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7 Secrets Credit Card Companies Don't Want You to Know

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Using a credit card.
Getty ImagesYou may love your credit card, but once you're hit with a rising interest rate, you'll find out it may not love you back.
By Paul Sisolak

If you think about it, you've got a close, intimate relationship with your credit card. The both of you have been inseparable through each daily transaction. You treat it right by paying off your monthly balance on time. You know all your card's important details, such as its credit limit and interest rate, right down to memorizing every reward and benefit. You might even know your card number by heart. Unfortunately, there's some bad news that could be financially heartbreaking:

Your credit card company may be holding out on you.

The fact is, you've been kept in the dark about several secrets because your financial benefit comes at your card issuer's financial loss. Read on to find out some of the things your carrier doesn't want you to know.

1. Fixed rates aren't really fixed. Issuers can raise your APR whenever they choose. This information isn't necessarily a blatant secret, but it'll be hidden so deeply in the fine print of your cardholder's agreement that card companies are hoping you miss it. Commonly, we're enticed to sign on with a fixed introductory interest rate that may change at the company's will. You have the right to be notified 15 days before a potential rate increase, but to stay on top of them, check your mail; you'll receive notifications in a thin, discreet white envelope.

2. One late payment ... two penalties. In a perfect world, one late payment equals one penalty fee; on-time payments equal zero fees. In this imperfect world, you can be penalized with two surcharges on one delinquency, and you won't know about them until you've been charged. These can come in the form of a late fee (up to $35), and a penalty rate -- a permanent interest increase that can jack up your APR to as high as 29.99 percent! The 2009 CARD Act sought to place limits on these increases, though the details aren't widely known by the average cardholder.

3. Twice the interest in one month. Another one-two financial punch comes in the form of a legal maneuver which allows your card company to impose two months' interest for just one month of late balance payments. For example: You're charged twice the interest for a partial balance payment in October even though you paid on time in September. Called double-cycle billing, the card issuer looks at your average daily balance over two consecutive months and charges you higher interest based on the month you carried a higher balance. It's not even the interest that makes this a problem, but the principle of being punished for good financial behavior.

4. Disgraceful grace periods. How many of us who've made big-ticket purchases have been thankful for the grace period? Say you charge $1,000 to your card and pay $250 by the due date to hold over your creditors. Most cards carry grace periods up to about 25 days, allowing you to pay off the remainder, interest-free. But in the spirit of profiteering, many providers are reducing the grace period to just 20 days, while some are doing away with them altogether. That means you'll get charged interest on every purchases, even with timely repayments. Avoid this fall from credit grace, and check how many grace period days your card company offers.

5. No card limits -- just with limits. Many consumers in possession of a no-limit charge card discover they have a revolving spending cap -- let's use $5,000 -- but only learn of it after racking up $7,000 in purchases, leaving them stuck with a remaining $2,000, plus interest, to pay off. Why is this so? Your card company advertised your plastic as no limits, but it's really set at a no preset limit, based on your own month-to-month spending behavior and habits. Before snatching up a no-limit card, ask your provider if the limit is predetermined, and be careful not to spend beyond that amount.

6. Minimum payments to the maximum. It's the nature of the credit beast: The longer you stay in debt, the more interest credit card companies can charge, and the more money they make. In the past, card holders had a 5 percent minimum monthly payment. This became problematic for creditors because people were motivated to pay off their balances more quickly. So they lowered the monthly minimum to 2 percent. But now, with smaller repayment requirements, we're prone to spend more and accrue more debt each month. Experts maintain that this move by card companies adds thousands of dollars in interest, creating a repayment schedule that could last years, if not decades.

7. Late payments to any creditor can raise your APR. We hope that our creditors aren't wishing us to slip up on our repayments, but if there's one thing to take away from this article, it's to be on time paying down your debt. One late or partial payment, be it your credit card, car or mortgage payment, can jack up your total APR across each line of credit in your name. Can you imagine your auto or home loan going from 3 percent to 29 percent? Just like we've got the CARD Act, creditors have something called the universal default clause, which insures them against people who pose a credit risk. (Not like they need it.)

Paul Sisolak writes for GoBankingRates.com, a source for the interest rates on savings accounts, CDs, mortgages, auto loans and more.

 

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How to Safely Increase the Estate You'll Leave to Your Family

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Romantic Mature Couple Sitting In Garden Enjoying The Outdoors
monkeybusinessimages via Getty Images
When my mother entered her 70s, she began focusing more on what she would leave for her kids than her own financial well-being. She was more than fine; she had assets and steady income from two pensions, Social Security and an annuity. If you're in that phase of life, you may have similar priorities. The question is: Do you know the best ways to increase your estate?

Most people mistakenly believe that once they stop working, their net worth will shrink as they draw on assets for living expenses. Many people who are still working into their 60s and 70s also believe that it's too late to add any significant wealth to their estate. Neither of those has to be true -- if you have a well-designed plan.

Whole Life Policy

Let's consider a client who is 64 and plans on working another 10 years. He is reallocating some existing assets and putting some extra cash into life insurance. We are not talking about an end-of-life policy sold by the truckloads by TV personalities with a $10,000 payout to cover funeral expenses. This might be a good call if you have very little in assets and worry about your kids paying for your funeral. This client has some resources, so we could do something a little more creative.

He elected to fund a whole life policy with $25,000 a year for eight years for a total of $200,000. His starting death benefit is $310,000. If he dies in the next eight years, his family would receive $310,000 to $508,000, depending on when that happens. If he reaches 72, he will have the entire $200,000 that he put into the policy over those eight years back in the form of cash value in the policy. He is free to take loans and disbursements, or just let the money sit and grow during the rest of his lifetime.

Should he reach 85, he would have more than $376,000 of cash value in the policy -- even though he has only paid in $200,000 into it. Upon his death, his family will receive more than $470,000 of tax-free cash. He will more than double his estate by simply reallocating assets and letting tax-free compounding and guarantees go to work. Meanwhile, he can access the cash he is funding the policy with. If he does, he will lower the death benefit, but he has no need in the foreseeable future.

Fixed Indexed Annuity

Another client, who is 70, had concerns about leaving money behind to benefit a child with a mental handicap. The first step was finding a rock-solid trustee to make sure any money benefits the child after the death. Since the client was 70, the cost of life insurance was prohibitive.

The client had put away $300,000 for the child. The last market downturn had cost $130,000, but most of those losses have been recouped.

The client was very clear on wanting no market risk and elected to go with a fixed indexed annuity with a death benefit rider. This rider guarantees that the $300,000 will never decrease in value and will increase at a minimum of 4 percent -- plus any indexed market gains. The least average growth rate combined with the 4 percent percent guarantee means that if the client dies in 10 years, the client will leave behind more than $650,000 in cash. If the client lives only five more years, annuity will leave behind $488,000.

A fixed indexed annuity can also have a lifetime income rider that guarantees you income no matter how long you live and even if the underlying cash goes to zero from income withdrawals. The National Association of Fixed Annuities has more information about how these products work.

John Jamieson is the best-selling author of "The Perpetual Wealth System." Watch his video of the week for more information covered in this weeks article.

 

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7 Reasons Buffett May Sit on Berkshire's $55 Billion in Cash

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7 Reasons Buffett May Sit on Berkshire's $55 Billion in Cash
Bill Pugliano/Getty Images
With the recent revelation that Warren Buffett's firm, Berkshire Hathaway, is sitting on a $55 billion pile of cash, financial analysts, pundits and talking heads have had a field day theorizing what the Oracle of Omaha will do with it. However, there are seven reasons that he might not do anything -- at least in the near term.

