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Could the Affordable Care Act Improve the U.S.' Failing Health-Care Grade?

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When it comes to the health care system in the United States, we might be closer to the end of unaffordable services and the barriers to access they create. But we're not out yet.

A new report (link opens PDF) by the Commonwealth Fund, which has been assessing and ranking health care around the world for years in its Mirror Mirror on the Wall series, paints a grim picture for the U.S. Based on quality, effectiveness, access, efficiency, and equity, the rankings were as follows:

Australia; Canada; France; Germany; the Netherlands; New Zealand; Norway; Sweden; Switzerland; United Kingdom; United States.


The U.S. took dead last, and one of the biggest reasons we're not making the grade, according to the report, is the unavailability of affordable health care for all citizens. We have the most expensive system in the world: The U.S. spent $8,508 per person on health care in 2010 -- that's 50% more than the second-highest-spending country, Norway -- and yet individuals using that system still describe problems:

  • For many, insurance isn't buffering expenditures. About 41% of U.S. respondents, both insured and uninsured, paid at least $1,000 out of pocket for medical care in 2013.
  • 59% of the U.S. doctors surveyed told the Fund in 2013 that affordability is a problem for people in need of medical attention.

The numbers are hard to ignore. But so is the notion that we have a brighter future on the horizon if the Affordable Care Act does what it's supposed to do for all Americans. So let's take a closer look at the findings and the potential for an emerging U.S. system that better addresses the costs associated with good health for all.

The high price of equity

Getting ranked last is a hard pill to swallow. In the Fund's report, the numbers tell us that Americans in need of care are often not getting it because of the price tag attached.

  • 37% of Americans polled said they did not follow through on recommended care, fill a prescription, or visit a medical professional because of cost. The next-highest percentage was in the Netherlands, at 22%.
  • 28% said their insurance companies either denied them payment for medical care or did not pay as much as they had expected (followed by France at 17%).
  • 23% of Americans said they had serious problems paying their medical bills or could not pay them at all (followed by France at 13%).

In all 11 surveyed countries, individuals reporting below-average incomes more often reported having chronic health problems.

  • In 2013, a list-topping 39% of Americans with below-average income and medical problems did not see a doctor because of cost. By comparison, only 17% of U.S. individuals with above-average incomes described that scenario.
  • 30% of below-average income respondents in the U.S. said they skipped prescription refills or doses because of cost. Above-average income earners saying the same: 12%. These percentages are the highest and second-highest, respectively, among countries surveyed.

How about some good news, then? A remedy might already be in place. The Fund hasn't ignored the impact, or the potential, of the Affordable Care Act as it approaches its first anniversary since implementation.

The ACA and the future of U.S. health care

2013 was a particularly interesting year for the Fund to conduct its study, as the ACA first became operative. After a slow ramp-up, and with state-by-state challenges still ongoing, there are positive signals emerging from the reform.

More than 8 million people entered the new system by the end of March 2014, far exceeding the predictions of even its federal proponents. And the New England Journal of Medicine estimates that some 20 million people gained coverage by May 2014.

If we set aside for the moment all other ways of evaluating U.S. health care, from efficiency to effectiveness of care, and consider only the cost of care and its consequences for the individual patient, the ACA is designed to drive improvements along this very front. Among the Act's many provisions, the following cut to the core of that idea:

  • Americans with incomes between 133% and 400% of the federal poverty level are eligible for subsidies to help them purchase health insurance.
  • For those who earn too much to get Medicaid but too little to buy a state-exchange plan, the ACA provides the Basic Health Program , giving participating states a pool of money with which to leverage lower-price insurance.
  • When it comes to co-payments and deductibles, buying plans at the Silver level or higher means further reductions in costs for the individual.

And data from states that pioneered health care reform tells us that the effects of more affordable care -- from a financial perspective, at least -- can be measurably positive. For example, Massachusetts has had its own reformed system in place since 2006. In that state, the number of bankruptcies attributable to medical bills dropped to 52.9% in 2009 from 59.3% in 2007.

Indeed, the Fund sees the future influence of the ACA as an important context for considering this year's report -- it says so in the first pages of the study:

The U.S. has made significant strides adopting health information technology and undertaking payment and delivery system reforms spurred by the Affordable Care Act. Continued implementation of the law could further encourage more affordable access and more efficient organization and delivery of health care, and allow investment in preventive and population health measures that could improve the performance of the U.S. health care system.

The prognosis might well be looking up.

If the ACA works in the ways it's supposed to, state by state and nationwide, we can look forward to a follow-up report from The Commonwealth Fund that can't be summarized by pairing the words "U.S." and "last."

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The article Could the Affordable Care Act Improve the U.S.' Failing Health-Care Grade? originally appeared on Fool.com.

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.

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Mortgage Settlement Hits Citigroup 2Q Earnings

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Citigroup Earnings
Victor J. Blue/Bloomberg via Getty Images
By STEVE ROTHWELL

Citigroup (C) said Monday that its net income dropped in the second quarter after it took a $3.8 billion charge to settle claims over its risky subprime mortgage business.

The charge pushed down its net income to $181 million from $4.18 billion a year earlier.

On a per-share basis, net income was 3 cents, compared with $1.34 in the second-quarter a year earlier.

Excluding the charges and an accounting loss, the bank's second-quarter profit rose 1 percent to $3.93 billion, or $1.24 a share. That beat the $1.06 a share predicted by analysts polled by FactSet.

Revenue was $19.4 billion, excluding the accounting loss, compared with $20 billion a year earlier.

The bank's stock rose $1.71, or 3.6 percent, to $48.72 or midday trading Monday.


Citigroup's Fine, Earnings and More Business News

 

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This Industry Expert Says Utility Mergers Will Keep Coming

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Wisconsin Energy is buying Integrys Energy Group for $9.1 billion. The deal is big, but it's really just par for the course in an industry that's seen over 100 mergers and acquisitions over the past 20 years. This deal shows why famed value investor Mario Gabelli thinks there's plenty of deal making left to be done.

What's the deal?
Wisconsin Energy is paying a premium of roughly 17% to buy Integrys Energy Group. That's a nice pop for Integrys shareholders. A couple of days after the deal was announced, shares of Integrys were trading around $69 a share, a couple of bucks below the nearly $71.50 deal price. Investors looking to lock in a quick gain should probably sell their shares.

(Source: ReubenGBrewer, via Wikimedia Commons)

Once consummated, the combined company will be named WEC Energy Group. Of course, the merger has to pass through the typical hurdles before the deal can get done, including approval of key utility regulators. It's usually not a quick process and sometimes deals do get nixed. That's why there is a difference between the deal value and Integrys' share price.


Wisconsin gets bigger
The big benefit of this deal is that Wisconsin Energy will gain scale in the regulated utility market. It will go from roughly 2.2 million natural gas and electric customers to 4.3 million. Moreover, its operating region will expand from its namesake Wisconsin and Michigan to include Illinois and Minnesota. That will provide for material economies of scale.

