Shares of mortgage insurer Radian Group Inc (RDN) spiked 18% higher following news that asset manager Clinton Group is pushing for more disclosures about the business in an effort to convince potential bidders than RDN is worth buying. The stock jumped on hopes that a buyout is possible.

I believe the best way to play a potential takeover is by buying call options on RDN, not stock.

Comment From Clinton Group Managing Director Greg Taxin:

If the board and management team choose not to adopt one or the other alternative that we have suggested, we will feel compelled to take additional steps to ensure shareholders are being treated appropriately.

The best approach for creating shareholder value is to sell Radian to a buyer that has the expertise to understand and value the legacy book and future business opportunities

While Clinton Group certainly believes a deal is best for shareholders, the

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Investing in dividend paying stocks makes sense for the following reasons:

1. A steady income without having to sell your position
2. It’s a good hedge against inflation
3. Cash flow regardless of market direction
4. Quicker compounding
5. Provides one with the two potential sources of income, one from capital gains and the other from the dividends paid out
6. You can also open up additional streams of income by selling covered calls and or puts if you are bullish on the stock

Some reasons to like Annaly Capital Management (NLY):

• An excellent yield of 13.62%
• A strong quarterly revenue growth of 29.1%
• A good quarterly earnings growth rate of 28.8%
• A decent relative strength score of 56
• A five year cash flow per share average of $2.07
• Operating margins of 70%
• Profit margins of 63%
• A low beta of 0.23 indicates that this is not a very volatile stock
• A strong five-year dividend growth

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What is the Volcker Rule?

The Volcker Rule is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It got its name from the former Chairman of the Federal Reserve, Paul Volcker. The rule aims to put an end to proprietary trading by banks on their own accounts. Prop trading is when a company trades stocks, commodities, derivatives etc. using its own cash reserves to make a profit for itself. The goal of the rule is to simply stop the banks trading for profit because the taxpayer will have be responsible for terrible mistakes. The Volcker rule is meant to come into effect on July 21st 2012.

JPMorgan
’s $5 billion loss

JPMorgan’s (JPM) CEO Jamie Dimon announced on May 10th that the company had made a $2 billion trading loss on faulty derivatives bets in London. This has since spiraled into a potential $5 billion trading loss. It

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To say that the Facebook (FB) IPO has been a disaster would be an understatement. FB is now trading significantly below the IPO price of $38.

In addition to the bad stock performance, the IPO has also been characterized by major technical probelms. Conformation reports, usually available shortly after a trade is placed, were delayed hours. Institutional investors who had put in large orders did not know whether they had been filled or not, and at what price.

The blame for the technical problems should be attributed to Nasdaq (NDAQ) as it was the exchange Facebook decided to list on. In an interview with the Wall Street Journal, Nasdaq CEO Bob Greifeld said, “this was not our finest hour” and that the exchange is “humbly embarrassed.” This embarrassment is sure

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Citigroup (C) is one of the major money-center banks in the world. Like so many big companies, Citigroup certainly is not the company it used to be.

In reality, Citigroup does not measure up to its banking peers in this article. I share my assessment of Citigroup in order to help investor expectations conform to reality. In my practice, a reality check is quite similar to my process of comparative analytics. Nowadays, companies either have or do not have clear support for future price appreciation.

Recently, I wrote an article on Bank of America (BAC), and I intend to offer my input on JPMorgan Chase (JPM) in a week or so. Neither of these, or other banks, are currently competitive with other sectors and industry groups.

Citigroup is currently selling for about $26.00 and has a recent high of $38.40. It is sporting a very high dividend yield of 3.8%.

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In the world of modern finance, there has always been the search for the Holy Grail. Ever since the advent of computers, practitioners have looked to harness the power of computing and direct it towards the goal of producing endless profits. Regrettably, nobody has found the silver bullet, but that hasn’t slowed down people from trying. Wall Street has an innate desire to try to turn the ultra-complex field of finance into a science, just as they do in the field of physics. Even JPMorgan Chase (JPM) and its CEO Jamie Dimon are already on their way to suffering more than $2 billion in losses in the quest for infinite income, due in large part to their over-reliance on pseudo-science trading models.

James Montier of Grantham Mayo van Otterloo’s asset allocation team was recently a keynote speaker at the CFA Institute Annual Conference in Chicago. His prescient talk, which preceded

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Like the horror movie where the little monster created in a test tube in the lab grows and grows only to wind up threatening the whole village, the JPMorgan (JPM) “London Whale” trader’s exotic credit derivative bet is now a potential $100 billion liability, according to the Wall Street Journal of last Friday. And the loss has ballooned from $2 billion to possibly $5 billion in one week! While Jamie Dimon may have beached his Whale, the credit derivatives, which Warren Buffett aptly called “weapons of mass destruction” continue to grow. Indeed, Dimon and JPMorgan continue to argue that this was a proper “hedge” which was “poorly monitored” and have fired the underlings supposedly responsible for the mess.

The rest of us, however, know better. We know how this horror movie will end, because we saw it over and over again in 2008 and beyond. It was called “Too Big

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Long-term investors in Bank of America (BAC) may find this review and information useful. The following items were reviewed for the 10 years ending December 2001 through 2011

• Revenue
• Net income
• Dividends
• Share repurchases
• Long-term debt

The first thing that stands out:

• The increase in long-term debt
• The percentage of revenue and net income used to repurchase shares when $0 was spent during the last four years.
• The number of years of net income in 2011 required to cover the long-term debt.

What happened to long term debt?

It moved higher.

• 2002: Long-term debt was $ 60.2 billion
• 2011: Long-term debt was $372.3 billion

Long-term debt increased $312.058 billion or 518%

What happened to revenue?

• 2002: $34.494 billion
• 2011: $93.454 billion

How many years of revenue would it take to pay off the long-term debt?

• 2002: 1.75 years
• 2011: 3.98 years

What happened with net income?

• 2002: Net income was

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Goldman Sachs Group, Inc. (GS) has reported results for the first quarter of the current fiscal that show net revenues of $9.95 billion and net earnings of $2.11 billion. On a diluted basis, earnings per share work out to $3.92 per share as against $1.56 per share in the same quarter of the previous year and $1.84 per share in the preceding quarter. The annualised return on average equity was 12.2% as Goldman continued to demonstrate its leadership position in investment banking ranking first in global mergers and acquisitions in this year to date. In Investment Banking, net revenues were 9% lower than the same quarter in the previous year at $1.15 billion but 35% higher than the last quarter of 2011. Financial Advisory revenues were 37% higher than the comparable quarter of the previous year at $489 million but net revenues from underwriting were 27% lower at $665 million.

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Investors have been attracted to mortgage REITs including American Capital Agency (AGNC) due to their strong dividend yields. The majority of mortgage REITs trade around book value, thus investors need to understand the specific strategies that each manager deploys. AGNC is an agency focused mortgage REIT, meaning they investment in securities that have an implicit government guarantees. AGNC management has been able to outperform its peers due to security selection. AGNC has focused on securities that exhibit lower prepayment speeds than other securities.

Prepayment Risks

Mortgage REIT investors should focus on conditional prepayment rates (CPR) to monitor the health and dividend potential for mortgage REITs. The CPR reflects the percentage of principal that is prepaid over a period of time on an annualized basis.

As CPRs increase, the company will have to invest in securities with lower coupons, which will hurt earnings. Mortgage REITs are highly levered investment vehicles, which

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