After Market: Yellen Talks of Frothiness, Stocks Head Downward

July 15, 2014, 9:42 am

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Filed under: Earnings, Market News, Federal Reserve

Wall Street was on a see-saw Tuesday as it weighed strong bank earnings against words of caution from the Fed. Janet Yellen rattled the markets with an unusual comment saying biotech and social media stocks have gotten frothy of late. That sent some shares lower.

By the end of the day the Dow Jones industrial average (^DJI) had gained 5 points, but the Nasdaq composite (^IXIC) fell 24 and the Standard & Poor's 500 index (^GPSC) was down by 3 points.

Social media stocks got a slap in the face from the Fed comments and many closed lower. Yelp (YELP) was down almost 3 percent, while Facebook (FB), Twitter (TWTR), Groupon (GRPN) all fell around 1 percent. Biotech stocks, many of them penny stocks, were also sharply lower.

On the flip side, the banks had a good day thanks to strong earnings reports. JPMorgan Chase (JPM) was the second major commercial bank this week to beat on earnings expectations, even though it posted a decline in profit for the last quarter. The stock gained more than 3.5 percent.

A pickup in investment banking revenue helped Goldman Sachs (GS) post a 5 percent profit for the quarter and the stock gained more than 1 percent.

Another bank -- Comerica (CMA) -- also beat on earnings, and its stock gained more than 2.5 percent.

And the earnings parade marched on: The world's largest health care product company Johnson & Johnson (JNJ) fell 2 percent despite beating on earnings and raising its forecast. This could be a classic case of buy on the rumor, sell on the news.

GoPro (GPRO) rebounded on Tuesday after a heavy bout of selling on Monday. The stock gained 13 percent after JPM Securities initiated coverage with a buy rating.

Fashion king Michael Kors (KORS) was not in vogue today. Shares fell more than 7 percent after analysts at Sterne Agee expressed concern about the company's margins and sales in Europe.

Another big loser on the day was tobacco firm Lorillard (LO), down 10.5 percent after announcing it would be bought by rival Reynolds American (RAI), which also fell almost 7 percent.

Apollo Group (APOL), which owns several for-profit educational institutions fell 2 percent on news the Department of Education is investigating the financial aid programs at the company's University of Phoenix.

And one of the top gainers on the day was oil and gas exploration company Anadarko (APC). It gained 3.5 percent after several positive announcements.

-Produced by Karina Huber.

What to Watch Wednesday:

• The Labor Department releases the Producer Price Index for June, 8:30 a.m. Eastern time.
• The Federal Reserve releases industrial production for June at 9:15 a.m.
• The National Association of Home Builders releases its July housing market index at 10 a.m.
• The Federal Reserve releases its survey of recent economic conditions across the country, known as the Beige Book, at 2 p.m.

These major companies are scheduled to release quarterly financial statements:

• Abbott Laboratories (ABT)
• Bank of America (BAC)
• BlackRock (BLK)
• Charles Schwab (SCHW)
• EBay (EBAY)
• Las Vegas Sands (LVS)
• PNC Financial Services (PNC)
• U.S. Bancorp (USB)
• United Rentals (URI)
• Yum Brands (YUM)

 

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The 7 Biggest Money Mistakes 40-Somethings Make

July 15, 2014, 11:00 pm

≫ Next: Corporate America's Earnings Season Gets Off to Bad Start

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Filed under: Personal Finance, College Savings Plans, Home Loans, Life Insurance, Financial Education

Are you experiencing a midlife financial crisis?

We spend a lot of time thinking about our financial strategies at the beginning and end of our working lives -- how we'll stretch our first entry-level paychecks, what our retirement will look like, and so on. But we can loose focus when we hit our 40s and wind up coasting -- when we should still be actively strategizing.

If it's been a while since you re-evaluated your financial goals, look at this list of the seven biggest financial mistakes that 40-somethings fall prey to. If you're guilty of any, a course-correction may be in order.

Paula Pant ditched her 9-to-5 job in 2008. She's traveled to 30 countries, owns six rental units and runs a business from her laptop. Her blog, Afford Anything, is a gathering spot for rebels who refuse to say, "I can't afford it." Visit Afford Anything to learn how to shatter limits and live life on your own terms.

 

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Corporate America's Earnings Season Gets Off to Bad Start

July 15, 2014, 11:00 pm

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Filed under: Earnings, Retail, Market News, Rumors, Wall Street Watch

This was supposed to be the quarter that showed that the economy had bounced back. Winter snowstorms held back what could have been a potent holiday shopping season. and when many consumer-facing companies shot blanks during the first three months of this year, they blamed the calendar. The shift of the Easter holiday from March last year to April this year disrupted seasonal spending patterns.

However, now that we are ready to discuss the second quarter -- with the Easter holiday assist and not a snowflake in sight -- corporate America is calling in sick. There were a lot of grim pre-announcements last week, just ahead of the wave of financial reports that will be flooding in over the next couple of weeks.

Warning Signs

The market fell last week, and a major contributor to the tumbling indices was the flurry of companies warning that the second quarter wasn't so hot. In what should have been an otherwise slow news week dominated by World Cup and NBA free agency news, a lot of familiar companies offered up uninspiring outlooks.

• The Container Store (TCS) reported the comparable-store sales slipped 0.8 percent in its latest quarter. The retailer, which specializes in storage solutions, pins the weakness on a "retail funk" that's coating many chains across the country.
• Lumber Liquidators (LL) is the country's leading discounter of hardwood flooring. This was a booming market during the early stages of the housing recovery, but Lumber Liquidators is telling investors to dial back near-term expectations after a sharp drop in comps.
• Rent-a-Center (RCII) would seem to be a natural in this iffy climate as a leader in rent-to-own furniture, TVs, PCs and other home essentials. However, it too is pointing to a material weakness where sales and earnings will fall short of initial forecasts for the quarter. Things are challenging enough where it's resorting to renting smartphones to help drive more traffic.
• Bob Evans (BOBE) prides itself on serving up "homestyle" food at value prices, but that wasn't enough to help the chain of casual dining restaurants in its latest quarter. Despite selling off its Mimi's Cafe chain to help focus on its namesake concept, Bob Evans saw its same-store sales slip 4.1 percent in its latest quarter. With an activist investor already stirring up unrest, it's not the kind of performance that Bob Evans needed to prove that it could bounce back on its own.
• Liquidity Services (LQDT) isn't a consumer-facing company, but it staffs a popular exchange for suppliers looking to unload clearance items. Liquidity Services also hosed down its projections last week, suggesting that there's distress even in moving distressed merchandise.

Get Ready to Rumble

These are just some of the companies that took hits last week after unleashing negative news. We can also dive into the soft June sales at the once-trendy Gap (GPS) or even tech weakness at networking solutions provider Gigamon (GIMO) after it warned that it failed to convert potential customers that are being more cautious with their tech decisions.

An optimist will argue that this isn't all horrendous. Companies that aren't announcing or pre-announcing a sloppy quarter now may be ready to live up to expectations -- if not surpass them entirely -- when they report in the coming days. However, that would be naive.

There will certainly be retailers that don't fall into The Container Store's "retail funk" and tech companies that don't face Gigamon's challenges to win over new business.

