Photo by: Benno Hanson.
I have a special place in my heart for the activist investor. The media often give them a bad rap, but activists play an important role in making big, quick changes in America's biggest companies.
So, with that said, I wanted to look back at the three best activist campaigns this year to highlight how activist investors can work for the good of all shareholders.
1. A fruity concoction
At the top of this year's list is Carl Icahn's stab at Apple (NASDAQ: AAPL ) . By now, every investor knows that Apple has a boatload of cash -- some $40.5 billion in cash plus more than $106 billion of other investments.
Growing corporate cash hoards are a real problem for investors across the board. Too much cash threatens long-run stock returns, since cash and debt investments simply do not provide the same return as equities -- ownership of a business.
Most laudable is Icahn's demand for speed. Apple has a buyback and dividend plan in place, but Icahn wanted it done immediately. He suggested Apple borrow against its cash and investments held overseas to make big buybacks spanning a single year.
By and large, the debate is mostly over. Apple will return as much as $100 billion to shareholders by 2015, with the bulk coming in the form of share repurchases. David Einhorn deserves a mention, too, for his suit against Apple, and subsequent plan for Apple preferred stock, which kicked off a universal discussion about the iPhone maker's massive cash stash.
2. An automated return of capital
Remember Redbox? While Outerwall (NASDAQ: OUTR ) , formerly Coinstar, isn't necessarily a stock that gets widespread attention, it makes frequent appearances in value investing and activist circles.
Outerwall underwent a name change to enact a new strategy: Make every product under the sun available in automated kiosks, from coffee to sandwiches. Unfortunately, few of its new initiatives could stand up to its Redbox and Coinstar machines in profitability.
That's when Jana Partners entered the fray. The activist group acquired a 13.5% stake, pushing Outerwall to return cash to shareholders instead of investing in new, mostly unproven, vending businesses. The company has since approved a $100 million buyback, tossed its new ventures out the window, and had its president "step down." Not to mention, shares have surged since Jana announced its position.
What's most important here is that an outside activist group was capable of ending a new ventures program that existed mostly as a jobs program for management.
Redbox won't last forever -- DVDs, BluRay disks, and physical media are dying a slow death. Outerwall had two choices: enjoy the money while it lasts, or throw cash at new attempts to recreate Redbox's success. Jana said "no go" to new concepts; shareholders should take the money and run.
3. A political mess
Bruce Berkowitz was successful in bringing AIG back to private hands, but a new effort to privatize Fannie Mae (NASDAQOTCBB: FNMA ) and Freddie Mac (NASDAQOTCBB: FMCC ) may be his biggest campaign ever.
The plan had to be on this list for the sheer complexity and difficulty of actually getting this deal done. Berkowitz will have to convince the government to give up a cash cow -- two companies that have given the government more than $100 billion in 2013 alone.
I still think this deal is a long shot, and so does the rest of the market. Fannie Mae and Freddie Mac preferred stock is essentially priced as if this is a 5-to-1 event. These are long odds, indeed.
And it won't be easy for political reasons. Lawmakers have little desire to give up deficit-busting, profitable mortgage companies. The president has spoken negatively about giving Fannie Mae and Freddie Mac to shareholders. And Congress routinely bickers back and forth about who exactly should insure America's trillion-dollar mortgage industry.
If Berkowitz strikes gold in Fannie Mae and Freddie Mac, a future Foolish article from the year 2100 should name him activist of the century.
