You may not have heard of it yet, but it's the buzz of the tech world, and China's Alibaba is about to increase its profile -- big time.
The Chinese Internet giant has made it official, filing plans for an initial public offering in the U.S. It's expected to be one of the largest IPOs of all time. The trading debut is still months away, but the deal could value Alibaba at as much as $250 billion. The e-commerce company has hundreds of millions of customers, and handled $11 billion last year -- more than Amazon.com (AMZN) and eBay (EBAY) put together. And get used to hearing the name Jack Ma. He's the dynamic Internet tycoon who founded and runs the company.
There was a time long, long ago -- before the housing market collapse of 2008 -- that consumers would tap the equity in their homes to help finance other expenses. Now, those in need of cash are turning to their 401k retirement accounts. That's not necessarily good news because it can trigger tax penalties, and as Bloomberg reports, it reduces workers' retirement nest eggs, leaving them with even greater financial crises later on.
Here on Wall Street, the Dow Jones industrial average (^DJI) fell 129 points on Tuesday, the Standard & Poor's 500 index (^GPSC) lost 17, and the Nasdaq composite (^IXIC) slid 57 points.
Two stocks to watch are Electronic Arts (EA) and Activision Blizzard (ATVI), the leading makers of video games. Both posted better than expected earnings and offered an upbeat outlook for the year. They're being helped by the success of a new generation of video game consoles rolled out late last year -- Microsoft's (MSFT) Xbox One and Sony's PlayStation 4. Activision has high expectations for the latest version in its "World of Warcraft" series, while EA thinks the upcoming World Cup will give a big boost to its FIFA soccer games.
Finally, former Federal Reserve Chairman Ben Bernanke has a book deal worth at least $1 million. The Associated Press reports the book, due out next year, will focus on Bernanke's leadership in avoiding a world banking collapse at the start of the Great Recession.
If you're uncertain where life might take you next -- for a job, a relationship or just a change of scenery -- renting beats buying. It costs a lot less in terms of time, effort and money to break a lease than to sell or rent out a home that you own. Plus, the landlord is responsible for maintenance and repairs.
Buying can be a great investment -- or a lousy one, depending on the market where you live when you buy and when you sell. If you buy and home values go down, you may have to wait to sell to get back the money you invested in a down payment and mortgage closing costs (see advice on what it takes to qualify for a mortgage).
It usually makes sense to buy only if you plan to stay in your home for five to seven years. That's generally long enough to recoup the upfront cost to get a mortgage and the back-end costs to sell and pay an agent's commission. If you fit that profile, now is a good time to buy; most cities in the U.S. have recovered from the housing market bust that began in mid 2006, and mortgage rates are still superlow. Once you become a homeowner and prices rise, you'll be rewarded with the power of leverage -- you may put only 20 percent (or less) down, but you get 100 percent of the appreciation. Regardless of whether your home's value goes up, you'll benefit from the tax deductions for mortgage interest and property taxes if you itemize deductions on your federal tax return. And you will probably be able to keep up to $250,000 of profit tax-free when you sell ($500,000 if you're married and file your income taxes jointly).
If you're on the fence about buying or renting, take a look at the price-to-rent ratio where you live (the median sale price of a home divided by the average annual rent for a comparable one). In general, if the ratio is less than 15, the market favors home buyers; if it's more than 20, it rewards renters. Right now, the ratio nationally is a balanced 14.8, according to Marcus & Millichap, a real estate research firm. Ratios between 15 and 20 can go either way, depending on factors such as taxes and the potential for appreciation. The ratios in such millennial meccas as New York City, San Francisco and Washington, D.C., typically favor renters, but a spike in rents and low mortgage rates is tipping the ratios in favor of buyers. (For a look at the largest 100 cities, see Trulia's Rent vs. Buy Map and use the calculator to assess your situation.)
Even with your down payment in hand, landing your dream home could be a challenge, especially in markets where the inventory of homes for sale is low (often the same markets where rents are inflated) and the best homes attract multiple bids. What you can do: Get preapproved for financing to make your bid more attractive. And ask the seller's agent if you can get the home inspected before you make an offer so you don't have to include it as a contingency in the contract.
Olivier Le Queinec/Shutterstock
It's starting to happen again. A buoyant real estate market is starting to birth many of the sights that we saw before the last bubble popped. Late night-infomercials pitching real estate as an investment -- "with little or no money down" -- are hitting the air. Flipping properties is hot again -- and some budding opportunists could get badly burned.
What Goes Around ...
More and more people are buying houses with the intention of sprucing them up and reselling them at sizable markups a few months later. Why not? Residential real estate prices have been consistently moving higher, especially in the markets that tumbled the most during the financial collapse. Mortgage rates remain reasonable. The economy's improving. What could go wrong?
However, the easy money has already been made, and it's going to be a lot more difficult to turn a quick profit on properties in the future. Let's go over five things to watch out for in this now-flawed pursuit for easy cash.
5 Reasons You Might Want to Skip the Flip
1. A 30 percent gross return is not a net return. RealtyTrac's data shows that flippers paid an average of $183,276 on a property investment, selling the house for an average of $238,850 a few months later. That sounds neat, but keep in mind that this doesn't mean pocketing a profit of $55,574. Flippers spend an average of nearly $5,000 to improve the properties they buy to make them more marketable -- about 3.34 percent of the purchase. But the bigger bargains are usually in sorry shape, making them more costly to spruce up. And in depending on where you live, the average price tag gets much higher: As RealtyTrac reports, in Atlanta the median amount spent on improving a flip was $18,250; in San Francisco, it was $13,900. Let's also not forget real estate brokerage commissions that can eat as much as 6 percent of a sale.
2. Carrying costs can be a killer. Anyone who has owned a home can tell you that it's not always a bargain. Utilities may not be as expensive for a vacant home, but taxes and insurance costs accrue between the purchase and the eventual sale.
3. Homebuilders are developing again. One factor helping the housing market's recovery is that real estate developers were forced to the sidelines during the early stages. Folks weren't buying houses, so they had no reason to build more. That has changed lately. Higher prices and rising demand have breathed new life into the construction business. That spike in new supply means flippers aren't just competing against existing properties. Deals may still be there for buyers of distressed properties, but the increased supply will make it harder to sell later.
4. Mortgage rates won't stay low forever. The Federal Reserve kept interest rates low during the long recessionary stretch and its aftermath, but now that the economy's showing genuine signs of life, we're seeing rates inch higher. Mortgage rates have actually been sliding a bit in recent weeks, but they're still almost a full percentage point above where they were during last year's record lows. Higher mortgage rates means fewer people who qualify to borrow the money to buy the homes that flippers are selling. As for investors, higher interest rates give more of an advantage to folks paying all cash for properties to flip. It's not easy to have all that money tied up in a property that may or may not sell a couple of months later.
5. Prices won't keep rising. The combination of the last two points -- more new homes going up and higher mortgage rates -- make it highly unlikely that prices will continue to increase at a rate that makes flipping as profitable as it has been recently.
It was fun while it lasted, but it's time for home flippers to find a new way to get rich.
Charles Dharapak/APFederal Reserve Chair Janet YellenBy MARTIN CRUTSINGER
WASHINGTON -- WASHINGTON -- Federal Reserve Chair Janet Yellen said Wednesday that the U.S. economy is improving but noted that the job market remains "far from satisfactory" and inflation is still below the Fed's target rate.
Speaking to Congress' Joint Economic Committee, Yellen said that as a result, she expects low borrowing rates will continue to be needed for a "considerable time."
Yellen's comments echo earlier signals that the Fed has no intention of acting soon to raise its key target for short-term interest rates even though the job market has strengthened and economic growth is poised to rebound this year. The Fed has kept short-term rates at a record low near zero since December 2008.
At the same time, Yellen cautioned that geopolitical tensions, a renewal of financial stress in emerging markets and a faltering housing recovery pose potential threats.
In response to a question, Yellen described rising income disparities in the United States as a "very worrisome trend" that could undercut economic stability and democratic principles. But she cautioned that "it's hard to get clear evidence" that pay or wealth disparities have slowed economic growth.
Sen. Roger Wicker, R-Mississippi, argued that the Fed's own policies had helped widen the wealth gap in the United States: The Fed-engineered low rates, intended to fuel the economy, have boosted stock prices and wealth for the richest Americans, Wicker contended.
Yellen countered that low rates had strengthened overall economic growth and helped home prices recover from the housing bust, thereby helping ordinary households.
Rep. Kevin Brady, R-Texas, the committee chairman, pressed Yellen to specify when the Fed might start raising short-term rates and how it will act to pare its record holdings of Treasury and mortgage bonds.