Then again, given the ominous tone established by a handful of prolific companies last week, it's hard to dismiss concerns. This was supposed to be the turnaround season -- and it's just not living up to the hype.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Liquidity Services, Lumber Liquidators, and The Container Store Group. The Motley Fool owns shares of Lumber Liquidators and The Container Store Group.

 

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Top 7 Retirement Milestones You Need to Know

July 15, 2014, 11:00 pm

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Filed under: Family Money, Personal Finance, Retirement Living, Retirement Plans, Financial Education

By Kelly Campbell

Retirement planning is a process that actually continues throughout your retirement years, with tweaks and changes to ensure that you stay on track. Many folks will immediately think of their portfolio and rate of return, but your age is also an important factor that can help you maximize certain benefits, while helping you avoid mistakes, which are often accompanied by hefty penalties. Make sure to mark your calendar for these important milestones.

In order to help illustrate these points, we'll use the example a fictional 49-year-old named Claire, who was born in 1965. Claire is still putting in hours at the office, but her children are in college and she's starting to think more seriously about her retirement. Let's examine how these retirement milestones work for Claire and many others years away from retirement:

Age 50. Once Claire reaches age 50, she's eligible to take advantage of something called the "catch up" provision, meaning she can make greater contributions to her qualified retirement accounts (individual retirement accounts, Roth IRAs, 401(k)s, etc.). Claire is now able to contribute an extra $1,000 to her IRA and Roth IRA, increasing her total contribution from $5,500 to $6,500 annually. If able, she can also add an extra $5,500 to her 401(k), increasing the contribution limit from $17,500 to $23,000 annually. It's important to take advantage of this provision, if you weren't able to start saving for retirement as soon as you would have liked.

Age 59½. One of the good things about getting older, aside from getting wiser, is that Claire will be able to access her retirement savings. Age 59½ allows individuals to avoid the 10 percent "early withdrawal penalty" if an unplanned event or illness occurs. However, income tax is still assessed on traditional 401(k) and IRA withdrawals, while withdrawals from Roth-optioned accounts are tax-free if held in the account for more than five years. It's important to understand the differences between Roth and traditional accounts and assess the advantages of one over the other.

Age 62. This is the earliest age that Claire is eligible to file for Social Security benefits, but there is a catch. If Claire files for Social Security, as soon as she turns 62, then she will only be eligible to receive 70 percent of her total benefit. Also, should she decide to file and continue to work, her benefits could be partially or entirely withheld and taxed. However, if she continues to work and files for Social Security, once she has reached her full retirement age of 67, then she will receive her full retirement benefit, regardless of income.

Age 65. Once Claire turns 65, she is eligible to enroll in Medicare. This means that she no longer has to rely on employer-sponsored or private health insurance plans. An important point to remember is that filing for Social Security doesn't automatically include enrollment in the Medicare program. Claire will need to register for Medicare benefits during a 7-month window, including the three months before her 65th birthday, her birth month and three months after, to avoid possibly paying higher premiums for coverage.

Age 66 and 67. For the majority of baby boomers (born between 1943 and 1954), the retirement age will be 66. For Claire, because she was born after 1960, her full retirement age is 67, which means that she is now eligible to receive her full retirement benefit. Should Claire decide that she wants to claim her benefits at age 65 and not wait until her full retirement age of 67, then, according to the Social Security Administration, she will receive about 87 percent of her total benefit.

It's important to note as well, that spousal benefits are also affected by the decision to receive benefits early. A spouse may claim 50 percent of the higher earner's benefit. So if Claire, having the higher earnings record, decides to file at 65 and not 67, and receive a reduced benefit, then her spouse would receive 50 percent of her reduced benefit.

Age 70. If there is a penalty for drawing Social Security benefits early, there must be an advantage when you delay receiving benefits, right? That's correct. For every year that Claire delays drawing her Social Security benefit, she receives a "Delayed Retirement Credit," which is an 8 percent annual increase to her accumulated Social Security benefits. Claire decides to work a couple more years and not file for Social Security at 67, so she can receive that 8 percent increase. However, she is only able to receive the delayed retirement credit until age 70. After age 70, there isn't any advantage to delay filing for benefits.

There are numerous strategies and ways to file for Social Security and depending on your specific situation, you want to develop a filing strategy that will substantially increase your benefits over your lifetime. I strongly recommend that people do their research and develop a filing strategy that ensures receipt of the maximum benefit.

Age 70½. Once Claire reaches age 70½, she is required to begin taking required minimum distributions from her traditional retirement accounts, or she will have a 50 percent tax penalty on the amount that should have been taken out. That's a pretty substantial fine by the Internal Revenue Service. Where else can one be penalized for continuing to save money? Scheduling and taking required minimum distribution withdrawals is one of the most important things that retirees must remember to do.

Until this point, Claire's traditional qualified retirement accounts have grown tax-deferred. She has only paid taxes on money withdrawn. However, she can't keep money in her retirement accounts indefinitely, because the function of these accounts is to provide income during retirement. Required minimum distributions are a way to ensure that the government is able to collect tax revenue on the tax-deferred dollars that are held in these accounts. Required minimum distributions do not apply to Roth-optioned retirement accounts, which is a great advantage of Roth accounts.

I hope that this quick overview of significant retirement milestones, illustrates the importance of factoring your age into your retirement planning.

Kelly Campbell, certified financial planner and accredited investment fiduciary, is the founder of Campbell Wealth Management and a registered investment adviser in Alexandria, Virginia. Campbell is also the author of "Fire Your Broker," a controversial look at the broker industry written as an empathetic response to the trials and tribulations that many investors have faced as the stock market cratered and their advisers abandoned their responsibilities to help them weather the storm.

 

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No Longer Niche, Local Foods Becoming Big Business

July 15, 2014, 11:00 pm

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Filed under: Saving

By MARY CLARE JALONICK

PHILADELPHIA -- Once a niche business, locally grown foods aren't just for farmers markets anymore.

A growing network of companies and organizations is delivering food directly from local farms to major institutions like Thomas Jefferson University Hospital in downtown Philadelphia, eliminating scores of middlemen from farm to fork. Along the way, they're increasing profits and recognition for smaller farms and bringing consumers healthier, fresher foods.

Over the past five years, with more than $25 million in federal aid, these so-called food hubs have helped transform locally grown foods into a bigger business, supplying hospitals, schools, restaurant chains and grocery stores as consumer demand grows.

Major institutions like Jefferson have long relied on whatever giant food service companies provide, often processed foods that are delivered efficiently and are easy to heat and serve. But with a steady supply of locally grown food from the Common Market food hub, Jefferson now serves vegetables like bok choy and asparagus, creamy yogurts from Amish country and omelets with locally sourced cage-free eggs and spinach.

The model is simple: Common Market, a nonprofit, picks up food from 75 regional farmers and small food companies and quickly turns it around in its Philadelphia warehouse. The food -- everything from vegetables to turkey to tofu -- is then sent to 220 city customers along with detailed information about where it was grown or produced. There are about 300 other similar food hubs around the country.

Worth the Additional Cost

Shelley Chamberlain of Jefferson's dining services says the hospital hopes to eventually source 10 percent of its food from Common Market. The items can be a bit more expensive and take more labor and training to cook, but Chamberlain says it's worth it to serve healthier foods.

