Market Wrap: More Records Fall Thanks to Good Economic News

September 18, 2014, 10:12 am

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Filed under: Market News, Investing

By MATTHEW CRAFT

NEW YORK -- More encouraging economic news and friendly signals from the Federal Reserve cheered investors on Thursday, as the stock market climbed to another record high.

The gains came a day after the Fed made clear that it's in no hurry to raise a key bank lending rate, easing a major concern for the stock market.

Eight of 10 industry groups in the Standard & Poor's 500 index rose, led by financial stocks.

"The question isn't 'Why are we up today?'" said Dan Veru, chief investment officer at Palisade Capital Partners in New York. "It's 'Why aren't we up a lot more?' What you're seeing is the U.S. economy growing at a modest pace, not too hot and not too cold."

Veru said it's an environment that allows the Fed to stick to a policy that coaxes businesses to borrow and spend and could fuel further gains for stocks.

The S&P 500 and Dow Jones industrial average closed at all-time highs. The S&P 500 index (^GPSC) gained 9.79 points, or 0.5 percent, to 2,011.36. The Dow (^DJI) surged 109.14 points, or 0.6 percent, to 17,265.99. The Nasdaq composite (^IXIC) climbed 31.24 points, or 0.7 percent, to 4,593.43.

The S&P Financials sector rose 1.1 percent. Bank profits could rise if short-term rates stay low while the rates they charge on longer-term loans creep higher.

The day began with good news about the economy. Fewer Americans filed first-time claims for unemployment benefits last week, according to the Labor Department. Weekly applications fell to 280,000, well below economists' forecasts. The four-week average, a less-volatile measure, also dropped.

Major markets in Europe headed higher as voters in Scotland decided whether to break from the United Kingdom. Germany's DAX advanced 1.4 percent, and France's CAC 40 gained 0.8 percent. Britain's FTSE 100 added 0.6 percent.

Scotland opened polling stations on Thursday for a referendum on whether the country should leave the United Kingdom of Great Britain and Northern Ireland to become an independent state. Opinion polls have suggested the "Yes" campaign favoring independence is neck and neck with the "No" campaign that wants Scotland to stay in the U.K.

"A 'yes' vote is likely to weigh heavily on the sterling and equities," said IG strategist Stan Shamu in a commentary. "A 'no' vote should result in a relief rally and is likely to be positive for the sterling and equities."

The pound was trading at a two-year high against the euro at €1.27, and holding steady against the dollar at $1.64.

On Wednesday in the U.S., the Fed maintained its stance of keeping short-term interest rates near zero for a "considerable time." Investors had speculated that the Fed might hint at an earlier start for rate hikes.

Among companies making big moves on Thursday, Rite Aid (RAD) plunged 19 percent after it cut its profit forecasts for the full year, laying part of the blame on higher costs for generic drugs. The drugstore chain still expects sales of $26 billion this year. Rite Aid's stock fell $1.23 to $5.41.

ConAgra (CAG) said its quarterly profits nearly tripled, sending its stock up $1.47, or 5 percent, to $33.48. Sales for the company behind Chef Boyardee canned pasta and Hebrew National hot dogs were flat, but other costs fell.

Alibaba Group is expected to wrap up its mammoth initial public offering later Thursday, then make its debut on the New York Stock Exchange on Friday under the symbol "BABA." The Chinese e-commerce company could raise as much as $21.8 billion from institutional investors, making it the largest IPO on record in the U.S.

Elsewhere, Hong Kong's Hang Seng finished 0.9 percent lower and Japan's Nikkei 225 gained 1 percent as the yen traded at a six-year low against the dollar. Markets in mainland China, India and Southeast Asia also rose.

In commodity trading, prices for precious and industrial metals fell broadly. Gold dropped $9 to settle at $1,226.90 an ounce, and silver sank 22 cents to $18.52. Copper dropped 5 cents to $3.09.

The price of oil fell on expectations of a quick return of Libyan production and continuing signals of lower global demand. Benchmark U.S. crude fell $1.35 to close at $93.07 a barrel in New York. Brent crude, a benchmark for international oils used by many U.S. refineries, fell $1.27 to close at $97.70 in London.

