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IMF Chief Under Investigation in French Fraud Case

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Jim Watson, AFP/Getty ImagesInternational Monetary Fund Managing Director Christine Lagarde
By Chine Labbe

PARIS -- IMF chief Christine Lagarde has been put under formal investigation by French magistrates for alleged negligence in a political fraud affair dating from 2008 when she was finance minister.

Lagarde was questioned by magistrates in Paris this week for a fourth time under her existing status as a witness in the long-running saga over allegations that tycoon Bernard Tapie won a large arbitration payout due to his political connections.

"After three years of procedure, the sole surviving allegation is that through inadvertence or inattention I may have failed to intervene to block the arbitration that brought to an end the longstanding Tapie litigation," she said in a statement Wednesday. "I have instructed my lawyer to appeal this decision, which is without merit."

Under French law, magistrates place a person under formal investigation when they believe there are indications of wrongdoing, but that doesn't always lead to a trial.

Lagarde's lawyer, Yves Repiquet, told Reuters he would personally appeal the magistrates' decision. That means Lagarde wouldn't have to return to Paris in the meantime, allowing her to continue her duties as managing director of the International Monetary Fund uninterrupted.

"She is now on her way back to Washington and will, of course, brief the [IMF] board as soon as possible," IMF spokesman Gerry Rice said. "Until then, we have no further comment."

The inquiry relates to allegations that Tapie, a supporter of conservative former President Nicolas Sarkozy, was improperly awarded 403 million euros ($531 million) in an arbitration to settle a dispute with now defunct state-owned bank Credit Lyonnais.

The inquiry has already embroiled several of Sarkozy's cabinet members and France Telecom's chief executive, Stephane Richard, who was an aide to Lagarde when she was Sarkozy's finance minister.

In previous rounds of questioning, Lagarde hasn't recognized as her own the pre-printed signature to sign off on a document facilitating the payment, Repiquet told Reuters by telephone. However, Richard has stated that Lagarde was fully briefed on the matter.

The offense of negligence by a person charged with public responsibility in France carries a maximum penalty of one year's imprisonment and a 15,000 euro fine.

Lagarde was a star in Sarkozy's cabinet and well respected by peers, pushing through many of the high-profile initiatives in France's presidency of the Group of 20 nations.

She has been managing director of the IMF since 2011 after her predecessor at the global lender, Frenchman Dominique Strauss-Kahn, resigned over sexual assault charges that were later dropped.

Continued Support

The IMF's board discussed the possible consequences of the Tapie case before deciding to select Lagarde, the board said at the time. It has continued to support her through various stages of the case.

The IMF is traditionally headed by a European, and five of the last eight managing directors have been French. But the BRICS group of large emerging markets -- Brazil, Russia, India, China and South Africa -- protested the tradition during the last selection process in 2011, saying that continued European dominance could undermine the IMF's legitimacy.

Lagarde competed for her post against Mexican central bank Governor Agustin Carstens.

The IMF's No. 2 official, David Lipton, an American, would likely take over as acting managing director if Lagarde weren't able to perform her duties.

Tapie, a colorful and often controversial character in the French business and sports world, sued the state for compensation after selling his stake in sports company Adidas to Credit Lyonnais in 1993.

He claimed the bank had defrauded him after it later resold his stake for a much higher sum. Credit Lyonnais, now part of Credit Agricole, has denied wrongdoing.

Investigators are trying to determine whether Tapie's political connections played a role in the government's decision to resort to arbitration that won him a huge payout. He has denied any wrongdoing.

-With additional reporting by Anna Yukhananov in Washington; writing by Mark John.

 

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More Consumers Apply for Mortgages in Latest Week

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Approved Mortgage Application
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By Luciana Lopez

NEW YORK -- Applications for U.S. home mortgages rose last week as demand for both refinancing and purchase loans increased, an industry group said Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 2.8 percent in the week ended Aug. 22.

The MBA's seasonally adjusted index of refinancing applications rose 2.8 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, rose 2.6 percent.

Fixed 30-year mortgage rates averaged 4.28 percent in the week, down 1 basis point from the week before.

The survey covers more than 75 percent of U.S. retail residential mortgage applications, according to MBA.

 

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Tiffany Boosts Full-Year Forecast on Improved 2Q Profit

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EARNS TIFFANY
Mark Lennihan/AP
By Devika Krishna Kumar and Ramkumar Iyer

Upscale jeweler Tiffany & Co. (TIF) raised its full-year profit forecast for a second time following a better-than-expected quarterly profit, driven by strong sales in the Americas and Asia-Pacific regions.

Shares of Tiffany, known for its Blue Boxes and its Fifth Avenue flagship store in Manhattan, rose as much as 4.8 percent in premarket trading Wednesday.

"We were ... pleased with solid performance across most product categories, ranging from the success of perennial classics in fine, statement and engagement jewelry to our newest Atlas collection," Chief Executive Officer Michael Kowalski said in a statement.

Lower-priced jewelry such as the Atlas collection -- a range of silver jewelry including lariats and pendants priced below $500 -- nets Tiffany higher margins than its more expensive pieces, for which it is famous.

The company said comparable-store sales in the Americas region, which accounts for nearly half of Tiffany's overall sales, rose 8 percent in the second quarter ended July 31.

Same-store sales in the Asia Pacific region grew 7 percent, driven by strong demand in Greater China and Australia.

Tiffany raised its earnings forecast for the year ending Jan. 31 to $4.20-$4.30 a share from $4.15-$4.25.

The company's net income rose 16 percent to $124.1 million, or 96 cents a share, in the second quarter.

Net sales rose 7.2 percent to $992.9 million on a constant currency basis. Total comparable-store sales rose 3 percent.

Analysts on average had expected a profit of 85 cents a share on revenue of $987.9 million, according to Thomson Reuters I/B/E/S.

Tiffany's shares were up 2 percent at $102.74 in Wednesday premarket trading.

 

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Spider Webs Force Recall of Suzuki Kizashi Sedans

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Spider Webs Force Recall of Suzuki Kizashi Sedans
Daniel Acker/Bloomberg via Getty ImagesA 2011 Suzuki Kizashi Sport on display at the New York International Auto Show in 2010.
By Bernie Woodall

DETROIT -- Spiders drawn to gasoline vapors and weaving webs that block a hose to vent those vapors have caused Suzuki Motor of America to recall about 19,000 Kizashi midsize sedans from model years 2010 to 2013, U.S. regulators said Wednesday.

Air flow blocked in the cars' evaporative emissions system can cause negative pressure in the fuel tank, which can lead to cracks which could cause leaks that increase risk of a fire, said the National Highway Traffic Safety Administration.

This is a similar problem to one experienced by some Mazda6 owners. Mazda Motor has recalled the Mazda6 twice since 2011 because of spiders building webs in ventilation hoses.

No crashes or injuries have been reported in relation to this issue, Suzuki told NHTSA.

Suzuki last year stopped selling cars in the U.S. market after nearly three decades, so NHTSA and Suzuki advise Kizashi owners to take their sedans to authorized "service providers." Letters the company will send to car owners and filed with NHTSA don't identify where these service providers are, but owners can call a customer service line at 800-934-0934 to find out.

The remedy to be applied is a filter on a ventilation line to keep the spiders out.

The Kizashi was one of the company's best-sellers in the United States before Suzuki in late 2012 said it would stop selling vehicles in the U.S. market after its standing inventory ran out. U.S. Kizashi sales reached about 7,000 in 2011 and fell each year after that.

 

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2014 Growth Forecast Revised After Weak First Quarter

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Budget Deficit
J. Scott Applewhite/AP
By ANDREW TAYLOR

WASHINGTON -- The Congressional Budget Office on Wednesday forecast that the U.S. economy will grow by just 1.5 percent in 2014, undermined by a poor performance during the first three months of the year.

The new assessment was considerably more pessimistic than the Obama administration's, which predicted last month that the economy would expand by 2.6 percent this year even though it contracted by an annual rate of 2.1 percent in the first quarter.

The economy did grow by 0.9 percent during the first half of 2014.

Looking ahead, the CBO said it expected the economy to grow by 3.4 percent over 2015 and 2016, and predicted that the unemployment rate would remain below 6 percent into the future.

The economy went into reverse at the beginning of this year, reeling from an unusually harsh winter that disrupted consumer spending, factory production and other business activity.

