Burger King Goes Cold on Unsatisfying 'Satisfries'

August 13, 2014, 9:14 am

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Filed under: Company News, Food & Beverage, Restaurants

By CANDICE CHOI

NEW YORK -- Burger King (BKW) is getting rid of its lower-calorie french fries at most restaurants after less than a year.

The Miami-based chain said in a statement that it gave its North American franchisees the option to continue selling the french fries earlier this week. Only about 2,500 of the approximately 7,400 locations opted to continue selling them as a permanent item. The others have started phasing them out.

The french fries, called "Satisfries," were a big bet for Burger King when they were announced in September. But they weren't as well received as Burger King had hoped.

The name was mocked in some corners, with one website referring to them as "Saddest Fries." There also is some confusion about their caloric superiority, with a small order still containing 270 calories. A small order of McDonald's fries, by comparison, has 230 calories because the serving weighs less.

Satisfries also are pricier, costing about $1.89 for a small order, compared with a $1.59 for regular fries.

And it's unclear whether customers were aware what made the fries lower in calories. Burger King said Satisfries used a different type of batter to prevent some oil from being absorbed by the potatoes during frying. But the company did not have signs in restaurants explaining the difference between Satisfries and regular fries.

It was just one of many gambits by Burger King since investment firm 3G Capital took it public again 2012. Other moves have included the return of the "Big King," which resembles a Big Mac and a "French Fry Burger," which is essentially a burger with four french fries smashed on top.

This week, Burger King Worldwide Inc. also announced the return of "Chicken Fries" for a limited time. The company said it brought back the deep-fried chicken in response to demand it saw online. The efforts haven't yet sparked any big sales gains at a time when traditional fast-food chains are struggling.

In the latest quarter, sales at established restaurants in the U.S. and Canada edged up just 0.4 percent.

 

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Market Wrap: Tech and Health Sectors Send Stocks Higher

August 13, 2014, 9:32 am

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Filed under: Earnings, Market News, Economic Indicators, Investing

By MATTHEW CRAFT

NEW YORK -- A modest gain for the stock market on Wednesday tugged the Dow Jones industrial average back into the black for the year as investors set aside concerns about Ukraine, Iraq and earnings, at least for a day.

Amazon (AMZN) led the gains in light trading, despite a mixed batch of economic and corporate news. The gains were broad but thin. Three companies rose for every one that fell on the New York Stock Exchange, and all 10 sectors in the S&P 500 ended higher.

"This is a very resilient market," said Uri Landesman, president of Platinum Partners, a hedge fund in New York.

Markets have turned choppy in recent weeks as investors have weighed a host of concerns. At times, worries over global conflicts and Europe's economy have overshadowed signs of steady growth in the U.S. economy and rising corporate profits. Landesman pointed to plenty of reasons for traders to ditch stocks this summer, including high prices.

"We're getting through the summer and the market is still pretty close to its high," he said. "It shows you the trend is still upward."

Amazon, the online retail giant, unveiled a new payment system for mobile phones. The device, called Amazon Local Register, is aimed at helping small businesses accept payments through smartphones and tablets. Amazon's stock gained $6.96, or 2 percent, to $326.28.

The S&P 500 (^GPSC) rose 12.97 points, or 0.7 percent, to end at 1,946.72. The Dow (^DJI) gained 91.26 points, or 0.6 percent, to 16,651.80, the first time in August that the 30-stock average has been in positive territory for the year.

The tech-heavy Nasdaq composite (^IXIC) climbed 44.87 points, or 1 percent, to 4,434.13.

Of the handful of companies reporting quarterly results on Wednesday, a few well-known names warned of sliding sales and shrinking profits. Macy's (M) turned in results that fell short of Wall Street's forecasts. The department store chain also cut its full-year outlook for sales, saying it couldn't make up from a shortfall at the start of the year when winter storms kept shoppers at home. The company's stock dropped $3.29, or 6 percent, to $56.47.

Deere & Co. (DE), the country's largest maker of farm equipment, said weak sales will likely cut into its earnings for the entire year. Deere dropped $1.99, or 2 percent, to $84.49.

King Digital Entertainment (KING), maker of the "Candy Crush Saga" video game, plunged 23 percent. The company reported second-quarter sales that came up short of estimates and also cut its full-year earnings forecast. King's stock lost $4.21 to $13.99.

Despite some high-profile misses, however, overall corporate results for the second quarter have looked solid. With the earnings season drawing to a close, seven out of 10 companies in the S&P 500 have posted stronger profits than analysts projected, according to S&P Capital IQ. Quarterly earnings are on track to climb 10 percent over the year before. That's much better than the 3 percent increase companies reported for the first quarter of 2014.

The Commerce Department said Wednesday that retail sales edged up by a tiny amount compared with the prior month. A separate report said businesses continued adding to their stockpiles in June. A greater amount of goods on store shelves and in warehouses reflects optimism about future demand.

In other trading, Germany's DAX gained 1.4 percent, while France's CAC 40 rose 0.8 percent. Britain's FTSE 100 inched up 0.4 percent. All three indexes have slumped more than 1 percent this month.

In the U.S. government bond market, the yield on the 10-year Treasury note was 2.42 percent, just shy of its low for the year and a drop from 2.45 percent late Tuesday. U.S. crude oil rose 22 cents to $97.59 a barrel in New York.

Elsewhere, gold rose $3.90 to $1,314.50 an ounce, silver slipped 6 cents to $19.85 an ounce and copper fell four cents to $3.11 a pound.

What to Watch Thursday:

• The Labor Department releases weekly jobless claims, and import and export prices for July, both at 8:30 a.m. Eastern time.
• Freddie Mac releases weekly mortgage rates at 10 a.m.

These major companies are scheduled to release quarterly financial results:

• Advance Auto Parts (AAP)
• Agilent Technologies (A)
• Applied Materials (AMAT)
• Autodesk (ADSK)
• Houghton Mifflin Harcourt Co. (HMHC)
• J.C. Penney Co. (JCP)
• Kohl's (KSS)
• Nordstrom (JWN)
• Perrigo Co. (PRGO)
• Walmart Stores (WMT)

 

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5 Future 401(k) Changes You Need to Keep an Eye On

August 13, 2014, 11:00 pm

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Filed under: Saving

By Kelly Campbell

Defined contribution plans, such as 401(k)s, are the most popular employer-sponsored retirement plan in America, according to the Department of Labor's June 2013 Employee Benefits Security Administration report. We have seen significant changes within this field, such as required disclosure of fees and conflicts of interest, along with increased regulatory scrutiny by the Department of Labor and the Internal Revenue Service, which have benefited participants.

Innovations in the form of exchange-traded funds, along with participants' ability to invest in self-directed brokerage accounts from within the 401(k) platform, are opportunities that are beginning to shape the 401(k) landscape today. However, they will also present challenges to investors that they may be unfamiliar with. Let's take a look at the big opportunities within 401(k) plans and what you can do as an investor to take advantage of these opportunities when they become available.

1. Better service models. Employers gauge the success of their 401(k) plans by the number of participants within the plan and how much money their employees are saving. A large determinant to the amount employees save, however, is based on their education about the fund options and ability to invest with confidence. As a result, more plans are focusing on an "education plan" for participants to arm them with the knowledge to save enough money for retirement and feel confident in their investing decisions.

