Forbes USA - 16 December 2013.bak

2O14 investment guide
sp e c i a l i s s u e
WAYS TO
GET RICH
stocks to buy now
new tax tricks real estate tactics
secrets from investing legends
plus: the one investment
to avoid at all costs
WHATS THE BIG DEAL

ABOUT DIVIDENDS NOW?
Dividends can be a key source of stock market returns.
40%
WHAT IF THERE WERE

NO DIVIDENDS?
Dividends have accounted
for up to 70% of annual
returns in the stock market.
In fact, dividends can be the
difference between a net
loss and a net gain.
of total stock returns

come from dividends.1
1940 - 49
3.0%
9.2%
1950 - 59 13.6%
1960 - 69
4.4%
1970 - 79
1.6%
19.4%
7.8%
5.9%
1980 - 89 12.6%
17.5%
1990 - 99 15.3%
2000 - 12 -0.2%
Returns without dividends
18.2%
1.7%
Total returns with dividends
Source: Morningstar EnCorr , FMRCo, as of 12/31/2012
Stock markets are volatile and can decline signicantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign
securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnied in emerging markets.
Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds.
Changes in real estate values or economic downturns can have a signicant negative effect on issuers in the real estate industry.
Preferred securities are subject to interest rate risk. (As interest rates rise, preferred securities prices usually fall, and vice versa. This effect is usually more
pronounced for longer-term securities.) Preferred securities also have credit and default risks for both issuers and counterparties, liquidity risk, and, if
callable, call risk.
Dividends have been rising faster than earnings.2
$1.8 trillion
U.S. companies have $1.8 trillion
in cash the highest level in
history.3 This cash can serve as an
important source of capital return
for shareholders.
50-year lows
Payout ratios are still near 50-year lows,
suggesting plenty of room to rise.
70%
60%
50%
CHARACTERISTICS OF
DIVIDEND-PAYING COMPANIES
40%
Stable, mature businesses

Steady cash ow
20%
Relatively stable prots

Tend to be lower risk
and less volatile
30%
2013
1947
Source: Standard & Poors, Haver Analytics, Fidelity Investments

(AART), through 6/30/13.
Put our dividend funds to work for your portfolio.

FEQIX FIDELITY EQUITY-INCOME FUND
This fund seeks a yield that exceeds the yield on the securities
in the S&P 500 Index.
FGRIX FIDELITY GROWTH & INCOME PORTFOLIO

This fund seeks high total return (including dividends and stock
price growth) through current income and capital appreciation.
At Fidelity, we use our global reach

and research expertise to bring you
smart investing ideas.
Get our full perspective and fund

details now.
FSDIX FIDELITY STRATEGIC DIVIDEND & INCOME FUND

This fund seeks a reasonable level of current income and the
potential for capital appreciation.
Fidelity.com/dividend
800.FIDELITY
Before investing, consider the funds investment objectives, risks, charges, and expenses. Contact Fidelity for a
prospectus or, if available, a summary prospectus containing this information. Read it carefully.
Keep in mind that investing involves risk. The value of your investment will uctuate over time, and you may gain or
lose money.
Past performance is no guarantee of future results.
1
Source: Morningstar EnCorr, FMRCo, as of 12/31/2012.
2
Source: FMRCo and FactSet.
3
Source: FMRCo, Haver Analytics, as of 12/31/2012.
Fidelity Brokerage Services LLC, Member NYSE, SIPC 2013 FMR LLC. All rights reserved. 655470.4.0
PO
A S
1-800-441-4488
Hermes.com
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contents DeceMBeR 16, 2013
VoLUMe 192 nUMBeR 9
28 | lEons dEn
Inside a hedge
fund moguls
command center.
23 | FACT & COMMEnT
by stEvE ForbEs
A shameful deal and a dangerous one, too.

Plus: The Forbes 2013 All-Star Eateries.
52 | its good to bE king

John Menard, DIY monarch.
lEADERBOARD
28 | ROOM wITh A vIEw
Leon Cooperman favors function over form

for his oce.
32 | InDOnESIAS RIChEST
Some of the nations wealthiest
are investing far away.
34 | STAn kROEnkES SpREADS

Seven homes belonging to the real estate
developerbought in his own personal land grab.
36 | ChARITABlE BAnG FOR ThE BuCk

The ten largest U.S. charities and how their
takes compare with their leaders.
Plus: The Best Books of 2013.
40 | AppETITE FOR InnOvATIOn
Three entrepreneurs profting from creative

eating experiences at homes, schools
and even helipads.
42 | ACTIvE COnvERSATIOn
Can education reform solve poverty?
ThOuGhT lEADERS
44 | CuRREnT EvEnTS
by lEE kuan yEw
Sihanouk: a lead player in many roles.
62 | canadian dollars
Go north, NHL, and prot in
the provinces!
46 | InnOvATIOn RulES
by rich karlgaard
Smarts in business is not about IQ.
50 | CApITAl FlOwS
by mark skousEn
A new way to measure the economy.

12 | FORBES DECEMBER 16, 2013
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STRATEGIES
60 | taking Flight
A $400 million retail
business soars from
Duck Dynasty.
52 | hOME DESpOT
John Menard makes all the rulesand the

billionsat his midwestern hardware empire.
by Erin carlylE
60 | DuCk (DynASTy) SEASOn

How the Robertsons stole Christmas.
by clarE oconnor
62 | hOCkEy GO hOME!
The NHLs fnancial future lies north of

the U.S. border. Just ask Winnipeg.
by tom van ripEr
TEChnOlOGy
66 | BIll GATES FOOD FETISh
80 | charliEs anglE
The reckless expansion of
accessories retailer Charlie
Chanaratsopon.
Some of the worlds most infuential investors

are betting Hampton Creek Foods can
make the humble egg obsolete.
by ryan mac
70 | READInG yOuR FInAnCIAl

FOOTpRInTS
Shrewd startups are crunching the data behind

credit card swipes to sell you more stuf.
104 | madElinE mismanagEd

How not to run a family
business.
by adam tannEr
76 | ThE AnTI-SIlICOn vAllEy

STARTup
Apprenda thrives by ofering what the Bay Area

cant: cheap housing and low taxes along
with challenging work.
by susan adams
EnTREpREnEuRS
118 | a vEhiclE For
timid bulls
Capturing most of the
upside and avoiding half
the downside.
80 | SpEED DEMOn
Must Charlie Chanaratsopon slow down the

growth of his $400 million-plus retail empire?
by brian solomon
92 | TAppInG InSpIRATIOn
Now in his fourth startup, Howard Lerman has

an uncanny sense of timing. Whats his secret?
by J.J. colao
InvESTMEnT GuIDE
104 | MADElInE AnD ThE FAMIly
BuSInESS
The Parisian schoolgirl has enchanted generations. Now shes endangered by poor planning.
by dEborah l. Jacobs
BrandVoice
by FidElity invEstmEnts
The Case for Dividends. 107
112 | FInDInG ThE nExT SAMSunG

Joohee An braves Asias massive consumer
jungle to fnd the next blockbuster stock.
by kEnnEth rapoza
131 | avoid art

Beautiful things are terrible
investments.
118 | STOCkS wITh A SAFETy nET
Edward Silversteins convertible fund has beaten

both stocks and bonds. Howd he do that?
by william baldwin

122 | BACkDOOR pROFITS FROM
FRACkInG
Theres money to be made on pipelines, railroads

and other infrastructure plays.
by daniEl FishEr
129 | pORTFOlIO STRATEGy

by kEn FishEr
Turning $1,000 into $42 million.
131 | hOw SMART IS ART?
A watercolor may give more pleasure than an index

fund, but its not what you should invest in.
by susan adams, JanE lEE and calEb mElby
122 | stocks to
buy now
Forget the drillers. Focus on
frackings infrastructure.
136 | FInAnCIAl STRATEGy

by a. gary shilling
Happy days will be here again.
142 | yEAR-EnD ChECkup

by william baldwin
160 | mortgagE man

William Erbey understands
indebted homeowners better
than they understand
themselves.
A Janet Yellen stock portfolio.
144 | nInE FORMulAS FOR wEAlTh

BuIlDInG
Simple formulas can sometimes capture
the secrets to fnancial success.
by william baldwin
154 | puTTInG InTEl InSIDE

yOuR 401(k)
176 | smart cookiEs

Jack Kent Cooke never
went to college; his
foundation ensures some
exceptional kids will.
Dimensional Fund Advisors relies on a Nobel

laureate for its solution to the retirement crisis.
by matt schiFrin
160 | ThE upSIDE In unDERwATER

MORTGAGES
William Erbey has built a $2.8 billion fortune by

fguring out what makes subprime borrowers tick
and how to keep them paying.
by liyan chEn
164 | ShOw ME ThE MOnEy
186 | plutocratic prEppErs

Rich worrywarts refurbish their
homes into futuristic fortresses.
James Koutoulas runs a small commodities hedge

fund, but his biggest score could be getting back
all the money of MF Globals customers.
by John F. wasik
168 | GEnEROuS TAx TRICkS
To do well while doing good, put private company

stock in a donor-advised fund.
by ashlEa EbEling
176 | SChOlARShIpS AREnT EnOuGh

The late Jack Kent Cooke devoted his fortune to
helping the smartest poor kids exceland that
means more than just paying for college.
by kErry hannon
lIFE
186 | BIllIOnAIRES BunkERS
In anxious times, home security goes sci-f.

by morgan brEnnan
200 | ThOuGhTS
168 | giving ...
and rEcEiving
A smarter way to give
away private fortunes.
On Christmas.
what happens when
garden
green thumb
meets
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FOrbeS
FACT & COMMENT STEVE FORBES

With all thy getting, get understanding
A ShAmeFul deAl
And A dAngerOuS One, tOO
BY STEVE FORBES, EDITOR-IN-CHIEF
On May 24, 1940, as the Allied

military situation in France was rapidly deteriorating, Britains foreign
minister, Lord Halifax, made a drastic proposal at a meeting of the War
Cabinet: Britain should explore a
separate peace with Nazi Germany.
Winston Churchill was horrifed, hammering home the profound
truth that once talks started they
would rapidly take on a life of their
own; the war would be over, leaving Britain at the mercy of the Nazis. Churchill
stressed that Hitler was implacable.
The mullahs of Iran are implacable and are absolutely determined to get the bomb. The Iranian
economy is in shambles. The sanctions, which took
years of painful diplomacy to put in place, were
fnally taking a real toll, and Congress was ready to
enact more severe ones. Yet there was Secretary
of State John Kerry, oblivious to what Churchill
knew about implacable opponents. His deal with
Iran is a disaster. The sanctions will begin to
crumble. Irans nuclear weapons eforts will be
barely dented by an agreement that has loopholes
bigger than the proverbial dump truck to drive
through. And now this negotiating process will
take on a life of its own. Iran knows the U.S. must
keep the talks going lest it look like it failed.
Kerry may not know what hes doing, but
President Obama knows exactly what this means:
Iran will become a nuclear power. Obamas position is for us to get over it and cope with the new
reality. To him the U.S. presence in the world is
a force for bad, and Iran is an aggrieved power
that the U.S. and Britain didnt do right by back
in the 1950s, if not earlier.
Israels security? Obama thinks it brought on
most of its troubles itself; anyway, Iran probably
wont nuke it, so whats the big deal?

Will the Saudis and the Turks
now go nuclear? In Obamas worldview they can do what they want.
As long as the U.S. isnt involved, the
world is a better place.
But an increasingly dangerous
and hostile world wont leave us
alone. Sorry, Mr. President, America
is not the source of evil. Trouble is,
the American people will pay the
price for your folly.
Where does this leave Israel now? The U.S.
has refused to take military action against Irans
nuclear facilities, but Israel has come close
to doing so on its own more than once. In the
spring of 2012 Israel decided to attack. The U.S.
moved major military assets to that part of the
world to deal with the fallout, even as Washington was pressuring Jerusalem to back of. Israel
did just that, and then backed of again in the
fall, when it revisited the attack option.
Israel is boxed in. Understandably, that small
country is reluctant to go against the wishes of
its only ally. But Iran is one of those rare cases in
which Israel should have risked Washingtons
displeasure and done what needed to be done, just
as it did in 1981, when it bombed Saddam Husseins nuclear facility, and in 2007, when, despite
opposition from the Bush Administration, it destroyed Syrias budding atomic weapons eforts.
Now that theres no possibility sanctions will
undermine the Iranian regime, the existential
threat posed by a nuclear Iran may prod Israel
to strike, despite the immense difculties and
the withering response from the U.S., Europe
and most of the rest of the world.
Whatever comes to pass will be extremely
dangerous.
december 16, 2013 FOrbeS | 23
FORBES
FACT & COMMENT STEvE FOrbES
THE FORBES 2013

ALL-STAR EATERIES
IN NEW YORK
Another dreary year of economic sluggishness, international uncertainty and polarizing political
bickering, compounded by the ghastly unraveling of the Afordable Care Act, a.k.a. ObamaCare.
Thankfully, 2013 was also another year of epicurean excellence in the Big Apple that makes the bull
market look pallid. Our gastronomical gurusFORBES Editor Randall Lane, FORBES Editor-atLarge Richard Nalley and media maven Monie Begley, as well as brothers Bob, Kip and Timshine a
light, as FORBES has been doing for more than four decades, on the citys fnest fooderies.
HHHH
Daniel
Del Posto
Eleven Madison
Park
The Four
Seasons
Gotham Bar
and Grill
Gramercy Tavern
Jean-Georges
La Grenouille
Le Bernardin
Ai Fiori has truly hit its stride. In its serene modern

setting you can actually have a conversation without
shouting, and the service is as impeccable as the food.
You dont need a secret handshake to access Atera,
a tiny room tucked like a hipster speakeasy into a
nondescript building; you just need the patience to
brave the onerous online reservation process and
the nonrefundable $500 up front for two. Once
inside youre in for a singularly intimate dining delight. Del Posto, situated in a vast, crepuscular room,
is another of New Yorks great dining experiences.
Celebrating 50 years in the Big Apples restaurant
business, Tony May, in partnership with daughter
Le Cirque
Marea
The Modern
Nobu
Per Se
Peter Luger
Steak House
Rosanjin
SD26
Tocqueville
21 Club
Marisa, has brought an innovative and elegant level

of exquisite Italian cuisine to the city with SD26,
delivering his magic in a beautiful setting. Daniel
remains frst in its celestial class. The senses are
caressed, teased, surprised, dazzled, amused, transported and coddled from start to fnale. No question
Jean-Georges Vongerichten is also at the top of his
game, as Jean-Georges delivers on all fronts and then
some. Rosanjins serene ambience is perfectly suited
to kaiseki, the traditional Japanese tasting menu.
Enjoy a succession of sublime fsh, vegetable and rice
dishes, each distinctively prepared and beautifully
presented. The new Aquavit is, in a word, wow.
la grenouille
sd26
le cirque
nobu
the modern
Krystallynne For Forbes
Ai Fiori
Aquavit
Atera
Blue Hill
Bouley
With all thy getting, get understanding
HHH
ABC Kitchen
Bondst
JoJo
Nippon
Prune
Aldea
Brushstroke
Junoon
NoMad Hotel
Annisa
Caf Boulud
Keens Steakhouse
North End Grill
Red Rooster
Harlem
Aretskys
Patroon
Carbone
Maialino
Park Avenue...
Riverpark
Casa Lever
Marc Forgione
Perla
Saul
Perry St
Shun Lee Palace
Porter House
New York
Swiftys
Asiate
Circo
Babbo
Il Buco Alimentari
& Vineria
Beatrice Inn
The Mark
Restaurant
Monkey Bar
Remodeled on the occasion of its 50th anniversary,

Nippon continues to set the standard for Japanese
cuisine in New York. ABC Kitchen will make you
orgasmic for organic. Never a beat is missed in the
Beatrice Inns cozy basement space, from the specialty cocktails through to the perfect desserts. The
preparation of NoMad Hotels straightforward fare
is innovative, with a sophisticated combination of
ingredients. Bondsts sushi is superb. The pristine
white-on-white setting of Perry St has been restored
in every detail following Hurricane Sandy, and the
food is every bit as delicious as it was before the trauma of closing. Annisa, a charming, understated room
on a charming, understated West Village block, quietly turns out the citys best Asian-fusion food. Saul,
Saul Boltons Frenchifed haute American diamond
Waverly Inn
in the rough, sparkles in the new Brooklyn Museum

setting. Carbone ofers an exuberant, sexy supperclub vibe and turns classic dishes into masterpieces.
Caf Bouluds menu is fun and deliciously tempting in a setting both glamorous and cozy. JoJo is
the jewel-box restaurant that started Jean-Georges
empire; the fare, decidedly French, changes with the
seasons. The Mark Restaurant takes a somethingfor-everyone approach to its menu with delectable
results; desserts are irresistible. The fagship of
Mario Batalis empire, Babbo, remains a must visit
on NYCs culinary tour. The classic steak house,
Aretskys Patroon, has undergone a stylish reinvention. Another standout in the highly competitive
arena of steak houses is Porter House New York.
At Casa Lever all remains molto bene.
middle center: AP Photo/richArd drew; AP Photo/mAry AltAffe
red rooSter
BondSt
mArc forgione
monKey BAr
DECEMBER 16, 2013
FORBES | 25
FORBES
FACT & COMMENT STEvE FOrbES
THE FORBES 2013

ALL-STAR EATERIES IN NEW YORK
SPECIAL
ABC CocinaMexican with a twist, courtesy of

Jean-Georges.
American Girl CafePerfect place for girls and
their iconic dolls.
Antonucci CafeWarm, boisterous and brimming
with pastas and a fne selection of meats.
AquagrillStunning array of fresh fsh and seafood,
including nearly 30 kinds of oysters.
ArtisanalOutstanding choices of cheeses, and the
rest of the menu is mouthwatering, too.
BG / Freds at Barneys NY / Le Train BleuEach
a destination unto itself, at Bergdorf Goodman, Barneys NY and Bloomingdales, respectively.
Billys Bakery / Buttercup Bake Shop / Dominique
Ansel Bakery / Crumbs Bake Shop / Cupcake
Caf / Magnolia BakeryYum!
Blue Smoke / Daisy Mays BBQ / Dinosaur Bar-BQue / Fette Sau / Hill Country / Mighty QuinnsThe
best in barbecue bring a touch of country to the city.
Boulud SudMediterranean masterpieces.
BuddakanMemorable Asian menu, lively scene.
CenterBarSeriously fun cocktailing, with topshelf booze fowing into delicious concoctions.
CraftbarServing fun, fusion/confusion fare, such as
an open-faced cheese-and-white-anchovy sandwich.
The DutchExcellent American-cuisine treat.
E.A.T.Scrumptious sandwiches ensure you do it well.
El Toro BlancoSmall yet innovative menu. The
prix fxe lunch, at $18, is a steal.
Grand Central Oyster Bar & RestaurantSuperb
seafood, superb setting.
The GroceryOriginal renderings of American food.
IliliLuscious Lebanese cuisine in a hip scene.
Jones Wood FoundryWonderful artery-clogging
union square caF
the little owl
meals and out-of-this-world sticky-tofee pudding.

Kin ShopYoull get a high from this version of Thai.
Kings Carriage HouseAntiques-flled duplex with
the feel of an English country home and a menu with
an emphasis on American-style preparation.
KurumazushiSome of the best (and priciest) sushi.
The Leopard at des ArtistesSolid Italian dishes offered within walls adorned with murals of the fairer sex.
the little owlWell worth the efort to land a reservation.
Locanda VerdeA brilliant French touch layered
atop home-style Italian in TriBeCa.
Lure FishbarHooks you every time.
M PcheExceptionally inventive Asian fusion.
Mas (farmhouse) and (la grillade)Euro-style, highrustic chic with a commitment to fne, New American
food from local purveyors.
MichaelsMeals to make media moguls forget the Web.
Minetta TavernAuthentic, classic American tavern
setting, serving evocative French bistro food.
Osteria MoriniNorthern Italian chain with spoton classic pasta preparations, custom cuts of pork
and steak and an expertly chosen wine list.
PeriyaliGreat Greek gastronomical experience.
PetrossianFine French cuisine, but go for the caviar.
The Todd English Food HallCornucopia of eating temptations at the Plaza Hotel.
RobertasPizza and pasta heaven.
RosemarysAiry garden concept still makes this
special, with the food as fresh and tasty as ever.
The Standard GrillAbove-standard fare and scene.
TamarindOutstanding Indian oferings.
Tribeca GrillSuperb American menu, notable wine list.
Union Square CafExcellent dining in the company of
a smart crowd from the media and fnancial communities.
right: aP Photo/larry crowe
craFtbar
LEADERBOARD
Keeping Score on Wealth & poWer
SeaT of poWer
Room With A vieW

phoToGraph by eVan KafKa for forbeS
Leon cooperman, boss of $9.8 billion Omega

Advisors, has been obsessed with markets ever since
he quit dental school and a quality-control job at Xerox
to get his M.B.A. from Columbia in 1967. The result:
reliably impressive returns, including 31% this year to
date. True to his value bent and disdain for showiness,
his function-over-form ofce displays a hodgepodge of
memorabilia from a long career on Wall Street.
28 | FORBES dEcEmBER 16, 2013
He displays a replica of
a type of prIVaTe JeT
he leases for about 25
hours each year. Since
he could easily buy one,
the plane refects both
wealth and thriftiness
at once.
The SLIDInG GLaSS

WInDoW behind his
desk is left open during
the trading day so he
can call out directives
to his secretary Mickey
(center) and his
traders.
A sculpture by
aLexanDer caLDer.
Still, says Cooperman,
Im not a collector
of art but rather of
stock certifcates that
hopefully rise in value.
Omegas boss has

sufered from chronic
back pain since 1978. He
sits comfortably, though,
in a herman mILLer
chaIr with a classic
design by Charles and
Ray Eames.
A Goldman Sachs
partner gave him a
buLLWhIp after he
led a grueling 30day road show to
raise $500 million
for Goldmans frst
mutual fund in 1990.
a courTroom
SKeTch shows him
testifying in Tyco
Internationals 2004
trial. He said Dennis
Kozlowski had lied to
him about a payment
to a company director.
Warren buffeTT
sent him a note
praising his contrarian
analysis of Teledynes
stock in the 1980s. He
has signed Bufetts
Giving Pledge.
GoLDman
SachS buSIneSS
prIncIpLeS from the
1970s. Cooperman
spent 25 years
there and built its
asset management
business.
dEcEmBER 16, 2013 FORBES | 29
Real Estate
The real esTaTe indusTry remains

cauTious, aware oF risks
Real estate executives turned out to be the most strategically
cautious of four industries surveyed by Forbes Insights/Zurich
in North Americaand also the least optimistic about their
growth prospects over the next three years. The study included
more than 400 executives in banking and fnancial services,
construction, healthcare and real estate.Their companies annual
revenues ranged from $25 million to $750 million.
Edward J. Fritsch, president and chief executive of Highwoods Properties, a real estate investment trust in Raleigh,
Why real estate executives may be nervous

Does your company align growth strategy with
risk management?
No
29%
Does it know how to mitigate risk?
No
29%
Does it understand the sources of risk?
No
25%
Are you aware of the risks in your companys
growth strategy?
Yes
60%
and what theyll do about it (or not)

How would you manage risk diferently over the
next three years?
No diferently
47%
Dont know
31%
Diferently
22%
N.C., includes himself

among the cautious. For
one thing, this is such a
cyclical economy, he says.
If you get too aggressive
in the business, its only
a matter of time before
youre out of business.
The survey showed
that, of the four industries, real estate executives
are also the least hopeful
that theyll be hiring new
workers over the same
period. Only 40% predicted headcount growth
versus an average of more than 50% for the other three industries. Fritsch, who was interviewed independently of the
survey, says the economic downturn has enabled his company,
and the industry in general, to do the paring of mediocre
and underperformers so that productivity is at an all-time
high. But until his clients start hiring again, he cant either.
I think employment is the biggest risk for us, says Fritsch,
whose company owns nearly 350 ofce and commercial properties. The gist of it is that if youre a customer of ours and
youre not hiring more people, you dont need more of our
product. If you lease 20,000 square feet and youre not hiring
more people, then its hard for me to convince you that you
now need 30,000 square feet.
Fritsch dismissed climate change and extreme weather
as signifcant threats to his industry, mainly because of the
advance of technology in building materials. The survey
showed a similar lack of worry among respondents. Dan
Kleiman, head of Real Estate at Zurich in North America, notes
that real estate investors have developed a more detailed appreciation of risk. But still, he says, it has to be juxtaposed against
a new reality of severe weather patterns. He cites Californias
recent hail and thunderstorms as examples, so aberrant that
the damage they caused fell outside any predictable or measurable patterns. Companies can prepare for severe weather, but
the degree of severity can still surprise us.
*The complete study is available at www.forbes.com/forbesinsights/Zurich_Risk
Zurich neither endorses nor rejects the recommendations of the discussion presented. Further, the comments contained in this brieng are for general distribution and
cannot apply to any single set of specic circumstances. If you have a legal issue to which you believe this article relates, we urge you to consult your own legal counsel.
LEADERBOARD
820%
Change in Indonesias GDP since

1998, the year Suharto, the countrys
longtime dictator, was overthrown.
SCoRECARD
billionAiRES
WINNERS
INDONESIAS
RIchEST
Jef
Bezos
David
Filo
Net worth:
$34.3 billioN
Net worth:
$2.8 billioN
Net worth:
$2.6 billioN
Amazons stock continues

its spectacular run as the
company premieres Alpha
House, its frst original tV
series for subscribers to its
Prime service.
Yahoos revenue remains

stagnant, but Ceo Marissa
Mayers stock buyback
program boosts its share
price, increasing its
cofounders wealth.
Ubiquiti Networks, which

he founded, enjoys
quarterly sales growth of
88% for its bread-andbutter airMAX high-speed
wireless technology.
+$550 million +$200 million
Robert
Pera
+170 million
The countrys economy has

slowed down, so some are
investing far away. Take billionaire Mochtar Riady: In
June he bought Californias
tallest building, L.A.s U.S.
Bank Tower.
For more, visit
forbes.com/
Indonesia.
1. r. budi Hartono and micHael Hartono
$15 billion
the brothers biggest holding is in bank Central Asia, the
countrys largest private bank.
2. eka tjipta Widjaja

$7 billion q
the familys Asia Pulp & Paper, long criticized for deforestation, announced this year it will stop cutting natural forests.
3. antHoni salim
$6.3 billion
his Salim Group owns the worlds largest noodlemaker plus

stakes in telecom and retail.
LOSERS
4. susilo WonoWidjojo
$5.3 billion q
Shares of his clove cigarette maker, Gudang Garam, dropped

after a bad harvest drove up costs.
5. cHairul tanjung
$4 billion
6. sri prakasH loHia

$3.7 billion
the brother-in-law of steel billionaire lakshmi Mittal owns a

polyester maker and a Nigerian petrochemicals plant.
Mark
Zuckerberg
Elon
Musk
Leon
Black
$1.3 billion
$1.1 billion
$470 million
Net worth:
$21.6 billioN
Net worth:
$5.8 billioN
Net worth:
$5.6 billioN
Facebooks stock
continues to sag as teens
go elsewhere, while
Snapchat reportedly turns
down a $3 billion buyout
ofer from the company.
Musk blames media hype

when reports of three
battery fres in tesla Model
S cars send his electricauto companys stock
down nearly 30%.
his private equity frm,

Apollo Global Management,
reports a 39% rise in
quarterly profts, but its
shares fall anyway after a
yearlong climb.
FiGUreS reFleCt the ChANGe iN VAlUe oF PUbliClY trADeD holDiNGS FroM NoV. 6 to NoV. 20.
SourceS: InterActIve DAtA vIA FActSet reSeArcH SyStemS; ForbeS.
7. boenjamin setiaWan
$3 billion
Dr. boen, as hes called, runs the nations biggest pharma

outft and has a chain of hospitals.
8. peter sondakH
$2.7 billion
he owns everything from the St. regis bali hotel to a gold

mine to a stake in a taxi company.
9. mocHtar riady
$2.5 billion
his lippo Group has interests in property, retail, health care

and education.
10. sukanto tanoto

$2.3 billion q
Margins have been squeezed at April, his paper company; he

also owns pulpmaker Sateri.
UP
UNChANGeD q DowN New
scorecard by brian solomon

toP: DiDier MArti/GettY iMAGeS; toMohiro ohSUMi/blooMberG; riChArD VoGel/AP
his trans Corp operates two of the nations top fve tV

stations and owns the countrys Carrefour stores.
The L.U.C Collection

Each part is a masterpiece
The
width
of
the
blade
guaranteeing
the
suppleness of the three patented hammers in

the L.U.C Chrono One is calculated to enable
the chronograph hands to be swiftly and gently
reset to zero. Making this vital part too thick would
result in a rough jerking motion, while if it were
too thin, the hands might not return at all. Like
every component in the L.U.C Calibre 03.03-L,
each hammer is hand-decorated and nished
by the artisans at Chopard Manufacture. The
L.U.C Chrono One houses a movement that is
chronometer-certied by the COSC.
L.U.C CHRONO ONE
E x p l o r e t h e c o l l e c t i o n a t U S . C H O PA R D . C O M
LEADERBOARD
$180 MILLION
Cost to construct Kroenkes Pepsi Center

Denver sports complex, which opened in 1999
the entire amount funded privately.
HOME Equity
STAN KROENKES SPREADS

Stan Kroenke made his fortune in real estate developing warehouses and shopping centers, many of them used by Wal-Mart,
which was founded by his wife Ann Walton Kroenkes uncle. Since then hes amassed a sports empire that includes the
NFLs St. Louis Rams and Premier League soccer club Arsenal, and his Kroenke Group oversees ventures in real estate
development and self-storage. Then theres his steadfast land grab: Kroenke is now Americas eighth-largest private landowner, according to the latest Land Report 100 ranking. At 66 and worth an estimated $5.3 billion, he has these seven homes
plus 1.5 million acres of ranchland in Montana, Wyoming and British Columbia, and several California vineyards.
Montana Farm
broken o ranCh,
augusta, mont.
list priCe: $132.5 million
state laws keep the price of this

november 2012 purchase undisclosed.
its a 124,000-acre operational ranch
that spans three counties and has a
10,000-square-foot main house with an
indoor pool, stables, more than 4,000
head of cattle and an expanse of open
cropland.
Main Digs
west nifong boulevard
Columbia, mo.
valuation: $2.5 million
California Beach
House
Red Mountain
Retreat
Aspen Mountain
Town House
Steamboat
Springs Duplex
paCifiC Coast highway,

malibu, Calif.
valuation:
$8.9 million
ridge road,
aspen, Colo.
purChase priCe:
$20.75 million
south mill street,

aspen, Colo.
valuation:
$6.2 million
robert e. lee lane,

steamboat springs,
Colo.
valuation:
$872,000
his 8,000-square-foot tuscan

villa on 2.5 oceanfront acres belonged to Dodi fayed, Princess
Dianas companion until their
fatal car crash in 1997. it has
four bedrooms, a guest house,
a pool and a tennis court.
aspens most expensive

home sale of 2011, this estate
includes a 10,500-squarefoot contemporary main
house with a theater, a
1,600-bottle wine cellar and
a resistance pool.
Kroenke purchased this

7,150-square-foot four-bedroom town home in 2004 for
$5.9 million. it sits on a sliver
of land in the high-end top of
mill development at the foot
of aspen mountain.
he owns commercial land

and buildings throughout
the ski town, including this
multifamily home built in
1982 and tucked into less
than half an acre.
Penthouse Crash Pad
pepsi Center, denver, Colo.

valuation:
not available
he reportedly bunks occasionally

at an 11,500-square-foot duplex
penthouse atop his Pepsi center
complex, where his nBa team, the
Denver nuggets, and his nhl team,
the colorado avalanche, both play.
by morgan brennan
left: Pictometry; toP: michael martin / Getty imaGes
his 12,000-square-foot primary residence, built in 1988, sits on nearly 84 acres and has fve bedrooms, six full baths
and a swimming pool with a colonnaded pavilion alongside.
Whose cloud powers

270,000 more websites
than Amazon?
If your answer is IBM, youre among the well
informed. The IBM Cloud offerings also support
30% more of the most popular websites than
anyone else in the world. And our SoftLayer bare
metal options allow cloud clients to run their
most demanding apps on dedicated servers
without unwanted interference from their
virtual neighbors. Start powering your cloud
at ibm.com/getstarted
This is Cloud on a Smarter Planet.
IBM
Amazon
270,000 and 30% data sourced from HostCabi.net, as of 10/25/13. IBM, ibm.com,
Lets Build a Smarter Planet, Smarter Planet and their logos are trademarks of
IBM Corp., registered in many jurisdictions worldwide. See current list at
ibm.com/trademark. SoftLayer is a registered trademark of SoftLayer Technologies,
Inc. International Business Machines Corp. 2013.
$328 million
LEADERBOARD
Total U.S. sales of e-books, the most lucrative book format, in the frst quarter of 2013.
(Paperbacks were second at $306.6 million.)
PHILANTHROPY
The countrys largest charitable institutions bring in a lot of giftsand their top executives bring in pretty good
salaries. But the ratio of those two numbers varies greatly: The Salvation Army collects nearly three times as much
for every dollar paid its boss as does the United Way. Here are the countrys 10 biggest charities and how their takes
compare with their leaders. For the 50 biggest, with more data, go to www.forbes.com/charities.
DonaTions
($mil)
chariTy
1. UNITED WAY
$3,926
Boss
Dollars DonaTeD
Per Dollar oF
comPensaTion
comPensaTion
BRIAN GALLAGHER
10
$1.5 MIL
$2,607
2. SALVATION ARMY
1,885
WILLIAM A. ROBERTS
250,000
7,544
3. TASK FORCE FOR GLOBAL HEALTH
1,660
MARK ROSENBERG
320,000
5,189
4. FEEDING AMERICA
1,511
BOB AIKEN
431,000
3,506
5. CATHOLIC CHARITIES USA
1,447
REV. LARRY SNYDER
354,000
4,091
6. GOODWILL INDUSTRIES INTERNATIONAL 949
JIM GIBBONS
725,000
1,308
7. FOOD FOR THE POOR
891
ROBIN G. MAHFOOD
411,000
2,166
8. AMERICAN CANCER SOCIETY
889
JOHN R. SEFFRIN
832,000
1,068
9. YMCA
827
NEIL NICOLL
501,000
1,650
10. WORLD VISION
826
RICHARD E. STEARNS
457,000
1,809
incluDes salary, BeneFiTs, one-Time PaymenTs anD DeFerreD comPensaTion in laTesT rePorTeD Fiscal PerioD. comPensaTion may Be For PreVious ToP Person.
SOURCE: IRS FORM 990 OR STATEMENT OF INDIVIDUAL CHARITY.
musT-ReAds
the best books of 2013
THe
BRIck BY
BILLIONAIRe
BRIck
ANd THe
How LEGO
mecHANIc
Rewrote
How Larry
the Rules of
Ellison and a
Innovation
Car Mechanic
and
Teamed Up to
Conquered
Win Sailings the Global Toy
Greatest Race
Industry
by Julian
by David c.
guthrie
robertson
THe
FRAckeRs
The
Outrageous
Inside Story
of the New
Billionaire
Wildcatters
by gregory
Zuckerman
THe GReAT
escAPe
Health,
Wealth, and
the Origins of
Inequality
by angus
Deaton
HATcHING
TwITTeR
A True Story
of Money,
Power,
Friendship,
and Betrayal
by nick Bilton
THe IdeALIsT
Jefrey Sachs
and the
Quest to End
Poverty
by nina munk
I INveNTed
THe mOdeRN
AGe
The Rise of
Henry Ford
by richard
snow
ONe cLIck
Jef Bezos
and the
Rise of
Amazon.com
by richard l.
Brandt
ONe summeR
TRAdING
America, 1927
BAses
by Bill Bryson A Story About
Wall Street,
Gambling,
and Baseball
(Not
Necessarily in
That Order)
by Joe Peta
CHARITIES BY WILLIAM P. BARRETT
FORBES staf picks the years most entertaining and illuminating nonfction reads.
For more on each book see Forbes.com/books.
PhiliP lewis / BloomBerg; Bill oleary / The washingTon PosT / geTTy images; larry Busacca / geTTy images; James giBBons: John Froschauer / aP; mark lennihan / aP; larry French / aP; Paul morse / aP; ToP: mark lennihan / aP
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Credit approval required. Offered by Capital One Bank (USA), N.A. 2013 Capital One.
Special Advertising Section
THE UPPER HOUSE, HONG KONG
THE NAM HAI, VIETNAM
THE SOUND
OF SUCCESS
Traveling well is as much
about the journey as it is about
arriving at the destination.
These Forbes Travel Guide
Tastemakers know how to
travel in style. Here are their
picks for where to stay, what
to pack, what to bring home
and what to listen to when
on the road.
Presented by
GRAHAM ELLIOT
TARA BERNERD
CHEF, RESTAURATEUR
Graham Elliot | Chicago
INTERIOR DESIGNER
Tara Bernerd & Partners | London
Favorite place to travel: Los Angeles
Favorite place to travel: Hong Kong
Check into: The Peninsula Beverly Hills

I always travel with: My iPad mini
the ability to have my music, movies,
games, documents, photos and apps
all on one tiny device is awesome.
What to bring home: I enjoy grabbing
souvenirs like silly key chains or T-shirts
to bring back for friends and family.
Travel advice: Pack light and bring
just the essentials. You can always
grab stuff when you arrive.
My travel playlist: Sunny Day Real
Estate, The Get Up Kids, Jawbreaker,
Texas is the Reason, The Smiths, The
Promise Ring, Girl Talk
Check into: The Upper House

I always travel with: My iPad, a takeaway Itsu meal and a copy of Monocle.
What to bring home: Whatever I can
t in my suitcaseusually a cool cuff
bracelet.
Travel advice: Always bring your
passport, a bottle of water and a pair
of Ray-Bans, and have a great driver
in every city.
My travel playlist: The Rolling
Stones, Daft Punk, Bob Dylan
SPONSORED MESSAGE
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to take you from the boardroom to the
tarmac and everywhere in between.
These over-ear headphones deliver the
legendary Beats sound in a rened
premium package thats easier than
ever to take on the road.
LOS ANGELES
ForbesTravelGuide.com
HONG KONG
Photo credit: Hotels: The Peninsula Beverly HillsThe Peninsula Beverly Hills, The Upper House, Hong KongTheUpperHouse; The Nam Hai, VietnamGHM Hotels | Photo credit: Tastemakers:
Graham ElliotGraham Elliot, Tara BernerdAlex Lake, Spike MendelsonSpike Mendelson, Alpana SinghAnthony Tahlier
THE PENINSULA BEVERLY HILLS
Special Advertising Section
Photo credit: Destinations: Los Angelesistock_davidcrockett; Hong Kongistock_samxmeg; Vietnamistock_pirjek; Amersterdamistock_SaraWinter, istock_Klaaslingbeck
2013 The Five Star Travel Corporation. All Rights Reserved.
HOUSEBOATS, AMSTERDAM
SPIKE MENDELSOHN
ALPANA SINGH
CHEF, RESTAURATEUR
Barnaise | Washington, D.C.
SOMMELIER, RESTAURATEUR
The Boarding House | Chicago
Favorite place to travel: Vietnam
Favorite place to travel: Amsterdam

Check into: A houseboat rental
Check into: The Nam Hai

I always travel with: A Canadian ag
on my backpack.
What to bring home: SpicesI try to
bring the avors home with me.
I always travel with: My iPhoneyou

can instant message, listen to music,
search restaurants, share your trip
photos on social media, access maps
and directions, and so much more.
Travel advice: Always hang with the

locals to nd the best spots.
What to bring home: My husband and

I bring back holiday ornaments. Each
December, its fun to revisit mementos
from our past travels.
My travel playlist: J. Roddy Walston

and the Business, Bob Marley
Travel advice: Pack light and try to limit

your luggage to a carry-on.
My travel playlist: Empire of the Sun,
Passion Pit, MGMT, Foster the People,
Florence and the Machine
VIETNAM
AMSTERDAM
ForbesTravelGuide.com
$1,180
LEADERBOARD
ASK 50 bILLIONAIRES
NEw bILLIONAIRES
ThE hOLIDAY SPIRIT
GEOSOUThERN ENERGYS
GEORGE h. BIShOP
What is your favorite drink?

11.1% OTHER COCKTAIL
2.2% MARTINI
22.2%
I DONT
DRINK
53.3%
WINE
4.4% BEER
6.7% WHISKEY/SCOTCH
resPonses To an anonyMous Poll oF
50 MeMbers oF THe Forbes worlds bIllIonaIres lIsT.
UP-AND-COMERS
APPETITE FOR INNOVATION

These entrepreneurs are profting by
bringing creative eating experiences to
our homes, schools and even helipads.
Brian Bordainick DINNER LAb
bordainick, 28, launched his dinner club last year as

a way to connect undiscovered chefs with adventurous diners. He now works with 80 chefs in cities
from los angeles to new york, presenting meals in
exotic locations such as a motorcycle dealership and
a helipad. He charges $175 a year for memberships and $40 to $100
or more per meal. His 2013 revenues: $2.4 million.
Michael and Nicky Bronner UNREAL
after his father, Michael, 54, confscated his Halloween loot three years ago, nicky bronner, now 16, set
out to learn what makes candy so unhealthy. what
followed was an odyssey that led the bronners to
adam Melonas, an australian chef who agreed to try
to replicate beloved american candies without the artifcial ingredients.
Their team has raised a sweet $14 million in private equity funding.
Kirsten Saenz Tobey and Kristin

Groos Richmond REVOLUTION FOODS
The two mothers, 35 and 38, founded their company to

make nutritious, afordable meals available to schoolchildren. now their meal kits are in stores such as whole
Foods and safeway, and they serve a million meals a
week to K12 students. Theyve raised millions in funding and count Judy
Palfrey, director of the white Houses lets Move initiative, as a supporter.
The oil tycoon long stayed

below the radaruntil late
November, when Devon
Energy agreed to buy the
Texas oilfelds GeoSouthern operates for $6 billion.
Of that, $1.5 billion will
likely go to Blackstone,
which has fnanced drilling, and the rest straight to
Bishop, 77, who founded
GeoSouthern in 1981 and is
believed to own it outright.
If estimates of the companys total oil output are
accurate, the Devon deal
claimed less than half its
assets, and Bishops fortune could be as much as
$4 billion even after debt
payments and taxes.
GALERIES LAFAYETTES
GINETTE MOULIN
The 86-year-old grande dame of French retail
and her family are worth $3 billion thanks to
their ownership of Groupe Galeries Lafayette,
the upscale department store chain founded by
her grandfather in 1893.
ESTEE LAUDERS
JANE LAUDER
The granddaughter of cosmetics mogul Este
Lauder and daughter of billionaire Ron Lauder
joins the ranks of billionaires after a massive
stock transfer. She, 40, and her sister, Aerin, 43,
both sit on the board of Este Lauder.
LONGChAMPS
PhILIPPE CASSEGRAIN
The French handbag company, founded in 1948,
has had sales growth of nearly 75% since 2009,
hitting $600 million last year. Philippe, the
founders son, runs Longchamp; he and his three
children own it all.
up-and-comers BY kathrYn dill

bronners: Jason Grow; rIGHT FroM boTToM: berTrand rIndoFF PeTroFF / GeTTy IMaGes; evan aGosTInI / aP; dIMITrIos KaMbourIs / GeTTy IMaGes; Glenn rea / THe Cuero reCord
Cost of the priciest Kate Moss-designed

Longchamp handbag, an airline-friendly
travel satchel that comes in three colors.
We create
chemistry
that makes
wow love
why
Do you know kids most popular reaction to chemistry?

Its Wow! One simple word with great scientic experience
behind it. Weve heard it many times, in more than 30
countries, at BASF Kids Lab. For one day, kids become
scientists. They experiment in a playful manner and learn
why and how the worlds marvels work. Because we believe
that one day these kids will wow us in return.
When science can be seen as a foundation of wonder,
its because at BASF, we create chemistry.
www.wecreatechemistry.com
LEADERBOARD
$1.25 BILLION
Amount Paul Tudor Jones Robin Hood Foundation

has donated to combat poverty in
New York City since its 1988 founding.
active conversation
BILL GATES AND BONO,
PHILANTHROPY DUO
@AFRIHOST
Bill Gates and Bono may be an

unlikely dynamic duo, but two
of the worlds most infuential
people can do a lot of good.
@GOGLOBALFOOD
Interesting that Bono admits

capitalism is the basis to
defeat poverty not government handouts.
EDUCATING THE EDUCATORS
E-SPORTS
FORBES, DECEMBER 2, 2013
@DENNISTONDK
22,111 VIEWS ON FORBES.COM
40,860 VIEWS ON FORBES.COM
After a quarter-century fghting poverty through his Robin

Hood Foundation, hedge fund billionaire Paul Tudor
Jones decided it all wasnt nearly enough; now he must do
no less than transform American public education. Monte
Burkes profle quotes Jones comparing his mission to
John F. Kennedys drive to put a man on the moon: We
are losing the space race. This time the space is between
our kids ears. Commenter Gurdeep Singh Bariana was
mightily impressed: This is a great efort, which will
enhance education for Americans and change the outlook of Americans in the future. But others disagreed.
Guybo211 complained, Here we go again, putting the
cart before the horse, improving education as a cure
for poverty. Leveling the playing feld of educational
opportunity requires frst that we make a very real attempt to level our very uneven society. Daryl Fletcher
added, Let us begin with educations foundation, a
mother and a father. Without money or wealth, a parent can infuence an education more than any other
person. Goatrope asked, How successful has the Robin
Hood Foundation been at combating poverty in New
York? After 25 years ... I still have not seen many meaningful metrics demonstrating that the charity has been
successful. Innovation only comes from the resultsoriented free market, not the public sphere, insisted
Wendy, to which another commenter responded, Oh,
really! The results-oriented free market produced so
much innovation that it collapsed in 1929 and came near
to it several times thereafter. I for one would never
trust the market with the education of my children.
And Lou concluded, Better idea: Get noneducators out
of the education business. Build policies only with
massive educator input.
David M. Ewalt described

how a website called
Twitch is turning videogaming into a big-money
spectator sport. Commenter Clayton Erickson
found it hard to believe:
E-sports will always
remain a niche market
because as one game falls
from the throne, there
will be hundreds vying
for its place. Fellow commenter Jacob countered,
Thats why Twitch is a
platform for all games,
not a marketing channel
for one game, and added,
Hulu pays for content
using an antiquated
model, where Twitch
facilitates user-generated content and treats
creators like partners.
EngSci ETC praised the
charity side of Twitch,
like the biannual marathons that have raised
in the range of a million dollars over the last
few years for infuential
charities like Doctors
Without Borders.
Entrepreneurial capitalism
causes entrepreneurial philanthropy. Nice!
LIFTING UP LIBERIA
@MSjENNAHSCOTT
Yep! Thats our amazing

president [Liberias Ellen
Johnson Sirleaf ] encouraging
billionaires to support
@LIBPhilanthropy.
@NICK_ZEN
How about helping the

30 million poor people
here. Or is it more fun to fy
around the world?
PANDORAS BATTLE OVER
ROYALTIES
@KjPIXELATED
Im loving iTunes Radio on

my iPhone, guiltily, as Pandora led me to this streaming music experience.
fAvORITE
TwEET
@williecolon (salsa star):

Every morning, I get
up and look through the
FORBES list of the richest
people in America. If
Im not there, I go to
work.
top: AmAndA Gordon / BloomBerG
FORBES, DECEMBER 2, 2013
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Move into a New World
thought leaders
lee KuaN YeW CurreNt eVeNts
sihanouk
a lead player in many roles
Norodom SihaNouk, born Oct.
31, 1922, was a charismatic fgure in
Cambodian politics. In many ways
he was larger than life: He took six
wives and concubines and fathered
at least 14 children in 11 years; he was
fascinated with flms and became a
flm director, producer, cameraman
and actor; and he played the saxophone well. The French plucked him
from down the line of succession and
put him on Cambodias throne in 1941,
mistakenly thinking he would be easy
to control. But the young king agitated
for Cambodias independence, eventually gaining the support of the U.S.,
Canada and Japan, among others.
France fnally relented, granting Cambodia independence on Nov. 9, 1953.
In 1955 Sihanouk abdicated in
favor of his father so he could enter
politics and become prime minister. When his father died in 1960,
Sihanouk again became head of state,
with the title of prince.
I met Norodom Sihanouk when I
visited Phnom Penh in 1967, and later
I twice visited Angkor Wat in Siem
Reap, where the ruins bear witness to
a once great civilization. Both times he
generously requested that I use his residence at Siem Reap as my base, with all
the residences services at my disposal.
In 1965 Sihanouk made a pact
with China and North Vietnam that
allowed North Vietnam to establish
bases in Cambodia and China to send
military supplies to Vietnam through
Cambodias ports. This, combined
with the severe political repression
unleashed in 196667, set the stage
for civil war. In 1970, when Sihanouk
was on a visit to Moscow, General
Lon Nol staged a successful coup.