"We can't go out to farms and say, 'I'd like to buy your cucumbers,' 'I'd like to buy your bok choy,' 'I'd like to buy your carrots,' " she says. "They provide an infrastructure for us to trust what is coming in the door."

Dawn Buzby of A.T. Buzby Farm in Woodstown, New Jersey, says it's a movement toward "farm to institution." Three times a week, Common Market picks up tomatoes, sweet corn, eggplant, cantaloupes and other produce from her farm and sells the food in Philadelphia, 35 miles away.

She says Common Market is helping her business get urban name recognition. And her farm sets the price of sales, something that isn't an option at the auction down the road.

"People are just becoming so interested in their food and where it comes from," Buzby says. "I only see it getting better."

It's a cultural transformation for the agriculture industry -- and the Agriculture Department -- which has long been focused on the biggest farms and staple crops like corn and soybeans. Most fruits and vegetables are shut out of major subsidy programs as billions of federal dollars flow to large growers.

USDA has upped its commitment to building small farms and locally grown food with a program started in 2009 called "Know Your Farmer, Know Your Food." Boosting food hubs like Common Market has been one of its priorities. There isn't good data yet on locally grown food sales, but USDA says it has touched almost 3,000 separate projects.

Agriculture Secretary Tom Vilsack says it's a part of a government effort to revitalize rural areas, which have been losing population -- and important political clout.

Reconnecting with Nature

"It's all designed to reconnect people with the food that they consume so that there is a better appreciation, a greater appreciation, for the amazing story of American agriculture regardless of what production system you favor, or what sized operation you have," he says.

Haile Johnston says he co-founded Common Market in 2008 after seeing how little farmers were making at wholesale and how much customers were paying for the same foods in the city.

"The two anchors of the chain, the producers and consumers, are really the most marginalized in this system," he said.

Johnston says hospitals like Jefferson, along with schools, were a part of their model from the start because they could be a steady source of business and serve a large number of low-income people who may not have much access to produce.

In 2008, Common Market generated $125,000 in sales. This year, the organization is set to surpass $2.5 million -- all money reinvested into the nonprofit. Last year, Common Market received a $300,000 USDA grant designed to improve access to healthier foods in low-income communities.

New York City's Greenmarket Co. and Detroit's Eastern Market are running similar models, both with help from USDA. Like Common Market's, their customers are varied, from large institutions to grocery stores, restaurants and farmers markets in low-income areas.

Promoting Local Food

USDA has helped these hubs and farmers that supply them with research dollars, technical support, microloans, infrastructure such as hoop houses for winter growth and help buying equipment. USDA also facilitates farm-to-school programs and has heavily invested in promoting farmers markets.

In Mississippi, Walmart (WMT) has started buying purple hull peas -- similar to black-eyed peas -- directly from farmers in the Mississippi Delta, a deal cemented with USDA help. One of the farmers, Charles Houston, says the checks from Walmart have helped many of his area's small farms survive, paying for new irrigation and infrastructure.

Ron McCormick, Walmart's senior director of sustainable agriculture, says many of the company's distributors are getting into the local game. The company, the nation's largest retailer, pledged to double its share of locally grown foods between 2009 and 2015.

Consumers are continuing to want more of it. Consumer and market research company Hartman Group found that nearly a third of consumers bought more local products than in the previous year.

Dan Carmody of Detroit's Eastern Market says he compares local foods to the craft brew industry -- once on the sidelines, it's now making a dent in the country's beer sales.

"You see the same thing happening in food," he says. "It's really changing the narrative."

 

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Apple, IBM Team Up in Bid to Dominate Biz Computing

July 15, 2014, 11:36 pm

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Filed under: Company News, Technology, IBM, Apple, Computer Industry

By Matt Hunter | @MattMHunter

Tech behemoths Apple and IBM announced a partnership Tuesday that could make Apple (AAPL) -- traditionally a consumer brand -- a major player in the business market.

IBM (IBM) said it would create a class of more than 100 business applications exclusively for iPhones and iPads to run on Apple's iOS platform. In return, IBM will sell Apple's products with 100 industry-specific apps to its clients worldwide.

Some of the services IBM will provide via iOS include device management, security, analytics and mobile integration, they said in a release. In return, Apple's vaunted AppleCare service would provide support for these applications.

The partnership is about "transforming enterprise," Apple CEO Tim Cook told CNBC in an exclusive interview. The partnership aims to "deliver on the promise of mobile in a big way," he said.

One priority of the partnership will be one of the "biggest inhibitors" in enterprise, which is security, IBM CEO Virginia Rometty told CNBC. Security is increasingly important as cyberhacking and surveillance become more ubiquitous concerns.

The news could impact BlackBerry (BBRY), once the industry leader in enterprise mobile, which is aiming to right itself after years of declining profits and fleeing clients.

"Apple just took a sword and just stabbed it right in the heart of Blackberry and said 'you're done,' " said Ross Gerber, CEO of wealth management firm Gerber Kawasaki, in a "Closing Bell" interview.

The partnership is also sure to put more pressure on Microsoft, which is making its own push into cloud and mobile services for enterprise clients.

That software giant is at the first stage of what CEO Satya Nadella recently said will be a transformation away from selling software. The company also launched a version of its office software for Apple's iPad earlier in the year.

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Bank of America Earnings Hit by $4 Billion Litigation Charge

July 16, 2014, 12:47 am

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Filed under: Bank of America, Earnings, Banks, Scandals and Lawsuits

By STEVE ROTHWELL

NEW YORK -- Bank of America (BAC) said Wednesday that its second-quarter earnings were hit by higher litigation expenses.

The Charlotte, N.C.-based bank earned $2 billion in the second quarter after payments to preferred shareholders, compared with $3.6 billion in the same period a year earlier, a decline of 43 percent.

Revenue fell 4 percent to $21.9 billion from $22.9 billion.

Per share, the bank's earnings worked out to 19 cents, compared with 32 cents a year ago.

The bank's litigation costs of $4 billion crimped earnings by 22 cents a share.

Bank of America also said that it had reached a $650 million settlement Tuesday with American International Group (AIG) to resolve all outstanding residential mortgage-backed securities litigation between the two companies.

The bank said that "substantially all" of the litigation expenses incurred in the second quarter of the year were related to existing mortgage issues that have been previously disclosed.

Like its competitors, Bank of America is still dealing with the fallout from the financial crisis that began in 2007 and the subsequent collapse of the housing market. The bank said in March that it will spend $9.33 billion to resolve a dispute over mortgage securities with the Federal Housing Finance Agency, the regulator that oversees Fannie Mae and Freddie Mac.

However, unlike JPMorgan (JPM) and Citigroup (C), Bank of America has yet to settle a federal investigation into its handling of risky subprime mortgages. Citigroup said Monday that it had agreed to a $7 billion settlement with the Department of Justice, while JPMorgan reached a $13 billion settlement in November.

"We feel like we've gotten a large chunk of this behind us ... Clearly, the DOJ is the most significant matter that's out there remaining," Chief Financial Officer Bruce Thompson said on a call with reporters.

