While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Extreme Networks, Inc. popped about 5% this morning after Wunderlich Securities initiated coverage on the networking gear company with a buy rating.
So what: Along with the bullish call, analyst Matthew Robison planted a price target of $9 on the stock, representing about 55% worth of upside to yesterday's close. So while momentum traders might be turned off by Extreme's share-price weakness in recent months, Robison's call could reflect a growing sense on Wall Street that its growth prospects are becoming too cheap to pass up.
Now what: According to Wunderlich, Extreme's risk/reward is rather attractive at this point. "Since purchasing Enterasys, Extreme has gained scale and uniqueness as an enterprise-focused network supplier with both switching and wireless," Robison said. "Growth opportunities are emerging with upgrade cycles: higher caliber wireless with analytics and network access control (NAC), as well as Ethernet fabrics for virtualization and lower latency." When you couple those positive trends with Extreme's forward price-to-sales of about 1, it's tough to disagree with Wunderlich's upgrade.
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The S&P 500 is getting the second quarter off to a positive start, up 0.60% as of 10:15 a.m. EDT, while the narrower Dow Jones Industrial Average was up 0.59%.
Former Citigroup CEO John Reed has provided investors with some context on last week's unexpected rebuff of the bank by the Federal Reserve.
The Fed refused to sanction Citi's capital return program on "qualitative concerns," leaving it the only major U.S. bank not allowed to update its dividend and stock repurchase plans. As such, Citigroup is forced to continue paying a token $0.01 quarterly dividend, while rival Bank of America was allowed to raise its dividend from $0.01 to $0.05 (not to mention getting the OK for a spanking new $4 billion stock repurchase authorization). Citigroup was banking on implementing a $6.4 billion share repurchase program by the first quarter of 2015 and a dividend hike to $0.05. Shares of Citigroup fell 5.4% on the day following the central bank's announcement.
Speaking yesterday at a conference in Boston, Reed said that "having three or four CEOs in the last decade hasn't helped" Citigroup, and that the bank has been "unable to create what the Fed is looking for and when you're talking about an institution that is large in size, diverse in activities, and has gone through a certain amount of managerial turmoil, you can well imagine that it was very difficult for them to respond to the request that they got."
The comments point to a question -- which remains unanswered -- of whether megabanks are simply too big to manage. (We know they're too big to fail, or at least that markets continue to perceive them that way, as another analysis from the Fed showed recently.) Despite significant efforts by Citigroup to focus on its core activities, it still has attracted regulators' attention at its Mexican Banamex unit, over compliance with the Bank Secrecy Act and anti-money laundering controls, for example.
I made the case last week that, at a discount of roughly 10% to their tangible book value, Citigroup shares are an attractive risk-reward proposition -- particularly in a somewhat overheated market. I continue to believe that, but Reed's comments are a reminder that investing in a financial organization of this complexity is not without risk.
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Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America and Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.
15.7 million viewers watched the fourth season finale of AMC's The Walking Dead on Sunday, a 27% jump from the 12.4 million viewers who tuned in to the third season's finale last year.
It also attracted 10.2 million viewers from the 18-49 age group -- a 25% increase from the 8.1 million viewers from that demographic who watched the season 3 finale. That also makes the finale, "A," the third highest rated episode of the fourth season after the season premiere, which attracted 16.1 million viewers, and the midseason premiere, which drew in 15.8 million viewers. By comparison, 5 million to 6 million viewers watched the first season.
Source: AMC Press Center.
The story also ended on a cliffhanger, which guarantees that the show will return to explosive ratings this October. Looking ahead, what do all these positive signs mean for the hit show, and what questions does AMC now have to answer?
The treasure trove within the undead grove To understand how much The Walking Dead matters to AMC, we should take a closer look at how much the company has been charging companies for ads during the show.
During the third season, AMC reportedly charged $200,000 to $260,000 for a 30-second spot, and $375,000 for "scatter" advertisers who buy the spots much closer to air time. During the fourth season, that price skyrocketed to $600,000, according to The New York Post. That's more than the $570,000 it costs to advertise during Sunday night NFL games. By comparison, CBS' The Big Bang Theory currently commands the highest advertising rates on network television, at $326,000 per 30-second commercial.
Considering that The Walking Dead's total viewers rose 27% between the third and fourth seasons, it wouldn't be surprising for AMC to ask for $700,000 per 30-second slot for the fifth season.
Considering that The Walking Dead has an estimated budget of $2.8 million per episode, it wouldn't take long to recoup its production costs and reap huge profits. AMC's advertising revenues, which account for 42% of the company's top line, already rose 26.7% year-over-year in fiscal 2013 to $663 million -- fueled by strong demand for original programs such as The Walking Dead, Breaking Bad, and Mad Men.
Will a spin-off dilute the brand or boost profitability? Meanwhile, a spin-off of The Walking Dead is expected to arrive in 2015. The show will take place in a different corner of the world, possibly be a prequel, and won't feature any of the characters from the main series.
Source: AMC Press Center.
AMC obviously hopes that this will keep its top franchise alive for a long time after Mad Men concludes in 2015. AMC is also trying to keep the legacy of Breaking Bad alive with the spin-off Better Call Saul this November, but it's uncertain if it can capture the magic of the original series. Mad Men drew an average of 2.5 million viewers last season, while the audience for Breaking Bad's final season swelled from 2.9 million viewers to 10.3 million viewers for its series finale.
The Walking Dead spin-off has Robert Kirkman's blessing, but it's easy to see the idea getting out of hand as CBS did with CSI. Although the spin-off series might be just as successful as The Walking Dead, it could also dilute the brand and appeal of the main series. Time Warner's HBO, for example, exercises better restraint than AMC -- it ends hit series after a few seasons and only spins them off onto the big screen or other networks.
Will AMC grow complacent in introducing new shows? This leads into another problem -- will depending on spin-off shows and add-on shows like The Talking Dead undermine AMC's reputation for producing original, high-quality shows?
AMC's top shows -- The Walking Dead, Breaking Bad, and Mad Men -- were all originally developed by high-profile writers and directors. The Walking Dead was originally developed by acclaimed director Frank Darabont, Breaking Bad was created by X-Files writer and producer Vince Gilligan, and Mad Men was created by Sopranos writer and producer Matthew Weiner. Yet with all that talent came major clashes with the network over creative and budget concerns. Darabont was eventually fired and Weiner's conflict with AMC caused Mad Men's fifth season to be delayed.
Meanwhile, other ambitious projects, such as The Killing and Low Winter Sun, never gained a following to match those three shows. The Killing only averaged between 1 million to 2 million viewers, and was canceled once after the second season and again after the third. However, the show has been revived a second time by Netflix, which will bring the show back for a final six-episode long season later this year. Low Winter Sun fared even worse, plunging from 2.5 million viewers for its premiere to 0.7 million viewers by its final episode last October.