Yellen said she couldn't give a date. But she said the Fed expects to begin raising rates when it sees enough progress in restoring full employment and when inflation has returned to its target of 2 percent.
She pointed to the Fed's latest quarterly economic forecasts, which showed that most members expect the Fed to begin raising short-term rates in 2015 or 2016.
Yellen noted that even when the Fed's bond purchases end, it intends to maintain its high level of holdings and will begin to reduce them only when the economy can withstand the pullback. The Fed's record investment portfolio exceeds $4 trillion.
But Yellen also stressed that the Fed wants to avoid past mistakes of keeping its policies loose for too long and thereby fueling inflation. She noted the prolonged bout of high inflation of the 1970s.
"The lessons of that period are very real to all of us, and none of us want to make that mistake again," Yellen said.
Yellen's testimony marked her first chance to discuss the economy since the Fed met last week and the government said Friday that the economy added 288,000 jobs in April, the biggest hiring surge in two years. The unemployment rate dropped to 6.3 percent, its lowest point since 2008, from 6.7 percent in March.
But the unemployment rate fell that far because many fewer people began looking for work in April, thereby reducing the number of unemployed. The proportion of Americans who either have a job or are looking for one has reached a three-decade low.
On Wednesday, Yellen cautioned that the share of the unemployed who have been out of work for more than six months and the number of people working part time who would prefer a full-time job were at historic highs.
She also said weak wage gains are a signal of a subpar job market.
Still, at last week's Fed meeting, the central bank indicated that it saw signs of a strengthening economy. It approved a fourth $10 billion reduction in its monthly bond purchases to $45 billion, down from an original $85 billion. The Fed has been buying bonds to try to keep long-term rates low.
The Fed is expected to end its bond purchases by year's end. But even when it does, the Fed will maintain its holdings at a record level above $4 trillion and provide continued downward pressure on long-term rates.
Last week, the Fed reiterated its expectation that short-term rates would remain near zero for a "considerable time" after the bond buying program ends. Yellen repeated that language Wednesday.
"Many Americans who want a job are still unemployed, inflation continues to run below [the Fed's] longer-run objectives and work remains to further strengthen our financial system," she said.
In a speech last month, Yellen had stressed the need for the Fed to remain flexible in deciding how to manage interest rates. She said that it was important to be able to respond to "significant unexpected twists and turns the economy may make."
Many Republicans have expressed concerns that the Fed's low-rate programs are raising the risks of financial market instability and high inflation in the future.
Addressing those concerns, Yellen said the Fed recognized that an extended period of low rates could foster risky behavior in which bond investors "reach for yield" and thereby take on greater risks.
She said there was some evidence that this was occurring in the market for junk bonds where "underwriting standards have loosened." But she said the risks so far appears "modest."
-AP Economics Writer Josh Boak contributed to this report.
There is a big misconception in the financial world and among consumers today that all interest is the same: that, for example, a 6 percent mortgage is the same as a 6 percent line of credit. That's not true, because the type of interest you are paying and how it is calculated are just as important.
Most U.S. mortgages are financed with fully amortizing loans. This means that a monthly payment to pay off the loan is based on the interest rate, the amount and the term. For example, if you borrow $200,000 using this kind of loan, your payment based on a 6 percent rate and 30-year amortization schedule is $1,075.
You may have heard that just one extra payment a year toward the principal of such a loan will pay it off about 10 years sooner. Homeowners have many reasons not to do this. They don't want to tie up that extra $1,075 in their house. They receive no immediate benefit. They would rather keep their $1,075. They want to spend it on something they probably don't need and won't want three months after they buy it. They reason that they will sell their home in eight years anyway, so it doesn't matter. Or they believe interest rates are so low now that they should borrow as much as they can, and invest all of their money rather than paying down debt, because they will come out ahead that way.
In home equity lines of credit -- also called HELOCs -- the interest rate is less important than the finance charge. Finance charges on lines of credit are figured on average daily balance for the month. For example, when the 30-day finance period closes, your bank calculates that you had an average daily balance of $50,000 and the interest was 6 percent, so you will pay $8.22 per day in finance charges. Your interest charges for the month total $247, so your total payment might be around $325 because the bank will also require some money toward the principal. Simple enough, right?
What happens if on the first day you pay $5,000 on the principal? Your balance is now $45,000, so your 6 percent rate now produces a finance charge of $7.40 per day or $222 for the month. You consider that $5,000 as a pay-down, but your bank considers that $5,000 as your payment for the month.
Where do we get the $5,000? How about if you used your paycheck? Too many Americans let their pay sit in checking accounts until they pay bills. Why let that money sit there earning zero (or very little) interest? Let that income sit in your revolving line of credit to reduce or cancel finance charges.
If the line of credit is properly set up, would you be able to access your funds by writing a check? Absolutely! Would you have immediate access to any extra loan pay-downs, such as the $5,000 in the example above? Absolutely! Would the time that your money sat inside the line of credit affect your finance charge to your favor? Absolutely!
Make Every Penny Count
Let's go back to that example. You pay down $5,000 on your line of credit -- but only for 20 days, until you need most of the money to pay bills. The money then gets withdrawn (borrowed again). Your average daily balance and finance charge have been reduced. This is making every penny count by earning or canceling interest every day.
The next step is to leave some discretionary income in the line of credit. Over time, your line of credit will fall dramatically and seemingly without effort. When you balance goes down to $40,000 and all the bills are paid for the month, you can borrow $10,000 from the line of credit and send it to your first mortgage as loan pay-down? You should and do it as often as possible.
You are systematically transferring your debt from front-end-loaded amortized debt to average daily balance debt. Every time you do this, your will increase the port of your regular mortgage payment that goes towards the principal and reduce how much goes toward interest. In this was, you can use the principles of interest cancellation (and some of your discretionary income) to pay off mortgages, cars and any other amortized loan in a fraction of the scheduled time. I've had many clients take almost-new 30-year mortgages, and using this program, put themselves on pace to pay them off in six to 12 years without it affecting their lifestyle.
Getty ImagesMoms often teach their kids some of their earliest money lessons.By Gail Blair
As a child, my mom always made me feel safe, secure and loved. But she also made it a priority to prepare me for a life of financial stability. She spent a lot of time and effort over the years to set me on the right path. Sometimes she taught by example, and other times it was necessary for me to learn the hard way. These lessons have become a part of my core set of values and impact how I strive to teach my own child as well as my work for a coupon company. Here are some of the key money lessons I learned from my mom.
Make your own money: My mom believed I wouldn't truly understand the value of a dollar unless I had to earn it myself. I got my first job at 15 and continued to have a job throughout college. Yes, working for minimum wage while my friends spent lazy days by the pool was hard. But as time went on, I realized I made more responsible decisions when I earned my money. I became a savvy shopper and learned to use coupons and scoured store sales and clearance racks for the best deals.
Invest: Sometimes spending less doesn't equal saving more. I remember on one of our shopping trips, I proudly showed my mom a trendy blouse I had fallen in love with and it was only $10! I was sure she couldn't object. Not so fast. After closely eyeing the cheap garment, she asked me how many times I'd be able to wear it before it fell apart or was no longer fashionable. Two times? Three times? This taught me my first lesson in investment shopping: Calculate the per wear price. It didn't seem like such a bargain after all. Sometimes it's worth paying more for high-quality, timeless pieces if I can get more uses and versatility out of them in the long-run.
Make it work: As you could probably guess, my mom didn't grow up with a silver spoon in her mouth. There was no extra money to spend on items deemed frivolous, which unfortunately for her meant toys. She became very resourceful with what she had around her. She made flowers by folding old newspapers and caught insects to keep as pets to distract herself from the fact that she didn't have dolls to play with. She reimaged most items into serving more than one purpose. Once when I ran out of glue for a school project, she used some leftover cooked rice from our dinner and mashed together a sticky paste to hold together my artwork.
Cash in on the perks: We were fortunate that the company my father worked for paid for annual family vacations, including first class tickets and upgraded hotel accommodations. A very nice perk indeed! However, she would book us in coach and we would stay in more moderately priced lodgings or sometimes even stay home for a staycation. There were times I whined about it, but she would respond that we would have more spending money for shopping and fun activities. She won that argument every time.
Let your head rule your heart: This isn't to say my mom doesn't believe in true love or romance. But she felt having financial compatibility with your mate was just as necessary to sustain a happy marriage. It was important that she and my father were on the same page with their spending habits and financial goals. Bad spending of habits of one person in a family causes bad consequences for everyone.