Sihanouk sought refuge in China and
set up a government-in-exile. Lon
Nol, however, was unable to stop the
North Vietnamese from using Cambodian territory to infltrate and attack South Vietnam. This caused U.S.
forces, in defense of South Vietnam,
to regularly bomb the border.
EnEmiEs within & without

In 1975 the Khmer Rouge, whose goal
was to demolish Cambodian society
and rebuild it from scratch, overthrew
Lon Nol. The Khmer Rouge leader,
Pol Pot, in his ideological madness,
destroyed the Cambodian intelligentsia and killed more than 1 million
people in what came to be known as
the killing felds. Ieng Sary, Khmer
Rouge foreign minister of Democratic
Kampuchea, came to Singapore and
explained that they were going to build
a new society, one not corrupted or
infuenced by French colonialism.
Once the Khmer Rouge took over,
Prince Sihanouk returned to Cambodia as the symbolic head of state. But
it wasnt long before he was placed
under house arrest. During this time
many members of the Sihanouk family were killed or deported.

Following the Vietnam War, North
Vietnam signed a mutual defense
pact with the Soviet Union, hoping it
would be protected when it embarked
on the annexation of Cambodia and
Laos. Deng Xiaoping, Chinas supreme
leader, wasnt about to let this happen.
He visited Bangkok, Kuala Lumpur
and Singapore and in November 1978
told me to expect a response from
China if Vietnam embarked on such an
invasion. He said China didnt want a
Soviet Cuba in Southeast Asia. When
the Vietnamese invaded Cambodia
that December and seized control
of Phnom Penh in early 1979, China
crushed and punished the provinces
of North Vietnam just across its border
and put paid to their wider ambitions.
Sihanouk was sent by the Khmer
Rouge to speak at the UN in its
defense and against the Vietnamese
invasion. But while in New York he
planned his escape, feeing after his
UN speech and seeking refuge in
China and North Korea.
In 1993, following UN-sponsored
elections, Cambodias National Assembly voted to restore the monarchy, and
Sihanouk was reinstated as king. But
in October 2004, citing poor health,
Sihanouk abdicated. The government
proclaimed him His Majesty the KingFather of Cambodia. He lived the rest
of his life in Pyongyang and Beijing,
returning to Phnom Penh to celebrate
his 89th birthday with a last public
appearance in October 2011.
Sihanouk died 16 days shy of 90,
having spent most of his life in service to his country and people. F
Lee Kuan Yew, FORMER pRiME MiniStER OF SingapORE; DaviD MaLpass, glOBal ECOnOMiSt, pRESiDEnt OF EnCiMa glOBal llC;
aMitY shLaes, DiRECtOR, thE 4% gROwth pROjECt; anD pauL Johnson, EMinEnt BRitiSh hiStORian anD authOR,
ROtatE in wRiting thiS COluMn. tO SEE paSt CuRREnt EvEntS COluMnS, viSit OuR wEBSitE at www.forbes.coM/currentevents.
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thought leaders
rICh Karlgaard INNoVatIoN rules
smarts in business
is not about iQ
When academics use the word
smarts, they usually mean general
intelligence, or g for short. This is
the ability to learn, think and apply.
For decades scientists have sought
to measure g by using IQ and similar
cognitive tests.
But smarts is something diferent
in the real world. It isnt defned by
800 math SATs. Its more about the
importance of hard work, perseverance and resilience. Call it grit. Call
it courage. Call it tenacity. Because
these are old-fashioned concepts,
theyre easy to miss.
In business the questions are: Who
can get things done? Who can achieve,
endure and succeed? The oil wildcatter
in North Dakota or the top insurance
salesman in Kansas City may not be a
mathematical genius like Googles Sergey Brin, but theyre both wily, clever
and capable. Theyll survive good times
and bad. Theyll adapt to changing
markets and win more than they lose.
While discussing smarts, CEO Tom
Georgens of NetApp, the $6.3 billion
data storage company, made a very
interesting observation: I know
this irritates a lot of people, but once
someone is at a certain point in his
or her careerand its not that far
out, maybe fve yearsall the grades
and academic credentials in the
world dont mean anything anymore.
Its all about accomplishment from
that point on. About his own hires,
Georgens ofered, I dont even know
where some members of my staf
went to college or what they studied.
To him and other CEOs, at a certain
point it just doesnt matter anymore.
Taking the idea in a more entrepreneurial direction, Greg Becker,
CEO of Silicon Valley Bank, told me,
smarter. This happens because grit

results in an increased ability to learn
more and adapt faster.
grit creates smarts
Some of the better venture capital

frms that I know want people who
are scrappy, who have been through
trials and tribulations. These people
will fgure out a way to make it work,
no matter what.
Maynard Webb, chairman of Yahoos board of directors and a board
member of Salesforce.com, added,
What Im looking for is talent. But
talent isnt just intellect. Talent is
also what youve done. If youre
an entrepreneur trying to break
through, its hard work. You have to
be tough, you have to be willing to
take lots of body blows. So Im looking for that grit factor.
This should be good news for most
of us. Were not limited or defned
by the IQ weve inherited. Much
of what makes us real-world smart
comes from what weve learned
usually the hard way. Academics will
say those things dont technically defne smarts. Fair enough. Efort and
tenacity dont directly align with the
scientifc defnition of intelligence.
But before dismissing this columns
defnition of smarts, let me show you
how grit leads directly to becoming
From the prenatal period to the end

of our lives what shapes the neural
circuits underlying our behavior is
experience. This can include such
uncontrollable infuences as adversity,
as well as such intentional infuences
as learning and training. The human
brain displays amazing plasticitythe
ability to modify neural connectivity
and functioneven into our 70s.
The smartest people in business
are not those who have the highest
g; they are those who regularly put
themselves in situations requiring
grit. These acts of courage accelerate
learning through adaptation.
For example, salespeople who make
more calls will almost always outperform salespeople who make fewer
calls. Thats no surprise, but heres the
key point: This doesnt happen just
because the act of making more calls
mathematically raises the chances of
success. Theres much more to it. By
facing up to the task of making a call,
frequent callers put themselves on a
faster learning curve. They discover
more rapidly what works and what
doesnt. Theyre quicker to learn
techniques that overcome rejection.
Thus, their success yield will improvei.e., double the calls, triple the
sales. The act of making lots of calls
also helps a person learn self-discipline and understand the rewards of
delayed gratifcation.
In the real world its grit that
makes us smart. F
Rich KaRlgaaRd iS thE puBliShER at FORBES. FOR hiS paSt COluMnS anD
BlOgS viSit OuR wEBSitE at www.FORBES.COM/kaRlgaaRD.
Promotion // PhilanthroPy
American Red Cross:

A Season of Giving Gets New Meaning
By Susan Burnell
tories about disasters and emergencies move people to give to the American Red Cross. A family is
housed after a fre. Survivors get help following a
hurricane or tornado. Patients receive lifesaving blood.
These are just some of the services that the Red Cross
offers. The Red Cross is working to show donors that their
donations have far greater impact than they may realize.
Our donors need to hear how their support makes a difference in peoples lives after disasters and in many other
ways, says Neal Litvack, Chief Development Offcer of the
Red Cross. For example, one donation of blood can help
save up to three lives. The Red Cross collects and distributes
about 40 percent of the nations blood. Donations help us train
people in CPR, frst aid, babysitting and aquatics safety, and
lives are saved as a result of that training.
The Red Cross launched its campaign, Give Something
That Means Something, in 2011. Last year, monetary donations to the Red Cross during the holiday season were up by
about 33 percent. We believe that weve tapped into something very meaningful, Litvack says. Particularly during the
holiday season, people feel a need to think differently about
how theyre giving gifts.
This year, the organization is expanding its holiday card

program for military members and their families. Receiving a
handwritten note on a card really means something to service
members who are unable to be with their families during the
holidays. Last year, we collected 1.8 million holiday cards for
U.S. troops and their families, says Litvack. This year, were
incorporating social media. People can make a video greeting card, then post it to Instagram or Vine with the hashtag
#HolidayMail. Those greetings will go up on our Red Cross
blog so that any hospital, military base or veterans center can
easily share the stream of videos with the military community.
The Red Cross also seeks ongoing and reliable giving through
its Annual Disaster Giving Program (ADGP) for corporate donors.
Corporations have rallied around this program by committing to
help the Red Cross prepare for and respond to disasters through
an annual gift instead of giving episodically or after a disaster.
The program has grown signifcantly, and 78 corporations now
donate $500,000 or more annually as ADGP members. Last
year, the program maintained a 94 percent retention rate.
Financial contributions are just one piece of the deep partnerships that the Red Cross has with corporations, explains Litvack.
About a quarter of our corporate donors also host blood drives
for us. They purchase Red Cross CPR and frst-aid courses so
that their employees know how to respond to emergencies at
home or at work. Some corporations also help through programs
in which they compensate employees for time spent volunteering
for the Red Cross and other organizations.
Corporations can also offer the Red Cross their ideas and
expertise. Loaned executives, for example, will help on an
IT project or lend their expertise to help our organization run
more effectively, says Litvack.
The Red Cross works hard to make every donation count.
On average, 91 cents out of every dollar we spend is invested
in our humanitarian services and programs, says Litvack.
We work to ensure effcient use of resourcesboth paid and
volunteerand use our size and scale to make the most of
every dollar our donors entrust with us.
Committed corporate partners are instrumental in helping
the Red Cross deliver our mission, Litvack says.
About Our Holiday Partners

The American Red Cross is grateful for the support of our corporate partners that
generously contribute to our Holiday Giving Campaign. They include: Circle K and its
customers in the West and Florida divisions; Community Safety Foundation, funded
by CSAA Insurance Group, a AAA Insurer; Mazda and its dealers nationwide; and
University of Phoenix. Thanks to the generosity of these and other sponsors, the Red
Cross is able to carry out its mission of helping people prevent, prepare for and respond
to emergencies every day here and around the world. Each holiday season the Red
Cross gives everyone the chance to support our work by giving blood, signing a card
for military heroes or buying a gift through our holiday catalog.
The rst 50 readers to donate

at least $100 to the Red Cross
through www.redcross.org/forbes
between November 30, 2013, and
December 31, 2013, will receive an
iPad cover from Forbes.*
*Receipt of an iPad Cover may reduce the amount of a
donors tax deduction for the donated amount.
Your gift of any size will support the lifesaving mission
of the American Red Cross, whether its responding to
a disaster, collecting lifesaving blood, teaching skills
that can save a life, or assisting our military members
and their families.
On a cold morning, the Red Cross

was there for Angelina and her family
with shoes, warm clothes and shelter.
Every 9 minutes, we help a family
after a home fire.
Donate at redcross.org/forbes
Thanks to the generous support of
Funded by CSAA Insurance Group, a AAA Insurer
thought leaders
Mark skousen CaPItal FloWs
A NEW WAY
To Measure The econoMy
consumer spendingthe largest single

driver of the U.S. economy.
Or take this statement in the New
York Times in 2011 during the economic
recovery: Fridays estimates of secondquarter gross domestic product [1.3%,
well below consensus forecasts] provided a sobering look at how a decline
in public spending and investment can
restrain growth. The astonishingly
is substantially bigger, representing over 50% of economic activity.

Thats more consistent with economic
growth theory, which emphasizes
productive saving and investment in
technology on the producer side. Consumer spending is largely the efect,
not the cause, of prosperity.
Second, GO is signifcantly more
sensitive to the business cycle than GDP.
During the 2008-09 Great Recession
nominal GDP fell only 2% (owing largely
to countercyclical increases in government spending), but GO collapsed by
over 7% and intermediate inputs by 10%.
Since 2009 nominal GDP has increased
3% to 4% a year, but GO has climbed
over 5% a year.
I believe that gross output flls in a
big piece of the macroeconomic puzzle.
It establishes the proper balance between production and consumption,
i.e., between the make and the use
consuMer spending is largely The

eFFecT, noT The cause, oF prosperiTy
slow growth rate from April through
June was due in large part to sluggish
consumer spending and an increase in
imports, which subtract from growth
numbers. But dwindling government
spending also held back growth.
Gross output exposes these misconceptions. First, gross output provides
a more accurate picture of what drives
the economy. Using GO as a more
comprehensive measure of economic
activity, spending by consumers turns
out to represent around 40% of the
economy, not 70%, as commonly reported. Spending by business (private
investment plus intermediate inputs)
economy, and it is more consistent with

growth theory. As Steve Landefeld,
director of the BEA, and coeditors Dale
Jorgenson and William Nordhaus state
in their work, A New Architecture for
the U.S. Economic Accounts (University
of Chicago Press, 2006), Gross output
[GO] is the natural measure of the production sector, while net output [GDP]
is appropriate as a measure of welfare.
Both are required in a complete system
of accounts.
When the BEA releases its GDP
estimates next spring, be on the lookout
for an even more vital statisticgross
output. F
Mark SkouSen iS EDitOR OF Forecasts & strategies anD will BE a PRESiDEntial FEllOw at ChaPMan UnivERSity in 2014. hE iS thE aUthOR OF the structure
oF Production (nEw yORk UnivERSity PRESS, REviSED 2007), whiCh intRODUCED thE COnCEPt OF GROSS OUtPUt aS an ESSEntial MaCROECOnOMiC tOOl.
50 | FORBES
DECEMBER 16, 2013
thomas kuhlenbeck
Starting in Spring 2014 the U.S.

Bureau of Economic Analysis at the
Commerce Department will release a
breakthrough new economic statistic
on a quarterly basis. Its called gross
output (GO), a measure of total sales
volume at all stages of production. GO
is almost twice the size of GDP, the
standard yardstick for measuring total
goods and services the nation has produced in a year.
Starting with my work The Structure of Production in 1990, I have made
the case that we needed a new statistic
beyond GDP that measures spending throughout the entire production
process, not just fnal output. Based on
my research, GO is a better indicator of
the business cycle and more consistent
with economic growth theory.
While GDP is a good measure of
national economic performance, it has
a major faw: In limiting itself to fnal
output, GDP downplays the make
economy, that is, the supply chain needed to produce all those fnished goods
and services.
This narrow focus on GDP has
created much mischief in the media,
government policy and boardroom
decision making. For example, journalists are constantly overemphasizing
consumer and government spending as
the driving force behind the economy,
rather than saving, business investment
and technological advances.
Since consumer spending represents
70% or more of GDP, followed by 20%
by government, the media naively conclude that any slowdown in retail sales
or government stimulus is necessarily
bad for the economy. For instance, the
Wall Street Journal stated a few years
ago, The housing bust has chilled
Who insures you doesnt matter. Until it does.
Financial Strength and Exceptional Claim Service

Property | Liability | Executive Protection | Workers Compensation | Marine | Surety
Homeowners | Auto | Yacht | Jewelry | Antiques | Accident & Health
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For a list of these subsidiaries, please visit our website at www.chubb.com. Actual coverage is subject to the language of the policies as issued.
Chubb, Box 1615, Warren, NJ 07061-1615. 2012 Chubb & Son, a division of Federal Insurance Company.
strategies
Biggest Private ComPanies
Home Despot
John Menard makes all the
rulesand the billionsat his
midwestern hardware empire.
By Erin CarlylE
52 | FORBES DEcEmBER 16, 2013
Thats largely due to the visionand

authoritarian managementof 73-year-old
founder John Menard Jr., Wisconsins richest person (net worth: $7.5 billion, No. 57 on
the latest Forbes 400). If our annual list of
Americas Biggest Private Companies had a
poster child, Menard, who owns 89% of the
company, would be the guy.
While Menard tells FORBES that family
members now run the company along with
some very competent and longtime professional management, insiders say he still
oversees even the smallest details, from the
material for store parking lots to answering company mail. Hes never felt much pull
to take his kingdom public. We feel staying
private is the right decision for our situation,
he says.
Thats understandable. Menards throwback style would be a rough ft for a public
company. Everyoneincluding executives
is supposed to punch a time clock. Store
managers are paid hourly but can make six
at his command: We
feel staying private is
the right decision
for our situation,
Menard says.
Joe Robbins / Getty imaGes foR nasCaR
our months before December a

blue-shirted Menards employee
at the hardware retailers fagship
store in Eau Claire, Wis. surveys
a display of artifcial Christmas
trees. A 7.5-foot spruce dolled up in faux
snow towers over him as he takes a customer
call. Of course we sell safety goggles! This is
Menards! We sell everything from diapers to
deodorant, he says.
And all at low prices, without feeling like
a bargain-basement explosion. This is the
formula: bright clean foors, neatly arranged
product selection, employees who are knowledgeable and eager to help. The $7.9 billion
(estimated 2012 sales) retailerthe largest
private do-it-yourself chain in the nation, in
sales behind only publicly traded $74.8 billion
Home Depot and $50.5 billion Loweswas
ranked the most customer-centric retailer
among the competition by research frm
Dunnhumby and may just be the best hardware store in the country.
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strategies Biggest Private ComPanies
The Top 50 Private Companies

dell and Heinz join our rankings as Hilton, aramark
and bi-lo Holdings prepare to go public and depart.
1 (2012 rank: 1) Cargill

Food & drink
Revenue:
$136.7 billion
Tops the list for the sixth year in a row.
2 (2) Koch Industries
MultiCoMpany
$115.0 billion
3 (-) Dell
tEChnology hardWarE & Equip
$56.9 billion
After a brutal fght with

activist investor Carl Icahn,
Michael Dell and private
equity frm Silver Lake Partners completed $25 billion
buyout in October. First company to
debut in top ten since Chrysler in 2007.
4 (4) Bechtel
ConstruCtion
$37.9 billion
5 (3) Mars
Food & drink
$33.0 billion
6 (5) PricewaterhouseCoopers
BusinEss sErviCEs & suppliEs
$32.1 billion
7 (6) Pilot Flying J
ConvEniEnCE storEs & gas stations
$30.4 billion
8 (7) Publix Super Markets

Food MarkEts
$27.5 billion
Largest employee-owned company in
the U.S. is gearing up for a fght over
market share as Wal-Mart continues to
expand in southern Florida.
9 (9) Loves Travel Stops

& Country Stores
$26.1 billion
10 (8) Ernst & Young
$25.8 billion
11 (14) Reyes Holdings

Food & drink
$22.0 billion
12 (10) C&S Wholesale Grocers

Food & drink
$21.7 billion
1
13 (11) US Foods
Food & drink
$20.8 billion
1
14 (12) HE Butt Grocery Co.

Food MarkEts
$20.0 billion
15 (20) Enterprise Holdings
sErviCEs
$16.4 billion
16 (17) TransMontaigne
oil & gas opErations
$16.0 billion
1
17 (16) Cox Enterprises

MEdia
$15.3 billion
In January canceled $300 mil IPO of
AutoTrader, citing market conditions.
18 (30) Cumberland Farms
$15.0 billion
19 (15) Meijer
Food MarkEts
$15.0 billion
1
20 (19) Aramark
$13.9 billion (preparing ipo)

1
21 (18) Toys R Us
rEtailing
$13.5 billion
Plans to open 100 stores in 21 countries.
22 (22) Performance Food Group

Food & drink
$12.8 billion
23 (21) Fidelity Investments
divErsiFiEd FinanCials
$12.6 billion
24 (24) Transammonia
trading CoMpaniEs
$12.2 billion
tony avelaR / bloombeRG
fgures with annual bonuses tied to performance. Managers must adhere to orders from
corporate on everything from where to place
merchandise to which product to use to clean
store foors. A feet of company inspectors
fies out from Eau Claire to make sure stores
toe the line, and Menard personally reads the
reports. Managers who miss the mark get
slapped with fnes. John at his core is driven
on results, says Tony Misura, a former Menards manager. There are his objectives and
his values, the way he perceives them, and
there are no other rules other than results.
Last year the retailer paid an undisclosed
settlement to a 40-year veteran who claimed
age discrimination after he turned 60 and
was abruptly dismissed. A similar case involving a 34-year veteran is still open. The
company continues to fght a former Menards attorney (the founders ex-girlfriends
sister) who won $1.65 million after claiming
gender discrimination and wrongful termination. And last year Menards agreed to pay
$1 million in a class
action launched by
John at his
core is driven African-Americans
claiming they were
on results.
systematically denied
There are his promotions. Keep
Your Mouth Shut
objectives
any confdential
and his values about
company business,
...and there
reads a 200102 emare no other
ployee contract.
His bootstrap backrules, other
ground explains a lot.
than results. Menard is the eldest
of eight kids from
Eau Claire. We moved to a farm when I was 5
years old, and I grew up there, he says. Farm
life is hard but a great atmosphere to grow
up in. He started out building agricultural
structures in the area surrounding his hometown while he was a student at the University
of Wisconsin-Eau Claire. He incorporated his
business in 1962, the year after North Carolina-based Lowes went public. By the time he
graduated in 1963 (with majors in math and
business and a minor in psychology), he was
making as much as IBM ofered him to join up,
so he passed on a job to build his own business.
Menard began selling lumber left over
from his building projects on Saturdays,
when regular lumberyards were closed. He
Promotion // investing in gold
Despite Buffeting,
Gold Retains Its Unique
Investment Value
By Michael Roney
Competing economic crosswinds have buffeted the gold market over this past year, with
prices ranging from $1,199 to $1,748 an ounce. Still, this most unique of asset classes
remainsperhaps now more than everthe one portfolio element that can be relied upon
for stability and diversifcation, with a dependable long-term return.
or now were going to see gold prices potentially be driven more by monetary policy
and the political environment, says David
Mazza, vice president of State Street Global
Advisors (SSgA) and head of the frms ETF
Investment Strategy for the Americas. However, it
is being set up for potentially more positive performance, while its unique role as a valuable diversifcation element continues.
Uncertainty and Potential Shaping

The Gold Market
The U.S. economy is gradually improving and interest rates are expected to rise, exerting downward
pressure on gold prices. Yet, at the same time, ongoing debt-ceiling and budgeting issues continue to fuel
uncertainty. The largest driver for gold remains supply and demand in the jewelry and industrial markets,
against rather fat production of late. Were entering
a holiday season where jewelry demand is strongest,
particularly in markets like India and China, and historically that accounts for roughly two-thirds of gold
demand, Mazza notes.
He points out that two years ago gold was $500
higher per ounce during this same season. Because
that recent speculative activity now seems to have
been shaken out of golds priceit has overshot both
the upside and downside and is now in the $1,300
InvestIng In gold // promotIon
to $1,400 rangethat puts it in a more

positive position from a long-term fundamentals basis, which really has the
potential to start kicking into play today.
A Unique Asset Class

Gold offers a number of potential benefts
to investors, including an effective hedge
against infation, dollar depreciation and
stock market volatility. In our opinion,
gold is both an investment and fnancial
asset, says Mazza. Its not only taken
out of the ground for industrial or technological use like other commodities, but
intraday liquidity and excellent insight

into real-time price, volume, supply and
demand. This allows investors to rebalance their portfolios to their strategic
viewpoints, or take advantage of shortterm market opportunities as they arise.
Today GLD holds over 800 tons of gold
worth approximately US$37 billion in its
London warehouse.
At 40 basis points, GLD is relatively
less expensive than what it would cost to
store and secure other gold investments,
and transaction costs are negligible to
investors, Mazza explains. This gives
golds volatility is somewhere in between the

bond market and equities, so when added
to a riskier portfolio, it can reduce volatility
over the long run.
David Mazza,
vice president and Head of etF Investment strategy at ssgA
also used as a long-term investmentnot
just by individuals, but by central banks
that look at gold relative to other currencies. Those factors, along with its singular
supply-and-demand characteristics, give
gold unique risk-and-return profles that
are not correlated to traditional assets like
stocks and bonds, providing real strategic value for diversifcation.
That lack of correlation makes gold less
subject to some of the buffeting that may
hit other parts of the market. Mazza notes
that when gold is held as 2% to 10% of
a portfolio, depending upon an investors
particular holdings and goals, it tends to
lead to more favorable returns and reduced
volatility. Golds volatility is somewhere in
between the bond market and equities,
so when added to a riskier portfolio, it can
reduce volatility over the long run.
The Gold ETF Advantage

Investors can buy and store gold in bars
and coins, but the ETF has unique benefts. State Streets own SPDR Gold
Shares (GLD) and other gold-backed
ETFs are traded on an exchange just like
any other individual security, providing
A GROWING
NUMBER OF
INVESTORS ARE
RECOGNIZING
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pay as the difference between your bid
and your offersomething that can be
less transparent when dealing with gold
bullion dealers.
Lessons Learned
Golds signifcant run-up over the past
few years drew many who thought that
its only role would be to outperform traditional assets like stocks and bonds.
However, todays informed investor fully
recognizes that theres still nothing like
gold for diversifcation and a long-term
hedge against infation.
The main lesson we gained from
the global fnancial crisis is that capital
preservation and risk management are
of particular importance going forward,
Mazza states. With a gold ETF, investors can think about what allocation is
most integral for the long term, and then,
when they tactically want to take advantage of market opportunities or dislocations, they can do that.
www.spdrgoldshares.com
www.spdrs.com
*SSgA, as of 9/30/2013.
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strategies Biggest Private ComPanies
25 (23) Platinum Equity
39 (36) RaceTrac Petroleum
$12.0 billion
$9.1 billion
MultiCoMpany
1
26 (-) H. J. Heinz
40 (40) Wawa
$11.5 billion
$9.0 billion
Food & drink
Berkshire Hathaway took private in

June in deal valued at $28b with debt.
27 (37) JM Family Enterprises

ConsuMEr duraBlEs
41 (54) Mansfield Oil

$8.0 billion
$11.5 billion
42 (45) Bloomberg
28 (25) Amway
$7.9 billion
housEhold & pErsonal produCts
30 (26) QuikTrip
Founder Michael Bloomberg says he wont return

to running his fnancial
information frm when
his third term as mayor
of New York City ends in
January. Revenues increased only 4% to
$7.9 billion, due to decrease in new subscriptions to the Bloomberg terminal.
$11.2 billion
43 (56) Menards
31 (27) First Data
$7.9 billion
$10.7 billion
44 (47) McKinsey & Co.
32 (32) Southern Wine & Spirits
$7.8 billion
$10.5 billion
45 (43) Sinclair Oil
33 (29) Giant Eagle
$7.7 billion
$11.3 billion
29 (28) Kiewit Corp.

ConstruCtion
$11.2 billion
Food & drink
Food MarkEts
$9.9 billion
34 (39) Gordon Food Service

Food & drink
rEtailing
1

1

1
Sinclair Oils billionaire owner, Robert Earl Holding, died in April. Son
Stephen likely next CEO of holding
company.
$9.8 billion
46 (49) Hy-Vee
35 (33) Bi-Lo Holdings
$7.6 billion
47 (35) Tenaska Energy
36 (34) SC Johnson & Son
$7.2 billion
$9.6 billion
48 (57) Lansing Trade Group
In October CEO Fisk Johnson announced a worldwide restructuring.
$7.2 billion
Food MarkEts
housEhold & pErsonal produCts

1
Food MarkEts
1
MultiCoMpany
37 (41) Allegis Group
49 (42) Momentive Performance

Materials Holdings
$9.5 billion
ChEMiCals
38 (38) Hilton Worldwide

hotEls, rEstaurants & lEisurE

estimateD.
11
$7.1 billion
50 (51) Capital Group Cos.
divErsiFiEd FinanCials
$7.0 billion
1
ChaRles sykes / invision / aP
bought property with a railway spur and

began buying directly from lumber carts rolling in from the West Coast. Eventually he
augmented his inventory with shingles
and nails, opening his frst retail store in
Eau Claire in 196414 years before Bernie
Marcus and Arthur Blank founded Home
Depot. By the early 1990s Menards had 78
store locations, and its founder stopped
building sheds and focused entirely on retail.
Menards was the frst DIY retailer to use a
hub-and-spoke distribution system, sending
out trucks from Eau Claire. As Depot grew
and Lowes grew, I dont know if they copied
the Wal-Mart plan or the Menards plan, because he certainly was doing it before they
were, says retail consultant John Cashmore.
The company saved money by pressure-treating its own lumber and eventually added an
entire manufacturing division: plants dedicated to prehung doors, truss manufacturing,
steel roll forming, and nail and board packaging. In the summers he chopped up pallets
and resold them as mulch; in Wisconsins
cold winters he packed old, broken-down
pallets into furnaces to heat the buildings at
his companys corporate headquarters. He
never wasted an inch of lumber, says former
Home Channel News editor Gary Ruderman.
The billionaires thrift also shaped the
companys growth pattern. Rather than race
through the 1990s gobbling up smaller, collapsing players, as did Depot and Lowes,
Menards mostly expanded organically, fnancing growth through the companys own
cash pile. Between 1990 and 1998 the company nearly doubled its number of stores; Home
Depot increased its stores fve times over in
the same period to 761. Today Home Depot
has 2,260 stores in the U.S., Canada, and Mexico. Menards is still regional: 279 stores in 14
states across the Midwest and Wyoming.
And while he may not be easy to work for,
Menards control-freak, cost-saving ways do
well by shoppers. Cashmore, the retail consultant, once compared Menards prices to
rivals and found them lower on every single
itemoften by one penny. Being private
has many advantages, says Anne Brouwer
of McMillan Doolittle. He doesnt have the
level of scrutiny or oversight to have to worry
about. He can kind of run it the way he wants
to run it.
Its good to be the king. F
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sTraTegies
merchandising
Duck (Dynasty) Season

How the Robertsons stole Christmas.
By Clare OCOnnOr
Camo Christmas: Duck

Dynastys robertson
clan will be everywhere
this holiday season.
in the name of commerce, Willie

Robertson has been turned into a Chia Pet, a
bobblehead and a garden gnome. Come this
Christmas season Robertson and his family, the bayou-based cast of A&Es reality
megahit, Duck Dynasty, will be something
more: an inescapable cyclone of gear, greeting cards, clotheseven a holiday album.
Ive just been surprised at the enormity of
it, says 41-year-old family fgurehead Willie. The nature of the show causes people to
buy into it.
For legions of devoted viewers11.8 million
for Augusts season premiere, a reality TV recordthese duck-hunters-turned-millionaires
are the new faces of the American Dream. And
boy, do their faces move merchandise. By the
end of 2013 Duck Dynasty product tie-ins will
have raked in a massive $400 million in retail
sales, according to industry sources.
Wal-Mart alone accounts for about $200
million of that bounty, with some stores

devoting entire aisles to Robertson-themed
merchandise. Other major chains selling Duck
Dynasty goods include Target and Kohls.
Growth has been phenomenal, says Kate
Winn, A&Es senior vice president of consumer products, whos overseen the rollout
of all things camoufage. Weve seen 50%
growth in revenues quarter by quarter.
Duck Dynasty debuted in spring 2012 but
didnt pop, to use Winns term, until a special
holiday episode in December last year. Both
A&E and Wal-Mart pounced, with the help
of Brandgenuity, a branding agency overseeing more than 75 licensing deals for everything
from rain boots to antibacterial bandages.
At Wal-Marts annual shareholders conference in June, the retail giant announced that
its bestselling piece of apparel across every
category over the past yearmens, womens
and childrenswas a Duck Dynasty graphic T-shirt. At the time, products based on the
show could be found in 6 Wal-Mart departments. Today that number is 13 and growing.
Wal-Mart was the frst major retailer to
recognize the moneymaking potential of the
Robertsons, cementing a relationship back
when they were simply the ofeat clan behind Duck Commander, a West Monroe, La.
manufacturer of duck calls handcrafted from
cedar. But it isnt the last. Universal Music
scored when Duck the Halls, an album of the
Robertsons holiday music, debuted at number
one on Billboards country charts in November.
Hallmark is shilling holiday cards and ornaments adorned with the casts faces and catchphrases. Have a Christmas Thats Family Certifed, Redneck Approved, reads one greeting.
Next up: products for the casual outdoorsman,
like branded Igloo coolers and Duck Dynasty
fshing rods and reels by Zebco.
All this has meant big things for the Robertsons bottom line. Typical celebrity branding arrangements see stars getting a small
cut (4% to 6%, generally) of wholesale. Beyond that, the cast of Duck Dynasty makes a
combined $200,000 per episode, thanks to an
August raise, and their family business stands
to make over $50 million at retail on duck
calls alone in 2013.
Its the American dream: They made
themselves into millionaires, says Charlie
Anderson, CEO of retail marketing agency
Shoptology. Yet people working for $8
an hour can still relate to them. F
sportsmoney
Hockey Go Home!
The NHLs fnancial future lies north of the

U.S. border. Just ask Winnipeg.
By Tom Van RipeR
Under Ceo Jim Ludlow

the Winnipeg Jets are
booming, thanks to
a timely move from
atlanta to Canada.
he Winnipeg Jets are doing

something billionaire hockey
team owners like Terry Pegula
in Buffalo and Henry Samueli
in Anaheim cant seem to pull
off, a trick so complex that scores of highly
paid sports executives in cities across the
United States are unable to duplicate it.
Theyre turning a profit.
While 12 of 30 National Hockey League
teams operated at a loss or close to it

during the 201213 season, according to
FORBES estimates, the Jets are basking
in a turnaround, thanks to a timely move
from Atlanta to hockey-mad Winnipeg
after a 15-year absence of the sport from
the city.
In the first year following the 2011
relocation Jets revenues shot up 48%
to $105 million with operating profit of
$13.3 milliondespite relocating to a
700,000-person metro roughly one-eighth
the size of Atlanta. Winnipegs 15,000seat arena may be the
smallest in the NHL,
but its always sold
out, with average
ticket prices of $81,
third highest in the
league.
So while True
North Sports & Entertainment paid
$110 million for the
Jets (plus a $60 million relocation fee),
just $10 million less
than the St. Louis Blues sold for in
2012, Winnipeg is
now worth $155 million more than the
Blues, according to
FORBES.
All of which
proves that when
it comes to hockey, there really is
no place like Canada. This has been
a dominant hockey market over the
years, says Jim
Ludlow, CEO of
True North, matter-of-factly.
Winnipegs success should be a siren
song for the rest of the league. Hoping for
growth, in the 1990s the NHL invaded Sun
Belt cities like Miami, Tampa, Dallas and
Phoenix (where the original Jets fled to in
1996, only to eventually incur bankruptcy). It hasnt worked. Those clubs routinely discount tickets and consistently rank
in the leagues bottom seven in local cable
viewers, averaging below 1% of their mar-
John Woods For Forbes
strAteGIes
strategies sportsmoney
Canadian power play
Teams north of the border dominate the top of our NHL valuations thanks to typically higher attendance and arena revenue than their U.S. rivals.
Value
Current1 1-year
($mil)
Change
rank team / Owner (year aCquireD)
Debt/
Value2
Operating
reVenue inCOme
($mil)
($mil)
ToronTo Maple leafs / Bell Canada, rogers CoMMuniCaTions (12)
$1,150
15%
14%
$142
new York rangers / Madison square garden (97)
850
13
131
$48.7
27.3
MonTreal Canadiens / Molson faMilY (09)
775
35
37
127
29.6
VanCouVer CanuCks / aquilini faMilY (05)
700
105
14
101
15.8
ChiCago BlaCkhawks / roCkY wirTz (54)
625
79
115
25.6
BosTon Bruins / JereMY JaCoBs (75)
600
72
18
114
18.5
philadelphia flYers / CoMCasT speCTaCor (96)
500
49
13
95
6.0
piTTsBurgh penguins / Mario leMieux, ron Burkle (99)
480
67
21
107
20.9
10.5
deTroiT red wings / MiChael & Marian iliTCh (82)
470
36
96
10
los angeles kings / philip ansChuTz (95)
450
63
28
98
8.2
11
CalgarY flaMes / CalgarY flaMes lp (80)
420
71
89
11.5
12
washingTon CapiTals / Ted leonsis (99)
414
66
31
83
8.0
13
san Jose sharks / hasso plaTTner (02)
405
82
84
2.1
10.3
14
edMonTon oilers / darYl kaTz (08)
400
78
25
80
15
oTTawa senaTors / eugene MelnYk (03)
380
73
39
83
6.8
16
winnipeg JeTs / True norTh sporTs & enTerTainMenT (11)
340
70
38
79
6.3
17
Colorado aValanChe / sTan kroenke (00)
337
60
67
0.3
18
dallas sTars / ToM gaglardi (11)
333
39
45
79
1.6
19
MinnesoTa wild / Craig leipold, philip falCone (08)
330
51
34
81
13.6
20
new JerseY deVils / Joshua harris, daVid BliTzer (13)
320
56
81
78
4.2
21
anaheiM duCks / henrY & susan saMueli (05)
300
56
23
73
3.9
22
Buffalo saBres / TerrenCe pegula (11)
250
43
32
76
1.0
23
florida panThers / VinCenT Viola (13)
240
41
50
69
7.7
24
nashVille predaTors / ThoMas Cigarran (07)
205
23
41
71
0.8
25
phoenix CoYoTes / george gosBee, anThonY leBlanC (13)
200
49
62
67
8.9
26
new York islanders / Charles wang (00)
195
26
51
61
1.2
27
Carolina hurriCanes / peTer karManos Jr (94)
187
15
59
71
3.4
28
sT louis Blues / ToM sTillMan (12)
185
42
35
72
2.5
29
TaMpa BaY lighTning / JeffreY Vinik (10)
180
25
72
5.4
30
ColuMBus Blue JaCkeTs / John p MCConnell, naTionwide (97, 12)
175
21
43
69
4.9
league aVerage
413
50
29
88
7.0
Revenue and opeRating income (eaRnings befoRe inteRest, taxes, depReciation and amoRtization) aRe foR 2012-13 lockout-shoRtened season. 11 enteRpRise value of team based on cuRRent aRena deal (unless new
aRena is pending). 22includes stadium debt. statistics by kuRt badenhausen, michael k. ozanian and chRistina settimi.
kets. Meanwhile, Quebec lost its franchise

to Colorado in 1995, and Hamilton, Ont.
lost out on landing the Coyotes in 2009
when the NHL nixed a sale to billionaire
Jim Balsillie.
Whats behind this market distortion?
Subsidies, of course. American taxpayers are far more willing to prop up teams
than their Canadian counterparts are. Both
Florida clubs, the Panthers and the Lightning, enjoy sales-tax rebates of $2 million
a year, money that goes back to the team
rather than to the state. Hockey remains in
Phoenix only because the city of Glendale,
Ariz., Phoenixs neighbor, where the Coyotes play, agreed to cover up to $50 million
in team operating losses.
Atlanta didnt do that, compelling its

ownership group, the Atlanta Spirit, to
sell to True North. If American taxpayers
were less interested in subsidizing NHL
teams, there would be more teams in Canada, says the Toronto Globe & Mails Tony
Keller, who has studied the economics of
the NHL. The NHL declined to comment.
Ludlow thinks moving north is a nobrainer for flailing clubs. Businesses fill
his arenas 55 suites, some of them committing for up to ten years. Season-ticket
holders commit for three to five years; the
waiting list is up to 8,000 seats. The reason is simple. We arent up against MLB
or other major sports, he says. We are
the go-to place. F
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GamE CHaNGErs
Founder and cEO Josh Tetrick

pondering a dish of scrambled
eggs made from plants.
Bill Gates Food Fetish

Some of the worlds most infuential investors
are betting Hampton Creek Foods can make
the humble egg obsolete. Billions are at stake.
By Ryan Mac
Its 8 a.m. on openIng day at a new

Whole Foods in San Franciscos Castro neighborhood, and Josh Tetrick is a just a little too
excited for a guy hawking mankinds blandest
condiment.
With fngers fdgeting he paces in front of an
open-air fridge stocked with ready-made quinoa and kale salads and verbally pushes people
toward his companys sample booth. The sell?
Hampton Creek Foods plant-based mayonnaise, which has been mixed into an Italian
antipasto salad turned breakfast sampler.
Come try our breakfast bruschetta, the
blue-eyed, square-jawed Tetrick shouts at a
millennial in yoga pants and neon running
shoes. She turns and speed walks toward the
checkout line.
While Tetrick, Hampton Creeks CEO,
hasnt been able to persuade everyone, its
the number of people he has convinced that
has the San Francisco food startup turning
heads. Bill Gates is a backer, handpicking the
company as one that could change future food
production. Tetrick has raised $6 million to
date from the likes of Peter Thiels Founders
Fund, Vinod Khoslas Khosla Ventures and
environment-friendly billionaire Tom Steyer.
Newly turned vegan Al Gore is also circling.
To Gates and the others, Hampton Creeks
value is in its multibillion-dollar opportunity
to make the egg obsolete, replacing it with a
plant-based formula that is cheaper, cholesterol-free and more humane. Its Silicon Valley
solutionism at its fnest, focusing entrepreneurial fair and science on an industry not
known for innovation.
Food to me is broken for a lot of reasons,
but the best sort of manifestation of that is the
world of intensive animal agriculture, says
the 33-year-old Tetrick. With a slight southern drawl, he speaks with a particular distaste
for the egg industry, notorious for caging and
force-feeding beakless chickens and burning
through resources.
But the company sells itself on economics
as much as on environmental stewardship.
The ratio of energy input to food energy
output for chicken-laid eggs is about 39-to-1,
behind only beef and lamb farming. Hampton Creeks plant products maintain a ratio
of 2-to-1. That translates into direct cost
savings: Its egg equivalents cost 39 cents
a poundalmost half of its chicken-begat
counterpart. As for the mayonnaise, the fnal
product, mixed with lemon juice, vinegar
Martin KliMeK / Getty iMaGes for forbes
TECHNOLOGY
THE
TRENDSPOTTING
CLOUD
In the cloud built for business, social sentiment isnt all talk its action.
Learn more about SAP Cloud for Social Engagement at sap.com/cloud
RUN BETTER.
2013 SAP AG. SAP and the SAP logo are trademarks and registered trademarks of SAP AG in Germany and several other countries.
TECHNOLOGY GamE CHaNGErs

and other ingredients, costs Whole Foods
10% less than regular mayo. Hampton
Creek is taking on an entrenched industry
that has been doing business the same way
for years. [The company has] a core technology that is fundamentally more aordable,
says Khosla.
For now the company has only the mayo
but will begin selling egg-free cookie dough
in February. FORBES estimates Hampton
Creek has garnered less than $1 million in
revenue in about a month of selling goods to
consumers.
Tetricks progress isnt bad for someone
who graduated third from the bottom of his
high school class. Hailing from Birmingham, Ala., Tetrick grew up on a steady diet of
chicken wings and buttered biscuits with the
hopes of playing professional football. The
son of a hairdresser, he walked on to West
Virginia Universitys football team, playing
linebacker for a year and a half before realizing that academics was a better way to climb
above the poverty line. He transferred to
Cornell, where he graduated top of his class.
After getting a law degree from the University
of Michigan in 2008, he worked on climatechange strategy and started a now defunct
site called 33needs, which raised money for
social ventures.
Tetrick, who turned vegetarian in college, had often engaged his childhood friend
Joshua Balk on the ethics of food production. Balk, director of corporate policy at the
Humane Society, would often tell Tetrick
how food companies wanted to be animalfriendly but were more eager for a cheaper
egg product that didnt compromise on taste.
That was all Tetrick needed to hear before
he dropped $37,000 of his own money into a
startup he named after Balks dog in 2011.
The odds that this guy would be working on an animal-friendly, environmentally
friendly project are probably pretty interesting, says Khosla Ventures partner Samir
Kaul, who seeded Hampton Creek with
$500,000. He has been a tough, gritty guy
his entire life.
Fast-forward two years and Hampton
Creek Foods is one of the many startups
nestled in the former warehouses south of
San Franciscos Market Street. Instead of a
space flled with software developers working on Macs, Hampton Creek has biochemists
poached from Unilever and Otis Spunkmeyer

rubbing elbows with chefs cooking up French
toast and cookies from the vials of yellow pea
and sorghum solutions. Hampton Creek has
examined the molecular properties of 1,500
types of plants to fnd species with the best
characteristics for emulsifying into mayo or
congealing in a hot pan like scrambled eggs.
Those resultsand subsequent publicityhave traditional egg producers on the
defensive. The American Egg Board began
an educational campaign in October with the
attempt to persuade consumers to Accept No
Substitutes. President Joanne Ivy maintains
that the campaign was not directed at Hampton Creek, and indeed, egg substitutes such as
ConAgras Egg Beaters have been around for
years. But those are often composed of fllers
such as xanthan and guar gums. Consumers
want natural ingredients and a clean label,
she says. And theres nothing more natural
than an egg.
Tetrick begs to dier, reading ingredients
like organic sugar and canola oil o a label
on his companys Just Mayo to prove a point.
Putting a female bird in a cage in a space so
small that a female bird cant fap her wings
for two years, I fnd that the antithesis of
natural, he responds.
Validated originally by certain regional
Whole Foods locations, Just Mayo is now in
120 stores and will be available nationally
by years end. If talks go according to plan,
the mayo may fnd its way onto the shelves
of another major supermarket by early next
year. Tetrick is in negotiations with a giant
fast-food chain to use its mayo as a condiment,
but success there is contingent on Hampton
Creeks mayonnaise coming in cheaper than
the incumbent. Similarly, a joint research venture with General Mills is exploring if Hampton Creeks concoctions are up to snu for a
corporation that oversees brands like Betty
Crocker and Pillsbury.
Mayonnaise, an $11.3 billion global market, could be just the beginning. A shelf-stable
cookie dough is due out in February, with
another formula in the works that is meant to
mimic scrambled eggs when cooked. Thats
a $42.5 billion market dominated by corporate farmers and their hens. With billionaires
watching his work carefully, Tetrick and
Hampton Creek are just hoping to avoid laying
an egg on their way to saving the planet. F
THE KILLEr
aPP
all MiXeD UP
Amateur Hitchcocks who

nd Vine and Instagram too
conning for their cinematic
visions will want to get behind
the lens of MixBit, a free
video-creation app developed
by Chad Hurley and Steve
Chen, whose previous gig was
cofounding a little trie called
YouTube. MixBitavailable for
iPhone, Android and the plain
old Webenables budding
directors to shoot video in
16-second chunks, then edit
and remix to taste, for nished
clips of up to 68 minutes.
Its social, of course; you can
grab any publicly posted
video of MixBit.com for use
in your own Oscar contender.
Meanwhile, Hurley and Chens
company, Avos Systems, was
recently sued by Kanye West
and Kim Kardashian for having
posted to the site a MixBit
of Wests marriage proposal.
Riling Hollywood already?
Auteurs, take note.
Brian Dawson
TECHNOLOGY
BIG DATA
Reading Your
Financial
Footprints
Shrewd startups are crunching
the data behind billions of credit
card swipes. Why? To sell you
more stuf, naturally.
By AdAm TAnner
ing money, you know lots of things about

them without having to know their personally identifying information, Laube says.
Cardlytics, based in Atlanta, has a view
into 70% of U.S. bank customers. Its servers
will have read 11 billion U.S. transactions this
year, amounting to $500 billion of spending.
Its algorithms serve up 1 billion ads a month
to more than 35 million customers on the
websites and mobile apps of 400 banks, including Bank of America, PNC, Regents and
Lloyds of London. Cardlytics says it drives
$500 million in sales every quarter across all
banks. In a typical arrangement the Sports
Authority would want to know everyone who
spends more than $100 a month on sporting
goods but not at its stores. Cardlytics serves
up a Sports Authority ofer to those people,
and Cardlytics and the banks share a commission from the merchant, typically about
10% of any resulting purchase.
Merchant-funded rewards is still a nascent industry, but Cardlytics believes it has
80% of a market growing at north of 100%
a year. Its rivals include Cartera Commerce,
edo Interactive, FreeMonee and Londonbased ERN Global. Cardlytics expects to
gross $25 million in the fourth quarter, for a
total of $50 million for 2013, up fourfold from
2012. It expects to double revenue next year.
Grimes and Laube have raised $104 million
in venture funding from frms such as Ca-
Scott Grimes and Lynne