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Alamy My wife and I are just starting the journey of buying our first home together. We're both excited and nervous, because a lot can and does go wrong. One of the first steps I took was to figure out exactly how much house we could comfortably afford to buy. While there are a variety of affordability calculators out there, I wanted to get pre-approved before we ventured out to find our dream home. Turns out, the fact that we don't plan on moving until next summer made it too early to consider getting pre-approved. That said, the effort wasn't completely wasted. I learned three things that every prospective home buyer should know in order get their house in order, so to speak -- things that will make for a smooth process when applying for a loan. 1. Get Your Credit House in Order Home buyers need to do everything in their power to boost their credit score before applying for a mortgage. This means paying down credit cards and making sure your credit is as squeaky clean as you can get it. It's a good idea to check out your credit reports well in advance of applying for a loan to make sure there are no issues you need to address. You can pull reports from all three major bureaus for free at annualcreditreport.com. (Everyone whose income is going to be considered in qualifying for the loan needs to do this.) If there are any issues, start fixing them immediately. Some red marks -- even if they are due to inaccurate reporting and not because of your bad credit management -- can take a while to clean up. When I pulled my credit report I was pleased to find that my credit score is still in healthy shape. However, it could be better. I have too many accounts carrying balances. To get my credit house in order, I plan on paying off the one card that's holding a balance from our last vacation, despite the fact that it charges zero percent interest. 2. Protect Your Credit Reputation Once your credit house is in order, protect it. According to John Laymac of CBC National Bank, there are several things we can do between now and when we buy our new home: "Do not let anyone pull your credit, pay everything on time, do not close any accounts you may pay down to zero, do not apply for any new credit (besides the mortgage), do not buy a car, do not make other large purchases on credit and do not carry a balance on any revolving account that is more than 25 percent of the card's limit. Use a mix of cards if you have more than one and pay the balance off or below 25 percent of the limit when the bill arrives." That pretty much sums up what you need to do to avoid accidentally dinging your own credit before you start shopping for a loan. What's probably most surprising is that closing accounts or paying off a term loan are actually a very bad idea, especially before applying for a mortgage. Closing a major credit card can actually do damage to a credit score. Lenders look at the balance on revolving credit accounts in terms of its ratio to total available credit. Closing an account can have the unintended consequence of raising the ratio. Paying off a car is the same story; lenders want to see a long-term credit history. So, it's actually better to put any extra money toward a down payment rather than paying off the car. One other thing Laymac recommended we do is go to OptOutPrescreen.com and register to electronically opt out of electronic offers (spam and junk mail) of credit for five years. He said that "this is similar to the do-not-call list and the credit bureaus see it as a positive." Bottom line: Prospective homeowners should do all they can to protect their credit before applying for a mortgage. 3. Open a Separate Account to Hold Your Down Payment Funds It goes without saying that a new homebuyer will be forking over money, and lots of it, at the closing. What you might not know is that the funds set aside for a down payment and closing costs shouldn't be kept under the mattress, nor should those funds be in your main checking account. Instead, homebuyers should open a separate account specifically for the down payment. I asked Laymac to explain why the separate account, and he said: "To avoid delays, establish a dedicated account for the down payment and closing costs and have all transfers into that account final at least 60 days before you start the process. Any non-payroll deposits into asset accounts must be explained in detail and any cash deposits can cause a loan to be declined. Banks typically only ask to see the two most recent months of account statements, so transactions prior to two months are not scrutinized. If you have no transactions in the account over two statements, there is nothing to explain and no additional documentation to provide." So, sell that stock or get grandma to send the Christmas money early. (If a money gift comes in later, you may have to provide your lender with a note from the gift giver stating that the money was a gift and no repayment is expected.) Then sock it away in a separate account that has been designated for the down payment. Final Thoughts Following these three steps should make the mortgage application process less painful and intrusive. Buying a house