In other energy trading, wholesale gasoline fell 0.8 cent to close at $2.561 a gallon. Heating oil fell 3.3 cents to close at $2.712 a gallon. Natural gas fell 10.3 cents to close at $3.910 per 1,000 cubic feet

AP Business Writer Youkyung Lee contributed from Seoul, South Korea.

What to Watch Friday:

• The Conference Board releases leading indicators for August at 10 a.m. Eastern time.

 

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It's Time to Stop Feeling Guilty About Your Finances

September 18, 2014, 11:00 pm

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Filed under: Personal Finance, Credit Cards, Retirement Plans

Let's be honest. Most people would rather talk openly about their sex lives with a stranger than share the status of their finances.

While a variety of emotions, backgrounds and experiences contribute to our uneasiness to discuss money, feeling guilty and insecure about it generally boils down to a lack of clarity about what's going on with it and a lack of education as to how to fix or get it on track once we have identified the issues.

Ultimately, there's no sugar coating it. If you want to start making smart choices with your money, you have to take action. You won't lose weight by doing nothing; you won't earn a college degree by zoning out in the back row of your classes; and your finances won't fix themselves.

If you want to get rid of your money guilt and insecurity once and for all, follow these steps.

Determine Where You Want to Make Progress

The overarching subject of money covers a multitude of complicated and ofttimes stressful areas: budgets, net worth, spending patterns, insurance, retirement, credit and more. It's no wonder it's overwhelming to think about getting it all under control. How does one even know where to start?

Your first instinct may be to dive in and try to tackle it all in one go, but your best bet is to handle this as you would any other large undertaking: Break it down into bite-size pieces. Where is your attention needed most? Do you most need to get better at tracking spending? Has it been a while since you've checked in on your investments? Do you have too much money sitting in cash? Should you be saving more? Have you set up your retirement accounts? Is there a better strategy you could be using to pay down your credit cards?

Pick two or three areas that you want to make progress on first, and commit to working on those over the next few months. Once you've gotten those areas on track -- and on something closer to cruise control -- you can move on to others.

Create a Goal for Each Area

Once you've determined the areas you want to work in, set goals for yourself.

Never mind the general goals of "I want to pay off my debt" or "I want to start building my emergency fund." That's the same as saying "I'm going to lose weight." Great -- but how much weight are you planning on losing? At what rate? And by when?

It's hard to celebrate your intermediate wins when you don't have a place to measure progress. Skip the hassle of creating big-picture goals for yourself and drill down into what you specifically want to accomplish in each area and when you want to do it by. Your goals should be quantified and measurable so you can celebrate your progress. This workbook will walk you through goal setting.

Schedule Your Money Time

A good way to start kicking your guilt to the curb is to start paying more attention to your money. Schedule time each week to sit down and review your progress and evaluate areas where there may be room for improvement.

Set a recurring date on your calendar and include an agenda in the notes section. Your agenda may include the following:

• Review expenses and savings. Which categories are you above and under on?
• Track progress on goals and paying down debt. Did you add to balances, pay down debt or stay even for the month?
• Make adjustments. Where do you need to change to stay on track?
• Celebrate wins.

Establish Your Values and Priorities

Money guilt can stem from a variety of factors, but what typically brings on this guilt is the fact that we're not using our money to live a life we value. We know that by not tracking our spending or saving for retirement or even that big vacation, our money isn't going towards those things we value or prioritize in our lives.

There's a famous quote from James W. Frick where he says "Don't tell me where your priorities are. Show me where you spend your money and I'll tell you what they are."

Think about your finances. Is it the tangible or intangible things that motivate you? Do you get excited about possessions or experiences? What are you saving for right now?

• How will reaching your goals make you feel? Secure? Free? Powerful?
• What's the ultimate reason behind your desire to earn more, save more or experience more? How does it translate into your life?

Keeping your "why" in mind will help to keep your finances in line when faced with the tough decisions.

Money is a tough topic to tackle, and it's OK to be uncomfortable with it. What's not OK is stick your head in the sand. Take small steps, schedule focus time, set clear-cut goals and you'll likely find that the more attention you pay to working through and out of the issues, the better and stronger you'll feel about your money.