That dovetails with Mario Gabelli's industrywide expectations. "For several decades, utility companies have acquired other utilities and utility assets for the sake of gaining economies of scale and efficiency. The same forces that resulted in more than one hundred utility takeover announcements over the past two decades remain in place, and new forces have come into play that continue to drive this long-term trend."

The new trends he's talking about include climate change and the associated regulations now being implemented, as well as a slowing in the rate of electricity demand. However, according to Gabelli, "The electric and gas utility sector remains fragmented, with over 60 electric utilities and 30 gas utilities. This is 50 more than we need, from the standpoint of economic efficiency."

There will be more
Basically, Gabelli is saying that there will be more mergers to come. The acquisition of Integrys Energy Group by Wisconsin Energy is a great example of why. Although Wisconsin Energy has increased its dividend in each of the past 10 years (including the 2007 to 2009 recession), its revenues have been stuck between $4.2 billion and around $4.5 billion since 2007. Wisconsin is a nice state, but there's only just so much growth potential from being in what is effectively one market.

(Source: ReubenGBrewer, via Wikimedia Commons)

That's why adding two new markets makes complete sense. The combined generating assets will give the enlarged entity more choices when juxtaposing environmental regulations against its power needs. It will also increase Wisconsin Energy's natural gas business from around 15% of the top line to nearly 25%. Historically low natural gas prices have shifted this segment of the utility market into growth mode again.

Once the deal is done, the merged Wisconsin Energy and Integrys Energy Group will own a combined 60% stake in American Transmission. Transmission assets are an increasingly valuable side of the utility market. Part of that is because of regulatory changes that are leading to shifts in the sources of power utilities are employing. Getting power from where it's generated to where it is used is increasingly important. In fact, investments in the so-called grid tend to be viewed favorably by regulators.

A year to go
Wisconsin Energy expects its acquisition of Integrys Energy Group to close in the summer of 2015. That's a long way off. Integrys shareholders should at least consider locking in gains. However, for those with a long-term bent, Wisconsin Energy looks like it will be a better company after the deal is done. You can expect a dividend hike along the way as well. For those looking for the next big merger, though, this deal shows exactly why you need to keep a close eye on the utility market.

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The article This Industry Expert Says Utility Mergers Will Keep Coming originally appeared on Fool.com.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Wisconsin Energy. 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.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Stock Market Today: Why Citigroup and Alcoa Are on the Move

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The Dow Jones Industrial Average has gained 77 points in premarket trading, suggesting a strong start to the stock market this week. World indexes rose across the board overnight, with Chinese stocks posting a 1% gain and European shares up by about 0.5% as of 8:30 a.m. EDT. There isn't much on today's economic calendar that should move markets. But Citigroup and Alcoa stocks are both trading heavily this morning on fresh earnings news.

Citigroup investors have plenty of new information to digest today. The bank this morning posted second-quarter earnings results that beat expectations, and Citigroup also announced a $7 billion legal settlement with the Department of Justice. Excluding the significant costs of that agreement ($3.8 billion sliced from net income), the bank earned $1.24 per share in quarterly profit, which was well above the $1.05 Wall Street analysts were expecting. Revenue fell much less than expected, slipping 6% year over year to $19.3 billion, whereas analysts had been bracing for $18.9 billion in revenue. CEO Michael Corbat said in a press release that Citi's results showed "resilience in the face of an uneven economic environment," and he highlighted the bank's improving capital position. Citigroup's Tier 1 common ratio grew to 10.6%, which bodes well for management's plans to boost the company's dividend payout. The stock was up 4% in premarket trading.

Alcoa announced today that it just secured a $1.1 billion deal to supply engine parts to United Technology's Pratt & Whitney over the next decade. The agreement breaks lots of new technical ground, delivering the first-ever aluminum fan blade to be fitted on a jet engine. According to Alcoa CEO Klaus Kleinfeld, the special design and advanced materials helped the company "crack the code on forging an aluminum fan blade that is lighter and enables better fuel efficiency" while keeping costs in check. The metals giant will be sourcing aluminum for the deal from its Pennsylvania and Indiana factories, and the sales should help give a lift to its aerospace business, which  is expected to grow significantly this year. Today's deal makes that growth even more likely. Alcoa's stock was up 2% in premarket trading.


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The article Stock Market Today: Why Citigroup and Alcoa Are on the Move originally appeared on Fool.com.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of 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.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Why Chevron Is More Successful Than ExxonMobil

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Choosing between ExxonMobil and Chevron can be a tough task for investors.

On one hand, as one of the largest publicly traded companies in the world, Exxon is unlikely to disappear anytime soon and is seeking stability of earnings. On the other, Chevron is seeking rapid growth over the next few years, which could go horribly wrong if the price of oil collapses.

However, dig through the numbers and it becomes clear that while Exxon is the bigger company, Chevron is much more successful.


The lucky one
Chevron has had plenty of success all over the world, and the company has been proactive in ensuring that its size does not affect profitability.

Chevron is able to squeeze more earnings out of every barrel of oil produced than any of its peers. This is not just luck, either; Chevron's management has sought out lucrative oil projects with high margins and LNG production sold on oil-linked contacts.

Chevron has also had better investment opportunities. The company's exploration program has been highly successful in the Gulf of Mexico, generating a flow of lucrative discoveries. These include the Jack/St Malo and Big Foot fields.

The Jack/St Malo development involves drilling 43 subsea wells. When in full production, the facility will have a capacity of 170,000 bpd of oil and 42.5 mmcf per day of natural gas. Big Foot has a potential production capacity of 75,000 barrels of oil.

More cautious
ExxonMobil, on the other hand, is being much more cautious in its investment and development selection. Exxon is looking for quality and sustainability, so it would rather develop a project that could produce 10,000 barrels a day for 30 years than 100,000 barrels per day for five years. Of course, the company is still looking to make a solid return on its investments as well.

Exxon is also prepared to wait. The company believes that we are heading toward an era of oil "abundance" as technical advances allow companies to unlock oil reserves around the world.

However, despite Exxon's and Chevron's differing levels of success, both companies are focused on the development of domestic shale oil properties.

Domestic shale
This is somewhat of a departure from tradition for both companies. Chevron is a specialist in offshore deepwater drilling, while Exxon is more specialized in huge multi-billion dollar projects with decades-long life spans.

Further, onshore shale developments are more gradual in nature than traditional offshore projects. Onshore developments usually require the drilling of several wells, with each well only taking a few days to drill and revenues from the well dropping off quickly.

A continual stream of new wells needs to be drilled in order to sustain production. In comparison, large offshore projects usually take years to develop but the payoff is sudden and long term.