Growth in the gross domestic product, the economy's total output of goods and services, recovered in the second quarter, advancing at an annual rate of 4 percent, according to the government's first estimate. That forecast will be revised Thursday.

Even with the rebound, economists have lowered their outlook for the entire year, given the weak start. Economists at JPMorgan Chase (JPM) are forecasting that the economy will grow by 1.9 percent this year, when measured from the fourth quarter, down from 3.1 percent in 2013.

Slightly Higher Deficit

The CBO also projected that the government would run a deficit of $506 billion for the budget year that ends Sept. 30. That would be the lowest level of Barack Obama's presidency.

The CBO foresees a slight increase from its earlier $492 billion projection of this year's deficit but also modest improvement over the coming decade.

Obama inherited a recession and a trillion-dollar-plus deficit picture when he took office in the aftermath of the 2008 fiscal crisis. The economy has recovered more slowly than hoped; some of the recent drop in the jobless rate is due to frustrated job-seekers leaving the labor market.

The report confirms a trend of short-term improvement in the deficit but an unsustainable long-term fiscal path if Washington doesn't cut spending or raise additional revenue.

Over the long term, the CBO said "the large and increasing amount of federal debt would have serious negative consequences" including the risk of a crisis that could raise interest rates.

The latest numbers come as the GOP-controlled House and Obama are taking a break from the budget, debt and tax battles that have flared up several times since Republicans won back the House in 2010.

Obama did not see attacking the deficit as a priority during his first term. Republicans forced him to the negotiating table in 2011 and extracted more than $2 trillion in spending cuts over the following decade, though little of that savings came from big benefit programs such as Medicare.

-AP economics writer Martin Crutsinger contributed to this report.

 

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10 Smart Money-Saving Tips for Time-Strapped People

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Woman and daughter shopping for apples at a grocery store
AlamyA trip to the store can turn into a long price-comparing excursion. Use shopping apps to quickly find the best deals, or order from Amazon Prime instead.
By Karen Cordaway

Many times saving money equates to trading time. If you take time to research the best deal, you can find it. If you take the time to make meals from scratch, it will usually cost you less than eating out. We all know these tips work, but many people don't have time to implement these strategies.

So what does a time-strapped, money-conscious person do? Here are tips to still save money when you're short on time.

1. Make smarter shopping decisions in the moment. If you like to shop in person to find the best prices in your area, try using the StockUp app. This is the first app that allows users to update the deals. This way, shoppers can discover all of the available deals in-store through a community of users who update the database. There are two ways to spend less using this app: Scan a bar code on a product you are interested in purchasing, and the app will provide you with real-time price updates. It also helps you plan your savings while creating a shopping list on the app. When you add needed items to your list, the app lets you know if any of them are on sale.

2. Have a default plan. If you only have a certain window of free time to shop and getting to the store is hard, Amazon.com (AMZN) can be your default plan for finding low-priced items. If you're an Amazon Prime member, you can take advantage of the free shipping and cheaper pricing offered to those with the membership. Also, if you have to shop in spurts, you don't have to worry about losing money on shipping because you didn't buy everything at once. Amazon Prime members can always benefit from free shipping no matter how much they spend.

3. Draft under the gurus. Have you ever been secretly envious of the savings scored by the couponers and deal seekers of the world? Many of them have their own websites where they share their insight and aggregate the best deals for you. If you'd like to come close to replicating their methods, a little time and effort can get you some of the best hand-picked deals.
PennyPinchinMom.com has a slew of resources available on her site, which is organized in such a way that it serves as a one-stop shop to spend less on needed items you are looking to buy.

Also check out another site called PocketYourDollars.com, which includes back-to-school deals and shares insight about paying less for organic items and how to make a shopping list to maximize savings. Other sites such as RainingHotCoupons.com, TheKrazyCouponLady.com, BargainBriana.com and many others update the latest deals like these on a regular basis.

4. Get rewarded when necessary. Whether you manage to find sales online or at brick and mortar stores, you can continue to get rewards or cash back by using rewards credit cards responsibly. WiseBread.com community manager Ashley Jacobs suggests using rewards credit cards to pay for necessities. "This way you can accumulate rewards without spending money on things you don't need," Jacobs says. "Be sure you only use your credit card if you are able to pay it off in full each month. Otherwise the rewards points you rack up won't translate into savings - they will translate into debt."

5. Make a note to self. If paying the bill tends to escape your mind after all the work you did purchasing items, set up reminders to pay on time. Glen Craig at FreeFromBroke.com explains how online calendars are your friend. "Don't be late with bills anymore. If you're not ready to automate payments, at least make sure you aren't paying late," he says. "I personally set up reminders in Google Calendar before certain bills are due to make sure I get them taken care of in time." Craig also points out that many credit cards and banks will let you set up reminders. Doing so helps you avoid late fees or interest charges, which would cancel out the savings you gained.

6. Save on in-season produce. Many articles will tell you to buy in-season produce. This is an excellent tip that works, but if you don't know how to use the fruit or vegetable, it can end up in the garbage can. I once bought a waxed turnip just because it was on sale. I stared at it every day on my counter wondering what I was going to do with it. Then, like most people, I used the magic of search engines to get ideas. I picked the simplest recipes and used it in a slow cooker recipe that would normally call for potatoes. Do the same with other in-season produce to reap the benefits of spending less.

6. Bookmark economical recipes to save time and money. Pick a few recipes that you know you can manage. I recommend bookmarking those types of links so you can quickly access them again and don't spend extra time looking for them through search. You can set up Pinterest boards for seasonal recipes just for this reason. Then you can have go-to recipes on hand, so you can actually eat those in-season fruits and vegetables you buy.

7. Pare down on ingredients. Make recipes that call for fewer ingredients. You save time by not looking for loads of ingredients in the grocery store, and that also equates to spending less. Check out sites such as 5DollarDinners.com and AllRecipes.com for these types of recipes, or literally search for "5 ingredient recipes" or whatever number of ingredients would be ideal to save time and money simultaneously.

8. Substitute ingredients when it doesn't compromise the flavor. If you attempt to make a certain dish and realize you're out of a few items, see if you can substitute those ingredients. Resist the urge to make a trip for one or two items if you can help it. You may not have to purchase anything. For example, if you are making a dish that requires onions or garlic and you don't have those items available at home, try to substitute onion or garlic powder. This works well for many slow cooker recipes.

9. Nonperishables come to the rescue. Pastas and items for making Mexican food are usually low-cost, but you can get them even cheaper if you stock up when they are on sale. LaTisha Styles from YoungFinances.com advises: "Don't buy when an item is for sale, buy when it's on sale." Styles notes that many store sales are cyclical. When these items are on sale, stock up. Bulk purchases on nonperishables at these times can save you time and money. When it's time to make that tasty lasagna, you will only have to purchase the meat or veggies instead of looking for all needed ingredients every time you shop. Casseroles and other pasta dishes also do well with this method.

10. Use what you buy. It's one thing to spend less when shopping, but the savings don't count if you don't use what you purchased. Be sure to eat your food before it goes bad. Plan meals, so you know you will use the groceries you purchased, and use perishable items earlier in the week.

Karen Cordaway is a teacher and writer who currently shares money saving ideas on her website, MoneySavingEnthusiast.com.

 

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Do You Really Want McCafe in Your Keurig?

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McDonald's To Alter Dollar Menu With Higher Priced Items
Scott Olson/Getty Images
In a few months, morning commuters hitting the McDonald's (MCD) drive-thru window won't be the only ones enjoying McCafe coffee. McDonald's is teaming up with Kraft Foods (KRFT) to distribute its packaged java beans through retailers come 2015.

The original announcement called for Kraft to distribute McCafe blends in bags containing whole and ground coffee as well as pods for single-serve brewers. It wasn't clear if the partnership included Keurig Green Mountain's (GMCR) category-leading K-Cup platform, but that was settled on Friday when Keurig struck a licensing deal with Kraft that would include getting McCafe into the popular K-Cup portion packs.

The deal between Kraft and Keurig is in and of itself a pretty big deal. Kraft has been championing its own one-cup brewing platform for years, but the high-end Tassimo -- capable of making cappuccino, latte and espresso beverages as well as traditional cups of coffee -- never took off as Keurig became the country's industry standard.