My final take When we combine those three factors -- rising advertising rates for The Walking Dead, the difficulties of dealing with high-end Hollywood talent, and the poor performance of its new original shows -- we get a situation where AMC could pursue surefire bets rather than create the next Breaking Bad.
Source: AMC Press Center.
AMC is certainly hoping that Turn, which features a ring of American spies during the American Revolution, could be its next hit show when it premieres next Sunday. Placing it in the same time 9 p.m. slot as The Walking Dead could help it premiere with strong ratings, but it needs to hook in a lot of viewers to avoid the fate of Low Winter Sun.
'It's for you.' AMC is clearly generating a lot of money from The Walking Dead, and its stock has risen more than 100% over the past three years as a result. Imagine if you had picked up a few shares of AMC when The Walking Dead was just starting to gain steam.
To discover more hidden gems in the media industry like AMC, be sure to check out The Motley Fool's free guide to investing, and share your thoughts in the comments section below!
Leo Sun has no position in any stocks mentioned. The Motley Fool recommends AMC Networks and Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.
The U.S. steel industry wants more protection from foreign imports, continued access to cheap energy, and increasing infrastructure spending. That's a nice wish list that industry executives from ArcelorMittal and U.S. Steel recently brought to Capitol Hill. They can support their points, but will they get what they want?
Stop the imports According to ArcelorMittal USA CEO Mike Rippey, "U.S. steelmaking facilities are running at only 77 percent capacity." In his company's last two quarterly conference calls, Nucor CEO John Ferriola has basically blamed imports. He has said that overcapacity is the, "...greatest threat..." to the steel industry and has made specific calls for policymakers to, "address the huge issue of global steel overcapacity." So far, that's taken the shape of trade cases.
(Source: Alfred T. Palmer, via Wikimedia Commons)
On that front, there have been a few wins recently. For example, AK Steel CEO James Wainscott noted in the fourth quarter that, "...the International Trade Commission has made a preliminary finding in favor of the domestic [electrical steel] industry..." In his company's fourth quarter call, U.S. Steel CEO Mario Longhi pointed out that, "The U.S. Department of Commerce is expected to announce preliminary anti-dumping duties in February for the [oil country tubular goods (OCTG)] trade case." Although the dumping cry may sound like a broken record to some, it looks like Washington is listening to U.S. steel on this one.
Build more But limiting imports is only part of the problem; the U.S. steel industry also wants to see more infrastructure construction. That's a double benefit since the industry will see increased steel demand and use the upgraded infrastructure to move product and receive supplies. The frightening talking point for this call is the D+ grade given to domestic infrastructure by the American Society of Civil Engineers.
(Source: Jawny80, via Wikimedia Commons)
Even if the Society's call for $3.6 trillion of spending by 2020 is answered, however, it doesn't mean U.S. steel will be a big winner. For example, the Metropolitan Transportation Authority of New York sourced steel from China for its Verrazano Bridge project. That ruffled some feathers, however, and it tapped the expertise of ArcelorMittal's U.S. mills when the Tappan Zee Bridge project came up.
If that's the start of a buy American trend, the U.S. steel industry will be on solid footing. Still, while the industry visiting D.C. can help ensure that such a push takes hold, it can't guarantee it. Keep an eye on big infrastructure projects to get a sense of where government leaders are heading on this one.
Keep costs down Keeping energy costs low is another big issue for the domestic steel industry, but it's likely to have a harder time gaining traction here. That's particularly true now that Russia has taken over Crimea. While steel titans were asking for low energy prices at one hearing, another hearing saw impassioned calls to use increased natural gas exports as a tool against Russia.
Leaders from Nucor and U.S. Steel have both pushed Washington in the past for limits on natural gas exports. In fact, Jennifer Diggins, director of public affairs at Nucor has specifically stated that her company wouldn't have been able to invest in a recently built facility, "...if the price of natural gas had stayed where it was six or seven years ago."
Unfortunately, the oil and gas industry carries a pretty big stick in Washington, too. And the anti-Russia card is both strong and popular. It's probably safest to anticipate increasing fuel costs in the domestic steel industry.
You win some you lose some The U.S. steel industry is important in many ways and after five tough years, it's due for some good news. It looks like that's starting to happen with regard to imports and even domestic infrastructure spending. Continued Washington lobbying can only help sustain both trends. That said, two out of three ain't bad, so don't be too upset if the industry's call for keeping energy costs low, and natural gas exports limited, goes unheeded.
Increased gas exports would help this U.S. industry...
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Russia's recent actions in the Ukraine have put many on edge. It is important to recognize that in terms of oil America has little to fear. Russia could always constrict supply and cause a global oil shock, but this would only encourage more countries to diversify away from crude oil. A number of companies have rebooted America's oil industry, and they offer quite promising investments.
The above charts shows how U.S. oil imports have fallen significantly in the past couple years. In this time period the U.S. has grown its oil production significantly while Russia has only slightly increased production.
Russia wants U.S. help For all of Russia's aggressive statements the reality is that it wants U.S. technology. ExxonMobil and Rosneft have signed a number of deals, including a joint venture to work together on oil fields in Western Siberia.
Russia's problem is not a lack of resources. According to 2012 data Russia's proven reserves are more than two times bigger than America's proven reserves. The problem is related to slow tight oil growth, as Russia doesn't have America's experience or capital.
Western investors need to be careful Getting caught in the middle of two warning nations is not a good idea. Still, big oil needs big projects, and ExxonMobil is not the first to accept Russia's political risks to replace falling legacy production. Chevron is involved in the Caspian Pipeline expansion. The pipeline is quite big, exporting 910 thousand barrels per day (mbpd) in February 2014.
In the former soviet republic of Kazakhstan ExxonMobil and Chevron have come together to work together on the complicated Tengiz field. Production challenges have made the field an expensive venture, but big oil needs to continue financing its development. Kazakhstan's close proximity to Russia means that it could easily reorient itself toward Moscow and sacrifice ExxonMobil and Chevron in the process.
Smaller can be better ExxonMobil has big volumes to maintain. In 2013 it produced 4,175 mboepd while Chevron produced 2,597 mboepd in the same time frame. Chevron's smaller size allows it to be a nimble company that can grow quickly.
Mid-tier oil producers are in an easier position. They have big enough balance sheets to finance efficient large scale operations, and yet their production levels are small enough that they can focus on high-margin plays. Apache has shifted North American onshore production from 34% of its total production in 2009 to 60% of its 2013 pro forma production. With its 2013 pro forma production of 537 mboepd Apache is significantly smaller than Chevron, but it is still a good size player.