Laube, the founders of
Cardlytics, have a view
into $500 billion of
consumer spending.
Brian Merwin for forBes
ynne Laube and Scott Grimes

were among the few Capital
One employees left at the ofce
late one afternoon just before
Thanksgiving break in 2007. It
had been a long day, and they were kicking
back in their own nerdy way: spinning stories
about anonymous strangers by looking at
their card-transaction data.
This looks like a soccer mom. You can tell
because she is going to McDonalds and then
Target and then McDonalds and Babies R
Us, says Laube. Grimes pointed to another
set of data: This is clearly a single guy. He
purchases at bars and Taco Bell.
At one point the two executives looked
at each other and went silent. As far as we
knew, no one was really using these stories to
help marketers better reach that customer,
Grimes says. Card-swipe data was a largely
untapped mother lode for banks that, seeing the growth of daily-deal startups like
Groupon, would be able to make a little extra
money (and win loyalty) by pitching targeted
deals to customers. The banks would need
a nimble middleman to crunch the data and
deliver the ofers. Within months the two
quit their jobs and started Cardlytics.
Laube, 43, Cardlytics president and COO,
and Grimes, 51, its CEO, have since helped pioneer a data-driven advertising niche called
merchant-funded rewards. It targets people
based on what they buy, not who they are. If
you know where and how someone is spend-
PROMOTION
China Construction Bank:
An International Model Reaps Rich Rewards
hina Construction Bank

(CCB) is a modern, competitive provider of global
financial services that is
strengthening its business
in Asia-Pacifc while actively expanding its operations in Europe, America
and emerging markets through organic
growth and mergers and acquisitions.
out the world, whose total assets have

increased 11 times since 2005 and
reached Rmb636.3 billion at the end
of June, 2013. It has successfully built
franchises in mature economies and
has recently extended its footprint in
emerging markets.
CCBs success is based on a comprehensive domestic-and-overseas col-
China Construction Bank
One of CCBs principal objectives is to

support Chinese companies that want
to expand internationally and foreign
frms that do business with China. CCB
began its international footprint in 1991
by establishing a London Representative
Offce. This year, it opened subsidiaries in
Russia and Dubai and a branch in Taipei.
CCB has received regulatory approvals
to open branches in Osaka and Luxembourg and is awaiting fnal approval
for a Toronto Branch. Meanwhile, it has
integrated its Hong Kong offces and the
China Banking Regulatory Commission
has agreed that it can launch in Macau.
Today, CCB has 17 fnancially strong
tier-one overseas entities through-
laboration platform. It has well-defned

client and product positioning, supports
domestic frms that have global activities, provides loans and other fnancial
services, and offers superior cross-border renminbi service.
In particular, CCB has enjoyed substantial growth in its cross-border renminbi settlement business, increasing
178% year-on-year to Rmb561.1 billion
in 2012. Notably, CCB London issued an
offshore Rmb1 billion bond, the frst by
a Chinese bank in Europe.
CCB has launched several marketing
campaigns in China for its corporate and
institutional clients. It also developed private banking services in its Singapore
Branch and began offering retail services

in its Tokyo Branch. These initiatives indicate the diverse nature of its ambitions.
Over two decades, CCBs international
business has evolved so that it is now
entering a stable stage, offering a full
range of banking services on a competitive basis and gaining a strong reputation
worldwide.
Its global activities include a US$30
million fnancing agreement with Turk
Telekon in 2009 that provided an export
buyers credit for a Chinese technology
company; leading a US$300 million syndicated loan for a subsidiary of MTN in
Nigeria to support the export of technology and telecommunication equipment
from two Chinese companies; and last
year a Rmb5.2 billion offshore loan for
China Three Gorges Corporation guaranteed against its domestic business.
Its achievements are refected in its
most recent financial results. In the
frst half of 2013, CCB posted operating income of Rmb252.307 billion, up
10.75% year-on-year, and net profit
of Rmb119.964 billion, an increase of
12.65% year-on-year, according to its
latest report. Annualized return on average assets and equity was 1.66% and
23.90% respectively, demonstrating
a healthy performance, while the bank
retained its leading position among its
peers for its capital adequacy ratio and
tier 1 core capital adequacy ratio, which
were 13.34% and 10.66% respectively.
Indeed, CCBs track record across all
its businesses has been widely acknowledged and earned it many accolades,
including being ranked second on
Forbes Global 2000 list of the worlds
largest companies.
www.ccb.com
TECHNOLOGY BIG DATA
have soured on daily deal programs such as

Groupon and LivingSocial, see any value from
them. Gadi Maier, CEO and cofounder of
Cardlytics competitor FreeMonee, is cautious
about the felds futureat least the way his
rivals are approaching it. Promising better
data analytics than rivals in boosting store
sales, he has raised around $40 million
in venture capital and expects sales of
$10 million this year. His frm, with partners
such as Citibank, Discover, Capital One and
U.S. Bank, ofers data-targeted gifts to customers that expire relatively quickly. Almost
all of the results that merchants are seeing
in the card-linked space are the results of
accidental redemption, he says, referring to
people who click on ofers but use them only
weeks or months later when theyre going to
that store anyway. Cardlytics says it can prove
the positive impact of its program by setting
aside thousands of consumers as a control
group who dont get the ofer.
Some experts fear the success of merchantfunded rewards could prompt banks and
brands to move into more sensitive categories such as health care, gambling or sex in a
manner that could alienate clients. Without
any type of regulation and without any type
of limit other than the proft model and greed,
it seems to me to be inevitable we are going
to get to the point where abuses are going
to occur, says Scott Dueweke, an expert on
alternative payments at Booz Allen Hamilton.
There will be a backlash, not just from the
tinfoil-hat, libertarian crowd but from people
who are quite average.
I dont think anyone has quite fgured out
what level of sharing is okay and what value
can be driven given the constraints, says
Deepinder Gulati, who served previously as
the American Express vice president overseeing strategic insights and digital analytics.
If the banks lose their appetite for rewards
programs, Cardlytics has plenty of others
who want access to its data insights. We
have hedge funds calling us at least once a
week saying, Will you sell us the data so we
can use it to better predict earnings? Laube
says. And we have enough data that I can tell
you if any given retailer is going to be up or
down for the quarter.
There are plenty of tempting lines of new
revenue, if the banks are willing to let Cardlytics have at them. F
TRENDING
What the 55 million
Forbes.com users
are talking about.
For a deeper dive go to
FOrBeS.COm/TeCHnOLOGy
COMPANY
SALeSFOrCe.COm
a big deal with HP and a
hyped customer confab in
san francisco masked a
milestone: salesforce is the rst
cloud-computing rm to gross
$1 billion in a quarter.
PERSON
KUWABATAKe SAnJUrO
Thats a pseudonym for the
creator of assassination
Market, a site that lets anyone
anonymously contribute
Bitcoins toward a bounty on
any government ocial. its
Kickstarter for political hits.
IDEA
SPACe HOrTICULTUre
in 2015 nasas Lunar Plant
Growth Habitat team will try
to raise basil, sunowers and
turnips in coee-can-size
aluminum cylinderson the
moon. itd be the rst creation
of life on another celestial body.
HaL MaYforTH
naan Partners and Polaris Venture Partners

and strategic investors FIS and Aimia.
The success of Cardlytics was far from a
foregone conclusion. Despite their experience
at Capital One (Laube was a vice president and
Grimes a senior vice president), the duo was
rejected by dozens of banks wrestling with the
2008 fnancial crisis and uneasy about sharing
their customer data with two entrepreneurs
with PowerPoint and no money. They couldnt
get merchants if they had no banks on board.
Finally, in late 2008, they got one callback after
a meeting with the biggest fsh of them all:
Bank of America. But on the drive from Atlanta
to Charlotte, N.C. Grimes car caught fre, and
the deal went up in smoke, literally, and then
fguratively as the bank feared Cardlytics was
too small and untested.
They snared their frst big client, Intuit,
in 2009. At the time the online tax-prep giant
handled online banking transactions for
many small banks. I think it worked pretty
well, says Eric Dunn, Intuits SVP for payments and commerce solutions. But, he says,
Cardlytics had a hard time running along
behind quickly enough to provide kind of a
rich set of ofers to cover the banks that they
were adding.
Merchants became more interested after
Cardlytics fnally landed Bank of America in
2010. BankAmeriDeals went live last year,
and its customers have received $17 million
in savings and generated more than $700 million in sales.
There are limits to what Cardlytics can
know or wants to know. It sees only storelevel data, so if you go to CVS, Cardlytics
doesnt know whether you bought Xanax,
chewing gum or condoms. If someone is
doing online gambling, we see that. If they
are buying porn at an X-rated site, we see
that. We obviously dont use that data, but we
do see all of the purchases, Laube says.
The banks remain sticklers for privacy, and
prohibit Cardlytics and its rivals from moving
the data of the banks servers. Aditya Bhasin,
a senior vice president at BofA overseeing
analytics and digital banking, says, It is extremely important to us that customer information remains inside Bank of America and
that no individual customer information is ever
shared either with Cardlytics or the merchant.
The success of card-based rewards will depend on whether merchants, many of whom
The sidelines
that had a big win.
When the CFO realized he was double-booked,
he brought 150 brand reps along for the ride
to Belmore Field.
And the shelves in thousands of stores
told him how the product was selling
from moment to moment.
So when they broke the all-time sales record,
the CFO watched it happen live with his group,
all without missing the other big victory of the day.
CISCO CONNECTED
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For more stories about how Cisco, our partners and the Internet of Everything
help businesses do business anywhere, visit cisco.com/tomorrowstartshere
WELCOME TO OUR WORLD

The seven pilots of the Breitling Jet Team belong to the international elite of aviation professionals. In performing
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BRE ITL ING.COM
CHRONOMAT 44
FLYING FISH
TECHNOLOGY
HumaN CapiTaL
The Anti-Silicon Valley Startup

Apprenda is thriving by ofering engineers what the Bay Area
cantcheap housing and low taxes along with challenging work.
By susan adams
ing its venture stake to $32 million and accelerating its stafng needs. The plan: to double the
number of employees to 100 within the year.
We hired fve people in the last week, says cofounder Matt Ammerman, 34. Were looking
in every department, from software engineering to client services to marketing. Despite the
hiring challenge, CEO Sinclair Schuller, 31, insists Apprendas location is an advantage. I
think being an enterprise software company
not in Silicon Valley gives us the advantage of
forcing investors to focus on the viability of our
business and not the vanity of our location.
From left: apprenda

cofounders matt
ammerman, sinclair
schuller and abraham
sultan.
david yellen for forbes
ix software engineers are

packed into
one room,
intently coding beneath fuorescent
lights. The CEO sits
in a cramped cubicle against the wall
just outside the kitchen, where a foosball
table stands next to a
kegerator, a spigottopped fridge stocked
with beer homebrewed by members
of the staf. Down the
hall an exercise room
has showers where
coders who stay all
night can sluice of
before getting back to
their task.
This is not a Silicon Valley startup.
Rather its the ofce
of Apprenda, a booming six-year-old software company in, of all
places, Clifton Park, N.Y., a nondescript suburb 15 miles north of Albany. Apprenda makes
so-called platform as a service (PaaS) software
that helps its clients, which include JPMorgan Chase, Honeywell, Diebold and wholesale
drug distributor AmerisourceBergen, create
and run new mobile and cloud-based applications without having to burden their own IT
departments.
Apprenda is in the midst of a major growth
spurt, announcing $16 million in third-round
funding this chilly mid-November day, pump-
Health care
reform is
confusing.
Only 5% of employers
say they understand
health care reform
really well.*
How will you make the right decisions?

Call your local Aac ofce or download our Employers Guide:
aac.com/HCRGuide
Z130889A
*Source: 2013 Aac WorkForces Report
9/13
TECHNOLOGY HumaN CapiTaL

gion produces a surprising amount of engineering talent. Rensselaer Polytechnic Institute, Sultans and Schullers alma mater, is frequently mentioned among the nations top engineering schools. There is also SUNY Albany, where Ammerman got his diploma, Union
College in Schenectady, Skidmore in Saratoga Springs and Clarkson in Potsdam. Syracuse University is two hours to the west.
Many young programmers dont want to move
across the country and fght the West Coast
competition. Apprenda software engineer
Eric Coonradt, 27, a graduate of SUNY Binghamton, grew up in the Albany suburb of East
Greenbush. He wanted to stay close to home.
I have this weird regional pride, he says. I
like the idea that were the underdogs.
Apprendas newly hired HR head, Dean
Iacovetti, who used to be its outside recruiter,
says his best source is referrals from employees. The company ofers $5,000 to stafers who
make a successful connection to a new hire.
Iacovetti also combs LinkedIn for prospects
and poaches from other companies in the area
like videogame maker Vicarious Visions and
order-fulfllment company CommerceHub.
Once he fnds software talent he wants, he
puts them through a fve-stage hiring process,
including phone interviews, a coding challenge and a personality test where they rate
the importance of qualities like competitiveness and individual responsibility.
Since Apprenda opened shop, some other
tech companies have moved in, most notably
GlobalFoundries, a Milpitas, Calif.-based semiconductor maker owned by the government of
Abu Dhabi, which has invested nearly $7 billion since 2009
to build a 222-acre campus
in nearby Malta, N.Y. that includes a microchip-fabrication
plant (the state gave it incentives worth $1.4 billion). So far
CLIFTOn PaRK
sTeWarTs sHoPs (ice cream)
the facility has created 2,200
CUrTis lUMber
tech jobs, boosting the regions
$15/sQ. fT.
reputation as a lure for talent. The Center for Econom$725,000
(4,200 sq. ft.)
ic Growth in Albany calls the
area Tech Valley.
$3,000/year
At frst some of our
$8
funders tried to get us to move
to Silicon Valley, says Ap$109
prenda CEO Schuller. But
were not going anywhere. F
Its far-fung funders agree. New Enterprise

Associates, with ofces on Sand Hill Road in
Menlo Park, and Ignition Partners, also with
a branch in Silicon Valley, together have committed $20 million. Ignitions Frank Artale
says the frm rarely invests in companies a
plane ride away: We knew that as long as they
could recruit the kind of software development talent they needed, the company would
be a success.
While Silicon Valley attracts engineers
looking for an atmosphere of intense competition, salaries that can reach as high as
$250,000 and great weather year-round, Clifton Park sells its employees on stability and a
low cost of living, with homes that go for less
than a sixth of their California counterparts.
Albany-area salaries for software engineers
top out at $130,000, but people stay put for
longer. While Silicon Valley engineers often
job hop after less than a year, only four employees have left Apprenda since its inception;
just one went to the West Coast.
When Apprendas three cofounders started out, they rented an ofce for $200 a month.
At the time Ammerman was living in nearby Troy, N.Y., in a spacious two-bedroom in a
complex with a pool where his rent was $800.
His colleagues, Schuller and Abraham Sultan,
33, had similar housing deals. That made it
possible, when they got their frst infusion of
$100,000 from friends and family, for Schuller to quit his job at a SUNY administrative offce in downtown Albany and work full-time
on Apprenda.
When it comes to hiring, the Albany re-
PaLO aLTO
Large Local
Business
HeWleTT-PaCKard
Tesla
Oce Rent
$30/sQ. fT.
House
$4.6 Million
Property
Taxes
$13,000/year
Glass of
Pinot noir
$15
dinner
For Two
$220
(4,100 sq. ft.)
GaDGETS
WE LOVE
PenCil
FiftyThree, the software

developer that enthralled
iPad users in early 2012
when it debuted its
beautiful, tactile Paper
app, has now taken the
next obvious stepthis
time into hardwarewith
Pencil, a Bluetoothenabled stylus. Available
in Walnut ($59.95)
or Graphite ($49.95),
Pencil can be as blunt
or as ne a writing and
drawing instrument as
you require, and the
eraser on its top end
makes for quick mistake
eradication the way you
did it back in third grade.
(Likewise, Papers Palm
Rejection capability
means your hand wont
make errant marks on your
masterpieces as you go.)
Battery power will last
about a month between
charges, and Pencil works
as an ordinary stylus
with any touch-sensitive
device. It even stores
nicely behind your ear.
Brian Dawson
eNtRePReNeURS
Retail
Speed Demon
In less than a decade Charlie Chanaratsopon has built a $400 million-plus empire by
selling cheap accessories in hundreds of stores. Is it time to slow down?
Michael Thad carTer FOr FOrBeS
BY BRIAN SOLOMON
harlie Chanaratsopon is a young

man in a very great hurry. I
hate downtime! exclaims the
35-year-old Thai-American,
chopping the air for emphasis.
With his slicked-back hair and sleeves rolled
up to the elbows, hes always ready to get
down to businesseven as he weaves frantically in and out of Houston trafc in his black
Mercedes S550, eager to show a visitor one of

his stores. Id probably be the worst lawyer,
worst doctor, worst engineer on the planet
because of my ADD-ness, says Chanaratsopon (cha-na-ROT-suh-pon).
No examples of botched cases, mangled
surgeries or shoddy construction in his
world. But theres an element of reckless endangerment in Chanaratsopons rush to build
The in place for

suburban moms day
of: Charming Charlies
founder at one of the
more recent locations.
in my throat, clicked it back. Im 13, and all I

remember thinking is, Well, I think I had a
great 13 years.
His parents, who immigrated in 1974,
had founded Silver Express, a sterling silver
jewelry outt that sourced production from
Thailand and sold on consignment to the
likes of J.C. Penney, Nordstrom, Target and
Wal-Mart. Chanaratsopon grew up with the
business, watching his parents work 18-hour
days, overhearing dinner-table discussions of
employee issues and traveling with them on
sales calls and sourcing visits.
Some of that business education surely
stuck, since Chanaratsopon ended up in the
elementary school principals ofce after
charging rst-grade classmates $1 a day to
rent his Nintendo games. Prots fueled more
game purchases and, hence, more rentals.
Today, he says, Im still buying and selling
thats what I love.
There were detours. After graduating
from Loyola Marymount in Los Angeles with
a degree in nance, he became a real estate
analyst at Sanwa Bank, then came back to
Houston to help his dad nd a new headquarters, persuading him to build rather than lease.
Chanaratsopon supervised construction of an
ofce building as well as an adjacent strip mall,
which he quickly lled with tenants. That
venture was so successful he started nancing construction of other shopping centers in
Houstons suburbs, building seven in two and
a half years. It wasnt being smart, it was kind
of luck at the time, he muses. The real estate
market was so hot, and they were valuing it so
high, whatever you built you could make so
much renancing and selling it.
But Chanaratsopon couldnt sit still. He
dreamed of building 100 such malls and making more money by owning the store that anchored them all. But what kind? Apparel had
too many players. Harwin Avenue, Houstons
stretch of discount stores ofering cheap imports in warehouse settings, ofered inspiration. With leftover consignment returns from
Silver Express as the merchandising backbone, the rst Charming Charlie opened in
October 2004.
It nearly died after the rst month of desultory trafc. On a whim Chanaratsopon decided
not to pull the plug and re-lease the space but
to stay open another couple of weeks. Thanks
to dumb luck, or a direct-mail drop, women
TRENDING
What the 55 million
Forbes.com users
are talking about.
For a deeper dive go to
FORBES.COM/ENTREPRENEURS
IDEA
AVOIDANCE
Mentally strong leaders avoid
feeling sorry for themselves,
giving away power, giving up
after failure, shying away from
changeand theyre not afraid
to spend time alone.
PERSON
ROB KATZ
Vail Resorts CEO oversees a
$2.5 billion company, invests
heavily in IT and social media
and packs in the crowds with
the Epic Pass.
COMPANY
HOST COMMITTEE
It lls NYC nightclubs during
downtimes (8 p.m. to 11 p.m.),
charging guests $25 for a
three-hour party and free
booze; many stay later and run
up big bar tabs.
RJ SANGOSTI / THE DENVER POST VIA GETTY IMAGES
a retail chain of accessories. In less than a decade the young founder and CEO of Charming Charlie has built a $400 million-plus
(sales) mini-empire of watches, necklaces,
scarves and handbags284 stores in 40 states
that FORBES values at $1 billion-plus. With
an estimated net worth of $500 million hes
careening toward billionaire status before his
40th birthday.
Since launching his rst store in Houston
nine years ago, Chanaratsopon hasnt slowed
down a whit. Hes now opening ve stores a
month, mimicking the model of fast-fashion
giants Zara and H&M by selling attractive
but cheaper versions of trendy items, sourced
from Asia. Examples: $15 scarves, $9 sunglasses and $7 to $15 iPhone cases. Customers spend, on average, $30.
Is he making money? Chanaratsopon insists
that all but one of his existing locations is profitable. The companys Ebitda is an estimated
15% or sobetter than most apparel chains
but far below luxury retailers like Coach
and Michael Kors. Chanaratsopon refuses to
comment on a key indexsame-store sales
growththough its probably safe to peg it at
10% (Francescas, a clothing and accessories
boutique with 360 outlets, does 10% to 15%).
One former Charming Charlie buyer claims on
her LinkedIn page that her division, apparel
and accessories, expanded 26% across same
stores in 2012.
Chanaratsopon says hes in a race to capitalize on a burgeoning trend. Accessories are
a $9.2-billion-a-year business in the U.S. and
expanding swiftly. As a category, paired with
beauty and footwear retailers, it grew six times
as fast as other mall-based apparel stores from
2007 to 2012, reports Credit Suisse. Weve
spent years brute-forcing things across the nish line, says Chanaratsopon.
His drive runs deeper than business, supercharged as it is by a familiar immigrant
success story. His maternal grandfather
worked at a gas station in Houston to put his
two daughters through college. As the rst
generation born in the U.S., Chanaratsopon
always felt the heat to keep pushing. Perhaps
a frightening childhood episode played a
part, too. Burglars broke into his house at 2
a.m., tied up his family and forced his father
to give up all their valuables. They put me
on the oor and started kicking me, he recalls. They took the revolver out, shoved it
DECEMBER 16, 2013 FORBES | 81
ENTREPRENEURS RETAIL
at the warehouse-style uorescent lights,

beige slat wall and water-stained ceiling
panelsall part of a discount store vibe that
drives me nuts. As the company fanned out
across the country, it replaced those features
with higher-quality xtures but still organized merchandise according to color instead
of type (walk out of teal and into orange).
The newer stores are smalleraveraging
5,300 square feet instead of 8,000and assert
more fashion condence, leaving little to a
wandering imagination. Push on the hot-pink
doors and walk into walls of bold navy and
white stripes and blaring pop music. The
oor is packed with mannequins and atpanel TVs to demonstrate hot looks using
diferent Charming Charlie products. New
trend tables show of the latest bubble necklaces and sand-blasted bracelets; cubby walls
hawk higher-margin handbags.
One slight problem: The redesign isnt
making the stores more lucrative. Average
sales are slightly lower than they are at the
companys traditional stores, though costs
per square foot are up 25%. So why do it?
Customer surveys suggest that store experience has dislodged low prices as the chief
reason for shopping there. Put another way,
Chanaratsopon is trying to develop Charming Charlie into a brandone he hopes
to export to the Middle East and South
America (as well as to New York Citys Fifth
Avenue next year). Where I think we have
an opportunity is 5,000 stores globally, he
blurts without hesitation.
You want to tell him to chill. A few stores
in Canada are a whole lot easier than in Europe and Asia, says Laura Champine, retail
analyst at Canaccord Genuity, the New York
investment bank. Theres still plenty of runway in the U.S.
Chanaratsopon might also put more horsepower behind his e-commerce eforts. The rst
attempt, two years ago, was a painfully expensive mistake he refuses to quantify. We didnt
really focus on it, didnt complete the thought,
he says. Take two, launched in October, is a
clean if unexciting website that isnt yet mining
a potentially rich vein of customer data.
If there are speed traps ahead, Chanaratsopon seems determined to ignore them. Says
Bill Moreland, the new vice president of real
estate, Its 100 miles per hour all the time
around here. F
FOUNDERS
TOOLBOX
SERVER FAILURE
Stumped for a startup idea?

Consider this: The $1.3 trillion
so-called switching economy
of Americans who take their
business elsewhere thanks to
bad customer service. That total
swells to $5.9 trillion worldwide,
according to Accentures 2013
Global Consumer Pulse Survey.
The industries that used to be
the hallmarks of loyalty are today
the ones most under re, says
Robert Wollan, a survey author.
Among the culprits: retailers,
banks and cable and phone
providers.
Accenture applauds
companies like Amazon that
ofer hyper-relevant product
suggestionsone of ve
categories that keep customers
the happiest. But smaller
businesses are particularly adept
at this, too, adjusting to social
engagement and customer
relationships faster than large
companies. It doesnt take much
to stand out by delivering even
slightly better service.
Emily Inverso
HAL MAYFORTH
started queuing up outside the doors before

Charming Charlie opened each morning. It
became the in place for suburban moms day
out, recalls COO Steve Lovell, who joined the
company after the third store. Word spread
like crazy. My wife heard about it from her
friend before it ever opened near us.
Chanaratsopon didnt need much encouragement to start fast-tracking. Own the
store, own the complexthat was the idea,
he says. That kind of turned when I realized
you couldnt physically build 100 shopping
centers in six years. The stores were getting
so much traction. It was a better business
a faster business. Each cost, on average,
$750,000 to open.
So he appended a grandiose plan to his
business school application to Columbia in
late 2005. Over the next two years he ew
back and forth most weeks between New
York City and Houston, where he not only
wrote checks but also hung display racks and
swept oors at new locations. Monday mornings he was back in Morningside Heights, soliciting advice from professors and speakers.
Slapping the go button even faster after
he returned to Houston full-time in 2007,
Chanaratsopon raised an undisclosed amount
from private equity rm Hancock Park Associates, to double the store count from 7 to
14. (He and Hancock today control 95% of
the company.) As the economy crumbled,
Chanaratsopon squeezed desperate shopping
mall operators for the best terms. Landlords
were freaking out, he recalls. Charming
Charlie more than doubled in size to 36 units
in 2010, jumping to 96 in 2011. Its cheaper
wares hit the mood of the times, ofering
what Hancock Park
managing partner
Id probably
Mike Fourticq calls
be the worst
the perfect shopping experience for a doctor, worst
hurting economy.
lawyer, worst
But as the econengineer on
omy mends and the
the planet
chain grows, Chanabecause of my
ratsopon pegs his
overall performance
ADD-ness,
at six out of ten. As
says Charming
he walks into store
Charlies
number ve, its obfounder.
viously in need of a
face-lift. He shudders
promotion // Diversity
In Good Company:
How Women Will Lead the Future of Business
By Lynthia romney
orporations and fnancial services frms

seeking to manage the complexities
and risks of todays global marketplace have a powerful resource at hand:
women executives.
The need for leaders who can effectively drive profitable relationships among interrelated networks of
customers and suppliers has never been greater. At
the same time, successful leaders must be able to
anticipate and outpace the myriad disruptions facing most industries across strategic, regulatory and
operational realms.
To tackle these and other pressing business issues,
corporations seeking strategic thinking, team building
and bold initiative need look no further than their own
diverse workforce. For companies with the vision and
pragmatism to promote them to their senior ranks,

women are todays competitive advantage.
Companies value accountable leadership, which
is a hallmark of todays effective managers, says
Kimberly Weinrick, President of the Financial Womens Association of New York (FWA). Successful
frms and their boards are recognizing the strengths,
talent and competitive benefts that diverse executives bring to a marketplace that is at once global,
multicultural and highly dynamic.
promotion 2 // Diversity
fwa.org
Founded in 1956, the FWA is dedicated to accelerating the advancement of
women in the fnancial community across
all industries. It offers women professionals access to the thought leadership, professional development and stakeholder
networks essential to success.
In one such interaction with a global
leader, JPMorgan Chase & Co. Chairman
and CEO Jamie Dimon last autumn spoke
most senior positions in their organizations, and is a trusted partner to many

premier fnancial and professional services frms enabling them to do so.
We at the FWA have long believed
in the power of the collaborative business model. Our FWA Presidents Circle members are able to provide their
womenand menwith access to the
leaders and innovators who are infuenc-
Founded in 1956, the FWA is dedicated to accelerating

the advancement of women in the nancial community
across all industries.
with FWA members on topics ranging
from critical issues in the fnancial markets
to navigating ones career path.
Getting to the top may not involve
always going straight up a ladderit
can and should involve some lateral
moves that expose you to new things
so you can work with different people,
Dimon said. You have to pick jobs that
are conducive to where you are during
each stage in your life.
The FWA is a signifcant source of support for women intending to rise to the
ing business today, says Lily Klebanoff

Blake, former FWA President, Chair of
the FWA Presidents Circle and President of Klebanoff International, a strategic global business consultancy.
The FWA Presidents Circle members,
corporations which provide support for
the organization, can also deeply engage
their women executives. The FWA offers
events on key industry topics, networking with women role models, and
opportunities for professional development, volunteerism and mentoring. On a
more targeted level, the FWA organizes

expert panels to provide advice to corporate members on priority issues ranging from global benchmarks for gender
diversity to senior-level strategies for
career advancement.
For example, a panel of female executives led by Ami Kaplan, Deputy Managing PartnerEast Region, Deloitte &
Touche LLP, discussed key leadership
traits at a recent Presidents Circle Best
Practices Breakfast. Critical conclusions
from the discussion were for women
to be visionary, think strategically and
use their ecosystem of contacts and
resources to build cohesive teams to
manage the risks and complexities of
todays marketplace.
Womens Winning Characteristics

Recent in-depth analysis of leadership
competencies confrms that women are
eminently qualifed to do so. In A Study
in Leadership: Women Do It Better Than
Men, Zenger Folkman Inc., an authority
in strengths-based leadership development, reported on a sampling of 7,280
male and female leaders from high-performing companies globally who completed its 360-degree assessment. The
report, released in 2012, looked at the top
16 competencies that the frms 30 years
Wells Fargo Advisors

women advisors from around the country gather in
a select location for two days of educational forums,
A-list speakers, and catered social gatherings; and
the Womens Business exchange, which connects
women advisors and leaders through regular conference calls and networking events.
Just as it has often led diversity eforts in the nancial

services industry, Wells Fargo Advisors supports its
women Financial Advisors in meaningful and measurable ways.
to get a sense of how that plays out among the rms
scores of women advisors across the country, just
ask margaret peg moore, a founding member of
the stutzmann-moore Wealth management Group of
Wells Fargo Advisors in Ann Arbor, michigan.
in addition to womens advocacy, Wells Fargo Advisors

encourages all of its advisors to set and reach career
milestones. As peg describes it, the rm asks Financial
Advisors to design what they want to become, and
then provides the training, growth, and development
opportunities to make it happen. thanks to the robust
network of support, peg has added three professional
designations to her rsum of industry credentials.
since joining the rm in 2006, peg has increased the

assets she manages for clients by 280%, moving from
a solid, mid-level producer at her previous rm to a
high-level business generator who holds the title of
managing Director - investments. in addition, peg has
earned some of the rms top distinctions and serves
as a mentor to up-and-coming women advisors.
she credits her career boost, in part, to initiatives
aimed specically at women advisors, and says the
rm provides an atmosphere of advocacy that is both
tangible and impactful. As examples, she cites the
Womens summit, a premier annual event in which
Peg Moore, CFP

Managing Director - Investments
Accredited Domestic Partnership
SM
Advisor SM
i choose to stay with Wells Fargo Advisors because of

the environment, peg explains. its not just about the
numbers; its about
the nurture.
92477-v1 (1113-02194)
Im positive about
my future.
And the strategy
to get there.
88
OF ENVISION PLAN
HOLDERS FEEL THEY ARE
ABLE TO LIVE THE LIFE
THEY PLANNED
Wells Fargo Advisors offers the Envision process, a unique planning tool
that helps us get to know your specific needs and goals in order to create
your tailored investment plan. Monitoring your progress is easy. Youll always
know if youre on course to reach your financial goals. Find out what having
an Envision plan can do for you by visiting envisionyourgoals.com today.
INVESTMENTS PLANNING RETIREMENT
Investment and insurance products: NOT FDIC-Insured NO Bank Guarantee MAY Lose Value
2012 Wells Fargo Advisors, LLC. Member SIPC. Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC and Wells Fargo Advisors Financial Network, LLC,
Members SIPC, non-bank afliates of Wells Fargo & Company. All rights reserved. Envision is a registered service mark of Wells Fargo & Company and used under license. RESULTS ARE BASED ON A SURVEY
CONDUCTED BY HARRIS INTERACTIVE FROM JULY-SEPTEMBER 2012 AMONG 606 INVESTORS WITH FINANCIAL ADVISOR RELATIONSHIPS. NOT INDICATIVE OF FUTURE PERFORMANCE OR SUCCESS. NOT REPRESENTATIVE
OF THE EXPERIENCE OF OTHER CLIENTS. 0513-05129 [87651-v3] a1520
fwa.org
of research shows are most important
to overall leadership effectiveness.
At every level, more women were
rated by their peers, their bosses, their
direct reports and their other associates as better overall leaders than their
male counterparts, stated co-founders
Jack Zenger, CEO, and Joseph Folkman,
Ph.D., President.
The report found that the competencies with the largest differences between
males and females were taking initiative,
practicing self-development, displaying
high integrity and honesty, and driving
for results. These traits map well onto
leadership roles strongly correlated to
organizational success factors such as
retaining talent, customer satisfaction,
employee engagement and proftability,
the report concluded.
They also apply to managing complexities and disruptionan area of
focus for CEOs.
The 2012 IBM Global CEO Study of
1,709 CEOs, general managers and
senior public sector leaders around the
globe asked how CEOs were responding to the complexity of increasingly
interconnected organizations, markets,
societies and governments. As part of
that answer, the report identifed top personal CEO success factors that included
customer obsession, inspirational leadership and leadership teaming.

The IBM report explained, The pressure to innovate is not subsiding, and
organizations are teaming to meet the
challenge. Compared to their less successful peers, outperformers are part-
they have risks that need to be proactively managed, and this is opening up
opportunities for women.
Haas notes that women can bring
inventiveness and focus to anticipating and managing strategic risksfrom
pricing or delivery disruptions to indus-
The FWA serves as a valuable resource for

companies interested in mining the potential of
women in their workforce.
nering for innovation more aggressively.
But they are also tackling more challenging and disruptive types of innovation.
Instead of settling for simply creating new
products or implementing more effcient
operations, theyre more likely to be moving into other industries or even inventing
entirely new ones.
Expanded Roles for Women

Managing Risk
Given their broad skill sets, women are
well positioned for this kind of leadership. Renetta Haas, Principal and
National Lead for Business Risk Services, Deloitte & Touche LLP, points out
that every industry is recognizing that
try consolidation. She sees new positions

being created to address these risks and
new opportunities for women to fll them.
Women executives show that they
can take a full-enterprise view and demonstrate transformational leadership,
Haas says. This opens another avenue
for women to enter the C-suite.
The most direct way for companies to
beneft from womens leadership potential
is to promote them. On this, there is still
considerable room for improvement: 24%
of senior management of global corporations are women, according to the Grant
Thornton International Business Report
2013; and women comprise only 4.4% of
the CEOs of the largest U.S. corporations.
BNP Paribas
Bnp paribas proudly supports its women
through its presidents Circle membership
in the FWA, which i have supported from its
inception. We have supported the FWA by
lending our global markets expertise, including the expertise of our female executive
leaders, in Brazil, the United Arab emirates
and our home market of europe.
Bnp paribas is committed to promoting a

diverse, inclusive and stimulating work environment; one where employees are treated
with dignity and respect, and value is given
to diferences in thought, backgrounds,
experiences and perspectivesas well as
where the nest talent is attracted, retained,
developed and empowered to succeed.
in nearly 80 countries, Bnp paribas benets
from the diverse perspectives of its employees and clients. our north American Diversity Council and eight Business networking
Groups are award winning internally and
externally. We received a siFmA Diversity
Award in the emerging Leader category, and
a perfect 100% score on the Human rights
Campaign Corporate equality index.
Jean-Yves Fillion
Chief Executive Ofcer
BNP Paribas North America CIB and IS
fwa.org
Why increase these numbers? Studies have shown that including women
in leadership, specifcally on boards
of directors, enhances share price
performance. Among them is Credit
Suisses Gender Diversity and Corporate Performance Report of August
2012, which added that evidence suggests that more balance on the board
brings less volatility and more balance
through the cycle.
The FWA: Delivering the

Benets of Diversity
A diverse and inclusive culture generates innovative solutions, FWAs Weinrick says. By engaging women and
diverse professionals at all levels and
opening the organization to a rich variety of viewpoints, a company is better
prepared to manage the complexities of
the marketplace and drive proftability
for its shareholders.
The FWA serves as a valuable resource
for companies interested in mining the
potential of women in their workforce.
The FWAs distinctive array of events
and programs support women throughout the arc of their careers, with a crucial
focus on high-potential women who are
rising in their organizations, Klebanoff
Blake points out.
The FWA Presidents Circle companies are committed to retaining and

promoting their female talent, she says.
We work with each of them to create
an annual strategy that is customized to
their business priorities and refreshed
on an ongoing basis.
A diverse and inclusive

culture generates
innovative solutions.
Kimberly Weinrick, President, FWA
For senior women executives, the FWA

has also designed a special invitationonly initiative, the FWA Executive Leaders program, to provide a focused opportunity to network with peers and expand
their business relationships.
Yet high-voltage visibility also serves
to sustain senior womens careers, and
the FWA Annual Dinner provides this
venue when it honors the FWA Women
of the Year, one each from the private and
public sectors, before 500 professionals
from the nations most prominent fnancial institutions and corporations.
Consistent with the value shared by

many women in giving back to the community and educating the next generation of leaders, the FWA offers robust
mentoring and scholarship programs for
students aspiring to college and graduate school and beyond. To date, these
programs have helped more than 5,000
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eNtrePreNeurs
cloud software
Tapping Inspiration
Now in his fourth startup, Howard Lerman has an
uncanny sense of timing. Whats his secret?
BY J.J. COLAO
This is crazy. Why are

you doing this?: Yext
cofounder Howard
Lerman knows when to
pounce, when to fold.
ante had his Beatrice, and

Keats, Fanny Brawne. Howard
Lermans muse? It appeared
after he stepped onto a treadmill at a Manhattan Upper
West Side gym seven years ago. So Im looking at Al Sharptons Spandex butt, and Im
like, I dont want to look at that, recalls the
33-year-old CEO of Yext. So I look out the
window instead. Outside he spotted a gym
salesman spinning a Wheel of Savings to

lure pedestrians with free trials and discounts. I walked out and said, This is crazy.
Why are you doing this? The rep told him
nobody read the Yellow Pages anymore, so
he had to fnd some way. Inspiration struck.
Less than a year later Lermans GymTicket.
com, a lead-generation service, had signed up
3,000 gyms around the country.
Epiphanies come in strange packages. The
most successful entrepreneurs act on them
but also know when to let go. Lerman has
been through that respiratory exercise three
times. Dressed in black at his corner ofce
near Madison Square Park, hes now deep
into his fourth company, the result of abrupt,
decisive shifts in strategythe sort that
transformed GymTicket.com into Yext via
a strange and tortured path. Investors, who
have bet $66 million on two incarnations of
the business since 2006, havent yet seen a
dime. But with this latest iteration, Lerman is
pretty sure he has it right.
Today his 250-person outft sells cloud
software that helps brick-and-mortar businesses manage online storefront dataaddresses, phone numbers and business hours
among themto keep listings accurate while
monitoring customer reviews and referral trafc from 46 websites, including Facebook, Yahoo and Yelp. They pay $500 per
year for each location while massive enterprise customers like Citibank and FedEx get
a discount. Just three years old, it should do
$33 million in sales this year, with 70% gross
margins, says Lerman. Hes confdent sales
will double again in 2014.
Growing up in Vienna, Va., the son of a physician and a store manager at Eileen Fisher,
Lerman went to a magnet high school that had
a $1 million supercomputer. He rigged a phone
line to his PC to access an online network of
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From the maker of
eNtrePreNeurs cloud software
conversations. For vets, spay might incur

an $80 charge, checkup just $5. By 2009
the company was nearly proftable and approaching $20 million in sales, yet few had
heard of it. Lerman and company did the
rounds on Sand Hill Road, emerging with $25
million from Institutional Venture Partners.
Yet after just a couple months Lerman saw
he was on the wrong path. We f---ed up, he
concedes. We should have never raised that
money. The model turned into a quagmire,
as clients disputed charges and tied up account managers. Growth slowed; managing
ten websites grew untenable. Instead of folding up or searching for a sucker to buy the
operation, Lerman decided to start an entirely new company within Yext.
In the spring of 2010 he grabbed three
employees, appointed Metz de facto CEO
of the old operation and holed up in a separate room. For years his customers had told
him how hard it was to keep tabs on dierent online listingsuntil their clients griped
about outdated addresses or business hours.
When the cloud software debuted in January
2011, it was an immediate hit. Sales were $2.7
million in 2011, $14.2 million last year. The
old business, meanwhile, known as Felix,
looked like deadweight.
At the suggestion of venture capitalist Ben
Horowitz, who declined to invest in Yext,
Lerman decided to spin out Felix, selling it to
IACs CityGrid Media for $30 million in April
2012. The proceeds went directly to Yexts
balance sheet. Two months later Lerman
raised a $27 million round, at a $270 million
valuation, from existing investors, plus Marker and CrunchFund. (Lermans worth: an estimated $50 million.)
Lerman is positioning Yext beyond local
data. He talks of Starbucks managers using
it to post pictures and specials on each locations Facebook page. And when retailers
start pinging in-store shoppers with geo-targeted ads, Yext might serve as the platform
for managing such campaigns. Meantime,
he can fsh among the estimated 20 million
storefronts in the U.S. and 50 million globally.
His current muse is his wife, Wendy. Just
months ago he sported shoulder-length
curls and a beard that ran untrimmed down
his neck. One day my wife was like, Youre
starting to look like a homeless guy, he says.
Today, coied, he looks like tens of millions. F
fouNders
toolBoX
PUBLIC HEALTH
Its been a great year for IPOs.