​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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Skip the Contract: Buying the iPhone 6 Outright Is a Better Deal

September 18, 2014, 11:00 pm

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Filed under: How to Save Money, Cell Phones, Android, iPhone, Consumer Electronics

The scourge of the Old West was the flimflam man, who drove his horse and carriage from town to town and -- with his city-slicker clothes and fast-talking ways -- conned the poor unassuming townsfolk into parting with their hard-earned money for fantastic elixirs and magical amulets.

A case could be made that the major cell carriers have become modern versions of the flimflam man, using slick web interfaces and byzantine terms of service agreements in their quest to separate consumers from their cash. Point in case, the offer to "discount" the price of a new phone, in exchange for signing a two-year contract.

Let's say that you have decided to upgrade to the new 16GB Apple iPhone 6, with Verizon (VZ) as your carrier. That model retails for $649 without a contract but drops to $199 with the contract. This is referred to as subsidizing the cost of the phone, implying that Verizon is eating the extra cost in exchange for your continued business.

A flimflam man would call it "the hook." If you look deeper into the terms and do the math, it turns out the buying the phone outright -- at full retail price without a contract -- is the better move.

Let's Do the Math

First, understand that even if you buy the subsidized version at $199, you still pay sales tax on the full retail value of $649, so there is no advantage there. That means the savings between subsidized and outright purchase is $450. But it is in the contract where the number go south for the consumer.

With a subsidized phone and a two-year contract, the minimum you can pay for Verizon's recommended plan that allows unlimited talk and text and 2GB of data is $90 a month. However, owning your phone outright, you can get that same plan for a single user at $50 a month.

But does buying my iPhone 6 means I have to come up with the full price of the phone upfront?

That extra $40 a month times the 24-month length of the contract comes out to $960. Subtract the $450 savings from the subsidized phone, and you are paying $510 extra. And as a bonus, you have no contract obligation, which means you can change carriers anytime you want without paying a penalty, which can run up to $300.

But does buying my iPhone 6 means I have to come up with the full price of the phone upfront? No. Both Verizon and T-Mobile (TMUS) give you the option to finance your phone over the life of the contract at a 0 percent interest rate, with no money down.

In almost all cases, no matter what type of phone you want or what carrier you are with, purchasing the unsubsidized phone makes better financial sense because service plans have come down dramatically in price and -- due to competition -- will continue to do so. And you can find even deeper-discounted plans by going with off-brand names like Cricket, which use the same cellular network as AT&T (T).

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

 

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Why Even the Righteous Should Invest in Sin

September 18, 2014, 11:00 pm

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Filed under: Stock Picks, Tobacco, Wall Street Watch, Stocks, Investing

CVS Health's (CVS) move this month to stop selling tobacco products in its 7,700 retail locations might seem like a win for anti-smoking advocates, but it may be a big loss for CVS shareholders.

Pundit Jim Cramer had this comment in Feburary after the initial bump in CVS stock price following the announcement. "This is not a market that's saying, 'You know what? I am going to buy CVS because they are good citizens.' It just doesn't work like that. That's a nice world, like Oz. Oz is terrific. It might make money in Oz, but Wall Street is not Oz."

Though Cramer swears he has never smoked a cigarette, he says he is not in the business of telling people how to lose money, and he feels that cutting out tobacco sales will hurt CVS shareholders.

Many Synonyms for Sin

Both the decision and Cramer's reaction highlight a long-running debate among investors: Should right-minded investors buy "sin" stocks? Typically these are companies involved in what can be considered immoral or unethical activities, the most well-known being tobacco-related companies like Altria (MO), Philip Morris (PM) or British American Tobacco (BTI).

But of course, avoiding sin stocks is not as easy as just staying away from tobacco companies.

According to the federal National Institute on Alcohol and Alcoholism, 17 million adults in the U.S. have alcohol-use disorders. Almost 88,000 people die annually from alcohol-related causes -- not including drunk driving -- making drinking the third-most-preventable cause of death. In addition, the Centers for Disease Control have estimated that alcohol misuse costs the U.S. $223.5 billion each year.