The only real mystery here is why folks will want to shove McCafe K-Cups into their Keurig brewers. What's next? Microwave-ready McRib sandwiches?

Beyond the Golden Arches

It's easy to see why someone goes for a cup of McCafe in the morning. McDonald's has more than 14,000 restaurants in the U.S., and odds are that morning commuters pass by a location.

McDonald's is also cheap. A cup of coffee can be paired up with a meaty Dollar Menu offering including a Sausage McMuffin or a sausage burrito for just a buck more. It's also fast.

However, just because a product sells briskly under favorable conditions -- and that's why McDonald's has been able to thrive in the breakfast market -- doesn't mean that a product will be successful on a more level playing field.

Go to any of McDonald's U.S. locations -- or any of its 35,000 eateries worldwide -- and you only have one brand of coffee. It's a different ball game in the grocery-store aisle.

Keurig itself offers 232 varieties through its online store, and these are just the licensed options. K-Cup patents expired nearly two years ago, opening the floodgates for portion packs by third parties that are serving up the private-label brands of many retailers. Good luck competing against Starbucks (SBUX), Dunkin' Donuts (DNKN), and even Keurig's own original Green Mountain Coffee K-Cups.

A No-Win Situation

We can't forget about the glut of unlicensed house brands, because it assures that K-Cup pricing will be honest. This will pose a particular challenge for McCafe. It can't sell at the same price as the established K-Cup brands.

McDonald's is in a pickle. The perceived quality of its brand is weak. A Consumer Reports poll asked more than 32,000 fast-food customers to rate the quality of chains based on their flagship products. McDonald's ranked dead last out of 21 chains on burger quality. If consumers don't see the value in its burgers, will they pay up for its coffee when the shelves are brimming with alternatives?

That leaves McDonald's in a bad place. If Kraft prices its McCafe K-Cups at comparable prices to existing offerings, they aren't likely to sell well. Pricing the portion packs to compete with cheaper private-label K-Cups will only diminish the brand.

Heads will turn when folks see McCafe K-Cups next year, but pocketbooks are unlikely to open.

Motley Fool contributor Rick Munarriz owns shares of Keurig Green Mountain. The Motley Fool recommends Keurig Green Mountain, McDonald's, and Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days.

 

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SEC Stiffens Rules on Loan-Backed Securities

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SEC Adopts Rules on Loan-Backed Securities
Mandel Ngan, AFP/Getty ImagesSecurities and Exchange Commission Chair Mary Jo White
By MARCY GORDON

WASHINGTON -- Financial firms that sell securities backed by loans, such as the kind that fueled the 2008 financial crisis, will have to give investors details on borrowers' credit record and income under action taken Wednesday by federal regulators.

The Securities and Exchange Commission adopted the rules for securities linked to mortgages and auto loans on a 5-0 vote.

The commissioners also imposed new conflict-of-interest rules on the agencies that rate the debt of companies, governments and issues of securities. That vote split 3-2 along party lines, with the two Republican commissioners opposing adoption of the rules.

Home mortgages bundled into securities and sold on Wall Street soured after the housing bubble burst in 2007, losing billions in value. The vast sales of risky securities ignited the crisis that plunged the economy into the deepest recession since the Great Depression and brought a taxpayer bailout of banks.

These reforms will make a real difference to investors and to our financial markets.

In requiring sellers of the securities to provide information on borrowers' credit and income, the aim is to enable investors to better assess the risks of the loans underlying the securities.

"These reforms will make a real difference to investors and to our financial markets," SEC Chair Mary Jo White said before the vote.

A recent report by the Federal Reserve Bank of New York showed that U.S. auto loans jumped to the highest level in eight years this spring, fueled by a big increase in lending to risky borrowers. The Fed also said that loans to borrowers with weak credit, known as subprime loans, continue to make up a smaller proportion of total auto loans than before the recession.

Still, the rapid increase in subprime auto lending has raised concerns among federal regulators in recent months that it could set off a wave of defaults such as occurred in the mortgage market collapse. Because auto loans are packaged into securities, an increase in auto loan defaults could be amplified.

The new rules on so-called asset-backed securities and credit rating agencies were called for under the sweeping financial overhaul law enacted in 2010 in response to the financial meltdown. The rules take effect in 60 days.

A number of big banks, including JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Goldman Sachs (GS), have been accused by the government of abuses in sales of mortgage securities in the years leading up to the crisis. Together, they have paid hundreds of millions in penalties to settle civil charges brought by the SEC, which accused them of deceiving investors about the quality of the securities they sold.

In recent months, the Justice Department and state regulators have reached multibillion-dollar civil settlements over mortgage securities with JPMorgan, Bank of America and Citigroup.

New Rules for Credit-Rating Agencies

The new rules require credit rating agencies to report to the SEC on their financial safeguards to ensure that their ratings are determined through a fair process. The agencies' sales people will be barred from participating in the ratings process. And agencies will have to review and potentially revise their ratings in cases where an employee was later hired by a company he or she rated.

The rating agencies are key financial gatekeepers. Their ratings can affect a company's ability to raise or borrow money and also can influence how much investors pay for securities. Critics say the agencies have a built-in conflict of interest because they are paid by the same companies they rate. The three big agencies -- Moody's, Standard & Poor's and Fitch -- were widely criticized for giving low-risk ratings to the risky mortgage securities being sold ahead of the crisis, as they reaped lucrative fees. Investigations by a Senate panel and a congressionally appointed independent commission found that the three agencies contributed to the crisis by awarding high ratings to securities based on subprime mortgages.

The three big agencies together account for nearly 95 percent of the ratings market. Several other smaller rating agencies are officially recognized by the SEC.

A key problem is that companies choose which firms rate them and then pay for those ratings, critics say. It's like having a pitcher choose the umpire for a baseball game, they contend, and it puts pressure on the agencies to award better ratings in order to secure repeat business.

Critics say a better solution would be to create a government board that randomly assigns agencies to rate companies. Congress debated that idea, but ultimately decided not to direct regulators to adopt such rules. Instead, lawmakers asked the SEC to study the idea.


 

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Shake Shack's IPO Had Better Bring the Beef

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Shake Shack Burger Chain Considers I.P.O.
Andrew Burton/Getty Images
After more than a year of hits and misses in the pool of emerging restaurants to go public, investors may soon be able to buy into a rapidly expanding gourmet burger chain. It's not In-N-Out. It's not Five Guys. However, don't underestimate the appeal of Shake Shack.

The milkshake and burger chain that got its start as a modest kiosk in the heart of New York City's Madison Square Park 10 years ago is gearing up to go public, according to Reuters. Things are far enough along that JPMorgan and Morgan Stanley have reportedly already been brought on to serve as lead underwriters for the offering.

Reuters is reporting that it's unlikely to be a big deal in terms of the number of shares offered. Shake Shack is expanding quickly, but it's still relatively small, with just a handful of locations worldwide. Given the market's interest in eatery IPOs lately, one couldn't blame Shake Shack for trying to strike while the iron skillet is hot.

Burger Lovers Trading Up

There are 26 Shake Shack locations in the country, half in its home state of New York. There are also another 19 overseas, with most in the Middle East. We don't have hard financials yet. That will come when Shake Shack formally files with the Securities & Exchange Commission to go public. Reuters reports that it's likely to post a profit of $20 million next year.

At a time when McDonald's (MCD) is struggling -- gearing up to post its first year of negative comparable-store sales in more than a decade -- taking a burger chain public may not seem like a very smart idea. However, Shake Shack knows that some of the weakness at McDonald's is coming from consumers trading up to the gourmet burger places that offer higher-quality meals at higher prices.

Shake Shack may not be alone. Reports earlier this year had Smashburger and Habit Grill -- two larger players in premium burgers that ranked well in Consumer Reports' taste tests earlier this year -- also exploring IPOs.

Some can also argue that there are already gourmet burger chains trading publicly. Red Robin Gourmet Burgers (RRGB) has been trading since 2002, two years before Danny Meyer opened the original Shake Shack stand. However, Red Robin is a casual-dining concept with table service. Shake Shack, Smashburger, In-N-Out and Five Guys all follow the counter-ordering model that McDonald's has been feasting on for generations.

Can Shake Shack Shake Things Up?

