WASHINGTON -- Sprint (S) has unveiled a plan that gives subscribers access to unlimited data for $60 a month, the industry's cheapest unlimited data offering as the carrier attempts to reverse the decline in its subscriber base.
Wireless carriers have been going after each others' subscribers as they try to increase revenue in a nearly saturated market.
Sprint's new offerings are $20 cheaper than T-Mobile's unlimited plan and are available to new and existing customers who bring in their own cellphone or pay full price for a new one.
The announcement comes just hours after rival T-Mobile US (TMUS) launched a campaign to lure subscribers away from other carriers. If an existing customer is able to persuade a subscriber of another carrier to switch to T-Mobile, both will get upgraded to an unlimited data plan for free for one year.
Earlier this week, Sprint doubled data offerings for customers in family plans, while industry leader Verizon Communications slashed prices for its unlimited talk and text plan.
Price cuts are a top priority for Sprint's new chief executive, Marcelo Claure, as he attempts to turn around a company plagued by customer defections due to a network overhaul that has caused gaps in coverage.
Sprint shares ended Thursday trading up 1.1 percent to $5.56, while T-Mobile shares slipped 1.8 percent to $29.16 on the New York Stock Exchange.
The price of spot gold edged towards a two-month low Friday morning as analysts weighed the many factors that have been causing the commodity to trade in a tight range in recent months.
Gold slipped to $1,279 an ounce in morning trade. It had been on a five-day losing streak and was headed for its worst week in five. That trend had turned around by midday London time with the price moving higher as tensions re-emerged in eastern Ukraine. But this could prove to be a brief respite with gold watchers predicting a slight fall in the longer term.
"We think in the next few months we'll get some more downward pressure on gold," Matthew Turner, a precious metals analyst at Macquarie Securities told CNBC on Friday.
John Meyer, a mining analyst at brokerage SP Angel, agreed and believes that the weakness will persist for gold. He expects the commodity to be range-bound for the rest of 2014. "Yes gold is heading south for now," he told CNBC on Friday.
In the 10 years up until last December 2012, gold had surged around 400 percent, with the help of low interest rates, extra Federal Reserve liquidity and concerns over the global economy. In 2013 it lost 30 percent of its value with the Fed beginning to dial back its $85 billion-a-month stimulus program. This year, meanwhile, the precious metal has added 6 percent to its price with a range of factors influencing both speculators and physical gold buyers.
Rate Hike
Gold is often seen as a hedge against inflation and traditionally has had an inverse relationship to interest rates, with demand for the precious metal increasing when rates are low. With the Fed delivering a more hawkish tone in the minutes from its latest policy meeting the price has softened.
Turner said that speculators follow Fed policy closely and were willing to buy gold as the price rose but accentuated the fall when the Fed's policy suddenly changed in 2013.
"The investment money has come out of the market," he told CNBC. "What drives speculation is U.S. monetary policy still and last year we had a shock ... this year we haven't had a shock."
Geopolitics
Continued concerns that violence in Ukraine could escalate rapidly has provided some support for the price which is seen as a "safe-haven" trade. Pro-Russian separatists are currently locked in fierce battles against Ukrainian forces and Turner has dubbed this a "Putin put" which he believes provides a floor for gold prices at $1,200. A put option is a contract which offers the right, but not the obligation to sell an asset at a pre-agreed level.
"We've raised our floor price on the grounds of these geopolitical events such as Ukraine and Iraq, we think it's put a 'put' under the market."
Foreign Buying
Also on the plus side for the precious metal, Turner believes than when the price falls slightly it spurs buyers in China and India who are inclined to buy physical gold items rather than gold derivatives or paper-based assets traded on exchanges.
However, this tailwind seems to have dissipated this year. In its latest quarterly report The World Gold Council noted that total global gold demand in the second quarter had fallen 16 percent from the same period last year, with demand in top buyers China and India falling about 50 percent and 40 percent respectively.
Central Banks
If physical demand is wavering then the reins may have been picked up by central banks who remain net buyers of the commodity in 2014. Data from the International Monetary Fund's financial statistics report continue to show that the Russian central bank has been stocking up on gold in an effort to diversify its reserves.
"Would you want to put your funds into U.S. dollars?" SP Angel's Meyer told CNBC.
"There's been lots of central bank buying. So that's positive. [Russia is] definitely buying gold, they bought 55 tons so far in the first half [of 2014] and I'm sure they'll be buying more of it, the Chinese too," he added.
Andrew Harrer/Bloomberg via Getty ImagesWilliam "Bill" Sample, Microsoft's vice president for worldwide tax, testifying before a Senate subcommittee in 2012.By David Sirota | @davidsirota | d.sirota@ibtimes.com
Microsoft (MSFT) is currently sitting on almost $29.6 billion it would owe in U.S. taxes if it repatriated the $92.9 billion of earnings it is keeping offshore, according to disclosures in the company's most recent annual filings with the Securities and Exchange Commission. The amount of money that Microsoft is keeping offshore represents a significant spike from prior years, and the levies the company would owe amount to almost the entire two-year operatingbudget of the company's home state of Washington.
The company says it has "not provided deferred U.S. income taxes" because it says the earnings were generated from its "non-U.S. subsidiaries" and then "reinvested outside the U.S." Tax experts, however, say that details of the filing suggest the company is using tax shelters to dodge the taxes it owes as a company domiciled in the United States.
In response to a request for comment, a Microsoft spokesperson referred International Business Times to 2012 U.S. Senate testimony from William J. Sample, the company's corporate vice president for worldwide tax. He said: "Microsoft's tax results follow from its business, which is fundamentally a global business that requires us to operate in foreign markets in order to compete and grow. In conducting our business at home and abroad, we abide by U.S. and foreign tax laws as written. That is not to say that the rules cannot be improved -- to the contrary, we believe they can and should be."
The disclosure in Microsoft's SEC filing lands amid an intensifying debate over the fairness of U.S.-based multinational corporations using offshore subsidiaries and so-called "inversions" to avoid paying American taxes. Such maneuvers -- although often legal -- threaten to significantly reduce U.S. corporate tax receipts during an era marked by government budget deficits.
[A] small but growing group of big corporations ... are fleeing the country to get out of paying taxes.
White House officials have called the tactics an affront to "economic patriotism" and President Obama himself has derided "a small but growing group of big corporations that are fleeing the country to get out of paying taxes." In a July speech, he said such firms are "declaring their base someplace else even though most of their operations are here."
"I don't care if it's legal; it's wrong," Obama said. Meanwhile, Democratic lawmakers have been pushing legislation they say would discourage U.S. companies from avoiding taxes through offshore subsidiaries. The proposals are being promoted in advance of the 2014 elections, as polling suggests the issue could be a winner for the party. In Illinois, the issue has already taken center stage in the state's tightly contested gubernatorial campaign.
Because Microsoft hasn't declared itself a subsidiary of a foreign company, the firm hasn't technically engaged in an inversion. However, according to a 2012 U.S. Senate investigation, the company has in recent years used its offshore subsidiaries to substantially reduce its tax bills.
That probe uncovered details of how those subsidiaries are used. In its report, the Senate's Permanent Subcommittee on Investigations described what it called Microsoft's "complex web of interrelated foreign entities to facilitate international sales and reduce U.S. and foreign tax." The panel's report noted that "despite the [company's] research largely occurring in the United States and generating U.S. tax credits, profit rights to the intellectual property are largely located in foreign tax havens." The report discovered that through those tax havens, "Microsoft was able to shift offshore nearly $21 billion, or almost half of its U.S. retail sales net revenue, saving up to $4.5 billion in taxes on goods sold in the United States, or just over $4 million in U.S. taxes each day."
U.S. Sen. Carl Levin, D-Mich., said at the time: "Microsoft U.S. avoids U.S. taxes on 47 cents of each dollar of sales revenue it receives from selling its own products right here in this country. The product is developed here. It is sold here, to customers here. And yet Microsoft pays no taxes here on nearly half the income."
Apple (AAPL) and General Electric (GE), which also employ offshore subsidiaries, are the only U.S.-based companies that have more money offshore than Microsoft, according to data compiled by Citizens for Tax Justice. In all, a May report by CTJ found that "American Fortune 500 corporations are likely saving about $550 billion by holding nearly $2 trillion of 'permanently reinvested' profits offshore." The report also found that "28 these corporations reveal that they have paid an income tax rate of 10 percent or less to the governments of the countries where these profits are officially held, indicating that most of these profits are likely in offshore tax havens."