In April, Bank of America was forced to shelve plans to increase its dividend and stock buyback program. The bank said the move came after it realized that it had incorrectly valued securities that it had obtained through its acquisition of Merrill Lynch in 2009. As a consequence, the lender said it needed to hold a higher level of capital.

Bank of America had intended to buy $4 billion of its own stock and raise its dividend from a penny a share to 5 cents a share. The plan had been approved by the Federal Reserve. The bank said May 27 that it had resubmitted its capital plan to the Federal Reserve.

Thompson told reporters Wednesday that he couldn't comment on "supervisory matters."

Bank of America's stock fell 6 cents, or 0.4 percent, to $15.75 in pre-market trading.

 

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Producer Prices Rise More Than Forecast in June

July 16, 2014, 1:31 am

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Filed under: Economic Indicators, GDP, Inflation, Manufacturing

By Lucia Mutikani

WASHINGTON -- U.S. producer prices rose more than expected in June with gains across most categories, pointing to some inflation at the factory gate.

The Labor Department said Wednesday its producer price index for final demand increased 0.4 percent last month, reversing May's 0.2 percent decline.

Economists polled by Reuters had forecast prices received by the nation's farms, factories and refineries rising only 0.2 percent.

The government revamped the PPI series at the start of the year to include services and construction. The new series was viewed as an alternative measure of economy-wide inflation.

But big swings in prices received for trade services, a gauge of margins for retailers and wholesalers, have injected volatility into the series and made it difficult to get a clear read on producer inflation.

The dollar widened its gains against a basket of currencies after the data. U.S. stocks were set to open higher.

Inflation is edging higher, with key consumer price measures rising in both May and April, even though the main gauge watched by the Federal Reserve continues to run below its 2 percent target.

The U.S. central bank is widely expected to start raising interest rates in the second half of 2015, but labor market strength poses the risk of an earlier policy tightening.

Fed Chair Janet Yellen cautioned Tuesday that the Fed could raise interest rates sooner and more rapidly than currently envisioned if the labor market continued to improve faster than anticipated by policymakers.

The Fed, which is moving toward wrapping up its monthly bond buying program, has kept overnight lending rates near zero since December 2008.

In the 12 months through June, producer prices increased 1.9 percent after rising 2 percent in May.

Wholesale food prices slipped 0.2 percent, declining for a second straight month as the cost of grains tumbled by the most since July 2009. Prices for canned, cooked, smoked and prepared poultry recorded their biggest decline since January 2004.

Gasoline prices increased 6.4 percent, the largest gain since September 2012.

Prices received for services at the final demand level rose 0.3 percent after falling 0.2 percent in May.

Producer prices excluding food and energy gained 0.2 percent in June after slipping 0.1 percent in May. In the 12 months through June, the core PPI for final demand rose 1.8 percent, adding to the 2 percent gain in the period through May.

Producer prices excluding food, energy and trade services increased 0.2 percent after being flat the prior month.

 

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Move Over Juan Valdez: Starbucks Opens in Colombia

July 16, 2014, 1:32 am

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Filed under: Starbucks, Retail, Consumer Goods, Food & Beverage, This Built America

By JOSHUA GOODMAN

BOGOTA, Colombia -- Make room Juan Valdez, it's time to meet the green-aproned barista.

On Wednesday, Starbucks (SBUX) is making its much-anticipated debut in the country synonymous with coffee after years of roasting Colombia's Arabica beans for billions of java lovers the world over.

The three-floor coffee house in Bogota is the first of 50 that the Seattle-based company plans to open here in the next five years. In a nod to the country's proud coffee-growing tradition, it's also the only one in the world to serve exclusively locally sourced coffee.

But will Colombians answer Starbucks' siren call and ditch a popular local chain bearing the bushy-whiskered coffee farmer's name?

Colombia's coffee federation, owner of the Juan Valdez chain, is outwardly welcoming the competition. The arrival of Starbucks it says will boost the market for gourmet java even if sales at its nearly 200 stores in Colombia take a hit over the short term

"There's room in the market for us both," said Alejandra Londono, head of international sales for the Colombian chain.

Juan Valdez's social mission promoting Colombian coffee and contributing to producers' welfare is likely to keep customers loyal, said Londono.

Since its founding 11 years ago, the Colombian chain has funneled more than $20 million to a national fund that supports the country's 560,000 coffee-growing families, some of whom also own shares in the company.

While Starbucks also has burnished its image for corporate responsibility, offering employees in the U.S. generous health care benefits and now online college courses, it's stayed clear of Colombia, Latin America's third largest economy, even as it has opened more than 700 stories in 12 other countries in the region. That may have been because it feared trampling on local sensibilities already hurt by the branding of coffee that leaves growers earning just a few pennies from every $4 venti latte sold.

Indeed, a desire to overcome the commodities curse is what's been driving the federation's focus on adding value up the retail chain, a strategy reflected in more sophisticated local coffee-drinking culture.

While known for exporting the world's finest beans, until recently Colombians' taste in coffee was quite provincial, relegated to a preference for heavily sweetened, warmed-over black coffee known as tinto, which is sold nearly everywhere.

Across from where Starbucks is opening on a leafy park in north Bogota, office workers at a rival Juan Valdez seemed thrilled with the prospect of having a new option for their late-afternoon caffeine fix. Service at their local coffee house, they said, has been improving ever since Starbucks announced it was coming a year ago.

"I like Juan Valdez but it doesn't mean I'll never go to Starbucks just because I want to support our own," said Marcela Gomez, an architect. "A little healthy competition is good."

 

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Money Minute: Apple, IBM Team Up to Boost Business Apps

July 16, 2014, 1:33 am

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Filed under: Technology, Media, Market News, Computer Industry, Drug Companies

They say the passage of time heals all wounds. Well, two one-time rivals are now joining forces to boost both of their businesses.

They make for strange bedfellows but Apple (AAPL) and IBM (IBM), which once competed in the personal computer era, are now teaming up in the digital age.

The two are going to be working together to create business apps that both hope will make them more attractive to corporate clients. Apple will get the chance to sell more iPhones and iPads to those clients. And Big Blue gets the opportunity to gain more revenue off its business software and services. The company, once a leader in hardware, has since sold its PC business to China's Lenovo and shifted focus to software and services. The deal stipulates IBM employees will provide support for Apple products to corporate clients much like AppleCare, which is available to Apple's retail customers.

Another partnership in the tech world is attracting some eyeballs. Google (GOOG) is going to be collaborating with Swiss pharmaceutical-giant Novartis (NVS) to create a so-called "smart contact lens." The lens attempts to detect blood sugar levels, which is important for diabetics to track. In January Google said the lenses would be able to track the data and upload it to smartphones almost in real time. Novartis had tried to create a similar contact lens on its own several years ago. The company's CEO said Google's engineers are doing incredible things with technology. The announcement comes at a time when many tech companies are looking at ways to tap into the health care industry to grow their businesses.

On Tuesday, stocks ended mixed on Wall Street, with the Dow Jones industrial average (^DJI) gaining 5 points, the Nasdaq composite (^IXIC) dropping 24 and the Standard & Poor's 500 index (^GPSC) falling 3 points.