The driving force of this education effort is coming from investment advisers who can meet with participants on an individual basis to help establish a recommended savings amount, along with a portfolio based on risk tolerance. I expect that, as these services evolve, investment advisers will become better at offering full financial planning services to help guide outside investments as well as offering advice to include budgeting, college planning, insurance and estate planning services as well.

2. More investment flexibility. The days of only being able to invest in stock or bond mutual funds within a traditional 401(k) model are over. As participants become more responsible for investing for their retirement, they are demanding more flexibility and options to build their nest egg. The results have been encouraging, when you consider the progress that has been made within the small amount of time that has passed.

3. Roth 401(k). One of the best options available today for 401(k) participants is the ability to put retirement dollars into a Roth 401(k). The Roth 401(k) allows you the same tax benefits as a Roth IRA, but the contribution limits are the same as those within the traditional 401(k) model. Participants under age 50 can put away $17,500 in 2014, and those over 50 can put in an additional "catch-up" contribution of $5,500. Considering that Roth IRA limits are $5,500 in 2014 if you are under age 50, or $6,500 if you are over 50, this could be a huge benefit for retirement savers.

4. Self-directed brokerage accounts. Another great feature being added to 401(k) plans is the ability to invest within a self-directed brokerage account.

These accounts are reserved for more savvy investors, or those who engage a financial adviser for investment counsel. However, they replace the limited number of investment options typically found within the 401(k) plan with the ability to invest in stocks, bonds, ETFs or mutual funds found on the retail brokerage side. Investing in this fashion places more responsibility on the employee, because they will have to develop an investment strategy on their own and monitor their investments more carefully. However, for those who are skilled or passionate enough to utilize this tool, it can allow them more flexibility to design their own portfolio.

5. ETFs. ETFs continue to evolve and develop to cater to many investor concerns and strategies. These investment vehicles offer many of the benefits of mutual funds, but trade like stocks and essentially bring the best of both worlds into one product. These innovations, coupled with the benefit of typically lower costs, have driven the demand for these products. Most plans are reluctant to offer these investments within 401(k) plans, for reasons ranging from the limits of index investing to revenue sharing, but I believe that as time passes, ETFs will capture more retirement savings dollars within 401(K) plans.

The common theme in 401(k) plan developments has been to empower participants with the tools and knowledge necessary to make strong investment decisions. The options listed above are just a handful of the features we are excited about moving forward, but we believe that as participants become more knowledgeable about retirement investing, they will demand better service with more options and at a lower price.

Companies aiming to capture a percentage of this huge market share will have no choice but to adapt, allowing for further innovation. I can't say for certain what the 401(k) will look like in 10 years, but I do think it will allow investors to invest confidently with a better understanding of fees and opportunities.

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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7 Financial Tasks to Accomplish Before You Hit 30

August 13, 2014, 11:00 pm

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Filed under: Family Money, Personal Finance, Saving, Financial Education

Over the last decade, 30 has officially pronounced itself the new 20. The millennial generation is taking longer to finish schooling, decide on a career and leave mom and dad's place. The average age of marriage is at an all-time high -- 27 for women and 29 for men.

And while some of those delays may be beneficial -- the higher age of marriage translates into a lower divorce rate -- other delays could have detrimental, long-term financial consequences. Luckily, we have you covered with this list of seven financial musts-dos to make sure you're prepared for the future.

You're only in your 20s once, so squeeze every last drop out of them. But don't let this decade pass you by without getting your financial ducks in a row. And if you've already passed the big 3-0, you know what they say: There's no time like the present.

 

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Could Bigger Pay Raises (Yay!) Send Stocks Sliding (Booo!)?

August 13, 2014, 11:00 pm

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Filed under: Labor, Unemployment Rate, Economic Recovery, Stocks, Investing

Throughout the economic recovery of the past five years, one area that hasn't seen as much improvement as expected has been worker pay. Yet even though one survey of major employers forecasts pay raises next year will continue growing more slowly than a decade ago, some finally believe that the long lull in labor cost increases could finally come to an end. If that happens, it could take away one of the key underpinnings of the bull market in stocks that has been running since 2009.

The 2014/2015 U.S. Compensation Planning Survey from the human resources consultants at Mercer found that most employers expect to keep their pay raises for 2015 in line with the recent past. After gains of just over 2 percent in 2009 and 2010 that corresponded to periods of extremely high unemployment, wages have increased at a higher rate. Nevertheless, employers have managed to keep increased labor costs within a tight range of 2.7 percent to 2.9 percent over the past four years, and Mercer expects that 2015 raises will come in at around 3 percent once again.

But not every worker can expect to see raises that size. Mercer found that the energy industry -- which has seen some of the largest growth in the domestic economy recently thanks to the boom in unconventional oil and gas exploration and production -- should see base pay rise 3.5 percent on average next year. By contrast, several other industries, including service providers outside the financial sector, will see subpar earnings growth.

Moreover, merit will determine a substantial portion of overall pay raises. Top-rated workers can expect to get raises of nearly 5 percent, while those among the lowest-rated in any particular company will be lucky to see pay levels stay flat, according to Mercer.

Getting Back to Normal?

Even with the slight upward trend in raises, growth in salaries still hasn't matched levels from 10 to 15 years ago when jobs were more plentiful and workers were in demand. As unemployment rates have fallen, though, companies have started getting the message that they'll have to pay their best workers more in order to retain their top talent.

If that happens, then it would be good news for struggling workers, who've had to endure tough financial conditions for a long time. Median household income fell for four straight years following the 2008 recession, and even after a modest recovery, it remains below levels from the early 2000s . With inflation running at 2 percent, a 3-percent pay hike won't fully close the gap, but it will keep median incomes moving in the right direction.

What's good news for workers could be bad news for investors, though.

A Catalyst for the Next Correction?

Historically, profit margins for U.S. corporations have run at around 6 percent, according to data from the U.S. Department of Commerce. Over the past several years, though, profit margins have climbed well above that level, ranging from roughly 8 percent to 10 percent.

Although a number of factors have kept profit margins high, low labor costs and higher worker productivity have played key roles in helping companies cut costs.

Many analysts have feared, though, that the trend toward lower labor costs was bound to reverse itself in time. Much of the focus of that fear has been on signs of inflation for raw materials used in manufacturing, but if labor costs climb back toward more typical historical levels, then they could put further pressure on corporate profits.

High profit margins have contributed greatly to rising earnings, which in turn have helped keep the stock market climbing. As the bull market ages, though, a pause in earnings growth could be the catalyst for a long-awaited correction in stocks. If pay raises do start to accelerate this year and in future years, then resulting higher labor costs could turn out to be the cause of the next stock-market downturn.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger. Some dividend-paying stocks that might well survive the next stock market downturn are in our latest free report.

 

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Cisco to Cut 6,000 Jobs in Restructuring Plan

August 13, 2014, 11:28 pm

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Filed under: Company News, Earnings, Cisco Systems, Layoffs, Computer Industry

By Marina Lopes

Cisco Systems (CSCO) forecast tepid current-quarter results and said it plans to cut another 6,000 jobs, as the network equipment maker works through a transition toward a new cycle of high-end switches and routers.

The latest round of layoffs is at least the third workforce reduction in about as many years for a company once synonymous with the Internet boom, but which has lately struggled to sustain growth.

The company announced in August 2013 that it would cut 4,000 jobs. And in 2011, it said it planned to reduce its workforce by more than 11,000.

Shares in the company slipped 0.95 percent to $24.96 in extended trading, from a $25.20 close on the Nasdaq.