1. Passive Income

First off, Berkshire Hathaway's (BRK-A) money stockpile seems to be more a result of passive income than any coordinated attempt to raise cash for strategic purposes. According to its most recent 13F filing, the proceeds from the sale of stocks - which include DirecTV (DTV), General Motors (GM), Phillips 66 (PSX) and Starz (STRZA) -- basically paid for increased purchases in existing positions like U.S. Bancorp (USB) IBM (IBM) and Walmart (WMT).

Instead, the bulk of its hoard has come from the compounding effects of more than $1 billion in profits that are generated each month by its portfolio of companies.

2. Not a Historically Significant Amount

Though $55 billion seems like a large number, it only amounts to roughly 10 percent of Berkshire Hathaway's assets, which on a percentage basis is down from a decade ago. This is because Buffett has been buying utilities and railroads, whose capital structure has greatly expanded the balance sheet. This means that on a relative basis it is not a significant amount in terms of the need to allocate.

3. Saving for a Rainy Day

Buffett has said that he likes to hold between $25 billion and $30 billion in cash to cover any unexpected claims for natural disasters from his insurance companies.

Backing out those cash reserves and using the current cash flow numbers, that means that Berkshire only has about two years' worth of excess cash lying around. That still is a sizable amount of investible capital, but it does help to put the top-line numbers in to better perspective.

4. Upkeep and Maintenance

Berkshire's expansion into railroads, utilities and energy has paid off handsomely, and that is one of the main reasons the company throws off so much free cash -- but it comes with a price. All of these sectors are capital-intensive, regularly requiring massive amount of money to modernize equipment and maintain infrastructure.

The potential for interest rates to increase is also a concern with these types of businesses. Having cash on hand to finance future capital expenditures could give Berkshire a competitive advantage over rivals that need to take on debt.

5. Not Many Options

After the financial crisis of 2008, Buffet went on a buying spree, snapping up stakes in companies like Goldman Sachs (GS), Bank of America (BAC) and Dow Chemical (DOW), where share prices had been beaten down dramatically.

These are the types of "fat pitches" that Buffett has repeatedly said he waits for: Situations where no matter what you do, it's very, very hard to miss. But with the mergers and acquisition cycle near record highs, there are few such balls out there to swing at.

According to Prequin, a London-based research firm, private-equity firms -- Berkshire's rivals in the acquisition game -- are sitting on a record $1.2 trillion in capital as of July. These firms, which are often under pressure from limited-partners to invest, and which may lack a long-term investing philosophy, have been driving up prices of potential acquisition targets, making it harder for find the types of bargains that Buffett is known to prefer.

6. Not Many Alternatives

With few if any attractive M&A targets in view and an equilibrium-type focus on individual stocks, there are limited options for Buffett's dry powder, none likely, based upon history.

Berkshire has only paid out a dividend once, more than 40 years ago. Illustrating his disdain for the practice, Buffett once said, "I must have been in the bathroom when that decision was made."

Bonds are another area where he could park his excess cash, but earlier this year Buffett cut his allocation to bonds to the lowest levels in more than a decade. With yield so low, he indicated his current distaste for them as a class, saying that they are "wasting assets."

7. The Outlier

Despite all outward signs to the contrary, the 83-year-old Buffett may be closer than we think to transitioning out of the day-to-day operations of the company. Though nobody expects him to ever completely retire (at least, not as long as his physical and mental health holds up), he has previously announced that a succession plan is in place at Berkshire.

There is a possibility then that he will hold onto that $55 billion because he knows that any significant acquisition would likely be managed long-term by his successor, and he might be waiting for a formal announcement of that succession.

Patience and Discipline Are Financial Virtues

One thing is for sure, Buffett has a history of patience and discipline when it comes to spending investor's cash.

In Berkshire's 1998 annual letter to shareholders, Buffett referenced six-time batting champion Ted Williams as his inspiration and model for his investing philosophy.

"Unlike Ted, we can't be called out if we resist three pitches that are barely in the strike zone," Buffett wrote. "Nevertheless, just standing there, day after day, with my bat on my shoulder is not my idea of fun."

The Lund Loop is a free once-weekly curated slice of what I am writing, reading and hearing about in finance, tech, music, pop culture, humor and the good life. But not sports or knitting ... ever!

 

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Pizza and Pasta IPOs Aren't Making Investors Much Dough

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Papa Murphy's Pizza Fremont
Nicholas Eckhart/Flickr
A lot of restaurant stocks have gone public over the past year and change. Investors have been hungry for consumer-facing companies they know, and underwriters have been chasing growing eateries to go public. The aftermath hasn't always been pretty, with many of the recent debutantes either trading below their initial IPO prices or well off their earlier peaks.

The market got a chance to check back on a pair of the forgotten restaurant newbies after the market close on Wednesday. Papa Murphy's (FRSH) and Noodles & Co. (NDLS) posted their latest financials results. They are both growing, but apparently not fast enough to please finicky investors.

Some companies just can't live up to the hype.

Making Dough Rise

Papa Murphy's is the country's largest player in the take 'n' bake pizza category. It sells gourmet pies that consumers pick up and bake at home. It watches over 1,436 mostly franchised stores, making it 20 times larger than its nearest competitor.

There's growth in this niche. Papa Murphy's experienced a 14 percent surge in revenue, fueled by expansion and a 1.5 percent uptick in comparable store sales. The growth isn't a fluke. Papa Murphy's has come through with positive comps in 36 of the past 41 quarters.

Net income on an adjusted basis nearly tripled to $1.1 million or 7 cents a share. Analysts were only holding out for 5 cents a share.

This is the pre-baked pizza chain's first full quarter as a public company, and normally the market would be eating up a company that posts better than expected results on both ends of the income statement in its first report. Yet Papa Murphy's isn't setting a lot of tongues wagging so far.

The company went public at $11 in May, settling for the low end of its initial $11 to $13 pricing range. There wasn't a lot of buzz here, and the stock closed at just $11.05 on its first day of trading. That was a good day for investors in retrospect. The stock has closed in the single digits in all but one day over the past two months.

Wet Noodles

There was a little more buzz when Noodles & Co. went public last summer. The fast casual chain specializing in pasta done up in several global-cuisine iterations was a market darling when its IPO hit the market. Noodles & Co. went public at $18, and within a few days it was peaking above $50. It's been rough after that, with the stock shedding more than half of its peak value.

Noodles & Co. wasn't as fortunate as Papa Murphy's in its latest quarter. Revenue may have moved 12 percent higher, but the growth was entirely the handiwork of expansion. Comparable restaurant sales and adjusted earnings declined for the period.

Papa Murphy's may have beaten analyst sales and profit projections, but Noodles & Co. fell short on both fronts. Investors shouldn't be surprised. This is the third consecutive quarter that it posts adjusted profits that fall short of Wall Street estimates.

Noodles & Co. did point out that comparable restaurant sales have been trending positive halfway through the current quarter, but the stock still took a hit in after-hours trading on the disappointing report. Noodles & Co. went public flying the same fast casual banner as Chipotle Mexican Grill (CMG), clearly it's nowhere close to being in the same league.

Eat Up

The market isn't giving up on all newbie restaurant stocks. One of last month's biggest winners was El Pollo Loco (LOCO). The California-based chain grilling up citrus-marinated chicken has more than doubled since going public at $15 three weeks ago.