EOG Resources has played a big role in boosting U.S. production to supplement foreign crude. Its focus on shale plays like the Eagle Ford has given it strong production growth and margins. In 2013 EOG Resources produced 510 mboepd with the U.S. alone contributing 428 mboepd.
EOG Resource's profit margin of 15% and Apache's profit margin of 13.9% are significantly higher than ExxonMobil's profit margin of 7.9% and Chevron's profit margin of 9.8%. It is very challenging for Chevron and ExxonMobil to focus on growth in stable markets because they have huge production bases to maintain. There is always the risk that their dealings in the Middle East and former Soviet states could be nationalized.
The Fool's bottom line Russia and U.S. aggression is increasing and ExxonMobil and Chevron have little choice but to walk a fine line. In some ways mid-tier North American producers like EOG Resources and Apache are less risky because they can afford to focus on established high-margin plays in stable nations.
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The March Manufacturing ISM Report on Business shows that the Purchasing Managers Index (PMI) came in at 53.7%. Growth was reported in New Orders, Employment, Production and Inventories subcomponents. Supplier deliveries slowed in March.
The big takeaway here is that weather may not have been what we all hoped in the prior months. Economic activity grew for the tenth month in a row in the manufacturing sector. The overall economy grew for the 58th consecutive month.
March's 53.7% reading was an increase of 0.5 percentage point from February's reading of 53.2%. It also was a tad light compared to the consensus estimates. Bloomberg was calling for 54.0% and Dow Jones was calling for 53.9%.
Below are the subcomponents:
The New Orders Index was 55.1%, a gain of 0.6 percentage point from February's reading of 54.5%.
The Production Index was 55.9%, a full 7.7 percentage points higher compared to February's reading of 48.2%.
Employment grew for the ninth consecutive month, but at a slower rate by 1.2 percentage points, registering 51.1% compared to February's reading of 52.3%.
Of the 18 manufacturing industries, 14 reported growth in March.
The four industries that reported contraction in March were Apparel, Leather & Allied Products; Wood Products; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing.
Tuesday's reading is not off estimates enough to move the markets much in either direction. That being said, the S&P 500 is still at a new all-time high (1,884) and the Dow Jones industrial Average is only about 30 points off a new all-time high (16,588.20).
I've been obsessing over whether to buy or rent an apartment over the last several months. But after renting for eight years, my wife and I finally decided that buying an apartment in New York City made sense for us.
When we started the process, I assumed that if Jenn and I did buy, we would just get a 30-year fixed rate mortgage. That's the loan type I'd always heard about -- the one whose rates are discussed in the news media, the one mentioned by friends who had bought.
Though the Fed recently said it was going to hold rates low "for some time," there's really nowhere for rates to go but up in the future. So it seemed natural to want to lock in today's attractive rates for a long period of time. On top of that, the alternative -- adjustable rate mortgages -- have gotten a lot of negative press for their role in the recent financial crisis. Their low initial interest rates lured subprime borrowers into taking out mortgages that they later found themselves unable to either refinance or repay.
After taking a long look at all of the factors and our own situation, we decided to go with a 7-year adjustable rate mortgage. That's right, we chose the much-maligned ARM -- and here's why.
It's About Time
When it comes to mortgages, the time component is the most important part of the equation. If you're buying a house that you're planning to stay in for the rest of your life, then a 30-year fixed rate loan probably makes sense.
For us, we went into the process having a strong idea that this apartment would be a "starter home," and that we'd probably want to move somewhere else in 5 to 7 years. To come up with that time frame, we walked through a lot of different "what-if" scenarios, and mapped out how those "what-ifs" would affect our apartment timing. Aside from our scenarios, we looked at industry data to confirm our logic.
According to Credit Sesame, the median number of years that the average American stays in a home has increased from 6 years to 9 years since the housing bubble burst. However, Chris Halstead of Halstead Property told us that the average term of ownership in NYC tends to be shorter than the national average."We see most customers holding on to any one apartment for an average of 5 to 7 years. This trend is most common in our entry level, and second move market."
"Because the average price of apartments in NYC is quite high, first- and even second-time homeowners tend to buy apartments that suit their immediate needs, and upgrade to larger apartments as their lives develop or their families expand."
Armed with some industry averages and our own scenarios, we looked at the 5-year, 7-year, and 10-year ARMs as well as the 30-year fixed rate loan to see what would be a good fit for us. Because we wanted to make sure we had some buffer room, we decided to forgo the 5-year ARM. Though it offered the most attractive interest rate, we wrote it off as too risky. The 10-year ARM actually had the same rate as the 30-year fixed rate loan, so we saw no point in even considering it. The 7-year ARM, on the other hand, provided us with a material interest rate benefit and matched the long end of our time horizon.
Lower Initial Cost
Compared with fixed rate loans, ARMs typically provide borrowers with a lower fixed interest rate for an initial period of time -- the length named in the loan -- after which that rate resets annually based on an interest rate index.
For us, the rate difference between a 30-year fixed rate loan and a 7-year ARM was about 1 percent. In other words, if the initial interest rate on the 7-year ARM was 3.5 percent, then the 30-year fixed rate was 4.5 percent.
Over that initial 7 year period, that 1 percent difference equates to $35,000 in additional interest on a $500,000 loan. That's a huge amount of savings that we'd be able to utilize for other household expenses, or to pay down our principal quicker.
Beyond the savings, having a lower interest rate allowed us to buy the apartment we wanted, while keeping our monthly payment (after the tax benefit) about equal to what we were paying in rent. This not only made me extremely happy, but satisfied the banks and co-op boards as well. Banks typically want to see your debt-to-income ratio below 43 percent; NYC co-op boards are much more strict and want to see a debt-to-income ratio lower than 30 percent.
Putting It All Together
In the unlikely situation that we do keep our apartment, and thus our loan beyond 7 years, our interest rate will almost certainly increase. However, there are rate caps on the ARM that prevent it from increasing too far or too fast. The interest rate can't jump by more than 2 percentage points a year in years 8 and 9, and can't rise more than 5 percentage points over the life of the loan. So, for example, if you locked in a rate of 3 percent for the first 7 years, the rate in year 8 could increase to 5 percent at most. Assuming you paid a rate of 5 percent in year 8, it could only increase to 7 percent (at most) in year 9, and no more than 8 percent beyond that.
In the end, whether it's better to get a fixed rate loan or an ARM really depends on a number of factors, with time horizon, I think, being most important. At some point along the timeline, a 30-year fixed rate loan does become more attractive than a 7-year ARM. In our case, the breakeven point was at year 10.