Aggressive plans
When it comes to domestic shale opportunities, Exxon was given somewhat of a head start over Chevron. Exxon dove into the industry in 2010 by buying XTO Energy, a shale producer. XTO was mainly a gas producer, however, so Exxon has had to shift its focus.

Nevertheless, Exxon is now drilling in the Bakken, in Oklahoma, and in the Permian basin. The company was producing 85,000 boe/d from these regions in 2010, but management is targeting output of 225,000 boe/d by 2017.

Meanwhile, Chevron is focusing on the Permian basin. Chevron's Permian production last year touched 135,000 boe/d, and the company has aggressive plans for expansion just like Exxon. Regional production is expected to hit 250,000 boe/d by 2020; this is a slower ramp up than that of Exxon, but Chevron has plenty of other projects around the world to dig its teeth into.

The bottom line
The bottom line is that Chevron is a more efficient oil company than ExxonMobil. Chevron has made some impressive discoveries during the past few years and the company has kept its costs low, giving it the widest profit margins per barrel of its peers.

ExxonMobil still has its attractive qualities, but Chevron is making rapid progress even though it is the smaller of the two. It could only be a matter of time before Chevron overtakes its larger peer.

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The article Why Chevron Is More Successful Than ExxonMobil originally appeared on Fool.com.

Rupert Hargreaves owns shares of Chevron. The Motley Fool recommends Chevron. 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.

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Why You're Paying Less at the Pump This Summer

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Consumer Prices
AP
By Ransdell Pierson

The average price of a gallon of regular gasoline fell 4 cents during the past three weeks in reaction to declining costs of crude oil, according to the Lundberg survey released Sunday.

Prices fell to an average of $3.67 a gallon for regular grade gasoline, according to the most recent survey, which was conducted on July 11.

"Crude prices have dropped in reaction to Libya having sizably hiked its oil production, and because Iraq's oil output has not being smashed by violence and turmoil there," said Trilby Lundberg, publisher of the survey.

The price of Brent crude in the U.K. has dropped by $8.35 a barrel in the past three weeks, while the price of West Texas Intermediate crude has fallen $6.43 during the same period, Lundberg said.

About a fourth of the crude oil price decline is now reflected at the pump, but drivers could see another 4 cent to 8 cent drop in gasoline prices in the near future, as retailers pass along more of their cost savings to consumers, Lundberg said.

San Francisco had the highest price within the latest survey at $4.12 a gallon, while the lowest price was in Tulsa, where regular grade cost $3.35 a gallon.

 

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Alamos Gold: Any Chance of Further Upside?

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Shares of Alamos Gold rebounded from lows seen in early June, but they remain at depressed levels. Falling production mixed with difficulties in obtaining permits for key projects continue to weigh on the company's performance. However, not everything is as bad as it looks. 

Growth postponed
The company's two main projects, Kirazli and Agi Dagi, are situated in Turkey. Back in 2013, Alamos Gold received environmental approval for Kirazli from the Turkish ministry of the environment and urbanization. However, the provincial court issued an injunction order regarding the ministry's approval of the Kirazli project. In turn, the ministry is challenging the court's decision.

This might look like a soap opera, but it's no fun at all. The project that was ready to be developed is stalled. Documentation for the second project, Agi Dagi, has been submitted and is currently under review. Together, Kirazli and Agi Dagi can produce 242,000 ounces of gold annually. In comparison, Alamos Gold expects to produce 150,000-170,000 ounces of gold this year.


According to statements from Alamos Gold, it will take 18 months to develop the Kirazli project after the permits have been obtained. The current political situation in Turkey is challenging, however, and obtaining permits could be a difficult and lengthy task. That's why Alamos Gold is among the few gold miners whose shares have lost ground since the beginning of the year.

Yamana Gold and Kinross Gold are also in this club. Yamana Gold purchased Osisko Mining together with Agnico Eagle Mines , but unlike its partner, the company's first-quarter performance was weak. Falling production and rising costs put significant pressure on Yamana Gold's operating cash flow. While the purchase of Osisko Mining is beneficial for Agnico Eagle Mines, Yamana Gold has yet to prove that it could afford such expenditures.

Kinross Gold was pressured as Russia faced increased sanctions over the Ukrainian conflict. Two of Kinross Gold's cheapest mines, Dvoinoye and Kupol, are located in Russia. However, I believe the fears were exaggerated, and Kinross Gold will get a boost after the dust over Russian sanctions settles.

Patience required
Fortunately, Alamos Gold has room for maneuver. The company finished the first quarter with $410 million in cash and short-term investments and had no debt. The biggest expenses associated with these mines were carried back at the beginning of 2010 when the company purchased them for $40 million in cash and 4 million of Alamos common shares.

Given the company's solid balance sheet, it can afford to pay a dividend which currently yields 2%. This dividend is a form of paying for patience, because it will take time for Alamos Gold to reach its growth targets. Hopefully, the second-quarter report, which is due on July 31, will shed more light on the developments in Turkey. It may also let investors know if the company has a plan B in case permits are delayed further in the future.

Bottom line
Alamos Gold's costs allow it to stay profitable in the current gold price environment. However, declining production from the company's sole producing Mulatos mine in Mexico leaves little room for an earnings boost. The company could experience major growth when its Turkish projects are approved, but before that, investors should stock up on patience.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

The article Alamos Gold: Any Chance of Further Upside? originally appeared on Fool.com.

Vladimir Zernov 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 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.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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3 States With Disturbingly High Foreclosure Inventories

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Flickr / Jeff Turner.

A few days ago, real estate analytics firm Corelogic announced the status of the foreclosure crisis and the news wasn't very good. A total of 47,000 foreclosures were completed this past May, down from 52,000 one year ago. The decrease represents only a bit more than a 9% improvement over last year, and the news gets worse: completed foreclosures were up by 3.8% month over month, and the U.S. still has a backlog of 660,000 homes in various stages of the foreclosure process.

Some states still have achingly high numbers of homes in the foreclosure pipeline. Notably, the states with the highest buildup of foreclosures are in judicial states, where foreclosures must wend their way through the court system. Foreclosures move to completion more quickly in non-judicial states, where the courts generally are not involved.


But the intervention of the courts is only part of the issue in these states. Here are the top three, with foreclosure inventory for each presented as a percentage of all mortgaged homes.

New Jersey: 5.8%
This state's problems go much deeper than just housing. New Jersey recently revealed an enormous budget deficit, brought about, at least in part, by the dismal employment situation. While the nation at large has been recovering many of the jobs lost during the Great Recession, New Jersey has regained very few. At a time when new unemployment claims are dropping at the national level, New Jersey's are rising. The state's unemployment rate is 6.8%, the twelfth highest in the U.S.