The moral of the story is that you can't treat all restaurants the same. Noodles & Co. followed up its bad report on Wednesday by lowering its growth expectations. It now sees flat same-restaurant sales and earnings growth in 2014. Papa Murphy's is sticking to its earlier guidance, calling for 105 new domestic franchise store openings, comparable store sales growth of 2 percent and $830 million in system-wide sales. We're still waiting for El Pollo Loco to post its first quarterly report since last month's IPO.

No two recipes are the same, and the same can be said about the wave of restaurant stocks that recently went public.

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

 

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Check Your Spice Rack: Oregano Recalled for Salmonella Risk

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McCormick oregano
McCormick & Co.
McCormick & Co., one of the best known names in the spice business, is recalling a batch of ground oregano because it might be contaminated with salmonella, the Food and Drug Administration said Wednesday.

The recall involves small containers (0.75 ounce size) of McCormick ground oregano with a UPC code on the label of 0-523561-6 and was "Best By" dates of Aug. 21, 2016 and Aug. 22, 2016. They appear on the labels with this code: "BEST BY AUG 21 16 H" and "BEST BY AUG 22 16 H."

McCormick (MKC) said the recall is limited to those specific containers, which were shipped in 1,032 cases to 41 states, Puerto Rico, the Virgin Islands, and several countries. The oregano was shipped between April 4 and Aug. 5.

Salmonella bacteria can make anyone sick, but the illness is particularly dangerous to young children, the elderly and those with weakened immune systems. And even a healthy person who gets infected with the organism is likely to have a fever and suffer abdominal pain, diarrhea, nausea and vomiting. The FDA said it has not received any reports of consumers getting sick from the oregano.

The contamination was discovered by the FDA during routine testing. McCormick said grocery stores have been notified to remove the products from their shelves and distribution centers and destroy them.

If you have the recalled oregano, you're urged to get rid of it and the container, and contact McCormick at 1-800-632-5847, weekdays from 9:30 a.m. to 8 p.m. Eastern time to get a replacement, a refund or ask any questions. You don't need to return it to the store where you purchased it.

 

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Supervalu Grocery Chain Latest to Suffer Data Breach

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Supermarket Chain Probes Possible Data Breach
Ariana Lindquist/Bloomberg via Getty ImagesA customer shops for yogurt at a Cub Foods store owned by Supervalu in Crystal, Minn.
By MICHELLE CHAPMAN

NEW YORK -- A data breach at Supervalu may have affected as many as 200 of its grocery and liquor stores and potentially affected retail chains recently sold by the company in two dozen states.

The announcement lengthens the list of retailers that have had security walls breached in recent months, including Target, P.F. Chang's and even the thrift store operations of Goodwill Industries International.

Hackers accessed a network that processes Supervalu transactions, with account numbers, expiration dates, card holder names and other information possibly stolen, the company said. Those systems are still being used by the stores sold off by Supervalu last year for $3.3 billion, potentially opening up customer data at those stores as well.

The breach occurred between June 22 and July 17, according to Supervalu, which said it took immediate steps to secure that portion of its network.

The cards from which data may have been stolen were used at 180 Supervalu (SVU) stores and liquor stores run under the Cub Foods, Farm Fresh, Hornbacher's, Shop 'n Save and Shoppers Food & Pharmacy names. Data may also have been stolen from 29 franchised Cub Foods stores and liquor stores. Those stores in North Dakota, Minnesota, Illinois, Virginia, North Carolina, Maryland and Missouri.

But Supervalu said that a related criminal intrusion occurred at the chain stores it sold to Cerebus Capital Management in March 2013, stores that Supervalu continues to supply with information technology services.

Those stores include Albertsons, Acme, Jewel-Osco, Shaw's and Star Market -- and related Osco and Sav-on in-store pharmacies in two dozen states.

Cerebus affiliate AB Acquisition said that it's working closely with Supervalu to evaluate the scope of the potential breach.

Supervalu has yet to determine if any cardholder data was actually stolen and said Friday that there's no evidence of any customer data being misused. Information about the breach was released out of "an abundance of caution," the company said.

Intrusion Contained

The company believes that the intrusion has been contained and it said it is confident that people can safely use credit and debit cards at its stores.

Supervalu and AB Acquisitions are offering customers whose cards may have been affected a year of consumer identity protection services via AllClear ID.

Supervalu has also created a call center to help answer customer questions about the data breach and the identity protection services being offered. The call center can be reached at 855-731-6018. Customers may also visit Supervalu's website under the Consumer Security Advisory section to get more information about the data breach and the identity protection services.

There are efforts underway to make credit and debit cards more secure following a rash of security breaches in recent months.

Target (TGT) said this month that expenses tied to a data breach leading up to last year's holiday shopping season could reach as high as $148 million. The incident led to a major shakeup at the company and CEO Gregg Steinhafel resigned.

Restaurant operator P.F. Chang's confirmed in June that data from credit and debit cards used at its restaurants was stolen. There have been smaller breaches at Neiman Marcus and Michaels Stores .

Shares of Supervalu shed 17 cents to $9.42 in morning trading.

 

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Apple Begins Storing User Data on Servers in China

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Apple starts to store user data on servers in China for first time
Andy Wong/APShoppers at an Apple store in the Wangfujing shopping district in Beijing.
By Gerry Shih and Paul Carsten

BEIJING -- Apple has begun keeping the personal data of some Chinese users on servers in mainland China, marking the first time that the tech giant is storing user data on Chinese soil.

The data will be kept on servers provided by China Telecom, the country's third-largest wireless carrier, Apple (AAPL) said in a statement Friday.

Apple attributed the move to an effort to improve the speed and reliability of its iCloud service, which lets users store pictures, email and other data. It also coincides with Apple's bid to support its iTunes Store in China, where local downloads of audio and video have been steadily increasing.

The storage of user data in China represents a departure from the policies of some technology companies, notably Google (GOOG), which has long refused to build data centers in China due to censorship and privacy concerns.

"Apple takes user security and privacy very seriously," it said. "We have added China Telecom to our list of data center providers to increase bandwidth and improve performance for our customers in mainland China. All data stored with our providers is encrypted. China Telecom does not have access to the content."

The encryption keys for Apple's data on China Telecom servers would be stored offshore and not made available to China Telecom, a person familiar with the situation said.

Apple has claimed to have devised encryption systems for services such as iMessage that even Apple itself can't unlock. But some experts expressed skepticism that Apple would be able to withhold user data in the event of a government request.

"If they're making out that the data is protected and secure that's a little disingenuous because if they want to operate a business here, that'd have to comply with demands from the authorities," said Jeremy Goldkorn, director of Danwei.com, a research firm focused on Chinese media, Internet and consumers.

"On the other hand if they don't store Chinese user data on a Chinese server they're basically risking a crackdown from the authorities."

Goldkorn added that data stored in the United States is subject to similar U.S. regulations where the government can use court orders to demand private data.

A spokesman for China Telecom declined to comment.

Google, Microsoft

Technology companies seek to position data centers as close to their customers as possible because smaller physical distances mean faster service speeds.

But some companies have opted not to situate servers in China, where they would have to comply with local laws. Google and Microsoft (MSFT) don't have servers for their Gmail and Hotmail services in China.

Google publicly abandoned China in 2010 and moved its services, including its search engine, to Hong Kong-based servers after refusing to comply with Chinese government censorship.

Yahoo Inc came under criticism in 2005 after it handed to Chinese authorities emails that led to the imprisonment of Shi Tao, a journalist who obtained and leaked an internal censorship order the government had sent Chinese media.