Since we reasoned that there was almost zero chance we would still have this apartment in 10 years, and most likely not beyond 7 years, we were comfortable with taking the risk in return for the upfront savings. Ultimately, what's most important is to try to match the length of your loan (with some buffer) with the expected time horizon of your home.
Are you currently in the market for a house? If so, are you planning to get a fixed or adjustable-rate mortgage, and how did you choose?
Roger Ma is the founder of lifelaidout, a personal finance blog that helps others identify value and save time, money, and energy in their everyday lives.
WASHINGTON -- U.S. construction spending posted a slight increase in February as a rebound in construction of hotels and other nonresidential buildings offset a decline in housing.
But housing construction fell as activity was still being depressed by the harsh winter.
Construction spending increased a scant 0.1 percent in February after a 0.2 percent drop in January, the Commerce Department reported Tuesday. The increase left construction at a seasonally adjusted annual rate of $945.7 billion, 8.7 percent above the level of a year ago.
The small increase in February came from a 1.2 percent advance in nonresidential projects, led by a 3.5 percent rise in construction of hotels and motels. Spending on government projects edged up 0.1 percent, helped by a big gain at the federal level. Residential construction dropped 0.8 percent, the biggest setback since July.
The increase in nonresidential construction was a rebound from January when spending in this area had fallen 1 percent.
The February increase was helped by gains in spending on construction of lodging establishments which offset weakness in office building and the category that includes shopping malls.
The 0.1 percent rise in public construction reflected a 5.8 percent rise in spending at the federal level which offset a 0.5 percent decline in spending on state and local government projects. Even with the small February advance, government construction spending is down 1 percent from a year ago government projects have been restrained by tight budgets.
The 0.8 percent decline in housing construction followed sizable gains in the previous three months and was expected to be a temporary drop. Housing is expected to continue being a source of strength for the economy in 2014. Economists say a strengthening economy will boost employment and the employment gains will provide the income gains needed to convince potential home buyers to take the plunge.
Most economists are looking for sales of new and existing homes to show improvement as the spring buying season gets into full swing. They expect pent-up demand to help sales following an unusually severe winter which depressed sales.
Housing, while still a long way from the boom of several years ago, has been recovering over the past two years.
One assumption underlying the optimism on housing: Even as the Federal Reserve keeps scaling backs its bond purchases, which were used to keep long-term rates low, mortgage rates will rise only gradually this year.
In her first major speech as leader of the Federal Reserve, Chair Janet Yellen delivered a strong statement on her concerns about a labor market she said was still too weak. Even though the Fed has been gradually trimming its bond purchases, Yellen said the central bank still needs to provide significant support to the economy.
She said that the extraordinary support the Fed is providing will be needed "for some time," a view she said was widely held by other Fed officials.
Her comments lifted spirits on Wall Street where investors had been worried that remarks Yellen had made last month following a Fed meeting might indicate that the central bank could start raising a key short-term interest rate sooner than expected.
tMary Altaffer/AP
J.C. Penney is challenged. Against a backdrop of suburban shopping mall decline, the retailer has to attract a new generation while earning forgiveness from the long-time customers it spurned in its last makeover, stay liquid and fight the clicks-vs.-bricks battle.
Giving Customers What They Want
With three CEOs in almost as many years (CEO Myron Ullman returned after the disastrous tenure of Apple and Target alum Ron Johnson), the chain's strategy has returned to pre-Johnson discount pricing, coupons and private label brands like St. John's Bay, which its core customers had sorely missed. To be fair to Johnson, he did spiff up the previously dowdy and cluttered stores. Unlike Walmart (WMT) and Sears Holdings' (SHLD) Sears and Kmart, J.C. Penney isn't inspiring photo-driven articles documenting its disarray.
Other changes announced by Ullman are the return of their home goods collection starting in April, the addition of 46 more in-store Sephora beauty shops (a big draw for younger women), and the closure of 33 underperforming stores.
A fourth quarter 2013 earnings call in late February -- which Ullman characterized as an update on the store's turnaround -- showed a 2 percent rise in same store sales. Other positive commentary on the call prompted Citigroup analyst Oliver Chen to upgrade to buy with an $11 price target.
J.C. Penney has to contend with more successful (and fashion-forward) rival Macy's (M), which lured away many of its core shoppers and has more traction with younger. Macy's has been performing well thanks to CEO Terry Lundgren's localizing strategies. Localizing sends merchandise to the stores whose customers actually buy it -- parkas to Minnesota and swimsuits to Miami. In that call, Ullman announced more localizing at J.C. Penney.
Clicks, Not Bricks
Shoppers are warming to J.C. Penney's online arm: Its sales rose 26.3 percent this last quarter year over year and contributed $381 million to sales. Ullman said the company is focused on "seamless customer experiences between J.C. Penney stores and jcp.com." Ordering on your phone or laptop and in-store pickup is part of the reason Ullman said gross margins should significantly improve in 2014. That's why the company reconfigured the interfaces and made several key hires.
Just six months ago analysts worried whether the chain could make it through one more year. This recent quarter's results have turned rating agencies cautiously optimistic. Standard & Poor's raised its rating from negative to stable. "With liquidity concerns on the back burner (for now), the focus has returned to fundamentals, which for the moment appear to be improving, albeit modestly," said Sterne Agee analyst Charles Grom, who maintains a neutral on J.C. Penney stock.
J.C. Penney has a long way to dig itself out of the hole deepened during Johnson's reign. It has to make itself relevant again in an Amazon (AMZN) world. And Macy's is a tough competitor, more so now that both will compete in home goods again. Macy's also has had a better read on fashion.
Likely J.C. Penney won't be the destination shopping experience Johnson envisioned nor "the leader in American retail" Ullman is prophesying, but it looks like it's staying around.
In recent weeks, General Motors' latest TV ad for its Cadillac brand has been the subject of a lot of discussion. Some folks love the ad; some hate it -- but almost nobody is indifferent, as you can see from the lengthy comment thread on the article I wrote about the ad.
Now, Ford has come up with a riposte to the Cadillac ad.
It emerged late last week that the automaker -- or at least, its ad agency, Team Detroit -- had put together a parody of the now-famous Cadillac ad, with a decidedly different twist.
Ford's ad stars Pashon Murray, founder of sustainability group Detroit Dirt, and a plug-in hybrid Ford C-Max, and... well, check it out for yourself:
That's an interesting move on Ford's part, isn't it?
Now, Ford isn't exactly blasting this all over the airwaves. It was released late last week on YouTube -- not via Ford's official YouTube account, but on a new account that appeared to have been created specifically for this ad.