So if you're avoiding sin stocks, then Anheuser-Busch InBev (BUD), Molson Coors (TAP), Diageo (DEO) and about 20 other alcohol-related companies should certainly be on your "don't buy" list.

Gambling and Guns

How do you feel about gambling? Statistics estimate there are 2 million pathological gamblers and 4 million to 6 million problem gamblers in the U.S. If that bothers you, then you might want to take Ceasers Entertainment (CZR), Las Vegas Sands (LVS), Wynn (WYNN) and similar stocks off your "buy" list.

Have an issue with guns? There goes Smith & Wesson Holdings (SWHC) and Sturm, Ruger & Co. (RGR).

Feel like there is too much war in the world? Might want to avoid Northrup Grumman (NOC), United Technologies (UTX) and Raytheon (RTN), all of whom have huge contracts with the military.

Depending on what your definition of "unethical and immoral" is -- and how true you are to your beliefs -- the list might include these sectors and companies:

• Finance (high-interest loans to low-income consumers): EZCorp. (EZPW), Cash America International (CSH) and World Acceptance (WRLD).
• Fast food (high-calorie food contributing to the obesity epidemic): McDonald's (MCD), Burger King Holdings (BKW) and Yum! Brands (YUM).
• Medicine (contraceptives that offend some religious beliefs): Pfizer (PFE), Eli Lilly (LLY) and Church & Dwight (CHD).
• Crime (construction and management of U.S. prisons): Corrections Corp of America (CXW), The GEO Group (GEO) and Avalon Correctional Services (CITY).
• Soft drinks (sugary beverages possibly linked to increase in childhood diabetes): Coca-Cola (KO), Pepsico (PEP) and Dr Pepper Snapple Group (DPS).
• Sex (strips clubs, pornography and Internet hook-up sites): Private Media (PRVT) and Rick's Cabaret International (RICK)

And if you look hard enough at almost any company, it can have a connection to a potentially "sinful" activity, from the way that Starbucks (SBUX) gets its coffee beans to the way the Goldman Sachs (GS) underwrote subprime mortgages.

Sorry, but Wall Street Doesn't Care

Though the desire for investors to be socially responsible is admirable one, Wall Street and the stock market are amoral: unconcerned about matters of "good" or "bad," and solely focused on what's profitable. And the irony is that the underlying companies of most sin stocks are quite profitable.

By their nature, the products these types of companies produce tend to draw a steady stream of customers, even in bad economic times, which makes them almost recession-proof.

Sin stocks also tend to be undervalued at times because institutional investors and analysts tend to shy away from them, even though they often outperform the broad market in the long run. As unpleasant as it may seem, the fact is, sin stocks are usually sound investments.

This last point is clearly illustrated in the chart above, which tracks the 10-year historical performance of The Barrier Fund (VICEX) -- formerly The Vice Fund -- which only holds sin stocks. The blue line plots the fund's performance against both the S&P 500 Index (^GPSC), in green, and the iShares MSCI USA ESG (KLD) Select Fund, in red, which only invests in socially responsible companies. It is easy to see that over the last decade sin stocks have dramatically outperformed both.

Using moral or ethical criteria to analyze a market of stocks that doesn't recognize either can hinder your ability to put together a winning portfolio.

Even when a large scale tragedy is linked to a specific type of sin stock, it rarely keeps them down. For example, in the aftermath of the Sandy Hook Elementary School shooting in December of 2012, Smith & Wesson shares fell 23 percent in a matter of days. But just two months later, it had regained all its losses and in a little over six months was hitting 52-week highs.

All investors have the right to decide which stocks they want to buy and which ones they want to avoid, but at the end of the day, investing is about making money. Using moral or ethical criteria to analyze a market of stocks that doesn't recognize either can hinder your ability to put together a winning portfolio.

When you avoid buying a sin stock it doesn't affect the company in question and ultimately is an empty gesture. Instead, why not "use" those sin stocks and create some good? A strategy that -- when warranted -- takes advantage of their earnings power and historical performance can be a way to improve your profits, which you can then take a portion of and donate to charities or causes you believe in.

