent book, Private Empire: ExxonMobil and American Power, the resource nationalism that emerged among the large oil-producing states in the world over the past few decades has forced the Western oil majors to embark on challenging journeys to all corners of the globe in search of oil.

But, like Kashagan, most of these projects require massive amounts of upfront investment, yet provide no guarantee about future returns. The bottom line is that, despite the fact that ExxonMobil and some other integrated oil majors are exceptionally well managed, they're still operating in an environment fraught with risk. Clearly, BP -- still recovering from the Deepwater Horizon incident's fallout -- is a poster child for this harsh reality.

This inherent friction of balancing risk minimization with the need to explore for oil in some of the riskiest locales around the globe is one major reason why investors should be wary of the numerous countries these companies operate in, and the level of risk -- weather-related, cost-related, political, social, and otherwise -- that their operations pose.

There are many different ways to play the energy sector, and The Motley Fool's analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations, and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.

3 Perpetual Myths for How to Improve Credit Scores

The world of personal finance, debt and credit scores can be a scary and confusing place. While there's a lot of helpful information about there to be found, there are also piles of misinformation as well. To help you navigate through the personal finance trenches, let's take a look at three big myths for how to improve your Fair Isaac Corporation (NYSE: FICO  ) score, as well as some solid steps that will actually help you improve your score.

Myth 1: Cancel Credit Card Offers
Although cancelling credit card offers may de-clutter your kitchen table, there's no evidence it'll improve your credit score. Credit card offers are considered "soft" inquiries, which don't have an impact on your score . Along the same lines, if you're worried that a checking your own credit score will lower it, don't be! Checking your credit score is also a soft inquiry and won't hurt your FICO score. The path to perfect credit is attainable, you just won't get there faster by cancelling offers.

Myth 2: Close Out Old Accounts
Sorry folks, closing those old paid-in-full accounts won't boost your score -- and it could actually hurt it . Credit reporting agencies like Equifax (NYSE: EFX  ) Experian, and TransUnion want to see long credit histories that are in good standing. When you close an account you, theoretically, shorten your credit history.

Creditors want to see that you've had a long history of responsible and diversified borrowing. When you have more credit available, and don't use it, your credit utilization rate stays low and can help increase your score. Keep in mind that some accounts will stay on your history even after they're closed. So if you're hoping to get rid of previously delinquent accounts but paying them off and canceling the account, it won't work.

Myth 3: Buy Better Credit
Although many companies out there promise they can improve your credit score if you pay them money, it's simply not true. If you've missed payments, you can't pay to make those records go away.

What can be done is to dispute legitimate discrepancies on your credit report .  But be careful about hiring a company to do this. Some will send a lot of letters to credit agencies about your account, but won't actually find out what should be disputed and what shouldn't be. You'll end up spending money and won't have fixed anything.

How to really improve a credit score
One of the first steps to improving your credit is to be proactive. Find out what your score is and make sure the accounts and payment history are correct. With so much information flowing into the credit agencies, finding a problem on your account isn't unusual. You can get a free annual credit report by going here: www.annualcreditreport.com.

Fellow Fool and personal finance expert Dayana Yochim says your credit history and total amount you owe make up 65% of your credit score. So keep the regular payments coming. Also, keep credit usage low. Some institutions, like Bank of America (NYSE: BAC  ) , will tell you that using up to 50% of your available credit is OK . But let's be honest, it's in the interest of those banks to have you using up your credit. A better bet would be to use 30% or less of your available credit, while 10% or lower should be your ultimate goal. If you're trying to figure out which debts to knock out first, start paying off any no-money-down financing plans you have.

Although it can seem overwhelming, it is possible to improve your credit score in months, not years -- so get started today! 

After it's all settled
Once you've figured out what to do with your personal debt and your credit score is all in order, one of the best financial investing approaches is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

 

One Simple Act Can Protect You From Credit Card Fraud

Eric Audras/PhotoAlto

Fourteen times a day.

That's how often the average Facebook (FB) user with a smartphone checks the social network, according to a 2013 International Data Corp. study commissioned by Facebook. Add all those visits up, and smartphone users spend about a half hour each day just on that one website. We don't think anything of visiting our favorite sites every day, often more than once. But what about your bank's website, or your credit card issuer's? How often do you visit them? The answer is likely very different. And in this age of data breaches and fraud, that can lead to trouble. When you log in to your bank or credit card website, you might be surprised to see just how many transactions there are. After all, you probably can't recall every single purchase you made in the past 30 days –- possibly even the past 10 days. We all have more important things to think about than the last time we got gas or a soda at the convenience store. That's a problem. And it's one that credit card and debit card fraudsters count on. The $2 Test One of the most common ploys used by credit card fraudsters is to make a small purchase at a gas station or a convenience store to make sure that the stolen credit card information they have is valid, and that the account is still active. Keeping that initial purchase small helps them avoid setting off any alarm bells with the victimized cardholder.