Florida: 5.2%
Florida isn't far behind New Jersey, but, considering how badly the Sunshine state was battered by the foreclosure crisis, this fact is not surprising. Several days ago, Fannie Mae and Freddie Mac reported that the agencies now hold a higher number of foreclosed properties from this state than they did at the end of 2010.

Much of this backlog has to do with fraudulent mortgage issues stemming from several large banks, which put foreclosures on hold while lenders tried to put things right. This explains why Florida also has the highest number of "zombie foreclosures" - homes vacated by foreclosed-upon owners, which are then left to deteriorate unabated. RealtyTrac estimates that Florida accounts for nearly 49,000 of these properties, out of a national total of about 141,000. 

New York: 4.3%
New Jersey's neighbor was also hammered by the housing crash, and the effects linger still. A recent report by housing activist groups note that 60,000 mortgages are still underwater in Manhattan alone - almost 12% of all home loans. Local politicians are considering enabling the city to take over these mortgages by "eminent domain" to help borrowers stay in their homes.

The situation is so dire that New York's state Attorney General Eric Schneiderman has announced a new mortgage assistance program for troubled homeowners. In addition to existing programs providing free legal help, the NY State Mortgage Assistance Program will provide small loans for those in danger of foreclosure. 

A recent RealtyTrac analysis identified New York as one of five states currently offering huge discounts on foreclosure inventory homes, with an average discount of 38.5% on vacant houses with negative equity.

These few examples show that the foreclosure crisis is far from over. As these and other states continue to struggle with the legacy of the mortgage meltdown, it seems very likely that housing will not recover completely until this fiasco is finally resolved.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

The article 3 States With Disturbingly High Foreclosure Inventories originally appeared on Fool.com.

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.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

 

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Intel Corporation Earnings Preview: What You Need to Know

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Intel is the world's largest semiconductor company by revenue. The company dominates the market for chips found in notebook and desktop computers, as well as the market for processors that go into many compute-focused portions of the data center. The company reports earnings on Tuesday, which should provide long-term investors with a number of key data points.

More details on the PC market needed
Intel investors got a mighty fine treat on June 12 when the company pre-announced that unexpectedly strong corporate PC sales drove significant upside to the company's prior guidance. Back in April, the company had guided to $13 billion in sales for Q2 (give or take $500 million), but following the upward revision in June, the company is now expecting sales to fall in the range of $13.7 billion give or take $300 million.

Even though business-oriented PCs led the sharply higher guidance, Intel likely saw nice growth in the low-end of the consumer PC market for a couple of reasons:

  1. Tablet slowdown. With tablet growth slowing significantly, consumer wallet share may be shifting back to the PC.
  2. More compelling PC offerings. Thanks to the roll-out of the low cost Bay Trail-M and Bay Trail-D chips, which have enabled fanless, low-cost PCs, Intel may have gained back share in the low end of the Windows PC market (Intel has lost significant share here to rival Advanced Micro Devices in recent years). Further, Intel's broad-based collaboration with Google on Intel-powered Chrome systems is likely further helping Intel win low end PC share (as well as wallet-share back from tablets).

The key thing to watch here will be how management guides PC growth for the rest of the year. It wouldn't be surprising to see management guide cautiously so that it has a high chance of meeting/exceeding estimates for the remainder of the year. Keep in mind, though, that management likely understands that the recent run-up in the stock price likely bakes in some optimism surrounding the guidance.

An interesting balancing act will be required, for sure, between setting expectations low enough to be easily beaten and high enough to keep investors optimistic about the long-term outlook for the company.

Server growth should be nice
Roughly half of Intel's data-center group is dependent on shipments into traditional enterprise servers. The other half is a mix of other segments, including high performance computing, networking, storage, cloud, and others.

Source: Intel

The nonenterprise portion of the market has generally been growing quite nicely, while -- as you can see in the Investor Day slide above -- the enterprise portion has been disappointing. But last quarter Intel actually saw the enterprise segment of the data-center group return to growth. If that segment can just grow slowly, then the rest of the segments should help to continue driving Intel's data-center group toward the low double-digit growth that management promised for the year.

Mobile should get better where it counts
Financially speaking, Intel's Mobile and Communications group is probably going to remain pressured on a year over year basis, but should improve sequentially. This improvement should be driven principally by the ramp of the company's first multimode LTE solution known as the XMM 7160 into a number of designs, such as the Samsung Galaxy S5 mini and Galaxy K Zoom.

Source: Intel

What won't be a tailwind to the financials -- but will be important to investors -- is how the company is tracking toward its 40 million tablet chip goal. In fact, since Intel is offering contra-revenue offsets for its lead tablet platform known as Bay Trail, and since this offset is done on a per unit basis, the worse that the financials are for tablets, the better it is in the long-run.

Why? Once Intel has the share, it can replace the Bay Trail chips with platform bill of materials reduced platforms that will no longer require contra-revenue support. Further, Intel's chips need a high presence on Google's Android in order to grab Android developers' attention, meaning that gaining scale this year -- even at the cost of profitability -- is critical.The worse that the financials are this year, the better things will look in 2015 when Intel is presumably driving even higher volumes but each of those chips is additive to earnings.

Foolish bottom line
The long-term picture for Intel is driven by three principal factors: PC sales, data-center group sales, and mobile progress (in that order). If the PC market shows signs of longer-term robustness, the data-center group shows double-digit year over year growth, and if mobile shows signs of long-term progress, the stock should continue to do well. 

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The article Intel Corporation Earnings Preview: What You Need to Know originally appeared on Fool.com.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and Intel. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Intel. 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.

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Is It Finally Time to Buy ConAgra?

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ConAgra Foods shareholders have had a hard time stomaching its earnings and outlook statements in the last couple of years. The company has disappointed across all of its segments, and its acquisition of Ralcorp has been fraught with unexpected difficulties. With that said, the stock now stands at a valuation discount to peers like Treehouse Foods and Kraft Foods , but does this make it the value play in the sector? It's time to look more closely.

ConAgra Foods in charts
Sometimes a chart tells you a lot of what you need to know about a stock. For example, ConAgra's price chart reveals that after every disappointing earnings report, the value hunters move in on the expectation that it will sort out its difficulties in due course.

CAG Chart


CAG data by YCharts.

Unfortunately, the latest setback has taken the stock price almost back to where it was in February when it last guided expectations lower. However, don't be surprised if the value players and activist investors start sniffing around the stock, because on a relative value basis, the stock is starting to look cheap.

ConAgra's acquisition of private-label food company Ralcorp is intended to enable the company to sell both branded and private-label foods into its customer base. The idea is that ConAgra can generate synergies in the process and take advantage of offering a range of products to the same retailers. With this in mind, Fools should keep an eye on its valuation versus Kraft (branded foods) and Treehouse Foods (primarily a private-label company).