Brian Lund has developed a list of "20 Books Every Investor Should Know About."

 

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The Must-Know Tactic to Boost Your Social Security Benefits

September 18, 2014, 11:00 pm

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Filed under: Retirement, Personal Finance, Early Retirement, Retirement Living, Social Security

An innovative strategy called "file and suspend" can help you get more Social Security benefits for your family and give you the chance to increase those benefits down the line.

The strategy takes advantage of two aspects of the Social Security system to get your family more benefits than you'd otherwise be entitled to receive. It allows you to get spousal benefits for your spouse early in retirement, but it also allows you to let your own benefits based on your work history grow, providing some key long-term advantages.

As background, married couples are entitled to receive either regular retirement benefits based on their own work history or spousal benefits based on the work history of their spouse. In general, one spouse can claim a spousal benefit equal to half of the regular retirement benefit of the other spouse. You're not entitled to both, so it's important to decide which will give you the better deal. For couples in which both spouses earn roughly the same amount, usually regular retirement benefits make the most sense. For single-earner families, spousal benefits play a much more vital role.

First You File; Then You Suspend

The problem is that you're not allowed to claim spousal benefits unless your spouse has filed for a regular retirement benefit. That's where the "file" part of the file and suspend strategy comes in: By having the higher-earning spouse file for benefits, it allows the other spouse to claim a spousal benefit.

Next, the "suspend" part of the strategy comes into play. If the higher-earning spouse simply files without suspending, then the family will receive two benefits: the regular benefit of the higher earner and the lower spousal benefit of the other spouse. In some cases, that works fine.

But in other cases, the higher-earning spouse might prefer to delay taking Social Security until later in retirement. From age 66 to 70, each year you wait adds 8 percent to your monthly benefit amount. Moreover, it also adds the same amount to what your spouse will receive in survivors benefits after you pass away. Those increases last for the rest of your joint lives, making it worth the delay for many couples.

As long as you're at full retirement age or above -- currently age 66 -- you can file for your benefit but immediately suspend it, allowing it to keep growing despite the fact that your spouse is receiving a spousal Social Security benefit. Later on -- but no later than age 70, because that's when the credits you get for delaying top out -- you can start receiving your benefit at its higher future amount.

Don't Get Greedy

One thing many people get confused about is why both spouses shouldn't file and suspend. On its face, you'd think you could get double benefits that way.

But Social Security doesn't let you double-dip. Only one spouse can use the file and suspend strategy, so figuring out which one does your family the most good is critical to getting the most from the strategy.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google Plus. Motley Fool retirement experts have created a free report on a simple strategy to take advantage of a little-known IRS rule to boost your retirement income.

 

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Alibaba Stock Soars 38 Percent in High-Demand IPO

September 19, 2014, 12:08 am

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Filed under: Company News, NYSE, China, Internet, IPOs

By Liana B. Baker, Jessica Toonkel and Ryan Vlastelica

NEW YORK -- Alibaba Group Holding Ltd's shares soared 38 percent in their first day of trading on Friday as investors jumped at the chance for a piece of what is likely to rank as the largest IPO in history, in a massive bet on China's burgeoning middle class.

It was an auspicious debut for the Chinese e-commerce company, which was founded by Jack Ma in his apartment in 1999 and now accounts for 80 percent of online sales in China.

About 100 people gathered outside the New York Stock Exchange at Wall and Broad Streets, many of them Chinese tourists with cameras, and they cheered and snapped photos when Ma exited the building with the kung fu star Jet Li.

The stock opened at $92.70 shortly before noon ET (1600 GMT) and quickly rose to a high of $99.70, before paring gains to close at $93.89. Some 271 million shares changed hands, more than double the turnover on Twitter Inc's first day last year, although still short of volume for the General Motors Co and Facebook Inc IPOs.

"This is the most anticipated event I've ever seen in my 20-year career on the floor of the NYSE," said Mark Otto, partner with J. Streicher & Co, who trades on the NYSE floor. "I think today's move is sustainable: The company is profitable, unlike some of its competitors, and it is a way for traders to tap into the Chinese growth story."