China's e-commerce juggernaut Alibaba is pushing further into the entertainment business. It has just signed a deal with Lions Gate Entertainment (LGF) to distribute hit shows like Mad Men and box office draws like Twilight through its set-top boxes as Chinese viewers are increasingly drawn to entertainment that can be enjoyed from the comfort of their couches. This is Alibaba's first content deal with an American company and comes as the firm is trying to grow its business as it gears up for a much anticipated U.S. listing that could be one of the largest in history.

And finally, you might think the top CEO of the year award should go to a hot tech company like Facebook (FB), Amazon.com (AMZN) or Tesla (TSLA). Well, the editors at Chief Executive magazine think otherwise and have instead given their annual award to an old media titan -- Walt Disney's (DIS) Bob Iger. Iger, who has been the top dog at Disney for nine years, is lauded for smart acquisitions, which include its purchases of Pixar and Marvel. The stock reached an all-time high last February, tripling in price since Iger took over in 2005.

 

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Labor Department Shows Inflation Uptick in Producer Prices

July 16, 2014, 2:05 am

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Filed under: Economy

The U.S. Labor Department released its Producer Price Index (PPI) for final demand for the month of June on Wednesday morning. We were worried that wholesale inflation would be stronger than what the economists were modeling for, and the good news is that the PPI was only marginally higher than expected.

The headline PPI for final demand in June was up by 0.4%. Dow Jones and Bloomberg were both calling for the headline PPI to be up by 0.3% in June. This was up from -0.2% in May, which was left static in the revision. The core PPI, excluding food and energy, was up by 0.2% in June. Dow Jones and Bloomberg were both calling for the core PPI to be up by 0.2%, after a -0.1% drop in May.

As previously noted, investors use the PPI as a precursor of consumer prices because rising costs of production can bring higher prices at the consumer level. It is a chain that is obvious, but there are frequently some exceptions.

The new PPI calculation has also been changed to measure the PPI for final demand. This change in how the data are presented still has many investors and traders a bit confused around the release, but eventually data are just data.

ALSO READ: 10 Cities Where Wages Are Soaring

Filed under: Economy

 

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Factory Output Rises for Fifth Straight Month

July 16, 2014, 2:34 am

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Filed under: Economic Indicators, Industrial, Manufacturing, Mining & Drilling, Public Utilities

By CHRISTOPHER S. RUGABER

WASHINGTON -- U.S. factory output increased for the fifth straight month in June as manufacturers cranked out more aircraft, chemicals and furniture. The modest gain underscored manufacturing's role in helping return the economy to growth after a grim first quarter.

Factory production rose 0.1 percent last month, the Federal Reserve said Wednesday, down from a gain of 0.4 percent in the previous month. May's data was revised slightly lower, but April's reading was revised much higher.

Despite June's small increase, manufacturing output rose in the second quarter at the fastest pace in more than two years, providing a critical boost to the economy after it contracted sharply in the first three months of the year. Factory output climbed 6.7 percent at an annual rate in the second quarter, the most in more than two years and up from just 1.4 percent in the first quarter.

Overall industrial production, which includes manufacturing, mining and utilities, edged up 0.2 percent in June, down from a 0.5 percent gain in May.

Mining output, which includes oil and gas drilling, surged 0.8 percent. Utility production fell 0.3 percent, mostly reflecting weather patterns. Industrial production rose at an annual rate of 5.5 percent in the second quarter, the best showing in nearly four years.

"The industrial economy is in reasonable shape but the recovery is steady rather than spectacular," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Most economists are optimistic that factory output will keep rising. The Federal Reserve Bank of New York said earlier this week that its regional manufacturing index reached a four-year high in July.

Americans are buying more cars and businesses are spending more on steel and other metals and computers. Auto sales reached an eight-year high in June. Auto production slipped last month, the Fed said, but that followed several months of strong gains.

Petroleum output fell, but mostly because of a temporary disruption at a large refinery, according to the Fed's report.

The government's jobs report earlier this month showed that factories added 16,000 positions in June, the most in four months, and the average work week for manufacturing employees remained at a post-recession high.

A survey earlier this month by the private Institute for Supply Management, meanwhile, found that manufacturing expanded in June for the 13th straight month, though at a slightly slower pace than the previous month. Growth was broad-based across nearly all the 18 sectors that the survey covers. The ISM is a trade group of purchasing managers.

The economy shrank 2.9 percent at an annual rate in the first quarter, the worst showing in five years.

But most economists expect growth returned in the April-June quarter. On average, analysts forecast the economy grew at an annual pace of 3 percent in the second quarter, according to a survey by the National Association for Business Economics. While healthy, that's down from a 3.5 percent forecast a month earlier.

 

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Homebuilder Confidence Surges on Stronger Sales

July 16, 2014, 3:09 am

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Filed under: Mortgages, Real Estate, Housing Market, Materials & Construction, Home Buying

By ALEX VEIGA

U.S. homebuilders' confidence in the housing market surged this month to the highest level since January, reflecting a pickup in sales of new homes and heightened expectations for sales the second half of the year.

The brighter sales outlook suggests home construction could pick up in coming months after a sluggish start this year.

The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday rose this month to 53, up four points from a revised reading of 49 in June.

Readings above 50 indicate more builders view sales conditions as good, rather than poor. The latest reading is the first above 50 since January, when it was 56.

Builders' view of current sales conditions for single-family homes, their outlook for sales over the next six months and traffic by prospective buyers each increased since June.

Higher mortgage rates and the bad weather weighed on home sales in late 2013 and early this year. Harsh winter weather also contributed to a sluggish start to this year's spring home-selling season.

But sales of new homes have picked up in recent months.

New home sales jumped 18.6 percent in May to a seasonally adjusted annual rate of 504,000, the highest level in six years. That followed a 3.7 percent increase in April. The gains came after declines in February and March.

Even with the big overall gain, sales of new homes are still running at just about half the pace of a healthy real estate market.

Still, the recent pickup in sales suggests that the housing recovery may be regaining its footing after slowing earlier this year.

Economists say there is significant pent-up demand for homes as many potential buyers put off purchases over the past few years because of concerns about the economy.

Solid job gains this year also bode well for housing.

Employers added 288,000 jobs last month, the fifth straight month of gains above 200,000. The national unemployment rate has slid to 6.1 percent, a 5½-year low.

"An improving job market goes hand-in-hand with a rise in builder confidence," said David Crowe, the NAHB's chief economist. "As employment increases and those with jobs feel more secure about their own economic situation, they are more likely to feel comfortable about buying a home."

That optimism is reflected in the latest NAHB index, which is based on responses from 241 builders.

In the latest survey, builders' view of current sales conditions for single-family homes rose four points to 57. A measure of traffic by prospective buyers increased three points to 39. And builders' outlook for sales of single-family homes over the next six months jumped six points to 64, the highest level since September.

Housing, while still a long way from the boom of several years ago, has been recovering over the past two years.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB data.

The builder confidence survey sent shares in U.S. homebuilders higher in morning trading Wednesday. M/I Homes (MHO), based in Columbus, Ohio, led the pack. The stock rose 72 cents, or 3.1 percent, to $23.63.

 

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Industrial Production Softening, Capacity Galore

July 16, 2014, 4:05 am

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Filed under: Economy

Wednesday's economic reporting included industrial production and capacity utilization data for the month of June. It turns out that production was muted, and capacity remains defiantly under that key 80% barometer. It just doesn't look like the United States is on its way back to being a manufacturing powerhouse.

