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."

New 3.8% surtax means new tax strategies for business owners

As advisers ready clients for year-end tax planning, they continue to grapple with complexities tied to clients' ownership of business interests: Will they or won't they be subject to the 3.8% Medicare surtax?

Tax gurus have spent a good part of 2013 helping clients navigate the American Taxpayer Relief Act of 2012, a key piece of legislation that was passed hastily Jan.1 to avert the fiscal cliff. They're particularly befuddled by the 3.8% Medicare surtax, which is also known as the net investment income tax, which will apply to income from rentals, annuities and capital gains if a taxpayer has modified- adjusted-gross income over $200,000 for those who are single, or $250,000 for those who are married and filing jointly.

In the simplest terms, taxpayers who have a “material” interest in a business are not subject to the 3.8% Medicare surtax. But if their interest is “passive” — such as a landlord who collects rent from a tenant who maintains the property — they will owe the surtax.

Though tax experts have crafted a couple of workarounds to mitigate the impact the tax will have on clients' investment portfolios, there are still questions aplenty about how to help those who own rental properties and businesses.

The problem is that the tax code is vague with respect to how to define a trade or a business activity, which can leave certain clients in limbo – namely, those who own property and rent out the space, as well as certain trusts that hold real estate. Planning around the 3.8% surtax with respect to those business interests can be hazy.

“Is the trustee actively involved in the real estate? To what degree are you materially participating in the management of the business?” asked Ronni Davidowitz, head of Katten Muchin Rosenman's trusts and estates practice. “We're looking for guidelines around what those bright-line tests are. What will be viewed as material participation in the management of the asset?”

The tax code dictates what's considered “material participation” in a business: Basically, a taxpayer works on a regular, continuous and substantial basis in operations. That individual must spend at least 500 hours per year in an active role in the business. On the other hand, the IRS considers collecting rent a passive activity.

But those lines can be blurry in certain cases, according to Mark W. Miller, a partner at Sikich LLP. For example, it is unclear what to do in a situation where an individual owns property and their business is situated there. Whether that person participates passively or materially depends on how he or she interacts with the property.

“Someone who owns a 256-unit apartment building and arranges landscaping and snow-plowing, and perhaps this building has a clubhouse — this is clearly a trade or business activity,” said Mr. Miller. “This trade or business [itself] isn't subject to the 3.8% surtax.” Bear in mind, however, the rental i! ncome the owner receives — regardless of his or her relationship to the business — will still be subject to the surtax.

There are plenty of gray areas on both the level of activity and who is carrying out the services. For instance, one of the conditions that need to be met in order to be considered a “material participant” in the business, the IRS requires that the taxpayer perform substantially all the work in the activity.

But there are situations where this might not be clear: A property like a warehouse might not require a lot of service from the owner. The facts and circumstances of a given case are a major factor in the extent to which the owner interacts with the property, Mr. Miller said.

Aside from assessing the facts and circumstances of these clients and their properties to determine whether they are passive or material participants, tax gurus are coming up with a couple of strategies for certain entrepreneurs to make sure they are able to meet that 500 hour requirement and avoid the 3.8% surtax.

For instance, there's grouping, wherein related business or trades owned by one individual are pulled together to form what the IRS calls an “appropriate economic unit.” Generally, the businesses need to have common ownership, share resources and have a common geographical location. Multiple businesses that are grouped can be treated as one activity, permitting the owner to meet the 500-hour threshold necessary to be a material participant.

“It behooves people to keep contemporaneous books and records [for appropriate economic units] and to document your participation,” said Bill Zatorski, a partner in the personal financial services department at PricewaterhouseCoopers. “We like to see clients be involved in management decisions.”

The Medicare surtax rules permit a one-time regrouping election, which can be made in 2013 or 2014, according to Mr. Miller. Again, grouping alo! ne does n! ot mean that the rental income won't be subject to the Medicare surtax. Further, grouping tends to be an irrevocable decision.

Finally, in some situations, it's worth considering whether a client with an ownership in a business wants to adjust his or her participation in an activity to either be a material or passive participant.

For instance, a retired father and his son have a 50-50 ownership in a business. If the father isn't a material participant in the business, his interest in it will be subject to a 3.8% surtax. If he is a material participant, he could potentially be subject to a self-employment tax of 15.3%.

Mr. Miller warned that advisers and clients need to consider the real-life implications of changing an owner's role in the business and not just fixate on tax savings.

“I may want to have a 50-50 say in the business, and if I give that up, there are economic considerations,” he said. “It's not just whether you want to give up those rights, but rather, you are ceding business decisions to the other person in the business.”

JP Morgan to Pay Hefty “London Whale” Fines (JPM)

Financial giant JP Morgan (JPM) will be pay a fine in order to settle the regulatory probes into the famed “London Whale” incident.

