There's no holding back silver miner Primero Mining , which is transforming itself into a storehouse of wealth that will enrich investors over the long haul.
Source: Primero Mining.
The miner said last week it had crossed the annual threshold of producing 3.5 million ounces of silver at its San Dimas project in Mexico that it is required to deliver to Silver Wheaton , and did so six weeks ahead of schedule. That's significant because, between now and August the rest of the output from the mine is available for Primero to begin selling at spot prices for its own account. Silver was last priced at around $21.24 per ounce, and the miner estimates it will sell between 1.25 million and 1.5 million ounces by Aug. 5, when the annual threshold jumps to 6 million ounces and remains there for the life of the mine.
Investors need to go back to 2010, when Primero bought San Dimas from Goldcorp for $500 million. At the time, silver streamer Silver Wheaton had in place a purchase agreement with the gold miner that had higher annual thresholds but which expired in 2029. When Primero took over, the agreement was renegotiated, lowering the thresholds for the first four years (but bumping them up thereafter) and extending the time frame to cover the life of the mine.
The arrangement was a win-win-win deal for all parties involved, despite the seemingly low price Primero paid for the project, because in return Goldcorp had received a 30% equity stake in the junior miner. Earlier this month Goldcorp entered into an offering to sell all 31.15 million shares it owned at a price of $224 million Canadian, the same day Primero announced it had completed the acquisition of another junior miner, Brigus Gold.
The cash flows from San Dimas are what's transforming this junior miner into a mid-tier precious metals powerhouse. Recently it purchased from Goldcorp the remaining 30.8% interest in its Cerro del Gallo development project that it acquired last year, and it followed that with the Brigus acquisition. With the proceeds from the sale of half of the San Dimas production filling its coffers and the promise held by Cerro del Gallo, Primero is ready to build on its successes.
Its shares surged 11% yesterday on the news it reached the milestone early and are up 50% over the past three months. But with significantly larger bases of reserves and resources, greater production potential, and a higher cash-flow profile, Primero Mining looks like it's golden.
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One of the most popular tax deductions people use is for interest on the mortgage loan you take out on your home. But what are the ins and outs of the mortgage interest deduction, and does it really help you as much as you think?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks closely at the mortgage interest deduction. Dan notes that there are two categories of mortgage loans for IRS purposes: those used to buy or make substantial improvements to a home, and those used for maintenance or non-related expenses. The first category is eligible for deductions on principal amounts up to $1 million, while the second has lower limits of $100,000. That can be a problem when Wells Fargo , Citigroup , Bank of America , and other lenders offer lower rates for bigger loans that might exceed the deductible-interest amount. Dan concludes with the important point that only those who itemize get the benefit of the mortgage interest deduction, making the tax break worthless for those who take the standard deduction instead.
Is Uncle Sam about to claim 40% of your hard-earned assets? Thanks to a 2013 law called the American Taxpayer Relief Act, or ATRA, he can, and will, if you aren't properly prepared.
Fortunately, The Motley Fool recently uncovered an arsenal of little-known loopholes to protect yourself from ATRA and help keep the taxman at bay when he inevitably comes calling. We reveal them all in a brand-new special report. Simply click the following link for instant, 100% free access.
Dan Caplinger owns warrants on Wells Fargo and Bank of America. The Motley Fool recommends Bank of America and Wells Fargo and owns shares of Bank of America, Citigroup, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
"Curiouser and curiouser!" cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English)." -- Lewis Carroll, Alice's Adventures in Wonderland
In Ukraine as in Wonderland, the news out of Crimea just gets curiouser and curiouser. Over the weekend, Russian troops crossed the border out of the breakaway region and into Ukraine proper, seizing control of a natural gas distribution station in the Ukrainian village of Strilkove. Meanwhile, back on the peninsula, regional vice premier Rustam Temirgaliyev finally admitted what everyone has known for weeks -- and which Russian President Vladimir Putin continues to deny -- that "Yes, we have Russian troops in Crimea."
And with those troops still in-country and armed to the teeth, Crimea has reportedly just wrapped up a regionwide referendum. The result of this "free and fair" poll: an 85% turnout, with 93% voting in favor of seceding from Ukraine and joining Russia instead.
In short, far from "de-escalating," the Crisis in Crimea is starting to look permanent -- and indeed, may expand beyond the borders of Crimea. This bad news helped stocks on the S&P 500 and Dow Jones Industrial Average suffer their worst declines in nearly two months -- and this could be only the beginning.
Two weeks ago, at the start of this crisis, we ran down five ways the conflict between Ukraine and Russia could affect your portfolio. Two weeks into the crisis, with new facts in hand, we're back to update that advice with five more predictions. Here goes.
Manufacturing Trade between Russia and the U.S. passed $38 billion in value last year, and much of that could be at risk if the Obama administration follows through on threats to punish Russia's land-grab in Crimea with trade sanctions. Even worse for investors, Russia has promised to retaliate against such sanctions, potentially hurting U.S. companies that have made direct investments in the country.
Major U.S. manufacturers such as Ford and General Motors have invested more than $10 billion directly in Russia. Ford, for example, manufactures Focus and Mondeo automobiles at its plant in St. Petersburg and is in the process of building a new $274 million engine plant in the Russian region of Tatarstan. GM set up its first factory in St. Pete as well -- a $300 million, 98,000-cars-annually assembly plant -- and up until this crisis began, it was expanding its joint venture with AvtoVAZ in Togliatti.
Banking One of the likeliest targets for U.S. trade sanctions would be cutting ties with Russian banks in an attempt to constrict Russia's access to foreign capital. This holds immediate implications for banking giant Citigroup . The U.S. bank with the most exposure to the country, Citigroup serves more than 3,000 institutional customers in Russia, has a retail customer base of 1 million and operates 50 bank branches in a dozen Russian cities. Citigroup earns about $300 million annually in Russia -- for now.
Oil and gas Closer to Crimea proper, a consortium of companies including Italian energy producer Eni recently signed a $4 billion investment deal with Ukraine to develop underwater gas fields off the western coast of Crimea. A "production sharing agreement," this deal was made with the Ukrainian government as a party, however. If Crimea is leaving Ukraine, the legal validity of the deal could be questioned -- and Eni could lose its 50% stake in the project.
Steel -- again ArcelorMittal is a bit trickier. Last time we looked at the stock, we mentioned how its operations might be disrupted by conflict in eastern Ukraine, hurting global steel supplies and driving up prices. Instead -- the opposite may happen. Last week, Arcelor warned that while it's still producing plenty of steel, steel usage in Ukraine has dropped like a rock, as companies delay construction projects to see how the conflict with Russia plays out.
Result: Arcelor's steel is being diverted to international markets, potentially increasing supply and driving prices down. (Curiouser and curiouser, indeed.)
Military suppliers Finally, we turn to the defense contractors. This week, Ukrainian leaders made impassioned pleas to the U.S. for military assistance. Asked to supply guns and ammo, the Obama administration agreed only to send food aid, fearing that sending weapons to Ukraine might offend Russia.
But as we saw with Arcelor, this situation is fluid. The U.S. has a history of providing surplus weaponry to bolster the militaries of allied nations -- offering two dozen old F-16 fighter jets to Romania in 2010, for example, and sending 400 used M1A1 Abrams main battle tanks to Greece in 2011 -- all free of charge.
But "free" isn't always what it seems. In the F-16 deal, for example, Romania was expected to spend $1.3 billion upgrading its fighter jets to modern standards. That's money in the bank for Lockheed Martin . Potentially, if Russia fails to back down in Ukraine, we could soon see Congress approve similar sales of military hardware -- to Ukraine, to Georgia (which has had issues with Russia in the past), and to other border states such as Estonia or Latvia, which also wish to strengthen their defenses.
The risk to investors? Shorting defense contractors in the middle of a new cold war.
Lockheed Martin's F-16 fighters -- headed to the front lines soon? Photo: Lockheed Martin.
Conflict is eternal, and defense stocks will never let you down So long as countries go to war against other countries, defense contractors that protect the one from the other will make money for investors. Over time, generous dividend-paying stocks can make you rich -- and defense stocks are some of the richest dividend payers out there. While they don't garner the notability of high-flying tech stocks, dividend-paying stocks are also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.
Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors and owns shares of Citigroup, Ford, and Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does SodaStream International Ltd. fit the bill? Let's look at what its recent results tell us about its potential for future gains.
What we're looking for The graphs you're about to see tell SodaStream's story, and we'll be grading the quality of that story in several ways:
Growth: Are profits, margins, and free cash flow all increasing?
Valuation: Is share price growing in line with earnings per share?
Opportunities: Is return on equity increasing while debt to equity declines?