Microsoft's use of the offshore subsidiary tactics has exploded in the last five years, with the amount of Microsoft earnings shifted offshore jumping 516 percent since 2008, according to SEC filings.
According to Microsoft's filings, if the company repatriates the $92.9 billion it is holding offshore, it would face a 31.9 percent U.S. corporate tax rate. U.S. law generally permits companies to deduct the foreign corporate taxes they've already paid from the U.S.'s official 35 percent corporate tax rate. According to CTJ's Richard Phillips, that means Microsoft's disclosure implies the company is paying just 3.1 percent in the locales where it is currently holding the cash. Phillips says such an extremely low rate strongly suggests the firm is keeping the earnings not just in relatively low-tax locales like Ireland, Singapore and others the company has disclosed, but also in smaller countries like Bermuda that are considered true tax havens.
According to a Wall Street Journal report in 2012 about companies reducing transparency about their subsidiaries, Microsoft "once disclosed more than 100 subsidiaries [but] reported just 13 in its 2003 annual report and 11 in its 2012 report."
Consumer Product Safety CommissionAce Bayou is recalling some 2.2 million bean bag chairs because zippers can open and allow children to crawl inside.
NEW YORK -- About 2.2 million bean bag chairs are being recalled after two children opened them, crawled inside and suffocated to death.
The U.S. Consumer Product Safety Commission said Friday that the zippers on the chairs, which are made by Ace Bayou Corp., can open.
A 13-year-old boy from McKinney, Texas, and a 3-year-old girl from Lexington, Kentucky, were found dead inside the chairs after they suffocated from a lack of air and inhaled the chair's foam beads.
The chairs were sold at Bon-Ton, Meijer, Pamida, School Specialty, Wayfair and Walmart (WMT) stores and online at Amazon.com (AMZN), Meijer.com and Walmart.com. They cost between $30 and $100 and were sold before July 2013. They come in all different colors, shapes, fabrics and sizes.
Owners of the bean bag chairs should check if the zippers open and take them away from children if they do, the CPSC said.
Ace Bayou, which is based in New Orleans, is offering customers a free repair kit that will stop the zippers from opening. Customers can order one at acebayou.com.
Jim West/Alamy
Going by the recent performance of former market darling Whole Foods Market (WFM), investors may think that the once-hot trend for organic and natural foods is cooling down. After all, the leading organic grocer has lowered its guidance three times this year alone.
Shares of Whole Foods Market -- one of the market's bigger winners over the past decade as consumer appetite for natural foods widened -- have been disappointing lately. The stock has plunged by more than 40 percent since peaking late last year. The market has generally been kind to consumer stocks this year, but Whole Foods Market has shed nearly a third of its value in 2014.
If you think that the prices at Whole Foods Market are high, think about the investors that now have even less to spring on soy milk and 5-Step Animal Welfare-rated meats. However, stock watchers writing off the organic industry based on a weak bellwether may be missing the boat on an industry that's still booming and blooming.
In Hain Sight
Hain Celestial (HAIN) reported better than expected quarterly results on Wednesday. The company behind Terra snack chips, WestSoy soy milks, Earth's Best baby foods and Celestial Seasonings natural teas saw net sales climb 26 percent to $583.8 million in its fiscal fourth quarter relative to the prior year. Adjusted earnings from continuing operations soared 45 percent.
To be fair, this isn't all "organic" growth. Hain Celestial collects smaller companies like Justin Bieber collects bad publicity.
It's been a great model for Hain Celestial. It can take small companies making organic or natural foods and health products in small batches and expand their distribution through its growing outlets. Hain Celestial is a big supplier for Whole Foods, but it also sells to faster-growing organic grocer Sprouts Farmers Market (SFM) and most major supermarket and mass merchandise chains. Hain Celestial revealed during Wednesday morning's earnings call that Amazon.com (AMZN) is one of its 10 largest accounts.
Even if the heady sales growth was padded by acquisitions earlier this year of Rudi's Organic Bakery and Tilda, Hain Celestial is still getting a lot of mileage out of its workhorses. Its 13 biggest brands -- accounting for the lion's share of its revenue -- grew at an average clip of 7 percent over the past year.
Sprouts' Season
It's not just Hain Celestial running hard. Whole Foods Market rival Sprouts is expected to grow its sales 21 percent this year and 19 percent come 2015.
Heady expansion at Sprouts accounts for some of that octane, but even at the store level the concept is rocking. Comparable store sales growth soared 9.5 percent in its latest quarter, and that's a lot better than the average per-store uptick of 3.9 percent that Whole Foods Market posted.
There's a growing market for organics out there. Don't let a single disappointing stock chart over the past few months convince you otherwise.
Growing Demand
The weakness at Whole Foods Market could be a positive for the industry. After all, it's not a lack of sales growth that's holding back the stock. It's not growing as quickly as it used to, but it is at least still growing.
Investors are concerned about the retailer's margins as it competes with grocery stores and now, apparently, Amazon.com. Walmart (WMT) recently said that it aims to slash prices on its private label organic items. Companies don't benefit from an industry price war, but it could go a long way to expand demand for organics.
Even with the potential of a domestic price war on organics, let's not understate the growth potential overseas. A big contributor to Hain Celestial's blowout performance was big gains in the United Kingdom, where the company is now generating more than a third of its sales.
Hain Celestial products can be found in 65 countries, but sales outside the U.S. and U.K. accounted for just a little more than 10 percent of its business. There's a high ceiling out there if Hain Celestial can gain traction in a few wealthier overseas markets.
Hain Celestial's guidance for the new fiscal year -- calling for 17 percent to 23 percent earnings growth and as much as 30 percent in net sales growth -- is encouraging. Even Whole Foods Market could be appealing at this point. It is trading at 25 times this fiscal year's profit target. That is not low, but it is for Whole Foods, which has historically traded at much higher P/E multiples.
Don't fear the organic stocks. The trend's alive and well with plenty of growth to be harvested.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Hain Celestial and Whole Foods Market. The Motley Fool owns shares of Amazon.com, Hain Celestial and Whole Foods Market. John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Try any of our newsletter services free for 30 days.
Mark Lennihan/AP
There were plenty of winners and losers this week, with a car rental giant revealing that it will fall short of its earlier expectations and the leading Mexican fast food chain raising the stakes in the battle for hungry bargain seekers. Here's a rundown of the week's best and worst.
Renting cars isn't an easy gig these days. Auto rental giant Hertz announced that it will fall well short of earlier expectations, laying the blame on everything from weak demand for its equipment business to recalls getting in the way of its car supply. A couple of analysts lowered their ratings on the stock following the news.
The shares started to bounce back after billionaire activist investor Carl Icahn revealed that he has taken a stake in the company, but his intentions are sometimes radical. Hertz was already trying to split its business in two, suffering from the restatements and delayed financials accompanying the move. The last thing Hertz needs is another distraction.
The video game industry is showing a lot of life these days, and GameStop, the dominant retailer, posted blowout quarterly results after Thursday's market close.
Sales soared 25 percent relative to last year, fueled by a 21.9 percent spike in comparable-store sales. Hardware sales were naturally strong. The Xbox One and PS4 weren't out a year ago. Even new software sales -- something that's been sluggish for years -- came through with a double-digit increase. That's huge, since software carries much higher margins than consoles. Analysts were seemingly aggressive in expecting earnings per share to double for the period, but profits per share soared 144 percent. Game on, Wall Street.
Bank of America continues to pay the price for the misdeeds of Merrill Lynch and Countrywide, which helped trigger the subprime lending crisis that led to a global economic setback. The "too big to fail" bank is apparently not too big to settle. It paid what it thought were good prices at the time to buy those financial firms, and now it's agreed to pay again -- $16.65 billion in a settlement after a government investigation.
This should be the last of the major settlements for Bank of America, and that's a good thing. However, the banking giant has reached nearly $80 billion in settlements as it tries to leave its unfortunate past behind.