Shake Shack is small, but it's popular with a rabid fan base. Lines at the original park location can get so long during peak lunch hours that the restaurant operator offers a webcam so guests can decide if the queue will be worth it. Shake Shack also has two separate lines, allowing those who simply want a shake or a frozen custard to have expedited access to the chilly treats without having to wait in the longer lines of folks hungry for its Angus beef burgers or flat-top hot dogs.

One thing for sure is that if Shake Shack is able to pull off its IPO in the coming months, it will draw attention. Most restaurant chains that have gone public in the last year have treated investors to healthy pops at the open on their first day of trading. Sustaining those gains has been the real challenge, and some of last year's market darlings, like pasta boiler Noodles & Co. (NDLS) and sandwich baker Potbelly (PBPB), are trading sharply lower in 2014.

The market has been rallying, and it's been particularly kind to consumer-facing companies. However, Noodles & Co. and Potbelly have shed nearly half of their value so far this year. Shake Shack hopes that it will be able to buck the trend and hold on to any initial gains, but it needs to make it that far first. It won't be easy. Even Shake Shake's concretes -- its signature frozen custard treats -- melt under heat despite their sturdy name.

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

 

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Best Buy Vs. RadioShack: Which One Will Fail First?

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Inside A Best Buy Store Ahead of Earnings Figures
David Paul Morris/Bloomberg/Getty Images
Tuesday was a day of extremes for investors of consumer electronics retailers. Shares of Best Buy (BBY) plunged 7 percent after posting disappointing quarterly results. That contrasted sharply with shares of RadioShack (RSH), which soared 19 percent on reports that a shareholder rescue package was in the works.

We can't judge the fate of two meandering chains on a single trading day. After all, Best Buy may have let the market down by posting weaker-than-expected sales, but at least it's not the one hoping that a "rescue package" will save it from bankruptcy.

Anytime a stock appreciates by a fifth of its value on anything with the words "rescue" and "package," you know there's a fairly good chance that it's not going to end well.

Best Buy Is the Better Buy

There's no denying that Best Buy is in a funk. Sales declined 4 percent to $8.896 billion, fueled by another quarter of shrinking comparable-store sales. The consumer electronics superstore chain sees the weakness continuing. It sees negative comps continuing through at least the next two quarters.

Consumer appetite has been weak in general. Tablet sales have been cooling off, and Best Buy points out that the smartphone market has stalled ahead of the iPhone 6 hitting the market. Apple's (AAPL) new smartphone should be unveiled at some point next month, but it's doubtful that will be enough to light a fire under the mobile handset market. Apple updates the iPhone every year, and none of those upgrades have been enough to save Best Buy over the past two years of sliding sales.

However, unlike RadioShack, Best Buy is still profitable. In fact, its adjusted earnings actually climbed in its latest quarter. The retailer has been successful in shaving its overhead to the point where it can grow its bottom line despite coming up short on top. It's a trick that Best Buy can't keep performing forever. Sooner or later it's going to have to find a way to get shoppers to come back. However, for now Best Buy is earning more than enough to cover its quarterly dividend.

Thinking Outside the Small Box

Things are going far worse at RadioShack. Forget dividends: RadioShack paid out its last dividend more than two years ago. Forget earnings: RadioShack hasn't been profitable since 2011.

The iPhone 6 won't save RadioShack. It's been profitless through the last two generations of Apple hardware. RadioShack's lack of earnings coincides with when it decided to emphasize mobile products and services a couple of years ago. It was right to do so; mobile usage has been a growth industry. Unfortunately for RadioShack, smartphone shoppers just aren't buying their Android and iPhone handsets at its stores.

Same-store sales plunged 14 percent in its most recently reported quarter, and deficits are widening. RadioShack is closing stores. It's attempting to remodel its remaining stores, but that doesn't come cheap. With $615.4 million in debt and its stock trading for pocket change, it seems as if RadioShack is on borrowed time.

This brings us to Tuesday's report. Sources tell Bloomberg that RadioShack's second-largest investor is trying to spare RadioShack from filing for bankruptcy. It's looking to issue debt or equity to help improve the chain's liquidity. Then again, access to capital isn't as relevant as the company's past few years of destroying it.

So where should investors be? Best Buy is bad, but RadioShack is worse. Best Buy is a stock where investors need to weigh the serious challenges it faces to start growing again. RadioShack at this point is more a speculation than an investment.

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

 

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Rental Car Prices Are Giving Us Sticker Shock

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Thanksgiving Travel
David Goldman/AP

The price of renting a car -- often the American traveler's transportation of choice -- has risen substantially in recent times.

Ponying Up in Portland

An August survey by CheapCarRental.net found that the average daily rate for the cheapest available rental car in many cities was much higher on a year-over-year basis. For example, the most expensive city was Portland, Oregon, with a $111 rate, while in the car manufacturing capital of the country, Detroit, it stood at $90, and in Denver it was $88. Rewinding one year, CheapCarRental's survey had a rate of $86 for Portland, $55 for Detroit and $65 for Denver.

The blame can be laid at the feet of the major rental companies. Avis Budget Group (CAR), for example, in its most recently reported quarter, lifted its U.S. rates by around 4 percent, excluding its budget brand Payless and short-term rental subsidiary Zipcar. Such raises seem to be a habit for the company these days -- in the previous quarter, it advanced its U.S. pricing by 2 percent.

Given that, it's no surprise that the company's revenue advanced 10 percent on a year-over-year basis to $2.2 billion in that most recent quarter, while net profit grew a robust 28 percent to $74 million.

The other big publicly traded auto lender, Hertz Global Holdings (HTZ), saw a nearly 20 percent pop in revenue in its fiscal 2013, with top line rising to $10.8 billion.

This, despite a heavy slate of recalls from the industry's big suppliers. So far in August alone, General Motors (GM) has recalled in excess of 380,000 vehicles. Meanwhile, in the same month, Ford (F) began the recall of 83,250 of its cars across several models.

Fewer Cars in the Parking Lot

Behind the higher bills and fatter profits is consolidation. With fewer competitors, of course, there's less pressure to offer attractive prices.

Avis Budget Group gets half its name from the Budget chain, acquired in 2002. Also under its spreading wing are more recent acquisitions Zipcar and another (relatively) low-cost renter, Payless.

Anyone who thinks that competition should be strong and lively thanks to the presence of midmarket names like Enterprise Rent-a-Car, National and Alamo had better guess again. All three stalwarts are part of the same company, privately held Enterprise Holdings.

According to Auto Rental News, in 2013, Avis Budget Group, Hertz Global Holdings and Enterprise Holdings combined had roughly 1.8 million rental cars in service in the U.S. -- 93 percent of the total. The three heavyweights commanded "just" 87 percent of the domestic fleet in 2012. Not coincidentally, back then Dollar Thrifty Automotive Group (acquired that year by Hertz for $2.3 billion), Zipcar and Payless were nearing the end of their tenures as separate, competing firms.

Three Kings

This basically makes the domestic car rental market an oligopoly, a fact which is not lost on federal regulators.

In the wake of Hertz's Dollar Thrifty deal, the Federal Trade Commission attempted to dilute that consolidation a bit. The commission ordered that Hertz divest Advantage Rent a Car, a smallish brand it bought in 2009. The company dutifully complied, but Advantage soon filed for bankruptcy.

Outside of that, there hasn't been too much action on the regulatory front, so it looks like the three kings will continue to rule. This dominant position has been noted by the market, with investors bidding up Avis stock by a powerful 70 percent so far this year. Hertz has seen only a modest rise, but this may be due less to fundamentals than deep-seated accounting issues delaying the release of quarterly results.

Accelerating Forward

That's the situation on the road now, but what about the future? There are some cautiously optimistic indications that price hikes might soon level off, at least in the near term.

In their latest Global Travel Price Outlook, the Global Business Travel Association and Carlson Wagonlit Travel estimate that in 2015 U.S. car rental prices will remain at the same level as this year.

But that might be only a brief stop at a red light. At the moment, the business is dominated by only a handful of monster companies whose price lifting has revved up their results and (in the case of Avis) stock prices. That light will very possibly change soon, after which renters might start paying even more.

Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford and Hertz Global Holdings. The Internal Revenue Service is encouraging investors to support America's growing energy renaissance with a tax loophole that's explained in a new special report, "The IRS Is Daring You to Make This Investment Now!" Try any Foolish newsletter services free for 30 days.