The “London Whale” incident came in early 2012 when JP Morgan lost billions at the hands of what the company called a “rogue trader,” who we now know to be Bruno Iksil. It was reported that the company agreed to a $750 million fine, which stemmed from the admission of faulty internal controls.

JP Morgan is reported to be trying to close out as may inquiries as possible before the quarter ends at the end of September. Another former trader is currently being charged with attempting to cover the bank’s losses, though his statements have all pointed to his former boss Iksil.

JP Morgan shares were up 55 cents, or 1.04%, at Monday’s close. The stock is up over 20% this year.

Rising Mortgage Rates Lead to Job Cuts

The sharp rise in mortgage interest rates over the past six months are going to do some serious damage to the nation's largest mortgage lenders. Just last week, Wells Fargo & Co. (NYSE: WFC) said it would fire 2,400 employees in its mortgage services unit, and that may be only the beginning.

The interest rate on a 30-year fixed rate mortgage has climbed from about 3% in January to more than 4.4% in August. Research firm SNL notes a month-over-month decline in lending at the four largest lenders, and only one, Wells Fargo, posting year-over-year growth. Lending at J.P. Morgan Chase & Co. (NYSE: JPM) is down more than 6% compared with the second quarter of 2012. Bank of America Corp. (NYSE: BAC) lending is down nearly 9%, and Citigroup Inc. (NYSE: C) lending is down nearly 10%. At Wells Fargo, lending is up about 1%.

For the most part, the blame is assigned to refinancings, which have dropped from highs of over 80% of all new mortgage applications to less than 65%. And even though the market for new homes is improving, it is not rising fast enough to pick up the slack.

Wells Fargo is not the only large bank cutting staff. Citigroup has said it will fire 120 employees at a call center in Illinois, and J.P. Morgan plans to pare 15,000 mortgage-related jobs by the end of 2014, according to SNL. Bank of America cut 1,320 jobs at its Buffalo, N.Y., mortgage servicing office earlier this year.

What is causing the rise in interest rates and the decline in mortgage applications, as well as the job losses? The U.S. 10-year Treasury note yield rose to around 2.9% last week and is down before markets open Monday morning to around 2.79%. The interest rate on a 30-year fixed rate mortgage historically averages about 1.5% above the yield on the 10-year Treasury. That is about where rates are now.

And what is causing the 10-year yield to rise? Most likely the belief that the Fed will begin tapering before the end of this year is creating enough uncertainty in the equities markets that the safe haven of U.S. debt is becoming attractive again. Even gold has reacted positively to the tapering talk.

As the cheap money made available by the Fed leaves the market, Treasury yields will continue to rise and so will mortgage rates. Wages and incomes for the vast majority of Americans are unlikely to rise at the same pace, and that will crimp the mortgage lending business. The impact on housing is more difficult to predict, but the recovering market for new houses may not be hit until mortgage rates rise to about double today's rates.

Should We Care About Barnes & Noble's Survival?

Once upon a time, the book superstore elicited two major responses. One: I'm in heaven; here are more books I've ever seen in one place, ever! Two: This is hell on independent bookstores; it's a sad time indeed.

Today, everything's come full circle. Borders failed, and even though one huge rival was wiped off the map, Barnes & Noble (NYSE: BKS  ) is showing serious signs of losing to its aggressive competition.

Some investors may be studying Barnes & Noble as a value play, but they'd better think twice. Not only is the bookstore chain in big trouble, but if it fades from the scene, maybe in the long run, nobody would even really care.

Full circle
This is a story of more than a decade of disruptive change. It illustrates the economic theme of creative destruction, as painful as that may be.

Amazon.com's (NASDAQ: AMZN  ) arrival on the scene was a major harbinger of the change to come. Recall that back in the old days, the idea that books and music would sell over the Internet was by no means a foregone conclusion. E-commerce was in its infancy. The tech bubble wiped out many early dot-com companies, even some that were good ideas but ahead of their time.

We now know that Amazon not only survived, but it's ingratiated itself into the fabric of many consumers' lives. It's so much more than an online book and superstore; its model started weakening bookselling chains Borders and Barnes & Noble long ago. Amazon's ability to track down just about anything and send it straight to your door was the next evolutionary step that spelled the beginning of the end.

Don't buy into this cliffhanger
Today, Barnes & Noble is losing traction, big time. The bookstore chain's most recent quarter revealed a staggering loss, a plunge in sales, and a prediction for falling same-store sales in fiscal 2013. Its quarterly net loss was a whopping $118.6 million, or $2.31 per share. Sales dropped 7% to $1.28 billion, and same-store sales plunged by 8.8%.

In more negative news, the retailer is retreating from the tablet business in a time when technology really matters. For ages, its Nook was holding its own against Amazon's Kindle e-reader and tablet lines. Now, Nook sales are falling while Kindle sales are growing. In its most recent quarter, Barnes & Noble's digital sales also dropped by 9%. It will still sell its basic Nook e-reader, but its decision to get out of the tablet business admits to defeat compared to Amazon's Kindle Fire and tablets from Apple and Microsoft.