Dividends: Are dividends consistently growing in a sustainable way?
What the numbers tell you Now, let's look at SodaStream's key statistics:
Source: YCharts. *Period begins at end of Q4 2010.
How we got here and where we're going SodaStream puts together a strong performance by racking up five out of seven possible passing grades. Over the past three years, the company's revenue and profit margin have both risen impressively on the back of high demand for the company's niche prodcts, but SodaStream's free cash flow has diverged markedly from these metrics, costing it a failing grade on this test and posing a worrying issue for investors who have long sought positive momentum on this front. Let's dig a little deeper to find out what SodaStream is currently doing to fix this one fundamental weakness
SodaStream's fourth-quarter earnings recently came through with mixed results -- revenue rose by an impressive 26% year-over-year thanks to double-digit growth in CO2 canister and flavor pack sales, but earnings per share took a dive as the company found it difficult to keep production costs under control. Fool analyst Blake Bos notes that the company decided to reconfigure 600,000 SodaStream machines for redeployment from the U.S. to other markets, which spiked expenses during the quarter. Moreover, SodaStream's exploration of other growth avenues, such as television's Home Shopping Network, wound up putting downward pricing pressure on its products as multiple outlets competed for the same consumer dollars.
According to SodaStream, the worldwide carbonated-beverage industry is estimated to be worth about $260 billion. At annual sales of just $563 million, SodaStream would appear to have a monstrous opportunity for growth in the foreseeable future. The company recently entered into a strategic agreement with Sunny Delight to produce SunnyD branded syrups for SodaStream's systems, and SodaStream also signed a deal with cocktail and drink-mix purveyor Skinnygirl -- part of the Beam stable of brands -- to develop a new range of flavors for women. Both of these new lines are slated to launch during the second half of 2014, and should expand the company's mind share beyond its current soda focus.The company alsointroduced single serve SodaStream Caps to flavor up carbonated beverages, which have gained solid traction thanks to a controversial Scarlett Johansson ad (more on that in a moment).
However, Coca-Cola's recent 10-year contract with Green Mountain Coffee Roasters to produce Coke's products in the upcoming Keurig Cold machine, which will be available this fall, was a major blow to SodaStream investors that is likely to hang over the company for some time. While SodaStream CEO Daniel Birnbaum said that "everyone has a right to make a mistake" in regards to the Coke-Green Mountain partnership, this clearly represents a threat to SodaStream's heretofore-unchallenged dominance of a very small slice of the carbonated-beverage market.
SodaStream had hoped to capitalize on a banned Super Bowl ad titled "Sorry, Coke and Pepsi" featuring Scarlett Johansson, and the ad has been popular, with more than 13 million views on the company's official "uncensored" YouTube version to date. However, all publicity may not be good publicity, and much of the press regarding this popular ad has focused on Johansson's association with an Israeli company accused of exploiting Palestinian workers at its West Bank plant. The one-two punch of these events could do more to dent SodaStream's growth than anything else it has faced to date.
Fool contributor Ted Cooper points out that speculation is swirling over a potential acquisition by soda giant PepsiCo , which would here be an attempt to follow rival Coca-Cola into the home-carbonated beverage market. With shares currently trading at a reasonable 17 times forward earnings, SodaStream might offer substantial upside potential -- if the company can overcome these new challenges, and its margin issues, to gain market penetration in the massive carbonated-beverage industry.
Putting the pieces together Today, SodaStream many some of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy -- or to stay away from a stock that's going nowhere.
Don't settle for a "maybe" stock ... it's time to buy the best There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.
Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Beam, Coca-Cola, Green Mountain Coffee Roasters, PepsiCo, and SodaStream; owns shares of Coca-Cola, PepsiCo, and SodaStream; and has options on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Alamy
You can never know in advance all the news that will move the market in a given week, but some things you can see coming. From a direct marketer of wellness supplements stepping up with healthy financials (we hope) to Olive Garden's parent checking in with a report on the dreary state of casual dining, here are some of the things that will help shape the week that lies ahead on Wall Street.
Monday -- Human Nature
Nature's Sunshine Products (NATR) distributes natural wellness products through its growing direct sales force of more than 340,000 reps worldwide, and it also happens to be kicking off the new trading week with its latest financials.
Analysts expect to see healthy bottom-line growth in Monday morning's quarterly report. They predict a profit of $0.35 a share, well ahead of the $0.28 a share it rang up a year earlier. The rub is that Nature's Sunshine has come up short against Wall Street profit targets in three of the past four quarters.
Tuesday -- Photoshop These Financials
Adobe Systems (ADBE) reports on Tuesday. The desktop publishing software giant behind Photoshop, Flash, and PDF authoring platform Acrobat has seen better days. The market's bracing for a dip in revenue and profitability in its latest quarter.
That probably isn't much of a surprise. There are now free or nearly free Web-based alternatives to many of Adobe's products. The alternatives may not have as many features, but they're more than enough for casual users. Adobe is going to need new products to get back on the growth track.
Wednesday -- New Home Sales Brewing
One of the economy's biggest turnaround stories is the residential real estate revival. Folks are buying houses again and they're willing to pay more for them, which is making developers a lot of money. After all, their component costs aren't rising at the same clip as home prices.
We'll get a great snapshot of the industry this week. KB Home (KBH) reports on Wednesday, and Lennar (LEN) follows a day later. KB Home is expected to post its third consecutive quarterly profit, and Lennar is likely to continue to build on its recent healthy growth.
Thursday -- Just Do It
Nike (NKE) has established itself as the top dog in athletic footwear, branching out into performance apparel and other branded merchandise. It reports on Thursday. Analysts are holding out for 8 percent growth in revenue, but they expect to see profitability taking a small step back.
Friday -- Cutting Bait on Red Lobster
Darden Restaurants (DRI) is in trouble. It apparently couldn't find a buyer for Red Lobster, so the casual dining giant is spinning it off later this year. Its other major chain -- Olive Garden -- has been struggling in recent quarters, leading Darden to postpone near-term expansion of the oft-lampooned chain of Italian eateries.
Darden reports on Friday morning. Investors will naturally get an update on its efforts to separate Red Lobster from the rest of the company. We may also get an early read on how some of the menu changes at Olive Garden that include new salad toppings pasta offerings are holding up. Wall Street pros see a sharp drop in profitability at Darden, and the bad news is that the chain has come up short in each of its three previous quarters. In short, don't be surprised if indigestion is on the menu.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Adobe Systems and Nike. The Motley Fool owns shares of Nike. Try any of our newsletter services free for 30 days.
Ethan Miller/Getty ImagesWorld Wrestling Entertainment Chairman Vince McMahon
By Tara Lachapelle
To spark a bidding contest for World Wrestling Entertainment Inc. (WWE), all Vince McMahon needs to do is wave a "for sale" sign.
McMahon, 68, controls the voting power of the $2.3 billion company that's been entertaining spectators with staged fights for decades. The stock is at a record after WWE launched its own subscription streaming network and became the subject of takeover speculation. Should McMahon ever decide he's ready to sell, companies from Comcast Corp. (CMCSA) to Madison Square Garden Co. (MSG) may line up with offers, Albert Fried & Co. and National Alliance Capital Markets said.
"What is McMahon's succession plan and who will he pass the keys of the kingdom to?" Robert Routh, an analyst at National Alliance, said in a phone interview. "WWE would be very attractive to many different types of buyers. What they've built can't be recreated. But without McMahon's blessing, it doesn't matter how much somebody is willing to pay for the company."
The franchise that thrust Hulk Hogan and The Rock into stardom owns the television shows "Raw" and "Smackdown," which have a dedicated following and command high cable-TV ratings, Vertical Group said. The company, which is hosting its annual WrestleMania event in three weeks, will post its best revenue and profit growth in more than a decade next year, according to analysts' estimates compiled by Bloomberg.
Stock Surge
The stock has climbed 35 percent this month, in part because of takeover speculation, to close at $30.94 last week. WWE isn't in merger talks, Chief Financial Officer George Barrios said in an interview March 6. A representative for the Stamford, Connecticut-based company, declined to comment last week beyond Barrios' earlier statement.
WWE's programs, which air on Comcast's USA and SyFy cable networks, may find a new home by the end of April, Barrios said. He said the company is in discussions on future domestic TV distribution with "multiple parties."
It has held distribution talks with companies such as AMC Networks Inc. (AMCX), though a renewal with Comcast's NBCUniversal is also possible, people with knowledge of the situation said.