Microsoft has seen its cloud storage service disrupted in China since early June. This development coincided with wider disruptions to overseas Internet services, including Google's, around the time of the 25th anniversary of pro-democracy protests in Beijing's Tiananmen Square.

"China doesn't want any digital service offered to Chinese people to be hosted offshore," said Goldkorn.

"I suppose it was inevitable that Apple had to comply if they were using foreign servers for Chinese user data."

 

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Robust Factory Output Boosts U.S. Economic Outlook

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wholesale prices
LM Otero/APSUVs rolling off the assembly line at a General Motors auto plant in Arlington, Texas.
By Lucia Mutikani

WASHINGTON -- U.S. manufacturing output rose broadly in July and automobile production recorded its largest increase in five years, boosting the economy at the start of the third quarter.

While other data Friday showed some cooling in factory activity in New York state this month, economists said it didn't change the view of an economy with strong momentum, noting that the pullback followed a robust increase in July.

The broad-based nature of the [manufacturing] gains indicates that the strong second-quarter rebound in economic growth momentum is being sustained.

"The broad-based nature of the [manufacturing] gains indicates that the strong second-quarter rebound in economic growth momentum is being sustained," said Millan Mulraine, deputy chief economist at TD Securities in New York.

The Federal Reserve said factory production jumped 1 percent last month after rising 0.3 percent in June. That was the largest gain since February and reflected increases across all major categories.

Auto production surged 10.1 percent, the biggest rise since July 2009. There were also sturdy gains in the production of machinery and computers and electronic goods, which economists said hinted at a pick-up in business investment this quarter.

A stronger pace of business investment is needed to ensure sustained economic growth.

The economy grew at a 4 percent annual pace in the second quarter and current forecasts peg the growth rate for the third quarter within a range of 2.5 percent to 3 percent.

Industrial capacity utilization, a measure of how fully firms are using their resources, last month hit its highest level since February 2008.

The solid rise in manufacturing and a 0.3 percent advance in mining output helped to offset a 3.4 percent weather-driven decline in utilities production. That left overall industrial production up 0.4 percent in July.

The data had little impact on U.S. financial markets, with traders focusing instead on events in Ukraine. The Ukrainian government said its forces had attacked and partly destroyed a Russian armored column that entered Ukrainian territory overnight.

Benign Producer Inflation

In a separate report, the New York Fed said its "Empire State" general business conditions index fell to 14.69 this month from 25.60 in July.

A reading above zero indicates expansion. Growth in new orders slowed, but a further decline in inventories pointed to an acceleration in activity in the months ahead.

While manufacturing is gaining steam, there is little sign of a broad pick-up in inflation pressures at the factory gate.

In another report, the Labor Department said its Producer Price Index for final demand edged up 0.1 percent in July as the cost of energy products fell, offsetting an increase in food prices.

Prices received by the nation's farms, factories and refineries rose 0.4 percent in June. In the 12 months through July, producer prices increased 1.7 percent.

Excluding food and energy, wholesale prices gained 0.2 percent, matching June's increase. They were up 1.6 percent in the 12 months through July.

"Aside from recent energy weakness, the PPI results continued to point to a steady firming in underlying inflation trends that we expect to continue to be seen in a continued inflection higher in the core consumer price index as well," said Ted Wieseman, an economist at Morgan Stanley (MS) in New York.

Overall, inflation has been rising in recent months, a fact acknowledged by the Fed at its July policy meeting. The U.S. central bank, which had repeatedly warned that price pressures were too low, said the likelihood of inflation running persistently below its 2 percent target had diminished somewhat.

Firming inflation and a tightening labor market have led some economists to anticipate an early interest rate increase from the Fed. The central bank, however, has shown no sign of being in a hurry to lift its benchmark lending rate from near zero, where it has been since December 2008.

Another report Friday showed consumer sentiment hit a nine-month low in early August. The Thomson Reuters/University of Michigan's consumer sentiment index fell to 79.2 from 81.8 in July.

-With additional reporting by Sam Forgione and Rodrigo Campos in New York.

 

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Airlines Squeezing Even More Seats Onto Smaller Planes

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Passengers on a aeroplane
Jack Sullivan/Alamy
When it comes to air travel these days, you can have easy access to the flights you want. You can have cheap tickets. Or you can have elbow room.

Pick two.

If you want tickets available when you want them, and you also want a comfortable flight when going there, you'll likely have to pay an arm and a leg for the elbow room. Airlines, in the meantime, are gambling that what you -- and most of your fellow travelers -- really want is access to air travel on the cheap, and please keep your elbows to yourselves.

Last year, The Wall Street Journal reported on a trend towards "incredible shrinking plane seats" aboard large, long-haul airplanes. Airlines were asking plane builders Boeing (BA) and Airbus (EADSY) to cram rows of 10 economy-class seats into cabins originally designed for nine. The new seats, just 17 inches wide, and with two-inch armrests, will bracket aisles of similar 17-inch width aboard Boeing 777 airliners, for example.

As the Journal explained at the time, the new 17-inch seat width would be 2 inches more cramped than your average football stadium seat, 3½ inches smaller than a coach seat on Amtrak, 4 inches less than what your compatriots in first class on that 777 get, and 8 inches narrower than the veritable thrones installed in movie theaters.

Now, the phenomenon is spreading to smaller jets as well.

Small Planes, Smaller Seats

According to the Journal, Boeing and Airbus are trying to stuff extra seating onto their A320 and 737 model single-aisle planes. They've enlisted airplane interiors designer B/E Aerospace (BEAV) in the effort. Last year, B/E announced that Boeing and Airbus are ordering a new airplane bathroom designed to reduce floor space to leave more room for seats.

Airbus, which currently can fit 180 passengers onto one of its A320s, wants to shoehorn in 189 seats. This will probably result in about 5 percent less elbow room for passengers.

Boeing -- whose 737 Max 8 regional jets already hold 189 passengers -- wants to add more seats to other models. Ireland's Ryanair Holdings (RYAAY), ordered 175 Boeing 737-800 jets last year, at $16 billion (at list price). Ryanair wants its planes to carry as many as 199 passengers, and Boeing is redesigning doors and scrunching rows to find room for 10 more seats -- again, at a cost of perhaps 5 percent less elbow room for passengers.

The biggest loss of territory, however, may await flyers on Airbus's A321 jetliners. Currently designed to accommodate 220 passengers, Airbus is working at customer behest to redesign the planes' interiors to accommodate as many as 240 passengers -- an 8 percent reduction in personal space.

Will passengers stand for the reductions? That remains to be seen. But if plane seats get much smaller, standing may be the only option left to us.

Motley Fool contributor Rich Smith is old enough to remember when it was still fun to fly. He has no position in any stocks mentioned, nor does The Motley Fool. For fresh stock picks, try any of our newsletter services free for 30 days.

 

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Consumer Sentiment Slips Even as Economy Improves

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Consumer Confidence
Mark Lennihan/AP
By Sam Forgione

U.S. consumer sentiment fell in August to its lowest since last November while a barometer of current economic conditions rose to its highest since July 2007, a survey released Friday showed.

The Thomson Reuters/University of Michigan's preliminary August reading on the overall index on consumer sentiment came in at 79.2, down from a final reading of 81.8 the month before.

It was below the the median forecast of 82.5 among economists polled by Reuters, and was the lowest since a reading of 75.1 in November of last year.

"While the data implies differential prospects for retailers, consumer confidence remains at moderately positive levels, high enough to support a continued expansion in personal consumption during the year ahead," survey director Richard Curtin said in a statement.

The survey's barometer of current economic conditions rose to 99.6 from 97.4 and above a forecast of 97.8.