"The market doesn't wait for anyone. We are going to lead it, period," Chief Executive Officer John Chambers told analysts on a conference call. "The ability to do that requires some tough decisions. We will manage our costs aggressively and drive efficiencies."

[W]e don't see emerging markets growth returning for several quarters and believe it could get worse.

Chambers partly blamed the cuts on the uncertainty in global demand. In emerging markets, where the company faces sluggish sales and increased competition, Cisco saw continued challenges. China product orders fell 23 percent, and Brazil had 13 percent declines.

"Unfortunately, as we look out, we don't see emerging markets growth returning for several quarters and believe it could get worse," said Chambers.

Total product orders rose 1 percent, with 2 percent growth in both the Americas and Europe, the Middle East and Africa, offset by a 7 percent decline in Asia and Pacific.

"The mixed quarter has become the norm for Cisco," said Zeus Kerravalla at ZK research. "As the market transitions, your staff has to transition. I see a lot of what they are doing as a reallocation and I think it is the right thing for the company."

Cisco's high-end routers and switches declined 7 percent and 4 percent year-over-year, respectively, as customers were slow to order a new series of products. Its data center revenues rose 30 percent, and security sector revenues rose 29 percent.

Security revenue was boosted by the acquisition of SourceFire, a cybersecurity firm Cisco acquired in October 2013.

Cisco also forecast earnings per share of between 51 cents and 53 cents for its current, fiscal first quarter. It predicted flat to 1 percent growth in revenue for the period.

Cisco posted a smaller-than-expected 0.5 percent drop in fiscal fourth-quarter revenue to $12.4 billion. Wall Street on average had expected $12.1 billion, according to Thomson Reuters I/B/E/S.

That beat the company's previous guidance for a decline in revenue of between 1 percent and 3 percent for the quarter.

Cisco reported a net profit of $2.8 billion in the fiscal fourth quarter, flat from the year-ago quarter and adjusted earnings of 55 cents a share. That exceeded the consensus forecast of 53 cents.

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Gold Demand Tumbles as Price Steadies

August 13, 2014, 11:55 pm

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Filed under: ETFs, Federal Reserve, Commodities & Futures, World Markets, Investing

By Katie Holliday | @hollidaykatie

Global gold demand declined sharply in the second quarter as prices steadied following exceptional circumstances in the same period of last year, according to the latest World Gold Council report.

Bullion demand stood at 964 tons in the second quarter, down 16 percent on year, when demand totaled 1,148.3 tons, the report published Thursday found.

However, the decline came as no surprise given the contrast in market conditions between the periods.

"The rapid 25 percent drop in the gold price during the April-June period of 2013 sparked a leap in gold demand that we have heard described as a 'once in a generation' event," the report said.

The 2Q13 price decline was driven by outflows from exchange traded funds as investors saw the onset of tapering by the Federal Reserve dampening inflation expectations.

By contrast, gold prices held within a relatively narrow sideways range in 2Q14, keeping volatility well below average.

Much of the slump was attributed to large declines in jewelry, bar and coin investment. Jewelry demand -- which historically accounted for over half of global gold demand -- fell by almost a third in 2Q14, while bar and coin investment fell to less than half the levels seen in 2Q13.

Much of jewelry's decline occurred in Asia and the Middle East, although most western markets -- with the exception of Italy -- saw year-on-year gains, particularly the U.S. and the U.K.

The WGC blamed China and India for the slump in bar and coin investment. Indian investors have had their hands tied by a ban on coin imports, uncertainty around the election of a new prime minister and restrictions imposed on the movement of cash and hard assets. Chinese investment demand was suppressed by a lack of price direction and the hangover from last year's buying frenzy. Base effects exacerbated the decline in China given record-high demand in in 2Q13.

However, despite the seemingly hefty declines, the WGC said that demand for both these segments was now more in line with longer-term norms.

Jewelery demand is just 2 percent below its five-year quarterly average. Gold bar and coin investment demand is down 20 percent on its five-year quarterly average, but remains comfortably within the higher range established after the global financial crisis.

In terms of exchange traded funds, or ETFs, the investment vehicles saw modest outflows of 39.9 tons, a vast improvement on the 402.2 tons of outflows in the year earlier period.

Central bank buying remained strong at 117.8 tons in the second quarter, logging its 14th consecutive quarter of net buying from this consistent category of demand.

Purchases in 2Q14 rose 28 percent on year, as ongoing geopolitical uncertainty spurred the desire to hold gold reserves as a form of protection, the WGC said.

Russia, Kazakhstan and Tajikistan were the three largest central bank buyers of gold over the quarter.

Supply Side

On the supply side, mine production increased in the first half of the year. An additional 58.2 tons of gold were produced compared with the first half of 2013. However, the WGC expects this rate of growth to slow in the coming quarters as the supply side thins and producers are less able to cut costs.

"Indeed mine supply may have peaked and will likely plateau over the course of the next 4-6 quarters as a result," the report said.

On Thursday gold traded at around $1,313 an ounce.

 

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3 Reasons Why Jack in the Box Is Beating McDonald's

August 14, 2014, 12:00 am

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Filed under: Company News, McDonald's, Industry News, Restaurants, Investing

McDonald's (MCD) is in a funk, and things are only getting worse. The world's largest burger chain posted uninspiring financial results over the weekend, with global comparable sales slumping 2.5 percent for the month of July.

Things were even worse closer to home, where comps at stateside stores clocked in 3.2 percent lower than the same month a year earlier. After three consecutive quarters of negative domestic comparable sales, McDonald's seems ready to stretch that streak to four periods of year-over-year quarterly declines.

Things may be bad for the revenue leader, but let's not paint the entire fast food industry with a broad basting brush. Many of McDonald's smaller rivals are doing just fine, and we heard from one of them -- Jack in the Box (JACK) -- late last week.

Let's go over a few of the ways that Jack in the Box is holding up better than McDonald's.

1. Comps are Growing at Jack in the Box

Your typical Jack in the Box eatery is still ringing up higher sales than it did a year earlier, unlike McDonald's which has posted negative comps at its U.S. restaurants in eight of the past nine months and is looking at the likelihood of its first year of negative comps since 2002.

Jack in the Box operates on a different fiscal year than McDonald's, but its comparable sales increased 2.4 percent during its fiscal third quarter which consists of 12 weeks ending on July 6. Comps are also positive -- up 1.8 percent -- through the 40 weeks ending on July 6, a period that's roughly in line with the three consecutive quarters of declining domestic sales at McDonald's.

Jack in the Box isn't the only chain that's growing its sales at the individual store level. McDonald's is actually the one that stands out for going the wrong way here.

2. Jack in the Box Kept its Quick-Service Burrito Chain

One of bigger mistakes that McDonald's has made was unloading Chipotle Mexican Grill (CMG). Many burrito buffs have no idea that McDonald's once owned a meaty 90 percent stake in the market darling of the fast-casual space. That's because it spun off the chain in 2006 after helping take it from just 16 locations when it first bought in back in 1998 to more than 500 when it gave it an IPO as a standalone publicly traded company.

McDonald's probably thought it was making a killing, turning roughly $360 million in investments into a $1.5 billion payday, but that doesn't seem so smart today with Chipotle carrying a $21 billion valuation.