Taco Bell -- Winner
There have always been bargains to be had at Taco Bell, but Yum! Brands' (YUM) fast Mexican food concept is giving it a stronger marketing message. Taco Bell introduced its Dollar Cravings menu this week, featuring 11 items that are all priced at a buck.
Burger chains have gone the dollar menu route, but now that Taco Bell has followed them into the breakfast business, it makes even more sense for Taco Bell to play up its one buck bargains. Many fast food chains have been struggling lately, but it has come through with positive comparable-store sales in nine of the past ten quarters.
Something tells me that McDonald's teaming up with Kraft Foods (KRFT) to put out packaged coffee through grocery stores and mainstream retailers is going to go over as well as its recent Mighty Wings fiasco.
McDonald's is hoping that its McCafe brand will be strong enough to help it sell packaged coffee beans and single-serve pods by early next year, but that dream seems far-fetched. Morning commuters settle for McCafe in the morning because it's quick, cheap and convenient. It'll be a harder sell in a crowded grocery store aisle when it's pitted against premium brands.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Bank of America and McDonald's. The Motley Fool owns shares of Bank of America, GameStop and Hertz Global Holdings. Try any of our newsletter services free for 30 days.
NEW YORK -- McDonald's named a new president for its struggling U.S. division Friday, marking the second change in the high-profile spot in less than two years.
The world's biggest hamburger chain says it's bringing back a longtime McDonald's executive, Mike Andres, to fill the role effective Oct. 15. Andres replaces Jeff Stratton, who is retiring.
Stratton, 58, took over in late 2012 and replaced Jan Fields. That shakeup was made shortly after McDonald's (MCD) reported its first monthly sales drop in nearly a decade. Sales in the U.S. have remained weak ever since, with the company facing intensifying competition and changing eating habits. In its most recent quarter, the company reported a 1.5 percent sales decline at established U.S. locations. Then for July, it reported a 3.2 percent drop.
McDonald's/APMcDonald's has named Mike Andres president of the company's flagship U.S. division.
McDonald's, which is based in Oak Brook, Illinois, has blamed its performance on a variety of factors, including its own missteps. For instance, the company has said it introduced too many items too quickly, which complicated kitchen operations.
McDonald's CEO Don Thompson has said the chain is working on fixing basics, such as the speed of service and order accuracy. The company is also pushing to improve the image of its food, in part by introducing items positioned as more premium offerings, such as its new Bacon Clubhouse burger. It also plans to offer mandarins as an option in Happy Meals this fall, and says it's exploring other fruits.
Andres, 56, will report directly to Thompson. He was most recently CEO of Logan's Roadhouse Inc., but has a long history with McDonald's.
The company said Andres started his McDonald's career as manager for his family-owned McDonald's in Northern California, then went on to a variety of roles in marketing, operations and development. He served as CEO of Boston Market from 2001 to 2007, when the chicken chain was still a subsidiary of McDonald's. He was president of the central division in the U.S. from 2010 to 2012.
McDonald's has recently made other changes in its executive ranks. Earlier this week, for instance, it named Julia Vander Ploeg as its first U.S. vice president of digital, a move intended to boost the brand's presence online and on mobile platforms.
McDonald's has more than 35,000 locations around the world, including more than 14,000 in the U.S.
J Pat Carter/APSpirit Airlines President and CEO Ben Baldanza takes the ice bucket challenge at the company's Miramar, Fla., headquarters.By ALICIA RANCILIO
NEW YORK -- The ice bucket challenge's phenomenal success is making other charitable organizations rethink how they connect with a younger generation of potential donors.
Since the ALS Association began tracking the campaign's progress on July 29, it has raised more than $53.3 million from 1.1 million new donors in what is one of the most viral philanthropic social media campaigns in history.
Thousands of people, including celebrities such as Taylor Swift and Oprah Winfrey, have posted videos of themselves getting buckets of ice water dumped over their heads and challenging others to do the same -- or donate money to the ALS Association, which raises money for Lou Gehrig's disease research and assistance.
The ice bucket challenge has shown it's OK to be silly for a good cause, says Brian Mittendorf, a professor at the Ohio State University Fisher College of Business, who teaches courses in nonprofit finance.
"Normally the model is to find people who are passionate about a cause and then ask for donations or to educate people and then seek out donations. [The ice bucket challenge is] something that's fun that people can do ... people are taking part in it and then taking the info and donating."
Unprecedented Generosity
The viral nature of the effort surprised even the ALS Association.
"This level of unprecedented giving is [something] I don't think this country has seen before outside of a disaster or emergency," said ALS Association spokesperson Carrie Munk. "We had no idea it would get to this point."
Who should get credit for making this a viral sensation depends on whom you ask. Some say it began earlier this month when friends of a 29-year-old Boston man with ALS, a neurodegenerative disease that affects nerve cells in the brain and spinal cord, did a group challenge.
It's also demonstrated that the average Joe or Jane can make waves.
"One of the big take-aways is the power of individuals who are so tightly connected to a cause can really make a difference," Munk said. "I'm pretty sure that if any company or any nonprofit had all of the public relations dollars in the world to come up with a campaign, we never would've seen this kind of success."
Lucretia Gilbert, executive director of The Pink Agenda, which raises money for breast cancer research and awareness, believes it will encourage other nonprofits to get creative on social media.
"It's a very simple thing and that's kind of the beauty of it. Everyone can do this challenge," she said.
The National Institutes of Health is spending about $30 billion this year, money that is divided in a highly competitive process to scientists around the country, and the world, to pursue what are deemed the most promising leads to understand various diseases and find new targets to fight them.
Congress cut government spending last year; in 2012, the NIH's budget was $30.8 billion. And even before those cuts, the agency's budget hadn't kept pace with inflation for about a decade. As a result, the NIH is funding about 1 in 6 grant applications - down from about 1 in 3 a decade ago, Director Francis Collins said earlier this year.
For Lou Gehrig's disease, the NIH's estimated budget this year is $40 million, down from $44 million in 2012.
Technology Spurs Giving
Employing technology for fundraising campaigns, of course, isn't a new idea: Perhaps one of the most enduring began in 1966 when the Muscular Dystrophy Association had its first annual Labor Day weekend telethon. Last year, it raised $59.6 million in contributions. Fundraisers have also embraced donating by text message in recent years.
But some fundraisers contend that one of their greatest challenges is asking the same people for money year after year -- a challenge successful social media campaigns could solve.
Mindy Bailey, corporate and community development specialist for JDRF, a foundation that raises money to fight Type 1 diabetes, said volunteers want to come up with a similar idea to fuel donations.
"We have had a lot of people reach out to us and say, 'Hey, we're going to do the ice bucket challenge,'" Bailey said. "Recently we had a woman say, 'I'm thinking of doing a pie-in-your-face idea.' The wheels have been turning."
However, not everyone is a fan of the public approach of the ice bucket challenge.
#NoIceBucketChallenge is a hashtag on Twitter that's being used for a variety of reasons.
"I just think it seems hokey and far too gimmicky and a hot trend and part of the whole 'me' culture of 'Oh look at me. Pay attention to me,' " said Cameron Mitchell of New York. "The charity part seems like an afterthought."
Waste of Water?
Some even argue that it's wasteful to dump water, even for a cause, especially in places such as California, where there's a drought.
The California Water Board offered a measured response.
"It doesn't violate any of our regulations. People should always use good judgment whenever they use water while we're in a drought. On the other hand, we understand that this is a charitable event," said George N. Kostyroko, director of the California State Water Resources Control Board's office of public affairs, in an email.
Annoyed, impressed or otherwise, the ice bucket challenge has people talking -- and ALS's Munk asserts that even if they don't donate, the campaign has raised public awareness, a major focus of the organization that last year spent 32 percent of its annual budget on public and professional education and 27 percent on research.
Just a few years ago, she said, only about 50 percent of Americans knew what ALS is.
"We're really looking forward to see how the needle moves," she said.
-AP Medical Writer Lauran Neergaard contributed to this report.
Alamy
After my father passed away eight years ago, I took the lead role in helping my mother manage her finances. During my first meeting with our (former) money manager, three things amazed me.
Retail brokers really do try to sell you speculative, high-commission products.
Good luck getting a decent yield on the cash component of your savings.
Challenging your broker with the wisdom of John Bogle can only lead to trouble.