Those factors are bad enough. However, there's an even more ominous theory circulating, as reported by The Wall Street Journal: that Barnes & Noble has been slowly putting more emphasis on selling odds and ends than actual books. Browse any Barnes & Noble and you'll see toys, games, journals, and an array of things that don't really relate to the act of reading. Rumor on the street is that publishers are having a harder time getting to Barnes & Noble's shelves, and the retailer is increasingly peddling high-margin merchandise that's more gift shop than book shop.

Although Barnes & Noble denies the allegations, the Journal's chats with those in the industry have revealed indications of some reduced orders of books and less varied assortments.

I predicted Borders' doom, and I'm afraid Barnes & Noble is on the same road. The fiscal year ended May 1, 2010, was the last time Barnes & Noble generated an annual profit. Revenue growth has decelerated over the past several years, and as of the year ended April 27, the company's total revenue fell by 4.1%.

Barnes & Noble has one positive attribute that Borders lacked: It's not overly indebted. That's the only bright spot I can see in this chapter of the company's story.

The danger of being the middleman
Last but not least, should we even care if Barnes & Noble eventually goes away? Amazon.com has an insanely great selection of books, both well-known and obscure, and has brought us the incredible ease of digital downloads. Discounters such as Wal-Mart, Target, and Costco all carry major best-sellers, easily dropped in carts during routine shopping.

On the other side of the spectrum, small is beautiful after all the pain indie bookstores experienced for years. The independents seem to be having a renaissance. Getting up-close and personal and slightly changing the small bookstore experience may make for the best competition in a brick-and-mortar landscape that has been dulled by retail chains.

I have a few anecdotal observations. I recently ran across an awesome bookstore/coffee shop called Borderlands Books dedicated only to sci-fi, fantasy, mystery, and horror in San Francisco. It offers new, used, first editions, and anything a fan of these genres might want to track down. Among its many descriptions of itself on its website: "We stay open late and wish we could stay open later. If you come in five minutes before closing time we won't close until you're ready to leave."

Alternative bookstore Atomic Books in Baltimore has hung in there for decades, with the tag line "Literary Finds for Mutated Minds." Although it shut down briefly in 2000, it reopened in 2001 under new management. One of its most interesting and coolest factors along with its do-it-yourself ethos and focus on obscure items: It accepts fan mail for John Waters. By the way, they also say: "Please do not call or email us for any information regarding John Waters. We won't tell you anything." (Good to know.) In April, the owners announced that the store is expanding and opening a related bar.

D.C.'s Politics & Prose is a local favorite in my neighborhood, with a politically progressive selection of books, a loyal customer base, and plenty of high-profile readings. When its retiring longtime owners put it up for sale in 2010, a shocking truth emerged in a world where most would assume indies suffer horribly. The operation was actually profitable, and not only that, when buyers emerged, the brand was described as "rich in goodwill." Investors know how important that is.

I can't speak for the profitability of all independent bookstores, and small business is generally an incredibly rough ride and not for the faint-heared. However, I do believe the future of brick-and-mortar bookstores is probably for a close connection to genre audiences of all kinds, as well as innovation with factors like hybrid models. The independents may end up having the last laugh as they not only survive, but thrive.

No happy ending for Barnes & Noble
Barnes & Noble is in the unenviable position of being stuck in the generic middle between discounters, the ease of e-books, and the renaissance of the independent bookstore that are obviously giving readers reasons to support their stores, as well as incredible differentiation and focus on specific types of customers.

Investors would most likely be better off buying Amazon than Barnes & Noble. Amazon's got a notoriously high valuation, but it's also got its hands in many areas; it's no one-trick pony, and it's prepared for the long haul. Barnes & Noble's core business is wearing out. Pay more for quality, and leave the doomed "value stocks" out of the portfolio. There may be happy endings for Amazon investors and great independent bookstores, but Barnes & Noble will likely end up shelved under tragedy.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged among the five kings of tech. Click here to keep reading.

Alcoa Expands Aluminum-Lithium Production

Alcoa (NYSE: AA  ) is expanding production capacity at its Kitts Green facility in the United Kingdom.

On Tuesday, the aluminum giant announced that it has completed a project that will help it soon quadruple the amount of third-generation aluminum lithium alloys it produces for the aerospace industry. According to the company, its revenues derived from the alloy are about $50 million annually today, but within six years' time could become a $200 million business.

The company notes that it's also expanded production of the new alloy at a plant in Pennsylvania, and will have a new facility for the metal's production set up in Lafayette, Ind., by the end of next year.

Alcoa said the new alloy will help airframers "build more fuel efficient and lower-cost airplanes vs. composite alternatives." Thus, these expansions could be characterized as moves by Alcoa to protect its market share in an industry that's increasingly shifting toward the use of advanced carbon composites for use in building its airplanes.