The pricing of the IPO on Thursday initially raised $21.8 billion for Alibaba. Scott Cutler, head of the New York Stock Exchange's global listing business, told CNBC that underwriters would exercise their option for an additional 48 million shares, to bring the IPO's size to about $25 billion, making it the largest initial public offering in history.

But a source close to the matter said the underwriters would make a final decision on whether to exercise the option over the next week or two, based on how the shares trade over the next few sessions.

Alibaba is nearly unknown to most Americans but is ubiquitous in China. The company, which operates China's largest Internet shopping destination, Taobao, and retail site Tmall.com, earned $3.7 billion in the 12 months ended March 31, 2014, up about $2 billion from the prior 12-month period.

At its closing share price on Friday, Alibaba has a market value of $231 billion, exceeding the combined market capitalizations of Amazon and eBay, the two leading U.S. e-commerce companies.

Alibaba is valued at 39 times its estimated earnings per share for its current fiscal year, which ends in March. That is right in line with Facebook's valuation of 39 times forward earnings but nowhere near the lofty valuation of Amazon.com's multiple of 264, according to Thomson Reuters Starmine data.

Trying to Chart the Stock's Future

The future path of Alibaba's shares is truly uncharted territory.

"It's very difficult to predict," said Stephen Massocca, managing director at Wedbush Equity Management LLC in San Francisco. "Is it going to trade based upon its true fundamental value, or is it going to become one of these cult stocks a la Tesla or Solar City, or some of these names where there really isn't a fundamental grounding to the valuation?

"And it's very difficult to see what bucket these guys are going to fall into," Massocca added. "My guess is there's a very high likelihood it does fall into this bucket, which would lead you to believe it does trade higher. But if you were to base it on a fundamental valuation, I would call it slightly overvalued at this price."

Morningstar analyst RJ Hottovy said that while he expected Alibaba to further grow revenues, it was entering an aggressive new investment stage that would likely pinch margins over the next couple of quarters.

Ma, a former English teacher who is now the company's executive chairman, boasts a personal fortune of more than $14 billion on paper, vaulting him into the ranks of such tech billionaires as Bill Gates and Jeff Bezos. The deal is also expected to make millionaires out of a substantial chunk of Alibaba's managers, software engineers and other staff.

The rise in the stock exceeds the average gain by new IPOs on U.S. exchanges of late. In the second quarter, the average first-day gain was 9.2 percent, according to Renaissance Capital IPO Intelligence. Underwriters usually aim for a gain of 10 percent to 15 percent on the first day.

Twitter last year saw its shares surge 73 percent on their first trading day.

Demand was intense among retail investors. J.J. Kinahan, chief market strategist at retail brokerage TD Ameritrade Holding Corp, said the company received customer orders amounting to about 70 percent of what it saw for Facebook and about three times the customer orders it had for Twitter's IPO.

Assuming underwriters elect to sell additional shares, the company's initial public offering will become the largest in history, surpassing listings by Agricultural Bank of China Ltd's in 2010 and by ICBC, another Chinese lender, in 2006.

What Happened in Hong Kong

Alibaba Group's orange banners were festooned around the exchange, with its logo on NYSE computer screens. Ma watched several long-time customers ring the opening bell at 9:30 a.m.

"I don't want disappointed shareholders, I want to make sure they make money," Ma said of the pricing, on CNBC, adding that he worries most about keeping customers happy.

Similar euphoria greeted Alibaba.com when its stock debuted on the stock exchange in Hong Kong in November 2007 on the eve of the global financial crisis. The stock more than tripled on day one, but five years later Ma delisted the company at the IPO price after failing to impress investors.

The NYSE held extensive tests ahead of the hotly anticipated offering to ensure it would be able to handle heavy trading volume. A call on Friday with periodic updates on order matching and trading continued until about noon ET.

"We've had a lot of major IPOs, and when you have one it's always the biggest until the next biggest one comes along," said

Ted Weisberg, floor trader with Seaport Securities in New York, who has been a member of the NYSE for 45 years.