Industrial production (output) was reported with a soft 0.2% gain in June, and May's number was revised down to a gain of 0.5% from a preliminary report of 0.6%. Bloomberg was projecting a 0.4% gain.

Capacity utilization (potential output ratio) came in at only 79.1%, under the 79.2% consensus estimate from Bloomberg. Manufacturing activity was up by only 0.1% in June, versus a lower revision to +0.4% (+0.6% preliminary) in May.

This is interesting when you consider that unemployment is improving, and when we are supposed to be in the midst of a snap-back recovery from a poor first-quarter gross domestic product figure of -2.9%.

Here is a partial breakdown by segment for production:

• Apparel and leather production was down 1.3%.
• Food, beverage and tobacco products fell 0.6%.
• Mining was up 0.8%, after a 1.1% rise in May.
• Utilities fell 0.3%, after falling 0.4% in May.
• Ex-auto manufacturing rose 0.2%, versus a 0.3% gain in May.
• Durable goods rose 0.4% in June (an annual rate of 8.8% in the second quarter).
• Non-metals mineral products rose 1.0%.
• Non-durable goods fell by 0.3%.
• Output of petroleum products and coal products was down 2.7% (listed partially from a major refinery disruption).

If you use June as a benchmark for the end of the quarter as we do, manufacturing production was up 6.7% on an annualized basis, after rising 1.4% in the first quarter. So even with these reports looking a tad soft, it just means that the growth in the second quarter might not be quite as robust as economists were hoping just a week or two ago.

Filed under: Economy

 

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Time Warner Rebuffs Fox Bid, but Murdoch Won't Give Up

July 16, 2014, 4:40 am

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Filed under: Media, Mergers & Acquisitions, Entertainment Industry, Entrepreneurs, This Built America

By Soyoung Kim and Liana B. Baker

NEW YORK -- Rupert Murdoch's 21st Century Fox (FOXA) said Wednesday it had offered to buy Time Warner (TWX), a move that would unite two of the world's most powerful media conglomerates, but Time Warner rebuffed its offer.

Time Warner's stock jumped 17.3 percent to $83.33 on the New York Stock Exchange after news that Murdoch had his sights on Time Warner, the owner of the Warner Bros. movie studio and cable channels such as HBO and CNN, among other media properties.

Murdoch's cash-and-stock bid was worth about $80 billion, or $85 a share, people familiar with the matter told Reuters earlier Wednesday. The offer, first reported by The New York Times (NYT), consisted of 60 percent in stock and the rest in cash.

Twenty-First Century Fox later confirmed it had made a formal takeover proposal in June but said there were no talks currently under way.

Even so, Murdoch and his advisers are unlikely to abandon his ambition to put Time Warner in his empire so easily, one of the people said, pointing out that he has the "disciplined determination" to get a deal done.

Fox's overtures to Time Warner could accelerate a wave of consolidation that is already reshaping the U.S. media landscape.

Reuters reported this month that Murdoch was in the midst of a deal that would give Fox the firepower to buy a content company.

Fox, which owns cable news channel Fox News as well as movie studio 20th Century Fox, has indicated it would sell CNN as part of its proposal to buy Time Warner to clear any regulatory hurdles, according to the people familiar with the matter.

"[It] would be good deal for Fox if it goes through Washington [regulators] with CNN sales," Wunderlich Securities analyst Matthew Harrigan told Reuters in an email. He said the "fair public value" for Time Warner was $82 a share.

Fox currently estimates that a combined company would save $1 billion in costs and possibly more, primarily by cutting sales staff and back-office functions, the people familiar with the matter said.

It believes that detailed negotiations with Time Warner could reveal much higher synergies than $1 billion, which may justify Fox sweetening its offer, the people said.

The combined company's revenue would be more than $60 billion.

Twenty-First Century Fox is in the middle of a reorganization of its television business as the network seeks to lift itself out of last place among the big U.S. broadcasters.

The shakeup of Rupert Murdoch's Twenty-First Century Fox's TV units comes a year after the film and TV company was spun off from Murdoch's News Corp. (NWS), which now operates publishing assets, including the Wall Street Journal.

Twenty-First Century Fox is being advised by Goldman Sachs (GS) and Centerview Partners, while Time Warner is working with Citigroup (C).

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Why I Choose to Not Be Rich

July 16, 2014, 5:38 am

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Filed under: Cost of Living, Global Economy, People

By Paul Fowler

In its Money Mic series, LearnVest hands over the podium to people with controversial views about money. Today, one man explains why embracing a non-rich lifestyle suits him best.

Around 10 years ago, when I was 20, I traveled to Sri Lanka. It was a trip I'd dreamt about for years -- and a country that, for some inexplicable reason, had always fascinated me. I had just graduated from Cardiff University in Wales, and it was my first time setting foot outside Europe, where I'd grown up.

The vacation was everything I'd wanted it to be, and it ignited one of the biggest passions in my life: travel. But it wasn't just the country's spectacular tourist spots that left a lasting impact -- one brief encounter actually changed the way I look at life.

One afternoon, while in the outskirts of Sri Lanka's capital city, Colombo, I took a walk with my friend's grandfather through the fields near his house. We came across two of his friends, who invited me into their home -- a mud hut with no electricity -- for a meal of curried chicken and rice.

I savored the food for its flavor, but I felt a sense of guilt, too. These people didn't have to be so generous to me, a stranger, but here they were, offering me what little they had. I explained this to them in an attempt to express my deep appreciation. "It's nothing," one of them said as he held my hand. "We have more than enough."

A Significant and Symbolic Gesture

My friend's grandfather later explained that Sri Lanka is a country rich in natural resources, so people generally have enough to eat. And because of the Buddhist values inherent in the culture, many feel completely satisfied owning very few material possessions. The experience altered me profoundly.

Although I wouldn't sign up to live in similar circumstances -- I've grown accustomed to certain luxuries, like smartphones and running water -- my perspective on what it means to live well is different. Since then, I've adopted the belief that the less you have in terms of possessions, the more you're able to find what really drives you. Since my trip to Sri Lanka 10 years ago, I've lived in London; Buenos Aires; Bogota, Colombia; and Berlin -- and I've traveled extensively in South America, Europe and Asia.

Of course, I didn't always think like this.

Of course, I didn't always think like this. Growing up, I received a very different message from my dad, a software engineer, who constantly regretted not having more money. And, for a while, I adopted a similar outlook: More money was worth striving for -- it was the key to lasting happiness and an important benchmark for success.

I remember sitting with him one morning when I was around 14, reading the paper. There was an article about my school, which was one of the worst in town. I could see how disappointed he was -- not just in the school, but also in himself. He told me as much, saying he was sad he couldn't send me to a more prestigious school.

I also noticed his discomfort when we'd visit friends of my mom. They were doctors, and their houses reflected their sizable wages. My dad never felt at ease -- and never invited them to our house. It was, he thought, too small and underwhelming.

What I See for My Financial Future

Do I ever wish I had more money? Sure. I work hard, and it's natural to want to see just reward for the work that you do. But the truth is that I believe this bootstrapping phase of my current job will only make it more rewarding when things work out for us -- I thrive on the excitement and challenges you face in the startup world.