Twitter stole the show, of course,
raising nearly $2 billion. But
others have starred, too. Techs
41 oferings have pulled in
$7.4 billion as of Nov. 20; the
industry has topped the charts
in number of deals four years
running. But look as well at
health care (50 issues, raising
$8.4 billion), nancial services
(43; $9.9 billion) and energy (19;
$9.2 billion). This isnt a return to
Icarus-like 1999 and 2000, when
more than 400 new issues took
about $100 billion from investors
each year. But by the end of 2013
we will probably see 230 IPOs
raising close to $50 billion, says
Kathleen Smith, a principal at
Renaissance Capitalthe best
year since 2000.
Emily Inverso
HAL MAYFORTH
local hackers. (Sean Parker grew up nearby

and occasionally joined the chats.)
While at Duke he studied history, the
easiest major he could fnd, and teamed up
as a sophomore in 2000 with high school
classmates Tom Dixon and Sean MacIsaac,
now Yexts COO and CTO, to launch
JustATip.com. Based on a whimprank calls
from high school daysthe service let users
send tips anonymously, e-mailing friends
about, say, their oensive body odor or lack
of rhythm. An intern at the White House at
the time, Lerman says he may or may not
have used government computers to build it.
The gag caught fre on college campuses. Jon
Stewart used the website on The Daily Show
in 2001 and usage rocketed to a million visitors per month. But token revenue from banner
ads barely made a dent in server bills, and the
founders searched for an acquirer. Two deals
fell through before Trafx, a publicly traded online marketer, bought the site for $150,000.
After a couple of roaring keg parties, the
trio launched Intwine, a consulting frm that
specialized in Microsofts .NET programming language. Within three years it grew to
30 consultants and $5 million in sales. It sold
to Datran Media, a digital marketer, for $7
million in 2005.
Next up, GymTicket.com. It worked like
this: Web surfers on the hunt for a gym found
the site through ads and search engines, entered their Zip codes, then viewed a list of
local gyms. When they called to sign up for
a trial membership, GymTicket pocketed
a fee. Lerman enlisted Brent Metz, a high
school friend and IBM speech scientist, and
Brian Distelburger, a colleague at Trafx, as
cofounders. Sales
jumped to $1 million
Instead of
within a year, and
folding up or
soon they expanded
searching for a
to nine more categories, including Local- sucker to buy
Vets.com and TVRethe operation,
pairman.com.
Lerman
With the sites
decided
rolled into Yext,
they developed tran- to start an
scription technoloentirely new
gy that recorded cuscompany
tomer phone calls
within Yext.
and charged clients
based on keywords in
Three Truths for

Highly-Paid Experts
By Brendon Burchard, #1 New York Times bestselling
author of The Millionaire Messenger
1. Who you are, what you know, and the advice

you have for others has greater importance and
market value than you ever dreamed.
2. You are here to make a difference. The best way
to do that is to use your knowledge and
experience (on any topic, in any industry) to
help others succeed.
3. You can get paid for sharing advice and howto information that helps others succeed, and in
the process you can build a lucrative business and
a profoundly meaningful life.
If any of this sounds unbelievable, then its probably
because youve never heard of the highly-profitable
experts industry.
The experts industry is a community of people who
share their advice and knowledge with the world and
get paid for it. These are people who have packaged
their successes, research, or life story into advice for
others and thus have become experts on a given
topic. They teach others how to live a better life or run
a better business. They create content and courses
online, along with coaching programs and live events,
and they offer them to the public for high prices.
In my case, I have books, DVDs, audio programs,
online video courses, seminars, and coaching
programs. I teach and coach people on how to succeed
more in their lives and careers. I do this from home and
I make millions of dollars doing it. Id like to show you
how. Check out my free videos here:
http://www.ExpertsAcademy.com/FreeVideos
You are SMARTER,

more experienced,
and more helpful
than youre being
paid for. Its time
to monetize what
you know online.
Meet Brendon. He
has less life and
work experience
than you do. Hes a
pretty simple guy
from Montana, but
hes figured out how
to monetize what he
knows online. Brendon works from home
and has made over $10,000,000 in sales
from his video courses, books, events, and
online programs. He doesnt have a fancy
office or big team. He just puts stuff online.
Millions of people are searching for good
advice on how to live a better life or run a
better business. Why not put yourself in
front of them? Why not monetize who you
are and what you know?
Your advice and wisdom is valuable, even
if you dont know it yet. Your message can
make a difference. Let us prove it. Go here:
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Monetize your wisdom and experience online. FREE video training here:
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Promotion // Business AviAtion
Business Aircraft
Acquisition +
Financing Guide
Written by
Tony Velocci
Tony Velocci is the former editor-in-chief of Aviation Week &
Space Technology magazine and was twice named
Aerospace Journalist of the Year by the U.K.-based Royal
Aeronautical Society. He is a member of the Board of
Directors of the National Aeronautic Association.
uccess in todays global, fast-paced economy is getting more challenging all the time, with companies on a never-ending quest for competitive
advantage amid rising customer expectations. But heres an insight that
management teams would be wise to consider: The best-run enterprises in the
world are avid users of business aircraft.
Recent updates to a widely respected 2010 report by NEXA Advisors, entitled
Business AviationAn Enterprise Value Perspective, confrmed as much. The
study, perhaps the most comprehensive of its kind, had the support of the National
Business Aviation Association (NBAA).
The correlation between business aircraft use and business success is no
coincidence, says Michael Dyment, founder and managing partner of NEXA
Advisors. Evidence of the value provided by business aircraft use can be seen
in the remarkably consistent correlations between the aggregate performance
of companies and industry sectors using business aircraft when measured
against those which do not. Among the Global 2000, a Forbes compilation
of leading companies, no less than 88% of the top 50 were users of business
aircraft, he notes.
A Strong Business Case

Since 2007, managers have been especially challenged to sustain revenue and
proft growth while maintaining healthy balance sheets. Here, too, the benefts
of business aviation are measurable and signifcant, according to NEXA. The
updated study examined the performance of the S&P 500 companies during
and after the Great Recession, between 2007 and 2011. Key fndings included
the following:
Business aviation users in 2011 represented 84% of the companies listed on
the S&P 500 and accounted for 96% of total revenue.
Of the companies added to the S&P 500 between 2007 and 2011,
74% use business aviation.
2 Promotion // Business AviAtion
As more companies around the world

have discovered the potential of business aviation to help them respond
to market opportunities and capture
value, the demand for business aircraft as a return-on-investment tool has
expanded. According to NEXA, from
2008 to 2009, when the global recession
was at its worst, annual GDP contracted
on a worldwide basis by 0.6%. During
the same period, the worldwide installed
base of business jets and turboprops
grew by 4.4%, according to the study.
In 2012, there were 19,258 fxed-wing
jets and 13,762 turboprops operating
around the world, for a total of 33,020
aircraft. Thats up from 23,720 in 2004a
39% increase. In North America, principally the U.S., business aviation has continued to expand, albeit at a slower pace
since the Great Recession.
Between the wide range of innovative
aircraft-acquisition programs and the
availability of favorable fnancingnot to
mention the numerous airplane models
to ft every conceivable needbusiness
aviation has never been more accessible. But that doesnt necessarily mean
chartering, leasing or even purchasing a
whole aircraft are the only choices.
Best of Both Worlds

An increasingly popular alternative is
fractional ownership, which is designed
to provide all of the benefits of whole
aircraft ownership at a fraction of the
cost. Owners get guaranteed access
to an airplane on short notice; they are
able to fy where they want to go, when
they want to go; and they avoid the burden of management responsibilities.
The undisputed leader in fractional
ownership is NetJets, a Berkshire
Hathaway company. NetJets pioneered
the concept of fractional ownership in
Photo courtesy of NetJets
A significant number of companies

that dropped from the S&P 500 during
the same period were non-users of
business aviation.
S&P 500-listed companies using business aviation mitigated revenue losses
and recovered more quickly from the
Great Recession than non-users.
Reasons for Business Aircraft Use

schedules not met
64% Support
by commercial airlines
locations scheduled
19% Reach
airlines do not serve
or personal
6% Industrial
security reasons
connections with
1% Make
scheduled airline fights
9% Other
Note: Total does not equal 100 due to rounding. Source: Harris Interactive Survey, 10/2009
the mid-1980s. A NetJets entry-level

share provides 50 annual fight hours,
and customers can purchase additional
shares in 25-hour increments, up to 800
fight hours annually.
For customers who need fewer than
50 flight hours a year but still want the
advantages of private aviation, there
is the NetJets Marquis Card. It allows
prospects to realize the benefts of fractional ownership before signing up, says
Adam Johnson, senior vice president
of global sales, marketing and service.
The Marquis Card is sold in one-year,
25-hour increments. Since it requires no
long-term commitment, the program is
especially popular with companies that
already own a business aircraft and need

supplemental airlift capacity. They simply prepay for the 25 hours of occupied
flight time for the specific aircraft type
selected. Nearly 4,000 individuals and
companies participate in the Marquis
Card program.
There are nearly as many NetJets
fractional ownersa group that includes
some of the worlds most admired companies and numerous prominent individuals in business, sports and entertainment. Becoming a NetJets fractional
owner involves a one-time purchase of
a specific serial-numbered aircraft.
The size of the share and the aircraft
type dictate the price. There also is a
Shopping for charter quotes

sounds good, until you think
about what its worth to you.
The NetJets Signature Series gives you more choices
to support your business and ensure your familys
safety. We deliver safety standards beyond the FAA
and like no other. Youll never have to gamble with
who operated your plane last or how your pilots were
trained. But we also make sure you have peace of
mind in product choice, peace of mind in your datas
security, and peace of mind that your experience will
be whatever you need it to be.
Contact us at netjets.com or 877-JET-5912
SHARE / LEASE / JET CARD
A Berkshire Hathaway company
All aircraft offered by NetJets in the United States for fractional sale, lease, or use under the Marquis Jet Card and Private Jet Travel Card programs are managed and operated by
NetJets Aviation, Inc., a wholly owned subsidiary of NetJets Inc. NetJets, ExecutiveJet, and the Marquis Jet Card are registered Service Marks. 2013 NetJets IP, LLC. All rights reserved.
4 Promotion // Business AviAtion
monthly management fee, plus a cost to

cover the hours that the owner actually
occupies his aircraft, depending on the
type, and fees to cover such necessities
as hangaring.
The minimum commitment is 24 to 36
months, again depending on the aircraft
type. Direct fnancing is available. From
a tax and legal standpoint, a NetJets
share is similar to purchasing a whole
aircraft: owners get all the financial
benefts of a capital-equipment acquisition. As an added beneft, customers
can exchange the aircraft type in which
they have a fractional ownership for any
other airplane type in NetJets U.S. feet
that may better satisfy a specifc travel
requirement.
NetJets recently introduced the Supplemental Lift Assurance program, with
guaranteed access to the entire NetJets
feet worldwide, based on comparable
cockpit confguration, in as little as four
hours. Here, too, there is no long-term
The correlation between

business aircraft use
and business success
is no coincidence.
Michael DyMenT
Photo courtesy of Jessica Ambats
neXa aDVisors
88%
Recession in 2009,
commitment
when the pace
and no obliof industr y activgation to comOf THe TOp
ity dramatically
mit to a specific
50 companies
slowed. NetJets
aircraft type or a
ON THe Forbes
reached out to ownspecific number of
ers and pilots to ask
Global 2000
fight hours.
how
their needs were
As the worlds largARe BUSINeSS
likely to evolve. We
est fractional ownerAIRcRAfT
spent a lot of time lookship provider, NetJets
USeRS.
ing at avionics and cabin
has fown more hours and
comfort, including noise
has more customers than
Source: NEXA
attenuation, says Johnson.
all other fractional aircraft
Advisors
NetJets is attracting growcompanies combined. By any
ing interest from whole-aircraft
me a sure, its f le et is huge
owners who no longer want the
more than 700 aircraft in every
hassle of flight planning, crewing
category of size, range and cabin
and training, and who would prefer
featuresand it manages more than
300,000 fights annually to more than to hand off all of these responsibilities.
We are receiving a lot of calls from
170 countries.
As unrivaled as NetJets is currently, individuals and businesses that want to
the company plans to renew its fleet exit whole ownership, says Johnson.
over the next ten years. On order are The solution: a service in which Net670 next-generation aircraft, custom- Jets can leverage its network of dealized from design through product ers to broker the sale of aircraft and
development. The initiative, called the help customers make the transition.
NetJets Signature Series, will include Being a part of Berkshire Hathaway,
advanced cockpit and cabin technolo- we have the financial wherewithal to
gies to ensure maximum safety, reliabil- provide this level of support.
ity and operating effciency, as well as
advanced in-flight entertainment sys- High Flier
tems. NetJets recently took delivery of Regardless of how an individual or
the frst of these new models: the Global company chooses to access business
6000 and the Embraer Phenom 300.
aviationcharter, fractional or a traT he S ignature S e r ie s wa s c on - ditional purchaseno manufacturer
ceived during the height of the Great offers more options than Embraer.
It produces seven different models,
ranging from the entry-level, four-tosix-passenger Phenom 100 with a
range of up to 1,356 statute miles, to
the Lineage 1000, an ultra-large business jet that can whisk up to 19 passengers in stylish comfort at more than
540 miles an hour, or up to eight passengers some 4,600 nautical miles.
The Phenom 300, part of the NetJets
Signature Series, can transport up to
six passengers at 520 miles per hour.
This is classifed as high-speed cruise.
With its range of 2,268 statute miles,
Boston to Miami would ft well within a
typical Phenom 300 fight profle.
The aircraft has proven ideal for
Wayne Gorsek, a Las Vegas-based
Business AviAtion // Promotion 5
entrepreneur who founded DrVita, a nutritional health company, in

2011. He chose the Phenom 300 after checking out two competing models of similar cabin size. Nothing else came close, so it
was simply a better value all around, says Gorsek, who frst owned
a Phenom 100. I liked the fact that it was a clean-sheet design,
and the airplanes endurance and safety features were unrivaled.
Gorsek uses his Phenom 300 primarily to help him manage the business as it continues to mature.
Like most business aviation users, Gorsek is a stickler for productivity, and therefore is thrilled that he can avoid commercial
aviation for most business travel. How can you trust commercial
carriers nowadays to get you to important meetings on time or
accommodate unplanned changes in your work schedule? With
my Phenom 300, I have all the fexibility I need to be as productive
as a start-up demands.
With its worldwide reputation for innovation in both commercial
and business aviation, Embraer recently announced enhancements
to two other aircraft in its product line that already had set standards
for performance.
The Legacy 500, the worlds frst full fy-by-wire midsize business
jet, features a six-foot-tall fat-foor cabineven wider than that of
some more expensive aircraft in the super-midsize category. Flyby-wire offers a smoother ride for passengers because the fight
control computers maintain aircraft path, adjusting for environmental changes much quicker and more precisely than humans
can react. Eight club seats may be berthed into four beds for complete rest at a cabin altitude no greater than 6,000 ft. As for the
Legacy 450, its range was increased to 2,500 nautical miles200
farther than its initial specifcations. The jet shares the same cabin
cross-section as the Legacy 500, allowing four club seats to be
berthed into two beds.
The enhancements get a thumbs-up from Embraer Executive
Jets. The Legacy 450 will be the best-in-class mid-light executive jet, says Ernest Edwards, president, Embraer Executive Jets.
We never stop listening to our customers input. And, thanks to
their invaluable feedback and our commitment to deliver distinctive business aircraft, both the Legacy 450 and the Legacy 500
will offer an above-premium travel experience.
n
Types of Locations Accessed

by Business Aircraft
23
FliGHT
loG
Building a new company from the ground up
is hard enough, but when customers and suppliers are spread across the country, the job of
running the business is that much more demanding. Such is the challenge for entrepreneur Wayne
Gorsek, who launched a nutritional health company in 2011.
The company, DrVita, headquar tered in las
Vegas, is growing even faster than a similar enterprise he started in 1994, Vitacost, which he built
into the worlds largest vitamin retailer. In both
cases, Gorsek credits business aviation as one of
the keys to his success.
To meet with DrVita suppliers and vendors across
North America, Gorsek relies primarily on his
embraer phenom 300. Soon after earning his single-pilot rating in the aircraft in 2011, he took delivery at the embraer factory in Brazil.
Gorsek thoroughly enjoyed flying his phenom
100, which he acquired in 2009, and has found the
larger and faster model to be even more versatile.
With a top speed of 450 kts and more than 15%
greater fuel effciency than other business jets in
its size categorynot to mention the ability to fy
above virtually any unfavorable weatherit allows
Gorsek and his management team to cover a lot of
territory in a relatively short time.
He and his vice president of sales and marketing
recently few from las Vegas to Arkansas to meet
with costco and Sams club buyers, and then on to
Seattle for a similar conference with drugstore.com
executivesall in a single day. The same travel and
business agenda would have taken me three days to
complete fying commercially, he says. Our meeting with costco went three times longer than we
originally planned, but that was no problem because
we had the fexibility we needed. Im able to conduct
business on my schedule, not commercial aviations,
and that makes all the difference in the world.
cOMpANY-OWNeD
OffIceS/fAcIlITIeS
18
NeW BUSINeSS
OppORTUNITIeS
13
cUSTOMeR
OffIceS
Note: Each total represents the average number of locations fown into
during a six-month period, based on a survey of 305 chief pilots.
Source: Harris Interactive Survey, 10/2009
Wayne
Gorsek
DrViTa
The 2O14
InvesTmenT GuIde
EditEd By JanEt novack and Matt Schifrin
he stock market gods were benefcent in 2013, but economic instability and pitifully low yields mean building
wealth in 2014 will be challenging. In this special 2014 Investment Guide weve distilled sophisticated investing advice to its actionable essence. Weve got nine formulas for answering such key problems as How much
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where the best fracking-boom returns can be made, how to proft from convertible bond deals and how to get the biggest
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Additionally we tackle hotly debated ideas like whether art is worth the investment and whether the 401(k) business is in need of the overhaul Nobel laureate Robert Merton has devised for it. In the interest of investor protection
and salvation we profle one young money mans crusade to protect commodities investors; how a Forbes 400 member
is breathing new life into underwater mortgages; and how another dedicated his NFL football fortune to helping the
smartest poor kids. Finally we ofer the tale of how one family is wrestling with its intellectual property inheritance built
around a fearless and enchanting little girl named Madeline.
#2
Dont mistake a low P/E ratio for a value stock.
#4
Let your attorneys ride shotgun, but not in the

drivers seat.
#3
Benjamin Graham: Patience is the fund investors

single most powerful ally.
#1
Sir John Templeton: Invest at the point of maximum pessimism.
#5
Remember Enron; reduce your employers

company stock in your 401(k).
TempleTon: Brian SmiTh/CorBiS; BeTTmann/CorBiS; enron: paT Sullivan/ap
Barbara Bemelmans cant part with

her fathers belongings and controls
the character he created.
#13
#14
#15
Add a personal items oater to

your homeowners insurance
to cover collectibles.
Beat death taxes in 20 states by making big gifts while youre alive.
#6
Warren Buett: Rule No. 1 is

never lose money. Rule No. 2 is
never forget Rule No. 1!
#19
View collecting as a hobby

rst and investment second;
psychic returns can make up
for a lower average return
than in stocks.
For simple federal tax-free wealth transfer, make $14,000 annual

gifts to children and grandchildren. It wont cut into your
$5.25 million lifetime exemption from gift and estate taxes.
#20
#21
When the bear charges, stand

your ground.
Get tax advice before settling a lawsuit.
#22
#7
For protection from ination and currency devaluation, buy the

gold you can eatfarmland.
BuFFeTT: JaCK WelCh; STernliChT: Simon DaWSon/BloomBerG; lYnCh: Brian SnYDer/reuTerS/lanDov; BiTCoin: Tomohiro ohSumi/BloomBerG; Bear: DarWin WiGGeTT/GeTTY imaGeS; real eSTaTe: GeTTY imaGeS
Fund a Roth IRA if youre

eligible; your money grows tax
free for retirement, and in an
emergency you can take your
contribution back without
penalty.
#23
Know your risk tolerance. Pick an asset allocation that lets you
sleep at night, so you wont panic and sell stocks at the bottom.
#24
Dont keep too much in cash equivalentsover time, this safe

investment barely keeps up with ination.
#25
After setting an asset allocation, rebalance yearly;

it forces you to take prots when stocks have surged and
to buy more shares when theyre cheap.
#16
Read Reminiscences of a Stock Operator by Edwin LeFvre.
#26
Benjamin Graham: Adopt simple rules and stick to them.
#17
#8
#30
To keep peace with both relatives and the IRS, document all
family loans.
Dont invest in a hedge fund

unless its audited results
are reported in compliance
with Global Investment
Performance Standards.
Barry Sternlicht: Pay attention

to the big themes, because they
are what will help you earn ten
times your money.
#31
#9
Build an emergency fund

outside your 401(k).
Back a friend or relatives

startup with a convertible
loan, so you share in the
upside.
#27
Buy Bitcoin as a speculation or

political statement, not
a hedge.
#10
#28
Use commodities as a hedge

against ination.
Be a tax-smart investor. Hold

taxable bonds in a 401(k)
or IRA. Put individual stocks
in taxable accounts so
you can sell losers to harvest
tax losses.
#11
Raise the deductibles on your

auto and home insurance.
#12
Form family limited

partnerships to transfer assets
at a tax discount.
#18
Peter Lynch: Never invest in any idea you cant illustrate

with a crayon.
#32
For the biggest tax break when

donating collectibles to charity,
make sure theyll be displayed
and not sold.
#33
Put alternative investments

like real estate (but never
collectibles) in your IRA.
#29
Pay attention to the IRS wash

sale rule when harvesting
capital losses.
2014 Investment guIde
Madeline in stir: Rather than part

with it, Barbara Bemelmans keeps
much of her dads art in storage.
Madeline and
the FaMily Business
The adventures of a Parisian schoolgirl have enchanted
generations. Now shes imperiled by a lack of planning.
By DeB0Rah L. JacoBs
FamIly wealth
L
WALTER SMITH FOR FORBES
udwig Bemelmans, the Austrian-born American writer

and artist, had no retirement
savings but used to tell his
wife, Madeline will be our Social
Security. When he died of pancreatic
cancer at the age of 64 in 1962, his
estate was valued at only $200,000.
Today Bemelmans legacy has
evolved into a family business worth
millions, and as he predicted, it all
revolves around a valuable piece of intellectual property named Madeline
that fearless, independent Parisian
schoolgirl he created (although his

descendants talk about her as if she
were real). In six books, starting with
the original Madeline published in
1939, she has an appendectomy, gets
lost at the circus and nearly drowns in
the Seine.
Madeline books have sold more
than 13 million copies. Yet her recent
perils highlight the challenges of protecting and building on an intellectual
property inheritance. Unlike other famous literary legacies mined to huge
economic advantage after the authors
deathfor example, those of Dr. Seuss
and Agatha Christiethe Madeline
brand has only partially tapped its potential. Now her future is clouded by a
lack of succession planning.
Artistic talent skipped a generation from Ludwig Bemelmans to his
youngest grandson, John Bemelmans
Marciano, 43, born eight years after
his death. Marciano has written and
illustrated eight Madeline booksthe
latest, Madeline and the Old House in
Paris, published in October.
But Marciano hasnt inherited the
keys to the kingdom. Those are still
held by his mother, Barbara Bemelmans, 77, the late artists only child.
Ludwig Bemelmans left the copyrights to Madeline, 11 other childrens
books and about 20 adult books, as
well as all his paintings and drawings,
in equal shares to Barbara and to his
wife, Madeleine. (He named Madeline
for his wife but altered the spelling for
a better rhyme.) Barbara has been in
sole charge since her mother died in
2004. Despite demand for Ludwigs
artwork, Barbara hasnt sold anything
in recent memory and stores hundreds of paintings and drawings at
Crozier Fine Arts, a New York storage
facility.
Theyre good stewards to the
extent that they look after what they
have but have been leery of taking
the franchise in new and potentially
lucrative directions, says Jane Bayard Curley, curator of a Bemelmans

exhibit scheduled to open in July
at the New-York Historical Society.
Both John Marciano and his mother
have been unreceptive to e-books, for
example. And theyve done very little
to develop Madeline.comeven after
spending more than $10,000 during
the late 1990s to buy the domain name
from a cybersquatter who threatened
to sell it to a porn site.
At times, Barbara acknowledges,
she has found the burden of protecting her fathers legacy overwhelming. If my father had left me a shoe
factory, and sometimes I wish he had,
that would be simpler, she wrote in
an e-mail to FORBES.
Today the center of operations for
Ludwig Bemelmans LLC is a 69-acre
New Jersey horse farm where Barbara
and her ex-husband gave riding lessons, held horse shows and ran a summer day camp while raising their three
sons. She still lives in a 19th-century
farmhouse with two poodles and rents
out the huge stable where she keeps
her 12 miniature horses.
Nearby is a two-story building,
once a general store, that Barbara
also owns. She has flled its capacious
downstairs with many of the contents of the Gramercy Park apartment where her father was living
when he died 51 years ago. The arrangement gives the impression that
Ludwig Bemelmans has just stepped
out, with jars of paint brushes, his
Olivetti typewriter, tubes of oil paints
and a watercolor palette scattered
around. On a table are stacks of
institutional china: demitasse cups
from the Ritz-Carlton Hotel in New
York (closed in 1951), where Bemelmans worked before he became a
writer; dinner plates from the Carlyle
Hotel, where he once lived; and more
plates, from Lchows, a famous German restaurant (it closed in 1986) in
#34
Burton Malkiel: All index

funds are not created equal.
Some have unconscionably
high expenses.
#35
Keep an eye onbut dont

obsess overmutual fund
fees and expenses.
#36
Even committed indexers

should use actively managed
funds to buy municipal and
high-yield bonds and
value stocks.
#37
Yield is nice, but total return

is the metric that matters.
#38
Gold is overrated as an
infation hedgehistorically,
its price moves are unrelated
to infation.
#39
For infation protection, buy

foating-rate
corporate bonds.
#40
Dont let the mood swings

of Mr. Market coax you into
speculating.
#41
Beware afnity fraud; fnd

God, not hot investments, at
your church, synagogue or
mosque.
FamIly wealth
New York that he frequented.

It all sets the scene for Barbara Bemelmans show-and-tell about Poppy, as she
refers to her dad. The family moved 17 times
while Barbara was growing up. Ludwig Bemelmans roamed the world, mingling with the
rich and famous: Armand Hammer, Greta
Garbo, Princess Margaret and Aristotle Onassis. Often Barbara Bemelmans traveled with
her bon vivant father, meeting Dorothy Parker
and Ernest Hemingway, and lunching with
him at the iconic New York restaurant 21.
When her dad died, I realized that I would
never get a good table at 21 again, she quips.
Where Barbara cant part with anything,
Poppy was extravagant. I never got the feeling that we were poor, but I often got the
feeling that we were broke, she recalls. As
Ludwig wrote in one undated letter to his
daughter: I consider money a fuid and that it
runs through my pockets like a sieve.
Ludwigs many letters, along with notes
and sketcheson napkins, hotel stationery,
the backs of menus and inside of matchbook
coverswere a valuable resource for grandson
John Marciano when he took up the family
franchise after studying art history and studio
art at Columbia College and working as a
newspaper reporter and editor.
In 1999 John published a biography of
his granddad, Bemelmans: The Life and Art
of Madelines Creator, and his frst Madeline
book, Madeline in America and Other Holiday
Tales, based on a mock-up for a book in his
grandfathers papers.
He spent a year studying and practicing his
grandfathers illustration methods and the cadence of his rhymes before venturing out with
his own Madeline stories. The frst of these,
Madeline Says Merci: The Always-Be-Polite
Book (2001), was his most successful, selling
60,000 copies. Others have not been as well received. The joy and brio of the original books
#43
#42
Sir John Templeton: The

four most dangerous words in
investing are: this time
its diferent.
Dont put more than you

can aford to lose into a
crowdfunded deal; startups
are always risky, and the
new JOBS Act reduces both
paperwork and investor
protection.
#44
Dont underrate the

importance of liquidity.
#45
Use Quicken or a Web service

to track all your fnances and
see your big picture.
#46
Use diferent passwords for

each of your online fnancial
accounts; add optional security
questions whose answers cant
be found in your Facebook or
LinkedIn profles.
Never poor but often broke: Ludwig Bemelmans with

wife Madeleine and daughter Barbara, circa 1942.
go missing, panned Publishers Weekly, reviewing Madeline and the Cats of Rome (2008).
Marciano makes no apologies. I want my
books to sit comfortably on the shelf alongside
my grandfathers books, he says, adding its
analogous to comic strip characters who are
reinvented and reimagined. For example, Ludwig Bemelmans corresponded for more than
six months, starting in late 1961, with Jacqueline Kennedy, then First Lady, about collaborating on a book that he wanted to call Madeline
Visits Caroline. The project was cut short by his
death in October 1962. But Marciano turned
the idea into Madeline at the White House
(2011), modeling the Presidents daughter after
his own little girl, Galatea, now 4.
Still, the bigger issue isnt creative but
legal: Doing a sequel to a book using the
same character requires permission of the
copyright owner, says Andrew Boose, a
lawyer with Davis Wright Tremaine in New
York. John Marciano has a friendly arrangement with his motherhe owns the copyright to the text and art in the Madeline
books he has produced; she gets royalties
from her fathers books. But without a formal
#47
Write down your passwords

and hide them; tell one
person where they are.
#48
Dont fght demographics

allocate a portion of your
portfolio to health care and
biotech stocks.
#49
Diversify globally to boost

your portfolios risk-adjusted
performance.
TOP: CONd NAST ARCHIvE/CORBIS; MALkIEL: PETER FOLEy/BLOOMBERg; TEMPLETON: ANN STATES/REA/REdux; gLOBE: LEONELLO CALvETTI/STOCkTREk IMAgE
2O14 Investment guIde
forbes
BrandVoice By FidElity
license, Boose says, Marciano could
lose the exclusive right to do sequels
when his mother dies, assuming she
leaves the copyright in equal shares
to her three sons. (Fortunately Marciano has got plenty else going on
besides Madeline; his The Nine Lives
of Alexander Baddenfeld, a darkly
humorous midgrade reader, was published in October, and hes negotiating a 13-book deal for his own series.)
But copyright is just one of many
tangled issues swirling around Madeline. Neither of Johns older brothers
is actively involved in the family business. Paul, 47, gives corporate workshops. Pauls twin, James, a retired entrepreneur, owns the Madeline website
but says he and his mother have never
been able to get on the same page
about what to do with it.
So Barbara Bemelmans faces a
thorny issue that confronts many parents with family businesses in which
only one child is actively involved:
whether to divide assets equally
among children or in some other way
that might better ensure continuation
of the family business. I dont know
what to do, so I dont do anything,
she admits.
Another continuing dilemma has
been fguring out what her father
would have wanted. After Ludwigs death Barbara and her mother
turned down a lucrative deal from
Disney. Their lawyers and accountants advised it could bring fnancial
security to the family, but mother and
daughter believed Ludwig personally
disliked Walt Disney.
As part of a movie deal, in the early
1990s the women signed a contract
that included Madeline productlicensing rights. The producers sold
those rights to a Disney subsidiary,
DIC Entertainment, which massmarketed Madeline products, from
dolls to home furnishings. Mother
and daughter discovered, to their
dismay, that they had turned over
licensing rights in perpetuity and had
no right to approve or disapprove specifc items. They were each earning
The
Case for
Dividends
Brian Hogan
Equity group prEsidEnt
FidElity invEstmEnts
Dividend-paying stocks have been
popular with investors seeking income
in a low-rate environment. And there are
good reasons for this interest, according
to Brian Hogan, Equity Group President
of Fidelity Investments. Historically, dividends have been a strong driver of total
return for equities, says Hogan. Since
1930, they have accounted for nearly 40%
of returns. Coupled with inherently lower
volatility than non-dividend payers, these
stocks have been a good way to gain
attractive risk-adjusted equity exposure.
Equity dividend yields are currently
competitive with xed-income yields,
and equity valuations are still reasonable, notes Hogan. Moreover, dividend payout ratiosthe percentage
of earnings that companies pay out as
dividends to shareholdershave only
recently risen from all-time lows, with
signicant room to grow going forward.
That means dividend-paying stocks
remain a compelling way for investors
to diversify their income sources across
asset classes. But its also true that
investors need to consider the full picture when investing for dividends.
Simply buying and holding a handful
of high-dividend-paying stocks exposes
investors to risks that they may not
have considered, says Hogan. Theres
the potential for future dividend cuts
or suspensions. Each year, around 10%
on average of companies in the top
quartile of dividend yield cut their dividend, and its sometimes preceded by
a sharp decline in the stock price, too.

Then theres valuation risk, which is
the risk that a company paying a high
dividend isnt able to grow its revenues,
earnings or dividend per share. If a company falters on those metrics, its stock
price can take a signicant hit, especially
if valuations are stretched to begin with.
Hogan feels theres no substitute for
rigorous research when it comes to nding attractive dividend options. We focus
on identifying companies that we believe
will grow their dividends for the right
reasons and can support them should
conditions deteriorate. We look for positive signs such as stable revenue growth,
high free-cash ow and other factors as
part of an active management strategy.
The roster of dividend-paying
stocks continues to expand across a
wide variety of sectors. Understanding the
dynamics behind dividend-paying stocks
and identifying tomorrows dividend payers today can help investors take advantage of what has been a powerful driver
of market outperformance over time.
past performance is no guarantee of future results.
Views expressed are as of the date indicated, based
on the information available at that time, and may
change based on market and other conditions. Unless
otherwise noted, the opinions provided are those of
the author and not necessarily those of Fidelity
Investments or its afliates. Investment decisions
should be based on an individuals own goals, time
horizon, and tolerance for risk. Stock markets are
volatile and can uctuate signicantly in response
to company, industry, political, regulatory, market, or
economic developments. Investing in stock involves
risks, including the potential loss of principal.
Fidelity Brokerage Services LLC, Member NYSE, SIPC,
900 Salem Street, Smitheld, RI 02917
Historically, dividends have been a

strong driver of total return for equities.
669586.1.0
Brian Hogan
Equity group prEsidEnt
FidElity invEstmEnts
#51
Cash in on companies with

stealth dividendsmeaning
stock buybacks.
#52
Diversify, but dont overdo it.
#53
Set investing rules for

yourself that block impulsive
decisions.
#54
Look beneath a funds name,

with Morningstars Style
Box and X-ray.
#55
Use software to track your

asset allocation.
#56
Ask for a brokerage

window in your 401(k)an
opening that allows you to
invest in any mutual fund
and even individual stocks.
#57
Bond laddering is good, but

diversifying your income
investments is
important, too.
#58
Treasury Infation-Protected
Securities (TIPS) ofer
protection from infation
not from rising interest rates.
FamIly wealth
$100,000 to $150,000 a year from the products but were appalled with their quality.
During this 17-year relationship they spent
four years fghting to get back the licensing
rights. The contract with DIC required arbitration in Los Angeles. Barbara ran up $1 million
in legal fees, exhausting her ready cash, and
even took a $200,000 equity loan on the farm
to cover added costs. Finally, in a 2008 settlement, she got back the licensing rights and
enough money to cover her legal expenses.
These days a former DIC employee runs
the licensing program for the family, with
these marching orders from Barbara: Making
money is secondary to maintaining the integrity of the character. Barbara has defnite
ideas about what Madeline would not wear
(no pink and no rufed socks, for example),
and John Marciano, too, must approve all the
products.
They now have deals with a dozen U.S.
companies plus others in Japan, each of which
produces a diferent Madeline-related producteverything from puzzles and pajamas to
costumes and party goods.
In this role, too, John Marcianos fnancial arrangements with his mom are surprisingly informal. She sends him checks, he says.
Without a written contract describing his
services and compensation, theres a risk that
the Internal Revenue Service could characterize those payments as gifts from his mother,
which could count against her $5.25 million
lifetime exemption from estate and gift tax,
lawyers say.
Equally surprising, given Barbaras protection of Madelines image, is that the family
has apparently not registered the trademark
to the name Madeline or the name along with
an illustration of the character, says Edward
H. Rosenthal, a lawyer with Frankfurt Kurnit
Klein & Selz in New York. (He checked, we
checked, and the family did not respond to
#61
#59
John Bogle: Time is your

friend. Impulse is your
enemy.
#60
Use salary increases to boost

contributions to your 401(k).
Farm like a billionaire

reaping tax breaks.
selling sequels: John Bemelmans Marciano with his

latest book based on his granddads heroine, Madeline.
FORBES request for the registration or serial

number.) Heres why that matters: Ludwig
Bemelmans Madeline books will go into the
public domain when the copyrights expire
starting in 2034, leaving anyone free to publish them. But a trademark can last forever.
By registering the trademark for books and
other printed materials, for whatever goods
the limited liability company is licensing, and
by getting international trademark protection,
the family could prevent others from making a
movie or products, based on Ludwig Bemelmans stories, long after the books copyrights
have expired. Without the trademark the
family is left to rely on so-called common-law
trademark rights, based on their being the
frst to use the name or illustration for certain
purposes. Thats weaker protection in the
U.S. and no protection in countries where the
trademark belongs to whomever fles the application frst.
Lest anyone doubt the importance of trademarks, the Carlyle Hotel has trademarked
Bemelmans Bar to describe the cocktail
lounge where the artist painted murals of New
York scenes in exchange for 18 months free
#62
Defy conventional wisdom

and increase your stock
allocation after retirement.
#63
To make money in smallcap stocks, look for novel

business methods and niches,
not the next blockbuster
drug.
#64
Dont abdicate investment

decisions to your spouse.
#65
Be suspiciousand
investigate furtherwhen
a corporation changes its
auditors.
TOP: TAyLOR HILL/gETTy IMAgES; BOgLE: TAyLOR HILL/gETTy IMAgES; FARM: WALTER ZERLA/gETTy IMAgES
#50
Benjamin Graham:
Speculation is neither
illegal, immoral nor ( for
most people) fattening to
the pocketbook.
Carry a $2 million or bigger

umbrella insurance policy to
protect your wealth from
liability suits.
#67
Warren Bufett: Be fearful

when others are greedy,
and be greedy when others
are fearful.
#68
Invest to meet goals, not to

beat indexes.
#69
Clarify your own objectives

by writing an Investment
Policy Statement.
#70
When you get restricted

stock in a startup, make
an 83(b) election; if the
company takes of, youll
save big on taxes.
#71
Consider your marriage tax

penalty (or bonus) before
setting a wedding date.
#72
Aim to have fve times your

salary in your 401(k) and
IRAs by age 55 and eight
times before you retire.
#73
Dan Ariely: If you cant

save enough money, be really
nice to your kids.
FamIly wealth
rent for himself and his family. The elegant bar

is the setting for, among other events, Madeline
teas held during November and December.
Just as valuable as the booksif not more
is Barbaras cache of her dads art. For example, a set of 15 of his murals adapted from the
frst three Madeline books, which he painted
in 1953 for the playroom of the Aristotle Onassis yacht The Christina, fetched $553,875 at
a Sothebys auction in 1999. Charles Royce,
whose money-management company is
known for its small-cap mutual funds, bought
two of these panels in a private sale, plus another six murals right of the walls of Bemelmans former Paris bistro, La Colombe, and
installed them at the Ocean House, his hotel
in Watch Hill, R.I.
One of Royces latest trophies, acquired
last spring for $75,000, is a watercolor-andcrayon drawing from the original Madeline
book, showing Miss Clavel and the girls in the
Tuileries Gardens right before they go to visit
Madeline in the hospital, where shes recovering from her appendectomy. Royce bought the
drawing from flmmaker Gavrik Losey, whose
mother, fashion designer Elizabeth Hawes,
bought it to commemorate his birth in 1938.
Despite that sentimental value, Losey sold it,
he says, to help pay for the college education
of his youngest child.
The three Marciano brothers, too, grew
up with Bemelmans paintings on the walls.
At night their mother used to lift them up to
say good night to the characters that Poppy
had created, James recalls. Yet neither he nor
his brothers own any of these paintings.
With so much family-owned art of the
market in storage, its hard to say how much
its worth. Even Bemelmans small sketches
now command thousands at auction. The
highest price paid for his work, according to
Askart.com, was $137,500 for the cover
painting of the frst Madeline book. But
#74
Put peer-to-peer loans in

your portfolio using sites
like LendingClub.com for
monthly cash fow and yields
of from 7% to 9%.
#75
Peter Lynch: Go for a

business that any idiot can
runbecause sooner or later,
any idiot is probably going
to run it.
that was back in 1999.

James Marciano would like to own one
of his grandfathers paintings but has no assumptions about inheriting anything, he says.
But it would be nice to have some sort of a
plan for the continuation of Madeline. These
are topics his mother feels most comfortable
talking about with John, he observes. My
brother Paul and I havent been invited to the
table for those conversations. John declined
to discuss the subject.
Barbara is leaving a lot to chance, says Barbara Shiers, an estate-planning lawyer with
Frankfurt Kurnit Klein & Selz in New York.
Without a will, under state law her three sons
will inherit Bemelmans LLC in equal shares.
A variety of planning techniques could avoid
potential disputes among her children and
grandchildren, make sure the company is run
according to her wishes after she passes away
and save estate taxes.
Whats also missing is a structure that her
heirs could use to run the business, including
a mechanism for decision making, Rosenthal notes. Without it the sons could disagree
about everything from licensing movie rights
to renegotiating old contracts with Penguin.
In his latest book, Madeline and the Old
House in Paris, John Marciano brings back
Lord Cucufacethe villainous head of the
boarding school that Madeline attends, from
his grandfathers second book, Madelines Rescue. This time, during his surprise inspection,
he walks of with a telescope found in the attic,
unleashing the misery of the ghost who haunts
the house. To comfort him Madeline comes up
with a scheme to get the telescope back.
Though that story has a happy ending, the
confict bears an eerie resemblance to the rising tensions among the authors descendants.
Perhaps Ludwig Bemelmans is the ghost
haunting the old house as they still struggle to
fgure out what Poppy would have wanted. F
#76
Never take on a mortgage

just for the tax deduction.
#77
Keep no more than $250,000

in any one bank.
#78
Buy an index fund weighted

to fundamentals.
#79
Remain anonymous after

winning the Powerball
jackpot.
#80
Work for a charity for ten

years and get your federal
student debt forgiven.
#81
Beware personal fnance

gurus pitching products.
#82
The most successful

investors spend many hours
at it each day and have
passion and patience. There
are no shortcuts.
#83
Warren Bufett:
Diversifcation is protection
against ignorance.
BuFFETT: JACk WELCH; ARIELy: STEPHEN vOSS
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Finding
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funds
FINDING THE
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Braving Asias massive
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stock, Miraes petite
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Joohee An, is leaving the
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by kenneth rapoza
f imitation is the sincerest form

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Now that investors are piling back
into stocks and emerging markets seem
to have bottomed, WisdomTree announced that it was launching a new
ETF called the WisdomTree Emerging Markets Consumer Growth Fund
(EMCG). More funds are coming.
Theyre all clamoring to get in front
of what is likely to be one of the most
important money waves in history.
Asias middle class already stands at
over 500 million people spending just

under $5 trillion annually. As China and
other emerging nations urbanize and
per capita incomes rise, this large pool
of middle-class consumers will swell
into an ocean.
By 2030, it is estimated, the Asia-Pacifc region alone will account for nearly
two-thirds of the worlds entire middle
class, spending $33 trillion annually.
Hundreds of companies want a piece
of this business, and smart investors are
looking to fnd stocks that will get them
in front of this tidal wave.
If someone told you 20 years ago
that they had found the next Samsung,
youd want to buy that no matter the
price, right? Im traveling Asia to look
for that for you. Im going to fnd at least
one, says An, 33, from her ofce in the
Admiralty district of Hong Kong.
To meet An is to understand that this
is not a woman who backs down from
competition. Dont let her Gangnam
manners, crisp white Armani blouse or
petite frame fool you. An speaks softly,
but she does so with the confdence and
road experience of a veteran money
manager.
She is the quintessential boots-onthe-ground stock picker, traveling up
and down the Asian continent, talking
with health care managers in Mumbai
and petting cows in Bengbu. While shes

at it shes clobbering the MSCI Asia Ex
Japan Index, though she doesnt believe
in benchmarks.
Since An took sole control of the
Asia Great Consumer Fund in February 2011, its up 14.7% compared with
MSCI Asia Ex Japan, up only 6.5%. Year
to date Miraes Asia Great Consumer
is up 5.3%. This beats nearly all of her
ofshore-fund rivals. Credit Suisses
Asia Consumer Fund is up 3.7% so far
this year, and UBS Asian Consumption
Fund is down 2.2%.
But An is dismissive of praise: I only
use benchmarks for my clients to have a
point of reference, but Im not a benchmarking player. Im running a highly
selective thematic fund, but this theme
is the story in Asia, she says. Unlike
WisdomTrees new ETF, which invests
in 200 stocks, An has only 28 stocks in
her fund.
And while her approach to fnding stocks with good fundamentals is
not much diferent from that of dozens
of managers who seek out growth at
reasonable prices using price/earnings-to-growth ratios and strong cash
fow as a guide, Ans real edge is her
local expertise and her insistence that
her team kick the tires and meet with
management.
Miraes intrepid money manager Joohee An in Macau. Trekking Asias hinterlands for blockbuster stocks, Gangnam-style.
PhiliPP EngElhorn For ForbEs
One of her biggest holdings is

Chinas Facebook rival, Tencent. By October 2013 Tencents WeChat and QQ
platforms had an active monthly user
base of 1.1 billion compared with 1.2 billion for Facebook, which is banned in
China. But WeChats and QQs monthly
active user base is growing at 64% compared with 18% for Facebook. An frst
invested in Tencent in 2010 when its
Hong Kong-listed shares traded at $169.
Today it trades at $423.
Macau is another fertile spot for
An. Think Las Vegas on steroids. During Chinas Golden Week holiday in
October, for example, Macau gambling revenue jumped a record 32% in
one month to $4.6 billion. By contrast,

Nevada pulled in $1.1 billion in its best
month in 2013.
In August An toured Macau, scouring empty lots along its Cotai Strip because her funds biggest holding, Galaxy
Entertainment, will spend up to $7.7
billion on expansion into Cotai by 2015.
Today Cotai has only 12 casinos while
the older section of Macau has 23. The
Strip in Vegas has 28 casinos, while Las
Vegas itself has 80 total.
Beijing has made it clear that it
wants the Macau region to be a travel
destination and is building infrastructure like the Macau-Zhuhai-Hong
Kong Bridge connecting the mainland
to Macau, encouraging its populace to

travel more. Galaxy and Sands China
are Ans top holdings in the region.
Recently back from Cotai surveying the future home of Galaxy I, II and
III, An is a chatterbox of enthusiasm:
Galaxys construction in Cotai is going
faster than they expected. So we can expect better earnings sooner, she says.
Ans approach to investing comes
from Miraes legendary founder and
chairman, Park Hyeon-Joo, 55. Park is
known as the man who created South
Koreas retail mutual fund business in
the aftermath of the Asian fnancial crisis of the late 1990s. Today Park is one
of Koreas richest men. His frms assets
december 16, 2013 FOrbeS | 113
Nine T. Rowe Price funds on the MONEY 70

list of recommended funds.
Nine T. Rowe Price funds on the MONEY 70 based on fees, stewardship, manager experience, and performance.*
Blue Chip Growth Fund
Capital Appreciation Fund
Diversied Mid-Cap Growth Fund
Emerging Markets Stock Fund

Equity Income Fund
International Discovery Fund
New Era Fund

Retirement Funds
Small-Cap Value Fund
Call your advisor, 401(k) provider, or a T. Rowe Price Specialist.
Request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses,
and other information that you should read and consider carefully before investing.
Read the story behind our performance.
Quality management and a consistent strategy MONEY Magazine