FSI gives revised Finra BrokerCheck link rule the thumbs down

An interest group representing independent broker-dealers continues to object to a proposal by Finra — despite the regulator’s modifications to the measure — that would require links to a broker database on firms’ websites and online communications.

Under the Financial Industry Regulatory Authority Inc.’s revised proposal, a brokerage firm must include a prominent reference and link to BrokerCheck, an online repository of broker background information, on their websites available to retail investors. A firm also must include a BrokerCheck link in online profiles of their registered representatives.

The revised proposal, designed to increase investor use of BrokerCheck, eased requirements put forth in the original January 2013 proposal that related to social media and third-party websites. It also removed a requirement that the links go directly to a broker’s summary page on BrokerCheck.

The changes were not enough to win over FSI, which wants Finra to entirely eliminate the requirement that a BrokerCheck link be included on third-party websites and social media, the group said in a June 12 comment letter.

“Firms will incur significant costs and operational burdens to implement the requirements and monitor for compliance,” wrote David Bellaire, FSI executive vice president and general counsel. “While Finra’s goals with the requirements related to third-party websites are laudable, many aspects of these requirements may not be feasible, and it is unclear whether they will actually increase traffic and awareness of BrokerCheck.”

The deadline for comment letters is June 16.

Firms would have to create new written materials and policies for the BrokerCheck link rule and would have to ensure that their financial advisers are properly adding links to their websites and social media, Mr. Bellaire said in describing additional regulatory costs. In addition, there’s no automated way to add a BrokerCheck link to each of their advisers’ social media accounts.

Although the revised proposal doesn’t require a BrokerCheck link on individual messages on social media platforms, it does say that a link should be posted in the “about” sections of profile pages on Twitter, Facebook, YouTube and Pinterest and in the “background summary” section of LinkedIn.

The FSI said that suggestion is unworkable because social media platforms will continually evolve.

“While Finra has provided helpful guidance with respect to the locations on existing social media sites where the BrokerCheck link can be placed, future social media platforms utilized by the public and advisers may not have room for the BrokerCheck link or may require additional guidance from Finra,” Mr. Bellaire wrote. “In addition, existing social media platforms may change the fields and locations where Finra has suggested the required link to Broker! Check appear.”

Finra wants to elevate the profile of BrokerCheck, which contains professional and disciplinary information about brokers. But FSI suggested it evaluate whether the link proposal is the best way to do it.

“FSI believes Finra should conduct a cost-benefit analysis to determine whether adding the proposed link to BrokerCheck in the designated locations will in fact increase traffic to the site,” Mr. Bellaire wrote.

Entrepreneurs, tech's a great tool — use it!

Hi, Gladys, Several months ago I was attending a network luncheon for entrepreneurs. The guest speaker was a man who gave a talk on the future of small business. According to him, within the next few years everyone would be shopping online. This would cause many small bricks-and-mortar businesses to shut down. I have owned a card and gift shop for many years, and so far we have been quite successful. How can I keep my small business thriving?

I have no idea what message the speaker was trying to convey but entrepreneurs created the technology world, and it's here to stay. And, the bricks-and-mortar world is not going away. However, you will need to find balance between the two worlds and use technology to your advantage. Computers, e-mail, Internet, websites, apps, tablets and various mobile devices have not only changed the way we do business it has enhanced the way we do business.

For instance, I belong to a gym and I have my days of being a slacker when it comes to exercising. The owners of the gym send a regular e-mail reminding their clients of the health benefits of exercise. They also include a healthy eating tips and sometimes an easy-to-prepare recipe. They understand that in order to keep customers and build new business they need to be in touch with us. And for me it works! All it takes is a computer, e-mail addresses of their current customers and the time to put the information together.

A successful business depends on the transfer of information and the gathering of knowledge. And it is easier now than ever. Tasks that once took hours or days now take minutes. We can respond to our customers' wants and needs more quickly and completely, and with fewer errors. We have at our fingertips educational resources, from up to date encyclopedias to in office learning programs never before available. Technology even allows us to be away from home and yet control the lights, temperatures, and security in our homes.