Of course, there have been times when managing my financial situation has been difficult. One day in Argentina, I remember walking by an empanada shop -- the cheapest food you can get -- and realizing that, with the change in my pocket, I couldn't even afford one. I had to ask myself: Was I really living how I wanted to?

And even now that my $1,000 monthly paycheck is totally sufficient (it's also the most I've ever made in my life), I occasionally wonder what it would be like to have more money. It scares me that I haven't made any contributions to my retirement. And I'd love to be able to buy more luxuries, like a good stereo system, and better Christmas gifts for family and friends.

But I don't want the material items enough to make money more of a priority in my life. For me, money signifies the beginning of attachment -- and attachments would stop me from living the lifestyle I love. I'm afraid these things might prevent me from leaving Berlin when my next adventure calls. It might seem illogical, but there's something about the challenge of a shoestring budget that captivates me.

Dad Helps Out Sometimes

When things have gotten really tough, my dad -- who's been really supportive of my commitment to this lifestyle -- has helped me out by sending $100 here and there, for which I'm incredibly grateful, especially since it's always been my choice to live how I do.

I actually think my choices have positively influenced my dad's own outlook on life. He's started to slow down, choosing to work less and spend more time with his grandchildren.

Is this life sustainable? I think so. Even when I start a family one day, I know that my attitude toward money won't change, especially since my girlfriend feels the same way that I do. Unlike my dad, it's not my goal to give my (future) kids the fanciest education. I want to travel with them, and give them a decent, comfortable upbringing, just like I had.

Appreciate What You Have

But, most of all, I'd like to teach them what I learned in Sri Lanka: If you appreciate what you've got, then you have everything you need.

In reality, my siblings and I had a very comfortable lifestyle. My family had two cars, we went on holiday every year, and we lived in a nice area of town. Looking back, my dad's desire to want more prevented him from taking stock of what he actually had -- a loving wife and kids, a spacious house, a job he enjoyed -- and appreciating it.

If it weren't for my life-changing trip to Sri Lanka, I might have followed in Dad's footsteps-and become obsessed with chasing the happiness that'd surely accompany a bigger paycheck.

In fact, just a year ago, I was offered a job that paid more than I've ever made in my life. But although I was tempted, I turned it down, opting instead to work for a lesser-paying but more exciting startup that also affords me time to travel, as well as the flexibility to work abroad and pursue my own happiness.

Why I Love Living the Non-Rich Lifestyle

For the last nine months, I've been living in Berlin, working as a marketing manager for a travel-focused startup and earning around $1,000 a month. The money isn't much by any account, but it allows me to be social, eat well and cover my $400 rent. It's the most I've ever earned. In Bogota, where I lived for three years, I made around $800 a month, and it was even less in Buenos Aires -- about $400.

You could argue that, with more money, I'd be able to travel more -- but it wouldn't be the same kind of lifestyle that I've come to love. Because more than just journeying around the world, I enjoy the challenge of being in a completely new environment -- with minimal financial resources.

What I've come to learn is I don't want experiences that money (or at least a lot of money) can buy. I don't want my connection to people in Colombia, for example, to be a commodity -- a brief sojourn into privileged areas of Bogota where I only meet people who are trained to show the best of the country.

I'd much rather sink into the culture of a country and find my way through it by making a living there. I want to earn my place. With more money, I might miss out on such rich, life-changing experiences.

 

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Fed: Skilled Workers in Short Supply as Economy Expands

July 16, 2014, 7:05 am

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Filed under: Economic Indicators, Housing Market, Economic Recovery, Job Market, Federal Reserve

By Lucia Mutikani

WASHINGTON -- U.S. manufacturing output rose at its fastest pace in more than two years in the second quarter, suggesting the economy was regaining enough momentum to lift growth throughout the year. Other data on Wednesday showed inflation stirring at the factory gate and the housing market getting back on track after its recovery stalled late last year.

Factory production increased at a 6.7 percent annual rate, the quickest pace since the first quarter of 2012, the Federal Reserve said. That was an acceleration from the January-March period's tepid 1.4 percent pace.

Manufacturing output, however, increased only 0.1 percent in June after a 0.4 percent gain the prior month.

But the strong performance in the second quarter coupled with a report on Tuesday that showed a surge in factory activity in New York state left economists confident the sector was on solid ground and would continue to support the overall economy.

"The backdrop for the manufacturing sector is favorable at the start of the third quarter," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina, who added that the manufacturing sector would continue to drive economic growth in the second half of the year.

The sturdy manufacturing growth helped to lift overall industrial production to a 5.5 percent pace in the second quarter, the fastest since the third quarter of 2010.

The economy contracted sharply in the first quarter. It has since rebounded, with growth estimates for the April-June quarter topping a 3.0 percent annual rate.

Separately, the Federal Reserve's Beige Book found economic activity continued to expand in recent weeks, with manufacturing and consumer spending gaining traction.

A second report on Wednesday showed the NAHB/Wells Fargo Housing Market index rose to 53 this month, the highest level in six months, from 49 in June. A reading above 50 means more builders view market conditions as favorable.

Builders were upbeat about sales over the next six months and optimistic about prospective buyer traffic. That is welcome news for a sector that has been stymied by higher mortgage rates, expensive homes and a dearth of properties for sale.

The upbeat data helped to lift U.S. stocks, with the Dow Jones industrial average surging to a fresh intraday high. The dollar firmed against a basket of currencies, while prices for shorter-dated U.S. Treasuries slipped.

Inflation Trending Upward

Another report from the Labor Department hinted at some pick-up of inflation at the factory gate. The department said its producer price index for final demand increased 0.4 percent last month, reversing May's 0.2 percent decline.

The series has been too volatile to offer a clear read on producer inflation since being revamped at the start of the year to include services and construction.

Still, inflation is edging higher. Key consumer price measures rose in both May and April, even though the main gauge watched by the Federal Reserve continues to run below its 2 percent target.

"We think the odds are growing that this inflation target could be exceeded by the end of this year and we still look to March 2015 as the date of the first rate hike," said John Ryding, chief economist at RDQ Economics in New York.

The U.S. central bank is widely expected to start raising interest rates in the second half of 2015, but labor market strength poses the risk of an earlier policy tightening.

Fed Chair Janet Yellen cautioned on Tuesday that the central bank could raise interest rates sooner and more rapidly than currently envisioned if the labor market continued to improve faster than anticipated by policymakers.

The Fed, which is moving toward wrapping up its monthly bond buying program, has kept overnight lending rates near zero since December 2008.

In the 12 months through June, producer prices increased 1.9 percent after rising 2.0 percent in May.

Producer prices excluding food and energy gained 0.2 percent in June after slipping 0.1 percent in May. In the 12 months through June, the core PPI for final demand rose 1.8 percent after increasing 2.0 percent in the period through May.

 

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Federal Reserve Beige Book Indicates Growth Trajectory Nationwide

July 16, 2014, 7:14 am

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Filed under: Economy

The Federal Reserve has released its latest installment of the so-called Beige Book. The Fed is getting yet another chance to move the market with data that should have already been known.