Every year, MONEY Magazine publishes the MONEY 70, a list of recommended funds
based on low fees, stewardship, quality management, and performancethat can help
investors reach their long-term goals. Once again, nine T. Rowe Price funds have made the
list.** At T. Rowe Price, we believe our fund managers have a special set of skills and unique
approach to investing, which is especially vital in uncertain market conditions. Our funds are
actively managed through collaboration and in-depth analysis in an effort to reduce risk and
increase potential. All funds are subject to market risk, including possible loss of principal.
Past performance cannot guarantee future results. Fund returns have been affected by market
volatility and are negative for certain periods.
To learn more about our nine funds that made the MONEY 70 list,
visit troweprice.com/ninefunds.
T. Rowe Price funds are low cost, so your investment goes further.
troweprice.com/ninefunds
1.888.636.4509
*In determining the funds on the MONEY 70, the staff of MONEY Magazine based its decision on each funds fees, stewardship, experienced managers, and performance. The ending date for
performance was 12/10/12. Note: The 11 T. Rowe Price target date retirement funds are counted as one fund on this list. (The T. Rowe Price Retirement Income Fund is not considered a target date
retirement fund.) From MONEY Magazine, January/February 2013 2013 Time Inc. MONEY and MONEY 70 are registered trademarks of Time Inc. and are used under license. MONEY and Time Inc. are not
afliated with, and do not endorse products or services of, T. Rowe Price. **The same nine funds made MONEY Magazines 2012 MONEY 70 list with the exception of the Diversied Mid-Cap Growth
Fund; last year, the International Bond Fund was included on the list.
T. Rowe Price Investment Services, Inc., Distributor.
MON081949
#84
Like Captain Kirk, have

advisors from diferent
planets.
#85
Before funding college

accounts make sure youre
saving enough in your
retirement accounts.
#86
To avoid a tax penalty, tap

IRAs, not 401(k)s, to pay
college tuition.
#87
Borrow from grandma at 4%

for grad school; Uncle Sams
Graduate Plus loans go
for 6.41%.
#88
Marry a billionaire,
or perhaps even more
rewarding, divorce one.
#89
When buying a luxury

condo, ignore superuous
amenities like massage
rooms and pet spas; they
wont contribute to
resale value.
#90
Add commercial real estate

to your portfolio.
#91
Wait for ination to rise

before buying TIPS.
funds
are $58 billion. Says Park, It is very important to

have two eyes. With one, observe what is going
on. With the other, foresee the future.
Joohee An joined Mirae in 2006 after a stint
as an analyst at Seouls LG Investments & Securities. She grew up in Seouls posh Gangnam
neighborhood and graduated from Koreas prestigious Yonsei University. At Mirae An moved up
quickly and within three years was transferred
to Hong Kong, where she was instrumental in
launching Miraes Emerging Markets Great
Consumer Fund in 2010.
While An is table-pounding bullish on consumer stocks in emerging Asia (Double-digit
income increases in Thailand, Indonesia and
China are reasons to buy), she is selective when
it comes to adding to her portfolio.
She recently visited dairy farms in the landlocked Anhui Province in eastern China, home
to 59 million Chinese, all of whom remember the 2008 tainted-milk crisis, which made
300,000 people ill and caused 6 infant deaths.
The new Chinese administration, which took
power in March, announced a strategy aimed at
rebuilding and creating national dairy champions in its infant-formula industry, which was
decimated by the scandal. This is exactly the
kind of change Joohee was looking for.
I stayed away from dairy for two years,
but since the government has pushed quality
improvements, Ive wanted to check it out, she
says from her home in Hong Kongs Star Street
district, a three-minute walk to her ofce. An
met with management from New Zealands
Fonterra, Biostime International Holdings,
China Modern Dairy and China Mengniu Dairy
Co. You have to meet them on the ground.
These trips are everything, she insists. But An is
still not a buyer.
When one is investing in the growth stocks
of developing nations, An says, its important not
to get too hung up on multiples. The real value,
she says, comes from brand leadership and from
#92
Howard Marks: Rule

number one: Most things
will prove to be cyclical.
Rule number two: Some of
the greatest opportunities
for gain and loss come when
other people forget rule
number one.
#93
Before remarriage, discuss

estate plans.
#94
Track gambling losses to ofset

taxable gambling winnings.
#95
Confess any tax crimes to a

lawyer, not a CPA.
116 | FOrbeS december 16, 2013
good management and strategies that can sustain growth. It might be trading at 40 times, but
that is not important. The value is in the management and the trend they inhabit long term.
Ans newest buy is Indias Apollo Hospitals.
Says she, Apollo always looked so good to me
but so expensive. As the stock has dipped shes
been loading up on it.
Her favorite trend is Chinese tourism. She
recently bought Thai developer Minor International. It operates 82 hotels throughout Asia,
Africa and the Middle East, including the Four
Seasons and luxury-resort brand Anantara.
They have hotels in hot tourist destinations
like the Maldives and Australia, she says. Earnings will beat consensus, and, most important,
Chinese travelers love Minors brands.
Back in Macau shes moving beyond the upand-coming Cotai Strip and looking for future
sources of revenue. Shes now investigating
Hengqin Island, a 40-square-mile, mostly vacant
piece of land next door to Macau. Its part of Beijings greater Macau concept, where there will
be malls, new theme parks and restaurants and,
of course, more hotels.
In October, on the Emerging Markets Great
Consumer Funds third anniversary, Morningstar gave it a fve-star rating. That means in
the future An is likely to be spending less time
scouring Asias hinterlands and more time
pitching little-known Mirae to clients in North
America and Europe. Despite her frms prowess
in emerging markets, her two U.S.-based retail
funds account for less than $100 million. Picky
advisors will need to be convinced that her talents are worth her funds 1.6% expense ratio.
Uncovering the next Samsung will help. I
cant say that all my global brands will be the
next big thing, she says. However, lets not
forget that this is a market of billions of people.
If some of these companies can become regional
giants, like Alibaba [Asias Amazon.com], then
we can still make a lot of money. F
#96
Deduct your yacht loan

as mortgage interest on a
second home.
#97
Dont do deals between

yourself and your own IRA.
#98
Dont roll your old 401(k)

into an IRA if you might face
a lawsuit.
grandma: gEtty imagEs ; marks: brEnt lEwin/bloombErg ; yacht: bloombErg
Connect.
Share.
Give.
Take.
Solve.
Save.
Smile.
Unify.
Introducing Unify.
Unifying business communications
for the new way to work.
unify.com
Copyright Unify GmbH & Co. KG, 2013

stocks & bonds
StockS With
A SAfety Net
Edward Silversteins
convertible fund has beaten
both stocks and bonds.
How did he do that?
by William baldWin
eres a security with seemingly magical properties: It

captures most of the gain
in a stock when the stock
is going up but loses only half as much
when the stock tanks.
Money manager Edward Silverstein
has 90 of these things in the portfolio
he runs. They are convertibles: bonds
(or sometimes preferred stocks) that
the owner can convert into shares of
common stock. As hybrids of debt and
equity, they are the perfect investment
for a timid bull.
If the stock in question shoots up,
you exercise your right to convert and
get most of the gain you would have
had owning just the stock. If the stock
bombs, you forget about the conversion
and cash in the bond when it matures
for its par value. Heads you win, tails
you dont lose very much.
A sure way to beat the stock market? Not quite. The subtlety here is that
stocks go up more often than they go
down, so the bet that seems lopsided in
favor of the buyer is in fact pretty close
to a fair one. Still, in the right hands this
compromise between stocks and bonds
can outperform both bonds and stocks.
Over the past decade the Barclays

bond index has returned 4.7% a year
and the S&P 500 stock index 7.7%. Silversteins $838 million fund, MainStay
Convertible, has delivered 7.9%, and
thats after a 1% expense burden.
Silverstein, 46, got into his profession in a roundabout way. After
completing an accounting major and a
law degree he realized he had no taste
for either feld. How to convert those
credentials into something tolerable?
He started out in the legal department
of a bank, edged into investment-related
work, then landed a job researching securities. Hes been lead manager of the
convertible fund (whose fund family
is owned by New York Life Insurance)
since 2004.
Silverstein and his deputy Elizabeth Xu are at heart stock analysts, not
bond buyers, and their success has to
do with spending more time thinking
about growth prospects and per-share
results than about credit ratings. They
are overweight pharmaceuticals (Gilead
and Teva) and oilfeld service (Schlumberger and Helix Energy). They like
consumer goods. They are not fond of
alternative energy.
Elon Musk, the glamour boy of
Silicon Valley, is behind two companies
with big convert issues outstanding:
Solar City, which puts solar panels on
rooftops, and Tesla Motors. Silverstein
wont touch either of them. Dont call
him antigreen; he commutes to work,
down Manhattans mean streets, on a

bicycle.
What bothers Silverstein is a business model that depends on subsidies.
Tesla cant live without the tax credits that go to electric car buyers and
the emission credits it sells to other
carmakers. Taxpayers may get tired of
supporting either the people who buy
$80,000 cars or the billionaire that produces them, he says.
Silverstein buys a lot of his converts
when they are spanking new. Issuers are willing to foat them at a slight
discount to their mathematical value,
he says, because raising capital this way
is less painful than the alternatives. A
pure bond ofering would carry a higher
interest burden; a pure stock ofering
would raise suspicions that management is expecting trouble.
When a new convert comes to market, it lies somewhere in the middle of
the bond/stock spectrum. In time it
may drift to one side or the other. If the
stock in question sinks like a stone, the
conversion privilege becomes close to
worthless and the bond trades like a
plain old bond (probably a junk bond;
issuers tend not to have terrifc balance
sheets). If the stock is a winner, the convertible shoots way up in price and acts
like a pure stock equivalent.
Gilead Sciences issued a 1% convertible bond three years ago, at a time
when its stock was limping because
investors were fxated on the coming
david YEllEn For ForbES
crEdit rigHt
money manager Silverstein has no use for electric carsor Tesla bonds.
#99
#100
Prot from stock market

volatility: Buy into a VIX
futures fund and use wild,
seemingly irrational swings
as buying opportunities.
HYBRIDS
THESE ANIMALS HAVE A FIXED-INCOME BODY AND AN EQUITY HEAD. THE LOWER THE CONVERSION
PREMIUM, THE MORE A CONVERTIBLE ACTS LIKE A STOCK.
FiRST
COnVERSiOn
bOnd
yiEld
Call OR
1
2
3
iSSUE
PRiCE
PREmiUm
ValUE
Gain
maTURiTy
CHART INDUSTRIES 2%
$1,447
15.0%
$768
1.6%
GILEAD SCIENCES 1%
3,158
0.1
1,001
0.3
MAY 2014
HELIX ENERGY SOLUTIONS GP 3-1/4%
1,200
35.1
933
3.7
MAR 2018
JARDEN CORP. 1-7/8%
1,305
13.2
874
1.6
SEP 2018
992
55.7
847
1.0
AUG 2018
JDS UNIPHASE 5/8%

MICRON TECH 1-5/8%
Gary Shilling: The market

can remain irrational
longer than you can remain
solvent.
#102
Beware dividend traps

fat payouts supported by
declining cash ow.
#103
Bet against weak currencies,

like George Soros.
#104
Back up your nancial

records using a secure
cloud service.
#105
Before investing in your own

states 529, compare its fees
and tax breaks to New Yorks
rock-bottom cost plan.
#106
Buy liens on homes of real

estate tax deadbeats.
AUG 2018
1,811
5.3
619
0.9
FEB 2018
STANLEY BLACK & DECKER $4.75 PFD
129
17.5
115
1.9
NOV 2015
TEVA PHARMACEUTICAL INDS 1/4%
996
7.9
978
2.5
DEC 2013
11
#101
stocks & bonds
2o14 Investment guIde
EXCESS OF CONVERTIBLE PRICE OVER VALUE OF STOCK INTO WHICH IT CONVERTS. 22WHAT THE SECURITY WOULD BE WORTH WITHOUT ITS CONVERSION PRIVILEGE. 33BOND COUPON LESS STOCK
DIVIDEND, AS A FRACTION OF CONVERSION VALUE. SOURCES: BLOOMBERG; MACKAY SHIELDS.
expiration of patents on AIDs drugs. Silverstein

fgured the company would come up with new
discoveries to replace the old ones. He bought
the bonds.
Since then a company Gilead acquired has hit
the jackpot with what looks like a very efective treatment for hepatitis C. Gileads stock has
quadrupled. The bonds Silverstein bought have
tripled in value to $3,158, a hair above the value
of the stock for which they can be exchanged.
The bonds $1,000 redemption value, and their
$10 annual coupon, are almost irrelevant.
The funds less meteoric securities have more
of a bond favor. Last year Jarden Corp. sold Silverstein 1-7/8% bonds convertible at the option
of the holder into 21.2 shares of stock. The company is a roll-up of assorted consumer brands
like Mr. Cofee, Coleman and Yankee Candle.
The MainStay fund paid $1,000 per bond. If
you want one now it will cost you $1,305. What
do you get for that outlay?
If you think of yourself as a fxed-income investor, then you are buying a bond that matures
in September 2018 at $1,000 and pays an $18.75
annual coupon. Absent the conversion feature,
that piece of paper would be worth $874, estimates Bloomberg. So you are paying $431 for
#109
#107
Know thyself: Read books

like Dan Arielys Predictably
Irrational and Your Money
& Your Brain by
Jason Zweig.
#108
Learn a lesson from each

stock-picking mistake.
Julian Robertson:
Buy into forgotten
markets.
an equity kickerthe right to switch into shares

of stock. And you will be switching, if the stock
doesnt crash.
Silverstein looks at this investment from the
other side. At this point the convert holder really owns shares in Jarden, he fgures, but pays a
little extra for the right to put the shares back for
$1,000 if something bad happens.
To calculate what the put option is costing
you, start with the fact that the 21.2 shares are
worth $1,153. Youre paying $152 more than that.
But youll be getting $90 in coupons over the
next fve years, while the stock pays no dividend.
Your put option, then, has a $62 price tag. If it
lets you sleep at night, its a good investment.
The MainStay portfolio has a strong equity
favor. Its market sensitivity is 0.79, meaning
that a 1% move up or down in the stock market
is likely to move the fund up or down 0.79%.
The average sensitivity for the convert universe,
Merrill Lynch calculates, is 0.59.
Converts are a plausible option for investors
who would otherwise buy a mix of stocks and
bonds. Do understand, however, that the bonds
in question are junk bonds. If we get another
2008when almost everything crashedthese
securities will not be immune. F
#110
Join an angel investing club.
#111
Keep your own

entrepreneurial options open
by refusing to sign onerous
noncompete agreements.
#112
Buy stocks of companies still

controlled by their billionaire
founders.
#113
Leon Black: Do your

homework, but still dont
bet the ranch.
SHilling: Scott EEllS / blooMbErg; SHilling: Scott EEllS / blooMbErg; robErtSon: PatricKMcMUllan / SiPa / nEWScoM
When creating a trust or

family limited partnership
for asset protection, dont
give it your own name or
one obviously identied
with you.
WAS YOUR LAST INVESTMENT DESIGNED WITH

THE SAME METICULOUS ATTENTION TO DETAIL?
or visit spdrs.com.
Before investing, carefully consider the funds investment objectives,

risks, charges and expenses. To obtain a prospectus or summary
prospectus, which contains this and other information, call
1.866.787.2257 or visit www.spdrs.com. Read it carefully.
ETFs trade like stocks, uctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions
and ETF expenses will reduce returns.
The SPDR S&P 500 ETF Trust is an exchange traded fund designed to generally correspond to the price and yield performance of the S&P 500 Index.TM
SPDR, S&P and S&P 500 are registered trademarks of Standard & Poors Financial Services, LLC (S&P) and have been licensed for use by State Street Corporation.
No nancial product offered by State Street or its afliates is sponsored, endorsed, sold or promoted by S&P.
ALPS Distributors, Inc., a registered broker-dealer, is distributor for SPDR S&P 500 ETF Trust, a unit investment trust.
IBG-9400

ReInventIng AmeRIcA
BackDoor
Profits from
fracking
The boom has driven up
prices of companies with
drilling rightsbut there
is money to be made on
pipelines, railroads and other
infrastructure plays.
by DAniel FiSher
he low-pitched thrum of
natural-gas-fred engines vibrates across the rural valley
in Pennsylvanias Susquehanna County, where Cabot Oil & Gas is
drilling a new well to tap the Marcellus
shale formation a mile underground.
As workers swing drilling pipe into
the 135-foot-tall rig, a parade of trucks
rumbles up the narrow dirt road from
Montrose, Pa. Until the shale boom
Montrose was best known for its bluestone quarries. Now the roads in this
northeastern Pennsylvania county are
flled with heavy trucks hauling drilling
fuids, pipe and the thousands of tons of
sand that drillers pump into the ground
to open up fssures in the granite-hard
Marcellus and let the gas fow.
Cabots Pennsylvania wells are
natural gas gushers, expected to pro-
duce an average of 14 billion cubic feet

over a wells 50-year life span, 14 times
as much as a typical Oklahoma well.
Already the Marcellus shale, extending from New York to West Virginia, is
supplying 12 billion cubic feet a day, or
almost 15% of U.S. gas demand.
Its well known that the combination
of newer horizontal drilling with the
60-year-old practice of hydraulic fracturing has unlocked huge new reserves
of oil and gas across North America.
Whats less well appreciated is how
enormous those reserves areNorth Dakotas Bakken shale will soon be pumping out nearly twice as much crude per
day as Prudhoe Bay in Alaskaand the
hundreds of billions of dollars that need
to be spent on infrastructure to bring all
this oil and gas to market.
Youre going to need pipelines,
youre going to need storage and in
some cases youre going to need the
existing pipelines reversed, says Aaron
Visse, who manages the $90 million
(assets) Forward Global Infrastructure
Fund in San Francisco. We built this
thing the wrong way, and now weve got
to adjust.
The shale boom has already driven
Farmland interrupted: A crane

towers over pump trucks at a
Cabot Oil & Gas fracking site in
Susquehanna County, Pa.
#114
Louis Bacon: As a
speculator you must
embrace disorder and chaos.
#115
Almost all great value

investors look for market
anomalies or disconnects
that they can exploit.
#116
Warren Bufett: Big

opportunities come
infrequently. When its
raining gold, reach for a
bucket, not a thimble.
#117
#118
Allocate investments against

your life risks.
#119
Andrew Tobias:
A penny saved is two
(pretax) pennies earned.
#120
Deduct losses from your

sideline/hobby by bunching
your expenses and showing a
small proft in 3 of 5 years.
#121
Postpone real estate gains

tax with a 1031 exchange.
crediT righT
#122
Qualify as a real estate

professional to save big
on taxes.
david Yellen For Forbes (leFT); bacon: ed andrieski / aP; buFFeTT: jack welch
Always keep some

investment powder dry.
Be leery of investments sold

for tax savings.
#124
Burton Malkiel: Start

saving now, not later: Time
is money.
#125
Before making a big

discretionary purchase,
calculate future costwhat
the dollars youre spending
could grow to if invested for
20 or 30 years.
#126
Read How to Make Money

in Stocks by
William J. ONeil.
#127
Buy designer goods at

consignment shops; when
you get bored with them, sell
for a proft on eBay.
#128
Discuss any prenuptial

agreement way in advance of
your wedding.
#129
Hell hath no fury. ... Never

cheat on your taxes and your
spouse at the same time
exes are a big source of
IRS leads.
ReInventIng AmeRIcA
up stock in drillers like Cabot. At more

RIDING THE SHALE BOOM
HERE ARE SOME BUYS WORTH CONSIDERING, WHETHER
than 27 times next years expected earnYOURE LOOKING FOR GROWTH OR, IN THE CASE OF THE
ings, the stock is priced as if the rest of
the wells Cabot will drill in Susquehanna MLPS, INCOME.
reCenT
2014 eST
County will be as productive as the 285
STOCKS
PriCe
P/e
its drilled so far. Investors are also paying more than the current net value of
NATIONAL OILWELL VARCO
$83.36
13
Pioneer Resources and other exploration NORFOLK SOUTHERN
86.05
14
and production companies with lots of
QUANTA SERVICES
29.27
17
undrilled shale acreage, and a lot less for
DiViDenD
shale-deprived Apache, according to oil
5-yr
analysts IHS Herold.
reCenT
AnnUAl
MlPS
PriCe
yielD GrOWTh
But there are still lots of ways to
play the shale boom, including pipeline
ENTERPRISE PRODUCTS PARTNERS $61.38
4.5%
6%
companies, chemicals giants like Dow
ONEOK PARTNERS
52.91
5.5
5
and smaller companies like Twin Disc,
WILLIAMS PARTNERS
49.66
7.1
9
which sells compressors to push the gas
PRICES AS OF NOV 20. SOURCES: INTERACTIVE DATA, FACTSET ESTIMATES AND REUTERS FUNDAMENTALS VIA
FACTSET RESEARCH SYSTEMS.
through the interstate pipeline system.
The Interstate Natural Gas Association
per thousand cubic feet from more than $10 per
of America estimates $5.7 billion a year, or more
thousand in 2008. Companies like Chesapeake
than $140 billion, will be spent on gathering
Energy that spent too much on land too far from
systems, interstate lines, and compression and
major markets and pipelines have been forced to
processing equipment through 2035.
sell assets to survive the decline in prices.
The growth were seeing in the U.S. is greatDrilling contractors are also sufering lately
er than anyone expected, says David Ginther,
from low gas prices, which leave the still healthy
manager of Waddell & Reeds $2 billion (assets)
drillers able to play them of against one anIvy Global Natural Resources Fund. To handle
an expected doubling of domestic crude produc- other for each new well. Railroads, however,
are emerging as clear winners, with volumes
tion over the next few years, Ginther says, the
surging as they haul oil from landlocked areas
nations oil infrastructure must be expanded at
least 70%. Gas pipelines and processing facilities like North Dakota. Visse likes Norfolk Southern
and CSX, both of which have good networks for
have already increased 35%, he says, and they
bringing Bakken crude to East Coast refneries.
have to do that again.
Norfolk Southern, for example, reported 20%
The shale boom isnt without risk, of course.
higher earnings in the third quarter thanks to
One is political: Environmentalists in states
higher shipments of crude oil and natural gas
not used to the sight of drilling rigs are mountdrilling equipment. Crude hauling is particularly
ing a ferce political battle to ban fracking (old
proftable since the drilling companies have to
hands wince at the insertion of a k in a term
pay for the tank cars.
based on the word fracturing), even though
Kent Croft of Croft Leominster in Baltimore,
the technology has been widely used in U.S.
with $850 million under management, has
oilfelds since it was developed in Kansas in the
been buying natural-gas-related companies for
late 1940s.
several years under the theory that the fuel is
Another is the risk of too much supply: The
so cheap relative to oil, or even gas in overseas
food of natural gas has driven prices below $4
#130
Dont buy a large amount of

a thinly traded stock
all at once.
#131
Buy and hold at your

own risk.
#135
#132
Peter Lynch: The

key to making
money in stocks is
not to get scared
out of them.
#133
Dont be afraid to buy

into strength.
#134
Its okay to chase

performancesometimes.
Burton Malkiel: In the stock

market, past is not prologue.
#136
Start a 529 college savings

plan for yourself before you
have children. If you dont
use it for graduate school,
transfer it to your kid.
marriage: skiP caPlan / alamY; lYnch: michael sPringer / bloomberg
#123
Siemens AG, 2013. All Rights Reserved.
Turning virtual into real

and skeptics into believers.
Siemens answers are helping leading companies explore new places in new ways.
The engineers at SpaceX knew that successfully

launching a rocket was contingent on millions
of things going right. Just a single error could
impact the entire mission to the International
Space Station. To help solve this challenge,
they turned to Siemens industry software. This
played a critical role in enabling the SpaceX
Siemens industry
software helps
innovative companies
increase productivity,
improve accuracy, and
signicantly reduce costs.
team to design and test products virtually before

constructing them physically optimizing the
chances of a successful launch.
Today, Siemens is helping business leaders
across the U.S. transform the way goods are
manufactured. In industries from automotive to
pharmaceutical, companies look to Siemens for
new ways to do more with less, to raise quality
while lowering costs, and to help factories and
plants be a bit gentler on our environment.
And its working a new era in manufacturing
is beginning to take hold across the country.
Somewhere in America, the people of Siemens
are creating answers that will last for years
to come.
siemens.com/answers
Make your kid rich

by helping him fund a
Roth IRA.
#138
Deplete Juniors UTMA

you can spend it on a laptop,
camps, private school and
tutoringbefore applying for
college fnancial aid.
#139
Reduce your student loan

interest rate with auto debit.
#140
Julian Robertson: Suggest

your kid take an accounting
courseIt was the course
that helped me more than
anything.
#141
Robert Shiller: If you want

to get rich, go into fnance or
a related feld. Finance is the
technology for making
things happen.
ReInventIng AmeRIcA
markets, that the price must eventually rise. Liquefed natural gas sells for $16 per million Btu
(equivalent to nearly 1,000 cubic feet) in Japan,
$15 in China and $11 in Europe, compared with
less than $4 in the U.S. On a Btu-equivalent
basis, gas in the U.S. is selling at less than a quarter the price of oil.
So Croft is buying companies that should
proft from a long-term closing of the gap. He
likes Houstons Quanta Services, which last year
sold its once-hot fber-optic contracting business to focus on building natural gas pipelines
and servicing electric utilities as they shift from
coal to natural gas. Quantas revenue was up
13% in the frst half of this year, while operating
income rose 37%. It sells at 16 times earnings,
only a slight premium to the Standard & Poors
500 Index.
Croft has also bought National Fuel Gas, a
Bufalo, N.Y. gas utility that owns 775,000 acres
in the Marcellus. National Fuel will spend an expected $460 million on exploration and production this year and is rapidly building pipelines to
carry Marcellus gas to market.
Other companies with heavy exposure to the
shale-infrastructure build-out and the expansion of the global LNG trade include pipe manufacturer Tenaris, National Oilwell Varco and
engineering frms like KBR and Fluor. Investors
with a stronger risk appetite might look at companies like Twin Disc, which makes pumps and
fracturing equipment, and Chicago Bridge &
Iron, which builds LNG terminals and has seen
its stock rise 16-fold since 2009.
Ginther urges caution with these companies,
however: One bad contract, and they can get
dinged pretty badly, he warns.
#142
Identify companies that

gouge you yet keep your
business. Buy them.
#143
Buy stocks like socksgood

quality on sale.
#144
Buy into big ideas just like a

global macro hedge fund for
as little as $1,000 to start.
#145
Use limit orders when buying

small-company stocks with
low trading volume.
#146
Dont leave it all in the

dollar. Invest globally for
currency diversifcation.
#147
Dollar-cost average the

whole stock market.
#148
Buy companies with high

ratios of gross profts-tototal assets.
#149
John Nef: Buy on the

cannons and sell on
the trumpets.
A more conservative way to play the shale

boom is by investing in master limited partnerships, which now have a new supply of projects
to increase dividends. Mark Reichman, with
the Houston investment banking frm Simmons
& Co., says Kinder Morgan is well positioned
to capitalize on growing natural gas exports,
including the $200 million Sierrita project that
will transport gas from Arizona to northern
Mexicoand help support gas prices in the U.S.
Markwest Energy Partners is building a gathering-and-processing network to collect gas from
wells in the Marcellus and Utica plays in Pennsylvania and Ohio, separating out the liquids that
frequently fow with it.
Reichman also recommends a handful of
MLPs that are investing in crude-oil transportation, including Crestwood Midstream Partners,
which this year acquired Inergy to gain access
to the Bakken shale; Enbridge Energy Partners,
which is building projects to move heavy crude
to the Gulf of Mexico and lighter Bakken oil to
East Coast refneries; and Williams Partners,
with its growing infrastructure in the Marcellus
and interstate pipeline system.
Williams Cos., the operator of Williams Partners, plans to spend $3.3 billion expanding its
gathering system in Pennsylvania through 2015,
on top of the $5 billion in dividend-producing
assets it already has there.
Ive worked all over the countryofshore
Gulf of Mexico, Texas, the Rockiesand these
are the biggest wells Ive ever seen, marvels
Ryan Savage, regional vice president in charge
of pipeline operations for Williams Cos., which
will carry Cabots gas to market. This resource
is so huge, its just incredible. F
#150
#156
Monitor your individual

stocks; set a Google news
alert and watch for signs of
possible trouble.
If you need to tap retirement

cash early, study up on the
exceptions that let you avoid
a 10% penalty, including
taking substantially equal
periodic payments.
#151
Bone up on risk parity

diversifcation.
#152
Always know how a fnancial

advisor is getting paid and what
if any commissions shell earn.
#153
Watch out for paid shills at

investment seminars.
#154
Ken Fisher: You know

who didnt have bad years?
Bernard Madofuntil he
got caught.
#155
Buy a retirement annuity

cheap by delaying Social
Security until 70.
#157
Burton Malkiel: Tune out

the fnancial TV channels.
Watch the cooking channel
or the gardening channel if
you want useful advice.
#158
Warren Bufett:
Returns decrease as
motion increases.
laPToP: eTTY images; shiller: PeTer FoleY / bloomberg; Fisher: gillianne Tedder / bloomberg
#137
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IMMY JO
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2010 J OFFERING IS MA
THIS
Today more than ever, investors need different ways to achieve

growth, income and protection* against certain risks. Because
there are opportunities and risks that didnt exist a few years ago.
At OppenheimerFunds were always exploring new ways to
help achieve these goals for investors, financial advisors and
institutions. Talk to your advisor about these new possibilities,
and the right way to invest in a changing world.
*Protection is positioned as an investment goal. Investing in certain securities may help to hedge
against certain risks, but does not imply any guarantee from loss. Mutual funds are subject to market
risk and volatility. Shares may gain or lose value.
Before investing in any of the Oppenheimer funds, investors should carefully consider a funds
investment objectives, risks, charges and expenses. Fund prospectuses and summary
prospectuses contain this and other information about the funds, and may be obtained by asking
your financial advisor, visiting oppenheimerfunds.com or calling 1.800.CALL.OPP (225.5677).
Read prospectuses and summary prospectuses carefully before investing.
2013 OppenheimerFunds Distributor, Inc.
INVESTINg
KEN FISHER PORTFOLIO STRATEgY
Thomas KuhlenbecK for forbes
TURNING $1,000
INTO $42 MILLION
I have been wrItIng for this
magazine for 29-plus years, and with
this issue I pass Lucien O. Hooper to
become the third-longest-running
expert columnist in FORBES 96year history. Lucien may have been
the most popular ever for what Steve
Forbes recalls as his conversational
way, and even though he died 25
years ago, his investing lessons still
hold today.
Lucien oozed his Maine farm boy
origins. A Harvard dropout, Lucien
began at the bottom of the Boston Commercial in 1919, eventually
overseeing statistics while penning
a commodity column. Soon he was
writing stock market commentary for
multiple brokerage frms now long
forgotten (remember E.A. Pierce?)
and became a leader on security and
fnancial analysis.
Luciens arrival at FORBES came
via Helen Slade. If Ben Graham is the
father of security analysis, then Helen
is surely its mother. Ben, in fact, was
Helens prime disciple. Number two?
Lucien. When Helen started The Analysts Journal in 1945 (todays Financial Analysts Journal and the bible to
the scholarly set), she had Ben and
Lucien debate each other in the very
frst issue. (So typical of him, Lucien
always said he lost. No one lost. Everyone won.)
Helen hosted legendary Tipsters
Wednesday night soirees once a
month40 to 50 fnancial folk, swilling, spilling and grilling each others
market ideas. Even my introverted
father attended when in New York,
and one July evening in 1949 so did a
MONEY MANAGER KEN FISHERS LATEST BOOK IS MARKETS
NEVER FORGET (BUT PEOPLE DO) (JOHN WILEY, 2011). VISIT
HIS HOME PAGE AT WWW.FORBES.COM/FISHER.
29-year-old Malcolm Forbes, who had

an amazing knack for picking people
and recognized that Lucien knew his
stuf, made the abstract comfortable
and endured where smarter men
usually fail, as Lucien put it.
On Aug. 15, 1949 Luciens frst
column came out swingingcorrectly claiming the three-year bear
market was over. Stocks skyrocketed
until 1956. He pushed people to quality growth shares, which also proved
right then. Sure, he made mistakes
he missed the 1974 downturn and
proved too cautious in the ensuing
bull market, prompting him to wind
up his column on Jan. 1, 1979. But
overall he was more right than wrong.
In FORBES he coined classic lines
like [Investors] make more money
with the seat of their pants than
the soles of their feet. He called
out-of-favor stocks ex-friends and
ex-possibilities. He explained the
diference between short-term and
long-term plays as the kind you take
out for the evening versus ones you
take home to mamma. (He dealt in

both but said most folks make more
money with mamma.)
His overarching counsel was to
pick among his picksthen let the
winners run very, very long. In honor
of Lucien here are fve of his picks
that I like nowand I show how rich
you would be if you had put $1,000
then into each (in a tax-free account)
when he frst recommended them,
and reinvested all dividends:
He recommended ROYAL DUTCH SHELL
(RDS.B, 71) on Dec. 15, 1974. That $1,000
then is worth more than $452,000 now.
I just recommended it again on Nov. 18.
My frst big hit in life, in 1975, was
coatings, glass and chemical maker
PPG INDUSTRIES (PPG, 183). I think its a potential hit again. Luciens Oct. 1, 1976
entry would turn $1,000 into more
than $172,000 today.
One of my fathers early big hits
was Motorola in 1953, now MOTOROLA
SOLUTIONS (MSI, 65). Lucien was there
frst on Feb. 1, 1950and $1,000 then
exceeds $735,000 now.
PROCTER & GAMBLE (PG, 85) should beat
the rest of this bull market. Luciens
pick at year-end 1950 would be worth
more than $1.1 million now.
The topper? KANSAS CITY SOUTHERN (KSU, 122)our very best railroad.
Lucien picked it in his frst column
and many times since. A $1,000 stake
on Aug. 15, 1949, reinvested, is worth
more than $42 million nowone of
historys best picks and one worth
repeating. Then or now, you read it in
FORBES frst. F
PLease TurN The Page TO see

The aLTerNaTIve INvesTINg gaTeFOLd
Investing in MLPs involves additional risks compared to the risks of common stock, including risks related to cash ow, dilution and voting
rights. Energy infrastructure companies are subject to risks such as uctuations in commodity prices, reduced volumes of natural gas or
energy commodities, environmental hazards, changes in macroeconomic conditions, regulations or extreme weather. MLPs may trade
less frequently which may result in erratic price movement. MLPs are highly regulated and may be adversely aected by changes in the
regulatory environment including the risk that an MLP could lose its tax status as a partnership. The Oppenheimer SteelPath MLP Alpha
Fund is organized as a Subchapter C Corporation which means that it will pay federal, state and local income taxes at a corporate rate
based on its taxable income (currently as high as 35%). The potential benet of investing in MLPs generally is their treatment as
partnerships for federal income tax purposes. Since the Fund is a corporation, it will be taxed at the fund level which in turn will reduce
the net asset value and the amount of cash available for distribution. The Fund is classied as a non-diversied fund and may invest a
greater portion of its assets in the securities of a single issuer.
The Fund accrues income taxes for future tax liabilities associated with the portion of MLP distributions considered to be a tax-deferred
return of capital and for any net operating gains as well as capital appreciation of its investments. This deferred tax liability is reected in
the daily NAV and as a result of the Funds after-tax performance could dier signicantly from the underlying assets even if the pre-tax
performance is closely tracked. Distributions from MLP funds have been classied as a return of capital which reduces the investors
cost adjusted basis.

ALteRnAtIve InvestIng
how
smart
is art?
$153.5 m
When a Francis Bacon triptych of his friend Lucian

Freud sold for $142 million in November, it was
heralded as the highest-ever price for a piece of art
at auction. But adjusted for infation, it didnt top
Renoirs 1876 painting of a Paris dance crowd, which
brought the equivalent of $154 million in 1990. And
those numbers dont refect the fuctuating values
of the art market as a whole, shown as the red line
that represents a newly released index of 21,000
works compiled by Stanford fnance professor Arthur
Korteweg. Though an index fund (the blue line)
doesnt give the pleasure of a work of art, it is a safer
investment. The gray bars show the highest-priced
works auctioned each year, adjusted for infation.
$121.9 mil
$90.1 mil
$75.8 mil
BY susan adams, jane lee and

caleB melBY
$27.7 mil
$22.5 mil
Gospels of
Henry the
Lion
Unknown
Benedictine
monk
c. 1200
1983
Source: Artnet.
Seascape:
Folkestone
J.M.W.
Turner
1845
1984
$21.5 mil
$20.2 mil
Paysage
au soleil
levant
Vincent
van Gogh
1889
Femme
lisant
Georges
Braque
1911
1985
1986
Irises
Vincent
van Gogh
1889
Acrobate
et jeune
Arlequin
Pablo
Picasso
1905
Self
Portrait: Yo
Picasso
Pablo
Picasso
1901
Au Moulin
de la
Galette
PierreAuguste
Renoir
1876
1987
1988
1989
1990
mil
david nahmad
BILLIoNAIRe MeGAdeALeR
If you know what you

are doing, art is the best
investment. You have
to buy an A-plus painting or something that is
not hyped. The superrich
people pay stupid prices
for the best paintings, and
they fght for the same
paintings.
$102.4 mil
$70.4 mil
S&P 500 Index
KKV art marKet Index
$46.2 mil
$23.3 mil
$44.7 mil
$26.9 mil
$23.3 mil
$18.4 mil
Venus and
Adonis
Titian
1554
London: The
old Horse
Guards from
St. Jamess
Park
Canaletto
c. 1749
Nature morte,
les grosses
pommes
Paul Czanne
1890
dame mit
Fcher
Gustav
Klimt
1917
1991
1992
1993
1994
Angel
Fernandez
de Soto
Pablo
Picasso
1903
1995
Woman
Willem de
Kooning
1949
Le rve
Pablo
Picasso
1932
Portrait
de lartiste
sans barbe
Vincent
van Gogh
1889
1996
1997
1998
donald RuBell
Co-oWNeR, RuBeLL FAMILY
CoLLeCTIoN
The real breakthrough

for us occurred sometime
around 1979. Wed go to
30 studios a month. If you
were lucky, in two or three
months youd fnd one artist who was interesting. All
of a sudden in 1979 every
week we were fnding [ones
we liked]. We bought Cindy
Sherman for $25.
$128.8 mil
$110.3 mil
$99.3 mil
$84.8 mil
$74.6 mil
$50.8 mil
$39.1 mil
$37.0 mil
Rideau,
cruchon et
comptier
Paul
Czanne
1893
1999
Femme
aux bras
croiss
Pablo
Picasso
1901
2000
La
Montagne
SainteVictoire
Paul
Czanne
1888
The
Massacre
of the
Innocents
Peter Paul
Rubens
1609
2001
2002
Landhaus
am
Attersee
Gustav
Klimt
1914
2003
Garon la
pipe
Pablo
Picasso
1905
2004
Venice, the
Grand Canal,
Looking
North-east
from Palazzo
Balbi to the
Rialto Bridge
Canaletto
c. 1724
2005
dora Maar
au chat
Pablo
Picasso
1941
2006
AKG-IMAGeS / NeWSCoM; uNIVeRSAL HISToRY ARCHIVe / GeTTY IMAGeS; THe J. PAuL GeTTY MuSeuM, LoS ANGeLeS; GRAeMe MASSIe / SPLASH NeWS / NeWSCoM; AFP PHoTo/CHRISTIeS / NeWSCoM; AKG-IMAGeS / NeWSCoM; SoTHeBYS / uPI / NeWSCoM;
AKG-IMAGeS / NeWSCoM; AP PHoTo / SoTHeBYS, FILe; TIMoTHY A. CLARY / AFP / GeTTY IMAGeS / NeWSCoM; CouRTeSY oF CHRISTIeS; ANdY PARAdISe / ZuMAPReSS / NeWSCoM; PHoToMALL XINHuA NeWS AGeNCY / NeWSCoM; AP PHoTo / SoTHeBYS;
AP PHoTo / CHRISTIeS
noRman BRaman
BILLIoNAIRe CAR SALeSMAN,
ART CoLLeCToR
I dont recommend people buying art as investment. I think its a huge

mistake. I dont know
one individual who
bought art for investment who has come out
well. Its just the wrong
approach. Art is special.
We love our art.
$142.4 mil
$122.0 mil
1000
900
800
700
$93.6 mil
600
500
$82.0 mil
400
$68.0 mil
300
$52.3 mil
200
White
Center
(Yellow,
Pink and
Lavender
on Rose)
Mark
Rothko
1950
Triptych
(in 3 parts)
Francis
Bacon
1976
Head of a
Muse
Raphael
c. 1510
Nude,
Green
Leaves and
Bust
Pablo
Picasso
1932
2007
2008
2009
2010
eagle
Standing on
Pine Tree
Qi Baishi
1946
2011
The Scream
Edvard
Munch
1895
Three
Studies
of Lucian
Freud
(in 3 parts)
Francis
Bacon
1969
2012
2013
100
S&P 500 Index / art marKet Index, 1983=100
$114.0 mil
Oppenheimer SteelPath MLP Alpha Fund

Overall Morningstar Rating (Among 90 Equity Energy Funds).
Overall rating of Class A shares for the 3-year period
ended 9/30/13 based on risk-adjusted performance.1
This fund aims to multi-task, looking to generate growth and earn income
by investing in U.S. energy infrastructure companies, structured as Master
Limited Partnerships. We believe these companies offer a unique and
compelling risk to reward balance, and could benefit from a renaissance of
shale-driven oil and gas production.
Lets take a fresh look at portfolios and start a new conversation about
growth, income and protection* against certain risks in a changing world.
*Protection is positioned as an investment goal. Investing in certain securities may help to

hedge against certain risks, but does not imply any guarantee from loss. Mutual funds are
subject to market risk and volatility. Shares may gain or lose value.
1. For each fund with at least a three-year history, Morningstar calculates ratings based on a proprietary risk-adjusted return score
that accounts for variation in a funds monthly performance (including the eects of sales charges, loads and redemption fees),
placing more emphasis on downward variations and rewarding consistency. The top 10% of funds in each category receive 5 stars,
the next 22.5% 4 stars, the next 35% 3 stars, the next 22.5% 2 stars and the bottom 10% 1 star with some adjustments for multiple
share class portfolios. The Overall Morningstar Rating is derived from a weighted average of the 3-, 5- and 10-year ratings
(where applicable). For the 3-year period, the SteelPath MLP Alpha Fund was rated 4 stars among 90 funds in the Equity Energy
category for the time period ended 9/30/13. Rating is for Class A shares and rating may include more than one share class of funds in
the category, including other share classes of this fund. Dierent share classes may have dierent expenses, performance
characteristics and Morningstar ratings. Ratings are relative peer group ratings and do not necessarily mean that the fund had high
total returns. Past performance does not guarantee future results.
Before investing in any of the Oppenheimer funds, investors should carefully consider a
funds investment objectives, risks, charges and expenses. Fund prospectuses and
summary prospectuses contain this and other information about the funds, and may be
obtained by asking your financial advisor, visiting oppenheimerfunds.com or calling
1.800.CALL.OPP (225.5677). Read prospectuses and summary prospectuses carefully
before investing.
2013 OppenheimerFunds Distributor, Inc.
INVESTING
a. Gary ShIllING fINaNcIal STraTEGy
Happy Days
Will Be Here AgAin
and additive manufacturing are far

from fully developed. The Industrial
Revolution started in England and New
England in the late 1700s. It grew like
Topsy, but it was only after the Civil
War that it was big enough in the U.S. to
turbocharge growth and productivity.
No doubt, the Baby Boomers are
aging. But their lack of retirement
savings is forcing many to keep working. Unlike Europe, which historically
exports people, the U.S. is a land of
immigrants, legal and illegal. They will
indomitable entrepreneurial spirit.

Consider the explosion of mobile communications and social media. In Japan
and parts of Europe there is cultural
antipathy toward entrepreneurs.
The $400 billion annual U.S. current
account defcit measures the extent
to which foreigners recycle dollars to
fnance the federal defcit and other
shortfalls. Its dropped from an $800
billion rate before the Great Recession,
and it will fall further as consumers
continue their shift from a 30-year borrowing-and-spending binge to a saving
spree, reducing demand for imports.
Also, the shale oil boom means the
U.S. is moving toward energy independence. This will reduce our geopolitical
vulnerability in the Middle East.
I expect that the dollar will reverse
its long slide. My study of currencies
since Roman times reveals that the
buck will continue to prevail as a global
reserve currency. The U.S. is the worlds
largest economy, and second-place
China is slowing as it shifts from being
cHinA is tHe only mAjor country tHAt

Will get old Before it gets ricH
keep the labor force growing. Japan, by
contrast, has the longest G-7 life expectancy, no immigration and low fertility. So it has a leaping pool of seniors to
feed and a declining population. Europe
will follow soon. With the one child per
couple policy in China, the number of
new labor-force entrants ages 15 to 24 is
falling. In fact China is the only country
that will get old before it gets rich.
Dont underestimate this nations
export-driven to domestically led.