Before taking on this task, I had very limited investment experience. I worked for a bank, but my experience was focused largely on lending. I'd been a risk manager for mortgage, credit card and personal loan portfolios across the U.S. and Europe.
To prepare for our first meeting, I did a lot of reading. And it wasn't easy. The loss of my father was unexpected and extremely emotional. And I felt a tremendous sense of responsibility, because my mother was depending upon me. She had been married to my father for more than 40 years. They were high school sweethearts. And he had always managed the investment portfolio.
Buying Into Bogle
The first book I read was "Bogle on Mutual Funds." As someone who was analytical by nature, I found that the data he presented made his conclusions clear and obvious. Beating the market consistently over time was impossible. Management fees were too high. Mutual fund managers could live comfortably off their 2 percent (or more) management fees, regardless of their performance. And the interests of brokers are not aligned with your long-term interests. They want you to trade and trade often, with a nice commission being taken along the way. Often, the more speculative the investment product, the higher the commission.
After reading the book, I was convinced that my mother should have roughly her age in bonds, as a percentage of her portfolio. And her entire portfolio should be in low-cost index funds, preferably from Vanguard. (I loved that book.)
Then I looked at the cash component of her portfolio, and I was shocked by the extremely low interest rate that she was receiving. Brokerages are keen to have you invest. So, it is very difficult to get the best certificate of deposit and savings account interest rates. And the differences were dramatic between what I found online and what the brokerage would offer.
In today's market, it's difficult to find good yield on cash. However, online banks can offer much higher interest rates. For example, you can find online savings accounts that pay 0.95 percent. I just recently spoke with a Morgan Stanley (MS) broker, and the best savings option he had to offer paid 0.5 percent. This makes sense: Brokers want you to invest, so they aren't motivated to find you great rates for FDIC deposits. At least, that has been my experience.
Speculative, High-Commission Products
With my homework done, I went to my first meeting with mom's broker. It didn't go well. Within the first five minutes, I could tell we were getting the standard "pitch." The investment he was offering was a hot new pick, destined for success.
I calmly told him that I wanted to talk about our asset allocation (time to de-risk, now that my mother was a widow), our fund choices (time to reduce costs) and our cash allocation (time to increase the interest rate). I was basically told that I could not expect the service of a broker if I made those selections.
I realized that I was being foolish. Bogle's conclusions and advice constitute an attack on the entire money management establishment. Too much money has been spent by people for too long, chasing speculative returns that end up lagging the general market returns. It was absurd of me to think I could go into the office of a broker getting paid on commission (even if he would call himself a "financial planner"), challenge him to be something completely different, and expect a good result.
We ended up leaving our broker and working with someone we trust to put our interests first. My mother's portfolio was de-risked. (And not a moment too soon: My father passed away in 2006, and we all know what happened to the markets not long after that.) The expense ratio came down. And I've learned a lot along the way.
Eight years into this adventure in money management, I have acquired seven bits of hard-earned wisdom that I am happy to share:
Don't be afraid to challenge, and to ask seemingly stupid questions. And if you don't like the answer (or don't understand it), ask again. Or find someone new who can answer your question.
Don't ever feel rushed into a decision. I have frequently said, "Let me think about it." That gives me time to think, talk to others and not rush into any decision.
Don't stop reading. The more you become familiar with the language used in the financial planner's office, the more comfortable you become with the process. I was petrified the first time I went into the office (despite my college degree and job in banking). Over time, it gets easier.
If you don't understand something, don't do it.
Bogle's advice has been working. Keeping roughly my mother's age in bonds, while keeping costs low, has been a winning formula during one of the most difficult investment horizons. At a minimum, compare your approach to that of John Bogle.
Don't check the value of your portfolio every day. I did that in the early years, and it drove me crazy. And it didn't make much of a difference in what decisions we made, because we weren't chasing returns.
If you have elderly parents, don't be afraid to talk about money with them. You will have to deal with their financial situation sooner or later, and it is better to talk about it in advance.
Now, if only I could manage my own money with the skill that I have managed my mother's. But that is a topic for another day.
Johannes Eisele/AFP/Getty Images
The top dog in this generation of video game consoles continues to pad its lead. Sony (SNE) revealed last week that it has sold 10 million PlayStation 4 systems since hitting the market nine months ago. Microsoft (MSFT) has yet to respond, but the latest data out of industry tracker NPD shows that the PS4 was once again the country's best selling system in July.
The last time we got comparable data it wasn't even close. Ahead of June's E3 gamer conference, Sony announced that it had sold 7 million PS4s. Microsoft countered by revealing that it had sold 5 million Xbox One consoles to retailers. This wasn't a difference of 2 million boxes. Sony's figure was for devices that had made it all the way into the hands of gamers, while Microsoft's tally included all of the systems collecting dust on store shelves. Technology blog Extreme Tech estimates that Microsoft has sold just half as many of the current generation consoles to consumers as Sony at this point.
Add it up, and it's not too shabby. Few figured that the Xbox One and PS4 -- released just a week apart last November -- would have sold a combined 15 million right now. And 5 million XBox Ones is nothing to sneeze at. This doesn't mean that Microsoft can rest easy. It's in a bind. History hasn't been kind to former market leaders that fail to keep up in future generations. If you need proof, just think about what Atari, 3DO and Sega are doing on the console front these days.
Gamers are noticing the shift in dominance. Investors will have to follow suit.
There Are No Cheat Codes
"History has shown us that the first company to reach 10 million in console sales wins the generation battle," is a quote that may come to haunt Microsoft. Those words were spoekn in 2008 by then-Xbox head Don Mattrick when the Xbox 360 beat the PS4 to that meaty milestone. It should be said that the Xbox 360 came out a year before the PS4. It also didn't help that the PS3 hit the market as the priciest of the three systems at the time, setting gamers back as much as $599 in its 2006 debut.
Sony learned its lesson. It made sure that it hit the market at a lower price than Microsoft this round. When Microsoft announced last year that it would hit the market at $499, Sony revealed that it would price its device at $399. When Microsoft infuriated gamers by suggesting that it would incorporate some software protective features, Sony cashed in by poking fun of the measures that Microsoft eventually abandoned.
The same Sony that gamers hated two years ago when its online gaming network was hacked has suddenly become the rock star in the eyes and controller-clutching grips of diehard gamers. Investors thought that this would be a close race, but folks who play the games and follow the industry knew that PS4 was going to have the early lead in this generation.
Microsoft's losing, and it doesn't have a lot of time to catch up.
Game On
Microsoft has gone from trying to please software developers last summer to trying to woo players this summer. It rolled out a new Xbox One that matches the PS4 at its $399 price point, forgoing the Kinect motion-based camera controller. This upset developers that were making games under the assumption that Kinect would be available to all players, but the gamble seemed to initially pay off when Microsoft announced that Xbox One sales tripled after the pricing move.
However, as long as Sony has the lead -- and NPD's data shows that PS4's lead is only widening this summer -- this could lead to bigger headaches for Microsoft. A console needs developers, and game makers aren't going to spend as much time working on titles to serve an estimated 5 million Xbox One players when that same time and effort can be used to target Sony's much larger audience of PS4 owners. Microsoft has several games that are exclusive to the Xbox One, but it's also not a surprise to see that last month's best-selling game -- "The Last of Us Remastered" -- is a PlayStation exclusive.
Sony is making sure that it doesn't take anything for granted. At E3 two months ago, it introduced a cloud-based game streaming service called PlayStation Now and entered the set-top media player market with PlayStation TV. Microsoft, on the other hand, continues to reel backwards. Last year's dreams of making the Xbox One the centerpiece of today's home theater haven't played out, and now it's closing the entertainment studio that was going to deliver original video streaming content. Microsoft is back to trying to market its Xbox One as a machine for gamers, but with 10 million early adopters already choosing its longtime rival, it's not going to be easy to stand out.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our newsletter services free for 30 days.
Dmitry Serebryakov/AFP/Getty ImagesTrucks from the Russian humanitarian convoy, parked near a checkpoint at the Ukrainian border. Ukrainian authorities fear the convoy may be used to smuggle in arms to the pro-Kremlin insurgents.By KEN SWEET
NEW YORK -- The stock market paused Friday, following four days of gains, after a speech by Federal Reserve Chair Janet Yellen left investors unsure about how the nation's most important financial voice feels about raising interest rates in the coming months.