The survey's gauge of consumer expectations slipped for a fourth straight month, to 66.2 from 71.8. The subindex was below an expected 73 and was the lowest since last October.

The survey's one-year inflation expectation rose to 3.4 percent from 3.3 percent, while the survey's five-to-10-year inflation outlook rose to 2.8 percent from 2.7 percent.

"Importantly, upper income households reported quite substantial financial progress," Curtin said. "But they reported the same sized losses as lower income households in their outlook for the overall economy."

 

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This Week's Winners and Losers: Monster Deals, Cisco Reels

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Monster Beverage Corp. Products Ahead Of Earns
Paul Morris/Bloomberg/Getty Images
There were plenty of winners and losers this week, with a fast food chain's attempt to offer healthier fare falling short and the world's largest networking equipment company letting pink slips fly. Here's a rundown of the week's smartest moves and biggest blunders.

Satisfries -- Loser

Burger King Worldwide (BKW) is giving up on trying to woo calorie counters. The burger chain is discontinuing Satisfies -- the crinkle-cut fries that contain 40 percent less fat and 30 percent fewer calories than McDonald's (MCD) signature spud sticks -- at most restaurants.

Some franchisees will keep offering Satisfries, but the item didn't stick on its menu for much more than a year. Burger King claims that the item didn't sell well despite clearing roughly 100 million orders for the slightly less unhealthy fries. One can argue that Satisfries were doomed because of Burger King chose to charge more for an order than its traditional fries. Fast food joints are magnetic to folks looking to save money. Plus Burger King isn't a big draw to folks on a diet despite following rivals into salads.

Monster Beverage (MNST) -- Winner

Coca-Cola (KO) has struggled to make a dent in the energy drink market dominated by Red Bull and Monster, so it's betting on a winner. Coca-Cola is investing $2.15 billion to buy a 16.7 percent stake in Monster Beverage.

It's a smart move for Coca-Cola as it continues to diversify from carbonated drinks that have fallen out of favor with consumers. However, it's a bigger deal for Monster Beverage. The stock jumped on the news, and rightfully so. Green Mountain Coffee Roasters (GMCR) has soared since Coca-Cola made a similar investment earlier this year.

Cisco (CSCO) -- Loser

It's another round of pink slips at Cisco. The networking gear giant announced that it that it will be dismissing 6,000 workers or 8 percent of its staff. It's a big number, but the market shouldn't be surprised. This is the fourth summer in a row that it has announced layoffs.

Cisco has seen better days. It was the country's most valuable company for a little while at the peak of the dot-com boom. It's been harder to find growth on this end of the dot-com bubble as failed acquisitions and competitive challenges have weighed on results. If these summer layoffs continue, it won't be long before employee morale is a bigger concern than opportunities for growth.

MannKind (MNKD) -- Winner

MannKind has a game-changing drug on its hands, and now it has a financially strong partner to help market it. Afrezza -- an inhaled insulin that was approved by the Food and Drug Administration earlier this summer -- could be a godsend to folks with diabetes who are weary of needle pricks. Now MannKind is teaming up with Sanofi (SNY) to help get it to market in time for next year's launch.

MannKind isn't flush with cash or seasoned with experience, and that's why many upstart biotechs and drug makers team up with larger partners. Some of the warnings associated with Afrezza could have scared off potential partners, but the far-reaching potential of Afrezza was too tempting for Sanofi to pass up here.

SeaWorld Entertainment (SEAS) -- Loser

It's been a great summer for theme park operators, unless you happen to be SeaWorld. Shares of the company behind the namesake marine life attractions, Busch Gardens and a few water parks plunged after posting disappointing quarterly results.

Revenue fell when analysts were holding out for growth. With the Easter holiday and good weather in its favor, it seemed as if this would be a rare winning quarter for SeaWorld. It wasn't. SeaWorld can't seem to shake the negative consumer sentiment that has been brewing since last summer's release of the "Blackfish" documentary that takes the park to task for having orcas in captivity.

It's not just the seasonally potent summer quarter that's not working out for SeaWorld. It's hosing down its guidance for the entire year.

Motley Fool contributor Rick Munarriz owns shares of Keurig Green Mountain. The Motley Fool recommends Burger King Worldwide, Cisco Systems, Coca-Cola, Keurig Green Mountain, McDonald's and Monster Beverage. The Motley Fool owns shares of Monster Beverage and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our newsletter services free for 30 days.

 

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Recalled Vornado Space Heaters Can Melt, May Cause Fires

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www.cpsc.gov
It might be hot outside, but it's time to think about space heaters. Specifically, Vornado VH 110 whole-room Vortex electric space heaters.

They're being recalled because they can start fires, the Consumer Product Safety Commission said. Vornado told the CPSC that it has received 29 reports of units overheating and melting. Among those were seven that reportedly caught fire. The company said one person suffered smoke inhalation, and another incident caused property damage from the soot and smoke.

The 79,000 recalled Chinese-made space heaters were sold for about $60 between June 2013 and May at Bed Bath & Beyond (BBY), Home Depot (HD), Menards, Target (TGT) and other retailers -- and online through the company website and Amazon.com (AMZN).

If you have one of the units, you're asked to contact Vornado to get instructions on getting a free replacement. You should not have to pay for shipping. Consumers can contact Vornado at (844) 205-7978 weekdays between 9 a.m. to 6 p.m. Eastern or visit the Vornado recall site.

Off-season recalls can be problematic in terms of getting consumers to act. Some companies -- and there's no evidence to suggest that's what happened here -- delay recalls until it's less likely that consumers will return items and ask for replacements.

 

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FedEx Indicted for Money Laundering in Online Drug Case

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FedEx Indicted
Charlie Riedel/AP
By PAUL ELIAS

SAN FRANCISCO -- Federal prosecutors say several addicts died soon after receiving shipments of illegal prescription drugs via FedEx (FDX).

The deaths were included in a new indictment filed late Thursday against FedEx that adds money laundering to a list of charges the company is facing over allegations it knowingly shipped illegal prescription drugs from two online pharmacies.

The indictment alleges that on at least five dates, "FedEx delivered controlled substances and prescription drugs from online pharmacies to individuals who subsequently died or accidentally caused the death of others."

The Memphis, Tennessee-based shipping giant is not charged with any of the deaths. No executives have been named in the indictment. The company faces a $1.6 billion fine if found guilty.

The three money laundering charges allege the online pharmacies paid their FedEx bills with money obtained illegally.

FedEx Corp. already was facing 15 conspiracy and drug charges that were filed last month for allegedly shipping powerful sleep aids, sedatives, pain killers and other drugs needing prescriptions to use. Rival UPS Inc. paid $40 million last year to resolve similar allegations.

The accusations against the two shipping companies arise from a nearly decade-long crackdown on Internet pharmacies that ship prescription drugs to customers lacking medical clearance.

In settling its case, UPS said it overhauled it procedures and worked with investigators to detect suspicious activity.

FedEx, on the other hand, said it's not a law enforcement agency and to work with authorities in the manner they demand would require invading the privacy of their customers.

"FedEx is innocent of these and all of the charges filed in this matter," spokesman Patrick Fitzgerald said. "We will plead not guilty. We will continue to defend against this attack on the integrity of FedEx."

Fitzgerald said FedEx will stop serving any online pharmacies that federal authorities tell it are operating illegally. "We have asked for a list, and they have sent us indictments," he said.

The case in U.S. District Court, Northern District of California is United States of America vs. FedEx Corp. et al., 14-cr-380.