Why would it do that?
I think Ford might be feeling that it needs to maintain a little bit of distance from this particular piece (though Ford spokespeople have acknowledged that the company is behind the ad).
Where GM's ad played to a certain set of patriotic and capitalist American values that we might associate with conservative politics, Ford's clearly plays to a set of values that we might think of as liberal.
One could argue that GM needs to do some work to woo conservative-minded American consumers who might have been alienated by the politics around the automaker's 2009 bailout.
But one could just as easily argue that Ford -- maker of America's best-selling pickup truck, among other things -- shouldn't be alienating those same folks.
So, what is Ford thinking? A Ford representative told the Detroit Free Press that the ad was intended to be "lighthearted" and wasn't about mocking a competitor, but was instead meant to "showcase positive work being done in our community."
Uh-huh.
I'm certainly willing to believe that Ford was pleased to showcase the efforts of Murray's group, which has worked with both Ford and GM. But I think this ad was about a little more than that.
One of Ford's biggest goals has been -- and continues to be -- to gain ground on import brands such as Toyota and Honda , which are often seen as "greener" than the Detroit automakers.
Ford has been working hard to put its fuel-efficient cars -- including the C-Max Hybrid, which competes directly against Toyota's Prius v -- on the shopping lists of buyers who prioritize green concerns.
I'm guessing that a lot of those folks hated GM's ad, and will love this one.
What do you think? Has Ford one-upped GM and its controversial ad? Or has the Blue Oval shot itself in the foot,? Scroll down to leave a comment and let me know.
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John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.
Coming into Tuesday, investors had hoped that gold prices would take the opportunity to add to their gains from the first quarter, despite a more recent downturn that has sent gold more than $100 down from its recent highs. Yet gold started the second quarter on a down note, leading to declines for SPDR Gold Shares even as Market Vectors Gold Miners and most mining stocks inched higher. Some of the most interesting news came from Barrick Gold , which announced a new compensation policy that it claims could revolutionize the industry.
How metals moved today June gold futures dropped $3.80 per ounce to $1,280, which resulted in a 0.2% drop for SPDR Gold Shares. Daily share volume for SPDR Gold Shares was well below average levels, suggesting a lack of trading interest in the yellow metal that likely added to the malaise in gold prices. May silver fell more than $0.06 per ounce to $19.69, but platinum and palladium prices gained on the day.
In the run-up to earnings season for the bulk of the stock market, gold investors are left trading on economic data, and lately, readings on the recovery have been reasonably strong. Without any impetus for the Federal Reserve to change its general direction on monetary policy, ETFs like SPDR Gold Trust will have a tough time bouncing back from their recent setbacks, and gold prices will struggle to regain levels from earlier in 2014.
For investors in mining stocks, though, it's becoming clear that efforts to keep costs in line are just as important as changes in bullion prices, if not more so. Barrick's new initiative to redefine its executive compensation practices comes in the aftermath of years of problematic relations between shareholders and executives. One key component of the new policy involves paying executives with convertible units based on a scorecard of various factors, including return on invested capital, dividends, and free cash flow. Controversially, the converted shares aren't eligible for sale until an executive retires or leaves the company. Some investors worry that the restrictions will give talented executives an incentive to quit early in order to reap the rewards of their performance, but others argue that vesting requirements should provide enough penalties to stay the course.
Whether Barrick's initiative is effective depends largely on how valuable the incentives its executives earn turn out to be. If the stock can't rebound, then all the equity-linked incentives in the world won't provide stronger performance. By contrast, awarding incentives at a time when the industry arguably can only go up is also dangerous in its own way. It'll be interesting to see how shareholders respond in the long run to Barrick's moves.
More broadly, though, mining-stock investors need to keep executive compensation and other costs in check in order to preserve cash and expand margins. Otherwise, the tough pricing environment for bullion could sink earnings and create further losses for shareholders.
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Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.
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Today, with the help of Erin Konrad -- who helps create content at CouponPal.com -- DailyFinance shares some of the smartest buys throughout April. These are items or services at their all-time low prices for the year.
Summer Air Travel
Last month, we suggested you pounce on travel deals, and they have lingered into April with an emphasis on flying discounts. "Airlines start to offer great deals for summer vacations in April," noted Konrad. "By booking several months ahead, you'll have access to awesome prices if you hit up sites like Expedia." She says you can save even more moolah if you use coupon codes during checkout. Sign up for newsletters from travel websites such as Expedia, TravelZoo, Southwest and Priceline. You can also find travel package deals on websites such as Groupon and LivingSocial, which may have discount codes. "It's always better to book during the week rather than on weekends when prices go up," she said. "Most say Tuesday afternoons are the best bet."
Earth-Friendly, Green Goods
What better month to purchase eco-friendly goods than April? Earth Day happens on April 22, but retailers use the entire month to promote green goodies. Throughout April, keep your eyes out for specials on organic foods, natural beauty and skincare items and other products that are particularly kind to our home planet. You'll probably notice many retailers offer discounts, launch products and provide coupons.
Winter Gear
"Since colder weather is on its way out, many retailers mark down their winter gear, such as snowboards, ski boots, and outerwear," said Konrad. "Sites like Backcountry.com and Dogfunk.com offer amazing winter clearance sales with items marked down as much as 50 percent off." While you won't need these items in April -- nature willing -- assess your supplies and determine what you may need for when the snow hits next year.
Vacuums and Cleaning Supplies
"Since spring cleaning is on many people's to-do list, vacuums are often sold for lower prices," said Konrad. "New models usually hit stores in June, so retailers are eager to get rid of the older models in April. That means you can find a great deal at places." Additionally, cleaning supplies in general remain a great buy in April. Look for specials and coupons in your newspaper and online.
Small Kitchen Appliances
Need a new coffee grinder? What about a blender? Or maybe you've been eyeing one of those fancy-schmancy Kitchen-Aid mixers? April is the best time to buy small kitchen appliances, including all of the above. "Graduation and wedding season is right around the corner, so retailers begin putting small kitchen appliances on sale during April," explained Konrad. Additional items to look out for include toasters, coffee makers, hand mixers, toaster ovens, slow cookers, food processors and more.
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When it comes to tax deductions, most taxpayers focus on items that have the most impact, such as mortgage interest and state income or sales taxes. Yet lesser-known tax breaks can also help you boost your itemized deductions.
Let's take a look at three miscellaneous deductions that many people don't even know exist, as well as the overarching limitation on how much you can deduct.
1. Unreimbursed Employee Expenses
Many employees have to pay work-related costs out of pocket without getting reimbursed. Tax laws allow you to deduct certain expenses that you pay in connection with your work as an employee as long as they're ordinary and necessary to your job. The way these rules get applied differs depending on your profession, but the general idea is that if an expense is commonly accepted in your business and is appropriate and helpful for you to get your work done, it can qualify for a deduction.