In a recent story, the The Wall Street Journal said composites -- formerly a niche product -- now make up 50% of the materials used to build Boeing's 787 Dreamliner, and 53% of the Airbus A350. Aluminum, in contrast, makes up only 20% of the 787, and 19% of the A350.

link

Don't Count out the Utica Shale Just yet

On May 16, the Ohio Department of Natural Resources finally published 2012 production data for the Utica Shale – a rock formation located thousands of feet below the Marcellus that spans Ohio, New York, Pennsylvania, Virginia, and West Virginia, though most activity to date has been concentrated in Ohio.

The long-awaited report shows that the play's 87 producing wells amounted to an output of roughly 1750 barrels of oil per day and about 35 million cubic feet of gas per day. While that's nothing to scoff at, the data was disappointing for investors hoping that the Utica would be the next big oil play, potentially even rivaling the prolific Eagle Ford play of Texas.

However, despite the less than stellar data released by Ohio officials, there is still reason to be optimistic about production growth in the Utica this year. Let's take a closer look.

Infrastructure constraints
The main reason the Ohio Utica's production results weren't as good as they could have been is that many Utica operators held back on bringing new wells on line last year, due largely to the lack of gathering, processing and fractionation capacity.

Chesapeake Energy (NYSE: CHK  ) , which was the play's most active driller last year and is currently operating 14 rigs there, cited the lack of processing infrastructure as the biggest reason for production growth remaining below its potential. "Processing is really the holdup," said Chief Operating Officer Steven Dixon in the company's first-quarter operational and financial update.

Good news ahead
However, infrastructure constraints are expected to ease substantially, which should provide a healthy runway for Utica producers to accelerate drilling. Indeed, Chesapeake expects to more than quadruple its average first-quarter natural gas volume this year, as new pipelines and processing plants are brought on line.  

Analysts expect some $2 billion worth of new projects to be revealed, in addition to the $2 billion of projects that have already been announced. Major projects that have either been proposed or are under way include a natural gas liquids processing plant by affiliates of NiSource and Hilcorp Energy; a gathering and processing plant by M3 Midstream LLC, Access Midstream Partners, and EV Energy Partners (NASDAQ: EVEP  ) ; and a proposed pipeline from Ohio to Detroit and Canada, to be built by DTE Energy, Spectra Energy (NYSE: SE  ) and Enbridge.

1 midstream company to watch
But the company that has perhaps invested most aggressively in Utica infrastructure is MarkWest Energy Partners (NYSE: MWE  ) . In just the past year alone, it has completed 60 miles of gathering pipelines, commenced operations at two major gas plants in the region, and hammered out agreements with a handful of major operators, including Gulfport Energy (NASDAQ: GPOR  ) , Antero Resources, PDC Energy, Rex Energy, and – most recently – CNX.

Markwest's Cadiz processing complex, which lies in the heart of the play's rich gas region, is already operating near full capacity. To cater to the high demand, the company plans to install an additional 200 million cubic feet per day processing plant at Cadiz in the second quarter of 2014.

Over the next 12 months, MarkWest plans to complete an additional 200 miles of gathering pipelines, boost processing capacity by 800 million cubic feet per day, and commission a third fractionation complex in the Northeast. This is definitely one midstream company worth keeping a close eye on if you're optimistic about production growth in the Utica.

Another company that stands to benefit big time from growth in the Utica is Chesapeake Energy, the largest leaseholder in the play. While debt-related challenges continue to cast a dark cloud of uncertainty over the company's future, Chesapeake has made major strides in reining in spending and adopting a more disciplined approach. For many investors, the important question is whether Chesapeake's current share price reflects its true value. To answer that question and to learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy, and as an added bonus, you'll receive a full year of key updates and expert guidance as news continues to develop.

Iron Man's Hidden Power

The following video is from Monday's Investor Beat, in which host Chris Hill and analysts Jason Moser and Bill Barker dissect the hardest-hitting investing stories of the day.

Iron Man 3 flexes its muscle overseas and shares of Disney (NYSE: DIS  ) hit an all-time high. What does Disney's newest blockbuster mean for investors going forward? Should investors take stock in the entertainment giant? In this installment of Investor Beat, our analysts discuss Iron Man 3 and the future of Disney.

It's easy to forget that Walt Disney is more than just the House of Mouse. True, Disney amusement parks around the world hosted more than 121 million guests in 2011. But from its vast catalog of characters to its monster collection of media networks, much of Disney's allure for investors lies in its diversity, and The Motley Fool's premium research report lays out the case for investing in Disney today. This report includes the key items investors must watch as well as the opportunities and threats the company faces going forward. So don't miss out -- simply click here now to claim your copy today.

The relevant video segment can be found between 0:17 and 3:16.

Impact Of Mid-term Elections On Your Investment Portfolio

By now, you've probably had enough of talking head political pundits weighing the odds of Republicans taking control of the Senate.