comes with enough issues of its own, so why complicate matters with a mortgage mishap? With the subprime mortgage mess unfolding all around us, there's never been a better time to make sure you make the right mortgage decision.Of course, no single loan is best for all circumstances, but the following eight loan types work better than most when matched to your individual situation and lifestyle. Next: For the Long Haul Make a Mortgage Match Loan to consider: 30-year fixed rate Why: Financial peace of mind can be worth the higher interest rate that won't change for three decades.Next: Refinancing For the Long Haul (15-20 yrs before retiring)Loan to consider: 15- or 20-year fixed or ARM Why: You can retire the loan before you retire from your job. A fixed rate generally costs more than an adjustable, but will give you more certainty in budgeting. However, if ARMs are a lot cheaper and your income can handle possible payment increases, you could save with the adjustable rate.Next: Recent Graduate Refinancing (With strong potential for increased earnings)Loan to consider: 1-year ARM Why: Stretch your dollars with low interest rates during the years when your income is at its leanest. Your rate can go up (or down) each year, but rate caps will limit that change to a predictable amount, and your rising income should be able to handle it. Watch out for loans that cap your payment instead of your rate. They could cause your indebtedness to grow. Next: Self-Employed Recent Graduate Loan to consider: No- or low-documentation loanWhy: Though you'll pay a higher interest rate, not having to produce paycheck stubs or employer references, as you would be expected to supply when applying for a traditional loan, can be a huge help to those with variable incomes.Next: 4-5 Year Plan Self-Employed Loan to consider: A 5/25 hybrid loan Why: If you won't keep the loan longer than five years, why pay extra to lock in an interest rate for a longer period? If you do end up staying longer, you can either refinance or live with an interest rate that adjusts every year.Next: Good Income, but ... Planning to Live in Home for 4-5 Years Loan to consider: Option ARM Why: With these very risky loans designed for people with incomes that vary monthly, each month you have a choice of payments: the full amount needed to pay off principal and interest, an amount that covers only the interest, or an even smaller amount that doesn't even cover interest owed. Over time, however, your required payments could rise significantly if you often choose the smaller payments.Next: Job Relocation Good, Varying Income (With good income, savings)Loan to consider: Interest-only Why: While these loans can be risky for novice borrowers or those stretching to afford a home, they can be a smart tool for savvy borrowers who already have assets built up. Monthly payments are low because you're not repaying principal, so you can afford a larger loan. If you sell the home for less than you paid, however, you have to come up with the difference.Next: Military or Veteran Job Relocation for a Short Run Loan to consider: VA loan Why: The U.S. Department of Veterans Affairs offers loan guarantees that allow qualified military personnel and veterans to take out mortgages for as much as $417,000 with zero down payment. In Alaska, Hawaii, Guam and the U.S. Virgin Islands, that loan amount goes up to $625,000.Next: More on Mortgages Active Duty Military or Veteran ' Your Credit & Mortgage Rates' Three Steps to the Best Loan' Five Types of Mortgages' Finding a Mortgage Lender' Five Mortgage Mess-Ups' Mortgage Contract Surprises' Refinancing Exotic Mortgages' The Problem: Option ARM Bankrate on Mortgages Get more information on finding, choosing and financing your next place to live:Great Places to LiveBest Cities for Each Life StageMost Affordable Suburbs Latest Money News & Features More on AOL 
If you're a trader, you should be focused on limiting risk first and maximizing profits second. So it's worth thinking about how you would handle the kind of scenario Porter sees coming. Fortunately, there's a very simple, safe plan available... You let the market decide. As we often say in our DailyWealth Trader service, the market is the judge, jury, and executioner of every trade. That's why we use predetermined stop prices on all our positions. If a stock we're following declines by a set amount, we exit the trade. If it doesn't... we can continue collecting profits. We've seen both scenarios at work this year. 
We moved closer to the exit... and then the market told us it was time to go. While C&J's share price completed a "round trip" back down into the high teens this spring, readers who followed our advice walked away with a 17% gain. 
Afterward, shares marched higher. Even after the recent market weakness, they're a chip-shot away from a new all-time high. Our readers can continue to make gains here until the market tells them otherwise. 
Andrew Mitchell for The Wall Street Journal 
Who's hungry? Insider trader ate his Post-it notes after passing stock tips. NEW YORK (CNNMoney) The middleman in a $5.6 million insider trading scheme has admitted to passing stock tips on Post-it notes and then eating the evidence. 