Jack in the Box watches over Qdoba Mexican Grill, the growing Chipotle rival with more than 600 locations across the country. It's no Chipotle, but it doesn't need to be. Qdoba's comps improved 7.5 percent in its latest quarter, making it one of the industry's best performers after Chipotle. Jack in the Box isn't in a hurry to sell off the strong concept that will give it some diversification if burgers go out of favor. The same thing can't be said about McDonald's.

3. Jack in the Box Doesn't Have the Stigma of McDonald's

A recent Consumer Reports survey of fast food patrons found McDonald's ranking dead last in the burger category on taste among the country's 21 largest burger chains. Now, taste tests may be subjective, but it's not as if Jack in the Box can claim bragging rights over McDonald's: It was ranked No. 20.

But Jack in the Box is not the poster child for an industry that pays entry-level employees poorly and is often the scapegoat for childhood obesity. Activists have been making plenty of noise as they protest McDonald's, urging it to boost its minimum wage to $15 an hour. You don't see the same kind of public dissent when it comes to Jack in the Box and other chains that aren't necessarily paying their employees any better.

No matter where you stand on the debate for increasing the minimum wage, it's a safe bet that you recognize giants like McDonald's and Walmart (WMT) are ground zero for the topic. They're the leading retailers, and while that has advantages in marketing and purchasing, it's working against the perceived image of these chains today. It's popular to diss McDonald's. Whether or not this is playing a part in the sales declines being experienced at McDonald's, it's clearly not slowing down Jack in the Box.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald's. The Motley Fool owns shares of Chipotle Mexican Grill. Try any of our newsletter services free for 30 days.

 

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Walmart Cuts Yearly Profit Outlook

August 14, 2014, 12:50 am

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Filed under: Company News, Earnings, Retail, Consumer Goods, Wal-Mart

By ANNE D'INNOCENZIO

BENTONVILLE, Ark. -- Walmart Stores (WMT) cut its annual profit outlook Thursday amid sluggish sales, higher-than-expected health care costs and the need to invest more in its e-commerce operations.

The world's largest retailer eked out a 0.6 percent increase in second-quarter profit, dragged down by a weak U.S. business. A key revenue measure was flat in its U.S. discount stores, though it reversed five straight quarters of declines. Meanwhile, the number of customers has now fallen seven quarters in a row.

The results show the continued challenges facing Walmart's new management team. Doug McMillon, who was head of the company's international division, took over the company as CEO on Feb. 1.

Last month, he named Greg Foran, who was the CEO of Walmart's China business as the head of Walmart's U.S. discount business, which accounts for 60 percent of the company's revenue. Foran, who started his new job earlier this month, replaced Bill Simon, who had held the position since 2010.

The Bentonville, Arkansas-based company is facing challenges from a slowly recovering economy and fierce competition from the likes of online king Amazon.com (AMZN), dollar stores and grocers. It's also dealing with a shift among shoppers seeking the convenience of small stores or buying on their mobile devices and PCs.

Walmart's low-income shoppers, who on average make $45,000 a year, were squeezed by the recession that began at the end of 2007 and have struggled to recover since it ended in 2009. While the job and housing markets are rebounding, Walmart's low-income shoppers have not benefited and continue to struggle to stretch their money between paychecks.

Walmart also said Thursday that the Nov. 1, 2013, expiration of a temporary boost in food stamps is still hurting its shoppers' ability to spend.

Analysts believe that competition could get even more intense heading into the final months of the year. Amazon.com is beefing up its services, like recently expanding its same-day delivery. A bigger Dollar Tree (DLTR) also could put more pressure on Walmart. The dollar-store chain announced last month that it's buying rival Family Dollar (FDO) for $8.5 billion, significantly broadening its reach.

In February, Walmart announced that it will more than double its expansion plans for its Neighborhood Markets and Walmart Express smaller stores that cater to shoppers looking for more convenience with fresh produce, meat and household and beauty products.

In fact, revenue at its Neighborhood Markets rose 5.6 percent during the second quarter, and customer traffic rose 4.1 percent.

Big Internet Push

Walmart has also vowed it will be move more quickly to bring e-commerce together with physical stores to better serve shoppers. That means rebuilding its e-commerce operation to further personalize the online shopping experience of each customer and making other enhancements.

Walmart reported its global e-commerce sales rose 24 percent on a constant currency basis during the second quarter, with double-digit growth in the U.S., United Kingdom, China and Brazil. However, that's below its annual forecast of 30 percent.

Walmart has also been sharpening its focus on everyday low prices and bringing that strategy abroad.

The challenges played out in the company's financial results.

The company reported net income of $4.09 billion, or $1.26 a share, compared with $4.07 billion, or $1.24 a share, in the same quarter a year ago.

Earnings, adjusted to account for discontinued operations, were $1.21 a share. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.21 a share.

The company said revenue rose roughly 3 percent to $119.34 billion from $116.1 billion in the same quarter a year earlier. Analysts expected $119.06 billion, according to Zacks.

In the U.S., revenue at stores open at least a year was unchanged from a year ago, including flat sales at Sam's Clubs.

Stronger sales in the U.S. businesses would've helped our profit performance in the quarter.

Sam's Club, which is facing fierce competition from rival Costco (COST), has been trying to rev up its business with trendier home and fashion assortments and offering more incentives in its membership program.

"Stronger sales in the U.S. businesses would've helped our profit performance in the quarter," said McMillon in a transcript of a prerecorded call Thursday. "We can get better operationally ... and we will."

Net sales increased 2.7 percent at the Walmart U.S. discount business, while rising 3.1 percent in its international business and 2.3 percent at Sam's Clubs.

Walmart said it now expects earnings a share for the year to be in the range of $4.90 to $5.15 a share. That's down from its previous guidance of $5.10 to $5.45 a share.

Challenging Economy

Walmart said that the reduction in full-year profit projections assumes a continued challenging global economy. But Walmart also said that far more U.S. employees and their families are enrolling in its health care plan than it expected.

As a result, it now expects the impact to be about $500 million for the fiscal year, which is about $170 million higher than the original estimate of about $330 million provided in February.

Walmart is also investing more in its online business, including hiring people and building shipping centers.

Shares slipped 3 cents to $74 in morning trading.

 

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Why Hollywood Isn't Funny Anymore - but TV Is

August 14, 2014, 1:00 am

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Filed under: Company News, Industry News, Entertainment Industry, Investing

It's not only the tragic passing of Robin Williams that has leached the humor out of Hollywood recently. Like many of the celebrated actor's late-career moves, the big-time film industry has been stepping away from comedy.

It wasn't so long ago that comedies were an important staple of any major studio's release diet. No more. These days, moviegoers would be hard-pressed to find one at their local multiplex.

Getting Serious

Of 2013's top 10 grossing movies, none was a pure comedy, according to boxofficemojo.com. According to data compiled by the Nomura Research Institute, 2014 is set to witness the lowest level of major-studio comedies in at least five years.

For 21st Century Fox's (FOXA) near-eponymous 20th Century Fox, comedies are anticipated to make up 8 percent of 2014 releases. That compares unfavorably to 27 percent in 2012 and 2013 and particularly to the 40-plus percent figures of 2010 and 2011.

Disney (DIS), although it's more inclined toward animated fare and other genres, typically throws a comedy or several into its schedule. But this year it isn't planning on releasing any pure comedies.

Lost In Translation

This decline in the funny is due largely to a shift in the global movie going audience. International markets have become increasingly more important, with non-North American audiences comprising 70 percent of box office take in 2013, according to data compiled by the Motion Picture Association of America.