A flare-up in tensions between Ukraine and Russia also weighed on the market after a Russian convoy entered the country, purportedly to bring aid supplies.
It was a quiet day overall. Stocks moved between small gains and losses, then settled modestly lower in the last couple of hours. Trading was slow, as it has been all week, as the summer winds down and with many investors on vacation. It was the second-quietest day of the year for trading on the New York Stock Exchange.
The Dow Jones industrial average (^DJI) fell 38.27 points, or 0.2 percent, to 17,001.22. The Standard & Poor's 500 index (^GPSC) lost 3.97 points, or 0.2 percent, to 1,988.40, but the Nasdaq composite (^IXIC) added 6.45 points, or 0.1 percent, to 4,538.55.
Even with Friday's modest losses, it was a strong week for the stock market. The S&P 500 rose 1.7 percent for the week, its best five-day performance since April.
The Fed dominated investors' agendas this week. On Friday, Yellen addressed an annual conference of central bankers and other policymakers from around the globe at the Fed's annual conference in Jackson Hole, Wyoming.
In her speech, which focused on labor markets, Yellen said the Great Recession complicated the Fed's ability to assess the U.S. job market and made it harder to determine when to adjust interest rates. Yellen offered no signal that she had altered her view that the economy still needs support from the Fed in the form of ultra-low interest rates.
"I think this was business as usual for Yellen. She was measured and deliberate and the market had a minimal reaction to it," said Michael Fredericks, portfolio manager of Blackrock's Multi-Asset Income Fund, which has $8.8 billion in assets.
The timing of a Fed rate increase remains unclear; however most investors expect the first one to come sometime in 2015. Yellen's speech comes two days after a report from the Fed seemed to show a growing chorus of policymakers wanting to raise interest rates.
"The uncertainty that policymakers feel on numerous fronts was evident in Yellen's speech," John Hoff, a fixed income strategist at RBS, wrote in a note to investors.
The Fed has kept its benchmark short-term interest rate, known as the Federal Funds Rate, near zero since late 2008 in order to simulate economic activity and demand. The downside to low interest rates is the possibility that they can lead to inflation.
The Federal Funds Rate helps determine interest rates on a variety of financial products including mortgages and credit cards, as well as the yields that bonds pay. Many investors believe the U.S. economy has recovered enough from the depths of the financial crisis to warrant higher interest rates.
The Fed has been winding down another economic stimulus program, large-scale purchases of bonds in the open market, since December.
Investors also had geopolitical tensions to contend with.
A Russian convoy entered Ukraine, defying the government there. Ukraine called the move a "direct invasion" intended to provoke an international incident. The action drew condemnation from the European Union, the United States and NATO. The trucks are purportedly carrying aid to residents in rebel-held zones where separatists are fighting with the Ukrainian government.
The Russia-Ukraine tensions have been a headache for investors for months now. Russia is Europe's biggest supplier of energy and is a major trade partner for the continent. The European Union has placed sanctions on Russia, which has lowered the amount of trade between Russia and the eurozone's countries.
U.S. government bond prices were little changed, a sign that investors were hesitant to make any large bets after Yellen's speech. The yield on the 10-year Treasury note edged down to 2.40 percent.
Benchmark U.S. crude oil fell 31 cents to $93.65 a barrel in New York. In metals trading, gold rose $4.80 to $1,280.20 an ounce, silver fell three cents to $19.39 an ounce and copper rose three cents to $3.20 a pound.
In individual companies:
Dynegy (DYN) rose $2.60, or 9 percent, to $32.32 after the company announced it was buying $6.25 billion in power plants from Duke Energy and Energy Capital Partners. The deal would double Dynergy's power generation capabilities.
Gap (GPS) jumped $2.25, or 5 percent, to $45.43. Gap said its profits rose 10 percent in the second quarter, helped by lower expenses and higher sales. The company also said it plans to expand in India.
Another clothing chain, Aeropostale (ARO), was not as fortunate. The company reported a loss for the quarter and cut its full-year sales outlook. Aeropostale plunged 39 cents, or 10 percent, to $3.52.
What to Watch Monday:
The Federal Reserve Bank of Chicago releases its gauge of national economic activity and inflation for July at 8:30 a.m. Eastern time.
The National Association of Home Builders reports new home sales for July at 10 a.m.
The Federal Reserve Bank of Dallas releases its survey of manufacturing conditions in Texas at 10:30 a.m. Eastern time.
Saul Loeb/AFP/Getty Images
The Rolling Stones may have sung about not getting any satisfaction, but now Burger King (BKW) patrons can't get any Satisfry-action. The burger chain announced last week that it was discontinuing the relatively healthier french fries.
It was easy to see why the crinkle-cut fries were doomed. Satisfries may have had an interesting marketing angle -- they were promoted as having 40 percent less fat and 30 percent fewer calories than a comparably sized McDonald's (MCD) fries -- but charging 30 cents more for an order than Burger King's own regular shoestring spuds was a deal breaker. Despite the slightly healthier attributes, it was a value proposition that didn't resonate with Burger King's penny-pinching customers.
Burger King may have served up 100 million orders of Satisfries since they were introduced late last year, but it wasn't enough. Then again, seeing how other fast food giants have fared in rolling out ill-fated healthier fare, the only real surprise is that Burger King tried at all.
Seaweed Burgers and Shaking Salads
Outside of perhaps Subway -- which has set itself apart on its "eat fresh" mantra and healthier sandwiches, wraps and salads -- it's been hard for any major quick-service chain to establish itself as a place for nutrition table watchers.
The failures have been plenty. Let's start with Burger's King's biggest rival. McDonald's introduced the McLean Deluxe in 1991. True to the "lean" in its name, the McLean Deluxe was a reduced-fat burger, made with 91 percent lean beef and an edible red seaweed extract. Taste tests went well, and McDonald's received critical praise for offering a slightly healthier menu option for burger lovers. It didn't succeed. McDonald's nixed it five years later.
Another McDonald's attempt to woo health-conscious diners was the McShaker salad that was served in an enclosed plastic cup that diners would shake to mix up. It was another flop, but largely on logistics of the experience. The dressing didn't blend well in the shaking process, and it would be a mess if the plastic lid came undone in the process. Customers go to a restaurant to be served. They don't want to be involved in the prep process.
McDonald's eventually fared better with the traditional salads that it serves today, but even now it doesn't offer any fat-free dressings as standard options.
Slim Sales
The diet-minded flops haven't been limited to burger chains. Yum! Brands' (YUM) Taco Bell introduced its Border Lights menu in 1995, just as McDonald's was getting ready to pull the plug on the McLean Deluxe.
"Eight new, slimmed-down entrees to be introduced starting next week by Taco Bell are getting a qualified thumbs-up from nutritionists, even as business analysts debate whether the new menu will boost sales," the Los Angeles Times reported at the time.
Offering items that carry about half the fat of its regular offerings may have made strategic sense, but Taco Bell's youthful audience wasn't buying it. It also didn't help that -- just like Burger King with the Satisfries -- that Taco Bell was charging a premium for its Border Lights items. Like Burger King's low-fat fries, Border Lights were pulled within a year.
It can't be a coincidence. Other short-lived flops by these chains include Burger King's veggie burger and a cholesterol-free muffin at McDonald's.
Have It Your Caloric Way
Light items make great headlines and please nutritionists, but they don't boost sales. If anything it's been the decadence -- think McDonald's with its McRib, Taco Bell with its Doritos Locos Tacos and Hardee's with its Monster Thickburger -- that drive sales growth.
It's an unfortunate reality, but when you're a fast food chain it seems to make more business sense to ignore your customer's health than to pander to it.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald's. Try any of our newsletter services free for 30 days.
DCL/www.tlc.comHoarding tendencies are rampant in America. "Seventy percent of home-owning Americans cannot park cars in their garages because there's too much stuff; one in 10 has a storage unit," Sandra Stark, of the Peer-Led Hoarding Response Team at the Mental Health Association of San Francisco, told Pacific Standard. All over the nation, businesses compete to serve hoarders, and more than 85 governments as of 2013 have special task forces to help hoarders whose compulsion threatens their own and the public's health and safety.