 

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Market Wrap: Stocks Drift Sideways; S&P 500 Tacks on New High

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Stocks Hit Intraday Record
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Even in a daylong sideways drift, the Standard & Poor's 500 index (^GPSC) managed to eke out its third record close in three days.

U.S. stocks ended essentially flat on Wednesday after spending much of the day wavering between tiny gains and losses.

The S&P 500 notched a gain of one-tenth of a point over the day before, extending its rise for the week.

Overall trading volume was about one-third below the recent average, reflecting an absence of major market-moving news and the approaching Labor Day holiday weekend.

Having achieved this 2,000 level, the market is simply taking a pause, catching its breath.

It was a sharp contrast to the day before, when the S&P 500 closed above 2,000 for the first time.

"Having achieved this 2,000 level, the market is simply taking a pause, catching its breath," said David Lebovitz, global market strategist at JPMorgan Chase.

U.S. stock futures pointed to a mixed opening in premarket trading Wednesday. The major stock indexes opened slightly higher, with the S&P 500 index at 2,001 points.

Early on, investors largely had their eye on company earnings. Retailers Express (EXPR) and Tiffany & Co. (TIF) were among the companies to post better-than-expected results. Express' shares surged 12.7 percent, adding $1.86 to $16.45., while Tiffany rose 98 cents to $101.75.

At 10 a.m., the Congressional Budget Office offered a new assessment of the nation's economy, projecting it will grow by just 1.5 percent this year. The forecast was considerably more pessimistic than the Obama administration's, which predicted the economy would expand by 2.6 percent.

Stocks declined shortly afterward, then recovered, only to waver through small gains and losses through much of the day.

The S&P 500 rose 0.10 of a point to 2,000.12. The Dow Jones industrial average (^DJI) rose 15.31, or 0.1 percent, to 17,122.01. The Nasdaq composite (^IXIC) fell 1.02 points to 4,569.62.

The Dow is 16 points shy of its own record closing high set July 16. The Nasdaq is still well below its dot-com era record.

Major U.S. indexes are riding a three-week streak of gains and are up for the year.

Investors have been encouraged in recent weeks by strong corporate earnings and data that point to a strengthening economy after a sluggish start to the year. The trend has helped extend a five-year bull market, lifting indexes to new records this year.

It's likely that trading will continue to thin further in the next couple of days as more investors get in vacation mode for the Labor Day holiday weekend.

Before that, however, the market will get a look at a few more economic barometers.

On Thursday, the Commerce Department delivers its latest estimate of how much the U.S. economy grew in the second quarter. Economists are looking for 3.9 percent growth after a decline of 2.1 percent in the first quarter.

New figures on personal income and spending and on how consumers feel about the economy, are due out on Friday.

Among stocks making moves Wednesday:
  • Best Buy (BBY) notched the biggest gain among companies in the S&P 500, adding $1.89, or 6.3 percent, to $31.69.
  • U.S. medical device maker Medtronic (MDT) bought privately held Italian company NGC Medical S.p.A. for $350 million. NGC manages cardiovascular suites, operating rooms and intensive care units for hospitals. Medtronic already held a 30 percent stake in the business. Medtronic slipped 25 cents to $63.27.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.36 percent. Benchmark U.S. crude rose 2 cents to $93.88 a barrel in New York. In metals trading, gold fell $1.80 to $1,283.40 an ounce, silver rose 2 cents to $19.41 an ounce and copper fell a penny to $3.18 a pound.

AP Business Writer Elaine Kurtenbach in Tokyo contributed to this report.

What to Watch Thursday:
  • At 8:30 a.m. Eastern time, the Labor Department releases weekly jobless claims, and the Commerce Department releases second-quarter gross domestic product.
  • At 10 a.m., Freddie Mac releases weekly mortgage rates, 10 a.m., and the National Association of Realtors releases pending home sales index for July.
These major companies are scheduled to release quarterly financial statements:
  • Abercrombie & Fitch (ANF)
  • Coty (COTY)
  • Dollar General (DG)
  • Genesco (GCO)
  • Signet Jewelers (SIG)
  • Splunk (SPLK)
  • Toronto Dominion Bank (TD)

 

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6 Comments You Hear from Your Financial Frenemies

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A frenemy, as well all know, is an enemy pretending to be a friend, or a friend who is also a rival. While it's unlikely that most of your friends are intentionally being your frenemies, they may be unintentionally wrecking havoc on your spending and your money. Read on for six statements to be wary of when coming from a friend -- or a frenemy:

"Can You Spot Me? I'll Get You Next Time"

It occasionally happens that our friends leave their wallet at home or don't have the cash on hand to cover a bill. Once in a while is OK. Once a month is not. If your friend is in the habit of mooching off of you, it may be time to sit down and set some boundaries on spending. Of course you want to have a good time with your friends, but that doesn't mean you need to foot the bill. Create a strategy to curb loans in the future, suggest that your friend get financially organized and don't be afraid to say "no."

"You Should Buy That -- You Deserve It"

I admit that I've told my friends that they deserve things. Like a raise, a better boyfriend and from an occasional splurge. However, who am I to tell them it's OK to splurge when I have no idea what their finances look like? If you're being told this, it doesn't translate into you having the funds to cover the purchase. Step back and evaluate or give yourself a 24-hour cooling off period before making the buy. If you don't have the money on hand, what are you willing to give up for the next few months to cover the expense?

"You Got a $50 Gift Card From Your Boss? I Got a $3,000 Bonus!?"

Just when you're feeling appreciated by others, a friend comes along to one-up you. It's hard not to feel bad or compare when in these situations, but your best bet may be to ignore the comments. You recognize that you have worked hard and you deserve the opportunity to feel good about it. If it is truly a bad and consistent habit from a good friend, having a conversation about how the money comments are making you feel may be a good place to start.

"How Big Was Your Raise? How Much Did You Pay for That?:

While talking finances is OK, people asking prying questions like this may be playing a comparison game with themselves. If you disclose that information, be aware that it may be shared with others. You can deflect the questions with general answers, such as "My raise? They met what I was asking for, which makes me feel like a recognized and valued team member."

"Must Be Nice That You Can Afford That"

There's a little green-eyed monster in all of us, but if you find that you're feeling guilty for certain purchases that are well within your budget or find yourself playing down some of your possessions to make others feel better, that's defeating the purpose of allowing you to enjoy your money and use it to live a life you value. While there's a balance with showing off, feeling guilty and playing down expenses won't help you or your friend. The best way to neutralize the situation is to simply address the comment by saying something like "Thanks. I'm really enjoying it."

"It's Just One (Dinner, Drink, Etc.)"

Even though your friends know you're trying to save money, they still encourage you to come out "just this once." It's hard to say no, especially if you're the type who doesn't want to miss out. So you can afford to say yes, budget some money for impulse spending. Or suggest cheaper alternatives such as game or movie nights, potlucks or lunch dates to get in quality time with friends.

Mary Beth Storjohann is a certified financial planner for Gen Y. She created Nine Steps to Workable Wealth to help you make smart choices with your money.


 

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Buy What You Know: 6 Consistent Dividend Winners in Your House

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Buy What You Know: 6 Consistent Dividend Winners in Your House
Daniel Acker/Bloomberg via Getty Images
Investing in stocks that pay dividends is a rewarding way to get both regular income from your investments and long-term growth potential. Historically, dividend-paying stocks have outperformed their non-dividend-paying counterparts, and given the low yields available from fixed-income investments like bank CDs and bonds lately, many investors have turned to dividend stocks as a way to generate cash to make ends meet.

One of the best signs of a healthy dividend stock is a track record of regular increases to dividend payments. According to historical data compiled by Dave Fish and available from DriP Investing Resource Center, fewer than 20 stocks have managed to boost their dividend payouts every single year for half a century. Those that have done so demonstrated an unparalleled ability to adapt to changing economic and business conditions and thrive, enhancing their profitability and sharing their wealth with shareholders.

There's another common piece of investing advice: Buy what you know. Well, of those top dividend stocks, a half a dozen are names that nearly everyone has heard of, and the odds are good that you have products from one or more of these companies in your house.

Procter & Gamble (PG)

Among these six dividend stalwarts, consumer giant Procter & Gamble has the longest track record of dividend increases at 58 years. The stock currently yields 3.2 percent, which is well above the average for the stock market.