We have the globes deepest, broadest and freest fnancial markets. Our
greenback is involved in 87% of international currency transactions. Despite
the downgrade, foreigners continue to
plow money into Treasurys.
Sure, the U.S. has its problems. But
dire forecasts of slow growth forever
are just another case of theory built
upon faulty facts. f
A. GAry ShillinG iS pRESiDEnt OF A. GARy ShillinG & CO. AnD AuthOR OF THE AGE OF DELEVERAGING: INVESTMENT
STRATEGIES FOR A DECADE OF SLOW GROWTH AND DEFLATION (JOhn WilEy & SOnS, 2011). www.forbeS.CoM/ShillinG.
Thomas KuhlenbecK for forbes
Whenever an abnormal economic condition persists, theories are

concocted to explain why it will last
forever. And why not? The theory-spinners have very receptive audiences who
enhance their credibility.
Real GDP growth in the last six years
has averaged 0.8% by my estimate, anemic compared with 3.4% in the previous, post-World War II years. So, right
on schedule, theories have come out of
the woodwork predicting sluggish economic performance forever.
Until their data were corrected by
a graduate student, Carmen Reinhart
and Kenneth Rogof convinced many
that when government debt exceeds
90% of GDP (the U.S. is now almost at
100%), the economy contracts 1% annually. Columbia Business Schools Glenn
Hubbard and Tim Kane see the storm
clouds of history gathering on Americas horizon due to political inertia,
antigrowth policies, eroding economic
vigor and excess government spending.
Niall Ferguson, who teaches at Harvard, believes ever encroaching government is strangling private initiative and
threatens representative government,
free markets and the civil society. Robert J. Gordon of Northwestern thinks
all the large growth-driving technologies are fully exploited and sees nothing
ahead to equal the automobile, telephone, radio or jet plane. The icing was
Barrons Oct. 28 cover, which screamed:
The Snail Economy.
Sure, the economy is fve years into
deleveragingabout halfway through
this gauntlet. But in about four years
it will probably resume normal gains,
even with a catch-up bonus. Productivity-rich technologies like computing,
the Internet, robotics, biotech, telecom
PROMOTION // TECHNOLOGY
The Economics
Of Cyber Security
Written by Peter Mills
Malicious cyber activity, from hacking and identity fraud to intellectual property theft, is a
growing problem within the global economy. While news reports tend to focus on the impact
of cyber crime on consumers, a recent Global Economic Crime Survey, published jointly by
the Center for Strategic and International Studies and McAfee, notes that direct losses to
consumers may be the smallest component of the cost of malicious cyber activity.
lthough consumer lossesestimated to be

around $1 billion annuallyare signifcant,
the McAfee survey points out that malicious cyber activity aimed at businesses
may cost the global economy as much as $400 billion
each year from stolen trade secrets, stock market
manipulation and intellectual property theftwhich
is by far one of the biggest concerns for companies
both large and small.
Hidden Costs of Intellectual Property Loss

The loss of intellectual property and conf dential
business information is one of the most serious, and
hardest to quantify, components of cybercrime. The
McAfee report notes that the actual value of intellectual property can be quite different from the research
and development costs incurred in creating it.
Take, for example, a recent case in which the

FBI arrested a Michigan couple for stealing trade
secrets related to hybrid technology from a major
automobile manufacturer. The couple planned to
sell the secrets to a competitor. If they had succeeded, the fnancial impact on the company would
have been far more devastating than the cost of
the R&D alone.
While it may be satisfying to see some perpetrators
of cyber crime facing jail time, this is still the exception. Many companies victimized by cyber theft may
not be aware for yearsor everthat theyve lost
their intellectual property or that someone illicitly
accessed their conf dential information. In these
cases, the McAfee report states, the victim may
not know the reason they were underbid, a negotiation went badly or a contract was lost.
PROMOTION 2 // TECHNOLOGY
Obviously, insiders are uniquely placed to get their hands

on sensitive information. Thats very diff cult, Steelman
says, because youve consciously made the decision to
give someone access, and if they abuse that access to take
information or disrupt operations, that can be a more devastating problem.
Bridging Communication With the C-Suite
Better Awareness of the Threatscape

The risks to intellectual property and sensitive information
may be growing, but the means of exploitation havent
evolved that much in a decade, says Doug Steelman, CISO
of Dell SecureWorks, a security services provider that
helps companies understand whats happening across
their networks.
What has changed, Steelman says, is that companies have
a better awareness of the threatscape. The things that threat
actors are doingfor example, spear-phishing exploitation,
client-side browser exploitation, Internet-facing web application exploitation, and denial-of-service attacksare activities theyve been doing for probably ten years now. I think
that whats increasing is the understanding of what the threat
actors are doing.
Thats good news, he explains, because every organization
needs to understand that there is a real risk from a variety
of malicious attackers bent on profting from trade secrets.
Intellectual property theft is a concern for every company
thats connected to the Internet, Steelman says. No matter
who you are or what your company does, theres likely to be
a threat-actor group, whether its a criminal or a nation-state
or a hacktivist group, interested in taking that information or
modifying that information or disrupting your ability to deliver
that information.
A great many information security threats come from
unknown quarters, but Steelman points out that about 20%
of Dell SecureWorks incident-response engagements are
the result of disgruntled employees or insiders. He says that
insiders often have access to more information than they
need, and that the principle of least privilege, in which users
have access only to the things they need for their jobs, is an
important tactic in protecting against insider threats.
While the understanding of the threat vectors is getting better, communication of the threats to senior executives is
still lacking. Steelman believes that the C-suite views cyber
threats differently than other types of business risks. Thats
in part because in the world of cyber security, the language
used doesnt mesh with the language that senior executives
are used to hearing.
Steelman says that Dell SecureWorks has developed a cyber
security proft-and-loss decision-making framework that communicates in plain language what the C-suite needs to understand. We call it a common operational picture, or COP. The
C-suite understands the language of P&L, but to date there is
no cyber P&L. Senior leaders usually have to take the word of
the security leader briefng them. We believe we have created
an operational construct and measurement to enable tactical
and strategic decision making with respect to cyber.
Intellectual property theft

is a concern for every company
thats connected to the Internet.
Doug Steelman
CISO, Dell SecureWorks
Visibility Helps Prevent Loss

No matter where threats originate, effective cyber security
can only be accomplished with appropriate visibility into
whats happening on corporate networks. It seems intuitive, Steelman says, but if you cant see the threat, youve
got no chance at preventing an attack. That means companies need ways to look at and understand network traffc,
user Web surfng, e-mail distribution and so on.
Dell SecureWorks security services enable visibility into
its customers networks, which leads to threat interdiction
or, at a minimum, detection, Steelman explains. Prevention will eventually fail. When it does, organizations must
ensure they can see whats happening on their networks.
Otherwise, the way they find out about embarrassing
exploitation of their infrastructure is through the press or
a visit from law enforcement.
PROMOTION 4 // TECHNOLOGY
Prized Possessions in the IP Space

The threat to intellectual property has grown tremendously
as companies have transitioned from tangible to intangible
assets in a post-industrial, knowledge-worker society, says
Chandra McMahon, vice president, Commercial Markets,
Cyber Security, for Lockheed Martins Information Systems
and Global Solutions business.
Theres a lot more for adversaries to gain by stealing
intellectual property than there is from some of the assets
that actually get created or manufactured, McMahon says,
because a companys prized possessions, regardless of
industry, are in the IP space.
Intellectual property, she explains, can be anything from
research and development to manufacturing processes to
fnancial data. Companies are really looking closely at what
they consider their crown jewels in terms of information, and
are trying to take action to better protect them.
No company is likely to be off the radar of cyber attackers,
McMahon reports. I have yet to come across a company that
says, I havent had to deal with hacktivists or cyber criminals
or attacks from nation states.
A companys prized possessions,

regardless of industry,
are in the IP space.
Chandra McMahon
Vice President, Commercial Markets, Cyber Security,
Lockheed Martin Information Systems and Global Solutions
This intelligence is used for the defensive countermeasures

that are built into Lockheed Martins solutions. In fact, the
company has been credited with identifying several zeroday vulnerabilities (previously unknown vulnerabilities that
are hard to detect and defend against), and coming up with
ways to block these attacks.
The company has established world-class centers
focused on research and development in cyber security
called the NexGen Cyber Innovation and Technology Center
to innovate and collaborate on new defensive capabilities
for customers. Today, there are centers located in Maryland, the U.K. and Australia.
The Weakest Link
Lessons Learned From Determined Cyber Attackers

As a large federal government contractor, Lockheed Martin not only helps defend government and commercial
networks, it also is a target of sophisticated nation-state
attacks. McMahon, who previously served as Lockheed
Martins CISO, says that defending against these attacks,
and having high visibility into the attacks against commercial and critical infrastructure customers, means the
company has a unique perspective on cyber threats. It
gives us insight into a broad array of adversaries and the
different types of tactics and techniques that theyre using,
she explains.
Determined attackers provide the company with a wealth
of threat intelligence. The whole premise to our approach
to cyber security is to be able to gather intelligence around
the adversaries, around their tactics and techniques, and
then use that intelligence so its actionable, McMahon says.
No matter how well you protect your own information or

employee data, intellectual property is ultimately only as
secure as the weakest link in the supply chain. McMahon
emphasizes that its critical to consider the entire cyber ecosystem in which information travels or is stored.
Lockheed Martin works closely with its suppliers to ensure
they have a heightened awareness of the threatscape and
participate in information-sharing programs so that they can
adequately defend themselves. In some cases, were looking to help those companies bolster their defenses through
the use of Lockheed Martins own cyber security services
and solutions, she says.
The threats to intellectual property and confdential business information are real, and the results can be devastatingnot only to the companies that suffer the losses, but to
the employees of those companies, the communities where
they live and work, and the global economy. Being prepared to
defend against and mitigate cyber attacks, with the assistance
of cutting-edge research, technology and expertise, should
be a cornerstone strategy for every company.
CYBER INTELLIGENCE
STREET SMART
With nancial institutions facing increasing risk of data loss, identity theft, sabotage and
more, the ability to effectively manage cyber risk has become a top priority. Lockheed
Martin Cyber Intelligence is helping major nancial institutions get cyber smart by
integrating it into everything they dofrom securing the infrastructure, applications and
data they rely on every day to cyber forensics that help predict and change the future.
Lockheed Martin Cyber Intelligence: protecting corporate Americas competitiveness.
cyber.security@lmco.com
(855) LM-CYBER (855-562-9237)
2013 Lockheed Martin Corporation. All Rights Reserved.
INVESTINg
wIllIam baldwIN YEar-ENd ChECkup
Janet yellen
stock portfolio
euthanasia of the bondholder.

If you are a retiree living of interest on bank CDs, you know at frst
hand about this process. If you are
younger, you should think about
what its going to do to your 401(k).
As the owner of a long-dated
bond, you can get poor very quickly
if interest rates shoot up. That would
crash bond prices. But even if the Fed
succeeds in maintaining artifcially
How to survive tHe federal reserves

explosive money supply
low interest rates forever, you can be
euthanized via infation. You cash in
the bonds at maturity and they dont
buy anything.
How to lessen the damage from
Keynesian economics? The frst
method is to replace some of the
bonds in your portfolio with stocks.
This creates a hazard of its own.
Stocks, overpriced at the moment,
just might correct 35% next year.
Shift into stocks only if you can shrug
of the next bear market.
GO TO fORbES.COm/SITES/bALDwIN fOr MOrE ON TAX-WISE INVESTING STrATEGIES.
142 | fOrBES DECEMBEr 16, 2013
Method two: Take out a mortgage.

If you buy a $500,000 house with
$100,000 down, you have, in efect,
taken a $400,000 short position in
the bond market. Your mortgage
would be a nice counterbalance to
$400,000 worth of bonds in your
retirement fund. Now, when infation
returns, the burden of your debt to
the bank is eroded as quickly as the
value of your savings.
Yes, it makes sense to be simultaneously long fxed income and short
fxed income, if you can get a low
rate on the mortgage and wrangle
a tax arbitrage. Youre a successful
arbitrager if your mortgage interest
is tax-deductible and your bond coupons are sheltered.
Method three: Have corporations
that you invest in do the borrowing.
Prefer shares of companies with leveraged balance sheets.
Among companies that like to
borrow money: SEALED AIR (SEE, 32), the

Bubble Wrap outft, and HCA HOLDINGS
(HCA, 45), the hospital chain.
When you buy $6,200 worth of
EQUITY RESIDENTIAL (EQR, 51) you are indirectly buying $10,000 of real estate
and fnancing it with $3,800 of IOUs.
Now you can be more sanguine when
the Fed achieves its long-sought goal
to cheapen the dollar. As landlord
you jack up the rent. As borrower
you repay the mortgage with junk
money. f
thomas kuhlenbeck for forbes
Bonds are going to get killed.

Are you ready for this?
The depredations on people who
lend money have been a long time
coming, and they will continue under
the dovish monetary policy of the
next Federal Reserve chairman. You
should be lightening your exposure
to rising interest rates and infation.
Ill show you three ways.
What exactly has the Fed been
doing the past fve years? The party
line is that it is striving to stimulate
the economy. Wrong verb. It is striving to accommodate. It is making
room for the 535 spendthrifts who
disburse federal money but fnd the
business of collecting it via taxes to
be unduly burdensome.
How to pay the bills? Step one:
The Treasury issues bonds. Step
two: The Fed buys them, paying with
newly created money.
What you have here is the funding of aircraft carriers, schools and
Medicare with a printing press. The
U.S. is following a fscal practice that
has been embraced by many governments that run short, such as Argentina, Zimbabwe and the Confederate
States of America.
John Maynard Keynes provides
inspiration to advocates of easy
money. In his 1936 classic, The General Theory of Employment, Interest
and Money (Palgrave Macmillan), he
decries the scarcity of capital created
by the money-hoarding rentier
class, that being the people who live
of bond coupons. His proposed solution is for the government to undertake what he whimsically calls the
Simply open and fund

your IRA in minutes
with Merrill Edge.
You can open a no-minimum-balance Merrill Edge IRA quickly

and fund it instantly online from your Bank of America bank
account. Rolling over a 401(k)? A Merrill Edge specialist can
help with the paperwork and contact the plan administrator
for you. Merrill Edge. Its investing, streamlined.
merrilledge.com/streamlined
Bank with Bank of America.

Invest with Merrill Edge.
Certain banking and brokerage accounts may be ineligible for real-time money movement, including but not limited to transfers to/from bank IRAs (CD, Money Market), 529s and Credit Cards and
transfers from IRAs, Loans (HELOC, LOC, Mortgage) and accounts held in the military bank. Merrill Edge is available through Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S), and consists of
the Merrill Edge Advisory Center (investment guidance) and self-directed online investing. MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of Bank of America Corporation.
Banking products are provided by Bank of America, N.A. and afliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation.
Investment products:
Are Not FDIC Insured
Are Not Bank Guaranteed May Lose Value
2013 Bank of America Corporation. All rights reserved.
ARQ853KR/11ES45

retIrement
NiNe Formulas For

Wealth BuildiNg
The secret to fnancial
success can sometimes
be captured in a simple
equation.
1. What CaN my PortFolio earN?
BY William BaldWin
f you want to retire in style,

youd better know the numbers.
We have some formulas that
will provide them.
The objective here is to steer you
to wiser investments and give you
some insights about what will happen to your assets and liabilities over
time. The formulas are not complicated. They all ft on the back of an
envelope. Some are adapted from
experts. Some we concocted.
With these rules of thumb, you
can answer questions like these: Do
I have enough in my 401(k)? Will
a mortgage ref pay of? What will
it cost to send my kids to college?
When is a closed-end fund a bargain?
Utterly unpredictable as markets are from month to month, their returns over long
periods (meaning: decades) are not a great mystery.
In this equation, R states, in percentage points, the expected real returnreturn,
that is, above and beyond infation. S is the fraction of your portfolio invested in
stocks, B the fraction in bonds. E is the percentage you lose every year to expenses.
Example: You have the customary 60/40 mix of stocks and bonds, and the funds
you are invested in eat up 0.5% a year in fees. Then 5*0.6 + 2*0.4 0.5 = 3.3.
Now, 3.3% a year is a decent return, but it may be a bit less than you were hoping
for. Its enough to turn the dollar you put into a 401(k) at age 25 into $4.04 at age 68.
That is, scrimping today will enable you to buy four times as much stuf in retirement.
The formula doesnt allow for taxes, which will come out of your retirement money
at some pointat the back end if you have a conventional 401(k) or up front if you
opt for a Roth account.
Is a 5% real return on stocks realistic? Theyve done better over the past century,
but they are very expensive today. John Bogle, the Vanguard founder and wise man
of investing, is telling people to expect a 7% nominal return less maybe 2% for infation, which nets to 5% real.
Bonds doing 2%? That takes some optimism, and a willingness to invest in riskier
corporate debt. Treasury bonds are safer, but the 20-year, infation-protected variety
yields only 1.3%.
Take four directives from the formula:
If you are young and can stand the volatility, aim for a stock-heavy portfolio.
Dont have cash. It earns nothing beyond infation.
If you see a projection about your retirement or about what some fnancial
product will do that assumes a return like 8%, be wary. The fellow doing the
projecting probably didnt allow for infation or expenses.
Cut your expenses to the bone. If theyre half a point higher than they are in
our example, leaving you with a 2.8% real return, the $4.04 shrinks to $3.28.
in partnership with
Private ComPany outlook 2013

Prospects for the broader U.S. economy
appear tepid. But among private enterprises,
opportunity seemingly abounds.
Find out what executives at private
companies had to say about this in
Forbes Insights Private Company Outlook,
in partnership with KPMG.
Download the full report at:

forbes.com/forbesinsights/private_company_outlook_2013
For more information regarding KPMG Private Markets Group visit www.kpmg.com/US/privatemarketsgroup
retIrement
2. is my 401(k) oN traCk?
#160
If you earn too much to

contribute to a Roth IRA,
fund a nondeductible IRA
and convert it.
#161
If divorcing, get a QDRO

from the court that allows
you to split retirement
assets without owing
immediate tax.
#162
Claim the American

Opportunity Tax Credit for
your kids collegeif youre
eligibile.
#163
Dont make multiple

$9,900 bank depositsthe
government might seize your
money and keep it on the
grounds youre trying to skirt
anti-money-laundering laws.
#164
Do a bond fund swap to

harvest tax losses.
#165
Gain fundingand a
marketon Kickstarter.
3. What do you saCriFiCe For yield?

Everyone wants a portfolio that combines a fat yield with high growth. Can you get that? This formula says
you cant. The higher your yield, the lower your growth.
You can be lucky with any one stock, of course, or unlucky. But you cant engineer an outsize return by
buying high-dividend stocks and expecting them to grow as fast as low-dividend stocks.
a reasonable expectation for the stock market is a 7% nominal return (before allowing for infation). The
average company yields 2% and plows back enough proft to keep the dividends and share price growing
5% a year.
If you buy a zero-yielder like autozone you can expect more than 5% in appreciation. If you buy a superhigh-yield stock like annaly Capital management youre likely to see a shrinkage in the share price and dividend. Its jam today or jam tomorrow.
The tradeof between appreciation and yield holds true for bonds, too, although for bonds the R is lower
than 7%.
take your piCk: Growth or yield
the tradeoff fiGureS into Current yieldS and our proJeCtionS for priCe appreCiation.
sEcuritY / BusinEss
sourcE oF
GroWtH or dEclinE
annaly Capital mGmt / mortGaGe bankinG
poSSible eroSion of book value
11.0%
4.0%
Junk bond portfolio / variouS
defaultS
6.2
1.6
total (adr) / oil
drillinG
5.7
1.3
20-year treaSury bond / defiCitS
none
3.6
0.0
20-year tipS / defiCitS
inflation adJuStment
1.3
2.0
autoZone / partS retailinG
Share buybaCkS
0.0
7.0
YiEld
GroWtH
nominal (befoRe subtRacting inflation). SourceS: value line; forBeS.
#169
#167
Dont let the tax tail wag the

investment dog.
#166
Barry Ritholtz: Never

confuse investing with
trading.
#168
Hold illiquid assets

in a Roth IRA, not a
regular IRA.
Be like Peter Thiel and put

hot startup stock in a Roth
IRA to make all gains tax
free.
#170
Learn about your fancs

debts, before you walk down
the aisle.
#171
Beware high-yield
investments pitched as being
like a bank CD.
#172
Watch out for stock hoaxes

on Twitter.
#173
Be leery of pitches involving

a self-directed IRA.
BaRoN: BloomBERg; RITholTz: SCoTT EEllS / BloomBERg ThIEl: DaVID paUl moRRIS / BloomBERg NEFF: UNIVERSITY oF pENNSYlVaNIa / ap pagE: BloomBERg
#159
Ron Baron: Dont waste

your time short-selling.
Show me the short-sellers
yachts.
The table comes from a study conducted last year by Fidelity

Investments. Its experts made some midrange assumptions about
investment returns and spending needs in retirement, and came up
with these guidelines for how much you should have salted away.
If you are making $100,000 at age 35, you should have that much
in your retirement account. If you retire from a $200,000 job at age 67,
you should have $1.6 million.
To get to these mileposts, the analysts concluded, you should be saving 6% of your income when you are
young and gradually scale up to 12%. Your employer needs to chip in 3%. given the $17,500 cap on 401(k)
contributions for workers under 50, better-paid folk will have to do some saving outside the thrift plan.
#192
Dont let family wealth

become a curse on your
children.
4. hoW muCh Will College Cost?
#193
Start your kid at the bottom

of your business.
C is the amount that a family is supposed to chip in per year when one or more kids are attending school
and getting fnancial aid. a is the familys available assets, defned to include home equity but not retirement
accounts. I is income after taxes but before any contributions to retirement accounts.
whats going on here? The college fnancial aid oce lets you keep a small pot of cash for emergencies
but each year wants to grab 5% of anything beyond that. It will let you have a subsistence-level income but
taxes anything beyond that at 46%.
The net cost calculators on college websites boil down to something close to this equation, at least at
the several hundred more selective institutions using the profle method of fguring need-based aid. The
formula comes from Troy onink, whose frm, Stratagee, gives advice on college cost planning.
Example: The parents have $150,000 of assets, not counting retirement accounts. They have an income,
after state and federal income taxes, of $160,000. They have two children in expensive private schools.
The formula says this family will have to cough up 0.05*($100,000) + 0.46*($130,000) = $64,800 a year,
or $32,400 per child. If the sticker price (tuition, room and board) at one of the schools is $52,400, that kid
should get $20,000 of aid.
oninks formula yields only an approximation; for a more precise result you have to input a lot of detail,
such as family member ages, into a colleges website. But it gives you a very good idea of where you will
come out.
The formula is a powerful reminder that you should do your retirement saving early. when the kids are
young, fll up your 401(k) before you put even a dime in a college savings plan. Come college time, the retirement account will be sheltered but your other assets will be taxed away. and during college years your
pockets will be picked so clean you may be unable to continue 401(k) contributions.
#174
Benjamin Graham: It
is absurd to think that
the general public can
ever make money out of
market forecasts. For who
will buy when the general
public, at a given signal,
rushes to sell out at a
profit?
#175
Avoid sudden lifestyle

changes after a windfall.
#176
#180
Ben Stein: Dont move into

a neighborhood of poverty.
Avoid any situation that
could leave you with too
much unsecured debt.
#181
Get an entrepreneur
mentor from SCORE, an
organization of retired
business folks.
#178
#182
Tap your ethnic community

for business funding.
#183
To get the best efort and

thinking from employees in
your startup, give them
stock options.
#184
Like Spanxs Sara Blakely,

solve an irritating problem.
#186
Dont blindly rely on a

target date fund in your
401(k).
#187
Dont let your advisor

manage you.
#188
Dont rely on regulators to

protect you from fnancial
fraud.
#189
Warren Bufett: What

is smart at one price is dumb
at another.
#177
Beneft from 20/20 stock

market hindsight by
reversing a Roth conversion
if stocks tank.
#195
Buy a gift annuity from your

alma mater.
#179
Donald Trump: Sometimes

your best investments are
the ones you dont make.
Automatically divert money

from your paycheck into
savings to the point where
it hurts.
Retire to a place without

state estate or inheritance
taxes.
#194
Read Common Stocks and

Uncommon Profts by
Philip A. Fisher.
#185
Larry Page: It is often

easier to make progress on
mega-ambitious dreams.
Since no one else is crazy
enough to do it, you have
little competition.
#190
With large-cap stocks,

focus more on cash fow
than earnings.
#191
Strong stocks tend to stay

that way. Buy high and sell
higher.
#196
John Nef: When you feel

like bragging, its probably
time to sell.
#197
Mine your closet for

eBay gold.
#198
Mine your network for

investment ideas.
#199
Warren Bufett: The risks

of being out of the game are
huge compared to the risks
of being in it.
#200
Sell put options like Warren

Bufett does.
#201
Buy stocks when a magazine

cover declares The Death of
Equities.
#202
#203
Leon Cooperman: Getting

rich takes hard work, a
passion for what you do
and luck.
#204
If you win the Powerball

jackpot, hire a tax advisor
before making any decisions.
#205
Hunt down pensions from

old employers.
retIrement
5. hoW QuiCkly do i earN BaCk reFi Costs?

The time it takes for your mortgage refnancing to pay of depends on your upfront costs and on your annual interest savings. It also depends on your tax situation. For most homeowners, interest is deductible and
the points fee is also deductible. But other costs, such as an appraisal or title insurance, are not.
Example: Youre refnancing a $200,000 mortgage in order to lower your interest rate by half a point,
which will be worth $1,000 a year. The lender wants two points, or $4,000. You have $1,200 in other costs.
Youre in a 40% tax bracket (state and federal combined).
payback time = ($2,400 + $1,200) / $600 = six years. If youre likely to move in fve years, you shouldnt
do the ref.
Deductions for points are supposed to be spread over the life of the new mortgage. But those deductions will be accelerated in many cases. Youll get a deduction quickly if, for instance, this ref is your second,
so that you have a remaining balance from the earlier one to claim. You also speed up the tax beneft if you
either refnance again or move. So this formula, which for simplicity assumes your points turn into deductions fairly soon, gives you a pretty good approximation of your payback. Its far more accurate than naive
calculators that ignore tax efects.
Takeaway: If you are in a high tax bracket or if your nondeductible costs are high, youre going to need a
long time for a refnancing to pay of.
6. should i use the home-state 529?
#206
If youre 50 or older, with

substantial self-employment
income, use a customdesigned defned beneft plan
to shelter $100,000 a year or
more from tax.
#207
Max out your 401(k)

contributions: In 2014 you
can contribute $17,500, or
$23,000 if youre 50-plus.
#208
If your marriage is shaky,

make a copy of all fnancial
documents.
#209
E is the expense ratio on your states college savings plan. T is

the percentage of your contribution youd get back in state tax
benefts. N counts the years until you use the money. The 0.17%
is the cost of the cheap New York plan you could buy instead.
This inequality asks the question: Is the reward for investing locally good enough to overcome the high cost of a local
plan? Twenty-eight states reward their citizens for loyalty, and
you need this calculation to know whether to take the bait.
(If you live in one of the other 22 states, the choice is simple:
Send your money to New York.)
Example: If you put $5,000 into your home-state plan,
youd get a deduction or credit worth $250, or 5% of that
amount. Your child will be in college ten years from now, so
T/N = 0.5%. Then the home-state plan has to be cheaper than
0.67% a year for it to be a buy.
Great StateS for

ColleGe SavinG
theSe Combine eConomiCal planS

with GenerouS tax benefitS for reSidentS who Stay at home with their
529 money.
statE
ExpEnsE maximum
ratio1 dEduction2
illinoiS
0.18-0.69%
miChiGan
$20,000
0.20-0.30
10,000
0.17
10,000
new york
South Carolina
0.05-0.25
no limit
weSt virGinia
0.29-0.40
no limit
wiSConSin
0.08-0.45
3,0003
Range of asset-based expenses. 22on a joint RetuRn. 33peR benefi-
11
ciaRy. Source: Savingforcollege.com
If your spouse is shady, fle

separate tax returns.
#211
Know when to fre your

fnancial advisor.
#210
Burton Malkiel: Never buy

anything from someone who
is out of breath.
#212
Be skeptical of principal
protected productsask
how much is guaranteed and
at what cost.
#215
#213
Be wary of companies that

have gone public in reverse
mergers.
#214
Low-priced stocks arent

necessarily cheap.
Make sure a stocks

dividends are less
than its cash fow and
likely to remain that
way.
#216
Warren Bufett: Risk comes

from not knowing what
youre doing.
#217
Beware unlisted
REITs.
#218
Save remodeling receipts

to add to your homes basis
and cut gains taxes when
you sell.
CoopERmaN: TIm paNNEll; malkIEl: pETER FolEY / BloomBERg; hoUSE: CaRRoll SEghERS / NEwSCom; BUFFETT: JaCk wElCh
Dont count on an
inheritance. If you get one,
dont blow it.
#226
Burton Malkiel: Trust in

time, rather than timing.
7. hoW loNg Will it take For

a deFerred aNNuity to Pay oFF?
#227
Delay retirement as long as

you can.
#228
The beauty part in those variable annuities sold by brokers is that your earnings compound tax free
until you take the money out. The ugly part: stif fees.
This formula assumes you are buying stocks that earn 7%. outside the annuity, well hypothesize,
your portfolio incurs a tax of 25%, meaning that your money compounds at 5.25% (thats the 1.0525
in the denominator). Inside, it compounds tax free but gets hit with a typical 1.5% fee (resulting in the
1.055 factor). when you exit the annuity, each dollar of proft turns into 60 cents after taxes (thats
the 0.6 in the numerator). alas, one of the features of annuities is that they convert low-taxed dividends and capital gains into high-taxed ordinary income.
You can pull those logarithms of a dime-store calculator. answer: 215 years. Dont buy stock annuities unless you are sure to remain invested until the year 2228.
what if the portfolio will be invested in bonds paying 4%? Then the annuity makes sense only for
people who can hold on until 2536.
8. WhiCh etFs are the Best Buys?
But dont assume in your

planning that you can work
full-time until 70.
#229
Compare insurance costs

before choosing a new car
model.
#230
Then go shopping for that

model at months end.
To fgure the annual cost of an exchangeetfS for CheapSkateS

traded fund, start with its stated expense
Some of theSe more than Cover overhead with
ratio (E). Now add the percentage bid/ask
StoCk-lendinG revenue.
spread (B), divided by the number of years
tEn-YEar
youll own the thing (N). Subtract l, the
tickEr Fund
cost
beneft you get from the operators ability to
vbk
vanGuard Small-Cap Growth
$154
lend out pieces of the portfolio for a fee to
SCha
SChwab u.S. Small-Cap
68
short-sellers.
xop
Spdr S&p oil & GaS explor & prod
38
The expenses and spreads are readily
vea
vanGuard ftSe developed marketS
27
available from morningstar and elsewhere.
vti
vanGuard total StoCk market
43
Securities lending data has to be dug out
SChb
SChwab u.S. broad market
49
of fnancial statements. For funds that own
cumulative cost of investing $10,000 foR a decade. Reflects bid/ask spRead, expense
Ratio and secuRities lending Revenue, but not tRading commission. SourceS: Bloomsmall-company shares this can be a big
Berg; interactive Data via factSet reSearch SyStemS; morningStar; funD venDorS.
number, more than enough to cover all of the
overhead expenses.
weve done the work for you. The table shows six cheap ETFs, with annual cost fgures that assume you stay put for ten years.
#220
Dont accept a high property

tax assessment of your
homeyou can appeal and
talk it down.
#219
Buy no more house than you

can aford.
#221
Dont assume you should buy

a house. Start by calculating
rent-versus-buy costs for
homes in your market.
#222
#232
Hold actively managed

mutual fundsthe kind that
pass on the most-shortterm gainsin tax-deferred
retirement accounts.
#233
Hold real estate in your

IRAbut carefully.
#234
Dont let the groupthink

of investment clubs cloud
rational investment analysis.
#224
If you have no time

for complexity, diversify
your portfolio with just
three mutual funds.
Build your own

ersatz retirement
annuity with savings
bonds.
#223
#225
Buy a deferred fxed annuity

to make sure you dont
outlive your money.
#231
To save even more, dont

own a car, share one.
Boost income with

closed-end, covered call
funds.
#235
Warren Bufett:
Diversifcation is a
protection against
ignorance.
#236
#237
David Dreman: The time to

buy is when theres blood on
the streets.
#238
Beware superstar CEOs with

weak boards.
#239
Compare benefts (including

options) before switching
jobs.
#240
Find out how your 401(k)

rates at BrightScope.com;
if expenses are high or fund
choices poor, lobby for a
better plan.
#241
retIrement
9. WheN is a Closed-eNd a BargaiN?

a closed-end fund difers from the usual kind (called an open-end or mutual fund) in having no exit door. when you want out, you cant ask the operator to send you cash; instead, you
have to get some new investor to take your place. Result: Shares often trade at a discount to their
asset value.
Closed-ends, then, are something of a roach motel, but they can be good buys if you get in cheaply enough. This formula tells you whats cheap.
The question being asked: Is the funds expense ratio (E) less than the product of its discount (D)
and its yield (Y)? If yes, consider buying.
Example: a fund with a portfolio worth $20 per share trades at $17, or a 15% discount. Its expense
ratio is 0.6%. It pays out $1 a year, or 5% of the asset value. The formula likes this fund because 0.6%
is less than 0.75% = 15% times 5%.
It doesnt matter whether the dollar being distributed comes from dividends, capital gains or a
return of capital; all that matters is that its cash. The fund is cheap because that dollar cost you only
85 cents, so you make a 15-cent proft when it arrives in your mailbox. The 15 cents more than covers
your 12-cent annual cost of ownership.
In todays bull marCloSed-end beSt buyS
ket (at least for stocks),
buy a dividend dollar for 91 CentS or leSS.
there arent many
tickEr Fund
discount YiEld ExpEnsEs
closed-ends that rate
as bargains. But wait
JGt
nuveen diverSified Curr opp
15.9%
8.5%
0.99%
until the next crash.
aCG
allianCebernStein inCome
14.6
5.0
0.55
Desperate sellers will
min
mfS intermediate inCome
9.1
8.6
0.71
be unloading at nice
mSp
madiSon StrateGiC SeCtor
13.9
7.5
0.98
discounts. For now our
nxp
nuveen SeleCt tax-free
9.3
4.5
0.28
list of cheap funds is
all payouts oveR past yeaR divided by Recent net asset value. excludes inteRest.
SourceS: morningStar; forBeS.
short.
Dont give Uncle Sam an

interest-free loan; adjust
your withholding so you
dont overpay your taxes.
#242
Even if you cant pay, fle

your tax return.
#244
Read Market Wizards and

The New Market Wizards
by Jack D. Schwager.
#245
Warren Bufett: Time is

the friend of the wonderful
business, the enemy of the
mediocre.
#246
Dont chase yesterdays

winners unless theyre still
winning.
#243
Take a cue from Mark

Zuckerberg: Get maximum
tax savings for your
charitable buck by giving
appreciated assets to a
donor-advised fund or
supporting organization.
#247
Purchase own occupation

disability insurance.
#248
Remember that market

underperformancejust like
costscompounds.
#249
#255
Ramit Sethi: Set up systems to

automate desired behaviors.
Leave your gym clothes at
the foot of your bed. Have
contributions to savings
automatically deducted.
#250
Open a spousal IRA for a

stay-at-home husband or
wife.
#251
If you work from home, get

a rider on your homeowners
insurance policy to protect
you if the FedEx man slips.
#252
To maximize college
aid, make Roth 401(k)
contributions, not pretax
ones, while your kids are in
college.
#253
Like Warren Bufett,

make concentrated bets in
stocks that you have high
confdence in.
#254
Live dangerously; invest

your emergency fund instead
of keeping it in cash.
Barry Sternlicht: Study

outliers rather than
eliminate them. You can
learn everything there
is to know about the
industry or the player
from the company that
is performing better or
worse.
#256
Dont wait until expiration.

Always look to buy back
cheap options.
#257
Most stock market gains

since 1950 have occurred in
the November-April period.
#258
Over the long run, small-cap

stocks have outperformed
big blue chips.
zUCkERBERg: JaCk wElCh; homE oFFICE: STEwaRT CohEN / alamY; CollEgE: CRaIg waRga / BloomBERg
Follow top money-manager

moves. Even the great
investors piggyback on other
smart investors.
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promotion // Economic DEvElopmEnt
Macedonia
part II of a series
A Prime investment DestinAtion

ERIC
Eric NATHAN
NathaN / ALAMY
alamy
acedonia boasts one of the bestperforming economies in Europe.

It registered a 3.4% GDP rise in the frst
six months of 2013, three points above
the European Union average. For such
a modest-sized country, occupying a
territory of just 10,000 square miles
and with a population of just over 2 million, Macedonia punches well above its
weight in economic strength, investment
potential and development prospects.
Thanks to a raft of free-trade agreements signed in recent years with the
EU, the European Free Trade Association (EFTA) and regional powerhouses
like Turkey and Ukraine, Macedonia provides preferential access to a market of
more than 650 million consumers. The EU
ranks as Macedonias leading trade partner, with around two-thirds of all goods
exported in 2012 destined for the other 27
member states, while more than 58% of
the countrys imports originated in the EU.
Macedonia also offers great potential for additional growth in the future,
with EU-leading fundamentalssuch
as a public debt ratio of 33.8%, the
fourth lowest in Europe; annual infation
of 2.8% projected for 2013; a budget
defcit of just 3.9% in 2012and a frm
business-friendly vision under the leadership of Prime Minister Nikola Gruevski,
who took offce in August 2006 and was
re-elected in 2011.
In October 2013, Fitch Ratings confrmed Macedonias long-term currency
and bond ratings as BB+, with a stable
outlook. Fitch predicts that GDP will
continue to expand by 2.7% in 2013,
before strengthening in 201415 as
exports increase and signifcant public investment gains momentum. While
challengessuch as unemployment,
which stood at 28.8% in the second
quarter of 2013, despite a drop of ten
pointsremain, most of the countrys
key economic indicators are pointing in

the right direction.
Macedonia is a dynamic European
economy, with solid macroeconomic fundamentals, confrms Zoran Stavreski,
the nations vice prime minister and
minister of fnance. We have the most
attractive tax regime in Europe and technological industrial development zones
(TIDZs) where we provide ten-year tax
holidays and even cash incentives.
With a fat 10% corporate and personal income tax rate, and no levy on
reinvested or retained profts, Macedonia aims to let those who generate
capital in the country reap the benefts in
the short term, with a view to stimulating
greater investment in the long term. Foreign investment in Macedonias TIDZs
already accounts for over a ffth of total
exports by value, and the trend looks set
to continue, adding still more capacity in
2014 and beyond.
Economic DEvElopmEnt // promotion
Paving the Road for

International Investors
Stavreski believes that while Macedonias fscal regime is undoubtedly an
important factor, the countrys commitment to creating a pro-business climate
also has served as a magnet for overseas capital. According to a 2012 World
Bank report, infows of foreign direct
investment accounted for 4.5% of the
nations $10.4 billion GDP in 2011.
Over the last six years, Prime Minister Gruevskis government has made
an effort to streamline procedures to
create a simple, clear environment for
investors, Stavreski notes, including
a fast track for establishing companies
and getting licenses, as well as reinforcing investment protection.
In line with EU economic development
guidelines, the Gruevski government
launched its National Strategy for Sustainable Development in 2010, adopting
a bottom-up approach to policy-making
that enabled the private sector to be
directly involved in the process, Stavreski
points out. The National Council for Sustainable Development includes public and
private sector players, who work together
to upgrade the nations regulatory and
institutional framework while ensuring
effective stakeholder consultation.
The result is that Macedonia has an
institutional architecture that is unique
in Europe, in terms of our approach
to investment, Stavreski says. We
combine institutions that are directly in
charge of looking for investors, putting
them in contact with top government
offcials, solving any problems by creating tailored programs, and following up
on the investment as it develops.
Ideal Business Conditions

The commitment to making it as simple as possible to invest and set up a
new ventureby removing red tape and
bureaucratic hurdles, and then going the
extra mile to ensure it prospers, providing support every step of the wayhas
helped Macedonia move up the World
Banks overall business climate rankings
from 94th place in 2006 to 23rd in 2012.
At the same time, Macedonia remains
one of the most competitive places to

do business in southeast Europe when
comparing operational overheads such
as salaries, logistics and regulatory risk.
Wages in Macedonia are up to 50%
lower than in other eastern European
countries. Coupled with low taxes and
duty-free access to markets and suppliers, manufacturing costs in Macedonia
rival those of China, enabling investors
to beneft from proximity to European
markets while paying Far Eastern prices.
predictability without requiring sacrifces

that affect the businesss bottom line. In
his opinion, Macedonia offers a hard-tobeat combination that is worth exploring.
Pristine water and a rich heritage make Lake Ohrid an

ideal tourist destination.
Tourists Welcome
High-caliber multinationals are committing to

ventures in Macedonia.
However, Macedonias value proposition is not just cost-effcient, it is also

effective. The countrys advanced telecommunications infrastructure and
highly trained workforcewith plenty
of multilingual graduates and engineers
available for hireallow it to compete
not just in cost but also in capacity with
business process outsourcing (BPO)
giants like India.
These key factors have already
attracted many international investors
with strong interest in the agribusiness,
electronics, food processing, health
products and high-tech sectors. In the
automotive sector alone, multinationals of
the caliber of Johnson Matthey, Johnson
Controls, Kemet, Van Hool, Kromberg &
Schubert, and Draexlmaier have committed to ventures in the country.
According to the minister, corporations,
faced with recurring unrest across North
Africa and lingering economic hardship
elsewhere in Europe, are constantly on
the lookout for investment destinations
that offer political stability and economic
Macedonia is also drawing in leisure

travelers, with the governments Skopje
2014 project aiming to put the national
capital on the global tourism map. A
multimillion-dollar initiative, comprising
the construction of some 20 government
buildings and museums, as well as 40
monuments celebrating the countrys
rich heritage, Skopje 2014 is designed
to attract many more tourists than the
650,000 who visited in 2011.
Macedonia has made great strides in
the last couple of years, and we are at
a turning point for major developments
in the tourism sector, Stavreski says.
This is one of the few places in Europe
where smart developers can build great
places and market them as unique experiences to appeal to European and other
global travelers.
While many of its rivals are still suffering
from the effects of the global recession,
Macedonia possesses a dynamic,
emerging economy with a stable macroeconomic situation, an enabling business
environment, an attractive tax package
and pro-business policies. We have
achieved twice the growth of Europe in
the past seven years and have very good
potential, he continues. v
Look for the third report in this series on Macedonia
in the March 24, 2014, issue of Forbes magazine.
Macedonia Section Project Manager:
Eduardo Magaa
For more information, contact:
Gabriel Gutierrezg.gutierrez@forbes-cm.com
The sponsors of this report have provided
all statistical data.

retIrement
Putting intel inside

Your 401(k)
It would take the wisdom of Solomon to solve the nations retirement crisis.
Dimensional Fund Advisors is turning to a Nobel laureate instead.
By MAtt SChiFrin
Chairman David Booth

hopes geek power can
propel DFA deeper into
the retirement market.
MIchAel ThAD cArTer For ForbeS
f there is a gigantic socioeconomic problem facing this nation that should be weighing
heavily on policymakers, its the
retirement income crisis.
Fact: There are 80 million baby boomers, and every single day for the next 17
years roughly 10,000 will turn 65.
Fact: According to the Federal Reserves most recent Survey of Consumer
Finances, only 52% of Americans have
saved anything for retirement, and for
those aged 55 to 64 who have retirement accounts the median balance was
$100,000.
Factor in life expectancy already averaging 85 or so, plus a near-zero interest
rate Fed policy, and you get a bleak future
for masses of old folks. Think trailer park
living and early bird specials at best;
working until their dying days at worst.
Enter Dimensional Fund Advisors, the
Ivory tower mutual fund manager with
$315 billion under management whose
efcient-market-minded funds are sold
either directly to large institutions or by
hand-vetted fnancial advisors.
Once youre lucky enough to be a
frm of our size, you kind of start to think
about what it is that you really want to
do, says DFAs billionaire founder and
chairman, David Booth, 66, sitting in
his architecturally striking Austin ofce
building with sweeping views of downtown. Helping people solve this problem is just about as cool as it gets. And
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retIrement
Mit economist and nobel

laureate robert C. Merton
can be thanked for DFAs
new noble cause.
were in a position with these great

fnancial thinkers that wed like to
take a crack at that. Thats kind of
going to be the focus of the frm,
going forward.
But Booths nonchalant musings
about his frms new cool mission understate how critical his new
marching orders are. Among large
fund companies, DFA, with a paltry
$25 billion in retirement assets, has
largely missed out on the explosive
growth of mutual funds into the
retirement market. As of 2010 the
overall retirement market in the U.S.
stood at about $18 trillion, up from
$4 trillion in 1990.
These days one of the fastestgrowing parts of the retirement
market is the $5 trillion in defned
contribution plans, known mostly
as 401(k)s. For traditional mutual
funds, like the ones DFA manages,
the market is probably the best
growth engine left. DFAs retirement
business is dwarfed by giants like
Fidelity, Vanguard and Capital Research & Management Co.
So DFA needs to grow in defned
contributions, but it also needs to
be careful not to go too mass market
like Fidelity and Vanguard. DFAs
highly successful operating model
has long centered on maintaining
low costs and the cultlike loyalty of
some 1,800 independent fnancial

advisors, who account for 60% of
its assets.
The genius of Booths new retirement-market strategy comes from
MIT economist Robert C. Merton,
once described by his teacher, the
famed economist Paul Samuelson,
as the Newton of modern fnance.
Mertons eponymous Black-Scholes-Merton options-pricing model
won him and Myron Scholes the
Nobel Prize in 1997 (Fischer Black
died in 1995). Merton was on DFAs
fund board from 2003 to 2009 and
now also holds the title of resident

scientist.
DFAs brain trust has always run
deep. There are two other Nobel
laureates on its boards: Scholes and
Eugene Fama. It was Famas work
(and that of Kenneth French, also on
DFAs board) on the efcient market
theory that inspired his onetime University of Chicago graduate students
David Booth and Rex Sinquefeld to
come up with DFAs fund strategy
and the frms philosophy. DFA funds
are built around the idea that you
cant outguess the market, but you
can outtrade other participants.
Scholarly research and Nobel
credentials have become the biggest
part of DFAs marketing shtick, but
smart execution is its real core competency. Trading is the cornerstone
of what we do, says Booth.
Over the years Famas and others
professorial theories have worked
their way into DFAs passive approach to include three factors that
improve returns over time: buying
small-cap stocks, buying low priceto-book stocks and buying those with
higher operating profts.
But with mutual fund growth
slowing, DFA went back to the academic drawing board in 2010 to buy
a software platform that Merton and
Look like your 401(k)? DFA makes no promises, but its four sliders could fx your retirement mix.
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PARTNER
ENTREPRENEURIAL PARTNER
#260
Move inherited IRAs from

trustee to trustee only.
#261
Name primary and

contingent IRA benefciaries
so your heirs can enjoy
the maximum years of tax
deferral.
#262
Maximize your Social