FedEx Drug-Trafficking Charges Linked To Illegal Pharmacies

 

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How Berkshire Hathaway Soared to $200,000 a Share

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Bufett Lunch
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There are all sorts of exclusive clubs on Wall Street -- and then there's Warren Buffett's Berkshire Hathaway (BRK-A).

On Thursday, it became the only member of the $200,000-a-share club. That's right: A single share of its Class A stock is trading for more than $200,000. And Berkshire is likely to remain the sole member of that club for a very long time. The next-highest priced stock is Tower Properties (TPRP), a real estate holding company that trades over the counter for $10,500 a share.

Some critics have argued for years that Berkshire is overvalued, but it has marched steadily higher year after year. According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, Berkshire has delivered an annual return of 22.6 percent (including reinvested dividends) ever since the stock topped $100 a share back in 1977. That's a record of consistently outstanding performance unmatched by any other Wall Street guru.

$1,000 to $2 Million

That means, if you invested $1,000 in Berkshire stock in May of 1977 and let it ride, your investment would be worth $2 million today.

The stock is up 13 percent so far this year, well ahead of the 5.6 percent gain for the S&P 500 (^GSPC).

Berkshire Hathaway is basically a mutual fund of Buffett's investments, including dozens of companies that he's bought and operated, as well as huge stakes in other publicly traded stocks.

The company's biggest stock holdings are in Wells Fargo (WFC) (more than $23 billion worth of stock) and in Coca-Cola (KO) (more than $16- billion). Buffett has also placed big bets on financial companies American Express (AXP) and Goldman Sachs (GS), energy giants Exxon Mobil (XOM) and ConocoPhillips (COP), DirecTV (DTV), DaVita Healthcare (DVA), and many others.

Buy and Hold

Buffett has long preached a buy-and-hold investment strategy, and he's maintained investments in many of these companies for several decades.

In addition to those stock market investments, Berkshire also owns a long list of insurance, railroad, energy and consumer business. Among the best-known brands are Geico, Burlington Northern Santa Fe, Fruit of the Loom, Dairy Queen and Mars. Last year, Berkshire acquired H.J. Heinz.

But unlike most other big-time buyout specialists, Buffett and partner Charlie Munger usually keep the existing management and staff of the companies being bought. Just like his stock market strategy, he buys with a long-term view, not so worried about the quarter-to-quarter gyrations that dominate Wall Street trading.

Pilgrimages to Omaha

Buffett is widely considered an investment genius, and his nickname of the "Oracle of Omaha" reflects that he still lives in that same Nebraska city where he was born.

Each year, tens of thousand of Berkshire Hathaway investors flock to Omaha for the company's annual Investor Day activities, hoping that some of Buffett's wisdom will rub off on them.

Buffett, who turns 84 later this month, was ranked as the world's richest person back in 2008, before he started giving billions of his vast fortune, primarily through the Bill & Melinda Gates Foundation.

Unlike most companies, Berkshire has refused to split its stock to make it more affordable for investors. Buffett believes the high price encourages investors to be more like him -- willing to place long-term bets on the American economy.

 

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Market Wrap: Stocks Rebound After Midday Tumble on Ukraine

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Ukraine
AP/Sergei GritsA local resident passes by Ukrainian army APC in the city of Lutugino, eastern Ukraine on Friday. Fears of an escalation of the regional conflict buffeted stocks.
By MATTHEW CRAFT

NEW YORK -- Renewed fighting in Ukraine rattled markets on Friday. Reports that Ukrainian forces attacked Russian military vehicles that had crossed the border knocked stock markets down in the afternoon and sent traders into the safety of U.S. government bonds.

By the end of the day, the Standard & Poor's 500 index (^GPSC) was back to where it started as investors realized that a wider conflict wasn't underway.

John Canally, the chief economic strategist at LPL Financial, said it's understandable that traders dropped stocks in response to the flare-up. "Anyone who doesn't want to lose their job over the weekend sells first and asks questions later," he said.

Canally suspects the dispute between Russia and Ukraine will likely follow the pattern of recent months. Worrying headlines will be followed by soothing speeches. "We've been here before," he said.

The S&P 500 index fell 0.12 of a point to 1,955.06. It ended the week with a gain of 1.2 percent.

The Dow Jones industrial average (^DJI) fell 50.67, or 0.3 percent, to 16,662.91, while the Nasdaq composite (^IXIC) gained 11.93 points, or 0.3 percent, to 4,464.93

Mark Luschini, chief investment strategist at Janney Montgomery Scott, said that one reason world events seem to be driving trading recently is that there's a lack of anything else for traders to focus on. All but a handful of big companies have turned in second-quarter results already, and no major economic reports came out this week.

"For the moment, geopolitical events seem to hold the interest of the few people at their desks in mid-August," Luschini said.

The news crossed at mid-morning Eastern time that a column of Russian armored carriers had crossed into Ukraine late Thursday. Ukraine claimed that its artillery fire destroyed most of the vehicles, but Russia denied that it happened.

The reports upended major European markets, turning gains into losses. Germany's DAX dropped 1.4 percent, after climbing 1.1 percent earlier. France's CAC 40 lost 0.7 percent.

The yield on the 10-year Treasury note plunged as low as 2.30 percent, the lowest since June 2013, as traders seeking safety shifted money into U.S. government bonds. In late afternoon trading the yield climbed back to 2.34 percent, still down from 2.40 percent late Thursday.

Among companies in the news, Monster Beverage (MNST) soared 30 percent after Coca-Cola (KO) announced plans to pay $2 billion for a stake in the maker of caffeinated drinks. The deal comes as Coca-Cola's flagship soda business is flagging and "energy drinks" have become popular. Monster jumped $21.84 to $93.49.

Supervalu (SVU), a grocery store chain, said hackers gained access to its computer network for handling credit-card transactions. The company said it isn't sure yet if customers' account numbers and other information were stolen. Supervalu fell 28 cents, or 3 percent, to $9.31.

After the market closed Wednesday, Nordstrom (JWN) reported a slight drop in earnings as well as sales that fell just short of analysts' estimates. The department-store's stock slid $3.58, or 5 percent, to $65.11.

In commodities trading, Benchmark U.S. crude oil rose $1.77 to $97.35 a barrel.

The price of gold fell $9.50 to $1,306.20 an ounce. Silver fell four cents to close at $19.53 an ounce and copper edged up a penny to $3.10 a pound.

What to Watch Monday:
  • The National Association of Home Builders releases its housing market index for August at 10 a.m. Eastern time.
  • Urban Outfitters (URBN) reports quarterly earnings after financial markets close in New York.

 

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It's Going to Be a Long Way Back for J.C. Penney

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Inside A JC Penney Co. Store Ahead of Earnings Results
Patrick T. Fallon/Bloomberg/Getty Images
The market is happy with J.C. Penney (JCP) -- for now. Shares of the department store operator initially moved higher after posting better than expected results on Thursday night.

Net sales climbed 5 percent to $2.8 billion, fueled by a 6 percent uptick in comparable store sales. Its quarterly loss narrowed significantly to $172 million, or 56 cents a share. Sales were roughly in line with expectations, but this is the third quarter in a row that J.C. Penney clocked in with a smaller deficit than what Wall Street was forecasting.

It's not the only way that this was an impressive quarter for the retailer. Gross profit margins improved, implying that J.C. Penney didn't have to mark down its merchandise as aggressively as it has through most of the past two years. Inventory levels also clocked in lower than they were during the prior year's fiscal second quarter. You always like to see inventory grow at a pace slower than a retailer's sales. It indicates that a merchant isn't left holding a lot of tired goods. Seeing J.C. Penney's sales inch higher with inventory levels shrinking is encouraging.