Basic comments covered that the economy expanded in all regions, but growth has been moderate to modest. Labor conditions continued to improve in all 12 districts, and consumer spending grew in every district. Vehicle sales, consumer sales, and tourism also expanded. Another observation was that real estate demand was mixed amid low inventories and rising prices.

Overall, it is an upbeat report — with a view that inflation is not out of control at all. Most Districts were optimistic about the outlook for growth. The Beige Book said,

"Retailers are hopeful that third-quarter revenues will be about 1 to 3 percent higher compared to a year earlier. We heard reports about a run-up in dairy and meat prices that is being partially offset by a decline in the prices of some other agricultural commodities. Food inflation this year is expected to be about 3 percent. Otherwise, vendor and shelf prices held steady. Several of our retail contacts noted that additional monies have been added to their capital budgets, mainly for brick-and-mortar projects. Payrolls are stable."

Wednesday's release was prepared at the Federal Reserve Bank of Kansas City, based upon information collected before July 7, 2014. The report summarizes comments received from businesses and other contacts outside the Federal Reserve, but the Fed always notes that this is not a commentary on the views of Federal Reserve officials.

The Beige Book has historically been called the Tan Book, and we would propose that 90% of the time they should be called the Dull Book.

FULL BEIGE BOOK

Filed under: Economy

 

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Hang On, LeBron Fans: A King James Roller Coaster's Coming

July 16, 2014, 7:46 am

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Filed under: Company News, Advertising & Marketing, Entertainment Industry, Sports

A financial windfall will accompany LeBron James when he returns to northeastern Ohio. Following the NBA superstar's decision over the weekend to return to the Cleveland Cavaliers, Cuyahoga County officials estimated that the local economy will benefit to the tune of roughly $500 million a year.

A little more than half of that windfall will come from the games themselves as ticket sales spike with fans willing to pay more -- and more often -- to see James play near his hometown of Akron. The balance will come from tourism and the exposure that comes from TV coverage that will gravitate to Cavaliers home games. Some experts, though. caution that the real revenue will be far less.

However, an unlikely winner from James' move may be of the country's largest amusement park operators.

Please Secure All Loose Belongings

Just 62 miles separate the Cavs' arena and Cedar Fair's (FUN) Cedar Point amusement park, on a scenic peninsula in Sandusky.

Last Wednesday -- two days before James made his big announcement that he would leave the Miami Heat after four seasons -- Cedar Point made an interesting Twitter post: "Hey @KingJames - come back to the @cavs and we'll rename one of our coasters, 'King James!' Ball in your court, sir. RT, #Ohio!"

It wasn't just talk. Shortly after James announced his decision to return home, Cedar Point promised to live up to its earlier promise: "It's been fun to watch the excitement surrounding the return of @KingJames to Cleveland. We stand ready to honor our original tweet."

James has been to the park a couple of times, and there's a YouTube video of him being heckled there while taking in a game of hoops -- naturally, after he had left Cleveland for Miami.

However, the initially radical thought of renaming a coaster King James now sounds like a winning move with the game's best basketball player coming back home as a prodigal son. That should be good news for Cedar Point and possibly even better news for Cedar Fair.

Coasters Have Their Ups and Downs

Cedar Point may be best known for its array of scream machines, but Cedar Fair is best known by its investors for its juicy dividend -- a healthy 5.7 percent.

Unlike its white-knuckle thrill rides, Cedar Fair revenues have risen steadily between 4 percent and 6 percent in each of the three previous years. Analysts see more of the same through the next couple of years. But the hype that will accompany the park re-branding a coaster as King James will be substantial.

The ideal move, of course, would be for Cedar Fair to announce that it will build a record-breaking coaster at Cedar Point this off season and name it King James. Renaming an existing coaster will upset purists. However, at the end of the day, Cedar Fair took a chance with a publicity stunt that seemed unlikely to pay off when it looked as if James would be signing another deal to stay in Miami. Now that King James is coming home, it's time for Ohio to hang on for the ride.

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

 

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After Market: A Golden Beige Book Lifts Dow to New Record

July 16, 2014, 9:42 am

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Filed under: Earnings, Market News, Federal Reserve, Investing

Strong earnings and positive signs coming from the world's two largest economies pushed the Dow Jones industrial average to a new record high Wednesday.

The Fed's beige book showed consumer spending up in all of its districts, and second quarter growth in China rose more than expected. On top of that, the day's corporate earnings were largely strong triggering a surge of buying on Wall Street.

The Dow (^DJI) gained 77 points to close at a new high of 17,138 points, the Nasdaq composite (^IXIC) rose 9 and the Standard & Poor's 500 index (^GPSC) was up by 8 points.

Earnings drove Intel's (INTC) stock sharply higher. Shares gained more than 9 percent after it beat expectations, raised its guidance, announced more buybacks, and said the worst was over for the battered PC market. Fellow chipmaker AMD (AMD) rose 3 percent.

Hospital operator HCA Holdings (HCA) rallied hard on the back of its earnings report. Its shares gained 10.5 percent after raising its guidance. Tenet Healthcare (THC) also had a great day, rising 8.5 percent. And railroad giant CSX (CSX) gained slightly on stronger revenue.

Bank of America's (BAC) earnings fell largely because of legal costs, and the stock dropped with it down 2 percent. PNC Financial's (PNC) earnings also fell and shareholders offloaded the stock down 3.5 percent.

Yahoo (YHOO) came out with its earnings after the bell Tuesday, and so far, investors aren't feeling it. The stock fell 5 percent after the company posted a drop in profits in the last quarter.

There was lots of action in the media business. Time Warner (TWX) gained a whopping 17 percent after rejecting an offer from 21st Century Fox (FOXA) which fell 6 percent. Analysts expect lots of consolidation in the industry, which helped boost some of the big players. Discovery (DISCA) gained 6 percent, Scripps Networks (SNI) jumped almost 5 percent and Viacom (VIAB), the owner of CBS, was up more than 3 percent.

And IBM (IBM) shares traded higher after announcing it would be working with its former rival, Apple, to develop business apps. IBM was up 2 percent, Apple (AAPL) fell half a percent.
Blackberry (BBRY) though didn't do well on the back of that news. Its stock was lower by almost 12 percent.

But casino equipment maker International Game Technology (IGT) had a stellar day gaining 9 percent after news Italy's GTech SpA, a lottery operator, is buying it.

-Produced by Karina Huber.

What to Watch Thursday:

• At 8:30 a.m. Eastern time, the Commerce Department releases housing starts for June; the Labor Department releases weekly jobless claims; and the Federal Reserve Bank of Philadelphia releases its survey business conditions in the Mid-Atlantic region.
• Freddie Mac releases weekly mortgage rates at 10 a.m.

The major companies are scheduled to release quarterly financial statements:

• Advanced Micro Devices (AMD)
• Baker Hughes (BHI)
• Baxter International (BAX)
• Blackstone Group (BX)
• Capital One Financial (COF)
• Credit Suisse (CS)
• Google (GOOG)
• IBM (IBM)
• Mattel (MAT)
• Morgan Stanley (MS)
• Novartis (NVS)
• Philip Morris International (PM)
• PPG Industries (PPG)
• SAP (SAP)
• Seagate Technology (STX)
• Sherwin Williams (SHW)
• Stryker (SYK)
• UnitedHealth Group (UNH)

 

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