The Internal Revenue Service gives several examples. Some of the most common include business liability insurance, depreciation on computer equipment that you pay for, professional dues, home-office expenses and travel expenses. Work-related education and job-search expenses in your current line can also be deductible.
2. Tax Preparation Fees
If you pay to have your tax returns prepared or to help you prepare your own taxes, then you're allowed to treat those expenses as a miscellaneous deduction. That includes paying an accountant, tax attorney or other professional to do your taxes and buying tax-preparation software or guides to do your own return.
These expenses are deductible in the year you pay them, not the year of the tax return in question. So on your 2013 tax return, you'd deduct expenses you paid last year -- which for most people means what they spent getting their 2012 taxes prepared.
3. Other Miscellaneous Deductions
A catch-all category includes many deductions for expenses connected with activities that produce taxable income or have an impact on your taxes. Some of the most common are investment expenses and fees, such as brokerage commission charges; legal expenses related to collect income or determine tax liability; and safe deposit box rentals.
In order to claim the Child and Dependent Care Credit, you need to fill out IRS Form 2441.
On the form, you need to provide the name and address of the person or organization that provided the child care, as well as the Social Security number or Employer Identification Number. By doing so, the IRS can match your claim against the records that some child-care organizations are required to provide, and it can also check to make sure that whoever you pay to provide child-care services actually reports those payments as income and pays taxes of their own.
There's one exception. If a tax-exempt organization provides the care, then you only need to write in "tax-exempt" in the box on Form 2441 that asks for an EIN.
Unfortunately, there's a limit on how much of these expenses you can deduct. You can only deduct the amount by which the total of eligible miscellaneous deductions exceeds 2 percent of your adjusted gross income. So if you earn $50,000, you're not allowed to deduct the first $1,000 of miscellaneous deductions; only the extra amount is eligible.
The full list of eligible miscellaneous deductions is on Publication 529.
Alamy
Consumer electronics retailing was a hot sector for investors last year, but results haven't been nearly so rosy in 2014. Best Buy (BBY) shares more than tripled in 2013, but they're trading 35 percent lower so far this year. Shares of hhgregg (HGG) nearly doubled last year, but the stock has fallen 27 percent in 2014.
Then we have Conn's (CONN). It soared 157 percent last year, but it led the retail laggards of 2014 by shedding half of its value during this year's freshman quarter. However, Conn's did rally last week, soaring 16 percent during an otherwise uninspiring week for stocks. Conn's was Nasdaq's fifth biggest gainer on the week, fueled by an encouraging quarterly report.
Pros and Conn's
Unlike Best Buy and hhgregg, which struggled during the holiday quarter, Conn's had no problem keeping its cash registers buzzing. Revenue climbed 44 percent to $361.1 million, fueled by expansion and a juicy 33 percent spike in same-store sales. Conn's, which operates in six states, was able to open 14 more stores in six new markets.
Gross margins expanded, leading adjusted operating income to skyrocket 147 percent. Adjusted diluted earnings only climbed 37 percent as the superstore had to increase its provision for bad debts, but Conn's also revealed that the picture of its deadbeat borrowers has been improving since the end of the quarter.
Wall Street was expecting slightly more in sales and earnings, but the stock still rallied on the encouraging words about the improvement in its delinquencies. Conn's sells a lot of big-ticket items on credit, so getting more customers to pay up should translate into healthy gains on the bottom line.
It's a Housing Play
There hasn't been a lot of growth among Conn's publicly traded peers during the holiday quarter. We saw hhgregg suffer a 12 percent plunge in sales, weighed down by weakness in consumer electronics as well as its computing and wireless products.
Best Buy also saw sales for the seasonally potent quarter decline. Best Buy blamed sluggishness in digital imaging, movies, and home theater for the negative store-level performance.
Things were even uglier at RadioShack (RSH). The small-box chain saw comparable-store sales tumble 19 percent during the holiday quarter. Matters are so bad at RadioShack that it's planning to close as many as 1,100 underperforming stores.
So why is Conn's thriving at a time when rivals are floundering? Look no further than the improving residential real estate market.
Mattresses, appliances and furniture pieces make up nearly half of Conn's sales. That makes it a stealth play on the real estate market, and given the housing boom, it's not a surprise to see folks buying more washing machines and beds than computers and phones.
Some of these items not only cost more, but they carry larger markups. So, while furniture pieces and mattresses made up just 26 percent of the quarter's sales, they accounted for 37 percent of the gross profit. Appliance sales also rose an encouraging 31 percent, fueled by even stronger growth in laundry, refrigerators and cooking devices.
The Future's Bright for Now
Conn's provided upbeat guidance alongside last week's quarterly report. Sales growth will decelerate, but it will continue to move in the right direction. Conn's is forecasting same-store sales to climb 5 percent to 10 percent in fiscal 2015 that began a few weeks ago. It also expects to add as many as 20 new stores.
Analysts see RadioShack, Best Buy and hhgregg all posting lower sales this year than they did the year before. Conn's is targeting profitability to clock in between $3.40 a share and $3.70 a share, well above the $2.57 a share it rang up in fiscal 2014.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days.
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After five years of booming stock markets, many investors are getting nervous about the possibility of a big pullback. Those who strongly believe that the market is overvalued can set themselves up to profit from falling stocks by selling those stocks short. Pick the right moments, and you can have great success betting against overpriced stocks, but it's important to understand going in all the risks and costs involved with short-selling.
How Short-Selling Works
Short-selling can sound complicated, but the process is actually pretty simple. In order to sell short, you borrow shares from someone who owns them and is willing to lend them to you. Once you have the shares, you sell them in the open market for the prevailing price, keeping the cash proceeds.
At that point, you're hoping the stock will fall in value. If it does, you can buy back the shares at a cheaper price, return them to the person you borrowed them from, and pocket remaining cash you have as profit. But if the stock prices rises after you sell it short, eventually, you still have to reacquire those shares to return them to their real owner. The extra amount you have to pay comes out of your own pocket and represents your loss.
The Costs of Short-Selling
Most investors assume that the costs of selling stock short are similar to ordinary share purchases. When you sell short, you generally pay the same amount in commissions that you would to buy shares. When you close out your short position, you'll pay another commission,
just as someone who bought stock would when they decided to sell.
But with certain stocks, additional fees can apply. What you'll pay depends on how hard it is for your broker to find shares it can borrow on your behalf so that you can turn around and sell them short.