Stay organized: She was a firm believer of having a place for everything, and everything in its place. How would I pay my bills if I couldn't find my checkbook, or know when the bills were due if they were scattered around the house? Getting charged my first $25 late fee for a bill I forgot to pay painfully proved this point. Today, there are several mobile apps and websites that make it easy to organize finances and bills online, which I've taken full advantage of because the groundwork was laid years ago.
Know when to hold them, know when to fold them: I used to cringe that her relentless bargaining skills could reduce a grown man to tears, but more times than not, she got what she felt was a fair price. She taught me to set a budget beforehand and not to be afraid to ask for a discount to get to that amount. The worse answer I could hear was "no." And if I couldn't close the deal, she taught me to just walk away. At times that was easier said than done, but she felt that agreeing to pay beyond your budget was the same as tossing money in the garbage. That mental picture has stopped me from many last-minute purchases.
I'll admit I've faltered from my mom's lessons over the years. Nobody's perfect, after all. But thanks to my mom, when I get financially off-kilter, I have the tools to always get myself back on track.
Gail Blair is a consumer engagement specialist at coupon company, Valpak and editor of their savings blog, Behind The Blue.
NEW YORK -- Nancy Strumwasser, a high school teacher from Mountain Lakes, New Jersey, always thought she'd have two children. But the layoffs that swept over the U.S. economy around the time her son was born six years ago helped change her mind. Though she and her husband, a market researcher, managed to keep their jobs, she fears they won't be so fortunate next time.
"After we had a kid in 2009, I thought, 'This is not happening again,'" says Strumwasser, 41, adding, "I never really felt comfortable about jobs, how solid they can be."
The financial crisis that followed the collapse of U.S. investment bank Lehman Brothers in 2008 did more than wipe out billions in wealth and millions of jobs. It also sent birth rates tumbling around the world as couples found themselves too short of money or too fearful about their finances to have children. Six years later, birth rates haven't bounced back.
For those who fear an overcrowded planet, this is good news. For the economy, not so good.
We tend to think economic growth comes from working harder and smarter. But economists attribute up to a third of it to more people joining the workforce each year than leaving it. The result is more producing, earning and spending.
Now this secret fuel of the economy, rarely missing and little noticed, is running out.
"For the first time since World War II, we're no longer getting a tailwind," says Russ Koesterich, chief investment strategist at BlackRock, the world's largest money manager. "You're going to create fewer jobs. ... All else equal, wage growth will be slower."
Births are falling in China, Japan, the United States, Germany, Italy and nearly all other European countries. Studies have shown that births drop when unemployment rises, such as during the Great Depression of the 1930s. Birth rates have fallen the most in some regions that were hardest hit by the financial crisis.
In the United States, three-quarters of people surveyed by Gallup last year said the main reason couples weren't having more children was a lack of money or fear of the economy.
The trend emerges as a key gauge of future economic health -- the growth in the pool of potential workers, ages 20-64 -- is signaling trouble ahead. This labor pool had expanded for decades, thanks to the vast generation of baby boomers. Now the boomers are retiring, and there are barely enough new workers to replace them, let alone add to their numbers.
Growth in the working-age population has halted in developed countries overall. Even in France and the United Kingdom, with relatively healthy birth rates, growth in the labor pool has slowed dramatically. In Japan, Germany and Italy, the labor pool is shrinking.
"It's like health -- you only realize it exists until you don't have it," says Alejandro Macarron Larumbe, managing director of Demographic Renaissance, a think tank in Madrid.
The drop in birth rates is rooted in the 1960s, when many women entered the workforce for the first time and couples decided to have smaller families. Births did begin rising in many countries in the new millennium. But then the financial crisis struck. Stocks and home values plummeted, blowing a hole in household finances, and tens of millions of people lost jobs. Many couples delayed having children or decided to have none at all.
Couples in the world's five biggest developed economies -- the United States, Japan, Germany, France and the United Kingdom -- had 350,000 fewer babies in 2012 than in 2008, a drop of nearly 5 percent. The United Nations forecasts that women in those countries will have an average 1.7 children in their lifetimes. Demographers say the fertility rate needs to reach 2.1 just to replace people dying and keep populations constant.
The effects on economies, personal wealth and living standards are far reaching:
o. A return to "normal" growth is unlikely: Economic growth of 3 percent a year in developed countries, the average over four decades, had been considered a natural rate of expansion, sure to return once damage from the global downturn faded. But many economists argue that that pace can't be sustained without a surge of new workers. The Congressional Budget Office has estimated that the U.S. economy will grow 3 percent or so in each of the next three years, then slow to an average 2.3 percent for next eight years. The main reason: Not enough new workers.
o. Reduced pay and lifestyles: Slower economic growth will limit wage gains and make it difficult for middle-class families to raise their living standards, and for those in poverty to escape it. One measure of living standards is already signaling trouble: Gross domestic product per capita - the value of goods and services a country produces per person -- fell 1 percent in the five biggest developed countries from the start of 2008 through 2012, according to the World Bank.
o. A drag on household wealth: Slower economic growth means companies will generate lower profits, thereby weighing down stock prices. And the share of people in the population at the age when they tend to invest in stocks and homes is set to fall, too. All else equal, that implies stagnant or lower values. Homes are the biggest source of wealth for most middle-class families.
Births might pick up again, of course. In France, where the government provides big subsidies and tax breaks for children, birth rates are back where they were in the early 1970s. In other countries, women who put off having children in the recession might play catch up soon, as they did after World War II. Demographers note that women were having children later in life even before the crisis, and so births are likely to rise anyway.
But even a snapback in births to pre-recession levels will leave families much smaller than they were decades ago, a shift that has already affected industries and economies around the world.
In Japan, sales of adult diapers will exceed sales of baby diapers this year, according to Euromonitor International, a marketing research firm. In Germany and Italy, towns are emptying as families shrink and there aren't enough children to replace older ones who are dying. And in South Korea, where births have fallen 11 percent in a decade, 121 primary schools had no new students last year, according to Yonhap, the country's government-backed news agency.
Park Hyun-kyung, a 34-year-old hospital administrator in Daegu, South Korea, says she would like to have three children, just like her parents. But she and her husband have decided to stick to one, if they have any.
"Most jobs are not secure enough to allow couples to have a baby and raise kids," she says.
In China, where the working-age population is set to shrink next year, the government is relaxing a policy that had limited many families to one child. It might not help much. Chinese are choosing to stick to one on their own.
Lei Qiang, a logistics manager in Shanghai with a 2-year-old daughter, has ruled out another child. "I just couldn't think how expensive it is to have two," says Lei, 39.
Economists are worried not just because growth is stalling in working-age populations. Their numbers as a share of the total population in many countries is falling. Economists like to see this share of total population rise, because it means more people are earning money, expanding the tax base and paying for schools for the young and pensions and health care for the old.
Before the recession, the number of these potential workers as a proportion of total population was falling in three of the world's six biggest developed economies -- Japan, Germany and Italy. Now the proportion is also dropping in the United States, France and the United Kingdom, according to investment firm Research Affiliates, using data from the United Nations.
Economists say it is rare for the number of working-age people as a share of the total population to fall in so many major countries at the same time. It's usually because of war and famine, although such proportions also fell in the 1950s as baby boomers were born and populations surged. The six countries with declining proportions of working-age people now, plus China, accounted for 60 percent of global economic output in 2012, according to Haver Analytics, a research firm.
The drops are small, a few tenths of a percentage point each year off proportions of working-age people, which had peaked in developed countries at 61.4 percent in 2009. But Research Affiliates expects the working-age share of total population to fall steadily for several decades, slowing economies each year, until they bottom at about 50 percent in 2040 or so.
A country can compensate for this demographic drag on economic growth by encouraging people to work longer or to use technologies to increase output. But most economists doubt that such changes are forthcoming or would be enough.
"You need incredible productivity growth," says Michael Feroli, a JPMorgan economist. He says economic growth of 3 percent is unlikely on a "sustained basis" even for the United States, which is blessed with a flow of immigrants, albeit a slowing one, to soften the blow.
Robert Arnott, chairman of Research Affiliates, thinks investors and policymakers don't realize how much demographics will hurt economies now because they never appreciated how much they helped in the past. Payrolls rose as the oldest baby boomers started working in the mid-1960s -- then kept rising as those born later took jobs. Retirees were relatively few because most workers were young. And many women joined the workforce for the first time.
It was an unusual confluence of beneficial demographic shifts, and perhaps unrepeatable.
"The developed world in the past 60 years has had the most benign demography in the history of man," Arnott says. But economic growth in developed countries will "tumble" to no more than a tepid 1.5 percent a year, on average, until 2040 or so, he estimates. And Arnott says economic growth per capita, a rough gauge of living standards, may "swing negative."