The $25 billion in ticket sales to those markets last year represented an increase of 33 percent from 2009. Meanwhile, the growth in North American box office across the same stretch was a mere 3 percent.

So international audiences matter more. The problem with comedies is that the humor often comes from the dialogue, even in films that feature heavy doses of sight gags and slapstick. (Think of the many verbal jokes among the physical humor of the 1980 classic "Airplane!" for example.) As a result, Hollywood comedies often don't work as well when dubbed or subtitled.

The Great Wall

Consider the size of the movie-going audience in Asia. China in particular is a white-hot market, with ticket sales rising a powerful 27 percent year-over-year in 2013 to $3.6 billion.

Unfortunately, to boost its domestic film industry, the Chinese government strictly limits Hollywood imports. At the moment, only 34 releases from the major American studios are allowed a year. As a result, they're only shipping over movies that translate easily. The top two American efforts of 2013 -- "Iron Man 3" produced by Disney and "Pacific Rim" from Time Warner's (TWX) Warner Bros. -- were big-budget fantasy action films.

That trend looks set to continue. So far in 2014, Hollywood holds the top box office spot in China. The winning movie? "Transformers: Age of Extinction," another expensive science fiction smash-'em-up, this one from Viacom's (VIA) Paramount.

Shrinking Screen

Although the amount of comedy in the multiplex is dropping precipitously, it's finding a niche in other media. In their respective bids to be key destinations for original programming, both Netflix (NFLX) and Amazon.com (AMZN) have filled their rosters out with several notable comedic efforts.

Netflix revived off-the-wall sitcom "Arrested Development" and is filming season three of "Orange Is the New Black," a dramedy set in a women's prison. And next year, Lily Tomlin and Jane Fonda will team up to star in a new sitcom, "Grace and Frankie."

Meanwhile, out of the five original series on Amazon's Prime streaming service, two ("Alpha House" and "Betas") are laughers.

Is this the wave of the future? Perhaps the comedy genre is more suited to the intimate confines of a tablet or a TV, rather than the massive screen of the movie theater. After all, on that medium at the moment, there only seems to be room for Transformers and superheroes.

Motley Fool contributor Eric Volkman owns shares of Disney. The Motley Fool recommends Amazon.com, Netflix, and Disney. The Motley Fool owns shares of Amazon.com, Netflix, and Disney. Try any of our newsletter services free for 30 days.

 

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Walmart Plays Matchmaker to Boost 'Made in USA' Push

August 14, 2014, 1:30 am

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Filed under: Retail, Consumer Goods, Manufacturing, Wal-Mart, This Built America

By James B. Kelleher

Walmart Stores (WMT), which has pledged to buy an additional $250 billion in U.S.-made goods over the next decade, is hitting a snag as it tries to meet that promise: Some vendors keen to participate in the initiative complain that after decades of offshoring it has become impossible to domestically source even commonplace components for their products.

So America's largest retailer has invited dozens of small- and midsize manufacturers that aren't necessarily interested in having a direct relationship with Walmart to come to Denver this week for a two-day matchmaking event.

The goal? To connect Walmart vendors hungry for key parts with manufacturers that have idle plants -- and to put those plants back to work cranking out components, such as small electric motors or polyester yarn, that have become hard to find.

"We're going to try to match up [vendors] who are looking for component parts with factories that have capacity in the hopes that we can rebuild that supply chain that doesn't exist anymore," said Michelle Gloeckler, the Walmart senior vice president in charge of the initiative.

Critics of the retailing giant are quick to claim that Walmart, which built its empire on low prices, is partially to blame for the sorry state of U.S. manufacturing.

Mary Bottari, a former trade analyst for Public Citizen's Global Trade Watch, says Walmart's push for cheap goods "has fueled a global race to the bottom in wages and working conditions." And the Economic Policy Institute, a union-friendly think tank, estimates Walmart's trade with China alone has cost the United States 200,000 jobs.

Walmart disputes those claims, and spokeswoman Brooke Buchanan says Boston Consulting Group has estimated that the domestic-sourcing initiative will create 1 million jobs in manufacturing and related service jobs.

Zippers and Snaps

The "Made in USA" program was conceived as a way to help Walmart win back customers who have defected in recent years to even cheaper competitors such as Dollar Tree (DLTR) and Dollar General (DG). So far the effort has failed to stem a five-quarter-long decline in U.S. sales.

Walmart says the 18-month-old program is a winner with customers. It hopes the Denver event, which has attracted 100 component part manufacturers as well hundreds of existing and wannabe Walmart vendors, will allow it to rapidly increase the number of U.S.-made products available in its more than 4,200 U.S. stores.

But the event is also a tacit acknowledgment that the "Made in USA" pledge is harder than it might have seemed when it was announced last year.

Not only are some raw materials and components hard to find, but many of the companies tempted to participate in the domestic-sourcing program are unprepared to do business with Walmart and its storied -- but complex -- inventory control and logistics system.

By eliminating the ocean freight, what we've done is lower the overall cost of goods. So I can not only beat Chinese prices, I can obliterate them.

Walmart's suppliers say difficulties with the program do not invalidate the idea. A number of factors, including rising wages in China, plummeting productivity-adjusted wages at home and a new appreciation for short, responsive supply chains, mean they can compete with Chinese rivals.

"By eliminating the ocean freight, what we've done is lower the overall cost of goods. So I can not only beat Chinese prices, I can obliterate them," says Keith Scheffler, president of Creative Things, an Arkansas toymaker that recently shuttered its last Chinese plant.

Still, vendors say they are forced to go overseas for such commonplace items as zippers and snaps.

Element Electronics, which makes flat-screen TVs for Walmart, has moved incrementally after finding "there was no known existing domestic supply base" when it moved assembly back to the United States, says Chief Executive Officer Mike O'Shaughnessy.

The company started simple, focusing on things like packaging materials. Now it is seeking U.S.-made suppliers of plastic and metal parts.

O'Shaughnessy figures three years may pass before domestic suppliers can supply all the parts Elements needs.

Supply-chain problems aren't the only challenge Walmart vendors face when they join the "Made in USA" push.

The retailer's "Retail Link" system presents vendors with a torrent of real-time sales, inventory and purchase information that they need to learn how to analyze so Walmart can minimize in-store inventories while keeping shelves stocked.

It's a difficult balancing act that even sophisticated suppliers like Mel Redman, a former senior Walmart executive who runs Redman and Associates, a toy manufacturer that supplies the retailer, struggle to achieve.

"Everything works backwards," he says.

"What a vendor needs to learn to do is to work from must-arrive-by date backwards through the production schedule, lead time and lag time. It's very complicated."

 

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Weekly Jobless Claims Up, But Trend Favors Strong Job Market

August 14, 2014, 1:35 am

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Filed under: Labor, Economic Indicators, Job Market, Career Change

By Lucia Mutikani

WASHINGTON -- The number of Americans filing new claims for unemployment benefits rose more than expected last week, but will probably do little to change views that the labor market was strengthening.

Initial claims for state unemployment benefits increased 21,000 to a seasonally adjusted 311,000 for the week ended Aug. 9, the Labor Department said Thursday, above economists' expectations for a rise to only 295,000.

There is, however, little doubt that conditions in the jobs market are firming. Although the four-week average of claims, a better measure of labor market trends as it irons out week-to-week volatility, rose modestly last week, it remained at levels consistent with solid job gains.

The dollar edged down against a basket of currencies after the data.