P&G's stable, which includes more than two dozen billion-dollar brands, has helped generate the cash to pay dividends over its long history. With Tide detergent, Gillette shaving products, Crest toothpaste and a host of other well-known items, Procter & Gamble estimates that it serves 4.8 billion people around the world. With an average annual total return of almost 14 percent over the past 30 years, Procter & Gamble has also served its shareholders quite well.

3M (MMM)

3M has a 56-year track record of annual dividend increases. The maker of Scotch tape and Post-it Notes has a dividend yield of 2.4 percent, and late last year, it made a huge 35 percent increase in its quarterly payout. The stock has given investors solid long-term returns of more than 12 percent annually over the past 30 years.

Even though most people only think of 3M for its consumer products, the conglomerate's business goes into many other areas. You'll find 3M products used in industries ranging from aerospace and energy to health care and food safety. With a long history of innovation, 3M has traditionally found new products to drive its growth, and the company continues to work in that direction today.

Coca-Cola (KO)

Coca-Cola's products are ubiquitous across the globe, with the drink maker having sported the world's No. 1 brand for years. On the dividend front, Coca-Cola scores well too, with 52 years of consecutive dividend increases and a yield of 2.9 percent helping to give long-term shareholders a 14.5 percent average annual return since 1984.

Coca-Cola has gone through some challenges lately, with poor results in its core carbonated-beverage line especially in its home North American market as health concerns weigh on demand. Yet with its move toward bottled water, tea and other popular noncarbonated drinks, Coca-Cola is working to reestablish itself as a growth leader.

Johnson & Johnson (JNJ)

Johnson & Johnson has raised its dividend for 52 straight years, producing a 2.7 percent dividend yield and an impressive 16.5 percent 30-year average annual return. Consumers have used Band-Aid bandages, Tylenol pain relief, and its namesake baby shampoo for decades, and the company gets the majority of its revenue from products in which it has dominant market share worldwide.

Recently, though, J&J has become a pharmaceutical powerhouse, with drugs like arthritis fighter Remicade and prostate-cancer treatment Zytiga having helped contribute to the pharma segment's growth. J&J's drug business is now the largest part of the company, and all signs point to its continued importance in Johnson & Johnson's future.

Lowe's (LOW)

Home-improvement retailer Lowe's has a track record of 52 years of dividend increases, yielding 2 percent. That dividend strength has contributed to total returns of 14.5 percent annually over the past 20 years.

Lowe's isn't the biggest company in the home-improvement sector, but it has still sported impressive growth from its No. 2 position in the industry. Even as the housing market has gone through massive disruptions over the past decade, Lowe's has been able to weather the storm and find ways to sustain growth -- even as competition from rival Home Depot (HD) has pressured the company.

Colgate-Palmolive (CL)

For 51 years, consumer products company Colgate-Palmolive has raised its dividend. It now pays a yield of 2.1 percent, having given shareholders a better than 16 percent average annual return over the past three decades.

Colgate started as a soap and candle business, but it has grown into a wide-ranging company focusing on oral-care, personal-care, and home-care products, as well as pet nutrition. In particular, the company has leading global market share in toothpaste and standard toothbrushes, and Colgate has used that brand strength to boost sales of mouthwash and other related products.

Overall, these six stocks don't just pay great dividends; they also have the fundamentally strong businesses you want to see from long-term investments. For those seeking reliable dividend income, this list of well-known companies is a good place to start.

To get more dividend ideas, Motley Fool analysts put together a free list of nine dividend stocks that should be in every income investor's portfolio. You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger. He has no position in any stocks mentioned. The Motley Fool recommends 3M, Coca-Cola, Home Depot, Johnson & Johnson and Procter & Gamble. The Motley Fool owns shares of Johnson & Johnson and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola.

 

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5 Unique Strategies to Help You Retire Earlier

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Getty ImagesTaking calculated risks that are likely to pay off could improve your financial security.
By David Ning

Let's say someone made you an offer that goes something like this: He will flip a coin and if it comes out heads, you lose $5, but if it lands on tails, you win $10. You further find out that there are absolutely no gimmicks to this game, meaning that there is an exactly 50/50 chance of the coin landing on either side. You are also allowed to play an unlimited amount of times. It's easy to see here that as long as you can afford a string of losses in a row, you should keep playing because you are expected to become rich by continually making this calculated bet.

You're not likely to receive an offer like this because no one would knowingly lose money. But plenty of similar opportunities exist that will help you gain a better chance to retire well. Now, the odds are not going to be so clearly stacked in your favor, but when the expected outcome is positive in the long run, then the best course of action is to keep making the bet as long as you can afford the losses. Interested? Here are some examples of investments that are typically worth the risk:

Investing the whole lump sum is likely better than dollar-cost averaging into the market. While there are many psychological reasons to dollar-cost average into the market whenever you get a big sum to invest, investing the whole lump sum as soon as you receive it turns out to be better most of the time due to the general upward trend of equity and bond markets. There are plenty of excuses to keep a lump sum out of the market including the facts that the market is at an all-time high now, valuations seem high, the Fed could wind down its push to accelerate the economy and it's very possible that the market will tank the second you submit a buy order. However, people also had plenty of reasons not to buy into the market over the past five years, but I doubt any stock market investors have come to regret their decision or the growth their money has experienced.

Put money in Roth IRAs as early as possible in the year. Not everybody has a chunk of idle cash to deploy on Jan. 1, but everyone should try to max out a Roth account as soon as they can.
The sooner you add money into these after-tax accounts, the less taxes you will ultimately pay. I know many people try to wait until a dip in the markets before they put a chunk in their tax-advantaged accounts, but remember that markets tend to go up. You'll get a better expected outcome if you invest sooner, and the more often you do it, the higher the chance that the odds will be in your favor. This advice also holds for other types of tax-advantaged accounts including 529s, HSAs and even 401(k)s. However, when contributing to a company plan, make sure you won't miss out on part of your 401(k) match if you contribute early instead of gradually contributing from every paycheck of the year.

Perhaps it's prudent to invest more aggressively when market sentiment is extremely bearish. During the depths of a bear market, everyone will be panicking for different reasons and sell, but it's wise to delay selling until valuations recover. For those who have a stomach of steel, are properly diversified globally and who can afford to lose their money in the extremely unlikely event that equity markets go to zero, there's even a case to be made to shift some of your bonds to stocks because the long-term expected return of stocks at the low points is so high. Historically, global equity markets as a whole have always bounced back, but you will need to proceed with caution on this one because there will never be a guarantee that equities will always return to similar historic valuations.

Skip insurance on everything that you can afford to self-insure. I look at insurance with skepticism, because if people who buy insurance win out, then who would be crazy enough to offer insurance? In general, insurance has a negative expected outcome. But for accidents that we truly can't afford to pay for, then it's worth every penny. Life insurance, for most people, falls into this category. So does insuring against accidents on your health, car and house. As for other types of insurance, you really have to look at your own financial situation. Can you afford to take the loss if the unfortunate event were to occur? If so, self-insure. Otherwise, buy the insurance and be happy if you never have to collect.

Keep the mortgage, but only if you can stay the course and keep investing. It's usually a good idea to pay off your mortgage early, because too many people end up spending more when they see an inflated investment account due to not using the funds to pay off their mortgage. Plus, the psychological freedom of being completely debt free is hard to beat. Still, keeping a mortgage and using the money instead to invest has a positive expected outcome. The key is to make sure you are consistently investing the extra money in the market whether the market is at a high or a low, and that you don't end up spending more. For those special few with the discipline to pull this off, this maneuver could be worth the trouble.

It doesn't always make sense to take on more risk in order to try for a higher expected return, but those who can stomach the losses have many opportunities they could take advantage of. When you make bets that have a positive expected outcome you are likely to come out financially further ahead as long as you can afford a long string of bad outcomes.

Visit MoneyNing.com for more personal finance discussions. This site also helps readers decide whether a zero percent balance transfer card is worth signing up for and keeps a good list of helpful promotion codes.

 

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5 Tips That Will Turn You Into a Smarter Stock Investor

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Richard Drew/AP
With the major stock indexes at or near all-time highs, lots of people are thinking about investing in the market -- some for the first time, and some who pulled out and have been waiting on the sidelines since the financial crisis of 2008.

But no matter what your experience level, there are several straightforward techniques you that can help you be a more successful investor. Here are five things you should keep in mind when putting your money to work for you in the market.