It's already on its way.
From 1960-2000, GDP per capita rose an average 2.6 percent a year in the big six developed countries. Since then, it has grown less than 1 percent a year. Arnott thinks the demographic drag is going to worsen, subtracting roughly a percentage point from the annual rate in the next few decades.
That suggests living standards barely growing, or even falling.
Andrew Cates, senior international economist for UBS in Singapore, worries that people accustomed to living better each year won't accept the new slow-growth future and will demand change through protests. "It's a recipe for social instability," he says.
Others note that smaller families are associated with some social benefits for societies. Births have plunged in countries where education has improved, the middle class has expanded and women have gained more freedom and rights.
Still, even optimists see the world at a delicate crossroads.
Reiner Klingholz, head of the Berlin Institute for Population and Development, says societies are unsure of their goals now that easy economic expansion is over. "We have no plans for how to run a society without growth," he says.
In aging societies, the big fear is that paying for benefits for the swelling number of retirees will weigh on economic growth. But even if benefits were fully funded, more retirees would practically guarantee slower growth for three reasons:
First, retirees don't produce anything. So a country's output falls unless new workers producing the same value of goods and services replace them.
Second, retirees don't save, invest and spend as much as workers with paychecks. That, in turn, cuts demand and slows growth.
A third reason is less obvious: Productivity of workers, or output per hour, tends to peak as they reach their mid-50s. And the increases in productivity as they near that age tend to be small. And with economic growth, only the change in productivity from year to year counts, not the level.
In other words, you may be very productive at work, but unless you're becoming even more so each year or work more hours, you're not helping the economy grow. And older workers past their peak productivity, by definition, subtract from growth.
Births have sprung back after plunging in previous economic crises, like the Great Depression. But back then many women didn't have careers, and they were expected to have big families. When the economy recovered and they could afford more children, they had them.
This time might be different.
"Now that I'm finally back to working full time I don't really want to have another child," says Christa Heugebauer, 39, as she watches her son, Finn, 4, race around an playground in Berlin. "Besides, I've got plenty of friends my age who don't have any children at all."
Some factors potentially could offset lower birth rates and help fuel economic growth. Lower unemployment rates would help. As hiring has picked up in the United States, people who had stopped looking for a job out of despair have started hunting again, thereby expanding the labor pool.
Countries can better educate and train their existing workers, attract more immigrants and encourage people to work past retirement age.
One hopeful sign: In April, the U.S. Labor Department reported that 19 percent of Americans 65 or older were either working or looking for work, up from a record low of 10 percent in 1985.
But many economists think demographic headwinds are just too strong to expect a jump in growth. The best hope is an unexpected innovation leading to a burst of efficiency in the workplace.
"Unless there is a technological miracle, demography alone points to 1 to 1.5 percent being the new normal," Arnott says. And 3 percent? That's "the new definition of boom times."
AP researcher Fu Ting in Shanghai and AP writers Frank Jordans in Berlin, Colleen Barry in Milan and Youkyung Lee in Seoul, South Korea, contributed to this report.
Many sectors rebounded on Wednesday, but those once high-flying tech stocks continued to slide.
The level of tension over a Russian military conflict with Ukraine was dialed back a bit after Russian President Putin indicated a willingness to hold talks, and claimed he had pulled troops back from the border.
The Dow Jones industrial average (^DJI) rose 117 points and the Standard & Poor's 500 index (^GPSC) added 10, but the Nasdaq composite (^IXIC) fell another 13 points.
Let's start with those Internet and social media "momentum stocks," where all of the momentum right now is on the downside.
Facebook (FB) and Amazon (AMZN) both lost about 2 percent. Google (GOOG) fell 1 percent and Twitter (TWTR) lost 3½ percent.
Yahoo (YHOO) dropped 6½ percent despite news that it's about to get a cash windfall when Alibaba goes public. Yahoo owns a huge stake in the Chinese e-commerce giant.
The other story of the day was earnings. On the upside:
o. The health insurance provider Humana (HUM) rose 8½ percent as net easily beat expectations. Humana shares have jumped more than 50 percent over the past year.
o. A pair of leading videogame makers rallied on strong results. Electronic Arts (EA) jumped 21 percent and Activision (ATVI) rose 9 percent. Over the past year, shares of EA have soared 84 percent.
o. Mondelez (MDLZ) rose 8 percent. In addition to strong results, the company is combining its coffee business with D.E. Master Blenders (DEMBF).
o. And shares of Walt Disney (DIS) slipped nearly 1 percent despite strong results, led by the movie blockbuster "Frozen."
There was also a long list of earnings disappointments.
o. Whole Foods (WFM) tumbled 19 percent after lowering its outlook for a third time.
o. AOL (AOL) dropped 21 percent. The company is the parent of Daily Finance, which publishes this report.
o. Groupon (GRPN) slid 20 percent on a wider loss and a weak forecast.
o. King Digital (KING) fell 13 percent. The maker of "Candy Crush" went public in March at $22.50 a share. It closed today at $16.27.
The online retailer Zulily (ZU) got the starch kicked out of it, dropping 30 percent.
FireEye (FEYE), a computer security firm, tumbled 23 percent.
And Aegerion Pharmaceuticals (AEGR) dropped 21 percent on a big earnings miss.
Other biotechs were also weak. Myriad Genetics (MYGN) fell 10 percent.
What to Watch Thursday:
Federal Reserve Chair Janet Yellen appears before the Senate Budget Committee in Washington.
Selected chain retailers release April sales.
The Labor Department releases weekly jobless claims at 8:30 a.m. Eastern time.
Freddie Mac releases weekly mortgage rates at 10 a.m.
These notable companies are scheduled to release quarterly financial statements:
Monkey Business Images/Shutterstock
Over the past few years, I've really focused on growing my financial planning practice, my blogs and my other online ventures. After enrolling in a coaching program and talking with mentors and other successful entrepreneurs, I realized that successful people make strong positive habits part of their daily routine to help them achieve great things.
Dan Sullivan, the founder of the Strategic Coaching Program, developed what he calls the 21-day positive focus. The basic concept fairly simple: focusing for 21 days straight on one key habit that you want to either introduce into your life or get rid of.
I chose two habits to acquire -- doing push-ups and reading the Bible -- and started the 21-day habit challenge on my blog, hoping to inspire my readers to incorporate new positive habits into their daily lives, too. I was surprised at the results.
1. It's Possible
Many people want to do good things -- like working out, eating right or writing in their journals -- but instead, they just talk about them. My public commitment made my goals much more attainable, and having the clear idea that I was going to finish the 21 days or bust also helped make it possible. While some days were harder, I'm excited to say that I completed the 21-day habit challenge successfully.
2. Writing It Down Makes All the Difference
As part of the challenge, I had my readers print off the Bad Habit Destroyer worksheet. It's a simple PDF that has 21 boxes that were to be crossed off for each day that you accomplished your daily habit goal. This was huge for me. Simply having to mark an X each day was a constant reminder to stay on point and finish this challenge. If it was late in the day and I was short on my push-up goal or hadn't read my Bible yet, I kept thinking about having to mark that X off, and it pushed me to get it done. What has since made incorporating those habits more effective is when I give myself a deadline during the day.
Science backs this, notes James Clear, who blogs about habit transformation and shared research that reveals a simple trick to double your chances of achieving any goal. In a study published in the British Journal of Health Psychology, researchers were trying to determine the most effective way to get people to work out. The study found motivation wasn't the largest factor for people to work out more; it was having a clear plan about when and where they were going to work out that had the most significant affect. "Over 100 separate studies in a wide range of experimental situations have come to the same conclusion: people who explicitly state when and where their new behaviors are going to happen are much more likely to stick to their goals," he writes.
3. Why Didn't I Do It Sooner?
These habits are ones I could've easily integrated into my daily routine months, if not years, sooner. For whatever reason, I didn't. I'm now thankful that I went through the challenge, because I feel like I now have introduced positive habits in my life that I hope never go away. Is there something that you've been wanting to get started, there's not a better time than now. I love this quote from Zig Ziglar: "You don't have to be great to start, but you have to start to be great."
4. Make It Public
Many people who joined the challenge were sharing what they were hoping to accomplish via Facebook (FB), Instagram and Twitter (TWTR). Any time you want to accomplish something new -- such as working out three days a week, for example -- I think it's a good idea to share your goal with your friends, your family and your co-workers. Heck, put it on Facebook. Why? You now have others who will hold you accountable.
5. Don't Let Your Goals Out of Your Sight
When I was working on my bad habits, I made sure that I carried the Bad Habit Destroyer worksheet with me everywhere. I made sure that I would see it each day to remind me what the habit I was focusing on. It's so important to constantly remind yourself what exactly you're trying to achieve.