Susan Walsh/APFederal Reserve Chair Janet Yellen. WASHINGTON -- Record-low interest rates will be around for at least a few more months, the Federal Reserve made clear Wednesday. Enjoy the easy money while it lasts. By mid-2015, economists expect the Fed to abandon a nearly 6-year-old policy of keeping short-term rates at record lows. Those rates have helped support the economy, cheered the stock market and shrunk mortgage rates. A Fed rate increase could potentially reverse those trends. Mortgages could cost more. So could car loans. Investors could get squeezed. "Borrowers should see the writing on the wall," said Greg McBride, chief financial analyst at Bankrate.com. "Interest rates are eventually going to go up. They should pay down variable-rate debt and keep an eye on that adjustable-rate mortgage. They don't want to be caught flat-footed." Investors, in particular, might recall that mere speculation about the end of the Fed's stimulus shook global financial markets in May 2013. In coming months, as the prospect of higher rates nears, traders might once again dump stocks and bonds and send prices tumbling. Higher yields on bank accounts and CDs could provide some modest relief for savers and retirees who have struggled for years to get by on meager interest income. But any gains they receive could be diminished by the likelihood that inflation will be higher once the economy is strong enough for the Fed to end its ultra-low rate policy. Still, on Wednesday, Fed policymakers once again decided: Not yet. The central bank said it intends to keep its benchmark rate near zero as long as inflation remains under control, until it sees consistent gains in wage growth, long-term unemployment and other gauges of the job market. The Fed retained language signaling its plans to keep short-term rates low "for a considerable time" after it ends its monthly bond purchases after its next meeting in October. Stocks Soar The decision sent the Dow Jones industrial average (^DJI) to a record high Wednesday. And on Thursday, stocks extended their gains. The Dow rose 86 points in midmorning trading. "What we heard from the Fed today is really what investors like to hear," McBride said. "The stimulus isn't going to go away overnight." In its statement, the Fed said it will make another $10 billion cut in the pace of its Treasury and mortgage bond purchases, which have been intended to keep long-term borrowing rates low. "In the Fed's mind, the economy still has work to do, but it's improving," said Mike Arone, an investment strategist with State Street Global Advisors. The Fed also clarified the process by which it will eventually unwind its low-rate policies. The Fed said it would first raise its key short-term rate before it stops reinvesting its bond holdings, which have driven the Fed's balance sheet to a record of nearly $4.5 trillion. The central bank also issued updated forecasts for growth, inflation and interest rates. The median short-term rate supported by Fed policymakers at the end of 2015 is now 1.38 percent, up from 1.13 percent at its June meeting. This suggested pressure from some Fed officials for a faster rate increase than the Fed's statement implied. The Fed also expects slower growth this year and next than in its last projections issued in June. It predicts that the economy will grow about 2.1 percent this year, down from its June forecast of roughly 2.2 percent. That reduction likely reflects the sharp contraction in the first quarter of this year. The economy has rebounded solidly since then. Keeping Rates Low On the eve of the Fed's meeting this week, the financial world had been on high alert for whether the Fed would reiterate that it expects to keep its key short-term rate near zero for a "considerable time" after the bond buying ends. With job growth solid, manufacturing and construction growing and unemployment at a near-normal 6.1 percent, many analysts had suggested that the Fed was edging closer to a rate increase to prevent a rising economy from igniting inflation. The number of U.S. job openings is near its highest level in 13 years. Layoffs have dwindled. And consumer confidence has reached its highest point in nearly seven years. Despite the signs of a stronger economy, most economists think the first increase in the Fed's short-term rate won't occur until mid-2015. The Fed's new statement retained language stating that a range of labor market indicators "suggests there remains significant underutilization of labor resources." Meeting with reporters after the Fed meeting, Chair Janet Yellen said she still thought the job market has yet to fully recover. "There are still too many people who want jobs but cannot find them, too many who are working part time but would prefer full-time work and too many who are not searching for a job but would be if the labor market were stronger," Yellen said. Minor Changes The Fed made only minor changes to its previous statement in its assessment of the economy. The statement was approved on an 8-2 vote. The dissents came from Charles Plosser, president of the Fed's Philadelphia regional bank, who had dissented at the last meeting, and Richard Fisher, president of the Dallas regional Fed bank. Both are viewed as "hawks" -- Fed officials who are most concerned about the threat of inflation and believe the Fed should be moving more quickly to raise rates. Asked at her news conference whether she had concerns about the dissents, Yellen noted that the committee had approved the policy statement by "an overwhelming majority, and I don't consider the level of dissent to be surprising or very abnormal." In response to another question, Yellen said it could take until the end of the decade to shrink the Fed's investment holdings to more normal levels. Before its policy announcement Wednesday afternoon, the Fed had received good news on inflation with a report that consumer prices fell by a seasonally adjusted 0.2 percent in August, the first monthly drop in prices in 16 months. In August, U.S. employers added just 142,000 jobs, well below the 212,000 average of the previous 12 months. The slowdown was seen as likely temporary. But some analysts said it underscored that the economic outlook might remain too hazy for the Fed to signal an earlier-than-expected rate hike. -.
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Peterma 
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Daniel H. Pink 