1. Start By Determining Your 'Type' and Your Strategy

Before you put a dime into the stock market, it is crucial that you determine what type of investor you are and what your strategy will be.

Are you a buy-and-hold type, in the equities you buy for the long haul, or are you a more nimble investor who tries to take advantage of stocks and sectors while they are hot? The answers to these questions will be crucial in determining how you approach your investing.

If you are a long-term investor, your strategy might be to look at value stocks or growth stocks, always keeping an eye on the fundamentals of the underlying company.

If you are a shorter-term investor, you will probably want to look at technical analysis, a way to use price and volume date to determine when to enter and exit stocks.

But no matter what your style or strategy is, you should always make sure that it is one grounded in sound risk management.

2. Don't Over-Diversify

Though at first this might seem counterintuitive, too much diversification in your stock portfolio is a bad thing. With too many holdings spread out across too many sectors or industries, you will be dependent on the whole market to rise to bring a good return. And though you won't be hurt dramatically if one stock tanks, neither will you benefit it one outperforms the broad market.

Legendary investor William O'Neil, the founder of Investor's Business Daily, suggests that the average investor allocate funds among three or maybe four different stocks at most, and then be hyper-vigilant on managing those stocks.

The trick then is to cut your losers quick, let your winners run and reallocate the cash from your sales into better-performing stocks. This helps make sure you always have the majority of your investing capital in the best companies at all times.

3. Only Invest What You Can Afford to Lose

One of the secrets to successful investing in the stock market is to try to stay as unemotional about your stocks as you can. This allows you to manage your portfolio with a clear head and make changes when needed.

One of the best ways to remove emotions from your investing is to make sure that you never risk an amount that is more than you can afford to lose. The chance that you would lose all your investing capital -- even in the worst bear market -- is pretty slim, but knowing that in a worst-case scenario, you can absorb the damage and come out the other side is reassuring, and will let you sleep soundly at night.

4. Stay Away From Big Bargains

Most of us have a natural inclination to want to buy things when they are cheap. It is something that society instills in us from the time we first learn the value of money. But the stock market works in the opposite way.

Sales occur when there is too much inventory and too few buyers. That is why we look for them when buying a car, or a TV or an appliance. But in all those cases, we're buying wasting assets -- things that are guaranteed to go down in value over time.

In the stock market, what you buy are shares of a company, shares that will be more valuable or less valuable based on the demand for them in the future. Because of this, you want to buy stocks that are currently in demand and that will continue to be.

This often means buying stocks near their 52-week highs. As distasteful as that may sound to some, if you study the history of some of the best-performing stocks, many of them spent a lot of time on the 52-week high list and many were considered "expensive" before beginning their next price ascents.
Stocks near their 52-week highs are in demand and will have a better chance of staying in demand, and thus moving higher, than other stocks.

5. Educate Yourself

There is no better time than now to be an investor in the stock market in terms of the amount of educational and informational resources available.

Fundamental data on all listed companies is free on most of the major financial websites (such as DailyFinance), and you can create stock charts with all sorts of technical indicators on sites such as BigCharts and FreeStockCharts.

For the latest market news you can go to Investors, CNBC, or TheStreet, and you can even create your own personal stocks scans based on both fundamental and technical factors on sites like Finviz.

And just so you know you are not alone, you can join StockTwits -- the biggest online investing community in the world -- for free and interact with investors and traders of all levels of experience.

All of this information allows you to be a more knowledgeable investor, with a better understanding of the stock market, and a better ability to profit from it.

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! Subscribe now.


 

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A Baby Costs How Much in Those First Few Years?

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smiling baby looking at camera under a white blanket/towel
Iurii Sokolov
Babies bring a ton of joy and wonder into our lives -- and a ton of extra expenses.

The average cost to raise a child, over the course of 18 years, is around $241,000 for a middle-income couple, according to the U.S. Department of Agriculture. (This doesn't include the cost of college, which is another article in itself). Let's break down basic baby costs in two categories: what you need at the beginning and what you'll be spending in the months that follow:

Upfront Costs
  • Childbirth. The costs of pregnancy, delivery and postnatal care are huge. Even if your insurance pays for part of it, you'll end up on the hook for your deductible (which may range from $500 to $3,000), plus your co-insurance (with can be 20 percent to 30 percent of the total), plus office visit co-pays (with can cost $30 to $75 per office visit.) Review your health insurance policy to see what is covered and what you must pay out-of-pocket, but expect the following price ranges for overall cost, according to Parenting.com: vaginal delivery ($7,000-$10,000), C-section delivery ($10,000-$12,500); delivery with complications (up to $250,000-$300,000)
  • Mementos. You might want a few keepsakes from your baby's birth, but remember that posting pictures from your phone on Facebook (FB) is free. Consider these price estimates: birth announcements ($50), baby book or scrapbook ($25) and photo printing ($130)
  • Insurance. You'll have two major insurance needs: health care for the baby, plus term life insurance for yourself. Adding a baby to a family health insurance plan will cost in the neighborhood of $200 to $450 a month. The cost of taking out life insurance for yourself will depends on your age, health and the amount of coverage you desire. But as an example, a healthy non-smoking male can get $500,000 in coverage for around $350 to $450 a year.
  • Supplies. Are you ready for an incredible list of everything you'll need when the baby arrives? Assuming you purchase everything new, here are the price estimates: furniture ($1,000-$3,000 for crib, changing table, rocking chair and accessories); bedding, blankets and mattress ($150-$200); bassinet ($100); stroller ($100); baby carrier ($20-$50); car seat ($100-$200); diaper bags ($50); feeding supplies ($90 for bottles and nipples, bibs, burp cloths and bottle brush); highchair ($100); baby monitor ($50); cleaning and toiletries ($50 for bathtub, towels and washcloths and accessories); play yard ($80); bouncer ($40); play mat ($50); mobile ($30); childproofing supplies ($45); and safety gate ($120). According to Parenting, new parents typically shell out $6,000 in total for supplies, though you could pull it off for $2,000 or less if you're a careful shopper.
Monthly Costs

Baby is here! Now here's what you can expect to pay going forward, according to a combination of estimates from BabyCenter.com and WhattoExpect.com:
  • Diapers. Many parents report that diapers are one of the biggest sticker shocks when their first baby arrives. Here are the costs: disposable diapers ($30 to $85 a month), diaper pail ($25), cloth diapers ($20 a month), diaper service ($75 a month) and cleaning wipes ($20 a month).
  • Food. You may or may not need baby formula, depending on your health and choices, but your child will start eating solid food after roughly six to eight months. Expect these costs: formula ($60-$100 a month); nursing bras ($50-$75 each); breast pump ($50-$250); nursing pillow ($30); milk storage bags, breast pads, ice packs and accessories ($75); baby food once your baby starts solid food ($50-$100 a month); and plates, bowls, sippy cups, utensils once on solid food ($45 one-time cost).
  • Day care. Day care when your child is a newborn will cost more than it will in later years since babies require extra care and attention. Depending on where you live, annual day-care costs can be $5,000 to $20,000 a year.
  • Clothes, toys, books, etc. These items are actually among of the cheapest, in part because they're mostly discretionary. Plan on spending $30 to $80 a month, for a reasonable quantity of clothes and other items.
Helpful Hints

By any measure, these are worrying numbers. And if you and your spouse decide that one of you should look after the child full-time, thus becoming a one-income family, the numbers become even more daunting.

One of the best ways to defray the costs of having a baby is by tapping into your network of family and friends. Can your brother, sister or your friends give you items -- like a crib, stroller, toys, books or some clothing that their own children have outgrown? Would grandma or grandpa be willing to watch the kids, even just one or two days per week, while you're at work?

Paula Pant ditched her 9-to-5 job in 2008. She's traveled to 32 countries, owns seven rental units and runs a business from her laptop. Her blog, Afford Anything, is a gathering spot for rebels who want to ditch the cubicle, shatter limits and live life on your own terms -- while also building wealth, security and freedom.

 

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Survey: Americans' Pessimism Over Economy Rises

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George washington lurking behind paper dollar money.
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By JOSH BOAK

WASHINGTON -- Americans are more anxious about the economy now than they were right after the Great Recession ended despite stock market gains, falling unemployment and growth moving closer to full health.