Enterprise value (market cap plus debt) to free cash flow is used, because ConAgra took a $681 million non-cash impairment charge in the recent fourth quarter, which reduced its net income for the full year to just $315 million. In addition, ConAgra, Treehouse, and Kraft all contain significant, but varying, amounts of debt.

CAG EV to Free Cash Flow (TTM) Chart

CAG EV to Free Cash Flow (TTM) data by YCharts.

There is no doubt that ConAgra looks like a good relative value, but is it?

ConAgra Foods growing slower than Kraft and Treehouse Foods
There are two related issues here.

First, Kraft Foods is forecast to grow EPS by 22% and 8% in its next two years, while analysts have Treehouse Foods growing EPS by 13% and 11% over the same period. However, the latest downgrade to expectations sees ConAgra's management guiding the market toward mid-single-digit growth in 2015, and high-single-digit growth in 2016.

Second, even if Fools accept the trade-off of a cheap valuation for lower growth prospects, they will still have to believe in ConAgra's guidance -- given trading conditions in recent times, that is no sure thing.

What's going wrong with ConAgra?
The company reports out of three segments, with its private-brands business largely comprised by Ralcorp. A quick look at the sales split for 2014 reveals the relative importance of each segment.

Source: ConAgra Presentations.

Unfortunately, ConAgra has had issues with all three segments in the last year. The good news is that conditions look set to improve in its commercial foods segment. Last year, the segment was hit with a poor potato crop at Lamb Weston (frozen potato products within the commercial foods segment) and the loss of a major contract. These issues have taken time to work through, but management is now forecasting "good sales and profit growth, led by stronger performance in our Lamb Weston business driven by international growth, and improved margins from a better potato crop beginning in the second quarter" for the segment in 2015.

On a less positive note, the ongoing decline at its consumer foods segment is worrying. The company previously highlighted its Chef Boyardee, Healthy Choice, and Orville Redenbacher brands as areas of weakness, and their problems continued into the fourth quarter. Consumer foods sales declined 7% with a 7% decline in volume. The company has tried product & packaging initiatives and making in-store promotions. Nothing seems to have worked, and it wasn't surprising to hear analysts asking on the conference call whether management might want to make a "strategic review on the portfolio." 

Furthermore, the Ralcorp acquisition has proved problematic, with ConAgra being forced to make pricing concessions in order to retain business with retailers. These issues should not come as too much of a surprise because Treehouse Foods has had to make restructuring activities in order to deal with shifts in consumer spending patterns in recent years. Ultimately, ConAgra appears to have underestimated the restructuring necessary with Ralcorp, and has spent the last year firefighting to deal with issues. In the words of ConAgra's president of private brands, Paul Maass: "Integration itself was challenging; and when you have a situation where your customers are really motivated to change suppliers, because we are letting them down on service and execution issues, you got to really pull the price lever to maintain the volumes."

What should Fools do next?
If you are a believer in relative value within a sector, then there is a case for picking up ConAgra, because it looks relatively cheap compared to Treehouse and Kraft. Moreover, many of its issues -- although ongoing -- seem to be about internal execution, rather than purely end-market driven. Similarly, the company may well yet decide to sell off some underperforming consumer brands, and raise cash to focus on the private-label business.

On the other hand, the stock doesn't look screamingly cheap enough on an absolute valuation basis (see charts above) in order to compensate for the ongoing deterioration in performance in its consumer foods and private brands segments. Worse, if the market falls out of love with the food sector, then Fools can't even rely on a relative value argument. ConAgra has a long road ahead of it.

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The article Is It Finally Time to Buy ConAgra? originally appeared on Fool.com.

Lee Samaha 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 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.

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Why Tripadvisor Inc Shares Could See Turbulence

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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 analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Tripadvisor Inc slipped 1% in premarket trading Monday after Nomura Securities downgraded the online travel company from buy to neutral.

So what: Along with the downgrade, analyst Anthony DiClemente reiterated his price target of $103, representing about 2% worth of downside to Friday's close. So while momentum traders might be attracted to Tripadvisor's price strength in recent months, DiClemente's call could reflect a sense on Wall Street that its valuation is becoming a bit stretched.


Now what: According to Nomura, Tripadvisor's risk/reward trade-off isn't too attractive at this point. "We continue to stand behind the company's fundamentals of 1) metasearch driving faster growth in user monetization, 2) continued global user growth, and 3) instant booking path to drive higher CPCs," said DiClemente. "However, we believe valuation is full at current levels, and as such, we downgrade the stock to Neutral and await a better entry point." With Tripadvisor shares up more than 30% over the past three months and trading at a forward P/E of 35, it's tough to disagree with Nomura's cautiousness. 

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The article Why Tripadvisor Inc Shares Could See Turbulence originally appeared on Fool.com.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends TripAdvisor. 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.

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A Look at the New Alcoa Inc

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Alcoa    recently reported earnings of $0.18 versus analyst expectations of $0.12 on revenue of $5.8 billion in its second quarter conference call on Tuesday. Needless to say, the stock is responding positively to the news, up over 6% since reporting. Including the recent rally, the stock is up over 87% in the last year. With the stock price nearly doubled, is it too late for investors to buy shares of Alcoa?

Alcoa CEO Klaus Kleinfeld discussed multiple areas in which the company has made improvements to reduce costs and spur innovation that should lead to sustainable future growth in last night's conference call. As for cost reduction, Kleinfeld believes that Alcoa can reduce its cost of alumina by 9% in the next two years, as well as reduce the cost of aluminum by 16% in the same time span. When it comes to innovation, Alcoa is already in the process of creating lighter wheels and auto sheets used in the making of automobiles and heavy trucks. In addition, Alcoa's strong and lightweight materials are becoming a staple in the construction of Boeing  aircrafts, Ford  automobiles, and Cummins  heavy trucks.

AA Chart


AA data by YCharts

In the graphic above, you will notice that Alcoa's stock price has been heavily reliant on the London Metal Exchange's price of aluminum for the previous five years. However, in the last year, the company has made a series of strategic moves that are allowing the stock to trade independently from the LME aluminum price. These actions can be seen in the company's most recent investments.

Investment in aerospace
During the first quarter of 2014, Alcoa agreed to acquire jet engine parts maker Firth Rixson for $2.85 billion in a push to expand its aerospace presence. Alcoa's exposure to the aerospace industry had been limited mainly to the construction of wings in Boeing 767 and 787 planes, which currently net the company $2.2 million and $4 million in revenue respectively per plane. The Firth Rixson acquisition now allows Alcoa to expand its business to include the construction of jet engines. In addition, Alcoa has reported an investment of $125 million regarding the manufacturing of jet engines that is expected to be completed by 2015 and is anticipated to contribute $2.2 billion in revenue by 2016. With Alcoa's newfound revenue generation and future growth outlooks so heavily reliant on the aerospace industry, it is essential that investors remain vigilant of Boeing's order book for new planes in the future. This will allow investors some foresight into the health of the industry.