McMahon controls WWE through Class B shares that have added voting rights. His daughter Stephanie McMahon Levesque is the company's chief brand officer, and her husband, pro-wrestler Paul "Triple H" Levesque, is executive vice president for talent and live events. McMahon's wife Linda McMahon helped found the company and has since mounted failed bids to win a U.S. Senate seat in Connecticut. Their son Shane McMahon is chairman of publicly traded You On Demand Holdings Inc., which streams movies in China.
'Strong Numbers'
Men account for two-thirds of WWE's audience, which consistently tops 4 million viewers on Monday nights on USA, according to Nielsen data compiled by Horizon Media Inc. In the week ended March 9, WWE's "Raw" was the third most-watched cable show, trailing only "The Walking Dead" and "Duck Dynasty," the data show.
"These are pretty strong numbers for cable," Brad Adgate, director of research at Horizon Media, said in a phone interview. For advertisers, "it's a great target for young males."
WWE's library of characters, story lines and hours of footage can't be easily replicated, which is why it could lure buyers, said Routh of National Alliance.
To persuade McMahon to sell his wrestling empire, any deal would probably have to be structured similar to Walt Disney Co. (DIS) and Pixar's relationship, in which the computer-animation studio operates independently even though it's owned by Disney, he said. Disney acquired Pixar in 2006.
Partnership Opportunity
"That type of situation would probably be the most likely one as far as the McMahons being able to be comfortable" with selling the company, Kim Opiatowski, a New York-based event-driven analyst at Vertical Group, said in a phone interview. "It's a question of a loss of control of the company. It'd be tough to take it out of the family's hands unless they felt there was something so compelling or such a good strategic partnership opportunity."
Comcast is a "natural acquirer" for WWE because it already airs the wrestling shows and Chief Executive Officer Brian Roberts isn't afraid to manage more than one type of media asset, said Richard Tullo, New York-based director of research at Albert Fried. Comcast owns cable and broadcast TV networks, the Xfinity cable service, the Universal Pictures movie studio and theme parks. A representative for Comcast said the $132 billion company doesn't comment on speculation.
Toys, Games
In addition to WWE's TV shows, any buyer would have to manage its wrestler-themed products such as video games and toys as well as its more than 300 annual live events.
Sports and live events are Madison Square Garden's specialty, which makes it a logical suitor, Tullo said in a phone interview.
MSG owns the New York Knicks basketball team and the New York Rangers hockey team, as well as the Manhattan arena they play in. The company is looking to sell its Fuse music TV channel, which people with knowledge of the situation said has so far drawn bids from both Jennifer Lopez and her former beau Sean "Diddy" Combs.
"MSG can manage WWE because they know the ropes," Tullo said. "MSG owns sports teams, they own arenas, they have the WWE in their venues. It would just need a couple of chips to fall into place first, such as selling Fuse."
Live Nation
Closely held Anschutz Entertainment Group, the owner of the Staples Center in Los Angeles, and Live Nation Entertainment Inc. (LYV), the world's largest concert promoter, also have the ability to operate WWE's assets, Tullo said.
Representatives for MSG, Live Nation and Anschutz declined to comment on the companies' interest in acquiring WWE.
Disney, with its expertise in managing and marketing characters across platforms from the big screen to consumer products, is another possible suitor, Routh of National Alliance said. The backing of Disney, a $140 billion entertainment conglomerate, would increase WWE's value, he said.
"You can't look at what WWE is worth today," Routh said. "It's about what it's worth in the hands of Disney, with all of their muscle behind it."
A representative for Burbank, California-based Disney didn't return messages seeking comment.
Disney's cash and equivalents of $4.4 billion is almost double the size of WWE's market value, data compiled by Bloomberg show. Comcast's cash stockpile is even larger at $5.3 billion, the data show.
"If you were Disney or Comcast looking at the numbers and what you could do with WWE, you could probably justify paying a decent price and it's still petty cash to you," Routh said. "The question is, what's the asking price, if there even is one. Only Vince McMahon knows."
To contact the reporter on this story: Tara Lachapelle in New York at tlachapelle@bloomberg.net
To contact the editors responsible for this story: Beth Williams at bewilliams@bloomberg.net Whitney Kisling
Alamy
Americans struggling to finance the rising cost of college can get help paying these bills from an unlikely source: the Internal Revenue Service. Let's look at two of the most popular tax credits that apply for educational expenses and who can qualify to take them.
American Opportunity Credit
The American Opportunity Credit -- formerly known as the Hope Credit -- is intended for undergraduate students pursuing a degree program. Under the credit, you can get back 100 percent of your annual qualifying educational expenses up to $2,000, plus an additional 25 percent on the next $2,000 for a maximum total of $2,500. The credit is available for up to four years.
Income limits apply, with single filers making $80,000 or less and joint filers with income of $160,000 or less getting the full benefit. The credit starts to phase out above those levels, and above $90,000 and $180,000 respectively, the credit is no longer available. Families with more than one student in school at the same time can claim a credit for each student.
Qualifying expenses for the credit include tuition, books, supplies, equipment for courses and mandatory student-activity fees. Not included are room, board and other living expenses.
One unusual benefit is that the American Opportunity Credit is partially refundable, meaning that even if you don't owe any income tax before the credit is applied, you can still get money back as a tax refund. Nonrefundable credits, by contrast, only help those who have tax liability; otherwise, they're essentially worthless. The refundable portion of the credit is limited to 40 percent, so you still need to have some tax liability in order to take full advantage of the credit.
Lifetime Learning Credit
The Lifetime Learning Credit is designed to cover students that the American Opportunity Credit doesn't, so you can't claim both in the same year. The Lifetime Learning Credit is just 20 percent of up to $10,000 in eligible expenses.
The Lifetime Learning Credit isn't refundable, which means you need to have tax liability for the credit to offset in order to get the benefit of the provision. Another key difference is that the maximum $2,000 credit is per tax return rather than per student. And the income limits for the Lifetime Learning Credit are lower: $63,000 for single filers and $127,000 for joint filers.
But the main advantage of the Lifetime Learning Credit is evident from its name: it can cover graduate students and non-traditional students who attend classes in a piecemeal manner without necessarily pursuing a specific degree program.
Some of the nation's biggest retailers are under pressure to stop selling cigarettes. Attorneys general from more than two dozen states are urging Walmart (WMT), Walgreen (WAG), Rite Aid (RAD), Kroger (KR) and Safeway (SWY) to remove cigarettes from stores that also sell prescription drugs. According to the New York Times, a letter from the attorneys general said there is a contradiction in selling these products in the same stores that service our health care needs. They want these companies to follow the lead of CVS (CVS), which recently said it will drop tobacco products from its store shelves.
Two of China's biggest Internet companies are coming to the U.S. -- or at least, their stocks are. Alibaba and Weibo are preparing for U.S. IPOs. Alibaba is an e-commerce giant and its offering could be valued at $15 billion or more, which would be in line with the amount Facebook (FB) raised with its 2012 IPO. Yahoo (YHOO) will one of the big winners; it owns a big stake in Alibaba. Weibo seeks to raise much less, but it's no slouch -- its messaging service has 130 million users.
Meanwhile, the Wall Street Journal says the all-American company GoDaddy is planning to go public. The company, known for its somewhat racy commercials, helps businesses set up websites.
Here on Wall Street last week, the Dow Industrials (^DJI) tumbled 387 points, a drop of 2.4 percent. The Dow fell every day last week, the first time that's happened in nearly two years. The S&P 500 (^GPSC) and the Nasdaq (^IXIC) both lost about 2 percent.
Under a Senate plan to abolish the mortgage giants Freddie Mac (FMCC) and Fannie Mae (FNMA) within five years, the government would continue to play a major role in insuring U.S. home mortgages. The bipartisan Senate proposal would create a new federal regulator to oversee and guarantee pools of mortgage bonds. It would be comparable to the FDIC, which insures our bank deposits. And what would happen to Fannie and Freddie shareholders? Well, that's likely to end up in court.
In a short sale, the mortgage lender agrees to let a homeowner accept an offer for their home that's less than the amount owed on the loan. The bank takes all the proceeds, but the seller walks away with the remaining debt forgiven.
Choosing to go that route will put a serious dent in your credit score, but it's not a fiscal death sentence. You can rebuild your credit and your finances after a short sale.
Immediately After a Short Sale of Your Home
In many cases, banks and lenders view a short sale as the equivalent to a foreclosure. Credit bureaus and future lenders consider it similarly to a default on your mortgage. The three major credit bureaus list it on your credit reports for seven years, but you can take steps immediately after a short sell to help restore your financial profile.
"You should regularly pull your free credit reports through AnnualCreditReport.com," says Todd Christensen, director of education for the National Financial Education Center. "For someone who is rebuilding their credit, they could consider accessing one of their three available reports every four months in order to check for accuracy in addition to any unfamiliar or fraudulent activity."