With large companies that trade millions of shares every day, any fees associated with locating shares to sell short will generally be minimal. But the smaller the company and the less trading activity there is in its stock, the harder it'll be for your broker to sell shares short. Stocks in which many bearish investors already have short positions can be even more difficult to borrow, which will lead some brokers to charge a borrowing fee.
Borrowing fees can make it a lot harder to make money by selling a stock short, because in many cases, you'll incur those fees for every day that you keep your short position open. That means that even if the stock price goes down, you might still not earn a profit after considering your out-of-pocket costs.
Covering Dividends
Many short-selling investors also forget that if the stock they've borrowed pays a dividend, they'll be responsible for paying that dividend to the person who let them borrow the stock. Often, share prices will drop immediately after a stock declares a dividend, giving short-sellers the chance to offset gains to counteract the negative impact of having to cover a dividend payment. But when you short high-yielding dividend stocks, it's essential to remember that you'll have ongoing cash drains on your account when dividends are due.
Short-selling can be extremely lucrative, especially in falling markets. But it's important to know all the potential risks and costs involved so that you don't get a nasty surprise.
Evan Vucci/APGM CEO Mary BarraBy MARCY GORDON
and TOM KRISHER
WASHINGTON -- "That is not how GM does business."
With statements like that, new CEO Mary Barra is trying to distance the General Motors (GM) she now leads from the overly bureaucratic company whose inattention to its customers helped land it in bankruptcy in 2009.
But it's clear from her appearance before Congress this week that she faces a difficult task. Documents submitted by GM ahead of a House subcommittee hearing Tuesday show that cost was a major consideration when the company declined a decade ago to implement fixes to an ignition switch used in small cars.
That switch is now linked to 13 deaths, and Barra, less than three months after taking over as CEO, finds herself thrust into one of the biggest product safety crises Detroit has ever seen.
Since February, GM has recalled 2.6 million cars -- mostly Chevrolet Cobalts and Saturn Ions -- over the faulty switch, which can cause the engine to cut off in traffic, disabling the power steering, power brakes and air bags and making it difficult to control the vehicle. The automaker said new switches should be available starting April 7.
At a hearing on Capitol Hill before a House subcommittee, Barra acknowledged under often testy questioning that the company took too long to recall cars equipped with the switch. At a press conference after the hearing, she said it "angers me that we had a situation that took more than a decade to correct."
Barra promised changes at GM that would prevent such a lapse from happening again.
"I think we in the past had more of a cost culture," she said, adding that it is moving toward a more customer-focused culture.
Barra herself is a product of the old GM. In more than three decades at the company she has held numerous positions, and was the head of product development before being named CEO.
Barra will be back before Congress Wednesday, this time testifying before a Senate subcommittee.
As relatives of the crash victims looked on intently, Barra told committee members that she didn't know why it took years for the dangerous defect to be announced. And she deflected many questions about what went wrong, saying an internal investigation is underway.
Barra did acknowledge, however, that GM used the ignition switch even when it knew the part didn't meet its own specifications. When she tried to draw a distinction between parts that didn't meet specifications and those that were defective and dangerous, Rep. Joe Barton, R-Texas, shot back: "What you just answered is gobbledygook."
Committee members repeatedly asked about decisions that prevented GM from recalling the cars much sooner.
GM has said that in 2005, company engineers proposed solutions to the switch problem, but the automaker concluded that none represented "an acceptable business case."
"Documents provided by GM show that this unacceptable cost increase was only 57 cents," Rep. Diana DeGette, D-Colo., said.
The 57 cents is just the cost of the replacement switch. The figure doesn't include the labor costs involved in installing the new part.
Barra testified that the fix to the switch, if undertaken in 2007, would have cost GM about $100 million, compared with "substantially" more now.
Under questioning, she said the automaker's decision not to make the fix because of cost considerations was "disturbing" and unacceptable, and she assured members of Congress that that kind of thinking represents the old General Motors.
David Friedman, head of the National Highway Traffic Safety Administration, also testified Tuesday. He blamed GM for what he said was its failure to provide adequate information to the government.
"It's my understanding that we did not have that information," Friedman said. In one example, GM didn't tell the agency that the switches didn't meet the company's specifications, he said.
Committee members questioned Friedman about why the agency didn't investigate the cars based on the information it did have. At one point, Rep. Barton was incredulous when Friedman acknowledged that NHTSA didn't fully understand how the air bags in some of the GM cars worked.
Some current GM car owners and relatives of those who died in crashes were also in Washington seeking answers. The group attended the hearing after holding a news conference demanding action against GM and stiffer legislation.
Owners of the recalled cars can ask dealers for a loaner vehicle while waiting for the replacement part. Barra said GM has provided more than 13,000 loaners.
Barra announced at the hearing that GM has hired Kenneth Feinberg -- who handled the fund for the victims of 9/11, the Boston Marathon bombing and the BP (BP) oil spill -- to explore ways to compensate victims of accidents in the GM cars. It's an indication that GM is considered some kind of compensation fund for victims, although Barra stopped short of saying that.
GM shareholders are also watching Barra. GM stock is down $2.75, or 7.4 percent, since March 11 when committees in the House and Senate said they would hold hearings on the recall and word leaked out that the Justice Department was investigating the company's handling of the issue.
On Tuesday, GM stock closed down 8 cents, to $34.34, after rising as high $35.14 prior to Barra's appearance.
NEW YORK -- Applications for U.S. home mortgages fell last week on lower refinancing demand, an industry group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, declined 1.2 percent in the week ended March 28.
The MBA's seasonally adjusted index of refinancing applications fell 2.9 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, rose 0.9 percent.
Fixed 30-year mortgage rates averaged 4.56 percent in the week, unchanged from the week before.
The survey covers more than 75 percent of U.S. retail residential mortgage applications, according to MBA.
John Minchillo/AP Images for U.S. Chamber of Commerce FoundationVeterans connect with employers at a job fair in New York.By PAUL WISEMAN
WASHINGTON -- A private survey shows that U.S. companies increased hiring at a healthy pace last month, suggesting that the jobs market is recovering from a brutal winter.
Payroll processor ADP (ADP) says private employers added 191,000 jobs in March. ADP also revised February's job creation up to 153,000 from an originally reported 139,000.
The construction industry added 20,000 jobs in March, up from an average 16,000 the previous three months. Financial firms added 5,000 jobs, the most since November. Hiring was healthy across most industries and businesses of different sizes.
The numbers suggest that the government's jobs report for March, to be released Friday, will show stronger hiring. Economists forecast the government will report that employers added 195,000 jobs last month. That would be the strongest one-month gain since November.
The ADP numbers cover only private businesses and often diverge from the government's more comprehensive report.