Seventy-one percent of Americans say they think the recession exerted a permanent drag on the economy, according to a survey being released Thursday by Rutgers University. By contrast, in November 2009, five months after the recession officially ended, the Rutgers researchers found that only 49 percent thought the downturn would have lasting damage.

And that was when the unemployment rate was 9.9 percent, compared with the current 6.2 percent.

"They're more negative than they were five years ago," said Rutgers public policy professor Carl Van Horn.

The slow pace of improvement during most of the recovery, now in its sixth year, has eroded confidence and slowed a return to the pay levels that many enjoyed before the economy suffered its worst collapse since the 1930s. About 42 percent of those surveyed say they have less pay and savings than before the recession began in late 2007. Just 7 percent say they're significantly better off.

The survey results dovetail with estimates that the median household income was $53,891 in June, according to Sentier Research. That's down from an inflation-adjusted $56,604 at the start of the recession.

Each year of subpar growth has compounded the anxieties of many Americans. In contrast to the robust snapbacks that coincided with most economic rebounds, this recovery proved tepid well after the recession had ended. Consumers struggled with an overhang of mortgage debt and the risk of layoffs for much of the recovery. A majority of those surveyed say they fear that job security has all but disappeared and that they'll have little choice but to work part time during retirement.

"No current worker had ever experienced this before," Van Horn said. "This recession was everywhere."

Researchers at Rutgers' John J. Heldrich Center for Workforce Development surveyed online a national cross-section of 1,153 adults between July 24 and August 3. The margin of error was plus or minus 3 percentage points. The survey is part of a broader series of polls taken over multiple years to study the consequences of the recession for workers.

Recent evidence of economic strength has done little to brighten most Americans' outlooks. The Standard and Poor's 500 stock index (^GPSC) has surged more than 170 percent since bottoming in March 2009. Yet only 14 percent of the respondents said the gains have affected them a lot -- a sign of either meager investments or the extent to which families unloaded their stock holdings near the bottom of the market.

Employers have added an average of more than 244,000 jobs a month since February, a vigorous pace that recalls the dot-com era of the 1990s. Over the past 12 months, the unemployment rate has dropped more than a full percentage point from 7.3 percent to a nearly normal 6.2 percent.

This month, job growth helped propel the Conference Board's consumer confidence index to its highest reading since October 2007. The index often tracks the unemployment rate.

The gap between the index and the Rutgers survey likely reflects the type of questions posed by the university researchers. They asked about family finances, job satisfaction, retirement plans and the specific consequences of the recession. By contrast, the confidence index asks about broader perceptions of business and employment conditions and plans to buy autos, homes and household appliances.

 

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Workers Cheer Return of Ousted Market Basket CEO

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Supermarket Feud
Steven Senne/APMarket Basket employees hug after watching a televised speech by restored Market Basket chief Arthur T. Demoulas.
TEWKSBURY, Mass. -- Hours after reaching an agreement to buy the company, the restored chief of the New England's Market Basket supermarket chain celebrated with workers in a rally at headquarters Thursday, saying he loved them and appreciated their efforts in helping him regain control.

"Seeing all of you here today is like seeing a little piece of heaven on earth," Arthur T. Demoulas told several hundred workers Thursday morning in Tewksbury, some of whom shouted "We love you" and "Welcome back" during a speech that sometimes resembled a political victory speech, and often took on the tones of a rock concert.

"I am in awe of what you have all accomplished," he said.

Arthur T. Demoulas was ousted in June by a board of directors controlled by rival cousin Arthur S. Demoulas, causing workers to stage protests. Hundreds of warehouse workers and drivers refused to deliver food, leading to empty shelves and tens of millions in lost revenue. Customers stopped shopping at Market Basket, with some even taping their receipts from competitors in Market Basket store windows.

Demoulas on Wednesday announced that an agreement has been reached for him to buy for $1.5 billion the 50.5 percent of the company owned by Arthur S. Demoulas and his allies.

Arthur T. on Thursday described the workers' six-week action as an insurgence.

"The public watched in awe and admiration because you empowered others to seek change," he said.

Tractor-trailers bearing the Market Basket logo and laden with the tons of food it will take to restock the chain's 71 stores in Massachusetts, New Hampshire and Maine, as well as vendor vehicles, pulled up to loading docks before business Thursday.

'Thrilled' Workers

At stores across the region, workers, some of whom have gone weeks without paycheck, showed up eager for work, while customers returned even though the stores haven't yet been fully stocked.

"I am thrilled!" said Shannon Mort, a cashier at the West Bridgewater store's cafe.

Store manager John Gordon, who has worked for Market Basket for 42 years, said customers were already returning.

"I knew we had loyal customers, but for them to stay away like that to support us was impressive," he said.

Kim Gray, who said she's been a Market Basket customer for years but had boycotted the chain during the dispute, went to the West Bridgewater store to shop shortly after 8 a.m. Thursday after she heard that "Arthur T." had finalized a deal to buy the company.

"Market Basket is like a family. I stayed away in solidarity with the workers -- my whole family did," she said. "I'm happy to be back."

The company's two current CEOs, Felicia Thornton and Jim Gooch, will remain in place until the deal is closed, within the "next several months."

Brokered Agreement

The crisis even prompted the intervention of Massachusetts Gov. Deval Patrick and New Hampshire Gov. Maggie Hassan, both Democrats.

"We are delighted that the parties have reached agreement on terms of sale and resolution of operating authority, so that employees can return to work and customers will once again be able to rely on these stores to meet their needs," the governors said in a joint statement.

More than 160 mayors and legislators in Massachusetts and New Hampshire signed petitions agreeing to boycott Market Basket. The stores, usually jam-packed with shoppers attracted by the chain's low prices, have had only a trickle of customers for weeks.

Business analysts said the worker revolt was remarkable at a family-owned, non-union company, particularly because the workers weren't seeking higher wages or better benefits, but instead were calling for the return of their CEO. The workers credit Arthur T. Demoulas for treating them like family, keeping prices low and leading the company's success.

Infighting in the Demoulas family has gone on for decades, but this was the first time the family's squabble had such a deep impact on Market Basket stores.

Market Basket stores have long been a fixture in New England. The late Arthur Demoulas, a Greek immigrant who was the grandfather of Arthur T. and Arthur S., opened the first store in Lowell nearly a century ago.

 

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JPMorgan Investigates Possible Cyberattack Probed by FBI

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FBI investigating reports of attacks on US banks
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By Jim Finkle and David Henry

JPMorgan Chase (JPM) is investigating a possible cyberattack and working with law enforcement authorities to determine the scope, a company spokeswoman said Thursday morning.

The bank was taking additional steps to safeguard sensitive or confidential information, though it didn't see unusual fraud activity at this time, company spokeswoman Trish Wexler said.

JPMorgan disclosed the investigation after the FBI said Wednesday evening it was investigating media reports earlier in the day that several U.S. financial companies have been victims of recent cyberattacks.

"We are working with the United States Secret Service to determine the scope of recently reported cyberattacks against several American financial institutions," FBI spokesman Joshua Campbell said in a statement late Wednesday.

Campbell didn't name any companies or give more details, although media reports had named JPMorgan as one victim of the attacks. Other potential victims have yet to be named.

Officials with the Secret Service couldn't be reached for comment.

JPMorgan launched its investigation after malicious software was recently discovered in the bank's network, signaling it was the victim of a cyberattack, two people familiar with the incident told Reuters. The bank has yet to determine the severity, said the sources, who asked not to be identified because they weren't authorized to speak publicly about the matter.

Bloomberg News reported Wednesday that Russian hackers were believed to have carried out cyberattacks against JPMorgan and another unnamed U.S. bank in mid-August, resulting in the loss of sensitive data. Authorities were investigating whether the breaches were linked to recent attacks on major European banks, Bloomberg reported.

The New York Times reported late Wednesday the networks of JPMorgan and at least four other U.S. banks had been infiltrated in a string of coordinated attacks this month, citing four people familiar with the investigation.

The attackers stole large quantities of data, including checking and savings account information, though their motivation was not yet clear, the Times reported, adding that several private security firms were hired to conduct forensic reviews of infected networks.

Reuters wasn't able to independently verify the details in the Bloomberg and Times reports.

-With additional reporting by Mark Hosenball and Doina Chiacu.


Hackers Target PlayStation Servers, Threaten SOE Exec

 

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