Another critical task is to ensure that your loan balance has been forgiven. If it hasn't been, you could find a collection company coming after you. Be aware, you also must claim the forgiven debt as income when you next file taxes.
Building and rebuilding credit is like the fable of the tortoise and the hare: Slow and steady wins the race. The short sale has less of an impact on your credit score each year after the event.
One to Four Years After a Short Sale
In those first few years, focus on small financial victories. "A simple and free way to begin the credit rebuilding progress is, first to ensure all utility, cell phone contracts and Internet provider payments are made on time and in full," says Christensen. Ask these companies if they report your on-time payments to at least one of the three major national credit bureaus. He says they're not typically required to do so, but they often will if asked.
The credit bureaus don't give utility and cell phone payments as much weight as good credit card stewardship, but they will help move the needle. And every little bit helps.
You may also find that without notice, other creditors will lower your credit limit after your short sale. Wording giving them that option is often included in the fine print of the contracts and user agreements of credit cards and other debt. Don't let that be a reason to make any more damaging credit moves.
"Keep paying bills on time, avoid applying for new credit, and don't close credit card accounts," says Miranda Reiter, a certified financial planner at She & Money Financial Planning. "You'll want to keep the cards open so that as you pay down your balances, your debt to credit available ratio is lowered, which improves your score."
Good budgeting can be one of your most vital tools in the years following a short sale. With a damaged credit score, you may find yourself with little to no ability to depend on credit cards as a backup plan. So it's doubly important that you work to build up a solid emergency fund and prepare a written monthly family budget.
Several Years After a Short Sale
If you do not have many open accounts after a short sale, you may want to try rebuilding your credit score by applying for a secured credit card. You may also be able to find a small loan offed by a bank or credit union in your area that specializes in helping to build up your credit.
"A secured card is one in which you put up a certain amount on deposit that you cannot access," says Cara Pierce, a housing financial specialist with ClearPoint Credit Counseling Solutions. "The lender in turn gives the borrower a credit card with a limit in the same amount of the deposit."
A secured credit card works just like an unsecured one. There is little risk to the banks and credit unions that offer these cards because your deposit acts as collateral and your self-imposed credit limit. These cards are a good way for a borrower to rebuild credit.
You're not entirely out of luck if you'd like to try again as a homeowner, either. In many cases, you do not have to wait the full seven years it will take for the short sale to vanish from your credit report before you can buy another home.
"If you were current on your mortgage payments and also did not have a job loss, you can apply for a VA loan two years after selling a home in a short sale," says Phil Georgiades, chief loan steward for VA Home Loan Centers. "You can also apply for a FHA mortgage three years after a short sale and a conventional mortgage four to seven years after your short sale."
Have you experienced a short sale? How big of a hit did your credit score take? What steps did you take to help rebuild your credit?
Hank Coleman is the publisher of the popular personal finance blog Money Q&A, where he answers readers' tough money questions. Follow him on Twitter @MoneyQandA.
Short-sellers and stock promoters have puzzled for years over who operated one of the largest penny-stock websites. A U.S. lawsuit points to a Bugatti-driving 26-year-old from Montreal.
John Babikian used an e-mail list called AwesomePennyStocks to tout a coal company's stock while dumping his own shares, the Securities and Exchange Commission said last week in a civil complaint. AwesomePennyStocks' messages about that firm and 38 others, sent over five years, helped fuel spikes in share prices that boosted the combined value of the stocks by as much as $3 billion, according to data compiled by Bloomberg. The value of a prescription-drug distributor that AwesomePennyStocks promoted in 2012 ballooned by more than $700 million within two months. After the bulk emails stopped, the shares collapsed.
The SEC said Babikian left Canada in 2012 in the wake of tax-evasion allegations and his whereabouts aren't known. Babikian moved to Monaco, according to Anne-France Goldwater, a lawyer who represented his wife in a 2013 divorce case. Babikian didn't respond to letters sent last year to five addresses associated with him around the world. Stanley Morris, a lawyer in Santa Monica, Calif., who said last year he represented Babikian, declined to comment after the SEC's case.
Babikian owned a Bugatti Veyron -- the cars cost more than $1 million -- as well as a Bentley and Lamborghini, according to documents from Revenue Quebec, the province's tax authority. It obtained a judgment allowing seizure of some of his assets last year, after he left the country, relating to its claim that he owed C$4.6 million ($4.1 million) in unpaid taxes.
The SEC is freezing Babikian's assets, including two homes and the proceeds of selling a fractional interest in a plane, the agency said in a March 13 statement. Babikian bought a Los Angeles house in 2010 for $2.2 million, according to real estate website Blockshopper.com.
Market Manipulation in a Grand Way
While promoting stocks is legal -- Wall Street's biggest banks send reports daily advising investors on what to buy, often in companies that are clients -- U.S. securities law prohibits market manipulation. OTC Markets Group, which runs venues on which penny stocks trade, tracks the promoters and marks stocks it deems suspicious with skull-and-crossbones icons on its website, according to CEO Cromwell Coulson. AwesomePennyStocks was "one of the biggest promoters," he said in a phone interview last year.
"The traditional Stratton Oakmont has been replaced by the opt-in newsletter," Coulson said, referring to the boiler room depicted in "The Wolf of Wall Street," the 2013 movie directed by Martin Scorsese. "People just get an e-mail and they buy these things without doing any fundamental analysis."
The SEC routinely sanctions promoters for buying cheap stock, hyping it to investors, then secretly selling their holdings, according to Tom Sporkin, the SEC's former chief of market intelligence and now a lawyer at BuckleySandler in Washington. The scheme is called a pump-and-dump, or scalping, he said. "It's what I call the street crime of securities," Sporkin said. "The world of pump-and-dumps occurs in the shadows."
The SEC began its latest crackdown on penny-stock fraud in 2010 and had sued 40 individuals and 24 companies as of August, according to its website. In July, the agency formed a microcap-fraud task force. Short-sellers and stock promoters said in interviews that AwesomePennyStocks was the most successful of the penny-stock websites and that they had tried for years to figure out who was behind it. One promoter, who asked for anonymity because he's facing SEC market-manipulation claims, likened AwesomePennyStocks to Keyser Soze -- the character portrayed byKevin Spacey in the 1995 film "The Usual Suspects" whose power is legendary and identity a secret. "It was always kind of a mystery," Peter Nicosia, who runs a stock-promotion site called Bull in Advantage, said late last year. "They had the market cornered."
Do the Math: $3 Billion Then, 1 Cent Today
AwesomePennyStocks built a list of subscribers with keyword advertising on search engines, bidding up the price of phrases like "penny stocks" to more than $2 a click, Nicosia said. Its e-mails generated the most stock buying in the industry, he said.
"The sheep that buy end up holding the bag and losing everything," said Randall Place, a lawyer who used to investigate penny stocks for a predecessor of the Financial Industry Regulatory Authority.
AwesomePennyStocks promoted at least 39 companies since 2009, according to e-mails sent to investors and reviewed by Bloomberg News. They included Calgary-based mining firms and a company in Scottsdale, Ariz., that owned medical-marijuana dispensaries. Another company in Boca Raton, Fla., sought to "redefine human donor organ procurement," according to a 2011 statement. The value of the 39 stocks increased by more than $3 billion during the days AwesomePennyStocks was promoting them. Most of the shares now trade for less than 1 cent each. The SEC accused Babikian of inflating the value of one of those stocks.
The promotion cited by the SEC involved America West Resources, a Salt Lake City coal company. AwesomePennyStocks and another list called PennyStocksUniverse sent messages promoting the company's shares on Feb. 23, 2012, according to the SEC. The stock rose as high as $1.80 from 29 cents as more than 7.8 million shares were traded, more than double the total volume in the prior year, the agency said. Babikian sold at least 1.3 million shares for $1.9 million, according to the SEC. America West filed for bankruptcy protection last year.
Remember the closing days of the 2012 presidential campaign when Mitt Romney ran that explosive ad suggesting Chrysler was going to stop building Jeeps in Ohio and move production to China? The one that got "Four Pinocchios" from the fact-checker at The Washington Post? The one Romney himself echoed in a speech he delivered near the Jeep plant in Ohio: "I saw a story today that one of the great manufacturers in this state, Jeep, now owned by the Italians, is thinking of moving all production to China." Right afterward, Meat Loaf performed.
Anyway, that Jeep plant? It didn't move to China. It's going gangbusters. Demand for Jeeps is so high that Chrysler workers are clocking 60 hours a week and can't keep up. So according to the Toledo Blade, the company is hiring up to 1,000 part-time workers -- American workers, in Ohio -- so they can meet the demand. These workers are even going to get health insurance.