However, despite all of the accolades coming out of the refreshing quarterly report, it would be premature to call J.C. Penney a successful turnaround story. It's not there, yet. It's not even close.

A Longer View

After a few rough years that have seen J.C. Penney's stock lose more than three quarters of its value since peaking in early 2012, we're starting to see the chain string together some positive streaks. This is the third quarter in a row that J.C. Penney punched in with positive comparable store sales growth. This is also the third quarter in a row that it posted a narrower loss than analysts were forecasting.

However, the more you dig into how far J.C. Penney has fallen -- and not just its share price -- the more that you will realize how far it has to go to find its way back.

Let's start this story in merrier times. The market cheered in the fall of 2011 when Ron Johnson was tapped as J.C. Penney's new CEO. He was a retailing guru, excelling at "cheap chic" retailer Target (TGT) before arriving at Apple (AAPL) just in time to roll out the insanely popular Apple Store concept.

We now know that he flew to close to the sun in his attempt to make J.C. Penney cool again. Ending the chain's practice of sales and coupons left shoppers feeling betrayed. Plans to offer a "town hall" redo with popular third-party brands grouped into mini-stores within the larger store confused mainstream customers. Nearly everything that Johnson did -- from offering kids' free haircuts on select Sundays to refreshing its classic logo -- backfired.

Johnson was let go last year, paving the way for a former CEO who wasn't all that successful before to come back.

It's All Relative

Sales stabilized last year, and they're moving higher. That's better than the alternative, but let's go back a few years. Comparable store sales slipped 11.9 percent during the same fiscal second quarter in 2013, plunging 21.7 percent in 2012.

Add it all up, and it's not pretty. The market may be cheering that the average store sold 6 percent more than it did a year earlier, but it's still selling 26.9 percent less than it did three years earlier. And -- just to frame this appropriately -- keep in mind that three years ago folks were applauding Johnson's arrival with radical ideas because J.C. Penney was starting to struggle.

The string of three quarters of smaller than expected losses is also a hollow cheering point. It's still red ink. From a financial standpoint isn't it better to come up short and post a profit than to exceed expectations while still delivering a deficit?

Analyst see annual losses continuing for the next few years at J.C. Penney, and that still raises the concept viability concerns that it must overcome. Until this once darling retailer turns profitable -- and until these gradual increases in comparable store sales overcome the previous two years of declines -- it's not fair to say that J.C. Penney has turned things around.

There are baby steps in the right direction in its latest quarter, but it's still going to be a long way back home.

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

 

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What I Look Forward to Most in Retirement

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Getty ImagesSavor the freedom of retirement by managing your own days.
By Dave Bernard

As someone on the cusp of retirement, I occasionally pause to picture life ahead when I will take my first steps toward senior citizen status. After surviving the working world and being fortunate enough to set aside what I hope is a sufficient nest egg to fund retirement, I have big hopes for the next 20 years. There are so many things I enjoy doing, and retirement is by definition the perfect opportunity to pursue my interests and feed my passions.

A reader of my retirement blog has an excellent perspective: "I'm retired (and, yes, past the honeymoon period) and I'm loving it! Each day opens up new possibilities. I find myself becoming more able to insist on things I want, rather than satisfying other's expectations. I don't necessarily need excitement, just newness. Don't do the same old stuff you always did! Try something new each day."

Where should I start? I feel like a kid in a candy shop with so many options that it is almost overwhelming -- but in a good way. Since I am in control of my days, I plan to revel in the freedom to try a little of this and taste some of that, ever sampling and experimenting with new things. As I think about what excites me most about beginning this next chapter, I am looking forward to the following:

No longer on the clock. After a career spent with every minute of every day tightly scheduled and carefully planned, I appreciate the virtues of a blank calendar. I dreamily imagine starting my day with nothing that I must do. It is invigorating to realize I need not worry about being late to the next engagement, but rather I am free to savor the moment. The only clock I have to adhere to is the one I manage.

Picture this: You start a project that keeps you entertained for a while. Then, even though not yet finished, you change course and start something entirely different. In retirement, you can do just that. No more deadlines, no rules or regulations from on high, no more last-minute fire drills. You control how you spend the hours in your day. You are off the clock and how sweet it is.

Freedom to choose. How I spend my retired day will be entirely up to me. It is hard to fathom this incredible freedom of choice. There may be days when I am high-energy and want to get out there and rock the world. On the other hand, there may be days when I am happy sipping my java seated in the backyard with a good book in hand. What I choose to do is solely up to me and not dictated by others. I am free to change my mind as often as I like. I am the decider, and that freedom of choice is something I plan to savor.

Time to nurture the creative me. Although I do not consider myself a particularly artistic person, I do have interests that allow for creative expression. I love writing.
Blogging and books are excellent vehicles to put into words my feelings and thoughts. And the fact that some people might enjoy and even benefit from my efforts is pretty cool. When I was a youngster, I took a good many years of piano lessons. As is often the case, I did little to sustain my skills through teen years and raising a family. But now that I have the time, I love to sidle up to the piano and jingle the old keys. Many retirees have a creative side that may have been smothered during a demanding career. The good news is retirement can be the perfect time to rejuvenate your artistic side and express yourself through whatever means you find most rewarding.

Refocus on good health. While we are stuck on the job, perhaps traveling too frequently and typically maintaining a hectic pace, it can be difficult to sustain healthy habits. When it comes to diet and exercise, too often the lifestyle we are forced to live doesn't remotely resemble how we should be living. Since this state of affairs is largely due to lack of time, retirement can be just what the doctor ordered -- literally. Instead of being forced to squeeze in a quick workout in a limited time slot, you can exercise when you feel like it. With the luxury to take all the time you want, your options become more interesting. You also have time to prepare better, more nutritious meals rather than succumb to fast food.

Revisit my relationship with my wife. We have been together for years, and during that time have become best friends. The demands of family and job have sometimes come between us, but only for a moment. We find strength and love and fun in the time we spend together. Once we both retire, we will have more quality time to share. I look forward to traveling and exploring and sharing time focused exclusively on us. My wife deserves to be spoiled, and I look forward to putting to good use my free time as a retiree doing just that.

Is there anything in particular that you are looking forward to when you retire?

Dave Bernard is the author of "I Want To Retire! Essential Considerations for the Retiree to Be." Although not yet retired, he focuses on identifying and understanding the essential components of a fulfilling and meaningful retirement. He shares his discoveries and insights on his blog Retirement-Only The Beginning.

 

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How to Avoid Being Stuck in the Sandwich Generation

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AWTGE0 Woman in foreground, elderly woman and girl in background, portrait Sandwich generation granddaughter; daughter; grandmot
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If you're part of the sandwich generation -- responsible for care of both your aging parents and your own children -- then you know how tough those demands can be on your time and money. Even if you aren't tasked with these responsibilities now, that could be your destiny.

While it's wonderful to be a part of a close-knit family willing to take care of one another, there's no denying the burden that puts on those in the middle of that generational sandwich.

If you want to break free from that cycle so that you don't become a burden on your own children as you age, it takes planning and perseverance. But it can be done.

What Will It Take?

Genworth (GNW) runs an annual survey that estimates the average cost of caring for an aging family member. The 2014 results:

Service Average cost Average monthly cost (*)
Homemaker $19/hour $1,140
Home health aide $20/hour $1,200
Adult day care $65/hour $3,900
Assisted living $3,500/month $3,500
Nursing home (semi-private) $212/day $6,360
Nursing home (private) $240/day $7,200
(*) Assumes 30 days/month and 2 hours/day of hourly charged services

Source: Genworth's 2014 Cost of Care Survey.