A good buddy, Ben Newman, author of the best-selling book "Own Your Success," keeps the positive habits he's working on listed in his bathroom so he's reminded regularly what he's striving to achieve. When you don't have a visual reminder of the habit you're trying to break, you forget, tend to get lazy and fall back into your old rut.
6. Be Realistic
Each time you try something new, you have to be realistic with your goals. For example, a few challengers who hadn't exercised at all in the last year were trying to work out 30 minutes a day, seven days a week. They were setting themselves up for failure.
Darren Hardy, the author of "The Compound Effect," suggests dividing your goal by two. Say, for example, you want to work out six days per week. Make three days your minimum goal achievement. People who tend to set their goals too high will end up giving up if they don't meet that goal for that week. Same thing applies with this habit challenge.
It's Your Turn
What's one new positive habit you would like to add to your daily routine? Reading more about personal finance, writing in your journal, tweaking your budget, stop biting your fingernails, exercising more?
Jeff Rose is a certified financial planner and has an unusual obsession with In-N-Out Burger. He created the Money Dominating Toolkit and filled it with awesome resources to show your money who's boss.
Alamy
One of the great selling points of mutual funds is that they're fire-and-forget investment vehicles. You make your contributions, and then check in on your fund's performance every once in a while, secure in the knowledge you're diversified across a wide range of stocks, bonds or both.
The flip side of fire-and-forget is that most mutual-fund investors probably don't look too closely at the critical details of their investments, like their fund expenses. These fees eat into returns and can add up to significant amounts. Happily, there's an easy way to compare these parasitic costs across different funds.
Your Friend, the Expense Ratio
As with any other kind of enterprise, a mutual fund needs money to operate. Costs can include administrative fees, taxes, marketing fees, legal expenses and securities transaction fees. But a mutual fund's biggest operating cost is typically the investment advisory fee -- the money paid to the fund's investment manager.
All of these costs have to be paid by someone, and that someone is you, one of the fund's many investors. The lower the operating costs, the better your returns. And the easiest way to compare operating costs across funds is with the "expense ratio."
The expense ratio is arrived at by dividing the fund's operating costs by its average assets, and it is expressed as a percentage. For example, the expense ratio of my Vanguard 500 Index Fund Admiral Class (VTSAX) is 0.05 percent. This means only 0.05 percent a year of the fund's total assets are paid to those who run it. A lower expense ratio leads to a better long-term performance.
The Numbers Don't Lie
Last year, Financial Analysts Journal published a paper by William F. Sharpe titled "The Arithmetic of Investment Expenses." Sharpe is professor emeritus of finance at Stanford University and the 1990 Nobel Prize in Economics. In the study, he compared two investments: one made in a fund with high operating costs and the other in a fund with low operating costs. The low-cost fund was a Vanguard Total Stock Market Index Fund Admiral Shares, and had an expense ratio of 0.06 percent a year. The high-cost fund had an expense ratio of 1.12 percent a year, which Sharpe said is the average for such funds.
The differences were startling. Over a period of 10 years, the fees on an investment of $10,000 were only $153 with the low-cost Vanguard fund, compared to $2,720 for the high-cost fund. But far more important were the effects high operating costs have on fund returns over the long run. Again over a 10-year period, an investor in the low-cost fund ends up with 11.25 percent more wealth than an investor in the high-cost fund -- all because of higher operating costs.
"A person saving for retirement who chooses low-cost investments," Sharpe says, "could have a standard of living throughout retirement more than 20 percent higher than that of a comparable investor in high-cost investments."
The funds being compared were index funds designed to simply track a benchmark. My Vanguard fund, for instance, mimics the S&P 500 (^GPSC). While there is almost certainly a human looking after things at my fund, that person isn't moving stocks in and out of it at his or her personal discretion. Not only would I have to pay extra for that, but I would also have to bear the costs such moves would generate.
Say It With Me Now: Expense Ratios
In his paper, Sharpe quotes a director of fund research at Morningstar (MORN), which provides mutual-fund analysis and data: "If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. ... They are still the most dependable predictor of performance."
Any investment house worthy of your money should be proud of its low-cost, high-return fund offerings. However you monitor your mutual fund's performance, the expense ratio should be easy to find. And if it isn't, you may want to ask yourself -- and the company offering the fund -- why.
Disney (DIS) is hoping to get its Florida visitors to spend more money by introducing park experiences that take place after the attractions close to day guests. That's on top of February price hikes that hit as much as $99 for a one-day ticket to visit the Magic Kingdom.
Epcot After Hours Wind Down, an intimate experience at four of the nation-themed restaurants, takes place after the 9 p.m. Illuminations show closes out the park. Guests can pay $35 per adult to stick around until 11 p.m., enjoying tapas-size tastings and wine pairings.
Epcot After Hours Wind Down didn't turn a lot of heads. The price is somewhat reasonable, by Disney's standards, for an after-hours experience that includes food and drinks. It also takes place after the park is closed, so it's not as if day guests feel as if they are being cheated. However, it may be a different story for the upcoming Harambe Nights.
Hakuna Matata
On Saturdays from June 7 to Aug. 9, visitors to Animal Kingdom after the 7 p.m. close will be able to pay for a three-hour party experience. It will be anchored by the park's restored theatrical performance of "The Lion King" in the new Harambe Theatre in the park's Africa section. Viola Davis, David Allan Grier and Alfre Woodard are just some of the celebrities who will narrate the 55-minute show during the 10-week run. A street party will go on when the show isn't taking place, complete with African treats, desserts and beverages. All for $119.
That's a lot to pay for a three-hour experience on top of the cost of the day's admission. Yes, food and drinks are included, but even Disney buffs who have accepted the media titan's stiff theme park admissions may have a hard time justify paying up for the experience.
In theory, Animal Kingdom is ripe for a nighttime event. The park has often been called a "half-day park" and is probably not doing itself any favors by being able to host a nightly event at 7 -- when its other three parks will be open for several more hours -- because that's when the park closes. As an animal-themed park, it may makes sense to operate during zoo-like daytime hours, but it doesn't seem right that a park now charging $95 for a one-day ticket is still closing at 7 p.m..
The early closings will end when a richly themed "Avatar" section opens in a couple of years. In fact, one of the additions is a nighttime show. The extra hours will relieve park visitors, especially in the summer heat, when the Animal Kingdom isn't a very easy park to tackle. However, it's also a fair bet that Harambe Nights will be gone by the time Avatar opens in 2016 or 2017. This will find Disney in a quandary if Harambe Nights is successful, but that's probably a good problem to have.
Party Time for Investors
Disney's rolling these days. It reported strong quarterly results on Tuesday afternoon with its theme parks division posting an 8 percent increase in revenue and a 19 percent spike in operating income. Disney scored this growth despite the shift of the seasonally potent Easter season from March last year to April this time around.
Shareholders working the math should be giddy. Including those visiting during a late Easter and the addition of hard-ticket events like Harambe Nights and Epcot After Hours Wind Down, the current quarter should be another potent period.
If Harambe Nights can get away with charging $119 -- a price that makes the $99 Magic Kingdom ticket seem like a bargain -- there's no telling what Disney will come up with next.
Motley Fool contributor Rick Munarriz owns shares of Walt Disney. The Motley Fool recommends Walt Disney.
Jeff Chiu/AP
So far, 2014 has been a high-scoring year for initial public stock offerings. The first quarter saw more IPO activity than any other initial quarter since 2000, with 64 companies listing on various U.S. exchanges raising a collective $10.6 billion. That's more than double the number of IPOs that took place in the first quarter of 2013.
This is directly related to the health of the overall stock market. Generally speaking, the better shares are performing, the higher the chance of an issuer being successful on IPO day. After all, who's eager to buy anything when the market's in the doldrums?
Yet even in a good environment for IPOs, companies occasionally get the jitters and withdraw their listings. Sometimes this is due to the overall atmosphere on the market; sometimes it's because of difficulties with the issuing company itself; sometimes it's both. Whatever the reason(s), the notable examples below scampered away before they could become publicly traded entities.
Square
One of the top anticipated IPOs of 2014 was for this cutting-edge e-commerce company, which pioneered the use of smartphone and tablet payment card readers. Then there's Square's impeccable geek credentials, thanks in no small part to its founder-CEO Jack Dorsey, who was one of the guiding lights behind Twitter (TWTR).
That, apparently, wasn't enough to bring it to market. In late February, media reports had it that the company postponed its planned IPO indefinitely. It seems that it's burning through cash very quickly and doesn't have enough revenue to cover this.