"Chrysler Group LLC plans to hire up to 1,000 part-time employees for the Toledo Assembly complex to keep production rolling while giving regular employees the chance for a break," the Blade wrote. "'Our people have been working a tremendous amount of hours,' Plant Manager Chuck Padden said. 'To get them more time off is important to us, to make sure they're refreshed, and can work safely.'
"With record demand for the Jeep Wrangler and the launch of the new Jeep Cherokee last year, employees are regularly working 60 hours a week. And while employees generally like the extra pay that results from working overtime, such lengthy stretches can wear on workers, he said."
Full-Timers Need a Break, and Temps May Get Full-Time Jobs
In case you're wondering, hiring temp workers isn't a maneuver to deny regular workers their hours. "You've gotta remember, these people [the regular workers] are working 10 hours a day, six days a week," a UAW boss who helped negotiate the deal told the Blade. "It's very important to have the day off you want with your family."
This is all great news for the workers and their families, for Ohio, and for Jeep. (Chrysler has hired 380 temp employees and converted 50 of them to full-time jobs, the Blade added.) If you happen to be waiting for a new Jeep Wrangler, I guess it's great news for you, too, since the new workers will allow the plant to start running its Wrangler assembly line on Saturdays.
Call me petty, but what I think is greatest about this story is the line tucked down at the end -- the one mentioning that 15 percent of the Cherokees built at the Ohio plant are "destined for international markets."
Joshua Green is senior national correspondent for Bloomberg Businessweek in Washington.
NEW YORK -- Stocks were sharply higher in late-morning trading Monday, recovering from a three-week low, as investors brushed aside the ongoing political turmoil in Ukraine. A surge in output at U.S. factories last month also helped push the market higher.
The Dow Jones industrial average rose 142 points, or 0.9 percent, to 16,207 as of 11:32 a.m. Eastern time. It jumped as much as 204 points earlier. The Standard & Poor's 500 index rose 13 points, or 0.8 percent, to 1,855 and the Nasdaq composite added 33 points, or 0.8 percent, to 4,278.
The Federal Reserve said U.S. factory output rebounded strongly, up 0.6 percent, in February after harsh winter storms caused a steep drop-off in production in January. Manufacturers produced more autos, home electronics and chemicals. The rise was triple the increase that economists had expected.
The vote in the Ukrainian region of Crimea to join Russia had been widely expected. Worries that the Crimea issue might prompt an escalation in tensions between Russia and Western powers have unsettled financial markets over the past few weeks. In the run-up to Sunday's referendum, many stock markets around the world hit multi-week lows while "safe haven" investments such as the Japanese yen and gold rose.
"Russia got what it wanted without having to take Crimea by force," said Sam Stovall, chief equity strategist with S&P Capital IQ.
Both the White House and the European Union announced sanctions and visa restrictions against several Russian officials as a result of the referendum. The U.S. imposed sanctions on seven Russian government officials as well as four Ukrainians, including former Ukrainian President Viktor Yanukovych. The EU slapped travel bans and asset freezes on 21 people from Russia and Crimea.
The Federal Reserve will hold a two-day meeting starting Tuesday. Investors expect the central bank to pull back further on its bond-buying economic stimulus program, as it has done for the last two meetings.
And Sears Holdings rose 44 percent, or 1 percent, to $44.41 after announcing that it planned to split off its Land's End business.
Getty Images/Orlando Sentinel/MCT/Joshua C. Cruey
SeaWorld Entertainment (SEAS) may not have a lot of fans among the growing number of people who have watched the scathing documentary "Blackfish," but it's hard to say that protestors are leaving much of a dent.
The marine life park operator posted another period of revenue growth during the holiday quarter, and it's targeting positive growth for 2014. It seems as if SeaWorld has survived the worst of the fallout behind last year's documentary, which took it to task for keeping killer whales in captivity.
The Splash Zone Includes Losing Some Performers
During last week's earning's announcement, SeaWorld reported that revenue climbed 3 percent during the fourth quarter as well as for all of 2013. Attendance fell 4.1 percent last year, but revenue is growing because those that are showing up are spending more to get in and spending more once they are inside.
However, if one would think SeaWorld's attendance would deteriorate as more people were exposed to "Blackfish," reality has painted a different picture. Attendance across its empire of theme, amusement, and water parks dipped just 1.4 percent during the period -- and actually increased at its SeaWorld-branded parks.
This is a welcome surprise. This is, after all, the first full quarter since "Blackfish" was broadcast on CNN and became a streaming entry on Netflix (NFLX). The furor against keeping orcas in captivity to entertain park guests should be growing, but the numbers don't bear that out.
Successful grassroots campaigns forced many musical acts to bow out of an annual SeaWorld music festival, and a California lawmaker is proposing a bill that would ban killer whales from being held in captivity. There are two sides to every story, and just because the "Blackfish" documentary filmmakers went first doesn't mean that they will have the final say on public perception. SeaWorld has refuted many of the claims made in the movie.
Diving Into a New Year and Predicting a Strong One
SeaWorld sees revenue clocking in between $1.49 billion and $1.52 billion for 2014, implying growth of as much as 4 percent. It sees operating results improving by even more than that.
SeaWorld has exposed some of the inconsistencies in "Blackfish," and it has ramped up efforts to educate the market on its marine life rescue initiatives. A documentary may have painted it as a villain, but the company feels it does right on most counts.
If SeaWorld ended its iconic killer whale shows, its parks would continue to be magnetic, and it would win back guests that have tried to take boycotts viral. The problem, naturally, is that it would open the door to folks arguing that dolphins, sea lions, penguins and other ocean critters shouldn't be in the park's habitats, either. It's a movement that could eventually sting local zoos.
In the end, registers don't lie. SeaWorld is making record sums of money, and that's something that bad publicity hasn't been able to wash away.
Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our newsletter services free for 30 days.
Wall Street lit up with green arrows on St. Patrick's Day. Investors wore their shamrock-colored glasses Monday, focusing on a pair of upbeat economic reports, and the fact that there was no violence connected to Crimea's weekend vote to separate from Ukraine and join with Russia.
The Dow Jones industrial average (^DJI) jumped 181 points, snapping a five day losing streak. The Nasdaq composite (^IXIC) rallied 34 and S&P 500 gained 17 points. Technical analysts are happy because the Standard & Poor's 500 (^GSPC) moved back above a key support level, after dipping below that line last week.
Two stocks rallied because they're being added to the S&P index. Biogen-Idec (BIIB) gained 4 percent and Green Mountain (GMCR) gained 2 percent. Both stocks have been red-hot. Green Mountain, in fact, has more than doubled in price. Investors jump on these S&P additions because they know all of the mutual funds that track the index will have to buy them later this week.
Leading the blue chip advance were Boeing (BA), IBM (IBM) and 3M (MMM) --all up about 2 percent. Yahoo (YHOO) gained 4 percent on news that Alibaba plans a U.S. IPO this year. Yahoo owns a 24 percent stake in the Chinese e-commerce giant. And Sina (SINA) rose 6½ percent, as its Weibo unit said it will list in the U.S.
Sticking with the China theme, electronic vehicle maker Kandi Technologies (KNDI) rallied 23 percent as quarterly results easily topped expectations. This is another stock with a fabulous year-over-year-gain -- it's up nearly 500 percent.
Another winner today: Hertz (HTZ) rose nearly 5 percent on a report it will spin-off its division that rents construction equipment.
Bucking the uptrend today, stocks that provide services and operate TV stations. Gray Television (GTN) tumbled 10 percent after a Wells Fargo downgrade. Others in the sector followed suit: Sinclair (SBGI) fell 8 percent, Nexstar (NXST) lost 9 percent, Lin TV (LIN) declined 4½ percent.
And the Internet infrastructure firm VeriSign (VRSN) fell nearly 6 percent. There are concerns its contracts could be in jeopardy as changes are made in the management of Internet domain names.
What to Watch Tuesday:
Labor Department releases Consumer Price Index for February, 8:30 a.m.
Commerce Department releases housing starts for February, 8:30 a.m.
Federal Reserve policymakers begin a two-day meeting to set interest rates.
Oracle (ORCL) reports quarterly financial results after the market closes.
A U.S. Senate plan to dismantle Fannie Mae (FNMA) and Freddie Mac (FMCC) may deliver an unintended blow to a fragile housing recovery.
A draft of the measure, which Senate Banking Committee leaders released Sunday, would replace the two financiers with a government-backed mortgage-bond insurer. Private interests would be required to bear losses on the first 10 percent of capital, leading to higher mortgage rates, according to Credit Suisse AG analysts. The plan also would eliminate a mandate that a percentage of mortgages go to lower- and middle-income families, threatening to decrease America's homeownership rate.