Reliance on auto sales

US Heavy Truck Sales Chart

US Heavy Truck Sales data by YCharts

Also contributing to Alcoa's recent success is the resurgence of the auto industry. In the chart above, it is apparent that both automobile and heavy truck sales are at five-year highs within the United States. The company's innovations in lightweight aluminum technologies such as wheels and auto sheets has allowed Alcoa to capitalize on this growth. They have become a staple in the production of both automobiles and heavy trucks for companies like Ford and Cummins.

The lighter weight material enables Ford to manufacture cars with higher gas mileage. This allows Ford models to stay competitive with other brands that showcase high mpg models of their own. In the case of Cummins, the lighter technologies allow for the manufacturing of heavy trucks with higher maximum payload capacity or higher mpg. This in turn makes Cummins even more competitive within the industry.

With the successful move into the auto industry, investors must remain vigilant of production growth in the domestic auto and heavy truck market. Any slowdown in the industry could have an adverse impact on Alcoa's business. Keeping an eye on the sales growth of the two industry leaders mentioned above, Ford and Cummins, is highly recommended.

Bottom line
My takeaway from the company's second quarter conference call is as follows: Alcoa is attempting to become less reliant on the LME price of aluminum by increasing its focus and investment on value-added businesses. This move is a step in the right direction if the company wishes to "de-commoditize" its  business. With all of this in mind, I believe that management is taking the right steps in creating a more sustainable and profitable company. I am completely comfortable rating Alcoa a buy even after the 87% appreciation in share price that has been seen in the last year. In short, I am convinced that this rally is merely the beginning for shares of Alcoa and I recommend buying the stock on any weakness.

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The article A Look at the New Alcoa Inc originally appeared on Fool.com.

Andrew Labutka has no position in any stocks mentioned. The Motley Fool recommends Cummins and Ford. The Motley Fool owns shares of Cummins and 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.

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Retail Sales to Be Closely Watched This Week

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cash register, not fullConsumer spending is said to make up close to 70% of U.S. gross domestic product (GDP), so that means that retail sales are of a paramount importance. This Tuesday we will get to see the monthly retail sales report from the U.S. Department of Commerce. We usually get to see enough same-store sales data ahead of this report to get a general direction, but investors are likely to pay much closer attention to this report at 8:30 Eastern Time on Tuesday.

Bloomberg has a consensus estimate for a gain of 0.6% for the month of June. The range of Bloomberg estimates is 0.5% to 1.3%.

On an ex-auto basis, that is also expected to be a gain of 0.6%. The ex-auto range of estimates is 0.4% to 1.2%.

As a reminder, that -2.9% GDP report from the first quarter is why this report will matter so much. June marks the end of the quarter, and that means there will be a semi-final unrevised level to finish up the quarter. We urge readers to recall that retail sales in May disappointed in the middle of the quarter. That may be partly offset by revisions higher for April, what was hopefully a snap-back after more than two months of soft retail spending due to weather in the first quarter.

Retail sales were up 0.3% in May and 0.5% in April. One wild card for revisions in May and the preliminary June report was a steady rise in gasoline prices at the pump. This has abated marginally, but crude oil remains a hair above that $100 per barrel mark.

Again, most of the directional data in retail sales has already been seen by the time the formal retail sales report is issued. Still, this is going to be watched closer than usual, particularly in light of softness seen from so many retail names in the last couple of weeks.

ALSO READ: 10 Brands That Will Disappear in 2015


Filed under: Retail

 

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5 Money Worries Every Boomer Woman Understands

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Stressed out businesswoman in office.
kieferpix/Getty Images

As a financial adviser, I hear firsthand what boomer women worry about. Of course, all women are not alike: We have unique lifestyles, careers and aspirations. Still, getting older seems to yield surprisingly similar financial worry-lists for us. Here is a list of the top five fears that my clients bring me, and some ideas about how to turn these worries into opportunities.

  1. Will I get laid off so that my employer can hire someone younger and cheaper to take my place? And if that happens, will anyone hire me at my age?
  2. I don't think I've saved enough for retirement. Will I run out of money?
  3. I want to invest my money, but I don't want to lose any money. The stock market is scary. What should I do?
  4. I don't think I can do this job for much longer. Can I afford to change to a lower-paying career?
  5. How can I help my children or my parents financially and take care of myself?
Reading, that list, you might be thinking, "But men worry about these things, too." True. But I would argue that the cultural and social realities in the U.S. make those worries more intense for women. Among other points:
  • Women feel more pressure than men to appear youthful to stay relevant.
  • Women often leave the workforce for years to care for children and parents, making it harder to save for retirement.
  • Women are more conservative (or fearful) investors than men.
  • Women earn less than men for similar work.
  • Women are left out of executive suites and boards, earning less and wielding less influence over workplace culture.
So, what's a girl to do? There is only so much we can control, but when it comes to money, there are clear actions we can take to ease those worries and get on track for better outcomes.

1. Plan

Hire a professional to prepare a comprehensive financial plan that's personalized for you, and follow through on the recommendations provided. Financial plans will show whether you're saving enough, whether you're investing for an adequate return, whether you can afford to help loved ones financially, and when you'll be able to retire or change careers for lower pay. A financial professional will also help you to understand if you are properly insured, are taking advantage of all the tax-savings opportunities available to you, and if you have a sound estate plan. You can find a financial adviser from the National Association of Personal Financial Advisors or the Financial Planning Association. Or, if you're a do-it-yourselfer, you can build your own financial plan with help form websites like Learnvest.

2. Save

Maximize all retirement savings opportunities that the Internal Revenue Service allows, including workplace retirement plans, individual retirement accounts and even annuities. If you max out all other retirement savings options and can save more, invest via taxable accounts.

3. Invest

Hire a professional to invest your money or get educated about investing and do it yourself. Leaving too much money in low-yielding investments -- such as bank savings and checking accounts, money-market accounts or certificates of deposit -- will increase chances that you won't have enough money in retirement. It's important to assess your need for return vs. your risk tolerance.

Don't wait -- you aren't getting any younger.

 

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For College Students, Credit Cards Can Be a Prereq for Life

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Subject: A group of college students Walking to class in a university campus with book bags on their shoulders.
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By Erin Lowry

Incoming college freshmen receive dozens of warnings:

  • Mom and dad caution them to not get carried away with extracurricular activities and instead focus on their grades.
  • Older siblings kindly suggest avoiding any beverage with the word "jungle" in the name.
  • Financial experts yell, scream and throw their arms in the air about avoiding credit cards.
While jungle juice should be avoided, there is a case for most college students to sign up for a credit card. Students who describe themselves as impulsive, spenders or forgetful may need to wait. Here are three reasons why a credit card will set them up for a healthy financial future.