A significant decline in layoffs, which has pushed claims down to their pre-recession levels, has been the major driver of an improving job market.

But hiring is also gaining traction. A report Tuesday showed hiring rose in June to its highest level since February 2008. The number of job openings that month was the highest since February 2001.

The strengthening labor market picture has some economists betting on an early interest rate hike from the Federal Reserve.

The U.S. central bank has kept its benchmark interest rate near zero since December 2008 and has shown little sign of being in a hurry to start tightening monetary policy.

Fed Chair Janet Yellen argues that there is still slack in the labor market, citing tepid wage growth and a large number of long-term unemployed Americans and those working part-time.

The jobless claims report showed the number of people still receiving benefits after an initial week of aid increased 25,000 to 2.54 million in the week ended Aug. 2.

The unemployment rate for people receiving jobless benefits was 1.9 percent for the fifth successive week.

In a second report, the Labor Department said import prices decreased 0.2 percent last month as a decline in the cost of petroleum offset a rebound in food prices.

Import prices had gained 0.1 percent in June. In the 12 months through July, import prices increased 0.8 percent.

Sluggish global demand is keeping imported inflation subdued. Imported petroleum prices fell 1.2 percent in July, the largest decline since November, after rising 1.1 percent the prior month. Imported food prices increased 1 percent. That followed a 1.6 percent decline in June.

Imported inflation was also dampened by weak automobiles prices, which recorded their largest drop since December 1992.

 

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Weekly Jobless Claims Back Above 300,000

August 14, 2014, 2:27 am

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Filed under: Economy

The U.S. Department of Labor has released its weekly jobless claims. We saw an increase back above the 300,000 level to 311,000 claims. This was an increase of 21,000 from the previous reading of 290,000.

What stands out the most is that this blew through the Wall Street Journal and Bloomberg consensus estimates for weekly jobless claims to be 295,000. The range of estimates was very tight at 295,000 to 300,000.

Another observation was that the 4-week average was at a recovery low last week, but it ticked up by 2,000 to 295,750 this week.

The Labor Department also showed that the continuing jobless claims rose by 25,000 to a seasonally adjusted 2.54 million. These continuing claims are what we refer to as the army of the unemployed, and they are reported with a one-week lag in their report.

As usual, the Labor Department said that there were no special factors impacting this week's initial claims.

Our final takeaway from this week's data is that the jump was not just higher than expected. This was a jump handily back above that 300,000 weekly mark. Still, it is far too soon to tell if one higher jobless claims report after last week's very strong report is going to be enough to force very many economists to change their predictions for August's payrolls and for the unemployment rate.

Filed under: Economy

 

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Hedge Funds Underperforming, Yet Still Growing in New Assets

August 14, 2014, 3:03 am

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Filed under: Investing

Hedge funds remain somewhat of a mystery to much of the public. They are supposed to have absolute returns, but they do not always outperform their benchmarks. A new report from BarclayHedge and TrimTabs Investment Research is showing that the hedge fund industry had inflows of another $7.7 billion in June. The survey and the headline for this story indicates that funds may be underperforming the industry benchmark, but it needs to be understood that this is a broader survey that involves other classes of hedge funds rather than long-only equity funds.

The report showed asset growth of 0.3% in June. May's new asset inflows was counted as $19.1 billion, or about 0.8% of assets. The first half of the year has seen some $82.5 billion in new assets for hedge funds. This is some 3.8% of the total hedge funds' assets, and it was the best first half for inflows in the hedge fund industry going back to 2007.

What should stand out the most here is that the $82.5 billion in new assets in the first half of 2014 was against only $26.8 billion in new asset inflows in the first half of 2013. This means that the inflows for 2014 have been just over three-times that of 2013.

Hedge fund industry assets also rose to a six-year high of $2.35 trillion in June. The figure was based on data used from some 3,441 hedge funds. Another observation was that total hedge fund assets rose by 21% from the end of June in 2013. This was still about 3.6% lower than the all-time peak in hedge fund assets of $2.4 trillion back in June 2008.

What investors and fund managers all likely know is that some of the asset growth was from inflows of new capital, and also from the strong markets. The monthly TrimTabs/BarclayHedge Hedge Fund Flow Report showed that the hedge fund industry gained 1.4% in June. This may have been the best monthly performance in four months, but it was it was still less than the 2.1% gain in the S&P 500.

Another relative performance metric stood out as well: over the past 12 months, hedge funds returned 10.8% versus a gain of 24.6% in the S&P 500. As yet another reminder, this may not be a fair apples-to-apples comparison as this was a survey of hedge funds in general and not just the traditional long-only funds. Those long-only equity funds had the best returns over other classes in June with gains of 3.4% for the month — better than the 2.1% for the S&P 500. The worst sector was convertible arbitrage funds with a gain of only 0.4%.

The monthly TrimTabs/BarclayHedge Survey of Hedge Fund Managers showed an equal divide among hedge fund managers on their outlook of the short-term prospects for U.S. equities. It reported:

• 37.2% of respondents were bullish on the S&P 500 over the next 30 days, while 34.6% were bearish.
• Optimism on the U.S. Dollar Index hit a two-year high.
• Bullish sentiment on gold hit a five-month high.
• The proportion of managers expecting crude oil prices to rise dropped to the lowest level in six months.

While it is easy to just say that hedge funds were underperforming the S&P 500 Index, we would again stress that the TrimTabs/BarclayHedge survey is of all classes rather than just the long-only equity classes.

Filed under: Investing

 

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Mortgage Rates Slip to Near Lows for the Year

August 14, 2014, 3:21 am

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Filed under: Mortgages, Refinancing, Housing Market, Home Buying, Interest Rates

WASHINGTON -- Average long-term U.S. mortgage rates declined this week, approaching their lows for the year.

Mortgage company Freddie Mac said Thursday the nationwide average for a 30-year loan slipped to 4.12 percent from 4.14 percent last week. The average for a 15-year mortgage, a popular choice for people who are refinancing, fell to 3.24 percent from 3.27 percent last week.

Mortgage rates are below the levels of a year ago. They have fallen in recent weeks after climbing last summer when the Federal Reserve began talking about reducing the monthly bond purchases it was making to keep long-term borrowing rates low.

Mortgage rates often follow the yield on the 10-year Treasury note. The 10-year note traded at 2.42 percent Wednesday, brushing its low for the year of 2.41 percent and down from 2.47 percent a week earlier. It fell to 2.38 percent in trading Thursday morning.

At 4.12 percent, the rate on a 30-year mortgage is down from 4.53 percent at the start of the year. Rates have fallen even though the Fed has been trimming its monthly bond purchases, which are intended to keep long-term borrowing rates low. The purchases are set to end in October.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

• The average fee for a 30-year mortgage was 0.6 point, down from 0.7 point last week. The fee for a 15-year mortgage was unchanged at 0.6 point.
• The average rate on a five-year adjustable-rate mortgage edged down to 2.97 percent from 2.98 percent. The fee remained at 0.5 point.
• For a one-year ARM, the average rate rose to 2.36 percent from 2.35 percent. The fee was stable at 0.5 point.

 

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Useful Used Car Apps -- Savings Experiment

August 14, 2014, 4:30 am

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Filed under: Savings Experiment, Travel Industry, Did You Know

Your smartphone may be the key to saving big bucks on your next vehicle purchase. The average car buyer spends 18 hours on research alone, and these days you can find out the value of a car, read reviews and check for deals in your area with just a few taps.