The reality shows "Hoarders" and "Hoarding: Buried Alive," both with millions of viewers, prove our fascination with this stigmatized condition. People play fast and loose with the term, although it's a long way from average slob or pack rat to the psychiatric disorder of compulsive hoarding.
Hoarders of note include artist Andy Warhol, Jacqueline Kennedy's aunt and cousin (who were the subjects of two movies, both called "Grey Gardens") and actress Delta Burke, and the most famous U.S. hoarders were brothers Homer and Langley Collyer, who died in 1947, one crushed under the weight of debris they accumulated in their Manhattan brownstone, the other of various conditions. Decades later, some firefighters still call the home of a hoarder a "Collyer mansion."
What Science Knows About Hoarding
The science behind the disorder is fairly recent, with the disorder only added to the Diagnostic and Statistical Manual of Mental Disorders in 2013.
Scientists have concluded that it tends to run in families, with half of hoarders diagnosed having another hoarder among blood relatives. Women tend to hoard more because of a Great Depression mentality (although many hoarders have never been economically deprived, and many are wealthy) while with men, it is more impulse acquisition and then a reluctance to dispose.
Thanks to studies using MRI scans, scientists believe hoarding is a processing disorder in the part of the brain called the bilateral anterior ventromedial prefrontal cortex. One study showed that the cingulate cortex also lights up in hoarders when presented with decisions involving personal possessions -- but not other people's stuff. Hoarders, interestingly, are often well-educated (the Collyers were both Columbia grads) but still have trouble with decision making. Getting rid of something is a decision -- and a traumatic one.
Hoarding Costs Everyone
There are clear costs to hoarding:
$20,000 is the minimum to clean out a Level 5 extreme hoarder requiring biohazard-suited cleaners. In San Francisco, Pacific Standard reported more than $6 million annually is spent by city agencies and landlords dealing with hoarders.
Six percent of U.S. house fires are attributed to hoarding conditions.
Sadly, there is the also the cost of care for those whose lifestyle can attract vermin and disease. Saddest of all is the emotional cost to hoarders whose shame often leads them to a solitary lifestyle without the comfort of friends and family.
Randy Frost, a Smith College psychology professor who pioneered studies on hoarding and co-authored with Gail Steketee "Stuff: Compulsive Hoarding and the Meaning of Things," notes the condition seems to be more prevalent in the Western world probably due to our relative wealth and acquisitiveness. That theory may also explain why the condition, which often manifests in early adulthood, doesn't become a full-blown problem until the hoarder has the wherewithal to acquire more and more.
Are You a Hoarder?
So, you may be asking yourself, am I just a disappointment to Martha Stewart or am I a true hoarder? Frost and Steketee helped develop the clutter image rating along with other self administered tests to help diagnose a possible hoarder. The clinical definition involves excess acquisition, extreme difficulty in disposing of possessions, inability to discriminate between what is valuable and what isn't (because to a hoarder everything is valuable) and -- most importantly clutter -- that is hurting a person's life.
Happily, there is help, and science is making inroads. And despite their sensationalism, reality TV shows have made more of us aware of the problem and -- maybe -- more understanding of the true costs of hoarding.
urfinguss
The idea of getting matching 401(k) contributions from your employer to help you save for retirement is attractive to many workers. In fact, it's such an attractive proposition that, as a recent survey found, people are willing to pay for that free money in the form of lower salaries -- even if it leaves them no better off than they would be without it.
Many people think of 401(k) matching contributions as free money, because they represent additional funds that your employer deposits into your 401(k) account to encourage you to save for your own retirement. One common example involves employers putting in 50 cents for every $1 you save, up to a certain maximum percentage of your salary, often 6 percent. That scenario adds an extra 3 percent of your salary in your retirement account if you put 6 percent into it.
A recent survey from Fidelity showed just how much workers like matching contributions. According to the survey, 43 percent of workers would rather have lower compensation if it meant having greater access to employer contributions from company matching. Moreover, only 13 percent would accept a job with no company match at all, even if the job paid more than similar jobs that did offer matching.
Fortunately for those who like employer matching, businesses have caught onto the trend. Fidelity says that 79 percent of the employer retirement plans it helps manage include some form of additional money for workers, whether it be a matching contribution or simple profit-sharing contributions that don't necessarily require a set level of participation from workers. The typical net match of 4.3 percent amounts to about $3,540 per worker each year.
Why You Should Take the Extra Pay Instead
Yet the Fidelity survey results indicated a fundamental misunderstanding about the nature of matching contributions. Specifically, the survey's question on the top offered four choices, with varying combinations of base pay and matching contributions that all added up to the same $100,000 amount. The most popular mix of base pay and match was $75,000 base and $25,000 match, with $90,000 base and $10,000 match coming in a close second.
Yet if matching contributions lead to a dollar-for-dollar drop in salary, they certainly are no longer "free" money, and you can sometimes give up more than you get. If your base pay is $100,000, you can always make contributions yourself that will bring your total annual savings to $17,500, or $23,000 if you're 50 or older. That's not quite as high as the 75/25 split that was the most popular choice in the survey, but it's more than sufficient to do a 90/10 split. Your own contributions are also excluded from your taxable income, so the tax benefits are the same regardless of whether you voluntarily make them out of your own paycheck or your employer pays them in the form of a match.
Matching contributions also come with restrictions that your own contributions don't have. Most employer contributions have vesting requirements, which means that you have to work a certain minimum period -- often three years -- or else you'll forfeit the match and any profit-sharing contributions your employer made on your behalf. By contrast, whatever you contribute is always yours to keep, no matter how long you keep your job.
Take What Your Employer Gives You
Of course, most of us don't have a say in deciding whether to get higher salaries or a 401(k) match. If your employer offers matching contributions, then it still makes sense to take maximum advantage of the extra money it means for your retirement. Just keep in mind that if you're job-hunting, getting access to an employer match might not be worth taking a smaller salary.
Dan Caplinger is a Motley Fool contributor and retirement expert. 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.
Alamy
For many workers, 401(k) plans offer a great way to set aside money for retirement, with huge advantages like tax-deferred growth and immediate income-tax savings for contributions. But the plans aren't perfect, and even the largest retirement-plan company in the U.S. had to deal with allegations from its employees that it wasn't treating them fairly.
Earlier this week, financial giant Fidelity Investments agreed to settle two lawsuits that its employees filed. In the lawsuits, workers complained that they thought excessive record-keeping fees and high-cost mutual fund choices violated Fidelity's fiduciary duty toward its employees. Fidelity paid $12 million to settle the claims -- an average of $240 for each of the 50,000 plan participants who were part of the class action.
In settling the lawsuits, Fidelity didn't admit any wrongdoing, and company spokespeople dismissed the merit of the claims. But going forward, Fidelity workers will see some changes to their plan, and Fidelity's actions could lead to further litigation from employees at other companies who are frustrated with their investment options.
Let's take a look at three aspects of the Fidelity litigation that could help you in deciding whether your 401(k) plan at work makes the grade.
1. Beware If Fund Options All Come From the Same Provider
One allegation that employees was that all 150 funds that Fidelity offered as investment options in its 401(k) plan were Fidelity funds or funds from Fidelity subsidiaries. As part of its settlement, Fidelity will add some non-Fidelity funds to its 401(k) investment menu.
Most employers don't offer their employees anywhere close to 150 choices, but it's not uncommon to see a single provider for all the options. Just because your employer makes a deal with a single financial institution doesn't automatically mean that your 401(k) plan is bad, let alone that you have any legal remedy against your employer. But be sure to ask your employer about the nature of its relationship with the company managing the funds, with special attention to any fee-sharing arrangements. Sometimes, investment providers offer discounts to employers with the hope that they'll exclusively offer their funds to employees in their 401(k) plan, and that can lead to your paying more or getting less performance.
2. Make Sure There Are Some Low-Fee Choices
Fidelity's plan participants argued that 85 percent of the nearly $8.5 billion in its 401(k) plan was invested in higher-cost mutual funds. Even though Fidelity did have some index-fund options in its menu, workers thought that management costs were excessive.