We can reach out to the entire world, makin! g it possible to expand our customer base and provide services and information that was never before available. Because of technology I can do workshops and individual consulting worldwide without leaving my office.

And technology is not just an advantage for business owners; everyone benefits. I often have dinner with my friend who lives 500 miles away via our devices. We set up our laptops on the dining room table and enjoy dinner and good conversation with each other over Skype. Without this technology we would just be voices on the phone.

Allow the world of technology to work for you. Take a look at all of the great possibilities that exist for you and your business to grow. Here are a few things to consider.

• Do you have the e-mail address of your customers so that you can alert them to specials and holiday sales?
• Do you have a website that works nicely with mobile devices. So that customers can read your offerings without difficulty?
• Can customers purchase items from your store online? This will allow customers to shop in your store 24/7
• Do you have a social media presence?

Many businesses both large and small have found that technology has been their path to success, enabling them to market their products and services. Give yourself the opportunity to learn as much as you can to help you continue to build your business.

I recently read Word of Mouse: 101 + Trends in How We Buy, Sell, Live, Learn, Work and Play, by Marc Ostrofsky. Marc says that we don't have to be intimidated by technology, and in some cases we may not completely understand how it works. But we do need to be aware of the many ways to use technology, so that we become and maintain success in business and in living.

In addition to Ostrofsky's book, there are many books, podcasts, websites, videos, etc. available that can help you learn how to make technology work to your advantage.

Gladys Edmunds, founder of Edmunds Travel Con! sultants ! in Pittsburgh, is an author and coach/consultant in business development. Her column appears Wednesdays. E-mail her at gladys@gladysedmunds.com. An archive of her columns is here. Her website is gladysedmunds.com.

Stocks, boosted by earnings, shoot higher

Stocks shot higher Tuesday as investors continue to watch over quarterly profit reports, including an earnings beat from Dow component Merck.

The Dow Jones industrial average rose 86.63 points, or 0.5%, to 16,535.37, led by a 3.6% gain by Merck.

The Standard & Poor's 500 index gained 8.90 points, or 0.5%, to 1,878.33 and the Nasdaq composite index rose 29.14 points, or 0.7%, to 4,103.54.

Investors were also reacting to a slightly softer-than-expected reading on April consumer confidence. The latest reading from The Conference Board came in at 82.3, a tad below the 83.2 economists expected and below March, which was revised up to 83.9.

CONFIDENCE: Dips in April

The S&P Case-Shiller home price index also showed a continued trend toward rising prices, with the 20-city index rising 0.76% in February, just below the 0.8% forecast. Home prices are up 12.9% in the past year, just shy of forecasts of 13.1%.

HOUSING: Case-Shiller shows price growth slows

"The U.S. stock market remains in an upward trend but at a more modest pace this year compared to last year," says Gary Thayer, chief macro strategist at Wells Fargo Advisors. "Recent market behavior shows investors are cautious and occasional bad news prompts selling causing the market to give back some of its previous gains. Fortunately, investors are still putting money into stocks and bonds, providing underlying support to both markets despite frequent price swings."

Markets were mainly focused Tuesday on corporate earnings, as this is another big week, with 135 companies in the S&P 500 reporting, according to Wells Fargo Securities.

Merck topped earnings-per-share forecasts by 9 cents, providing a 3.6% lift to the pharmaceutical giant's shares. High-end retailer Coach shares tumbled 9.3% to $45.71 after it sales dipped slightly despite topping profit forecasts.

Overall, the earnings season has been better-than-expected, as the bulk of U.S. companies are topping expectations, which we! re lowered by analysts and CEOs heading into the reporting season. With 273 of the companies in the S&P 500 having reported, 68% have topped analyst expectations, above the long-term average of 63%, according to Thomson Reuters I/B/E/S. Currently, year-over-year first-quarter growth is tracking at at 3.7%, which is up from a 2.2% forecast on April 1 but below the 6.5% expected at the start of the year.

In addition to the flood of earnings reports, Wall Street will also have a lot to digest later this week. The Federal Reserve ends its two-day meeting Wednesday with the release of its closely watched policy statement. In addition, the U.S. government on Friday will release its April jobs report.

Asia markets traded with little enthusiasm. Russian shares rose, a day after a new round of sanctions were imposed by the West on Russian companies and individuals. Japan's Nikkei 225 index fell 1% to 14,288.23.