The deal allows cornerstone Alibaba investors such as Japan's Softbank Corp and Yahoo Inc to profit from getting in on the ground floor at the company. Yahoo sold some $8 billion worth of shares in the offering, leaving it with a 16.3 percent stake. Shares of Yahoo were hit on Friday, dropping 2.7 percent.

Softbank is not selling for now and will be left with a 32 percent stake, making it the largest single shareholder.

In a measure of the mystique the Alibaba name carries with investors, shares in advertising company Chinanet Online Holdings Inc soared 92 percent to $1.96 after it announced discussions were under way with Alibaba to offer digital advertising services to its online shopping site Taobao.

(Reporting by Liana Baker, Ryan Vlastelica and Jessica Toonkel; additional reporting by Caroline Valetkevitch; writing by David Gaffen and Dan Wilchins; Editing by Steve Orlofsky and Leslie Adler)

 

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Has Apple Lost Its 'Cool'? Some Consumers Say, 'Yes'

September 19, 2014, 12:57 am

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Filed under: Apple, Mobile Technology, Cell Phones

By Malathi Nayak

SAN FRANCISCO -- Holly Riggle, a 29-year-old white-collar worker from Ohio, is just the kind of everyday customer Apple (AAPL) would love to have for its new iPhone 6, which launches Friday.

But Riggle is sticking to her Android smartphone, calling Apple less "original" than it was under former chief executive Steve Jobs. She's one of the 16 percent of respondents in a Reuters/Ipsos poll who said Apple had become somewhat or much less cool in the last two years.

By comparison, some 11 percent of respondents said that Android had lost some sheen in the same time frame. In a similar poll a year ago, 14.3 percent of 1,379 people surveyed thought Apple had lost its cool image between 2011 and 2012.

While still a juggernaut, with analysts expecting sales of around 9 million iPhone 6s in its launch weekend, Apple may be losing some of its shine, according to the poll.

More Americans feel that Apple has lost its "coolness" quotient than has the Android brand, according to the poll, conducted Sept. 8-13.

When questioned on how they perceive five popular technology brands -- Apple, Android, Microsoft (MSFT), Dell and Hewlett-Packard (HPQ) -- respondents gave the highest coolness factor rating to the Android brand, which includes devices such as Samsung and others that run on Google's (GOOG) mobile operating software.

[I]t's not surprising that Apple doesn't have the same cachet and coolness that it once did.

About 50 percent said that in the last one to two years, the Android brand had grown cooler, compared with 48 percent who voted for Apple.

Although the poll is based on a limited sample, it reflects how Android products, which tend to be less expensive, have caused Apple to shed some of its buzz.

"Especially when you have competitors who are doing a lot of innovative things themselves and great advertising, it's not surprising that Apple doesn't have the same cachet and coolness that it once did," said Kevin Lane Keller, a branding expert and professor at Dartmouth's Tuck School of Business.

The smartphone wars have become a lot like politics, with battling Democrats and Republicans, said Rob Janoff, the designer of the Apple logo and an independent branding and design expert based in Chicago.

"You can't carry that magic forever," Janoff said, but that does not mean consumers should dismiss mature brands. "I think people have to accept that companies that are out there, they age."

Last year when it launched its previous version of the iPhone, Apple sold 9 million iPhone 5Ss and 5Cs in the first three days in stores. But drawing a comparison with the iPhone 6 is tricky as sales are based on availability, and Apple hasn't shared comparable details.

Long Wait

Also, this time the iPhone isn't launching in China on Friday, unlike last time, Shannon Cross, an analyst with Cross Research, explained.

Many customers will need to wait until next month for their new iPhones after Apple logged a record 4 million first-day pre-orders, double the number for the iPhone 5 two years ago.

Errand-service TaskRabbit said more than 500 people in the United States and London have hired individuals at $25 an hour to stand in line at Apple stores to grab the new iPhone, up 43 percent from requests during the iPhone 5 launch two year ago.

Apple's iPhone is "easily broken and expensive to fix," said Jim Jackson, a 55-year old from Phoenixville, Pennsylvania, who participated in the survey.