Sen. Tim Johnson, a Democrat from South Dakota, and Sen. Mike Crapo, an Idaho Republican, are trying to pass the measure this year. Outside the Senate chambers, the housing market is showing signs of cooling as tighter lending and higher prices shut out increasing numbers of first-time buyers.
"It certainly slows the rate of recovery," said Kevin Chavers, a managing director at BlackRock Inc. and a member of its government relations and public policy group in New York. "It raises the question of what the implications are for the recovery as you raise costs and reduce the universe of people eligible to participate."
Fannie Mae was established in 1938, near the end of the Great Depression, to boost homeownership by making mortgages more available for low- and moderate-income borrowers. Along with the smaller Freddie Mac, created in 1970, the company bundles loans into mortgage-backed securities that are sold to investors with the support of the government.
Clinton, Bush
Federal officials steadily increased the firms' mortgage origination goals during the Bill Clinton and George W. Bush administrations. By 2008, the government's mandate to reach low-and moderate-income families peaked, an aim made possible by lenders peddling riskier loans.
During the housing crash, the surge in defaults almost sunk the companies and regulators seized them in 2008. The two firms received $187.5 billion in taxpayer funds over the next three years. And the Federal Housing Finance Agency lowered the firms' mortgage origination goals. It took about three years for Fannie Mae and Freddie Mac to earn profits again.
President Barack Obama and Democratic and Republican lawmakers want to wind down the two companies, shrink the government's influence in the market and bring in more private capital to create a less risky housing finance system.
Mortgage Rates
Crapo told Bloomberg Television last week that it's important to avoid the toxic mortgages that pushed the country into financial crisis.
"There probably will be a little bit of additional cost in some senses, but there will be actually savings and efficiencies in other contexts," Crapo said. "What we're putting together is at the front end of everything a strong underwriting system so there will have to be buyers with the ability to repay."
The Senate plan's requirement that the industry absorb the first 10 percent of mortgage losses would be a challenge for the market, Credit Suisse (CSGN) analysts led by Mahesh Swaminathan said in a report last week. Additional insurance fees for the holders of the mortgage-backed securities could lead to "sharply higher" mortgage rates, Swaminathan said.
The draft legislation calls for the dismantling of Fannie Mae and Freddie Mac over five years, which could be extended to prevent market disruptions, such as spikes in borrowing costs, according to a statement Sunday.
Rates for 30-year fixed loans climbed to 4.37 percent last week from a near-record low of 3.35 percent in early May. The rate reached a two-year peak of 4.58 percent in August.
Jeffrey Gundlach, chief executive officer of Los Angeles-based DoubleLine Capital LP, said the 10 percent rule would result in lenders further limiting risk.
Tougher Underwriting
"When you're asking or hoping for private money to take the loss risk, they're going to understandably want tighter underwriting or else the rate would have to be really high," said Gundlach, whose $32 billion DoubleLine Total Return Bond Fund invests in mortgage-backed securities. "At this point, tighter underwriting is more attractive than much higher mortgage rates."
Tougher credit standards and property prices, which are up 24 percent since their March 2012 low, already are posing obstacles to homeownership. More than 40 percent of borrowers in 2013 had FICO scores above 760, compared with about 25 percent in 2001, according to a Feb. 20 report by Goldman Sachs Group Inc. analysts Hui Shan and Eli Hackel.
Declining Homeownership
First-time buyers accounted for 26 percent of purchases in January, down from 30 percent a year earlier, according to the National Association of Realtors. This January's figure is the lowest market share NAR has recorded since it began monthly measurements in October 2008.
That's hurt U.S. sales. While purchases rose 8.2 percent for residences costing more than $250,000, they fell 10.7 percent for homes worth less, NAR data show.
The share of Americans who own their homes was 65.2 percent in the fourth quarter, down from a peak of 69.2 percent in 2004, according to the Census Bureau. Minority groups were heavily impacted by the housing crash: the homeownership rate for blacks fell to 43.2 percent in the quarter from 44.5 percent a year earlier and are down from 50 percent before the housing meltdown.
"You have the unusual situation that the segment of the population hardest hit by the foreclosure crisis is the one that's going to find it most difficult to rebuild in the aftermath," said Lautaro Diaz, vice president for housing and community development at the National Council of La Raza, a Washington-based Hispanic civil rights and advocacy organization.
Affordable Housing
The Senate proposal seeks to bring more buyers into the market by creating affordable housing funds. The industry would pay into funds that would be devoted to ensure affordable rental and for-sale housing is available. A 0.1 percent fee would be charged on mortgage-backed securities, which could add up to about $5 billion a year based on current volumes. Senators haven't worked out the details of how the housing funds would be used.
Anthony Sanders, a professor of real estate finance at George Mason University, supports provisions of the Senate plan to limit homeownership. He said the housing goals embraced by Clinton and Bush were responsible for inflating the bubble and should be eliminated.
"The housing bubble so decimated the middle class that they maybe can't come back into the housing market," Sanders said. "If suddenly incomes start surging, then we should really have to reconsider affordable housing goals one more time. Right now, it does moderate income and lower income households a disservice to try to encourage them to purchase."
Lacks Support
The bill would attract more private capital into the housing market and improve credit availability, said Jerry Howard, chief executive officer at the National Association of Home Builders. Howard, who supports the proposal, said investors are avoiding the housing financial system because Fannie Mae and Freddie are in conservatorship and subject to the whims of politicians.
"If you're an investor, would you rather do business with an entity that has concrete rules that govern its operations or an entity run by the political system," Howard said. "The answer is clear and that's why credit is sporadic right now."
The plan, which was drafted with input from the Obama administration, has yet to gain the backing of Senate Democratic leaders, who will determine whether it gets a vote. Senators Johnson and Crapo plan to hold a committee vote in coming weeks, and are pushing to pass their proposal this year before mid-term elections in November.
White House spokesman Bobby Whithorne said that the administration supports the Senate proposal.
No Exit
The companies will have returned $202.9 billion to Treasury by the end of this month -- exceeding the size of the bailout. The funds are counted as dividends on the federal investment, not as a repayment of the aid, leaving Fannie Mae and Freddie Mac no avenue for exiting U.S. control.
Democrats such as Sen. Elizabeth Warren of Massachusetts have said they won't back a plan to replace the mortgage giants unless it guarantees affordable loans for most homebuyers and includes significant support for low-income rental housing.
"With a fragile housing market, it does raise questions about whether this is the time to shake the whole thing up," said Mike Calhoun, president of the Center for Responsible Lending, a consumer group in Durham, North Carolina.
Alamy
Earlier this month, the stock market celebrated the fifth anniversary of its current bull run, with major stock-market indexes having posted unusually strong gains of 25 to 35 percent in 2013. So far in 2014, though, the S&P 500 (^GSPC) and other benchmarks have struggled to make any progress, while much stronger returns have come from an unexpected corner of the financial markets: gold.
With gains of about 15 percent so far this year, gold has surprised most people. But investors are more interested in whether the gains are sustainable -- and whether gold can continue to outshine stocks in the future.
Where Gold Has Been
Until 2013, gold put together one of the most impressive bull-market runs for any asset class in history, with 12 straight years of gains from 2001 to 2012. Moreover, gold's gains put the stock market's returns to shame.
Certainly, stocks have produced strong returns for investors over the past five years, with the Dow Jones Industrials (^DJI) having risen 150 percent since March 2009's lows. But as impressive as that performance has been, it's weak compared to the more than 500 percent gain for gold over that 12-year stretch.
Last year, though, gold came crashing down to earth, ending its winning streak with a 28 percent plunge. Many investors blamed the Federal Reserve for the plunge, pointing to its deliberations early in 2013 on the best way to ease off its economic stimulus measures. By December, the Fed had turned that talk into action, trimming its monthly bond purchases gradually to keep long-term interest rates down. By signaling its belief that the economy could continue to strengthen without further extraordinary measures, the Fed undercut fears that inflation would skyrocket due to the huge amount of money the central bank had injected into the financial system. The downward pressure on the U.S. dollar from extraordinarily low interest rates also eased off, hurting gold.
Is Gold Back?
So far in 2014, several events have helped support gold prices.
One was simply that after such a huge decline in the price of gold in 2013, bargain-hunting gold investors started coming into the market to buy. Even last year, lower gold prices stimulated greater demand for jewelry and gold bars and coins, with the World Gold Council reporting that consumer demand for gold worldwide hit new record levels of 3,864 metric tons. China alone bought more than 1,000 metric tons of gold for jewelry, bars, and coins, and several other countries posted new records for gold demand as a result of cheaper prices.