Instead of listing on an exchange, the firm is reportedly looking for a deep-pocketed suitor and has allegedly held discussions with Google (GOOG), Apple (AAPL) and eBay (EBAY), and possibly even one of its investors, Visa (V), regarding a potential buyout. Square denies it has been in acquisition talks.
Trustwave Holdings
Another nonstarter in the tech IPO space was Trustwave, which provides on-demand data security solutions. After Target (TGT) suffered a large-scale breach of its credit card data last November, both the retailer and Trustwave were sued by a pair of regional banks that claimed they suffered financial damages from the incident.
Trustwave claimed that it didn't outsource data security to Target (it's hard to tell -- such arrangements are usually confidential). Nevertheless, the lawsuit attracted the wrong kind of publicity before the banks dropped it in April.
Interestingly, Trustwave's cancellation of the IPO was its second; the first was a flotation planned for August 2011. This time, the company was to sell 6.25 million shares priced at $15 to $17 apiece on the Nasdaq. The underwriting syndicate was led by heavyweights Morgan Stanley (MS), JPMorgan Chase's (JPM) J.P. Morgan unit and Barclays (BCS) Capital.
Sundance Energy Australia
The world just can't get enough energy; oil and gas markets are thriving these days. Combine that with a strong market for IPOs, and you've got a bunch of new issues in the energy sector listing on stock markets.
Sundance Energy Australia had planned to complement the extant listing on its native exchange by floating nearly 7.8 million American depository shares on the Nasdaq. The issue was slated for this past February and was to be lead-underwritten by Wells Fargo (WFC) Securities, Canaccord Genuity and UBS (UBS) Investment Bank. But in April the company pulled the issue due to market conditions.
That's a shame, as Sundance likely would have attracted investor interest given that it has a presence in rich U.S. plays such as the Bakken formation in the Midwest. Although the company's net result hasn't always been positive, Sundance almost doubled its top line on a year-over-year basis in the first nine months of 2013.
Associated Materials
The building materials sector is home to this 67-year-old company, which did not specify a reason for withdrawing its planned IPO this April. Market weakness probably had at least something to do with it; on the same day it bagged its issue, three other stocks coming to market priced below their anticipated per-share ranges.
Fundamentals might also have been a factor. Both the current form of the company and its immediate predecessor have generally been unprofitable since 2009, and revenue has dropped in recent times. This is the sort of combination that gives investors pause.
Regardless, a trio of busy financials -- Goldman Sachs (GS), Barclays and UBS Investment Bank -- were set to lead-underwrite the issue, which was planned to raise up to $100 million on the Nasdaq or New York Stock Exchange.
Motley Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Apple, eBay, Goldman Sachs, Google (A and C shares), Twitter, Visa and Wells Fargo. The Motley Fool owns shares of Apple, eBay, Google (A and C shares), JPMorgan Chase, Visa and Wells Fargo and has the following options: short June 2014 $50 calls on Wells Fargo and short June 2014 $48 puts on Wells Fargo.
Kiyoshi Ota/Bloomberg via Getty ImagesBy YURI KAGEYAMA
TOKYO -- Toyota chalked up a record annual profit and sales above 10 million vehicles for the first time, but forecast a slower year ahead Thursday, as the momentum from a weak yen fades.
Expenses such as the $1.2 billion penalty it paid in a settlement with the U.S. Justice Department earlier this year for hiding information about defects in its cars dented its profit for January-March quarter, according to Toyota.
Toyota Motor (TM), the world's top automaker, is forecasting a 1.78 trillion yen ($17.5 billion) profit for the fiscal year through March 2015.
That's lower than what the company recorded for the fiscal year just ended, when its profit almost doubled to a record 1.82 trillion yen ($17.9 billion) from 962 billion yen the previous year.
Annual sales jumped 16 percent to 25.69 trillion yen ($252 billion), helped by a weak yen which aids Japanese exporters and thanks to growth in the U.S., Europe, Japan and the rest of Asia. The yen perk is likely transitory as the currency isn't expected to weaken indefinitely.
Toyota believes Japan sales were inflated in recent months as consumers rushed to buy ahead of a tax increase that kicked in April 1, so that such growth won't hold up during the current fiscal year.
Still, the company is on a roll.
The maker of the Prius hybrid, Lexus luxury model and Camry sedan became the first automaker to sell more than 10 million vehicles in a 12-month period, with sales totaling 10.13 million vehicles around the world for the fiscal year ended March. It also expects to surpass the 10-million milestone for the current calendar year.
It is expecting solid growth to continue, hoping to sell 10.25 million vehicles globally for the fiscal year through March 2015.
Highlighting the Japanese automaker's ambitions, it noted that extra costs including research and development expenses were a factor in reducing its January-March profit to 297 billion yen ($2.9 billion) from 313.9 billion yen a year earlier.
Quarterly sales rose 12.5 percent to 6.57 trillion yen ($64.5 billion).
It also said costs related to closing its auto plant in Australia cut into profits.
Toyota has bounced back from a massive recall crisis that began in late 2009, which tarnished its reputation.
But there was a moment of deja vu last month when it announced a recall of 6.4 million vehicles globally, for a variety of problems spanning nearly 30 models in Japan, North America, Europe and other places. Some vehicles were recalled for more than one problem.
Toyota has been trying to put the recall mess behind it, with the $1.2 billion settlement it reached with the U.S. Justice Department. It earlier paid fines of more than $66 million for delays in reporting unintended acceleration problems.
The National Highway Traffic Safety Administration never found defects in electronics or software in Toyota cars, which had been targeted as a possible cause.
Even more of a threat than recalls could be the fierce competition Toyota faces in key global markets from Volkswagen of Germany and Hyundai of South Korea, as well as U.S. automakers such as General Motors (GM). and Ford Motor (F).
Toyota sold fewer vehicles in North American for January-March at 567,000 vehicles compared to the same period the previous year at 603,000 vehicles.
But it is making up for such losses in other markets.
A weak yen also helped earnings at Honda Motor (HMC), which last week said that January-March net profit totaled 170.5 billion yen ($1.67 billion), up from 75.7 billion yen the year before.
Honda sold nearly 1.2 million vehicles worldwide during the quarter, also helped by demand ahead of the Japanese tax rise. It is forecasting a 4 percent rise in annual profit to 595 billion yen ($5.8 billion).
Although the dollar soared to about 100 yen during the past fiscal year from about 80 yen the fiscal year before that, it's unlikely to keep rising at that pace, to 120 yen, for instance.
Nissan Motor, allied with Renault SA of France, releases results Monday.
Here's something those trying to cash in on frequent flyer miles or points seldom hear: It's now easier to book the flight you want to the destination you want.
The annual Switchfly Reward Seat Availability Survey, which gauges the frequent flyer programs at 25 of the world's largest airlines, found seats were available for frequent flyer redemption on 72.4 percent of the flights checked. That's a 1.3 percent increase compared with the prior year.
"I was surprised by this year's results," said Jay Sorensen, president of IdeaWorks consulting firm, which surveyed 7,640 flights in March. "Typically, when you see the industry recovering from financial duress, one of the things they cut back on is giving away free seats."
Instead, many airlines have actually made frequent flyer seats available on more of their flights.
Sorensen credits the boost to the independent credit cards many flyers now use to rack up award miles that they can redeem without restrictions. Those credit cards, like the one offered by Capitol One, have become popular with consumers, and have forced airlines to make it easier for members of their own frequent flyer programs to cash in miles or points in order to compete.
"[The airlines] want to compete against the bank-issued credit cards, so this is one way for them to do that," Sorensen said.
Another factor is an accounting rule that says airlines can book revenue from the sale of frequent flyer miles only after the passenger has traveled.
Low-cost carriers offer the most options
As has been the case in past years, low-cost carriers have the most flights offering seats for frequent flyer redemption, according to the study.
On average, 95.8 percent of the low-cost airline flights surveyed had seats available. By comparison, traditional airlines had frequent flyer award seats on 65 percent of their flights. That's up 4 percent from last year, but still well below the availability offered by low-cost airlines.
Airlines with the most flights with seats open for redemption
Rank
Airline
% of flights with seats open
1
Air Berlin
100
1
Southwest
100
2
Virgin Australia
99.3
3
JetBlue
92.9
4
AirAsia
92.1
5
GOL
90.7
Credit: IdeaWorks
"The low-cost carriers tend to have a lot of frequency into the markets they serve, so they do have an inherent advantage," Sorensen said.
The frequent flyer programs offered by airlines such as Southwest (LUV) and JetBlue (JBLU) are also younger than the programs at older, legacy carriers. As those airlines have merged and become bigger over the years, so have the number of members in their loyalty programs. That means there are more miles in those programs than in the programs offered by competitors.