And if you live in a swing state, you've no doubt heard candidates droning on about why the future direction of the country is hanging in the balance in this year's mid-term U.S. election.

Post-election pop

What does this mean for investors?

Let's cut to the chase: It doesn't really matter if Harry Reid or Mitch McConnell runs the Senate.

While making investing decisions based on past market behavior is always risky, history shows that stocks usually head up in the 12 months following a mid-term election regardless of which political party prevails.

[Related -Indexes At Record Highs Following Economic Data Announcements]

Sam Stovall, equity strategist at S&P Capital IQ, has crunched the numbers, going back to 1946 and the results are illuminating.

According his research, the S&P 500 Index has gained 15.3% on average the first six months after a midterm election.

 

Click to Enlarge

Costa Rica aims to win World Cup ad game

NEW YORK (CNNMoney) Costa Rica's President Luis Guillermo Solís says Uruguay is "cocky" toward his nation and arrogant. This kind of talk would normally spark a diplomatic row, but the two nations face off in the World Cup today.

Many experts, including Goldman Sachs, predict Costa Rica (and the U.S.) won't make it out of the first round, but the Central American nation has it sights on another goal: Winning the World Cup ad game.

"Essential Costa Rica" is a print and TV ad campaign running in major cities in the U.S., U.K. and Germany during the World Cup. The message is simple: Costa Rica is more than a pretty place to vacation, come invest and partner with us.

It's a push to shed the country's image as a Banana Republic. Only 6% of the country's GDP is agriculture today, although the sector remains a large employer. The U.S. is its biggest trading partner, accounting for about half of its exports and foreign direct investment.

The country is growing its technology industry and promoting the fact that 16% of its population has college degrees now.

President Solís is a good example. His grandfather had no schooling. His father made it to about high school, and he has a master's degree. Before he was elected president in April, much of his life was spent as a history professor and scholar. He ran as a "third party" candidate.

CNNMoney interviewed President Solís in New York this week. This is an excerpt of the conversation.

Q: Intel (INTC, Tech30) and Bank of America (BAC) recently announced 3,000 job cuts in Costa Rica. What are you doing about it?

Solís: Within one month of taking office, I am here in the United States speaking with investors, those already working in Costa Rica and those who may want to go. As a result, we've been able to get an announcement from Intel that their Mega Lab will be installed in Costa Rica, which is extraordinarily important for us, thus moving us from manufacturing to research and development of new products. I hope this will bring about significant change in how we're seen in the international community.

We also have a VMWare (VMW) announcement saying they are expanding their activities in Costa Rica. I hope this will clear any doubt that may exist regarding the commitment of the new government to the private sector or the conditions of the country for direct investments.

Q: Several analysts cut your GDP f! orecasts in half. Is that fair?

Solís: This is not what the central bank in Costa Rica is saying. In our estimation and that of the World Bank, we are going to grow at a rate of 3.7% this year. I think it's going to go up, not down. I hope so because this is the best way we can deal with a number of challenges that we have: Fiscal, monetary and other ways.

Q: How do you move the Costa Rican economy beyond tourism and agriculture?

Solís: It has happened in the last 25 years. We were an early exporter of coffee to Europe. Now we have more than 250 multi-national companies, especially in manufacturing and services.

We have 14 different free trade agreements -- 50 countries -- with China, North America, Europe, etc. Coffee exports today are only 3% of our goods. Bananas are 7%. Services represent 33%. We have already moved beyond agriculture.

Q: Your currency the colón has fallen a lot against the dollar in recent months. Will this continue?

Solís: Before the government entered into office, the colón depreciation started to jump in the band system that we have. We're going to keep the bands, but we are going to lower the volatility by flattening the bands. The central bank has enough reserves to prevent this volatility without tampering with the trend -- the slow trend -- towards devaluation, which has been good news for the Costa Rican exporters and the tourism industry. We are almost at the level we were before the crisis.

Q: What would you like to see evolve in your relations with the United States?

Solís: I would like to see the relationship evolve in an official way to move more from security issues related to drugs into talk of the environment, green energy and social development issues. These policies will help prevent violence, including narcotraffic.

Q: A mysterious kidney disease is impacting your agriculture workers. What are you doing about it?

Solís: We are researching the probl! em to beg! in with because we don't know where it comes from. We were also asked about arsenic. We're trying to find out what the problem is because it seems to be associated with certain regions.

Kleintop: Forget Bonds; Your Portfolio Needs ‘James Bond’

The Strategists Panel is one of the most popular annual sessions held at IMCA’s national conference, and this year it didn’t disappoint.

Jeffrey Kleintop of LPL, Jeffrey Knight of Columbia Management and Benjamin Pace of Deutsche Bank regaled the packed session in Boston with insights and plenty of quotable takeaways. For example, when Kleintop was discussing the opportunities in fixed income, he was blunt and humorous at the same time.