Security using a couples
claiming strategy.
#263
Open all mail from the IRS.
#264
Dont cheat the IRS and

your business partner at the
same time.
#265
Never ignore a 1099, even if

its wrongthe IRS wont.
#266
Dont lie to your tax pro.
retIrement
Boston University professor Zvi Bodie created in 2006 for a company in the Netherlands.
Mertons SmartNest software is based
on what is known in academic and fnancial
planning circles as adhering to Life Cycle
Finance Theory, in that its goal is not returns
or growth of assets to some optimal value
(think INGs Your Number ad campaign) or
target date but rather meeting the liability of
lifetime income. All outcomes communicated
to plan participants are expressed according
to what income they will be able to achieve
after retirement over the course of their lives.
In some ways its a back-to-the-future
movement, explains Michael Lane, chief executive of Dimensionals SmartNest: SmartNest wanted to create a DC [defned contribution] plan that looked like a DB [defned
beneft] plan in terms of reporting, where
youd see everything in income terms. Because it doesnt matter what it is in principal
value. What matters is whats it going to give
you every month.
Mertons new software addresses a stark
reality in the defned contribution business.
Despite earnest eforts to educate 401(k)
holders, the vast majority are clueless about
how they need to structure their accounts
now and over the course of their careers to
ensure a reasonable income fow after retirement. The majority of 401(k)s today focus
on asset accumulation and only gloss over
income-planning postretirement.
Heres how Merton describes the current
defned contribution environment for the
average worker: It is like being a surgical
patient who, while being wheeled into the
operating room, has the surgeon lean down
and say, I can use anywhere from 7 to 17
sutures to close you up. Tell me what number
you think is best.
Mertons SmartNest, now the engine for
Dimensionals product called Managed DC,
#267
After you hit 70, take

the required minimum
distributions (RMD) each
year from your traditional
IRAs or face nearconfscatory tax penalties.
#268
If you dont need your RMD,

consider rolling it directly to
a charity.
#269
Sign a living will, health care

proxy and power of attorney,
even if youre still healthy.
#270
Get a will. What happens

to property if someone dies
without one (intestate)
varies by state and might not
be what you would want.
ofers a simple Web interface that shows

retirement plan participants four simple
customizable variables: a desired income
target, which might default to 50% of ones
preretirement income and the probability of
achieving it; a conservative income target,
which by default has a 96% probability of
success; pretax contributions; and retirement
age. Those are the only variables people ever
need to worry about.
Since the system is integrated into employer plans, it already knows things like
your current income and your expected Social Security benefts, and, if applicable, you
can plug in expected income from a defned
beneft pension plan.
Sliders are provided that let you perform
what-if scenarios. If you want to change your
desired income from $5,000 per month to
$6,000, the probability of you achieving that
might drop from 75% to 35%. The only way
to get back up to 75% would be to move the
slider for pretax contributions from 4% up
to 8% or slide your retirement age from, say,
65 to 70.
For DFA the beauty lies under the hood
because it would all be connected to three
DFA portfolios: a global stock index and
two infation-protected bond portfolios of
diferent durations, each charging 30 basis
points in expenses. DFA adjusts your mix to
match the duration of your income liability.
No more choosing funds or reading prospectuses. Simply move your slider, hit confrm
and let Dimensional handle it.
SmartNest gets around two big problems
prevalent in the 401(k) business today. One is
inertia, removing the large gap between getting sound advice and actually acting upon it,
and the second involves the one-size-fts-all
approach of target-date funds, which essentially assumes that everyone hitting retirement age in, say, 2025 is in the same fnancial
#273
Insure your home for its

replacement value; buy food
insurance if theres a risk of
water damage.
#271
If youve got an old estate

plan, review it. You may
no longer need to set up a
trust, since Congress raised
the federal estate and
gift-tax exemption above
$5 million and allowed
spouses to inherit
each others unused
exemptions.
#272
Warren Bufett: No matter

how serene today
may be, tomorrow is always
uncertain.
buFFeTT: JAck Welch; FlooD: chAD purSer/geTTy IMAgeS
#259
Take only calculated risks

on the smallest Pink Sheet
stocks.
bucket. According to DFA, engagement of SmartNest in

the Netherlands by participants was as high as 50%, and,
of those, 50% wound up saving more.
Of course, the holy grail for DFA would be getting
plan sponsors to assign SmartNest as a qualifed default
investment alternative for automatic enrollment, much
the way they did target-date funds starting in 2006. According to a government study published in 2007, automatic enrollment will account for up to $134 billion in
additional retirement savings by 2034.
But before DFA can even contemplate this, it needs
to get more plan providers to actually integrate and
ofer its service. One of its early adopters, Tampas
open-architecture Aspire, signed up a year ago but has
had limited success. Dimensional also has agreements
with SunGard and DST, but gaining traction in the byzantine and slow-moving world of defned contribution
plan recordkeeping wont be easy. Already several sophisticated software-based retirement products, including Nobel laureate William Sharpes Financial Engines,
have a big head start.
Listen to Heather Hooper, vice president of retirement strategies for Loring Ward, a $10 billion asset
manager that serves more than 1,000 advisors, all using
Dimensional funds: Most advisors place their own value
in choosing and managing investments. Dimensionals
Managed DC product is brilliant, but it takes them out
of that client conversation. Hooper has been a fan of
SmartNest for years, but Loring Ward has yet to ofer it.
I dont want to be the guinea pig, she says.
DFAs Lane swears that SmartNest has no intention of
undercutting the companys fnancial advisor base.
SmartNest is Intel. You can read all sorts of interesting things about what Intel is doing, faster processors,
but no one ever calls Intel or meets anyone from Intel.
Youre always calling someone at Dell or Apple, says
Lane. In our case you will deal directly with the person
who provides it, a fnancial advisor or a consultant or a
plan sponsor.
In order to make meaningful strides into the retirement market DFA needs to attract big retirement plans.
Institutions of higher education would be a natural ft,
and, according to insiders, DFA is currently working with
TIAA-CREF to bring its SmartNest to the retirement
plan of small liberal arts college Lewis & Clark in Portland, Ore. Its also working with Transamerica to sign on
a small New Jersey hospital.
Ultimately, Dimensional may even have to consider national advertising to spur demand for its Nobel
laureate-endorsed approach to retirement much the way
market giants like Fidelity and Prudential do. Given its
reliance on low costs and loyal fnancial advisors, this
could throw a wrench in the highly successful mutual
fund model Booth and Sinquefeld built. F

real estate
The Upside in
UnderwaTer MorTgages
William Erbey has built a $2.8 billion fortune by fguring out what makes
subprime borrowers tickand how to keep them paying.
BY LiYan Chen
William erbey of Ocwen Financial has a way with deadbeat mortgage

holders.
Jonathan KozoWyK for forbEs
n a typical sunny and humid Saturday afternoon in St. Croix most people are sunbathing
on Buckland Island beach or kayaking in Salt
River Bay. But William Erbey, the 64-year-old
executive chairman of Ocwen Financial, keeps the blinds
shut in the second-foor ofce of his 17th-century Danish
stone building. Out of his window is a magnifcent view of
the Caribbean Sea, but Erbey cant be distracted. Sitting
in paradise doesnt mean that we dont have the same discipline, he says as he sips from his glass of iced green tea.
Bill Erbey is all about 75-hour workweeks and pennypinching. Its the reason in 2012 he moved his principal
ofce from Atlanta to St. Croix, in the U.S. Virgin Islands,
which happen to be an economic development zone. As
a result Ocwen now saves 90% on its corporate income
tax. Its also the reason Erbey is now worth $2.8 billion
and may be the most innovative man in the mortgage
business.
Ocwen Financial is the largest nonbank mortgage
servicer in the U.S., with a gigantic $435 billion portfolio. Ocwens revenue hit $531 million in the third quarter, more than double the same period a year ago, and its
stock has zoomed even faster, climbing 275% in the last
two years and putting Erbey on The Forbes 400 list for
the frst time. The bulk of Erbeys wealth is tied up in
Ocwen, but he chairs four other afliated public entities:
Altisource Portfolio Solutions, Altisource Asset Management, Altisource Residential and Home Loan Servicing
Solutions.
Mortgage servicers like Ocwen are essentially debt
collectors, collecting monthly principal and interest payments from homeowners and delivering them
to investors such as Fannie Mae and Freddie Mac and
mortgage-backed security trusts. Contrary to their
reputation as heartless foreclosure machines, servicers
generate revenue by receiving fees on the serviced
loans, so their goal is to keep delinquent borrowers paying. Its especially difcult for Ocwen, which
specializes in risky subprime loans. To convince his
homeowners to stay on track, Erbey has deployed new
models and data-smart practices that combine technology and social psychology.
Imagine an underwater borrower who receives a call
from one of Ocwens 1,900 call-center operators in India.
The operator could start the conversation by telling you
that millions of Americans are losing their homes and
he understands why you are having difculty paying
OFFICE 365
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Harnessing
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of
an
entire
workforce is crucial when over 90 million

people depend on that company for their
nancial
security.
Thats
why
MetLife
is
on Ofce 365. It connects 64,000 global

employees to the right people with cloudbased email, Lync and SharePoint for more
effective communication. By working together
with Ofce 365, MetLife can keep addressing
customer needs with the best possible solutions.
NOWONOFFICE365.COM
#274
Scan in your tax records, and

keep a copy on the cloud or
on an external drive at work;
fres and foods happen.
#275
Keep business and personal

expenses separate.
#276
Maintain at least some

fnancial accounts separate
from your spouses.
#277
Peter Lynch: Know what

you own and know why you
own it.
#278
Have your kid read The

Little Book That Beats the
Market by Joel Greenblatt.
#279
Dont fall for cheap

stocks that are really worth
even less.
#280
Read the classic Where Are

the Customers Yachts? by
Fred Schwed Jr.
#281
real estate
your mortgage. Or he could approach you

with a more refned message: Ocwen is able
to resolve the mortgage delinquency issue
without having to foreclose 80% of the time.
Which prompt is more likely to keep the borrowers current?
To Erbey this simple question demands
a not-so-simple answer. He explains that
while both approaches sound empathetic,
they could have quite diferent results. The
former suggests the possible outcome of
failure, while the latter reminds borrowers of Ocwens successful track record. Its
like going to a child and saying, You are very
smart, and going to another to say, You are
very dumb. It is very impactful on their performances, Erbey says.
Over the past two decades Ocwen has
poured $150 million into developing its
proprietary software, REALServicing, and
related products. The system automates
the entire process, from loan setup to realestate-owned asset management, and allows
Ocwens employees around the world to
follow the same meticulous process. It also
helps Ocwen monitor the dialogues with
borrowers and collect extensive data to
conduct behavioral research. The goal is to
discover the most efective way to infuence borrowers. The software is now owned
and developed by Erbey afliate Altisource
Portfolio Solutions, which Ocwen spun of
in 2009 and has since climbed in market cap
from $100 million or so to $3.5 billion.
If you think about a persons monthly
budget, you have certain calls on that budget
every month, says Daniel Furtado, an equity
analyst at Jeferies who has a buy rating on
Ocwens stock. The predominant strategy is
to get in touch with the borrower, build the
dialogue and help them see that they should
pay your bill frst. In a thin-margin business
like servicing, these incremental gains or
Run from a pitchman

guaranteeing high returns.
#283
Snitch on tax cheats and

collect a multimillion-dollar
IRS whistle-blower award.
#282
Benjamin Graham: Speculate

only with a separate small
portion of your capital.
the reduction of losses that Ocwen achieves

through research and automation can make
a big diference in profts. In fact, Ocwen
maintains higher operating margins than its
competitors.
Erbey admits that he has been datafocused ever since he was president of GE
Capitals mortgage insurance unit in the
early 1980s. He saw that decisions determining the mitigation of loans were often
random. One person would try to foreclose,
and another would try to modify. They really
couldnt process it to optimize the outcome,
he says.
When he became chief executive of
Ocwen in 1988, Erbey set out to change its
approach with data modeling. Initially he
met strong resistance from tradition-bound
employees, but the data proved his tactics.
People laughed at us for the frst 15 or 20
years. Today its something that has been
adopted by the industry, Erbey says.
Wilbur Ross, the billionaire investor who
sold competitor Homeward Residential to
Ocwen last year and subsequently joined
the board, never laughed at Erbeys thriftiness and data obsession. At his frst board
meeting, Ross recalls, directors discussed
a bonus for a senior executive based partly
on how many seconds he reduced in service
time. Ive never seen a company with such
precise requirements, says Ross. That convinced me how they managed to have such
low cost.
Perhaps the best example of the benefts
of Ocwens obsession with data mining and
behavioral fnance is its Shared Appreciation
Modifcation program. Using SAM, underwater homeowners get the chance to stay in
their homes and have their principal balance
reduced by Ocwen to as low as 95% loan-tovalue ratio. But when they sell or refnance
the homes, investors in the mortgage-backed
#284
Learn what behavioral

economists have found about
self-destructive investor
behaviorso you can try to
avoid these common and
expensive mistakes.
#285
Understand the risks of

using leverage and inverse
ETFs, which rebalance
assets daily.
#286
Benjamin Graham: Every

nonprofessional who
operates on margin ... is ipso
facto speculating.
#287
Register for Medicare at 65,

even if youre still covered by
your workplace insurance,
to avoid having to pay a
penalty later.
cloud: courtnEy KEating / gEtty imagEs; lynch: michaEl springEr / bloombErg; graham: ap; allEn doniKoWsKi / gEtty imagEs
securities behind the loans get a 25% share of the upside.

Erbeys genius is that he recognized the option embedded in a typical mortgage and grabbed back a piece of it
for himself and investors. We are always trying to create
a win-win situation, he says.
Since its full launch in early 2011 almost 42,000
families have received loan modifcations through SAM.
The total modifcations amount to $3.7 billion in principal forgiveness, and they reduced mortgage payments
by an average of $520 per month. Re-default rates on
SAMs have mostly been 10% or less, compared with 33%
prior to its adoption, and Ocwen projects that the modifed loans are on track to produce a positive return for
investors.
Erbey admits he didnt make SAM uphe borrowed
it from his experience during the savings-and-loan crisis of the 1980s. In the years before the fnancial crisis
Ocwens solution for delinquent borrowers was generally forbearance. As the recession hit and income levels
fell signifcantly below the line to support the existing
mortgages, the company started doing more loan modifcations. By examining Ocwens proprietary data, Erbey
and his team found that default rates spike for borrowers whose mortgages have loan-to-value ratios above
95%. Applying decades-old principles to this issue,
Ocwen created SAM in 2010 to take advantage of the
downturn.
Like other servicers that survived the fnancial crisis and are now thriving in the low-rate environment,
Ocwen is using its strong cash fow to build its balance
sheet and buy mortgage-servicing rights from banks
compelled to divest them by Basel III. Besides loan
originations, Erbey is also talking about expanding into
other areas of consumer fnance. His new ventures will
likely add some leverage to the balance sheet, but Ocwens 1.64 debt-to-equity ratio is still lower than that of
its competitors.
Zach Gast, head of fnancial institutions research at
CFRA, thinks Erbeys innovations could bring competition. Their ingenuity could come back to bite them,
he says, referring to Erbeys publicly traded Home Loan
Servicing Solutions, a low-capital Cayman Island frm
that buys mortgage-servicing assets. The big question is:
Why cant the big banks do that?
In the meantime, as he avoids the sun in St. Croix,
Erbey relishes the attention his fnancial empire has gotten on Wall Street and on Main Street thanks to his socially responsible mortgage innovations. But he makes
no pretense: I am in the business of making money, but
I try to do it in a way that I can go home and say that
people benefted from what I did today. Even better
when his new home saves his shareholders millions in
U.S. taxes and happens to be a stones throw from a Caribbean beach. F

scams
show me
the money
James Koutoulas runs a small
hedge fund that bets on
grain and livestock futures.
But his biggest score could
be getting all of MF Global
customers money back.
by John F. Wasik
ames L. Koutoulas has never

lacked for brains, determinationor swagger. At 15, with
$10,000 hed earned designing websites, he started trading tech
stocks. He picked up Apple for $17 in
1997 and sold a year later for double
that, using the gains to buy his frst
car, a 1983 BMW. At Cooper City
High School in Florida he fashioned
himself as the swing-dancing, sportsloving, calculus and computer geek
the dashing one with the boisterous
laugh. He even ran for Mr. Cooper
City and placed runner-up.
After breezing through the University of Florida on a full academic scholarship as a fnance major (history minor),
Koutoulas planned to manage money.
But frst he enrolled in Northwestern
University law school because, he says,
after a bad experience involving a trafc
accident he was determined not to get
screwed by the lawyers again.
That legal training has come in

handy. On Halloween 2011 MF Global
fled for bankruptcy in New York City,
and $5 billion of customers funds were
frozen, including $55 million from the
clients of Typhon Capital Management,
a Chicago hedge fund Koutoulas started
in 2008, just two years after graduating
from law school. (With characteristic
bravado he had named his frm after the
hundred-headed beast of Greek mythology who battled Zeus.)
Within days of the MF Global fling,
Koutoulas and Chicago commodities
advisor John Roe had formed the Commodity Customer Coalition, a nonproft
group that came to represent thousands
of customers, including retirees, farmers who couldnt buy seed and a single
mom in danger of losing her house.
To that point Koutoulas courtroom experience consisted of helping
his sister get back a security deposit
and an $8,000 pro bono case. He had
never taken a bankruptcy class. But as
president of CCC he began drafting
motions and became a familiar face not
only in bankruptcy court but also on
CNBC. The 6-footer with the shock of
dark hair and dark glasses was ready
to say what grayer heads might not,
calling early and often for the criminal prosecution of Jon S. Corzine, the
former New Jersey governor, senator
and Goldman Sachs chief who ran MF

Global for its fnal 18 months. (Corzine has not been charged criminally
and denies wrongdoing. He is fghting
a Commodity Futures Trading Commission civil suit that alleges he is
responsible for MF Globals illegal use
of nearly $1 billion in customer funds
to support its disastrous proprietary
trading bets on European debt. The
frm itself agreed in November to pay a
$100 million fne to settle the case.)
Corzine wasnt Koutoulas only bigname target. His criticism of JPMorgan
was so blunt that the bank told him
to take Typhons banking business
elsewhere. (In March the bank, which
served as both custodian of MF Global
customers funds and its lender, agreed
to return $546 million of customers
money it had frozen.)
Impolitic, perhaps, but Koutoulas
and CCC got results. At the start of the
case customers were told their money
would be frozen for nine months, at
which point theyd get 60% released. It
was widely expected theyd never get all
of it back. Instead, after six weeks they
got 72% of their money, and the bankruptcy judge recently ordered 100% returned. (Corzine and other former MF
Global execs have appealed that order.)
Koutoulas was really ofended by
what occurred and got the quickest
Piggy-bank protector: James koutoulas went to northwestern Law so as not to get screwed by lawyers. now hes taken on Jon Corzine, too.
Sara StathaS For ForBeS
payback ever, says Sam Tenenbaum,

a professor and head of the investor
protection clinic at Northwestern Law,
who has served as a mentor to Koutoulas. No one else was representing
customers early on, when it mattered
most, says Hilary Till, principal with
Premia Risk Consultancy in Chicago.
His proactive representation of futures
customers has been just about the
only bright spot in the whole sorry MF
Global saga.
Koutoulas says he got his capacity
for moral outrage from his accountant
father, who talked at the dinner table
of quitting a job rather than agreeing to
cook the books and also about his own
strict Greek upbringing. Ive learned

the level of corruption in Washington
and the fnancial system runs deeper
than I ever thought, he says.
So these days Koutoulas is speeding
along on a dual trackas both a money
manager and an industry reformer. Last
December he and Rowe won a successful insurgent campaign for seats on the
board of the industrys self-regulatory
group, the National Futures Association.
How much they can change at the NFA
remains to be seen; in February they
lost a bid to impose a lifetime ban on
Corzine. (The NFAs president argued it
might interfere with federal probes.)
More signifcant for todays inves-
tors, however, is their campaign for an

insurance fund to protect retail commodities and futures customers. The
Securities Investor Protection Corp. insures stock investors for up to $500,000
apiece in losses from unsavory securities brokers like Bernie Madof, and
bank customers are protected by the
FDIC for up to $250,000 per account.
But theres no similar protection for
commodities and futures investors.
Futures, options, currency contracts
and swaps are handled through future
commission merchants, who are supposed to hold the customers money
safe in segregated accounts. Supposed
to. After Peregrine Financial Group,
Rob Arnott: No strategy

can make up for inadequate
savings or premature
retirement.
#289
Start saving for retirement

in your 20s to put
the compounding winds at
your back.
#290
Use the Rule of 72: Divide

your expected percentage
return into 72 to gure
how long it will take you to
double your money.
#291
Never sell a stock that keeps

on rising in price.
#292
Warren Bufett: When we

own portions of outstanding
businesses with outstanding
managements, our favorite
holding period is forever.
#293
Ben Franklin: An
investment in knowledge
pays the best interest.
#294
Use ETFs to be your own

international fund manager.
#295
scams
an Iowa FCM, closed its doors in July 2012,

ex-CEO Russell Wasendorf Sr. pleaded guilty
to embezzling $215 million from customers
accounts over two decades.
CCC has taken up the fght for Peregrine
customers, too. Their only hope to recover more
than 50%, Koutoulas says, rests with a suit the
CFTC fled in June against U.S. Bank that asserted it illegally allowed customers funds to
be used as security on loans to Wasendorf and
also permitted him to improperly keep customer
money in a commercial checking account that
funded his private jet and divorce settlement,
among other items. U.S. Bank denies any liability.
Without an insurance fund, customers of
bankrupt FCMs must rely on the courts, where
lawyers charge $450 to $1,000 an hour and long
delays can result in losses from margin calls,
Roe told the Senate Agricultural Committee last
year. We have to stop expecting the regulators
to do their jobs and start ofering customers
protections when they do not, he testifed.
A study released in November that was paid
for by the NFA and other industry groups gave
skeptical treatment to the notion of insurance.
Koutoulas doesnt dispute that setting up an
insurance fund could be complicated but argues
that small investors in particular need protection from malfeasance. He also wants Congress
to tweak the law to make clear that commodities
and futures customers are frst in line, before
other creditors, in a bankruptcya position they
had until a 1999 court decision.
But Koutoulas is incensed by a CFTC proposal to beef up customer protection by requiring
those who trade on margin to post 20% of their
positions, up from 10% now. The rules intent is
to protect customers from the risk that other cus-
Dont try to impose your ego

on the market.
#301
#296
Monitor the level of fear in

the market with the CBOE
put/call ratio and the VIX.
Set up 10% trailing stop-loss

orders to avoid unexpected
nosedives in your portfolio.
#299
#297
Be a vulture investor: Buy

distressed bonds at pennies
on the dollar like Marty
Whitman and David Tepper.
Barry Sternlicht: You have

to be willing to change your
mind. If you are a stubborn
mule, youll get killed.
#298
Read Warren Bufetts

favorite book,
Benjamin Grahams
Intelligent Investor.
#300
Pay attention to moving

averages. When the 20- or 50day average crosses below the
200-day average its bearish.
tomers wont make good on their margin calls.

Perhaps, Koutoulas says, the 20% rule should be
enforced on high-frequency traders, who in a
couple of minutes, with a rogue algorithm, can
blow up an FCM, but not on farmers and other
retail customers, who are being asked to double
down on the money they have at risk at FCMs.
Indeed, Koutoulas paints an alarming picture
of the business in which he now makes his living. There are, he says, scummy frms that take
inordinate risks and then change their names and
start again. He suggests investors should ask for
both audited statements and reports that show
how a frms returns compare with benchmarks
and how the risks it takes also compare. Among
the risk ratios to look at: the fve-year standard
deviation compared with the S&P and the Sortino
Ratio, which gauges downside risk. (FORBES tip:
Go back further to see how the frm did in 2008.)
Koutoulas also wants the NFA to post disciplinary information about members online, the
way Finra already does for securities brokers.
Typhon, for its part, deals only with what the
CFTC calls qualifed eligible participants
they must have a net worth of at least $2 million,
including $1 million in stocks or $200,000 in
futures or some combination thereof, such as
$500,000 in stocks and $100,000 in futures.
In 2008 Typhon smartly bet that interest rates
would fall, then turned to trading livestock and
grain futures on the Chicago exchange. Koutoulas calls his strategies conservative, and like those
of other hedge funds, they dont come cheap; Typhon charges 2% a year as a management fee and
takes 20% to 25% (depending upon the fund) of
investor profts as an incentive fee. Not a bad
living. We want to be the best in agricultural
trading without cheating, Koutoulas says. F
#304
Dont treat your 401(k) as a

piggy bank; youll regret it
come retirement.
#308
#302
Get tax help if youve got

incentive stock optionsthey
carry tax benets but also a
nasty alternative minimum
tax trap.
#303
Pay public school tuition for

your overachieving teen by
getting steep discounts at
great private colleges.
#307
Be alert for the signs that a

bubble is forming.
Use sentiment indicators as

contrarian tools.
#305
Read Money Masters of Our

Time by John Train
#306
Never buy anything from a

cold-calling broker.
#309
Dont confuse correlation

with causation in markets.
#310
Small-cap stocks with lower

price-to-book values tend to
outperform.
BUFFett: JaCK WeLCh; VULtUre: hULYa oZKoK / GettY IMaGeS
#288
WHERE THE MOST

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OFFICIALS & HEALTHCARE
PROVIDERS CONVENE
OCTOBER 9-10
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EMPOWERING THE PATIENT REVOLUTION
This year, on October 9th and 10th in New York,

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taxes
generous tax tricks

If you want to do well while
doing good, contribute your
private company stock to a
donor-advised fundnot an
old-fashioned foundation.
BY AshleA eBeling
Happy donors: the Brodskys on the roof of Brooklyns League Education & Treatment Center.
Walter SmIth For ForbeS
hen Brooklyn couple

Norm and Elaine
Brodsky wanted to
help their favorite
charities, they used to write personal
checks. As those checks carried more
zeros, however, their UBS AG fnancial
advisor suggested they set up a formal
structure and giving plan.
So in 2008 Norm, now 70, and
Elaine, now 65, created the Brodsky
Foundationwhich isnt (despite its
name) a private foundation but a donoradvised fund. Like a private foundation,
a DAF functions as a conduit. You make
your contribution and claim your tax
deduction now, then dribble money out
to specifc operating charities over years
or decades while your charitable dollars
are invested and growing tax free or
nearly tax free (with a private foundation, theres a small investment tax).
The DAF is like a subaccount at a
public charity. You have less control than
you do with a private foundation and a
lot less hassle. Some of our friends had
gone through the expense and torture of
setting up private foundations with the
stringent rules and reporting requirements, explains Norm. We felt wed
be best served by going with a donoradvised fund. We wouldnt have to have
EDUCATION FOR LIFE
LEARN MORE. CALL 866.467.7651 OR VISIT WWW.OUTWARDBOUND.ORG
Trinidad & Tobago
pushing Boundaries
ROLF
RICHARDSON/ROBERT haRding
HARDING WoRld
WORLD imageRy/coRbis
IMAGERY/CORBIS
Rolf RichaRdson/RobeRt
BLAINE haRRington
HARRINGTON iii
III / alamy
ALAMY
blaine
International Waterfront, Port-of-Spain
Carnival 2013
rinidad and Tobago is something

of an anomaly. The island nations
economy, unlike that of most of its
peers, does not rely primarily on tourism, but rather has fueled its growth with
hydrocarbons since achieving independence in 1962. Its oil and gas reserves
account for up to 90% of foreign direct
investment (FDI), 70% of exports and
40% of GDP. They have made the nation
one of the regions richest and most
developed, with one of the Caribbeans
highest GDP per capita fgures.
That wealth built strong institutions
and a sound macroeconomic framework that have garnered plaudits from
the likes of Moodys and Standard &
Poors. The latter gives Trinidad and
Tobago an A rating for local and foreign currency. Challenges remain, such
as improving transparency, infrastructure and productivity and streamlining
bureaucracy. However, the nation not
only inspires confdence, but continues
to generate region-leading revenues.

With an economy worth $24 billion in
2012, Trinidad and Tobago registered
average growth of over 8%, twice the
regional average, from 2000 until the
fnancial crisis began. In its wake, GDP
went on a roller-coaster ride, contracting in 2009 through the beginning of
2011 because of depressed gas prices.
By mid-2011, however, the economy
had recovered. It posted 1.6% growth
to mid-2012 and 1.7%, year on year,
through Q2 2013, with nonpetroleum
sectors expected to grow 2.5% by the
end of the year, according to the International Monetary Fund.
Although fossil fuels were a blessing in
the past, in todays turbulent economy,
things have changed. There is no doubt
in anybodys mind that Trinidad and
Tobago has to move away from overdependence on oil and gas, says Vasant
Bharath, the countrys minister of trade,
industry and investment. The rest of the
National Academy for the Performing Arts
world is moving at a fast pace, and we

have to clean up our act or be left behind.
Economic diversifcation is the way
forward, and the government of Prime
Minister Kamla Persad-Bissessar is
focusing on sustainable economic
development in fve competitive clusters: culture and creative industries,
fnancial services, food and food products, maritime industries and tourism. It
has also identifed the information and
communications technology (ICT) sector as a key enabler to growth.
Spearheading efforts to attract FDI
to these sectors is invesTT, the agency
charged with targeting and securing
local and overseas investment to Trinidad and Tobago, which in 2012 topped
$2.5 billion, including the energy sector.
Last year, we were responsible for $104
million in our frst year of operation, says
Kelvin Mahabir, invesTTs president.
We are targeting $210 million in 2013
and already have that in the pipeline.
Economic DEvElopmEnt // promotion 2
Achieving
Financial
Maturity
hile petrochemicals may have

made Trinidad and Tobagos
fortune over the last half century, the
financial sector will be key to longterm prosperity. The country is one
of the Caribbeans leading financial
centers, thanks to its near-shore location, transparent tax regime and robust
regulations, while its well-educated,
English-speaking workforce makes it a
jurisdiction of choice for business process outsourcing (BPO).
The fnancial services sector contributes about 14% of GDP and is the
fastest-growing sector in the country,
notes Varun Maharaj, CEO of the Trinidad and Tobago International Finance
Centre (TTIFC), the national investment
promotion agency that aims to connect
investors and partners in the fnancial
services industry to human and corporate resources.
Trinidad and Tobago is ranked 84th
on the World Economic Forums Global
Competitiveness Report 201213. It is
the third-most-attractive foreign investment destination in FDI Intelligences FDI
Caribbean and Central American Countries of the Future 2011/2012. Trinidad
and Tobago has developed the Financial
Institutions Support Services (FINeSS)
program to boost its BPO sector and support middle- and back-offce operations.
The banking industry comprises eight
commercial banks, most also active
elsewhere in the Caribbean; 17 nonbank
fnancial institutions; and two holding
companies. Among the products and
services offered are local and U.S. dollar
savings and investment accounts, money
market instruments, foreign exchange,
and project and trade fnancing.
Founded in 1993, First Citizens Group
is one of Trinidad and Tobagos two
fnancial holding companies and is the
highest-rated indigenous institution in
the English-speaking Caribbean. The
nine-member group includes the countrys third-largest bank, which offers

corporate, merchant and retail banking
services, as well as subsidiaries providing asset management, brokerage and
trustee services.
In July 2013, First Citizens launched
an over $170 million IPO, 20% of the
states stake in the publicly owned bank,
which was oversubscribed three times,
according to Larry Nath, group CEO and
president of the Bankers Association of
Trinidad and Tobago. In 1993, we had
$550 million in assets; now, in 2013, we
have over $800 million, he says. We have
come a long way and picked up every
award there is. This year, we won safest
bank in the region and received the Euromoney award for excellence in banking.
For its part, Republic Bank, the nations
oldest fnancial institution, is looking forward and outward to leverage its 175
years of experience doing business in
Trinidad and Tobago and fnancing oil
and gas developments overseas. It is
active in Barbados, the Cayman Islands,

Grenada, Guyana and Saint Lucia. The
bank also operates in Africa, where in
September it acquired additional shares
in HFC Bank Ghana with the goal of
growing 50% in fve years. When Ghana
found oil and gas and was asking Trinidad for assistance, our interest started,
explains Nigel Baptiste, Republics executive director. We now have a 40% stake
in HFC, and it is a long-term investment.
We wanted a partner bank for our panAfrica strategy.
Part of a group of 17 subsidiaries and
associated enterprises, Republic is the
biggest, most profitable bank in the
English-speaking Caribbean and has
been involved in the business community in Trinidad and Tobago from early
emancipation days, Baptiste notes. As
communities have grown, so have we. v
Trinidad and Tobago Section Project Managers:
Mauro Perillo, Rosie Venn and Matthew Dickert
For more information, contact:
3 promotion // Economic DEvElopmEnt
Leading
the Way to
Diversication
hile FDI across the Caribbean and

Central America fell 17% year on
year in 2012, Trinidad and Tobago bucked
the trend, posting a 38% FDI hike in the
same period, according to the United
Nations Conference on Trade and Development (UNCTAD) World Investment
Report 2013. Total infows of overseas
capital reached more than $2.5 billion,
almost three times the pre-2008 average.
As the government agency responsible for promoting investment in Trinidad
and Tobago, invesTT is at the forefront

of the countrys efforts to diversify away
from its traditional reliance on oil and
gas. Kelvin Mahabir, invesTTs president, is a committed advocate for the
development of other strategic sectors
in the islands economy. These arenas
should be ready for the day its hydrocarbon resources begin to run dry.
I am a frm believer that no country
competes on natural resources that
come out of the ground, Mahabir says.
They compete on the basis of their
people. We need to build on the kind of
clustering already present in the country;
it is unmatched anywhere in the world.
Our companies are so well designed in
terms of what they do to support varying
sectors that they are now moving all over
the world.
When Mahabir arrived at the agency in
2011, he and Brian Frontin, the chairman
of the Tourism Development Company
(TDC), came up with a list of the industries they felt would be most viable for
investment, taking into account global

trends and local strengths. These
include agribusiness, clean technology,
creative industries, downstream energy,
information and communications technology, light manufacturing, maritime
industries and tourism.
The agency has introduced incentives
to stimulate interest in each of these
targeted sectors: training for BPO and
software companies through university
programs; real-estate incentives, such
as rent-free tenancies in the new Tamana
InTech Park, to develop selected locations; a sliding-scale tax regime, with
free trade zone advantages and exemptions for manufacturing ventures; and a
comprehensive program to incentivize
physical investment in tourism.
Offering investors all the guidance
and support required to explore business opportunities, invesTT serves as
a one-stop shop under the auspices
of the Ministry of Trade, Industry and
Investment, leveraging its resources
For business opportunities in

Trinidad and Tobago, let us be your guide.
invesTT provides you with the resources you need to efectively
navigate the way to business opportunities in Trinidad and
Tobago. Our unique combination of knowledgeable sector
experts, strategic alliances and extensive network of real estate
and technology parks is at your disposal. invesTT will assist you
in establishing your business here at the hub of the Americas,
within the most developed nation in the Caribbean.
To learn more about the opportunities in our

burgeoning sectors maritime industries,
downstream energy, creative industries,
agri-business, fnancial services and
tourism contact invesTT at
+1 868 638 0038 or visit
www.investt.co.tt
and relationships to clients advantage.

invesTT assigns an account manager
to every investor, who acts as a point
person to interact with other agencies
involved in making investment projects
a reality.
invesTT is an all-encompassing
agency that gives investors the assurance that their project is being handled
professionally, notes Vasant Bharath.
We are refocusing public service agencies to be customer focused, customer
facing and as helpful as possible, moving from red tape to the red carpet.
As a source of information and means
of making connections, invesTT delivers the knowledge and contacts that
domestic and overseas investors need
to establish and expand their interests
in Trinidad and Tobago. The services
available via invesTTs investor sourcing and facilitation teams encompass
sector-based research into market and
investment opportunities, real estate
surveys and site visits, value-chain
advice and a wide range of aftercare

extras, including policy advocacy and
problem resolution.
Meanwhile, as part of its mission to lead
innovation, invesTT has also taken part in
developing what Mahabir believes to be
the nations most valuable asset: human
resources. He has initiated talks with the
University of Trinidad and Tobago about
co-branding its new facility at Tamana
InTech Park with a Latin American university: invesTTs campus of the University
of Trinidad and Tobago is going to be
ready for operation in March 2015, he
confrms. It is a fagship that will really
drive science and technology.
v
Maximizing Tourisms Potential
lthough Trinidad and Tobago has not had much development to date as a
tourist destination, the potential to receive greater visitor numbers is there
once it has facilities in place to welcome them. Some 455,000 people traveled to
the nation in 2012, accounting for nearly $1 billion of GDP, but, according to the
Ministry of Tourism, tourisms contribution could increase signifcantly, driven
by differentiated, internationally competitive infrastructure.
Among the projects that aim to make the islands stand out from the Caribbean
crowd are a $1 million 4,300-foot, recycled-materials boardwalk at Williams Bay,
on the Chaguaramas peninsula in Trinidad. The frst stage opened this May and
it will extend in future to Tembladora and Alcan Bay, with jetties and a marina.
The boardwalk is just one project the Chaguaramas Development Authority
(CDA) is overseeing on the 14,500 acres of land and fve islands under its control.
Other developments defned in the CDA master plan include creating an 18-hole
golf course on an existing 9-hole facility, upgrading the Chaguaramas Hotel and
Business Centre and turning it into a fve-star resort, and transforming the Harts
Cut area into a Venice-style development.
Around $4.5 billion of local and overseas capital has already been pledged for
development. Daniel Solomon, the CDAs chairman, notes: We attract different
types of investors, ranging from the wealthy to boutique investors. To meet our
mandate of sustainable development and diversifcation, we are partnering with
the private sector to access capital, knowledge and best practices.
As a government agency, the CDA is responsible for the promotion of all kinds
of development in Chaguaramas; the CDA is focused, at present, on the tourism
sector, serving as a conduit to drive private-sector investment.
v
5 promotion // Economic DEvElopmEnt
A Unique
Identity
ulticulturalism
is an infinite resource, says
Lincoln Douglas,
Trinidad and Tobagos minister of the
arts and multiculturalism. As long
as you have people,
they make things that have meaning for
themselves and others.
The birthplace of a medley of musical
styles, and the spiritual home of Carnival, Trinidad and Tobagos melting pot of
infuences has thrown a diverse population together in a culture of constant
creation, Douglas believes.
His ministry is working to support and
preserve the islands unique heritage.
This December, the country will also host
INVESTMENT
GATEWAY
the inaugural edition of TIME, the Trinidad

International Music Expo, showcasing its
vibrant culture to the world.
Trinidad and Tobagos best-loved
export is undoubtedly Carnival, celebrated worldwide at the end of winter.
But few know how to have fun quite like
the masqueraders on Port-of-Spains
streets in the week before Lent. When
the partys over, exhausted visitors can
head to Tobago for a little rest and relaxation in boutique guesthouses such as
Bacolet Beach Club, or resorts like the
Magdalena Grand.
The locals play hard, too, when it
comes to favorite regional sports, like
cricket. This summer, Trinidad hosted
the first Limacol Caribbean Premier
League Twenty20 Tournament, which
CEO Damien ODonohue hopes will fuel
the dreams of generations to come.
The Caribbean is the natural home of
T20 cricket, he says.
v
Nestled on the captivating northwestern peninsula of Trinidad,

the exciting development of
Chaguaramas offers investors
outstanding potential.
key projects INcLUDe: luxury retail, 5* HOtel & marina,

WaterfrOnt BOardWalk develOpment and 18-HOle GOlf COmplex
THE CHAGUARAMAS DEVELOPMENT AUTHORITY (CDA)
offers
fully autonomous property development facilitation enabling local
and foreign investors to explore the tremendous potential of this
growth region. Together, we can open the gateway to success.
info@chagdev.com
www.chagdev.com
taxes
Getty ImaGeS; PatrIck WelSh
accountants and lawyers at every step, and it

gave us a lot of fexibility. Then, this past fall,
the Brodskys tapped into two other advantages
of DAFs that explain why some very rich people
who in years past would have set up private
foundations are now using DAFs or supporting organizations instead. They donated $2.5
million worth of shares of CitiStorage, a privatedocument-archive business Norm founded.
Heres the frst tax advantage: If you give private stock to a foundation you can deduct only
what it cost you (your basis), whereas if you give
it to a DAF, a supporting org or any public charity like the United Way, you can claim the full
market value as a charitable deductionwithout
ever paying taxes on the appreciation.
Heres the second tax goody, which matters
to generous givers such as the Brodskys. If you
donate publicly traded appreciated stock to a
private foundation, you can claim a deduction
for its full market value, ofsetting a maximum
of only 20% of your adjusted gross income each
year. But if you donate appreciated property (including private stock and real estate) to public
charities, DAFs or a supporting org, it can ofset
30% of your AGI. Similarly, if you give cash to a
private foundation it can ofset only 30% of your
income, compared with 50% for cash contributions to a public charity, DAF or supporting org.
(In all cases any deduction you cant use in the
year of the gift can be carried forward for up to
fve additional years.)
Norm says the couple has a pretty good
carryforward. So far theyve used their swollen
DAF kitty to direct $250,000 to the League Education & Treatment Center in Brooklyn, which
helps autistic kids; a seven-fgure amount for a
new synagogue planned by the BACH Jewish
Center in Long Beach, N.Y.; and $100,000 to the
Telluride Foundation in the Colorado ski town
where they have a second home.
Serial entrepreneur Norm (he writes a startup column for Inc.) says he is so pleased with the
way the CitiStorage donation worked out that
he might eventually donate interests from his
latest venturesa chain of Japanese fast-food
restaurants, Kobeyaki, and the Black Gold Suites
hotels in North Dakota oil country.
Contributing closely held stock is defnitely
an underused giving strategy; with all the hoopla
publicly traded stock gets, private stock is the
redheaded stepchild, says Bryan Clontz, president of Charitable Solutions in Jacksonville, Fla.,
who helped with the logistics of the Brodskys
#311
CitiStorage donation.
To be sure, a lot of rich folks still crave the
bragging rights that come with a private foundation. But assets in donor-advised funds hit
$45 billion in 2012, as yearly contributions rose
to $13.7 billionequal to 45% of the amount
contributed to private foundations that year, up
from 36% in 2007, the National Philanthropic
Trust calculates. People once thought it was the
lesser choice of a foundation, but now DAFs are
the fastest-growing charitable vehicle out there,
NPT Vice President Andrew Hastings says. This
years jump in the top federal tax rate, as well as
the run-up in the stock market and in pre-IPO
values, are magnifying the tax advantages of
using DAFs, points out Claudia Sangster, director of philanthropy services at Harris myCFO.
Intrigued? Investors who want to be free to
give to any cause can open a DAF at a charity affliated with Vanguard, Fidelity or Schwab, or at
the private label DAFs the National Philanthropic Trust ofers through UBS, J. P. Morgan
and other fnancial service providers.
If you want a good chunk of your money to
help local charities, consider a community foundationmore than 600 of them nationwide ofer
DAFs, with a minimum contribution of $5,000,
and some also ofer supporting orgs, usually
with a minimum contribution of $2 million.
(Supporting orgs give the donor more control.
Facebook founder Mark Zuckerberg has used
one to donate $550 million worth of stock.)
Clontz points out that if your primary concern is to get the most tax and charitable bang
for the buck, giving appreciated public stock is
the way to go. Private stock donations require a
qualifed appraisal, which runs $5,000 and up.
Glen Tullman, managing partner of 7wire
Ventures, a VC frm, opened a donor-advised
fund at Fidelity Charitable in 2009 with stock
in Allscripts Healthcare Solutions, which he
took public in 1999 and where he served as CEO
through 2012. Hes used the account to funnel
nearly $5 million to the JDRF (previously the
Juvenile Diabetes Research Foundation) and additional amounts to other public charities, and he
replenishes it as needed with Allscripts shares.
While he doesnt rule out giving private stock
from the ventures he backs, Tullman likes the
ease of donating Allscripts shares. One account
allows us to do all of our giving and make decisions that are the right decisions at the right
time and not be driven by any particular calendar date or tax event, he says. F
Tap an IRAnot a 401(k)

without penalty for a frsttime home purchase.
#312
Leave the dollars in a Health

Savings Account growing tax
free for retirement while you
cover medical deductibles
and copays from your
current income.
#313
Use a fight path approach

to asset allocation, raising
your exposure to stocks as
you become a more confdent
investor.
#314
Know your sell rules before

you buy.
#315
Read letters of great

investors such as Warren
Bufett and Jeremy
Grantham online.
#316
Become an online stock

researcher.
#317
Beware of asset protection

scams.
#318
When stuck paying AMT,

accelerate some income.
#319
Rent out your vacation home

for two weeks a year, tax free.
#320
Most people dont need a

whole life policy; buy a 20year level-premium
life insurance policy before
your frst child is born.

PHILAntHROPY
ScholarShipS
arent enough
Famously parsimonious in
life, the late Forbes 400
member Jack Kent Cooke
devoted his fortune to
helping the smartest poor
kids exceland that means
much more than just paying
for college.
by KErry Hannon
ne night, as they sat in his

library sipping a $10 bottle
of Meursault, Washington
Redskins
Jack Kent
Equi tem quatempe
autowner
eum non
Cooke
to Stuart
A. Haney,
ea autturned
veliquuntia
nos mintur
nonsernatur
aditisin
hisremporecae
young lawyer
and aide
de camp,
and declared: Twenty years after
Im gone I will only be a footnote in
the annals of the National Football
League.
But, as both men knew, Cooke
wasnt ready to settle for a footnote.
A decade before his death in 1997
at age 84 he had secretly decided
he wanted to be remembered for a
namesake foundation devoted exclusively to helping a select group of
brilliant, driven and in some cases
musically gifted poor kids succeed.
Today, with $640 million in assets,
the Jack Kent Cooke Foundation,
based in Lansdowne, Va., ofers some

of the richest individual scholarships in the nation. Each year it picks
about 60 eighth-grade scholars
(average family income: $25,000) and
provides them individual academic
advisors, summer college and travelabroad programs, laptops and, if need
be, private schoolin other words,
the sort of enrichment lavished these
days on kids from well-of families.
Those extras continue through high
school at an average cost of $15,000
per child a year. Any who continue to
excel get college scholarships worth
up to $30,000 a year, or another
$120,000.
Mr. Cooke didnt want to do anything piecemeal, Haney explains.
He said these kids are from very
lean circumstances. Giving them
$30,000 gets them in the door, but
they arent going to stay there. We
need to back them through the whole
process, if possible.
Some might question devoting
so much money to a handful of kids
who are already high achievers but
not Nancy Green, executive director of the National Association for
Gifted Children in Washington, D.C.
Its about equity, not elitism, she
says. Theyre stepping in to support
students with opportunities that are

readily available to top students in
the middle class and above. With
federal aid for poor children directed
primarily toward those at risk of failing, helping the talented is a proper
job for private money, she adds.
Cooke himself never even started
Far from the rio

Grande Valley: Cooke
helped Edith Carolina
benavides make the
transition to Harvard.
Jason Grow For Forbes
college. Born in Canada in 1912 to

middle-class parents, he was an
indiferent student who cut class
to hang out at a local music shop in
Toronto where he taught himself
to play piano and clarinet. After his
dad went broke in the 1929 market
crash, he left school with a lower-
level high school diploma (it didnt

qualify him for college) and played at
weddings and on Lake Ontario cruise
ships with his band, Oley Kent and
His Bourgeois Canadians. While he
regretted not going to college, he also
reportedly told friends that if hed
had more talent he would have made
his living as a musician.