1. Credit Cards Help Establish Credit History

A credit card is a simple tool to both establish credit history and begin working toward a good credit score. Student loans help establish credit and can positively impact a credit score. However, part of Fair Isaac's (FICO) FICO scoring model depends on diversity of credit. And responsible use of a credit card -- making on-time payments, for example -- is a simple way to increase a credit score.

Credit cards also let students without loans establish their credit and spend four years proving they are responsible borrowers before graduation. Lest we forget, recent grads who don't want to return to their parents' basement will need a credit score to get their own apartment or house.

Parents concerned their child can't handle the credit limit associated with a credit card should consider having their child apply for a secured card to prove their responsibility before upgrading to the real McCoy.

2. Students Don't Always Have Cash

Some financial experts advise using cash to avoid debt because mindlessly swiping plastic doesn't register as spending money. Except cash is quickly becoming a relic of the past.

Plenty of young men and women are used to debit cards and use apps like PayPal or Venmo to pay back a friend instead of cutting a check or getting cash out at the ATM. If students don't have quick access to an ATM on campus, a credit card will save them if they're in a bind.

3. Online Purchase Shouldn't Use a Debit Card

College students are used to buying everything online. Unfortunately, the rise of technology also led to an increase in fraud and identity theft.

Using a debit card for online purchases makes an individual far more vulnerable than using a credit card. If a thief gets a hold of a debit card, he or she can effectively drain a bank account instead of just racking up fraudulent charges on a credit card. Most banks or credit card companies do not hold individuals liable for fraudulent purchases on credit cards. According to USA.gov, consumers are only liable for $50 if the loss is reported within two business days, but the charge could go up to $500 between day three and 60.

When They Get That Plastic

To avoid credit card debt and protect their credit scores, young adults need to be vigilant about paying their bills on time and in full. Credit card users should understand the ramifications of carrying a balance and paying interest on their debt. A credit card shouldn't be used any differently than a debit card, except you have to pay your bill at the end of the month instead of automatically seeing the money get deducted from your account.

The decision whether or not to apply for a credit card should be made based on self-awareness and fiscal responsibility. It takes a basic level of financial education to understand how credit cards work, the interest rates that get charged on debt and how easy it is to get trapped in a cycle of throwing money toward interest. But for responsible, independent college students, a credit card can help establish their financial footing.

 

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Budget-Friendly Bug Repellant -- Savings Experiment

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Budget-Friendly Bug Repellant

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Here's something to consider before you head to the drugstore. You can protect yourself from pesky summer insects without paying for pricey bug repellents. Here's the breakdown.

A 6-ounce container of brand-name insect repellent can cost up to $18, but you can make a cheaper and more effective solution with catnip. Yes, catnip.

Catnip repels mosquitoes 10 times more effectively than DEET, the active ingredient in most commercial bug repellents. Plus, it'll only run you $3 to $5 for the plant.

So how exactly do you turn it into bug repellent? It's easy. Just chop up some catnip leaves and stems and place in a food processor. Put them in a pot with two cups of boiling water and steep. Strain the leaves, refrigerate the remaining liquid and pour into a spray bottle.

Apply this organic and eco-friendly solution before you head outdoors to protect yourself. You'll be saving money this season while repelling all those annoying insects.

 

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VW Plans U.S.-Built SUV in Bid to Reverse Slumping Sales

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Volkswagen SUV
Carlos Osorio/APVolkswagen executive Ulrich Hackenberg introducing the Volkswagen CrossBlue SUV at the Detroit auto show in January.
By ERIK SCHELZIG and TOM KRISHER

NASHVILLE, Tenn. -- Volkswagen plans to build a new seven-passenger SUV at its factory in Chattanooga, Tennessee, adding about 2,000 factory jobs as it tries to reverse U.S. sales that have fallen for the past two years.

The German automaker announced Monday that it will invest $600 million to expand the factory and set up a new research center that will employ about 200 engineers. The research facility will coordinate products for North America to quickly include customer feedback into planned and existing models, the company said.

The announcement comes after months of political wrangling over the role of organized labor at the factory, which now employs about 1,500 workers and makes only one model, the Passat midsize car.

Production of the new SUV, based on the CrossBlue concept vehicle unveiled in Detroit last year, is scheduled to start at the end of 2016. It gives VW an entry into an important segment of the U.S. market -- the family people hauler.

VW sales fell almost 7 percent last year and are down more than 13 percent so far this year, largely because the company doesn't have competitive products in key market segments. VW had a big year in 2012, with sales rising 35 percent to more than 438,000. But sales fell to about 408,000 last year, and the brand sold only 179,000 through June this year.

"The Volkswagen brand is going on the attack again in America," Martin Winterkorn, chairman of Volkswagen's management board, said in a statement, repeating the goal of selling 800,000 Volkswagen brand vehicles in the U.S. by 2018.

Michael Horn, VW's CEO in America, said seven-passenger, three-row SUV sales in the U.S. have almost doubled since 2009 to 1.4 million a year. He also said the new engineering center will broaden VW's portfolio with more new products.

The company plans to add about 538,000 square feet to the existing factory to build the new SUV.

Negotiations over state incentives for the expansion of the plant hit a snag over a union vote at the plant in February that was narrowly lost by the United Auto Workers. Republican politicians had warned that a vote for the union could have hurt the chances of the Legislature approving more than $300 million in incentives.

The new incentive package wasn't announced Monday, and it's unclear whether ongoing attempts by the UAW to be recognized at the plant will affect legislative approval of the deal.

David Smith, spokesman for Gov. Bill Haslam, said there's no need for a special legislative session to approve the incentives. The state, he said, is providing a $165.8 million grant to help with site development, infrastructure, production equipment acquisition and installation, and building construction. It also is offering a $12 million grant for training new employees, he said.

VW, Smith said, is waiving its right to claim tax credits directly related to the expansion.

UAW Secretary-Treasurer Gary Casteel thanked Haslam in a statement "for extending the state and federal incentive funds necessary to make the economics work for the new product line."

VW wants to create a German-style works council representing both salaried and hourly employees, but can't do so without the involvement of an independent union.

UAW leaders announced last week that they had reached a "consensus" in discussions with Volkswagen and expect the German automaker to recognize the union if they sign up enough workers at the plant.

The union in February suffered a bitter setback in its effort to organize its first foreign-owned plant in the South when workers at the Chattanooga plant rejected UAW representation by a 712-626 vote.

Casteel said last week he is confident VW will recognize the union if it signs up a "meaningful portion" of Volkswagen's workforce in Chattanooga, though he didn't elaborate on what the threshold would be.

Volkswagen spokesman Scott Wilson issued a statement saying that the company has "no contract or other formal agreement with UAW on this matter."

"Just like anywhere else in the world, the establishment of a local organization is a matter for the trade union concerned," the company said.

-Krisher reported from Detroit.