“There are no opportunities” in the bond market, he said, and “there’s no ‘high’ in high yield.” Instead, he recommended that advisors put some “James Bond” in clients’ portfolios, by which he meant not “cool gadgets” as seen in the Bond movies, but alternatives like REITs, business development companies (BDCs) and MLPs.

Knight said that “you could argue that bond yields are way too low,” but “when inflation does get growing it’s likely to be disruptive” to fixed-income investors. He counseled that investors should carefully watch the wage inflation numbers as a precursor to generally higher inflation.

Speaking of the Federal Reserve’s quantitative easing program, Pace said that “[Ben] Bernanke thought he could glibly taper,” but that the ‘Taper Tantrum’ was a good experience for investors and the market. When will QE end? Echoing a prediction made earlier in the conference by Princeton economist (and former Fed Vice Chairman) Alan Blinder, Pace believes the Fed will wind down tapering by October or December of this year. That will be good for the market and economy, he said, because there was a “danger of becoming addicted to QE,” but the end of the Fed’s heavy buying of Treasuries and mortgage-backed securities will mean that “the dislocation will go away.”

Kleintop argued that “inflation bottomed in February” of this year, and that from his listening to many corporate earnings calls, he “heard a lot about pricing power,” so he suspects there will be some price increases in the economy.

If bonds don’t offer opportunity, what about stocks? What about emerging markets? What’s the danger from Russia’s meddling in Ukraine? Kleintop was optimistic, noting that as has been the case with other geopolitical disruptions of the past few years in Egypt, Syria, Iran and North Korea, the Ukraine situation was “troubling, but did not derail the markets.” Vladimir Putin, he said, is “trying to re-establish a buffer zone” between itself and Western Europe that it had lost since the Iron Curtain fell and the Eastern bloc countries began to embrace capitalism. Pace agreed somewhat, saying “Ukraine is masking Putin’s economic underperformance,” while “Koreas is now viewed as China’s problem.”

As for the bull market, Kleintop asked rhetorically, “What ends a bull market?" before answering, "an inverted yield curve,” which “will take a while to achieve.” To get to that inversion, “we’d need a 4% fed funds rate,” which he suspects won’t occur, if it ever does, before 2016 or 2017.

Pace acknowledged that the emerging markets are slowing down, but that “worldwide, economic growth will be led by the U.S.” While at Deutsche he said “we’ve encouraged clients over the last 10 years not to be so dollar denominated” in their investments, “now we’re asking for them to come home.” That’s why “we’re exploring emerging market debt” that’s in dollars, he said, arguing that “a lot of these [EM] countries are at or near investment grade.” Pace said “we’d rather stay with the developed markets,” but reported Deutsche had “taken Japan down to a neutral” rating due to recent Bank of Japan moves. For Knight, emerging markets equities “stand out as a cheap asset class,” outperforming developed markets equities since February.

“Last year the market was led by the U.S. and Japan,” he said, but this year it will be led by the emerging markets.

Kleintop agreed, saying that emerging markets “used to trade at a discount” in the 1990s before “they got to a premium” in the 2000s, but now he thinks some emerging markets have “attractive valuations.” Kleintop said “we’re attracted more to Asia” these days, especially the Philippines and Indonesia, and suggested that “valuations could drift higher."

Turning to municipal bonds, Kleintop says he thinks “there’s still value there,” and says investors were distracted by the high-profile muni bond problems with Detroit and Puerto Rico. “There was some throwing out of the baby with the bathwater,” he said, while Pace argued that munis with durations of less than five years are overvalued, but “longer than that there are opportunities.”

The strategists finally turned to domestic politics, with Kleintop arguing that if the Republican Party wins control of the Senate in this year’s midterm elections, “a lame-duck Obama” would be good for businesses. They’ll begin to spend more, “not just on buybacks,” but investing in equipment, facilities and employees, he believes, since no new legislation that could affect them will be coming out of a divided government in Washington. Knight agreed that "a lame duck would be a bullish window," but that "where we are now is troubling."

---

Related on ThinkAdvisor:

Church & Dwight: Will Innovative New Products Drive Earnings Much Higher?

Church & Dwight (NYSE: CHD  ) , the company behind very popular brands such as Arm & Hammer, Trojan, First Response, and Oxi Clean, has watched its stock outperform the overall market in 2014 and earnings have played a key role. Another strong report could add fuel to the rally, and its first-quarter results are due out in a couple of days. Let's take a look at the most recent earnings release, expectations for the upcoming report, and take a quick look at one of its top competitors, Procter & Gamble (NYSE: PG  ) , to determine if we should buy in right now or if we should wait to see what the quarter holds. 

Source: Church & Dwight's LinkedIn

The last announcement 
On Feb. 3, Church & Dwight released its fourth-quarter report to cap off a great fiscal 2013. Here's a breakdown of the results:

Metric Reported Expected

Earnings Per Share	$0.65	$0.66
Revenue	$822.6 million	$823.5 million

Source: Benzinga

Earnings per share increased 14% and revenue increased 1.6% year-over-year, driven by global volume growth of 5.2%. Organic sales rose 2.3% and this exceeded the company's original expectations of 1.5%-2% growth. The company's gross profit increased 3.7% to $371.7 million and the gross margin was very strong, expanding 90 basis points to 45.2%. 