Here, workers don't have much reason to argue, as it's entirely up to them how they choose to invest their contributions to their 401(k) plans. If index funds are available, you have to make the decision to use them -- and if you don't, you can't later complain that you paid too much. That said, some employers don't make any low-cost index funds or other investment options available to workers. In that case, workers should work harder to get lower-cost options into the investment menus.
3. Look for Independent Management
It might seem natural for Fidelity and other financial institutions to manage their own retirement plans. But without an outside independent third-party provider, it's hard for an institution to prove that it's meeting its fiduciary duty to its employees. Fidelity workers argued that the proper thing to do would be to follow the lead of rival TD Ameritrade (AMTD) and outsource its record-keeping and administration.
Unless you work for a financial company, you probably won't face this situation. But it's always best to know the full extent of the relationships among the parties involved with your 401(k) plan's administration to ensure that there aren't any conflicts of interest.
Be Careful With Your Retirement
Workers might not believe that they have much latitude to have an impact on their employer's retirement plan. But given how hard companies work to give employees the retirement benefits they want, you have more leverage than you might think to encourage your employer to make positive changes to your 401(k) plan.
Motley Fool contributor Dan Caplinger owns no shares of any company mentioned. The Motley Fool recommends and owns shares of TD Ameritrade. To learn 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.
Sometimes the markets just can't trust what Federal Reserve and central bank officials say individually. That is the verdict after this week's annual retreat in Jackson Hole, Wyo. Janet Yellen canned the idea of sooner-than-expected rate hikes by opining more strongly that the labor market has yet to fully recover. Other members of the Federal Open Market Committee (FOMC) do not entirely share her view, and some were much more hawkish. 24/7 Wall St. wanted to give some Yellen snippets, as well as showing what other Fed presidents were quoted saying. We also showed what Fed Funds futures were pricing in ahead to see what the actual market bets are signaling.
Janet Yellen noted that the quicker pace to reaching an unemployment rate of 6.5% or less does not mean that all is well, nor does it imply that the FOMC will hike Fed Funds rapidly now that that target has been reached.
READ ALSO: 10 States Struggling With Delinquent Debt
Yellen also keyed on the fact that the employment-to-population ratio has increased far less over recent years than the unemployment rate would suggest. Another point was that nearly 5% of the labor force is part-time workers who would rather have full-time employment. Referring to the Fed's labor model and to rate hikes, Yellen had two key quotes:
The labor market has improved significantly over the past year, but [the Fed model] also suggests that the decline in the unemployment rate over this period somewhat overstates the improvement in overall labor market conditions.
It likely will be appropriate to maintain the current target range for the federal funds rate [0% to 0.25%] for a considerable time after our current asset purchase program ends.
As far as the Fed dissenters and those talking about the rate hike timing and direction, these were as follows:
Kansas City Fed President Esther George said that it is time for the central bank to think seriously about raising Fed Funds above the current near-zero percentage levels.
St. Louis Fed President James Bullard echoed Esther George.
San Francisco President John Williams told CNBC that he still expects that the first rate hike would be by summer of 2015.
Atlanta Fed President Dennis Lockhart basically sided with Williams and Yellen.
READ ALSO: 10 States Where Manufacturing Still Matters
One key issue to consider for Fed Funds and short-term rates is the market for 30-day Federal Funds (Fed Funds) futures. Each Fed Funds contract has a face value of $5 million for one month, calculated on a 30-day basis, so there is real money behind these contracts (of which more than 55,000 contracts traded on Friday). Fed Funds futures signaled that rates will rise in certain increments by the following time periods:
0.25% Fed Funds rate is not priced in until June of 2015.
0.50% Fed Funds rate is not priced in until October of 2015.
1.0% Fed Funds rate is not priced in until April of 2016.
2% Fed Funds rate is not priced in until April of 2017.
D Dipasupil/FilmMagicJustin Bieber's Someday perfume.
Plenty of stocks go up and down in any given week. The gainers inspire us to keep investing. The decliners keep greed in check while reminding us about the risks of the equity markets.
Let's go over some of last week's best and worst performers.
China Finance Online (JRJC) -- Up 131 percent last week
The market's biggest winner last week was China Finance Online, more than doubling after introducing a new trading platform. The Beijing-based financial website operator announced that the new offering was the country's first integrated, Web-based securities trading service platform.
At least one noted worrywart disputed the claim. Citron Research -- a popular publisher of bearish reports on stocks -- tweeted that sloppy reporting and a misleading headline were making it seem as if no other online trading platform existed in the world's most populous nation.
The bulls won out. Shares of China Finance Online closed sharply higher in each of last week's five trading days.
Closer to home, another online platform moved nicely higher after striking a deal with Chrysler and auto insurer GEICO (BRK-A). TrueCar operates a negotiation-free car buying and selling platform. It launched a platform that could shake up the insurance industry, where roughly 3 million cars are totaled each year.
Insurers have typically just written a settlement check and provided a rental car voucher to cover the incident, but TrueCar's new plan would work with launch partners GEICO and Chrysler -- and other members of its insurance affinity partners in the future -- to work with the insured to directly replace the vehicle.
TrueCar went public at $9 just three months ago. The stock has been revving higher, going on to more than double in its brief time on the market.
American Eagle Outfitters (AEO) -- Up 26 percent last week
Shares of American Eagle Outfitters moved higher after it posted better than expected quarterly results. The clothing retailer may not have had a strong quarter in a absolute terms. Revenue declined 2 percent, as new stores helped partly offset a 7 percent slide in comparable-store sales. Earnings also took a hit, falling from 10 cents a share a year earlier to 3 cents a share this time around. However, it's all about expectations on Wall Street. Analysts were only forecasting American Eagle Outfitters to break even for the period.
Elizabeth Arden (RDEN) -- Down 16 percent last week
The maker of beauty care products could probably use a makeover after its latest quarter. Sales plunged 28 percent, and Elizabeth Arden blamed the plunge in demand for its celebrity-licensed fragrances. Sorry, Justin Bieber and Taylor Swift fans. Those perfumes just aren't selling these days. Sluggish sales resulted in Elizabeth Arden posting a much wider loss than Wall Street was expecting. Let's bottle it and call it Eau de Disappointment.
Oncothyeron joined Elizabeth Arden as Nasdaq's two biggest losers this past week. The biotech took a hit after its once-promising experimental lung cancer treatment failed to show its effectiveness in a clinical trial overseas. Concerned about what the failure means for Onothyeron future, Wedbush Securities slashed its price target for the stock in half.
Things continue to get worse for Coupons.com. Investors have been bailing on the Web-based coupon specialist since posting uninspiring financial results earlier this month. Coupons.com posted a loss of 9 cents a share in its latest quarter, worse than the 5 cents a share deficit that analysts were targeting. Coupons.com went public at $16 in March, but the stock is now trading well below its initial price.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool does not recommend or own any of the stocks mentioned. Try any of our newsletter services free for 30 days.
The stock market notched another first on Monday as the Standard & Poor's 500 index nudged briefly past the 2,000-point mark and closed with its second record high in a week.
It was the latest milestone in a five-year rally for U.S. stocks, which are enjoying a late-summer revival after dipping earlier this month on concerns about rising geopolitical tensions in Russia and the Middle East.
Investors have put aside those concerns for now, focusing instead on the improving outlook for the U.S. economy and the prospect of rising corporate earnings.
On Monday, traders were encouraged by some high-profile corporate deal news, which overshadowed sluggish sales of new homes.
News that Burger King (BKW) is in talks to acquire doughnut chain Tim Hortons (THI) and create a new holding company headquartered in Canada had stocks pointing higher in premarket trading. That built on word over the weekend that California biotech company InterMune (ITMN) agreed to sell itself to Swiss pharmaceutical company Roche for $8.3 billion. Some other names in biotech got a boost from the deal.
Shortly after the market opened, the Commerce Department reported that sales of new homes slid 2.4 percent last month to a seasonally adjusted annual rate of 412,000. Homebuilder stocks declined, but the report didn't weigh down the broader market.
The S&P 500 (^GPSC), a widely followed barometer of the U.S. stock market, crossed above 2,000 in the first hour of trading.
The index fluctuated above and below the milestone mark throughout the day and ended just below the 2,000 mark. The index closed above 1,000 points for the first time in February 1998.