Instead, Cooke became a salesman, peddling encyclopedias and
soap door-to-door. His big break
came in 1936 when he landed a job
running a radio station in Stratford, Ont., 100 miles from Toronto.
The station was owned by budding
DEcEmBER 16, 2013 FORBES | 177
#321
Warren Bufett: You

only fnd out who is
swimming naked when the
tide goes out.
#322
Save $100,000 or more

by sending your overachiever
to community college and
then have her transfer to the
Ivy League.
#323
Save on a mastersfor
yourself or kidsby earning
it in Britain in one year.
#324
Have your eldest child take

a gap year before college so
that more than one child is
in school at the same time
youll get more fnancial aid.
#325
RothifyRoth conversions
make sense in more cases
than most people realize.
#326
Time 401(k) contributions to

make sure you grab your full
employer match.
PHILAntHROPY
media mogul Roy Thomson. Impressed by

the younger mans smooth salesmanship and
drive, Thomson made him a partner. Cooke
went on to earn a fortune from newspapers,
radio stations and cable TV, moved to the
U.S. in 1960 and appeared on The Forbes 400
list every year from its inception in 1982 until
his death.
In contrast to Bill Gates, Warren Bufett
and many of todays 400 members, Cooke
wasnt a generous philanthropist during his
lifetime. He delighted in being a curmudgeon, recalls Haney, who had the task of
politely brushing of donation requests.
Rather than good works, Cooke was
known for his sports teams and his four
wivesthe last two of them half his age.
In 1979 he reached a $42 million divorce
settlement with his frst wife that made the
Guinness Book of World Records as the largest
to that date. To fnance it he sold the NBAs
Los Angeles Lakers and NHLs Los Angeles
Kings to Jerry Buss, in what was the largest
sports deal to that date. In 1987 he fled for
divorce from his third wife after only 73 days,
claiming the 31-year-old had gone back on a
prenuptial agreement to terminate her pregnancy. (She later gave birth to a daughter.)
In 1990 he got hitched to a woman headline
writers dubbed the Bolivian Bombshell
she had done time in the federal pen for drug
smuggling and, it turned out, wasnt properly
divorced from her previous husband. (Cooke
had his marriage to the Bolivian annulled,
then married her again after her previous
marriage was properly dissolved.)
Meanwhile, as Haney tells it, on many a
night Cooke would invite the young lawyer
to his library where the two would drink
cheap wine and hash over plans for the foundation. It was Mr. Cookes relaxation after
a difcult day to sit back and dream, recalls
Haney, now 56. He hoped that some of the
#328
#327
Factor your individual

health and life
expectancy into your
decision on when to take
Social Security.
Use an online calculator

to help you determine
the best strategy to
maximize your Social
Security benefts.
#329
Put junk bond funds in taxdeferred accounts.
#330
If your spouse dies, fle an

estate tax return to preserve
his $5.25 million estate/gift
tax exemption for your own
use later.
#331
Buy master limited

partnerships late in life to
avoid their tax drawbacks.
how to help
Direct support. you cant claim a charitable

deduction for it, but you can pay anyones private high school or college bills directly (send
the money to the school), plus give that person
up to $14,000 a year for expenses, without worrying about gift taxes.
existing organizations. if youre looking to
make a tax-deductible charitable contribution,
consider the Childrens scholarship Fund (which
helps send kids to private school for K8), the
First scholarship Fund (summer camp and college scholarships) or a school or local community scholarship fund.
endowing a scholarship. if youre ready to
donate at least $100,000, you can endow a
scholarship specifcally for low-income students
through a community foundation or individual
college.
best minds in every single profession known
to mankind would become connected
through his scholarships and foundation to
form a sort of virtual think tank.
Yet even after Cookes will became public,
melodrama and court battles overshadowed
his charitable ambitions. The Bolivian, having been cut out of the will, sued and settled
for millions. Cookes son, left just $50 million, fought desperately to keep the Redskins;
other executors of the estate decided to sell
the team, and he ultimately lost out to current
owner Dan Snyder. The disappointed son then
sued his fellow executors (including Haney)
for charging excessive fees; a settlement
reportedly cut their take by more than half
to $17.5 million. Finally, the daughter Cooke
never meant to have sued, too, claiming her
$5 million trust had been mishandled and she
couldnt pay her college tuition. (She lost.)
#332
Only buy closed-end

funds trading at
discounts to net asset
value.
#333
Invest in businesses
with sustainable
competitive advantages.
#334
Dont fght the tape.
#335
Remember, three out of four

stocks follow the markets
overall trend.
PatriCK welsh; CraiG warGa / bloomberG; niCK m. Do / Getty imaGes; bloomberG
I DONT KNOW WHAT

THAT THING IS,
BUT KEEP IT AWAY
FROM MY MONEY.
Morocco
Leveraging a strategic Location

ABDELHAK SENNA/AFP/GEtty
SENNA/AFP/GETTY ImAGES
IMAGES
GEtty
GETTY ImAGES
IMAGES
DIGItAL
DIGITAL VISIoN
VISION
wo and a half years after the Arab

Springwidespread civil uprisings that ousted rulers from power
across the Middle East and North Africa
(MENA), and that continue to fuel confict
in Egypt, Libya and Syriathe moderate
monarchy of Morocco remains an oasis
of calm and prosperity in the region.
Under the guidance of King Mohammed VI, who passed constitutional
reforms in response to peaceful protests, this progressive nation of 35
million held elections in November 2011.
The elections brought an Islamist party
to power in a transition to representative
government that left the countrys economic and social structure intact.
Strengthened by its political stability, Morocco has leveraged its strategic
location as a hub between the European
Union (EU) and its MENA peers, capitalizing on established trade networks to
boost exports and drive growth. Between
2001 and 2011, the countrys economy
expanded by 4% to 5%; however, due
to rising fuel costs, a poor harvest and

recession in southern Europe, its GDP
growth slowed to 2.9% in 2012.
By the end of 2012, Moroccos economy was worth $97 billion; imports,
mostly crude, topped $42 billion, and
exports rose to more than $21 billion.
The World Economic Forum already
ranks the nation as North Africas most
competitive economy, and the nations
government aims to boost exports,
under its Maroc Export Plus strategy,
to reach almost $40 billion by 2018.
Investments in Moroccos industrial
development and infrastructuresuch
as the Tanger-Med port and free-trade
zonewill enable the production and
exportation of higher volumes of addedvalue goods. Meanwhile, free-trade
agreements (FTAs), signed with the
United States (2006), the EU (2008) and
other nations, have opened new doors
for Moroccan manufacturers.
The liberalization of Morocco and
the conclusion of numerous FTAs have
allowed exporters to have access to a

market of 1 billion consumers and have
had a positive impact on the countrys
economic development, says Zahra
Maafri, the director of the Moroccan
Center for the Promotion of Exports
(Maroc Export).
Maroc Export is responsible for promoting Moroccos products overseas,
diversifying markets, supporting business internationalization and undertaking
research to develop the full potential of
the nations export industries. Its Maroc
Export Plus plan focuses on strategic
sectors, such as agribusiness, electronics, seafood and textiles, and aims to
build brands, add value and consolidate
the countrys presence worldwide.
We have an expert team, dedicated to
the fulfllment, guidance and support of
our mission: providing information, training, consulting and professional support
for exports in the international market,
Maafri explains.
Domestic Market
Since gaining independence from
France in 1956, Morocco has evolved
from a subsistence agriculture model to
a modern, competitive and diversifed
economy; because of this, it has proved
resilient to the global recession. As the
nation has matured and prospered, so
have its people, migrating from rural areas
to cities, joining the ranks of a burgeoning
middle class and fueling greater domestic
demand for products and services.
As GDP per capita swells, Moroccan
consumers are driving growth in sectors
such as the automobile market, which
grew by 29% in 2012 and attracted
billion-dollar investments from Frances
Renault; and construction, which is benefiting from large state infrastructure
projects and a housing boom. Social
housing alone saw a hike of 37% last year,
while the number of residential projects
nationwide registered a 26% increase.
As a result, contractors like familyowned TGCC (Travaux Gnraux de
Construction de Casablanca) are well

positioned to profit from the rising
demand. According to Mohammed
Bouzoubaa, its CEO, We are among
the leading Moroccan companies in
the sector, specialized in all types of
building: housing, industrial and civil
engineering. We build turnkey hotels,
malls, stadiums, air terminals and even
Tanger City Center.
TGCC currently is working on the
high-speed railroad from Tangier to
Rabat, Moroccos capital; and building
high-end residential projects for Prestigia, part of the Addoha Group. Its Bina
Immobilier division is acquiring realestate assets, while the company has
begun to develop social housing. It also
is exploring opportunities abroad via its
subsidiary in Gabon, with plans for Ivory
Coast and Libya.
www.tgcc.ma
THE PREMIER CONSTRUCTION

COMPANY IN MOROCCO
Education
In line with Moroccos economic
development, successive governments
SINCE 1991, TGCC HAS BUILT ITS BUSINESS

LEADING POSITION AS RELIABLE AS ITS
CONSTRUCTION PROJECTS ARE.
WITH CAPITAL OF 12 MILLION USD
AND A WORKFORCE OF 8000 PEOPLE,
TGCC, UNDER THE PRESIDENCY OF
MR MOHAMMED BOUZOUBAA,
RESPONDS WITH EXPERIENCE AND
PROFESSIONALISM TO DELIVER PERFECTLY
TO ITS CLIENTS EXPECTATIONS.
PORTFOLIO PROJECTS INCLUDE:
LOGISTICS, INDUSTRY, RENEWABLE ENERGY,
HOUSING, HOTELS, MALLS, HOSPITALS
AND ADMINISTRATION CENTERS.
TGCC HEADQUARTERS
4, RUE Al imAm moUSlim - oASiS
20000 - CASAblAnCA - moRoCCo
T: +212 522 23 88 93 / 94 / 95
F: +212 522 23 63 30
promotion 3 // Economic DEvElopmEnt
have invested in education to ensure

a brighter future for citizens and a
supply of well-trained employees for
businesses. Morocco invests close to
25% of its budgetmore than 5% of its
GDPin education, which is well above
the 13% average for industrial nations.
The country also dedicates one in three
civil servants to the sector, and has 7
million students enrolled in schools and
universities and more than half a million
in higher education.
Unemployment among young people,
however, remains a challenge, since
20% of the workforce is without jobs. In
a speech to the nation this August, King
Mohammed VI called for mandatory
foreign-language teaching and greater
emphasis on vocational and technical
courses to better tailor education to
employers demands.
Minister of Higher Education, Scientifc Research and Training Lahcen
Daoudi believes the private sector
independently and via public-private
partnershipshas an important role to

play in the development of a more business-friendly model of education.
Morocco is a liberal country, and I do
not see why there should be a sector
closed to private companies, Minister
Daoudi states. Every sector can offer
benefts, and education is certainly one
of them, not to mention the best investment opportunity from a fnancial point
of view, because after training, people
can start work immediately according
to the companies vision. This is a winwin situation for the country and the
investor.
According to the latest offcial data,
Morocco had 112 higher-education
facilities at the end of 2011, including an
increasing number of private schools,
though public universities continue to
hold their own. Among the countrys
top public institutions is Universit Sidi
Mohamed Ben Abdellah (USMBA) in
Fes, the site of the worlds frst university.
Founded in 1975, USMBA is the countrys
Every sector can ofer

benets, and education is
certainly one of them, not to
mention the best investment
opportunity from a nancial
point of view.
Lahcen Daoudi, Minister of Higher Education,
Scientic Research and Training
largest tertiary institution with 75,000 students and 13 centers.

USMBA is now looking for investors
to develop its ambitious International
University City project, a fully equipped
education hub based ten miles south of
Fes that is designed to attract top-fight
international schools to carry on the
citys rich academic traditions.
v
For more information about this section on
Morocco, please contact
A new approach to higher education

Famous for its medina, the UNESCO World Heritage site
of Fes also boasts the worlds oldest university, Al-Karaouine,
founded in 859. Following in its footsteps, the city today is
home to Moroccos largest higher education facility, Universit
Sidi Mohamed Ben Abdellah.
With 75,000 students, 2,250 staff, 13 centers, and 203
courses more than half in vocation programs dedicated
to the needs of the marketUniversit Sidi Mohamed Ben
Abdellah is already the size of a small town. And it now aims
to begin developing a groundbreaking city.
The universitys goal is to reach 125,000 students by 2016.
It has a budget of $163 million and plans to establish a modern university city. With the presence of foreign universities,
including American, Chinese and Japanese institutions, this
will be a new approach for Morocco and the region.
The goal is to give overseas universities and companies a
chance to establish themselves in Fes, leveraging competition to raise the quality of education. The university intends to
reproduce the city of Fes, a unique project worldwide.
The universitys goal is to reach 125,000 students

by 2016. It has a budget of $163 million and plans
to establish a modern university city
Universit Sidi Mohamed Ben Abdallah | route dimouzzer B.p.2626, Fes 30000 | tel. (212-35)60 96 60/60 96 61, Fax. (212-35)60 96 50 | www.usmba.ac.ma
CloCKwise From toP leFt: DaviD Deal For Forbes; louis lanzano / aP; sCott eells / bloomberG; Peter Foley / bloomberG
Stuart Haney helped Cooke keep his charitable plans

secret and his reputation as a curmudgeon intact.
Through it all, Cookes charitable plans

survived. The foundation opened in 2000
and so far has spent $120 million on scholarships and direct support of students, while
making $76 million in grants to other organizations helping gifted poor kids.
True to Cookes virtual think tank vision,
recipients are brought to Virginia once a year
for a weekend get-together, where they joke
about being Cookie cousins with the same
rich Uncle Jack. (On Cookes birthday, this
past Oct. 25, some changed their Facebook
profle pictures to one of Cooke.) During
this years weekend meet-up, reps from 60
schools, including Amherst, Swarthmore and
the University of California, Berkeley, showed
up for the foundations annual college fair,
conducting practice interviews and ofering tips to the Cookies. The schools show up
because they know the foundation has sloshed
through a deep talent pool for them, choosing
60 from 2,000 applicants a year.
Identifying the most promising students
so young is tough because nobody is really
accomplished at the age of 13, admits Emily
Froimson, vice president of programs at the
Cooke Foundation. So the foundation relies
heavily on standardized test scores and requires scholars to already be earning mostly
As, with no Cs in core academic subjects.
It also looks for accomplishments outside
the classroom. We want someone who will
set goals for themselves, persistently works
toward those goals and demonstrates resilience, Froimson says.
When Harvard senior Edith Carolina
Benavides heard she was a Cooke scholar, she
cried and later translated the acceptance letter for her parents, who couldnt read much
English at that time. Benavides attended the
local public high school in Mission, Tex., a
few miles north of the Rio Grande. Meanwhile, Cooke prepared her for the endless
diversity present outside the Rio Grande
Valley, she says, by sending her to summer
science programs at Smith, Brown and the
University of Michigan. At 16 Benavides, who
plays the sax, started an English and music
tutoring program for children in Monterrey,
Mexico. Now 21, shes majoring in Romance
languages and literature, still getting help
from Cooke, and deciding between graduate
school or working at a nonproft.
Yasmine Arringtons father has been in
and out of prison since she was 3, and her
mom died when she was almost 14, leaving a
grandmother to raise Arrington and her two
siblings. Finances were always a huge problem for my family, says the now 20-year-old
junior at Elon University in North Carolina.
#337
#336
Robert Shiller:
Market efciency
is only a half-truth.
You can proft
from irrational
exuberance.
#341
PHILAntHROPY
Spend 25% less than you

makeit will give you
fexibility to pursue the big
opportunity.
#338
Bruce Greenwald: To get

really rich, copy the hedge
fund, private equity and VC
masters and get your hands
on somebody elses money.
#339
Warren Bufett: Investors

should remember that
excitement and expenses are
their enemies.
#340
Watch out for high fees

hidden in some tax-sheltered
products like 529s and
variable annuities.
Protect your assets before

theres a claim against you;
after-the-fact moves can
backfre.
#342
Check your advisors ADV at

www.sec.gov.
#343
Remember Bernie Madof:

Make sure your investment
advisor keeps your money
in an account with an
independent custodian.
#344
Gary Shilling: Dont try

to reinvent the wheel.
Instead, intelligently and
efciently apply what is
already well known.
#345
Warren Bufett: You dont

have to make money back
the same way you lost it.
#346
When selling a business, plan

ahead and you may be able
to save big on tax.
#347
Retire to a place where jobs

are plentiful.
#348
Factor taxes into your

retirement income strategy.
#349
Take $500,000 per couple

in gains on the sale of your
home, tax free.
#350
Dont be afraid to deduct

a legitimate home ofce
you can now claim up to
$1,500 a year, with minimal
recordkeeping.
DEcEmBER 16, 2013 FORBES | 183
Review the assumptions an

ex-employer has made in
calculating your pension.
Mistakes arent unusual.
#352
Keep 5% of your portfolio

in gold.
#353
Own gold through ETFs

like GLD.
#354
When pundits declare the

death of buy-and-hold it
could well be the sign of a
market bottom.
#355
Warren Buffett: Its

optimism that is the enemy
of the rational buyer.
#356
Burton Malkiel: Efcient

markets does not mean that
the price of every security
at every moment in time is
correct.
#357
Look for undiscovered stocks

with market caps between
$1 billion and $10 billion.
#358
PHILAntHROPY
A Cooke advisor helped her develop her

interest in poetry; the foundation sent her to
summer writing programs in New York State,
North Carolina and Massachusetts as well as
to a six-week summer study and community
service program in Costa Rica. The foundation encourages scholars to do their own
charitable works, and after years of hiding
her own dads incarceration, in 2010 Arrington started ScholarCHIPS to raise money
for scholarships for the children of prisoners.
So is Cooke simply helping those so talented and motivated theyd succeed regardless?
Froimson insists not. Kids may start of as
high achieving but will fall out of the pipeline
given a lack of resources and challenges, she
says. Its important for philanthropists not
to forget this population. They are our future
leaders, and we are wasting talent when we
let these kids slip through the cracks.
The foundation doesnt, however, limit
itself to fnding the best and the brightest at
13. It also awards 40 four-year college scholarships, worth up to $30,000 a year, to high
school seniors who werent in the early program; 75 two-year scholarships, also worth
up to $30,000 a year, to poor kids who have
aced community college; and a varying number of up to $50,000-a-year graduate scholarships to students who are studying music, art
or creative writing.
On the college level the foundation flls
gaps left after students have tapped other
aid programsgaps that scare some poor
kids away and lead others to drop out. Most
get federal Pell Grants, now as much as
$5,645 a year, plus any need-based aid their
college gives. Yet even at the handful of
elite schools that claim to meet a students
full fnancial need, Cookes support makes
a diference. Typically a schools fnancial
aid package requires the student to spend
ten hours or so a week earning money at a
Understand how the

businesses you invest in
make money.
#359
If the short sellers are

swarming around your
stock, investigate the bears
thesis.
#360
When company insiders buy,

you should, too.
campus job; Cooke usually replaces those

earnings with a grant, so the student can
spend time doing an unpaid internship or
research, as a child from a wealthier family
might. If Cooke scholars take student loans
(or if their parents take out Parent Plus
loans to pay the expected family contribution), the foundation helps them repay
those loansprovided they graduate with at
least a B average.
One transfer scholarship recipient is Renata Martin, a junior biology major at Brown
who wants to be an oncologist. She was born
in Brazil and grew up in Kearny, N.J., where
her dad delivers pizzas and her mom cleans
houses. In high school, as an undocumented
immigrant ineligible for federal aide, she
worried she wouldnt be able to go on to college. But she won a full merit scholarship
from Essex County College, and during her
second year there applied to 14 four-year
schools and the Cooke Foundation. After she
notifed the schools that Cooke had awarded
her $90,000 toward earning a B.A., the acceptances rolled infrom Brown, Johns
Hopkins, Cornell and Georgetown, among
others. She chose Brown, she says, in part
for its liberal arts and creative community; in
addition to medicine, shes passionate about
music. Martin plans to apply for an M.D./
Ph.D. program beginning in 2015 and hopes
to research cancer disparities in low-income
communities.
Fitting in as a low-income transfer student at an Ivy League school can be tough,
she notes, but her own self-confdence and
the support provided by both the foundation
and other Cooke recipients have made the
transition work. We call each other Cookie
cousins because we believe that our common struggles and dreams make us a family.
And when you have a second family, things
become much easier. F
#362
#361
Benjamin Graham:
Those who want
freedom from
concern must
accept lower
returns.
Warren Buffett: It is far

better to buy a wonderful
business at a fair price than
to buy a fair business at a
wonderful price.
#363
Burton Malkiel: Avoid

the temptation to follow
the herd.
#364
Steve Jobs: Your time is

limited, so dont waste it
living someone elses life.
#365
Plan.
Dario PiGnatelli / bloomberG; Peter Foley / bloomberG; bettmann / Corbis; aP
#351
THE TRANSFORMATIONAL CMO:

MARKETER AS ENTERPRISE VALUE CREATOR
OCTOBER 23-25, 2013 | MIAMI, FL
The CMO ofce and the practice of marketing management is undergoing a fundamental shift from cost
center to business growth driver and contributor to enterprise value creation. Driven by data analytics and
a deep understanding of customer behavior, CMOs must intelligently align the vast array of engagement
tactics and digital tools available to them today to manage the customer journey and to show the value
proposition between marketing activities and nancial outcomes. The Forbes CMO Summit gathered
the worlds leading marketing practitioners and thought leaders to explore this theme and to share best
practices in meeting the challenges in orchestrating a complex marketing ecosystem.
FORBES.COM/CONFERENCES
FEATURING IDEAS FROM
PRESENTING SPONSORS
SUPPORTING SPONSORS
FoRBeS LIFe
at home
Billionaires
Bunkers
In anxious times home

security goes sci-f.
By MORGAN BRENNAN
home and tried to do something stupid?

Now his main residence has security similar
to that of the White House.
Hes far from the only one. Chris Pollack,
president of Pollack+Partners, a design and
construction advisor based in Purchase, N.Y.,
says that while security has always been a
given in building homes for his ultra-highnet-worth clients, the spending for home defense has increased markedly over the last
fve years.
It starts with a propertys perimeter. The
exterior has always been the holy grail because you could never really protect it without 24-hour guard service, says Christopher
Falkenberg, a Secret Service agent turned security specialist for high-net-worth families with
New York-based Insite Security. Cutting-edge
technologies have strengthened that fence.
For example, FLIR Systems, based in Wilsonville, Ore., manufactures infrared cameras that can read the thermal heat signatures
of everything in their sight lines regardless of
time of day or atmospheric obscurants such as
smoke. Human beings throw of more energy
Al and Lana Corbi

designed their Los
Angeles home to
protect against
everything from
home invasion to
electromagnetic pulses.
Tim Rue foR foRbes
l Corbis residence in the Hollywood Hills has the requisite

white walls covered in artwork
and picture windows ofering
breathtaking views of downtown Los Angeles, but it has more in common with NSA headquarters than with the
other contemporary homes on the block.
The Corbi family doesnt need keys (thanks
to biometric recognition software), doesnt
fear earthquakes (thanks to steel-reinforced
concrete caissons that burrow 30 feet into
the private hilltop) and sleeps easily inside a
2,500-square-foot home within a home: a ballistics-proof panic suite that Corbi refers to as
a safe core.
Paranoid? Perhaps. But also increasingly commonplace. Futuristic security technologiesmany developed for the military but
sounding as though they came straight from
James Bonds Qhave made their way into
the home, available to deep-pocketed owners whose peace of mind comes from knowing that their sensors can detect and adjust
for, say, a person lurking in the bushes a halfmile away.
If you saw this stuf in a movie you would
think it is all made up, says Corbi, whose fortresslike abode doubles as the demonstration
house for his frm, Strategically Armored &
Fortifed Environments (SAFE).
Its not hard to see why such cuttingedge technologies would appeal to high-profle homeowners. We had an assessment
done three years ago from a private security company, says John Paul DeJoria, billionaire founder of John Paul Mitchell Systems.
They said ... that every now and again you
get a real kook, and what if they came to your
FoRBeS LIFe at home
tReNDING
What the 55 million
Forbes.com users are talking
about. For a deeper dive go to
FORBES.COM/LIFESTyLE
BOOK
GRAIN BRAIN
is Alzheimers a third type
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IDEA
Home fortress: a door with internal locks; monitoring security via tablet; a fog screen; a wine cellar turned bunker.
than trees or small animals, so the devices can

pick someone out even from a hiding place,
from a kilometer away in the lowest-end models to as much as 15 kilometers away in the
premium versions.
Biometric technologies are becoming
more prevalent, too. Moving beyond a fngerprint scan, some programs dont require a
homeowner to touch anything at all. Former
Israeli major general Aharon Zeevi-Farkash,
onetime head of the Israeli Military Intelligence Directorate, has spent the past three
years with his company, FST21, creating a
software product that merges facial, voice
and behavioral recognition technology into a
keyless entry system. It transforms you into
the key for your building in under two seconds, he says.
Windows remain an obvious and vulnerable entry point into a home. Glass-break detectors can operate within a 15-foot range, allowing them to be unobtrusively installed in
the ceiling or on a wall near the window. The
size of a silver dollar, they can be camouaged
in their surroundings, important when dealing with home fnishes like gold-leaf ceilings
or silk wallpaper. Some urban town house
owners add a blast flm to their windowpanes,

which makes them nearly impenetrable, even
if struck with a hammer or a pipe.
And dont forget the smoke. The Corbis
have a system that billows out fog screens
that range from a harmless smoke meant to
disorient intruders to a noisome gas with disabling efects lasting up to 24 hours. Then
there is the Burglar Blaster Decintegrator, a
relatively discreet ceiling-mounted device
that, when tripped, showers pepper spray.
Such smoke systems can even be laced
with a DNA codeSelectaDNA, for example, comprises a series of unique, synthetic DNA chains that attach themselves to a
fog-shrouded intruder. The invisible, harmless forensic code lingers on skin for weeks,
shows up under UV light and, thanks to
unique markers, can be traced directly back
to a specifc home.
The panic room has also undergone a
high-tech evolution that makes the old Jodie
Foster movie look quaint. A prominent author who declined to be identifed has had
his South Florida home jerry-rigged with
a physical perimeter alarm, motion sensors throughout rooms and stairways, and
VANISHING COPyRIGHTS
Judge sides with Google
over Authors Guild:
Digitizing libraries online
is actually good for writers
and publishers.
STARTUP
DARK WALLET
Anarchist cryptocurrency
project seeks to make bitcoin
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the deepest shadows of the
Dark Web.
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2001 Route 46, Waterview Plaza
Parsippany, NJ 07054
2013 Hennion and Walsh. Securities oered through Hennion & Walsh Inc. Member of FINRA, SIPC. Investing in bonds involves risk
including possible loss of principal. Income may be subject to state, local or federal alternative minimum tax. When interest rates rise, bond prices
fall, and when interest rates fall, prices rise. *Source: Moodys Investor Service, March 7, 2012 U.S. Municipal Bond Defaults and Recoveries,
1970-2011. Past performance is no guarantee of future results.
FoRBeS LIFe at home

a heat sensor that detects room temperature diferentials caused by a sudden change
in body heat. If worse comes to worst: The
third-oor master suite is outftted as a
2,500-square-foot safe haven. Switches installed throughout the house will encapsulate the space, locking down its three
entrances with reinforced doors while alerting local authorities. Taking it further, the
spaces bathroom doubles as an inner panic
room, protected by a silent home defense
system with sucient armament. Fortunately, it has never come into use. The best
system in the world is the one you never
use, says the homeowner. But there is a lot
of peace of mind that comes with it.
And there is more to worry about all the
time. Recently we have seen, especially in
New York City, clients worried about dirty
bombs, says Pollack, meaning chemical
weapons. Air scrubbers can suck in fresh air
from outside a space and flter it indefnitely.
He recently oversaw one project that would
allow the client to
camp in his bathroom "Recently we
suite turned panic
have seen,
room for as long as
especially
a week, hopefully
in New York
long enough to wait
out the worst of the
city, clients
chemical attack.
worried about
Luxury home
dirty bombs,
builders have dissays Pollack.
covered that buyers
will pay top dollar
for such extensively fortifed mansions. One compound on hyperexclusive Indian Creek Island in Miami,
Fla., completed in early 2012, includes a
fully stocked safe room that operates on its
own generator and has a separate ventilation system, a wine cellar wired with facial
recognition software and an infrared surveillance system. The property traded last year
for $47 millionthe highest price ever paid
for a house in Miami-Dade County. In my
opinion, will the buyer use [the panic room]?
Probably never, realistically. But did it help
sell the home? Yes, defnitely, says Oren
Alexander, of Douglas Elliman Real Estate,
who cobrokered the sale.
Of course, without discretion even the
best systems and safeguards can become vulnerable, warns Paul Viollis Sr., chief execu190 | FORBES DEcEmBER 16, 2013
tive of Risk Control Strategies. His advice: All

contractors and household staf should sign
nondisclosure agreements and undergo background checks. When building or renovating an estate, the owners name should never
appear on legal documents or building plans
submitted to local government; when plans
are submitted, the security overlay should be
fled separately from the architectural drawings so it doesnt become available to the
public. Once privacy has been established the
space can be properly secured.
And properly secured for a long time. In a
twist of history that channels the Cold War
basement bomb shelteronly with amenities more in line with the Greenbrier resorts
now famous bunker for the U.S. Congress
the newest frontier in home security is the
catastrophe plan.
Corbi says his SAFE has projects catering to such anxieties under way on four continents. These bunkers can span tens of thousands of square feet and tunnel as much as 30
stories into the ground. They are typically hidden in plain sight, accessed by secret passageways like rotating freplaces and oors that lift
up to expose an underground staircase.
Corbis own home has such a facility in the
basementa space that doubles as a wine cellar. If the safe core is compromised or the
rooftop helipad (complete with evacuation
plans signed into a contract with a local helicopter company) isnt accessible, the family
can retreat to this stronghold, thwarting natural disaster, nuclear holocaust or electromagnetic pulses emitted by the sun.
SAFEs bunkers operate on geothermal
power and have sustainable food supplies,
their own wells for water and full medical
facilities. Many have amphitheaters, restaurants and health spas; for one client, Corbi
designed a promenade with ceilings handpainted with blue skies and stores displaying the family heirlooms. These are things
you would want to have personally, so right
now its an ultimate entertainment area, but
if there was a disaster you could go there
and stay for a long time, says Corbi.
A long time, indeed. He estimates that
families could survive in the best planned of
these luxurious strongholds for up to three
generations. They would be the new Adam
and Eve, essentially, who would start up
everything again. F
GooD LIFe
GaDGet
WiNe foR
ALL Time
Wine by the glass is as great

a pleasure at home as at
a restaurant, and as big a
bother: How do you keep an
open bottle from spoiling?
Wine lover Greg Lambrecht,
an inventor of medical
devices, teamed up with
ex-Keurig CEO Nick Lazaris
to think outside the cork.
Their solution: Dont open
the bottle. Their Coravin
system uses a hollow needle
so thin that it pushes the
cells of the cork aside rather
than piercing them. your
61 Latour pours out (very
slowly, it must be said)
without letting oxygen in,
and the airspace is relled
with inert argon gas. ($299;
a three-pack of argon
cartridges, about ten glasses
each, is $29.99.)
Meghan Casserly
FORBES // FRANCHISES
PROMOTION
Veterans a Great Fit for the Franchise Marketplace

The nations most successful franchisers love veteransnot only for their service to our country,
but because they ofer the discipline, leadership and tenacity necessary to succeed in business.
BY MICHAEL RONEY
ranchisers now proactively

recruit vets, often through the
fnancial incentives, training and
career-mentoring programs of
the International Franchise Associations VetFran initiative. Among the
most enthusiastic supporters are:
Tim Hortons Cafe Bake Shop:

As part of its commitment to the VetFran
program, Tim Hortons, with more than
4,000 restaurants worldwide, waives
qualifed vets initial franchise fees and
reduces monthly royalty payments.
Dale Carnegie Training:

This renowned employee performance brand, boasting 180 franchises
in more than 86 countries, has teamed
with the University of Central Missouri
DECEMBER 16, 2013
to offer tuition assistance and GI Bill

benefts to further support veterans
success.
The Maids:
This leading residential cleaning
company, named one of the Top 50
Franchises for Veterans by the World
Franchising Network (WFN), serves
over 90 major cities and offers veterans
a franchise fee discount through VetFran.
Realty Executives International:

Realty Executives International has
offces in 28 countries and 10,000 agents
worldwide. Since 1965, Realty Executives
has been an industry leader. Today it is
proud to offer a new program that supports the career goals of U.S. military
veterans.
Wow 1 Day Painting:

This innovative newcomer placed 91st
on the Forbes list of Americas Most
Promising Companies. Through VetFran it offers 15% off all franchise fees
for veterans.
Fresh Coat:
Fresh Coat is a veteran-friendly franchise opportunity, and offers a special
discount to all veterans interested in
becoming a Fresh Coat owner. In fact,
more than 30% of the Fresh Coat Painter
franchise owners are veterans.
As highly skilled, disciplined and motivated leaders with a strong work ethic,
veterans are indeed a great ft for franchisers. Thats why engaging with vets
is a win-win for all parties.
FORBES // FRANCHISES
PROMOTION
Fastest Growing Chicken Restaurant

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12
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25
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all industries The Wall Street Journal
QSR Magazine
Forbes Magazine
*Ranked in Percent Unit Growth
Learn more at
www.GrowWithBojangles.com/FM
1-800-366-9921
This is not an offering to purchase a franchise.

Offerings are made by Franchise Disclosure Document only.
Igniting Workplace
Enthusiasm
Best for Vets Franchises 2013

Military Times
Become a player in the exploding business

education market by joining a worldwide,
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If you have a command or sales
background and the ability to invest
in your future, look into this once in
a lifetime opportunity!
.dalecarnegie.com/veterans
Territories Available in Wichita, KS,
Montana & Western Massachusetts
To learn more contact

John Covilli at 636.925.9720
john_covilli@dalecarnegie.com
Copyright 2013 Dale Carnegie & Associates, Inc. All rights reserved.
franchise_ad_100813_vets
DECEMBER 16, 2013
FORBES // MARKETPLACE
I Hate AnnuitiesAnd So Should You!

The Soothing Sound of Guaranteed Income
Many investors currently own or are considering annuities. After all, they are sold as
safe investments, offering dependable and predictable returns, no matter what the
market does. And that sounds very appealing, especially after suffering through the
worst bear market since the Great Depression. So whats the problem with annuities?
What You Might Not Know about Annuities

Could Come Back to Haunt You
Before you put your hard-earned money into an annuity, or if you already own one,
please call 1-800-695-5929 for a special report, Annuity Insights: Your Guide to Better
Understanding Annuities. It could help save you hundreds of thousands of dollars and
untold nancial heartache.
The vast majority of annuities are really complicated insurance policies that make it
very difcult to fully understand the implications and unintended consequences. And
once you buy into an annuity, it can be a very difcult and potentially very costly
investment decision to reverse. Thats why it is vital you look before you leap and
ensure that you have your eyes wide open before you purchase an annuity. And if
you already own an annuity this free report is just as valuable as it can help you sort
out the good, the bad and ugly aspects of annuities.
What Youll Learn from this Free Report
The different types of annuities and the advantages and disadvantages of each
Why annuities can be complex to understand
What you need to ask an annuity salesman when evaluating his product
The ination risk, tax implications, estate planning considerations and
typical annuity fees
Stuck in an Annuity?
Because people often regret their annuity decision, Fisher Investments has helped
many investors extract themselves from annuities. In fact, if you have a portfolio of
$500,000 or more, we may rebate some or all of your annuity surrender penalties up
to $12,000 and beyond.* Please call for details and to see if you might qualify.
If you own an annuity or if

someone is trying to sell you
one, I urge you to call for
your free report. Annuities
can lock you into low returns,
complicate your tax situation,
tie up your wealth and hit you
with high fees. If you have an
annuity, my team can help you
decide if it is right for you and
if it isnt, we might be able to
help you get out of it and even
help you offset some of the
surrender fees.*
This free report could save
you from making one of the
biggest investment mistakes
of your life. And for owners
of annuities, the free analysis
could be a life saver.
About Fisher Investments
Ken Fisher
Fisher Investments is a specialized money management rm serving successful

individuals as well as large institutional investors. With over $46 billion** in assets
under management and with an over 25-year track record in bull and bear
markets, Fisher Investments uses its proprietary research to manage money
for prudent investors.
CEO and Co-Chief Investment

Ofcer, Fisher Investments
Forbes Portfolio Strategy
columnist for 28 years
Author of 10 nancial
books, including four
New York Times bestsellers
Please hurry! This offer contains time-sensitive information.
Call today for your FREE report!

1-800-695-5929 Ext. A162
2013 Fisher Investments. 5525 NW Fisher Creek Drive, Camas, WA 98607.
Investments in securities involve the risk of loss. *Subject to Terms and
Conditions. See www.AnnuityAssist.com/Terms-and-Conditions for
further information. **As of 6/30/2013.
DECEMBER 16, 2013
FOR MARKETPLACE ADVERTISING, CALL 212-206-5563
FORBES // FRANCHISES // MARKETPLACE
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wine club
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DECEMBER 16, 2013
HARBOR
FREIGHT TOOLS
Quality Tools at Ridiculously Low Prices
FACTORY DIRECT SAVINGS
How does Harbor Freight sell great quality
tools at the lowest prices? We buy direct
from the same factories who supply the
expensive brands and pass the savings
on to you. Its just that simple! Come in
and see for yourself why over 25 million
satised customers and leading automotive
and consumer magazines keep talking
about our great quality and unbeatable
prices. Visit one of our 475 Stores
Nationwide and use this 25% Off Coupon
on one of over 7,000 products*, plus pick
up a Free 1" x 25 Ft. Tape Measure, a
$5.99 value.
We Will Beat Any Competitors Price
Within 1 Year Of Purchase
No Hassle Return Policy
100% Satisfaction Guaranteed
ER
SUPER COUPON!
25%
LIFETIME WARRANTY
ON ALL HAND TOOLS!
FREE
1" x 25 FT.
TAPE
MEASURE
OFF
ITEM 69080/
47737/69030/69031
Item 69080
shown
$ 99
VALUE
ANY SINGLE ITEM!
WITH ANY
PURCHASE
LIMIT 1 - Save 25% on any one item purchased at our stores or HarborFreight.com or by
calling 800-423-2567. *Cannot be used with other discount, coupon, gift cards, Inside
Track Club membership, extended service plans or on any of the following: compressors,
generators, tool storage or carts, welders, oor jacks, Towable Ride-On Trencher (Item
65162), open box items, in-store event or parking lot sale items. Not valid on prior purchases
after 30 days from original purchase date with original receipt. Non-transferable. Original
coupon must be presented. Valid through 4/1/14. Limit one coupon per customer per day.
LIMIT 1 - Cannot be used with other discount, coupon or prior purchase. Coupon good at
our stores, HarborFreight.com or by calling 800-423-2567. Offer good while supplies last.
Shipping & Handling charges may apply if not picked up in-store. Non-transferable. Original
coupon must be presented. Valid through 4/1/14. Limit one coupon per customer per day.
NOBODY BEATS OUR QUALITY, SERVICE AND PRICE!
ER
Item 67227
shown
27 LED PORTABLE
WORKLIGHT/FLASHLIGHT
ER
LOT NO. 67227/

69567/60566
SAVE
56%
Requires three
AAA batteries
(included).
ER
900 PEAK/
800 RUNNING WATTS
HP (63 CC)
SAVE GAS2GENERATOR
NEW!
$90
REG.
$ 59 PRICE
$5.99
Item
69381
shown
44", 13 DRAWER
INDUSTRIAL QUALITY
NEW! SAVE
ROLLER CABINET
$290
SUPER HIGH GLOSS FINISH! LOT NO.
68784/
2633 LB. CAPACITY
69387
WEIGHS
245 LBS.
LOT NO.
66619/60338/69381
Item
68784
shown
8999
REG. PRICE $179.99

LIMIT 7 - Good at our stores or HarborFreight.com or by calling 800-423-2567. Cannot be used with other discount
or coupon or prior purchases after 30 days from original purchase with original receipt. Offer good while supplies last.
Non-transferable. Original coupon must be presented. Valid through 4/1/14. Limit one coupon per customer per day.
ER
3 GALLON, 100 PSI

OILLESS PANCAKE
AIR COMPRESSOR
Item
95275
shown
SAVE
50%
LOT NO. 95275/

60637/69486/61615
REG.
PRICE
$79.99
3999
ER
LOT NO. 69039/60727/68217
PORTABLE
GARAGE
ER
SAVE
$125
$ 99
SAVE
66%
ER
RETRACTABLE AIR/WATER
Item
HOSE REEL WITH
93897
shown 3/8" x 50 FT. HOSE
SAVE
$70
174
REG. PRICE $299.99

Item 69039 shown
ER
90 AMP FLUX
WIRE WELDER
LOT NO.
68887/61207/
61849
NO GAS
REQUIRED!
9999
Item
68887
shown
SAVE
$50
REG. PRICE $149.99

5999
59
REG. PRICE $129.99
ER
9 PIECE FULLY POLISHED

COMBINATION
WRENCH SETS
SAVE
60%
Item 42304
shown
SAE
ER
45 WATT SOLAR PANEL KIT
SAVE
$120
$
LOT NO.
68751/90599
Item 68751
shown
13999
REG. PRICE
$259.99
ER
Item 67255
shown
LOT NO.
LOT NO.
42304/69043 42305/69044
SAVE
REG.
$ 99$14PRICE
40%
.99
WEIGHS
27 LBS.
3-1/2 PUMPS
LIFTS MOST VEHICLES!
METRIC
YOUR CHOICE!
Item
68053
shown
REG. PRICE $119.99
99
SAVE
$60
LOT NO. 68053/69252/60569
LOT NO. 93897/69265
"The Undisputed King of the Garage"

Four Wheeler Magazine
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Covers your Entire Garage at an
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Street Trucks Magazine
99
ER
LOT NO. 42292/

69594/69955
REG.
PRICE
$14.99
REG.
PRICE
$649.99
AUTOMATIC
BATTERY FLOAT
CHARGER
Item
42292
shown
35999
14" ELECTRIC
CHAIN SAW
LOT NO.
67255/61592
4499
REG. PRICE $74.99
475 Stores Nationwide

DECEMBER 16, 2013
THOUGHTS
FinaL thoUGht
Christmas is a tonic for our souls. It moves us to think of others
rather than of ourselves. It directs our thoughts to giving.
B.c. ForBEs
on christmas
I stopped believing in Santa Claus
when I was 6. Mother took me to
see him in a department store and
he asked me for my autograph.
shirley temPle
For most of us it can be a Happy

Christmas if by happiness we mean
that we have done with doubts, that
we have set our hearts against fear, that
we still believe in the Golden Rule for
all mankind.
Franklin D. roosevelt
What I dont like about ofce Christmas

parties is looking for a job the next day.
Clarence Sandy Pratt is credited with being

founder and frst president of the Outdoor Christmas
Tree Association. In short, he has launched a
movement which has put trees in front of more than
a million American homes to glimmer gaily with
Yuletide brilliance. According to Sandys way of
thinking, cut trees, destined for next-weeks rubbish
pile, are quite too temporary to express the eternal
spirit of Christmas.
Christmas is the season

for kindling the fre of
hospitality in the hall,
the genial fame of
charity in the heart.
Christmas is a
season not only
of rejoicing but
of refection.
Washington irving
Winston churchill
From the Dec. 15, 1940 issue oF ForBes
Santa is even-tempered. Santa does

not hit children over the head who
kick him. Santa does not have a threemartini lunch. Santa does not borrow
money from store employees. Santa
wears a good deodorant.
othEr thoUGhts From that issUE:
Jenny Zink
(aDvising DePartment store santas)
christmas sPirit stiLL LiVEs Not even Europes most

ruthless dictators can debase their people into becoming pagans.
Christmas and everything it symbolizes will outlive the heathenism of
soulless gluttons for merciless domination over their fellowmen.
LUstY inFant This month commercial television celebrates its frst
birthday. And the National Broadcasting Co., as one of its proud parents,
has brought out a noteworthy booklet-biography.
The joy of brightening other lives, bearing

each others burdens, easing others loads and
supplanting empty hearts and lives with generous
gifts becomes for us the magic of Christmas.
W.c. Jones
SourceS: THe eNcYcLoPeDIA oF reLIGIouS QuoTATIoNS; SIMPSoNS coNTeMPorArY QuoTATIoNS;

THe WIT & WISDoM oF WINSToN cHurcHILL; THe YALe BooK oF QuoTATIoNS.
Getty ImaGes
Phyllis Diller
Breguet, the innovator.

Classique Le Rveil du Tsar
In April 1814, shortly after the allied armies had entered Paris, Tsar
Alexander I of Russia paid a visit to Breguet and ordered several watches
from his favorite horologer. Today, the Classique 5707 Le Rveil du Tsar
equipped with an alarm-activation indicator and a dial featuring several
hand-guilloch motifs pays tribute to one of Breguets most emblematic
patrons. History is still being written ...
BREGUET BOUTIQUES NEW YORK FIFTH AVENUE
646 692-6469 NEW YORK MADISON AVENUE
2 12 2 8 8 - 4 0 14
B E V E R L Y H I L L S 310 8 6 0 - 9 9 11 B A L H A R B O U R 3 0 5 8 6 6 -10 6 1 L A S V E G A S 7 0 2 73 3 - 74 3 5 T O L L F R E E 8 7 7 - 6 5 8 - 5 2 5 9 W W W. B R E G U E T. C O M

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What are some risks associated with different types of investments discussed in the document?

What are some risks associated with different types of investments discussed in the document?

What are some characteristics of dividend-paying companies?

What are some characteristics of dividend-paying companies?

2O14 investment guide

WHATS THE BIG DEAL

WHAT IF THERE WERE

of total stock returns

Total returns with dividends

Source: Morningstar EnCorr , FMRCo, as of 12/31/2012

Dividends have been rising faster than earnings.2

Stable, mature businesses

Relatively stable prots

Source: Standard & Poors, Haver Analytics, Fidelity Investments

Put our dividend funds to work for your portfolio.

FGRIX FIDELITY GROWTH & INCOME PORTFOLIO

At Fidelity, we use our global reach

Get our full perspective and fund

FSDIX FIDELITY STRATEGIC DIVIDEND & INCOME FUND

DEUTSCH & DEUTSCH

contents DeceMBeR 16, 2013

VoLUMe 192 nUMBeR 9

A shameful deal and a dangerous one, too.

52 | its good to bE king

Leon Cooperman favors function over form

34 | STAn kROEnkES SpREADS

36 | ChARITABlE BAnG FOR ThE BuCk

40 | AppETITE FOR InnOvATIOn

Three entrepreneurs profting from creative

Can education reform solve poverty?

Sihanouk: a lead player in many roles.

Smarts in business is not about IQ.

A new way to measure the economy.

Introducing our world-class

contents DeceMBeR 16, 2013

John Menard makes all the rulesand the

60 | DuCk (DynASTy) SEASOn

The NHLs fnancial future lies north of

Some of the worlds most infuential investors

70 | READInG yOuR FInAnCIAl

Shrewd startups are crunching the data behind

104 | madElinE mismanagEd

76 | ThE AnTI-SIlICOn vAllEy

Apprenda thrives by ofering what the Bay Area

Must Charlie Chanaratsopon slow down the

Now in his fourth startup, Howard Lerman has

The Case for Dividends. 107

112 | FInDInG ThE nExT SAMSunG

131 | avoid art

16 | FORBES DECEMBER 16, 2013

118 | STOCkS wITh A SAFETy nET

Edward Silversteins convertible fund has beaten

contents DeceMBeR 16, 2013

Theres money to be made on pipelines, railroads

129 | pORTFOlIO STRATEGy

Turning $1,000 into $42 million.

131 | hOw SMART IS ART?

A watercolor may give more pleasure than an index

136 | FInAnCIAl STRATEGy