Source: Church & Dwight

Although the statistics listed above are impressive, the highlights of the report came when Church & Dwight made two announcements, a dividend increase and the authorization of a share repurchase program. First off, the quarterly dividend was raised by 11% to $0.31, which gives the stock a yield of roughly 1.8% at current levels. It is also worth noting that this was the 18th consecutive year with a dividend increase. Secondly, the board of directors authorized the repurchase of $500 million worth of its common stock, effective immediately. In case you are not familiar, repurchasing shares reduces the amount of share available in the market. This in turn boosts earnings per share, making the remaining shares more valuable.

In summary, the earnings and revenues for the quarter may have missed expectations, but Church & Dwight more than made up for it with the dividend hike and share repurchase program. The company's stock has reacted by moving more than 11% higher in the months since, setting new highs along the way.

Expectations & what to watch for
First-quarter results are due out before the market opens on May 1. Analyst expectations may seem dim, but there is a positive reason for this. Here's an overview:

Metric Expected Year Ago

Earnings Per Share	$0.73	$0.76
Revenue	$783.9 million	$779.3 million

Source: Estimize

These estimates call for earnings per share to decrease 3.9% and revenue to increase 0.6% as compared to the same period a year ago. This compliments Church & Dwight's expectations because it stated that the majority of its growth would take place in the second-half of the year due to the scheduled release of "innovative new products," which will result in increased expenses related to slotting, couponing, trade promotions, and marketing during the first half. New products may cause one quarter's growth to stall, but could ultimately lead to future success.

Source: FirstResponse.com

With all of this being said and the key metrics aside, there will be three crucial updates and statistics to watch for:

It will be of the utmost importance for Church & Dwight to provide outlook on the second-quarter that is within analyst expectations. The current consensus estimates call for earnings per share of $0.68 and revenue of $811.8 million, representing year-over-year increases of 11.5% and 3.1%, respectively. Also, in terms of guidance, it will be important for the company to reaffirm its full-year guidance, which projects earnings per share in the range of $2.96-$3.07 and organic sales growth of 3%-4%.  Watch for comments on the success or failure to-date of the aforementioned "innovative new products." New products will play a pivotal role in earnings and revenue growth in 2014, so we need to be sure that they have begun to take share of their respective categories. We will also want to make sure that the company feels these products are on pace to bring in more revenue than was spent bringing them to the market and making consumers aware of their presence. In its fourth-quarter report, Church & Dwight stated that it had begun to "aggressively pursue" acquisitions, so investors will want to watch for updates on potential takeover targets. We have not seen a significant acquisition by the company in quite some time, so it would be great if it were to find the right acquisition at the right price. If Church & Dwight can meet or exceed analysts' earnings and revenue expectations and satisfy the three elements listed above, and I think it will, the company's stock will likely continue its run higher in 2014. For these reasons, I would be a long-term buyer going into the report and would add to the position if any weakness were to set in following its release.

A sign of things to come?
Procter & Gamble, one of the largest consumer product manufacturers in the world and the company behind competing brands such as Crest, Tide, Gain, and Old Spice, released its third-quarter results just a few days ago on April 23. Its report will give us a good feel for the condition of the industry and consumer, so here's what the company accomplished:

Metric Reported Expected

Earnings Per Share	$1.04	$1.02
Revenue	$20.56 billion	$20.73 billion

Source: Benzinga

Source: Procter & Gamble

P&G's earnings per share increased 5.1% and revenue decreased 0.2% year-over-year as organic sales increased 3%. Global volume rose 3% during the quarter, and this was led by growth of 6% in the fabric and home care segment. It is also worth noting that none of P&G's five segments reported negative volume growth; this shows that all categories of consumer products saw increasing demand during the quarter.

I believe that P&G's strong quarter is a positive sign for Church & Dwight and adds support to the idea of initiating a long-term position. However, if you are not sold on Church & Dwight, take a closer look at P&G because it represents a great opportunity in itself.

The Foolish bottom line
Church & Dwight is set to release quarterly results in a couple of days, and the current analyst estimates seem well within reach. I believe that Foolish investors should strongly consider initiating a long-term position right now. The potential price appreciation and healthy 1.8% dividend can provide significant returns over time. Take a closer look and see if there's a place in your portfolio for a consumer product giant like Church & Dwight. 

Top dividend stocks for the next decade
The smartest investors know that dividend stocks, like Church & Dwight and Procter & Gamble, simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

 

13 infamous tax cheaters

It's that time of year. Many folks are scheduling appointments with their accountants and collecting all the documents for the Internal Revenue Service. Or not.