In European corporate news, Nokia said it would return $3.1. billion to shareholders. The Finnish firm reported better than expected quarterly earnings. Nokia also named a new CEO, Rajeev Suri.

Europe's major bourses staged broad-based advances. Germany's DAX index added 1.5% to 9,584.12, while the FSTE in Britain ended up 1% to 6,769.91. France's CAC 40 finished the day up 0.8% to 4,497.68.

In economic news in Europe, Spain's National Statistics Institute said the unemployment rate edged up to 25.9% in the first three months of the year. The U.K. economy grew 0.8% in the first quarter of 2014.

Matt Krantz explains how wipeouts in mega-cap tech stocks like Amazon.com, Twitter and LinkedIn might be getting the attention, but it's the small tech stocks that are plummeting the most amid the ongoing downturn. (America's Markets, USA TODAY)

Many low-wage workers not protected by minimum wage

President Obama supports a Senate bill that would gradually raise the $2.13 an hour wage base for tipped workers to 70% of the full minimum wage.

NEW YORK (CNNMoney) President Obama's push to raise the federal minimum wage to $10.10 an hour, coupled with recent state-level increases, is welcome news for many people getting by on small paychecks.

But not every low-wage worker has to be paid the minimum wage.

That's because a crazy patchwork of rules and exemptions lets employers pay some kinds of workers below the full minimum wage -- in some cases, well below.

The rules are complex at the federal and state levels. But here's a partial list of how they treat certain classes of workers.

Disabled workers: Under federal law, employers may apply for a special certificate to pay less than the minimum wage to anyone "whose earning or productive capacity is impaired by a physical or mental disability, including those relating to age or injury."

The rule was established in 1938 and has hardly changed since. It was originally intended to encourage businesses to hire veterans with disabilities in an industrial economy, according to the National Disability Rights Network.

But today it's used primarily to employ disabled people in what are called sheltered workshops that often involve some form of manual labor -- such as packing boxes, doing laundry or printing t-shirts.

An estimated 400,000 disabled people hold such jobs. And their hourly pay is based on the employer's assessment of their productivity relative to the productivity of non-disabled workers.

Groups like the National Disability Rights Network and the American Association of People with Disabilities contend that the subminimum wage rule is out-of-step with today's economy and disabled workers should be ! paid at least the prevailing minimum wage.

Anyone working for very small businesses: Under federal law, an employer doesn't have to pay the minimum wage to a worker if the company's annual gross sales are less than $500,000 and if it doesn't do any business across state lines, according to Tsedeye Gebreselassie, a staff attorney at the National Employment Law Project.

Teenage trainees: Federal law allows employers to pay $4.25 an hour -- $3 less than the current federal minimum -- to anyone under 20 for the first 90 days of employment, according to the Congressional Research Service.

Maryland, which just increased its state minimum wage to $10.10, now exempts those under 20 for the first 180 days, during which employers are allowed to pay them 15% less than the state minimum.

Federal law also lets employers pay 85% of the federal minimum (or $6.16/hour) to full-time students working in retail or service businesses, in an agricultural occupation, or at an institute of higher education.

They are also allowed to pay just 75% of the minimum wage (or $5.44/hour) to students who are employed part-time as part of a vocational training program at an accredited school.

Tipped workers: Currently, under federal law, employers only need to pay tipped workers a minimum wage of $2.13 an hour -- if that wage plus the tips push the worker's pay to at least the $7.25 federal minimum.

But those who advocate for higher wages for tipped workers say that provision is very hard to enforce with employers.

A bill that the Senate is likely to consider next week would raise the federal minimum to $10.10 and also gradually raise the $2.13 minimum for tipped workers to 70% of the federal minimum.

Among states, there's a hodgepodge of rules.

  The road to! a minimu! m wage

Seven states require employers to pay tipped workers the state's full minimum on top of any tips those workers receive, according to NELP.

In at least 24 other states, companies must pay tipped workers a subminimum wage that is higher than the $2.13 required at the federal level.

But even where that's the case, there can be wrinkles. For instance, even though Maryland increased its state minimum wage, it did not raise tipped workers' base hourly wage of $3.63. Instead it chose to freeze it at that level.

That's a step back, according to the Economic Policy Institute's David Cooper. Why? Because previously, Maryland had mandated that tipped workers' base wage be set at 50% of the state minimum, which is now set to gradually increase to $10.10 from $7.25.