Among the largest airlines in the world, Delta (DAL) and United (UAL) flew in different directions in the latest report.
Delta, which finished dead last in the 2013 survey, moved up to 16th place. IdeaWorks found frequent flyer seats available on 55 percent of the Delta flights it surveyed, an increase of 18.6 percent compared with last year.
"I think Delta finally got around to looking at the health of their frequent flyer product and said, 'You know, we need to make some changes here,'" Sorensen said.
By comparison, United Airlines slipped to 14th place in the survey. IdeaWorks found frequent flyer seats available on 71.4 percent of flights, down 8.6 percent.
LM Otero/APWendi Kunkel owns a 2010 Chevrolet Cobalt that has been recalled to fix a faulty ignition switch. The Rockwall, Texas, resident says she's nervous about driving her car on her 30-minute one-way commute.By TOM KRISHER
DETROIT -- Nine million parts.
That's what General Motors (GM) needs to repair millions of cars it has recalled since Feb. 7. With ignition switches, power steering motors and other parts slowly arriving at dealers, frustrated drivers face waits of weeks or months, some while driving cars they fear are unsafe.
Any recall can present challenges for automakers and customers. Still, most recalls include less than 50,000 vehicles and are typically completed in two or three months.
But experts say eight simultaneous recalls covering 7 million vehicles is too much for any organization to handle quickly, even one as big as GM. Suppliers have to make the parts -- millions aren't sitting in stock. GM has to notify customers, ship the parts to dealers worldwide and train mechanics how to do repairs.
GM says it will take six months to make and distribute all the parts for the largest recall: 2.6 million small cars with faulty ignition switches that the company links to 13 deaths. The switches, mainly in older Chevrolet Cobalts and Saturn Ions, can slip out of the "run" position into "accessory," shutting off engines and disabling power-assisted steering and air bags. GM has told dealers to offer concerned owners a loaner car while they wait for parts. Those cars also need to have a second part replaced.
There's no estimate yet on when the other recalls will be finished.
Owners of all car brands might watch the mail for more notices. GM rival Toyota (TM), which itself recently ordered recalls of millions of vehicles, expects automakers to be more proactive in bringing cars in for repairs.
At least initially, the GM ignition switch recall didn't go smoothly.
"This is a big ol' hot mess," said Blair Parker, a Houston-area attorney who owns a 2005 Chevrolet Cobalt included in the switch recall. Her dealer can't tell her exactly when parts will arrive.
A few months ago, Parker's car engine shut off unexpectedly when she hit the keys with her hand, an incident she had chalked up to user error. Now she worries the Cobalt's switch is defective, and is driving a loaner car.
"We just decided it wasn't worth the risk," she said.
After the switch recall, GM conducted a review that turned up 4 million more vehicles with problems, including faulty power steering motors, transmission oil leaks, defective drive shafts and air bag troubles. About 500,000 of them only need a fitting to be tightened and don't need parts.
All told, the recalls present a Herculean task for GM. Multiple suppliers are involved, and parts need to go to more than 4,300 dealers.
Dave Closs, chairman of the Supply Chain Management Department at Michigan State University, says GM dealers will have frustrated customers on their hands for a while.
Lengthy Process
Parts-makers have to find factory space and workers to ramp up assembly lines. GM said Delphi Automotive has one line working seven days a week to make ignition switches and it's setting up two more.
Finished parts must then be inspected for quality. After that comes shipping, a costly and slow process, Closs says.
"You're shipping relatively small shipments all over the world," he says.
Toyota is in a similar situation. Last month it announced recalls totaling 6.4 million vehicles to fix defective seats and bad air bag wiring.
Bob Carter, Toyota's U.S. automotive operations chief, says car owners can expect more frequent recalls because the regulatory and competitive environments have changed. Instead of recalling cars for known defects, companies are now "recalling vehicles to change problems that we anticipate might happen," Carter says.
GM is under fire because it knew about the problem with the ignition switches for 10 years before conducting the recall. Two congressional committees, the Justice Department and federal safety regulators are investigating GM's slow response, and criminal charges are possible. GM has hired lawyer Kenneth Feinberg to negotiate settlements with surviving families and some injured drivers.
So far, the company says it isn't going to use its 2009 bankruptcy as a shield from wrongful death and injury claims. However, it is seeking bankruptcy court protection from claims that its small cars lost value.
Wendi Kunkel's 2010 Chevy Cobalt is part of the switch recall. Her dealer told her to pull everything off her keychain, which GM contends will stop the switches from turning off unexpectedly. But she's nervous about her 30-minute one-way commute near Dallas.
"I'm on a highway where I'm going 65 mph," the public relations representative says. "If my car were to switch into accessory or off, the likelihood of me crashing and not having air bags deployed -- it's pretty terrifying to think about."
Loaners Available -- If You Ask
Kunkel says her dealer, Lakeside Chevrolet in Rockwall, Texas, didn't initially offer her a loaner, although she plans to ask for one.
Frank Pecora, Lakeside's service manager, said the dealership doesn't offer loaners unless customers express concern for their safety, per instructions from GM.
So far, GM has put 45,000 customers in loaners, equal to 1.7 percent of the cars recalled for the ignition switches.
GM isn't offering loaners to car owners affected by the other recalls. Duane Paddock, owner of a Chevrolet dealer near Buffalo, New York, says he's offering loaners on his own dime to keep customers happy.
Recalls are often profitable for dealers such as Paddock because GM provides the parts and pays for installation. Also, owners of older cars travel to dealerships for repairs and see the company's new vehicles while they wait.
Dealers say small numbers of parts began arriving late in the week of April 7, and the pace has picked up. GM says it has shipped thousands of ignition switches and notified 1.4 million owners to set up repair appointments.
Jerry Seiner, chairman of a Salt Lake City-area dealership group, says his technicians have replaced 23 ignition switches and lock mechanisms for owners who contacted them before April 1. After more publicity about the problem in April, more than 150 people now are waiting for parts. Seiner says parts are arriving three to four weeks after they're ordered.
Google's test of a super-fast Internet connection in Kansas City is off to a speedy start.
A survey by analysts at Bernstein Research finds 42 percent of residents in Kansas City have signed up for Google Fiber at $70 a month. That's about $5 a month more than the much slower service offered by Time Warner Cable (TWC). Google (GOOG) previously identified 33 other cities for expansion of the fiber service, if the Kansas City test goes well.
Student loans are about to get more expensive. The rate on undergraduate loans is set to rise by nearly a percentage point, to 4.66 percent. For a freshman starting at a four-year college later this year, that could mean $2,100 in extra interest payments over a decade.
The Internal Revenue Service will conduct 100,000 fewer audits this year, mostly because of cuts to the agency's budget. As a result, the IRS Commissioner says the government will lose about $3 billion in uncollected tax revenue.
Here on Wall Street, the Dow Jones industrial average (^DJI) rose 117 points Wednesday and the Standard & Poor's 500 index (^GPSC) added 10, but the Nasdaq composite (^IXIC) fell 13 points. The Nasdaq has lost 6.5 percent since its recent peak in early March.
The hope of harnessing offshore winds for energy use is catching sail. The Energy Department will pay up to $47 million for each of three projects to corral the winds off the coasts of New Jersey, Virginia and Oregon. The long-delayed projects are expected to begin delivering energy by 2017.
The Navy has selected Sikorsky Aircraft and Lockheed Martin (LMT) to build new helicopters to replace the aging fleet of presidential choppers. No surprise there. They were the only bidders. The award of $1.2 billion is for six new helicopters.
Finally, here's hoping Bob Costas doesn't have another untimely bout of pink eye. NBC has locked up the rights to broadcast the Summer and Winter games through the year 2032. It agreed to pay $7.7 billion to extend the current deal, which had been set to expire in 2020.
AlamyThe U.S. Treasury building in Washington, D.C.By MARCY GORDON
WASHINGTON -- Government-controlled mortgage financers Fannie Mae and Freddie Mac posted solid earnings for the January-March period as the U.S. housing market continued to recover. Gains over recent quarters have enabled the companies to fully repay their taxpayer aid after being rescued by the government in 2008.
Fannie Mae reported Thursday that it earned $5.3 billion in the first quarter. Fannie will pay a dividend of $5.7 billion to the U.S. Treasury next month. With its previous payments totaling about $121 billion, Fannie has more than fully repaid the $116 billion it received from taxpayers.
Freddie Mac posted net income of $4 billion for the first quarter. Freddie, based in McLean, Virginia, will pay a dividend of $4.5 billion to the government. Freddie already had repaid its full government bailout of $71.3 billion after paying its third-quarter 2013 dividend.