In addition, economic trends around the world have been less encouraging, helping drive safe-haven buying of gold. In the U.S., a tough winter has had a measurable impact on the overall economy, with retailers seeing less customer traffic and manufacturers therefore having less demand for the goods they make. Meanwhile, signs of a potential economic slowdown in China have raised concerns around the world.
Finally, geopolitical tensions have put gold in a brighter light, with the current conflict between Ukraine and Russia having huge potential to drive further price gains. Russia is the world's fourth-largest producer of gold, with roughly 5,000 metric tons of known gold reserves and production of more than 200 metric tons in 2012 . If the U.S. and other Western countries impose economic sanctions on Russia, the impact on the gold market could be huge, both in terms of supply and demand, and from the ramifications of such restrictions on financial markets generally.
All That Glitters
As gold investors found out in 2013, gold can be volatile in both directions. Yet even though gold has already outpaced the stock market in the first few months of 2014, gold prices could keep rising if the conditions that have taken hold so far this year stay in place in the months to come.
Associated Press/Carol Phelps
The casino industry commands $37 billion in annual revenue. As far as competitive pastimes go, Americans spend more money on gambling than we do on professional sports. And if it's the rush that's the draw, there's no competition: We shell out $9 billion more on gambling than we spend on coffee and video games combined each year.
But when you dig into the demographics of gambling, a troubling trend emerges.
Among senior citizens, gambling is a primary social outlet -- more so than outings to museums, libraries, and zoos, according to one survey of activity directors from senior centers, assisted-care retirement centers, nursing homes, and church groups.
Casino visitation rates among the elderly are surprisingly high, with 28 percent of people aged 65 and older reporting having gone to a casino in 2012, and and 36 percent of those between ages 50 and 64 report having done so, according to the American Gaming Association's 2013 Survey of Casino Entertainment. And University of Pennsylvania researcher David Oslin told Psychology Today that his research revealed that 70 percent of those 65 or older said they had gambled in the previous year -- with nearly 10 percent admitting to gambling away more than they could afford to lose.
'Hospitality to the Vulnerable'
By 2030, there will be more than 72 million people aged 65 and older -- that's nearly double the number in that demographic in 2009 (the latest year for which data is available). The trend has the association on the defensive, promoting studies that assure that gambling is not "a major threat to the elderly" and it offers "excitement and entertainment" and an expression of "personal freedom."
But, as a new investigative report from the Institute for American Values argues it's more than just an innocent pastime for many seniors. (The nonpartisan, nonprofit institute focuses on initiatives to "renew civil society and end the culture wars.")
Amy Ziettlow, the report's author, admits it's not hard to see why seniors are so eager to frequent casinos. They're enticed by deals (a full breakfast buffet $3) and welcomed with wheelchairs or motorized scooters, and they feel at home in facilities stocked with deposit boxes for diabetic needles and supplies of adult diapers. All of which she calls a sort of "hospitality to the vulnerable."
Casino loyalty provide patrons a sense of belonging, but economics professor John Kindt told Ziettlow that they merely track patrons' activities so that targeted marketing can lure them back. Her experience was laden with depressing anecdotes of seniors telling her they were merely "passing the time" and reasoning, "What else is there to do?" All of which left her wondering why casinos were so friendly. And whether the hobby was as innocent as the industry alleges.
What Can Be Done?
The primary risk that seniors face when gambling (and according to Psychology Today, as many as 4 million seniors do have a serious gambling problem) is that they may not be aware of what they're doing and why -- which can transform into an unhealthy physical and financial addiction.
Some are lonely and enjoy interaction with the smiling faces working at a casino. Others suffer from dementia, a condition that weakens inhibitions, and gamble away more than they can afford. Still others sign up for activity clubs that revolve around regular trips to casinos. But because the median senior lives on a fixed income of roughly $35,000 a year, one day of overindulgence could mean the difference between being able to eat at the end of the month and going hungry.
If you're concerned that seniors you know ares at risk for gambling problems, have a discussion. But keep in mind that addiction usually indicates a deeper problem.
Help them find more fulfilling outlets for their energy or need to interact (gardening, a pet, volunteering, book clubs, etc.). If you have the means, offer to fund the new hobby. Look for senior activity groups within your community that offer regular, enjoyable events.
Of course, you should also make sure that, as you age, you avoid falling into the casino trap by taking similar steps. If you enjoy an occasional trip to the casino, adhere to a budge. Go light on alcoholic drinks that could convince you to spend more than you intended. And leave the rest of your money (or ways to get money) at home so you have no way to gamble past your limit.
Jacquelyn Martin/AP
NEW YORK -- Walmart plans to expand its video game trade-in program to its stores, offering store credit for thousands of video games.
The world's largest retailer plans to let video game owners trade in used video games online and in Walmart and Sam's Club stores for store credit but not cash. Previously they offered trade-ins on a more limited basis online.
It will also offer refurbished used games in its stores for the first time. Walmart (WMT) has been seeking new ways to boost revenue as its low-income customers remain under pressure due to a weak jobs picture and shaky economy.
In its most recent fourth quarter, net income dropped 21 percent, and the Bentonville, Ark.-based company gave a subdued forecast for the current year.
"Gaming continues to be an important business for us and we're actively taking aim at the $2 billion pre-owned video game opportunity," said Duncan Mac Naughton, chief merchandising and marketing officer for Walmart U.S.
In a call with journalists, Walmart executives said CE Exchange, the company that partnered with them on their trade-in program for smartphones and tablets launched in the fall, will also be in charge of the new video game program.
The value for each trade-in video game will vary by the title, console and age of the game. The amount will range from just a few dollars for older games to $35 and more for newer ones.
Amazon.com (AMZN), Target (TGT), Best Buy (BBY), GameStop (GME) and others also offer video game trade-in programs that offer store credit or cash for video games.
Jewel Samad, AFP/Getty ImagesBy Julia Edwards and Jason Lange
YOUNGSTOWN, Ohio and WASHINGTON -- Along the banks of the Mahoning River in the struggling Ohio steel town of Youngstown sits a once-abandoned furniture warehouse that has been converted into a sleek new laboratory.
Inside is a Silicon Valley-style workspace complete with open meeting areas and colorful stools. Several 3-D printers hum in the background, while engineers type computer codes that tell the machines how to create objects by layering materials.
The lab, called America Makes, is the first in a series of so-called "manufacturing innovation hubs" that President Barack Obama has launched with the promise that they could revitalize America's industrial sector and spur jobs growth in downtrodden communities like Youngstown.
Seven more hubs are planned by the end of the year, including projects in Chicago, Detroit and Raleigh, N.C., that will follow the Youngstown model of bringing together businesses, non-profits and universities to pursue technological breakthroughs.
But after more than a year of operation, the Youngstown hub underscores the challenges facing Obama's goal of ensuring "a steady stream of good jobs into the 21st century," as he put it in remarks at a White House event last month.
One of the biggest challenges is the nature of factory innovation itself, which often reduces, rather than bolsters, the need for workers who aren't very skilled. That means the manufacturing initiative could help create jobs for people with highly specialized skills, such as engineers, but it may do far less to help people struggling to find work after the shuttering of local steel mills.
Three-D printers, the focus of the Youngstown project, are an example of this. Once they are programmed and loaded with raw materials, they work their magic with nary a human hand. If they are ever widely adopted, researchers say a big reason will be that they use less labor than traditional manufacturing.
"A lot of the equipment can be run automatically, so it is less labor demanding," said Don Li, senior manager of process modeling at RTI International Metals (RTI), a Pittsburgh-based titanium manufacturer working on an America Makes project.
Multiplier
Former White House economic adviser Gene Sperling, who conceived the administration's manufacturing initiative, said the White House was focused on the "spillover impact" from new manufacturing projects, which also create jobs at suppliers. "When you look at manufacturing and the jobs it provides in the supply chain and in communities, these are middle class, high-skill jobs," he said.
Research by Enrico Moretti, an economist at the University of California, Berkeley, has found that each factory job on average supports 1.6 additional jobs outside manufacturing.
A job in a high-tech industry can support even more outside employment because high wages for engineers and programmers can spur more spending at restaurants, stores and other businesses.
When Obama first proposed the manufacturing initiative, he asked Congress for $1 billion for 15 centers but the request has gone nowhere amid Washington's political gridlock so he is funding the projects through existing budgets. Ultimately, he would like to set up 45 centers around the country.
The Department of Defense, which is contributing the federal funding to the Youngstown initiative, believes its demand for high-tech goods will help the broader economy, said Elana Broitman, acting deputy assistant secretary of defense for manufacturing and industrial base policy.