Some agricultural employees: Workers who are immediate relatives of an agricultural employer do not have minimum wage protection at the federal level, nor do some other agricultural workers with certain hours and job duty requirements.

Practically, this exemption usually applies only to very small family farms. The vast majority of farm workers are covered under minimum wage laws, NELP's Gebreselassie said.

Home care aides: Until now, home care workers who are hired primarily to dress, feed, bathe and otherwise attend to an infirm person's daily needs at home typically haven't received federal minimum wage protection.

But that will change on Jan. 1, 2015. Under a new set of rules governing "companionship services," home care agencies must pay such aides at least the full minimum wage. If the aide is employed solely by a private household, they may still be exempt from minimum wage protection but only if their primary duties fall within a much narrower definition of companion services.

Other exempt workers: Other groups exempt from federal minimum wage protection include newspaper delivery people, occasional babysitters, employees of small circulation newspapers, those e! lected to! state and local government offices (and their staffs); and anyone who works for some seasonal businesses such as amusement parks and summer camps.

Best Buy, J.C. Penney, and Barnes & Noble Shares Soar, But So What?

AP/Dave Martin The last week of February was a redemptive week for three fading retailers, but it's hard to argue that any of them will remain market darlings for long. J.C. Penney (JCP) was one of the market's biggest winners, soaring 29 percent after posting improving quarterly results. The struggling department store chain posted a narrower loss than analysts were forecasting, posting positive comparable-store sales during the holiday period for the first time in a couple of years. Barnes & Noble (BKS) also moved higher by 8 percent last week on strong financial results. The bookseller that outlasted Borders came through with a quarterly profit of $0.86 a share, blowing past the $0.61 a share that Wall Street pros were targeting. Its Nook business is still suffering from sharp declines, but its actual superstores are holding up surprisingly well. An analyst at Maxim Group boosted his price target on the shares from $20 to $32. Best Buy (BBY) also got a boost from a better than expected report during the holiday quarter. Best Buy's profit for the holiday period declined to $1.24 a share, but that was well ahead of the $1.01 a share that analysts were expecting. Shares of Best Buy also rose 8 percent on the week. These chains seemed to be on the way out last year, and all of them have brought in new CEOs over the past two years. Seeing the stocks move at least 8 percent higher and as much as 29 percent higher last week may suggest that reports of their deaths have been greatly exaggerated, but let's not assume that the storm clouds have cleared at any of them. Penney Arcade The troubled Ron Johnson era ended at J.C. Penney last year. The retail guru -- who had been instrumental in turning Target (TGT) from "cheap" into "cheap chic" before heading to Apple (AAPL) in time to start rolling out the wildly successful Apple Store chain -- flopped at the meandering department store chain. Investors cheered when Johnson arrived at J.C. Penney in late 2011. His plan was to put an end to the chain's discounting- and coupon-heavy practices, and reorganize the stores to center around trendy third-party brands. Alas, Johnson's vision was too radical, alienating the remaining J.C. Penney customers without winning over new ones. He was fired 11 months ago, replaced by an earlier regime that the board had originally tried to move away from. Despite last week's huge pop, J.C. Penney is still losing a lot of money. The holiday quarter's positive comps are a good sign, but its average store is still selling a lot less than it did two years ago. The identity crisis continues. Book Ends Barnes & Noble was already trending higher a week earlier when an investment firm was offering to pay a premium for a 51 percent stake in the company. It may seem like an opportunistic play, but do we really think that traditional books will regain their popularity? Barnes & Noble responded to the e-book trend a few years ago by introducing the Nook to take on the Kindle, but sales have been falling sharply over the past several quarters. It's hard to compete against Amazon (AMZN) when it's willing to sacrifice profitability on Kindles for the sake of market share. It also doesn't help that Apple's iPad and other tablets also double capably as e-readers. Best Bye Best Buy shares more than tripled in 2013, but it's been a different story in 2014. Despite last week's bounce, the leading consumer electronics retailer has seen its stock shed a third of its value this year. It's been a challenge for Best Buy to keep customers coming back to its stores given that online retailers offer cheaper prices, and that the DVDs, CDs, video games and software discs that used to attract much of its traffic have been supplanted by digital media that consumers can buy from the comfort of their couches. Despite the upbeat market's response to the quarterly reports, comps at Best Buy and Barnes & Noble were negative during the holiday quarter. The market was braced for worse from all three companies, but all three retailers have a long way to go before we can seriously begin discussing them as potential turnaround stories.