The temptation to omit numbers and cut corners has led many a taxpayer down the dark road of tax evasion year after year. Who hasn't wondered if maybe the IRS won't notice if you fail to report a gain here or forget to file some income there.

But celebrities and the not-so-famous alike have found out the hard way what can become of playing games with the IRS.

Some tax cheats have claimed that the price of becoming too rich and too high-profile garnered unwanted and undue attention to their finances. Surely, that's true. Then again, some taxpayers cheated the IRS deliberately and repeatedly -- until they got caught.

While a list of those who have yet to be found out might be more interesting, here's a roundup of some of the more famous people who ended up on the wrong side of the IRS.

Darryl Strawberry

On Feb. 9, 1995, the former New York Mets outfielder pleaded guilty to a single count of tax evasion and was sentenced to three months in prison and three months of house arrest. He acknowledged that he had not paid more than $100,000 in owed federal taxes after knowingly failing to report more than $350,000 in income from autograph shows and other promotional appearances from 1986 to 1990. He was originally indicted on three counts of evasion and conspiracy.

Pete Rose

The former Cincinnati Red star and manager pleaded guilty to two charges of filing false income tax returns in April 20, 1990, and he was sentenced to five months in prison and fined $50,000. In 2003, USA Today reported that Rose was hit again for problems with his 1997 and 1998 income tax filings, for which he consequently owed more than $154,000 total.

Lindsey Vonn

The IRS filed a $1.7 million tax lien against the World Cup champion skier and her estranged husband, Thomas Vonn, on April 2, 2012. She responded quickly and! announced via Facebook that the lien was paid off before the end of that month. She claimed to be completely unaware of how her taxes were being managed. She said, "Not being in control of my finances and relying on someone else who you believed had your best interest at heart was a mistake and one I will not make twice."

Martha Stewart

Before the home and garden guru was sentenced to prison for insider trading in 2004, she was forced to pay $220,000 in back property taxes and penalties to the State of New York for her home there. She tried claiming that she didn't owe taxes on the property because she didn't spend much time there.

Wesley Snipes

In 2008, the actor was convicted of three misdemeanor counts for failing to file tax returns from 1999 to 2001, cheating the government out of $7 million. He appealed for retrial and lost in 2010, which resulted in a three-year sentence at a McKean Federal Correctional Institution in Pennsylvania, where he was housed with about 290 white-collar inmates. He moved from prison to house arrest in April 2013.

Willie Nelson

After an investigation, the IRS slapped the country singer with a $16.7 million bill for back taxes, which his lawyer managed to negotiate down to $6 million. Because he lacked the funds to pay off the debt, Nelson spent three years working to pay it off. He recorded the album, The IRS Tapes: Who'll Buy My Memories?, which was sold for the sole purpose of paying his IRS debt. The money collected from suing his accountant also went toward the cause.

Al Capone

The Chicago gangster managed to avoid the feds until 1931, when he was indicted and found guilty of five counts of income tax evasion. After failing to bribe those involved in his hearing, he was sentenced to 11 years in prison and heavily fined. One of his prison terms was spent in the then-new Alcatraz prison.

William "Bud" Abbott and Lou Costello

The comic duo of "Who's On First?" fame split up and became bankrupt when the IRS char! ged the t! wo for so much in back taxes in 1956 that they had to sell their homes and the rights to many of their films.

Jesse Jackson Jr.

The former Representative (D–IL) pled guilty on Feb. 20, 2013 for fraudulently obtaining $750,000 of funds from his election campaign, and his wife, Sandra Jackson, pled guilty to one count of tax fraud for covering up the receipt of those funds from 2006 to 2011. Jesse was sentenced to 30 months in prison, while his wife was sentenced to one year.

Tom Daschle

The former Democratic senator from South Dakota "unintentionally" failed to pay taxes on the free use of a car and driver for several years, for which he paid $128,203 in back taxes and $11,964 in interest in January 2009. He said that he had become aware in 2008 of the fact that the service valued at more than $250,000 over three years.

Leona Helmsley

The businesswoman and real estate tycoon was convicted of evading $1.2 million in taxes in 1989, for which she was fined $7.1 million on top of the $1.7 million owed in back taxes. She served 18 months in federal prison, one month in a halfway house and two months on house arrest. During her trial, many of Helmsley's disgruntled hotel employees testified against her. One former housekeeper said she overheard the "queen of mean" say, "We don't pay taxes. Only the little people pay taxes."

Ty Warner

The billionaire creator of Beanie Babies toys was sentenced to two years' probation, 500 hours of community service and a $100,000 fine on top of paying a $53 million civil penalty and about $27 million in back taxes on Jan. 14, 2014, for evading taxes on a gross income of more than $24 million, which was hidden in Swiss bank accounts. The tax evasion charge he received carried a maximum penalty of five years in prison with a $250,000 fine, but the judge did not sentence Warner to prison, saying that it was best to allow him to "continue his good works."