The Youngstown hub is still in its very early stages but so far, at least, there are no obvious signs of a wider impact. About 29,600 people held factory jobs in the Youngstown metro area in January, the latest month for which data are available. That's actually slightly lower than the number of manufacturing jobs there when the administration awarded the hub to Youngstown in August 2012 and when it opened its doors that October. Total employment in the area was flat in 2013, while it grew nationwide.
Of six organizations in Youngstown and Cleveland -- the nearest major city in the state -- working on America Makes projects, none has made new hires for the work. But the non-profit managing the initiative, the National Center for Defense Manufacturing and Machining, has added 10 employees to run the lab and oversee the application process, said executive director Ralph Resnick.
Asked whether the administration had set goals for job creation at the manufacturing hubs, White House spokesman Robert Whithorne declined to say, noting that the hubs "are just getting started." He said there was a lot of interest among manufacturers in joining the hubs, showing the potential to create jobs.
Decades of Job Losses
To understand the harsh reality of factory job losses in Youngstown and other once-thriving communities along America's Rust Belt, one needs only to follow the Mahoning River upstream from America Makes to see how that theme has played out.
About 15 miles north in Lordstown, Ohio, a General Motors (GM) assembly plant has cut its workforce to 4,500 from 13,000 over the last 30 years. Further north in Warren, the sound of wrecking balls demolishing the area's last major steel mill echoes across the water.
Lloyd Carmichael, 57, was one of 1,100 workers who lost his job in June 2012 after RG Steel declared bankruptcy. He is now learning to be a carpenter but expects to be earning about half of his previous salary.
"When you look in this area for industrial jobs, there's nothing," Carmichael said.
After rising for decades, U.S. factory jobs peaked in 1979, and then declined due to technological advances and foreign competition. The decline accelerated after Washington lifted trade barriers to China following its entry into the World Trade Organization in 2001.
Obama and other Democrats have long sought to ensure that their economic message resonates with blue-collar workers like Carmichael. But Republicans have seized on the economy's sluggish recovery from the Great Recession to try to court workers in states like Ohio that are closely divided between Democrats and Republicans.
Wrestling with how to spur faster economic growth in the summer of 2011, Obama asked White House aide Sperling for a list of policy ideas. Sperling looked abroad for models of success.
Manufacturing's share of total U.S. jobs stood at just below 10 percent, half its level thirty years earlier. Americans seemed to be losing ground to other countries. In Germany, a rich nation that specialized in making high-precision goods, about 20 percent of workers still clocked in at factories.
Sperling drew inspiration from Germany's Fraunhofer Institutes, which bring together universities, companies and government to turn scientific knowledge into practical applications. Obama liked this idea.
For the Youngstown project, the administration organized a competition to win $30 million in federal money. The money is then allocated to research projects led by partners in the consortium, who must match the federal funds and explain how their project might benefit government agencies.
Current projects range from a cooling system for satellites to repairing aging metal casts, without which legacy equipment like B-52 bombers could be retired. Researchers are also toying with printing a light-weight prototype of a drone.
Ashley Martof, an intern at America Makes, is studying 3-D printing as an industrial engineering major at Youngstown State University. Her friends and family tell her she is wasting her time because manufacturing jobs have dwindled.
"I tell them there will not be as much need for the working class, but there will be more engineers," Martof said.
The availability of such jobs probably won't do anything to help people like Dennis Church, 60, who is retraining for a maintenance job after 31 years at RG Steel.
"Those are tech jobs," Church said. "My personality is more hands on."
David McNew/Getty ImagesGM previously recalled 1.6 million cars for faulty ignition switches, including 2005-07 model year Chevrolet Cobalt compact cars.By Jeff Green
General Motors (GM) is recalling 1.55 million vans, sedans and sport-utility vehicles, citing concerns over brakes, seat belts and air bags, adding to the 1.6 million cars recalled this year due to faulty ignition switches.
The automaker also said it expects about $300 million in expenses in the first quarter to cover the cost of repairs for the more than 3 million vehicles, according to a statement Monday. Delphi Automotive, the auto supplier that was once part of GM, is adding a production line to expedite supply of replacement parts, Chief Executive Officer Mary Barra said in a video statement.
The new round of recalls follows criticism that GM was slow to act on earlier concerns over vehicle safety. It took the automaker more than a decade to begin recalls on the Cobalt and other small cars that were the subject of complaints as early as 2003. The ignition switch defect threatens to harm GM's reputation and complicate efforts under Barra to recover from its 2009 bankruptcy.
"They are trying to be responsive to the general issues that lead to recalls, however this doesn't really affect the matter at hand, which is the recall of the Cobalt" and other small cars, said Alan Baum, an analyst at Baum & Associates in West Bloomfield, Mich. "They can't undo the underlying problem, and that is the time lag from when this was determined internally, and when it was acted upon."
GM discovered ignition-switch problems in 2001 while developing the Saturn Ion small car and thought it had addressed them before the model went into production, the Detroit-based company told regulators last week. The Ion, Cobalt and other small cars were recalled last month after the defective switches had been linked to at least 12 deaths.
'One Step'
"Something went wrong with our process in this instance and terrible things happened," Barra said in a videotaped message to employees on the company website. "As a member of the GM family and as a mom with a family of my own, this really hits home for me. We have apologized. But that is just one step in the journey to resolve this."
The recalls announced Monday cover the Chevrolet Express and GMC Savana vans from 2009-2014 to rework instrument-panel material, Cadillac XTS sedans from 2013 and 2014, because the brake-booster pump could lead to engine-compartment fires, and several sport-utility vehicle models in which the side-impact restraints may not deploy if the service air bag warning light is ignored. The covered SUVs are the Buick Enclave and GMC Acadia models from 2008 to 2013, Chevrolet Traverse from 2009 to 2013, and Saturn Outlook from 2008 to 2010, GM said a statement.
Redoubled Efforts
"I asked our team to redouble our efforts on our pending product reviews, bring them forward and resolve them quickly," said Barra, who started at the company as a college intern.
The CEO's video message may have helped mitigate any damage to her reputation as the leader of the company. She took the top job in January, about a month before the recalls were announced.
"It does make her more human to mention her status as a mom as part of the commitment to safety because moms want to hear that," said Kaitlin Wowak, an assistant professor of management at the University of Notre Dame in South Bend, Ind. "But the tricky part for her is that since she came up through the ranks of GM, she's not going to get as much leeway as she would if she were an outsider coming in."
Decade Wait
GM said last week that in 2003, service technicians found that an owner with a heavy key ring was experiencing engine stalls while driving that it thought were solved in 2001.
Previously, the company said it had investigated in 2004 a consumer complaint and engineers were able to induce an engine stall. GM officials have said the problem was investigated at that time and no action was taken.
The flaw caused ignition switches to slip out of position, cutting off engine power and deactivating air bags. Media reviews of the Cobalt also publicized the ignition-switch problems in 2005. GM engineers learned of airbag failures in a 2007 meeting with the National Highway Traffic Safety Administration, GM has said. The first recall was Feb. 13.
Barra said Monday in the video that GM has sent recall letters to customers and will send letters to dealers the week of April 7 to outline the recall steps. A separate production line is being added at the supplier of the replacement part to double the capacity to make parts, and GM has added employees at call centers to focus on customer questions, she said.
"Our system for deciding and managing recalls is going to change because of this," she said.
Multiple Investigations
In addition to a probe by NHTSA, the Justice Department has also opened a probe into whether GM executives violated criminal or civil laws by failing to notify regulators, said people familiar with the action. U.S. House and Senate committees have said they will investigate.
The recalled small cars are the 2003-07 Saturn Ion, 2005-07 Chevrolet Cobalt, 2006-07 Chevy HHR, 2006-07 Pontiac Solstice, 2007 Saturn Sky, 2007 Pontiac G5 -- all U.S. models -- plus the 2005-06 Pontiac Pursuit marketed in Canada and the 2007 Opel GT in Europe.
GM rose 1.6 percent to $34.63 at the close in New York.
The shares have slipped 2.6 percent from Feb. 12, the day before the first ignition recalls were announced through yesterday. The estimated $5 billion in lost market value may indicate investors are concerned the automaker will lose market share in addition to the $300 million in recall costs, Joseph Spak, an analyst at RBC Capital Markets, wrote in a report Monday after the second recall was announced.
"It does appear GM is trying to send a message of a refocused company and providing consumers with greater 'peace of mind,' " Spak wrote. "But to the average consumer, the negative headlines continue. For GM, you could argue these headlines are coming at the worst possible time given elevated industry pricing fears."