The economy appears to be gaining some momentum after an unusually cold and snowy winter.
On Tuesday, the Institute for Supply Management, a group of purchasing managers, reported that U.S. manufacturing grew at a slightly faster pace last month as factory output bounced back from disruptions caused by severe winter weather.
U.S. auto sales rose 6 percent to 1.5 million vehicles last month, far outpacing analyst expectations. The sales pace was the fastest since November, according to Autodata Corp.
Mark Zandi, chief economist at Moody's Analytics, which prepares the ADP numbers, said the hiring last month was "very consistent with the kind of job growth we were getting before the winter months and is suggestive of economic growth of somewhere around 3 percent" at an annual rate. The economy grew a sluggish 1.9 percent last year.
The cost of apartment rentals is going up faster than the rate of inflation.
A real estate research firm says apartment rents have jumped 3.2 percent from a year ago. It's a simple matter of supply and demand. More young people are finding jobs and leaving their parents home or the group living arrangement they've been in, while the vacancy rate continues to decline. And experts say this trend is likely to continue.
Americans are much more optimistic about their personal finances than they were just six months ago. A newly launched index from the Consumer Bankers Association and AOL -- the parent of Daily Finance -- finds many of us have shaken off the slumber brought on the government shutdown last fall. Since then, the stock market has rallied and the nation's employment picture has brightened.
The content war between Netflix (NFLX) and Amazon.com (AMZN) is on. Amazon's Prime Video Service has won the latest skirmish, getting exclusive rights to the upcoming encore series of the Fox TV (FOX) hit, "24."
The 12 episode Jack Bauer sequel, "24: Live Another Day," begins on May 5th. Amazon also gets exclusive rights to all 192 episodes of the hit TV drama. Amazon recently won the rights to two other hit TV series, even though they may not appeal to same audience: "Downton Abbey" and "Spongebob SquarePants."
Here on Wall Street, the Dow Jones industrial average (^DJI) gained 75 points Tuesday, the Nasdaq composite (^IXIC) jumped 69, and Standard & Poor's 500 index (^GPSC) gained 13 points, hitting its seventh record high this year. And the Dow is within 44 points of the all-time high it set on Dec. 31 last year.
Finally, Starbucks (SBUX) is responding to customer complaints and bringing back some menu items. You'll soon be able to buy slices of banana, pumpkin or lemon loaf cake. The breakfast market is heating up, and as Bloomberg notes, Starbucks wants to provide fancier offerings than fast-food competitors, without getting too fancy.
Carolyn Kaster/APPresident Barack Obama waves to supporters as he leaves the White House Rose Garden on Tuesday.By Jeff Mason
and Mark Felsenthal
WASHINGTON -- President Barack Obama's national health care program signed up more than 7 million people by the end of March, the president said Tuesday, notching a rare victory after a months-long, glitch-filled rollout of the law.
Appearing in the White House Rose Garden, the president said 7.1 million people had signed up for coverage under the law, known as Obamacare, and called for Republicans to end their bid to repeal it. House of Representatives Speaker John Boehner repeated his pledge to repeal the law on Monday.
"This law is doing what it's supposed to do. It's working," Obama said, with Vice President Joe Biden standing at his side. "The debate over repealing this law is over. The Affordable Care Act is here to stay."
His remarks represented a victory lap for the administration, which suffered from the botched unveiling of the program's primary website, HealthCare.gov, and wavering support from Americans some three years after the U.S. Congress passed the health care law over Republican objections.
Health and Human Services Secretary Kathleen Sebelius,
who has taken the brunt of the criticism for the shaky rollout, sat beaming in the front row during the Rose Garden ceremony. White House chief of staff Denis McDonough gave her a hug before Obama's remarks.
Experts had predicted a last-minute surge in enrollment. The figure could give a boost to Democrats, who have suffered from the criticism of the law, ahead of November congressional elections.
Obama's party is seeking to hold on to its control of the U.S. Senate and minimize losses in the Republican-controlled House, but the problems with Obamacare have complicated congressional races and handed Republicans a key talking point for skeptical constituents.
Republicans on Tuesday were quick to highlight outstanding questions including how many of the enrollees had seen their plans canceled because of the new law; how many people saw their premiums go down, and how many people who selected plans actually completed the process and paid their premiums.
"We don't know of course, exactly what they have signed up for, we don't know how many have paid," Senate Minority Leader Mitch McConnell told reporters on Capitol Hill, referring to the enrollees in the program.
"What we do know is that all across the country our constituents are having an unpleasant interaction with Obamacare. Whether they can sign up for a policy or not, they are discovering, of course, higher premiums, a higher deductible."
Strong Surge
White House officials dismissed the Republicans' criticism. Speaking to reporters ahead of Obama's announcement, one official noted that Democrats seeking to get voters from the coalition that elected Obama to support them wouldn't be able to do so without embracing the law.
House Democratic leader Nancy Pelosi told reporters her members were not running away from the issue.
"Our members are out there on the offensive on this issue because of what we did, and we're proud of it, and we're proud of what it means in the lives of Americans," Pelosi said after a meeting with Obama.
Monday's deadline for initial enrollment in the program came after a surge in registrations despite the return of technical problems, including a longer-than-expected maintenance session, although nothing as serious as the issues that beset the website's launch in October.
The site Tuesday announced that open enrollment for Obamacare had closed, but people whose applications were thwarted by technical problems would be given a chance to finish their registration.
By last week, more than 6 million people had signed up for private health coverage through the new Obamacare insurance markets, surpassing a target set after the disastrous rollout called the enrollment process into question.
Who Signed Up?
Industry analysts echoed Republicans' calls for more information about those who had signed up.
"We still have a lot to learn about what underlies those numbers in terms of who signed up and how many were newly insured people versus switching from other coverage," said Karen Pollitz, a senior fellow at the Kaiser Family Foundation.
"We have more to see ... about how many of them actually completed enrollment and how much coverage expansion was accomplished."
The health care law, one of Obama's key promises as a presidential candidate in 2008, was intended to expand access to health care coverage for millions of uninsured Americans, so having enrollment figures that reflect newly insured people is critical to the program's success.
Having a robust percentage of healthy young people to offset older enrollees is also important. White House spokesman Jay Carney said such details were yet available, but he said the demographic mix would be sufficient to ensure that the health market places that form the cornerstone of the law would function smoothly.
-Additional reporting by David Morgan, Thomas Ferraro and Larry Downing.
The March Manufacturing ISM Report on Business shows that the Purchasing Managers Index (PMI) came in at 53.7%. Growth was reported in New Orders, Employment, Production and Inventories subcomponents. Supplier deliveries slowed in March.