The average retiree's Social Security check -- $1,300 per month -- isn't enough to cover a basic lifestyle and in-home help. If you want to age gracefully without becoming a financial burden on your children, you need enough of a nest egg to cover those costs on your own.

Strategies for Easing Future Financial Burdens

Depending on where you are in your life -- and on who's depending on you -- there are several routes to shore up your own nest egg. The key is cost control on all sides and for all generations.
  • Caring for your parents may involve difficult decisions on where they live. Should they sell the family's long-time home and downsize to a smaller, lower-total-cost residence? Or should you combine households? The total costs for you would likely be far lower than supporting two separate households, though personal stresses from that arrangement may outweigh financial benefits. You should see if lower-cost generics or older medicines could help their conditions as well as the newest, most expensive ones.
  • Caring for your kids involves serious prioritizing expenses. The largest likely potential cost is college, and the traditional four-years-in-a-dorm experience is not the only way to get a marketable degree from a reputable school. Cheaper options include community colleges with credit-transfer agreements; ROTC programs that require follow-on military service; and scholarships based on academic, athletic or affinity groups. Don't forget the time-tested approach of working one's way through college to help defray the costs.
  • Caring for your future needs means making funding your retirement accounts a top financial priority, once you've got your basic costs of living covered. Socking away money in your retirement accounts saves you taxes, keeps your money from being easily spent and gives you the chance to compound it to cover your own costs of aging.
If you really want to break the cycle that creates the sandwich generation so that you don't become a financial burden on your own keep your own costs down. Invest the money you're saving, and instead of being a financial burden on your kids, you may find yourself able to leave them and their children a lasting legacy of financial freedom. Wouldn't that a gift worth giving?

Chuck Saletta is a Motley Fool contributor. For more on ensuring a comfortable retirement for you and your family, see our free report in which Motley Fool retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule to boost your retirement income.

 

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Best of DailyFinance: The Week in Review (August 11 - 17)

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True Confessions of a Former Debt Collector

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I have been yelled at. My family and my life have been threatened. I've heard every inappropriate word in the English language. It was all in a day's work for a mortgage debt collector.

There's nothing glamorous about debt collecting, but it's a necessary evil. Let's be honest, there are some people who can't pay their outstanding debts, and there are some people who won't.

I collected outstanding mortgage debt for one of the largest mortgage servicing companies, handling loans from Bank of America (BAC), Bear Sterns, Merrill Lynch, Countrywide and many others. The start of my time there predated the mortgage bust by a year, so I got to see exactly how banks had structured loans and people stretching themselves too thin. The job opened my eyes to the problems before they became supremely obvious to everyone back in 2008.

We had our hands in many of the most toxic and volatile mortgages being spun out during the run up to the bursting of the bubble.

We Don't Personally Call You

While I don't regret my time as a debt collector, I do regret many of my employer's policies.

Most of the large loan servicing companies use automated dialing systems. When I got to work, I logged into a system and within seconds, the dialing system would attempt to connect me to a delinquent account holder. Our goal was to connect with as many people -- and collect as much money -- as possible during our shifts. If we were able to get in contact with someone, we'd go through our script and try to convince them to pay their delinquent debt. Most calls were hangups or "no connects," but we did have a good handful of conversations with borrowers each shift.

Our dialing system would call a borrower once an hour until they was reached. We couldn't leave any messages and had to get in touch with the actual borrower. Our calling hours were 8 a.m. to 9 p.m. local time. This was seven days a week, with only a few holidays off.

Shady Payment Processing Happened Every Day

As a mortgage servicing company, it was our responsibility to take payments -- whether mailed checks, automatic bank drafts, or over-the-phone payments -- and apply them to loans. Seems straightforward, but it only took me a few months to realize we were creating trouble for borrowers. In a few cases, I discovered our payment processing department holding checks we'd received until after the due date. They would then charge the borrower a late fee, saying they hadn't received the check on time.

I got calls on a regular basis from borrowers who'd had their checking accounts double drafted: Our system would debit the mortgage payment on the regular date, then draft it again a day or two later. Not only would we not tell borrowers about it when we made these mistakes, but it would take us weeks to refund the money. Having seen this practice firsthand (plus an experience I had in which an auto-draft payment glitch led to me being briefly sued by a gym), I no longer allow companies to set up auto-drafts on my bank accounts.

You are Late the Day After Your Due Date

While your loan may indicate you are not charged a late fee until the 16th day after your due date, we had a different system. We considered all borrowers "late" as of the day after your mortgage was due. I had to discuss this policy on countless occasions until it was ingrained in my head. If your due date is the first of every month, then you were considered late as of the second. This is still technically true with most mortgage companies. They want their money on the due date. While they don't charge you a late fee, they can still start calling you to ask for the payment.

If Your Credit Score Drops, We Call You

Mortgage servicers had algorithms built into their systems to monitor your credit score. If your score dropped by a certain percentage, our system would add you into the calling queue - even if you'd paid your bill every month with no issues or late fees.

There was no worse feeling than getting connected to a borrower in good standing at 8 a.m on a Saturday morning. Since I could see all of the borrower's payment history, I would tend to try to end the call quickly and apologize. While my employer frowned upon this, I didn't like to disrespect those who were paying their bills on time.

We're Not All Rude Because We Want to Be

During my two-plus years as a debt collector, I learned I got the best results when I was kind to the borrowers and worked to help them. But I can honestly tell you the company I worked for didn't like it when I tried to help. Like many businesses with phone banks, they randomly monitored our calls to make sure we were "in compliance" with their policies. And I got in trouble a few times for providing helpful information to borrowers. I was told my job was to collect money and I shouldn't be focusing on helping. I even got written up a few times for it.

Still, I realized there were many people who were genuinely in need of a bit of good advice. Despite my employer having only one goal in mind, I felt it was my job to teach some of these borrowers what they could do to get around the collection calls and get current. Though I got in trouble here and there for that, I got away with it because I was still one of the top performing debt collectors in the company. Kindness, sympathy, and common sense worked.

Both Borrowers and Banks Were to Blame

When the bubble burst in 2008, we found out how many terrible mortgages banks had been giving out, then packaging up and selling to investors. The methods behind the securitization were terrible. Unfortunately, I got to see both sides of the story. Not all of the borrowers I encountered had fallen upon hard times. Many just wanted to "have it all" even though they couldn't afford it. I lost track of the number of people the auto-dialer connected me to who owned luxury homes and expensive cars -- but who had never earned enough money to cover their debts. I would talk to them about what they owed, and they didn't really seem to care.

I would argue both banks and borrowers were to blame for the mortgage crisis. Banks were giving away money to people whom they should have known couldn't afford to pay it back. Some borrowers were accepting the loans knowing they couldn't afford them. It was a vicious cycle. When my wife and I bought our first home at the height of the market in 2006, we were pre-approved for nearly $400,000 -- though our household income was only around $55,000 a year. Luckily for me, my time in the debt industry had taught me enough to recognize that amount was way more than we could afford. Banks never told you the amount they pre-approved you for was the maximum you could afford to pay just for the home. They didn't even factor our normal expenses into the equation. Millions of people all over the country were becoming instantly house poor the moment they signed the papers.

I left debt collecting after I realized I would rather help people than harass them. In a business where policies were dictated solely by profits, I was a poor fit.

 

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