"The index number itself is somewhat symbolic," said David Kelley, JPMorgan Funds' chief global strategist. "It's a continuation of what we've seen all year."
All told, the S&P 500 added 9.52 points, or 0.5 percent, to 1,997.92. It closed at a record last Thursday at 1,992.37.
The Dow Jones industrial average (^DJI) rose 75.65 points, or 0.4 percent, to 17,076.87. The Nasdaq composite (^IXIC) gained 18.80 points, or 0.4 percent, to 4,557.35.
The major U.S. indexes are riding a three-week streak of weekly gains and are up for the year.
Stocks, with support from the Federal Reserve's easy-money policies, have been on a bull run for more than five years after the market bottomed out during the Great Recession in March, 2009.
"Unless the story changes, the stock market is going to get pushed higher by the lack of potentially good returns elsewhere," Kelley said.
Corporate deals have been a recurring driver of the market this year. Investors seized on the trend on Monday, sending Burger King up 19.5 percent. The stock added $5.29 to $32.40.
Bond prices rose. The yield on the 10-year Treasury note slipped to 2.38 percent from 2.40 percent late Friday.
AP Business Writers Steve Rothwell contributed from New York and Youkyoung Lee contributed from Seoul, South Korea.
What to Watch Tuesday:
The Commerce Department releases durable goods for July at 8:30 a.m. Eastern time
The Standard & Poor's releases S&P/Case-Shiller index of home prices for June and the second quarter at 9 a.m.
The Conference Board releases the Consumer Confidence Index for August at 10 a.m.
These major companies are scheduled to release quarterly financial statements:
Getty ImagesSometimes, all you have to do to get a late fee waived is call the card issuer and ask.By Matt Schulz
It was all my fault, and I felt awful about it. Worse yet, I was stuck with it, unless I got a break.
I'm talking about a $25 late payment penalty fee on a department store credit card that I opened within the last few months. As so many people have, I signed up for the card at the checkout counter, largely for the discount, and didn't really concern myself with the interest rate. But I would pay it all off in a big hurry, so I didn't have much to worry about -- or so I thought.
I used the card several times in a fairly short period to save a little bit extra on some clothes I needed to buy, and I quickly paid all but a small portion of my balance off quickly. But as weeks passed following those shopping trips, I basically forgot about the card. Out of sight, out of mind -- at least until that second bill arrived.
Angry at myself over my mistake, I didn't beat myself up. I took action.
Here's what I did:
1. I paid the bill ... The next day, I paid the bill through my bank's website. I knew it would take a few days to process and for the money to actually get to the credit card issuer, but that was OK. Since I acted quickly, I knew I wasn't in any danger of ending up 30 days past due, getting a black mark on my credit report and slashing my strong credit score. (If you are nearing that 30 days past-due threshold, don't rely on online banking. Call your bank and arrange something that ensures the bank gets paid more quickly.)
2. ... but not all of the bill. I pay my credit cards off each month, typically. I've been deep, deep in credit card debt and have no intent of ever returning to that point. However, in this case, paying the entire statement balance would have been a tactical error. Instead, I paid the balance minus $25 -- the amount of the late payment fee, which I hoped would eventually be waived by the credit card issuer.
3. I set up electronic billing and auto pay through my bank. I made this move for the card issuer's peace of mind -- or algorithm. My bank allows me to receive electronic bills through the bank's website and then pay them in full automatically each month. It seemed like a win-win for me and the bank. My thought was that if, when speaking with the issuer about waiving my late payment fee, I could tell the company that I've made these arrangements to ensure I'll never be late again, that might help my case. Of course, the issuer would have no way of knowing if I really had done it or if I was just saying I had, but even so, it felt like a worthwhile good-faith gesture to make.
4. I called and made my pitch. "Hi, my name's Matt Schulz. I was late with a payment recently. However, I just paid my bill online -- and even set up electronic billing and auto pay so it won't happen again -- and I'd like to see if you could waive my late payment fee."
I was nervous about asking, since I don't have a terribly long track record with this card, but I asked anyway. The customer service representative said she needed to speak with her manager and proceeded to put me on hold. As I waited, I considered what I would do if my request was rejected, possibly going as far as threatening to close my card. But that became a moot point. A few nervous minutes later, she told me that the bank would grant my request, but only this once. Mission accomplished.
Of course, it probably helped that I have very strong credit overall, even if my history with this particular card is short. The better your track record with the credit card issuer, the more likely it is to cut you some slack when you mess up.
Still, the fact is that you don't have to have a perfect credit score to get a fee waived. Some credit cards -- like the Discover it card -- include a policy that allows a cardholder's first late-payment fee to be waived. But typically you do have to ask, and sometimes if you do, you might just find that you've saved yourself $25 for your efforts.
Matt Schulz is the senior industry analyst at CreditCards.com, a site dedicated to helping people make smart decisions about obtaining and using credit. You can follow him on Twitter at @matthewschulz.
Richard Levine/Alamy
These aren't the best of times for discount retailers, but it certainly seems as if Family Dollar (FDO) has become the belle of the marked-down ball. Two chains catering to thrifty-minded shoppers have entered into an unlikely bidding war for Family Dollar, and it's shaping up to be a bit more interesting than your typical love triangle between three retailers with the name "Dollar" in their monikers.
The story began late last month when Family Dollar announced that it would be acquired by Dollar Tree (DLTR) in an $8.5 billion transaction. It seemed like a simple enough transaction. Dollar Tree would be paying a reasonable 22 percent premium for Family Dollar.
The deal would create a discounting behemoth with 13,000 stores across North America. The combined companies would eventually result in trimming $300 million in annual overhead.
It seemed like a great way out for frustrated Family Dollar shareholders. The deep discounter had missed Wall Street's profit targets for three consecutive quarters. Analysts see declining profitability on flat sales for its fiscal year that ends this week. It seemed as if Dollar Tree would have Family Dollar all to itself, but then it got some unexpected company.
Turning Down a Fistful of Dollars
Dollar General (DG) stepped into the picture last week, offering to pay even more for Family Dollar. It offered an all-cash deal valued closer to $9 billion. The deal seemed to be clearly superior on the surface, but Family Dollar's board shot it down.
This wouldn't be the first time that a board sided with a friendly buyout offer to a higher hostile one. Arranged deals often mean cushier positions for the acquired company. However, there was a method to the board's madness this time. Family Dollar declined Dollar General's offer because it felt that antitrust regulators wouldn't let that particular buyout go through.
Dollar General rings up more than twice as much in sales as Dollar Tree. The bigger the rivals are, the larger hurdle that they have to clear for a corporate combination to go through.
However, despite the "Dollar" name in the signage of all three, the chains aren't all alike. Dollar Tree is a true dollar store. It's North America's leading operator of discount variety stores where everything sells for a buck or less. Family Dollar and General Dollar are traditional deep discounters, offering general merchandise at various price points. They do help shoppers stretch their dollars, but they're not dollar stores like Dollar Tree.
The Buck Stops Here
Offering shoppers bargains isn't enough anymore. Walmart (WMT) -- the world's largest retailer and a bellwether when it comes to discount department stores -- has posted flat or negative comparable-store sales at its U.S. stores for six consecutive quarters. "Cheap chic" discount department store operator Target (TGT) has also been posting uninspiring sales, clocking in with flat store-level sales in its latest quarter.
Given the dicey environment, it's not a surprise to see deep discounters giving sector consolidation a hand. Family Dollar will get bought out. It may seem as if Dollar Tree has the upper hand with the lower bid, but it remains to be seen if it will have to sweeten its offer. We also can't rule out Dollar General, especially if it agrees to close enough stores to make the deal more likely to clear regulator objections.
Investors are encouraged to keep following the "Dollar" signs.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days.
Sometimes the markets just can't trust what Federal Reserve and central bank officials say individually. That is the verdict after this week's annual retreat in Jackson Hole, Wyo. Janet Yellen canned the idea of sooner-than-expected rate hikes by opining more strongly that the labor market has yet to fully recover. Other members of the Federal Open Market Committee (FOMC) do not entirely share her view, and some were much more hawkish. 24/7 Wall St. wanted to give some Yellen snippets, as well as showing what other Fed presidents were quoted saying. We also showed what Fed Funds futures were pricing in ahead to see what the actual market bets are signaling.