To start, Kelly Blue Book now has an official app. The drawback? The prices you find there are just a point of reference, not the amount you should actually pay, especially when it comes to used vehicles.

If you're looking for more information, there's a more comprehensive app out there called Vinny. With just a quick scan of a car's VIN barcode, Vinny can instantly calculate a vehicle's fair market value by cross-referencing data from thousands of recent sales.

There's a ton of other great features, too. The in-app calculator can be used to estimate car payments, and there's an option to purchase a full vehicle history report for just $4.99.

So, the next time you're on the hunt for a used car, download these auto apps to make sure you're driving away with the best deal.

View Poll

 

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Risky Lending Drives Auto Loans to Highest Level in 8 Years

August 14, 2014, 4:40 am

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Filed under: Personal Finance, Federal Reserve, Car Buying, Auto Loans, Financial Education

By CHRISTOPHER S. RUGABER

WASHINGTON -- U.S. auto loans jumped to the highest level in eight years this spring, fueled by a big increase in lending to risky borrowers, according to a report Thursday by the Federal Reserve Bank of New York.

Yet the New York Fed also said that loans to borrowers with shoddy credit, also known as subprime lending, still make up a smaller proportion of total auto loans than before the Great Recession.

Federal banking regulators have raised concerns in recent months over the rapid increase in subprime auto loans. Such loans could lead to more defaults, harming banks and consumers. Auto loans are also packaged into securities and sold to investors, like mortgage loans. That could amplify the impact of any rise in auto loan defaults.

This spring, banking regulators at the Office of the Comptroller of the Currency said that "signs of increasing risk are evident" in auto lending. They found that lenders are making larger car loans. As a result, the size of car loans in default has increased in the past two years.

The Justice Department said last week that it is investigating General Motors' (GM) financing arm over its subprime lending practices.

Still, the New York Fed report stops short of recommending specific steps. In a separate post on its website, New York Fed economists said they would "continue to monitor" the issue.

Banks and other lenders issued $101 billion in new auto loans in the April-June quarter, according to the quarterly report on household debt. Total outstanding auto loans rose to $905 billion in the second quarter.

Auto loans are the third-largest source of Americans' debt, after mortgages and student loans. Mortgage debt actually declined in the second quarter to $8.1 trillion while student debt rose to $1.12 trillion. Americans have $669 million on their credit cards.

Mortgage lending weakened in the second quarter to the slowest pace in 14 years. That includes both mortgages for purchase and refinancing. Banks have significantly tightened their credit standards for mortgage loans since the recession. Home sales have also leveled off this year.

The Fed's data shows that the dollar amount of subprime auto loans -- defined as loans to borrowers with credit scores below 620 -- has nearly doubled since 2010. For borrowers in the two most credit-worthy categories -- defined as those with scores above 720 -- auto lending has risen by only about one-third.

The automakers' financing arms account for most of the increase in subprime loans. In the second quarter, the dollar value of their subprime loans was triple that of the banks. Economists at the New York Fed said that loans by auto financing companies are much more likely to become delinquent than those by banks.

Still, auto lending to credit-worthy borrowers has also jumped, the report said. As a result, just 22.2 percent of auto loans were subprime in the second quarter. That is still below the 25 to 30 percent that existed before the recession.

And the percentage of auto loans that were 90 days or more overdue was 3.3 percent in the second quarter, the same as in the first quarter. That compares to 3.4 percent of mortgages that were overdue, 10.9 percent of student loans, and 7.8 percent of credit cards.

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SeaWorld Is Sinking, and Cost-Cutting Is Not the Solution

August 14, 2014, 5:52 am

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Filed under: Company News, Earnings, Industry News, Travel Industry, Investing

SeaWorld Entertainment (SEAS) can't seem to catch a break. Shares of the marine life theme park operator were gutted on Wednesday after posting abysmal quarterly results.

Revenue declined 1 percent to $405.2 million on flat attendance growth. Net income checked in at $0.43 a share. Wall Street was holding out for a profit of $0.51 a share with a healthy increase in revenue.

From Bad to Worse

As maligned as SeaWorld has been since going public at $27 a share last year, this was supposed to be its turnaround quarter. Everything seemed to be going its way. The bad weather and price hikes that resulted in a 9 percent slide in attendance during the second quarter of last year should have been a springboard this time around. The shift of the Easter holiday this year -- going from March in 2013 to April in 2014 -- should have provided the school holidays that boost turnstile clicks. After all, SeaWorld blamed the timing of Easter for the 13 percent plunge in attendance during the first three months of this year.

As bad as the second quarter was for SeaWorld, the second half of the year is going to be even more of a mess. SeaWorld now sees revenue sliding 6 percent to 7 percent for all of 2014 -- with profitability falling even harder.

Desperation is starting to set in. The second quarter was the first time in the company's brief publicly traded tenure that attendance outpaced revenue growth. That's surprising given SeaWorld's annual rate increases, suggesting that SeaWorld is doing a lot of discounting and promotional activity to get guests into its theme parks.

SeaWorld Orlando and SeaWorld San Diego were the two biggest disappointments during the quarter, and even though the park operator refuses to call out "Blackfish" by name it's clear that last year's documentary is taking its toll.

Killer PR

"Blackfish," the film that took SeaWorld to task for having killer whales in captivity and placing its trainers in danger, wasn't much of a box office treat last year. It raked in just $2.1 million in ticket sales during its brief theatrical run. That translates into just hundreds of thousands of movie viewers. However, being broadcast on CNN late last year and now freely available on Netflix's (NFLX) streaming service has exposed the documentary to millions of watchers.

SeaWorld has responded to the allegations in the documentary, but it's safe to say that most people that have invested 80 minutes to catch "Blackfish" haven't bothered to take a few more minutes to hear SeaWorld's side of the story.

It may not be fair, but it's SeaWorld's reality. It's a brand mired in notoriety, and that was made clearly evident earlier this year when it was a runner up in Consumerist's 2014 Worst Company in America tourney.

Shaming Shamu

This should have been a great summer for SeaWorld. June hotel occupancy levels in Orlando -- near five of SeaWorld's parks -- hit a nine-year high this summer, and that was before Disney (DIS) kicked off its "Frozen"-themed attractions at Disney's Hollyood Studios, and Comcast (CMCSK) opened its Wizarding World of Harry Potter expansion at Universal Studios Orlando last month.

However, as SeaWorld battles the negative publicity that finds protestors occasionally picketing its parks and initiating online campaigns to convince bands to back out of SeaWorld music festivals, it's retreating instead of attacking.

SeaWorld will be embarking on cost-cutting initiatives during the second half of the year, making it less likely that it will be investing in magnetic attractions to draw guests and marketing campaigns to reshape the public's one-sided opinion of its business.

It's making a bad situation worse for the sake of capital preservation, and that's a strategy that rarely pays off in the long haul.

Motley Fool contributor Rick Munarriz owns shares of Netflix and Disney. He's a seasonal resident of Central Florida, living in Celebration when he's not in Miami. The Motley Fool recommends Netflix and Disney. The Motley Fool owns shares of Netflix. Try any of our newsletter services free for 30 days.

 

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Robin Williams' Estate Plan Spares His Heirs a Lot of Drama

August 14, 2014, 6:42 am

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Filed under: Celebrities, Estate Planning, Wills, Planning, Financial Education

The life of comic genius Robin Williams brought joy to millions of fans, and his tragic death has sent shock waves throughout the entertainment community. But as painful as his loss will be for family, friends and fans, it appears that at least according to early reports, Williams took care of business when it came to setting up a solid estate plan.