The government rescued Fannie and Freddie at the height of the financial crisis in September 2008 when both veered toward collapse under the weight of losses on risky mortgages. Together the companies received taxpayer aid totaling $187 billion.
The gradual recovery of the housing market has made Fannie and Freddie profitable again. Their repayments of the government loans helped make last year's federal budget deficit the smallest in five years.
Fannie, which is based in the nation's capital, said its first-quarter profit was bolstered by a stable stream of revenue from the fees it charges banks and other mortgage lenders for guaranteeing home loans. The company said it expects "to remain profitable for the foreseeable future."
The $5.3 billion earnings compared with record net income of $58.7 billion in the same period of 2013. The year-ago figure was mainly due to a one-time accounting move that allowed the company to lower its tax liability by applying losses on delinquent mortgages to its 2013 taxes.
Freddie's $4 billion net income compared with $4.6 billion in the first three months of 2013. Earnings were bolstered in the latest period by a decline in mortgage delinquencies, Freddie said.
Under a federal policy, Fannie and Freddie must turn over their entire net worth above $2.4 billion in each quarter to the Treasury. Fannie and Freddie said their net worth in the first quarter was $8.1 billion and $6.9 billion, respectively.
Fannie and Freddie own or guarantee about half of all U.S. mortgages, worth about $5 trillion. Along with other federal agencies, they back roughly 90 percent of new mortgages.
The two companies don't directly make loans to borrowers. They buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. That helps make loans available.
President Barack Obama has proposed a broad overhaul of the U.S. mortgage finance system - including winding down Fannie and Freddie. The goal is to replace them with a system that would put the private sector, not the government, primarily at risk for the loans.
A plan to phase out Fannie and Freddie, and instead use mainly private insurers to backstop home loans is advancing in Congress. Two key senators reached agreement in March on a plan that was endorsed by the White House.
The plan by Sen. Tim Johnson, D-S.D., chairman of the Banking Committee, and Sen. Mike Crapo of Idaho, the senior Republican on the committee, would create a new government insurance fund. Investors would pay fees in exchange for insurance on mortgage securities they buy. The government would become a last-resort loan guarantor.
Financial "stress tests" conducted by Fannie and Freddie's regulator found that under a severe economic scenario, an additional $190 billion in taxpayer aid could be needed for the two companies. That is a hypothetical situation and "not expected," the Federal Housing Finance Agency said in a report last month.
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The relationship between employee and employer within a small business is an idea that should work smoothly in theory. A conscientious employer who is respectful and pays competitive wages should have no problems getting along with their capable and hardworking employees. In theory.
But in the real world, a number of issues can get in the way of a smooth working relationship, and one of those issues is when employees request an advance on their paycheck.
There are times when even the most fiscally responsible employee may need some extra cash. Not only is it bad business, but morally questionable for an employer to deny an employee an advance when they have a crisis come up that is not of their own making.
Advances only become a problem when they are requested on a regular basis because they constrict cash flow and necessitate extra processing and paperwork -- all things that can have an impact on running a small business.
Advances have a tendency to go viral as well, meaning that once you agree to an advance for a certain employee, others will find out, and you will soon be inundated with requests. This may cause tensions between owners and employees, which can lead to a very unpleasant work environment.
To solve the problem of persistent advances, it is important to examine what may be the biggest contributing factor, frequency and timing of pay. When I ran my own small business I paid my employees every other week, on a Friday. Now think for a moment about what that means.
You've put a half month's wages in your employee's pocket at the end of working five days straight, and before having two days off. There is a natural temptation for most people at this point to blow off some steam, and even the most responsible employee can lose a good chuck of their pay drinking at a local watering hole, betting on some weekend games or buying a TV that's at a big-box retailer.
One solution to this problem is to change your pay period from twice a month to weekly. Employees can't spend what they don't have, so by giving them less money -- but more often -- you make it harder for them to get in the hole financially and necessitating an advance.
If you don't want the hassle of a weekly payroll, why not try changing your company's payday to Monday instead of Friday?
An employee is less likely to blow a big chunk of their pay when they get paid on a Monday.
An employee is less likely, and has fewer opportunities, to blow a big chunk of their pay when they get paid on a Monday, as most sporting events and sales are only on the weekends. And the responsibility of being at work on time and ready to go -- for the rest of the week -- cuts down on the post-paycheck watering hole activities.
I have known small business owners who paid their employees daily to eliminate advances, and even one who -- with written consent -- allowed his employee's spouse to come to the office to pick up his paycheck.
Of course the ultimate solution to this problem is for a small business owner to state up front when hiring a new employee that there is a "no advance" policy, and to stick to that policy for all employees, (with the exception of emergencies).
In the end, it all comes down to how much of an issue pay advances become, and how willing, flexible, and creative a small business owner is prepared to be in order to solve the problem.
If you've ever searched the aisles for healthy chicken, you know there are a lot of options out there, but what do these labels really mean, and how can you make sure you're getting what you pay for?
We've all heard the term "farm raised," but according to the U.S. Department of Agriculture, this label simply means that a chicken was born and raised on a farm. It doesn't define how they were treated. Technically, all chickens are farm-raised, so this label really has no meaning.
Another term to watch out for is "natural." While it's a popular marketing phrase, this label doesn't carry an weight either.
You've also probably seen the label "hormone-free." What most people don't know is that the U.S. Food and Drug Administration already prohibits the use of any artificial hormones in the production of poultry. That means any brand of chicken can be labeled "hormone-free."
Another term that can be deceiving is "free range." There are currently no industry standards that specifically define what a "free range" farm is. It could be anything from an open yard to a small, penned-in area.
As a result, 99 percent of poultry labeled "free range" simply isn't. You'll have to go to a local farm or farmer's market to get true free-range chicken.
Lastly, we have "organic," which is the only label that guarantees certain standards. This term means that there are no antibiotics used, and that 100 percent of the chicken's feed must be grown without chemical fertilizers, herbicides and other genetically-modified organisms for at least three years.
While these chickens may be more expensive, they're also much more nutritious and definitely worth the extra cost. So remember, sometimes the real savings happen when you know what you're paying for.
John Raoux/AP
WASHINGTON -- Average U.S. rates on fixed mortgages fell this week for a second straight week as the spring home-buying season has gotten off to a slow start.
Mortgage buyer Freddie Mac said Thursday the average rate for the 30-year loan declined to 4.21 percent from 4.29 percent last week. The average for 15-year mortgages eased to 3.32 percent from 3.38 percent.
Mortgage rates have risen almost a full percentage point since hitting record lows about a year ago.
Warmer weather has yet to boost home buying as it normally does. Rising prices and higher rates have made affordability a problem for would-be buyers, while many homeowners are reluctant to list their properties for sale.
Roughly a third of homeowners owe more on their mortgage than they could recoup from a sale.
Data released Tuesday showed that U.S. home prices rose at a slightly slower pace in the 12 months that ended in March, a sign that weak sales have begun to restrain the housing market's sharp price gains. Real estate data provider CoreLogic (CLGX) said prices rose 11.1 percent in March compared with March 2013. Though a sizable increase, that was down a bit from February's 12.2 percent year-over-year increase.
Home sales and construction have faltered since last fall, slowing the economy. A harsh winter, higher buying costs and a limited supply of available homes have discouraged many potential buyers. Existing-home sales in March reached their lowest level in 20 months.
Some signs suggest that buying might be picking up a bit as the spring season gets underway. Signed contracts to buy homes rose in March for the first time in nine months, the National Association of Realtors said last week.
The increase in mortgage rates over the year was driven by speculation that the Federal Reserve would reduce its $85 billion-a-month bond purchases, which have helped keep long-term interest rates low. Indeed, the Fed has announced four $10 billion declines in its monthly bond purchases since December.
The latest came last week as Fed officials decided to reduce the monthly purchases to $45 billion a month, because they believe the economy is steadily healing. However, the central bank expects its benchmark short-term rate to remain unusually low.
Fed Chair Janet Yellen told Congress this week that the economy is improving but noted that the job market remains "far from satisfactory" and inflation is still below the Fed's target rate.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage declined to 0.6 point from 0.7 point a week earlier. The fee for a 15-year loan remained at 0.6 point.
The average rate on a one-year adjustable-rate mortgage fell to 2.43 percent from 2.45 percent. The average fee slipped to 0.4 point from 0.5 point.
The average rate on a five-year adjustable mortgage was unchanged at 3.05 percent. The fee rose to 0.5 point from 0.4 point.
As part of the challenge, I had my readers print off the 