 

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Rent-a-Center and GameStop's Bad Call: Copying RadioShack

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Rent-a-Center To Close Over 150 Stores
Tim Boyle/Getty Images
Rent-a-Center (RCII) is developing a new product line to get it out of its slump.

"We are not satisfied with our second quarter results and hold ourselves accountable for improving our performance," the CEO of the country's largest rent-to-own retailer said after coming up short in Thursday's report. "To that end, we are excited to announce a new product line in our domestic retail stores with our entrance into the burgeoning smartphone business."

Did Robert D. Davis really say smartphones? He did. Offering smartphones that are easily lost, stolen or damaged to cash-strapped customers doesn't seem like a lucrative proposition. And the rub is that smartphones didn't work out well for RadioShack (RSH), another company in a funk.

Game On?

A few days before Rent-a-Center made its announcement, an analyst issued a bullish note on GameStop (GME). R.W. Baird's Colin Sebastian stuck to his bullish Outperform rating and his $50 price target after talking to the video game retailer's management.

Sebastian likes that GameStop has become AT&T's (T) third-largest retailer after acquiring Spring Mobile late last year and islooking to grow Cricket Wireless, AT&T's AIO brand of prepaid wireless stores that are being rebranded under the Cricket banner.

GameStop plans this year to add 200 to 250 Spring Mobile units to its existing 164 locations. It also plans to debut 100 to 150 Cricket Wireless locations after introducing 31 stores this past November. More importantly to its larger video game empire, GameStop is already offering Cricket pre-paid wireless at 100 of its stores.

GameStop and Rent-a-Center are taking entirely different approaches to smartphones. GameStop has aligned itself with AT&T, giving it all of the deals and incentives as the telco giant's corporate stores. Rent-a-Center wants to cover as many carriers and devices as possible to give renters a choice. However, the end result is the same, with the retailers following RadioShack into making mobile a bigger part of their operations.

Wrong Number

Rent-a-Center and GameStop are drawn to mobile because the physical products are small (which makes them easy to stock), and there are meaty bounties to collect in establishing initial carrier connections. However, eyeing a RadioShack chart may give any potential emulator some rightful concerns.

Since RadioShack decided to move away from traditional consumer electronics and key in on wireless products, losses are mounting, and RadioShack is closing more stores.

Did Rent-a-Center and GameStop take in RadioShack's latest problematic quarter before making the call to beef up on smartphones? RadioShack saw its red ink deepen, fueled largely by a 14 percent decrease in comparable-store sales. The move to depend more on smartphones has resulted in slower store traffic. That's not a surprise. Mobile phone products don't lend themselves to a steady flow of repeat customers, and once customers sign up, they may deal directly with the carrier in the future.

If RadioShack wasn't doing so well before, it's going to fare even worse in a more crowded market. Too many small-box retailers think that smartphones are the future, but they're probably ignoring why the RadioShack in the same strip mall is fading in popularity.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of GameStop. Try any of our newsletter services free for 30 days.

 

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It May Not Be Lights Out for Crumbs Bake Shop After All

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Crumbs Closes All Its Stores as Crumbnuts Fail to Revive Chain
Peter Foley/Bloomberg via Getty Images
NEW YORK -- An investor group that includes investor and reality TV star Marcus Lemonis said it plans to acquire Crumbs Bake Shop out of bankruptcy.

Crumbs, which filed for Chapter 11 bankruptcy reorganization Friday in New Jersey, said it agreed to be acquired by Lemonis and Fischer Enterprises, the company behind Dippin' Dots ice cream. It hopes to close a sale in about 60 days pending approval from the bankruptcy court.

Lemonis, the CEO of RV retailer Camping World and star of CNBC's "The Profit," plans to provide financing to Crumbs with the ultimate goal of acquiring the company. Fischer Enterprises made $5 million in credit available to Crumbs in January.

In a press release on Friday, Lemonis and Fischer Enterprises said they want to create a privately held Crumbs company and reopen its stores. They said they would take the company beyond just cupcakes, possibly adding items such as ice cream and popcorn and other snacks, to attract more customers.

Last Monday Crumbs Bake Shop closed all of its remaining stores after a string of losses. On Thursday the New York company said it was exploring its options with "interested parties."


The Crumbs Cupcake Boom and Bust

 

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5 Surprising Hidden Catches of Using Business Credit Cards

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business man paying with a...By Jason Steele

It is not unusual to see a credit card offered in versions for both consumers and business users. In addition, many business credit cards offer competitive rewards and benefits. Therefore, some people will carry both business and personal credit cards for everyday use. However, business credit cards carry some catches. Let's look at five.

1. They're Exempt From Many CARD Act Protections

The CARD Act was one of the most far-reaching pieces of consumer protection legislation to affect the credit card industry. Yet because those protections were meant to help consumers, lawmakers exempted credit cards used by businesses.

For example, the CARD Act prohibits double-cycle billing, which is when card issuers calculate interest based on the previous two billing cycles, often including transactions that were already paid. Other CARD Act provisions include banning interest rate increases based on information from other lines of credit and unfair payment allocation that credited payments to the balance with the lowest interest rate first. Thankfully, many business credit cards voluntarily comply with some of the CARD Act provisions enforced on consumer cards, but business card users need to closely examine their card's terms and conditions.

2. Business Debt Appears on Your Personal Credit History

Even though you applied for a credit card in your business's name and used its employer ID number, any debt incurred will still appear on your personal credit report. If the debt is substantial, it could increase your debt utilization ratio and hurt your credit score. This is why it's important to regularly check your credit reports for accuracy and monitor your credit scores to see how your habits are affecting your credit. You can check your credit reports for free every year from each of the three major credit reporting agencies, and Credit.com gives you two free credit scores, updated monthly, with an explanation of what factors are influencing them and a plan to help you build credit.

3. The Primary Account Holder Is Always Responsible for Paying

If you use a business card to charge expenses that are to be reimbursed by an employer or a client, the debt is still yours. If your client fails to reimburse you, or your employer goes out of business, you will be stuck with the debt, and any default will severely damage your credit.

Likewise, if you own a small business, and you make an employee an authorized cardholder, you will be personally responsible for paying all of his or her charges. Should a disgruntled employee use his or her card to make personal charges, you must first pay the bank and then pursue the employee to recover any money that you feel you are owed.

4. They Can Be Expensive

Most business credit cards are rewards cards that offer valuable features and benefits, but they also have substantial annual fees. These products can make sense for frequent business travelers, but owners of some small businesses may be incurring unnecessary expenses.

5. The Primary Account Holder Earns the Rewards

Perhaps you have been made an authorized cardholder of a business credit card account. Any points, miles or cash back rewards that are earned will be credited to the primary account holder, not the authorized cardholder. Some employees who are required to use their boss's business card feel that they are being deprived of the rewards that they could have earned had they used their own personal credit card.

 

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