Keeping Private Affairs Private

Celebrity estate planning is often bungled, and the errors get magnified both by the large sums involved, and the fact that their deaths play out on the same public stage that they lived their lives on. (Think of Philip Seymour Hoffman, for example.)

Despite having a wealth of advisers, many wealthy entertainers fail to prepare adequately to handle the transfer of their real wealth after their death. Williams, however, apparently used at least one revocable trust for the primary portion of his estate planning, and that will likely be adequate to avoid some of the complications and tax liabilities that other celebrities' families have had to endure.

Most people think of wills as the basic must-have estate-planning document. But for those in the public eye, the downside of using a will as your primary document is that it's subject to the probate process, which invites public scrutiny of court-filed records. Especially in California, where Williams lived, the probate process is notorious for being long and arduous.

By contrast, revocable trusts enable people to arrange for the disposition of their assets after death without any involvement from a probate court. And, the public has no right to see the trust document. It's possible that we'll never know for sure what any trust that Williams created said. Because trusts keep personal business out of the public eye, even family members who disagree with each other can choose to resolve disputes privately, if they choose. That can avoid the negative publicity of will contests and keep arguments from escalating.

Is a Revocable Trust Smart for You?

Apart from the different procedural requirements, revocable trusts also give you the ability to control how and when your loved ones will receive your assets. For instance, in many cases, parents arrange to have money held in trust until children reach a certain age at which they believe they will be able to responsibly manage their finances. These provisions allow trusted advisers to act as trustee and handle financial matters during the early part of children's lives, and they ensure that children don't squander their inheritance quickly and find themselves with regrets later in life.

In addition, revocable trusts can give you flexibility in making changes to your estate plan as needed without necessarily having the same level of formality that a will involves. Given that Williams was married three times and had children from different marriages, making sure that his estate planning was rock solid in the face of changing circumstances was particularly important. Sometimes, families will break up into factions following a death, and arguments can become contentious when the estate plan isn't perfectly clear.

The downside of a revocable trust is that it tends to be more costly in terms of upfront fees than a simple will. However, unless you live in a state whose probate process is relatively simple, the extra cost in preparing a trust often pays for itself in not having to hire an estate planning attorney or pay court costs associated with probate proceedings after death.

Testamentary Trusts Are an Alternative

If probate isn't an issue, then you can get the same protection that trusts provide by setting up testamentary trusts in your will. If you go that route, the trust doesn't come into being until after your death, and your will automatically transfers your assets into the trust according to your instructions at that time.

One important thing to remember is that a revocable trust doesn't do you any good at all unless you transfer assets into the name of the trust.

Many times, people make the mistake of creating a trust, but never executing the real estate deeds to move their home into the trust, or leave financial accounts in their own names rather than making arrangements with their brokers to have accounts opened in the name of the trust. Even if you follow the common practice of having a backup will that puts any forgotten assets into the trust at your death, doing that leaves you vulnerable to probate, negating one of the values of having a trust in the first place.

No matter how modest your estate might be, having the right documents in place, and your financial house in order, can make a huge difference to your heirs if something happens to you.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger.

 

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Market Wrap: Stock Indexes Edge Higher on Earnings News

August 14, 2014, 9:46 am

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Filed under: Earnings, Market News, Investing

By MATTHEW CRAFT

NEW YORK -- Better corporate earnings helped nudge the stock market up on Thursday in one of the quietest sessions this year.

Health care companies led the major indexes to slight gains, while Berkshire Hathaway crossed another milestone, trading above $200,000 a share for the first time.

With many who work in the markets on vacation, trading volume on the New York Stock Exchange thinned out: just 2.6 billion shares traded on Thursday. The average day this year is nearly 1 billion higher.

Stronger profits for Perrigo (PRGO), a drugmaker, drove its stock up 7 percent, the biggest gain in the Standard & Poor's 500 index. Perrigo jumped $10.14 to end at $149.29. Another drugmaker, Merck (MRK), gained 93 cents, or 2 percent, to $58.78 following news that it won federal approval for a new sleeping pill.

The S&P 500 (^GPSC) climbed up 8.46 points, or 0.4 percent, to close at 1,955.18. Health care companies led nine of the 10 industry groups in the S&P 500 up.

The Dow Jones industrial average (^DJI) rose 61.78 points, or 0.4 percent, to 16,713.58 while the Nasdaq composite (^IXIC) climbed 18.88 points, or 0.4 percent, to 4,453.00.

Markets often slip into a summertime lull in August. Trading desks remain short-staffed until people return from vacations after the Labor Day holiday. Without any major developments, trading volume usually dries up and stock indexes turn sleepy, as if stuck in their beach chairs.

The S&P 500 is still hovering near record highs, leading some analysts to fret that the market looks too expensive. Lawrence Creatura, a fund manager at Federated Investors, argued that the solid second-quarter earnings season, which is nearly wrapped up, should put investors' worries about high prices to rest.

The S&P 500, for instance, has gained nearly 6 percent this year. "That's an interesting number: 6 percent just happens to be the average earnings growth rate over the very long term," he said.

In Thursday trading, the Class A shares of Warren Buffett's Berkshire Hathaway (BRK-A) conglomerate crossed the $200,000 mark, making the highest-priced U.S. stock even more expensive. Buffett has never split Berkshire's A shares to make them cheaper, although Berkshire created more affordable Class B shares (BRK-B), which closed Thursday at $135.30. Berkshire's Class A shares rose $3,241, or 2 percent, to end at $202,850.

Kohl's (KSS), a department-store chain, turned in quarterly profits that were slightly better than analysts' expectations. Sales slipped but the company cut costs. Kohl's surged $1.80, or 3 percent, to $56.91.

After the market closed Wednesday, Cisco Systems (CSCO) reported falling quarterly sales and profits. The technology company also announced plans to lay off 6,000 workers, roughly 8 percent of its workforce. Cisco's stock dropped 66 cents, or 3 percent, to $24.54.

In Europe, more reports showed the region's economic recovery has stalled. Germany's economy shrank 0.2 percent from April to June, while the French economy stagnated. But both France's CAC 40 and Germany's DAX closed with gains of 0.3 percent. Britain's FTSE 100 rose 0.4 percent.

"Investors appear to be betting that the continued raft of disappointing economic data could compel the European Central Bank to take further steps to help try and boost economic activity before the end of the year," said Michael Hewson, chief market analyst at CMC Markets.

In the market for U.S. government bonds, the yield on the 10-year Treasury note fell to 2.40 percent. Earlier, it touched 2.38 percent, its lowest level this year.

The price of oil fell sharply on speculation that economic weakness in Europe would lead to lower demand for fuel. Benchmark U.S. crude fell $2.01 to close at $95.58 a barrel on the New York Mercantile Exchange, its lowest close since Jan. 21.

In metals trading, the price of gold edged up $1.20 to $1,315.70 an ounce. Silver settled up six cents to $19.91 an ounce. Copper fell two cents to $3.09 a pound.

What to Watch Friday:

• At 8:30 a.m. Eastern time, the Labor Department releases the Producer Price Index for July and the Federal Reserve Bank of New York releases its survey of manufacturing conditions in New York state.
• The Federal Reserve releases industrial production for July at 9:15 a.m.
• Estee Lauder Cos. (EL) releases quarterly financial results before markets open in New York.

 

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