"Apple is following Samsung at this point in terms of design," Jackson added. "A couple of years ago they were making fun of Samsung because Samsung grew big and now they've gone big," he said, referring to the 4.7-inch iPhone 6 and 5.5-inch iPhone 6-Plus that will hit store shelves on Friday.

That was the only area where Riggle saw innovation at Apple.

"The only new idea they've come up with is that they're adjusting the size of their products," she said.

 

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Here's When Remarrying Can Cost You Social Security Benefits

September 19, 2014, 3:10 am

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Filed under: Retirement, Divorce, Marriage, Social Security

Many retirees rely heavily on Social Security: The Social Security Administration reports that more than half of married couples and almost three-quarters of single retirees get at least half of their income from the program in retirement.

For those who've been married previously, Social Security commonly pays two types of benefits: spousal benefits (for divorced spouses who qualify) and survivors benefits (for those whose spouses have passed away). But of course, being divorced or widowed doesn't mean you're destined to stay alone. New love may surprise you. But if that relationship grows, it could lead to a much less pleasant surprise: discontinued Social Security benefits.

What Divorced Spouses Must Consider

Social Security recognizes the potential financial damage a divorce can do, and so it provides many divorced spouses with the same benefits they'd be entitled to receive if they remained married. Specifically, if you were married for at least 10 years, then you can claim spousal benefits based on your ex-spouse's work history.

Even if your ex-spouse remarries, you don't lose your Social Security benefits. That also doesn't reduce anyone's benefits; both you and your ex's new spouse both can claim spousal benefits if the necessary conditions are met.

But once you remarry, you become entitled to take spousal benefits based on your new spouse's work history after a short waiting period. But you lose the ability to claim benefits based on your ex-spouse's work record. If your ex had a higher income than your new spouse, then you could see your benefit shrink as a result.

For Surviving Spouses, Social Security Is More Complicated

If your spouse dies, then you'll be entitled to receive survivors benefits. Those benefits typically equal your spouse's retirement benefit, which is usually substantially higher than spousal benefits.

Like those who've divorced and whose ex-spouse is still living, widows and widowers face some potential pitfalls if they remarry. But with surviving spouses, Social Security's rules are more complex and seem almost arbitrary.

For most surviving spouses, if you haven't yet reached age 60 and get remarried, then you won't be entitled to survivors benefits based on your deceased former spouse's work history. Instead, you'll have to claim spousal benefits from your new spouse and potentially get survivors benefits on your new spouse's work history in the future.

Rules Change for Older People

But if you're 60 or older, Social Security treats you differently. Even if you remarry, you're still entitled to survivors benefits on your deceased former spouse's work record. Again, you're not allowed to double-dip, as you'll only be entitled to additional benefits if they exceed what you're getting as a surviving spouse. Nevertheless, the rationale for putting people younger than 60 in jeopardy of losing benefits while those 60 or older face no such worries isn't entirely clear.

As if that weren't enough, you can sometimes get back benefits even if you initially lost them. If a second marriage also ends in death or divorce, then you may be able to claim benefits based on your first spouse's work history.

Understanding the intricacies of Social Security as a spouse can be tough. But given the potential for problems if you don't consider the financial implications of marital decisions, it's important to get a handle on the rules so you can make an informed choice.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+. Motley Fool retirement experts offer a free report on a simple strategy to use a little-known IRS rule to boost your retirement income.

 

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5 Reasons Why You Fall for Scams, Cons and Rip-offs

September 19, 2014, 3:52 am

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Filed under: Ripoffs & Scams

By Bob Sullivan

Back in 1996, it was pretty easy to steal money from people on the Internet. You put up an item for sale on a site like eBay (EBAY), you took people's money, and you never sent the thing they bought. (Really, that's the first Internet scam article I wrote almost 20 years ago).

Scams have become a lot more sophisticated since then, but two things have remained incredibly constant during the past two decades. First, victims almost always send money using a method that offers no recourse, such as wiring the funds. And when I write an article about the latest con, a chorus of too-clever-by-half people will scream, "That could never happen to me!"

When I encounter people in that second vocal group, I often quiz them about their extensive portfolio of overpriced extended warranties, time shares and underperforming mutual funds, and gently remind them that the folks who think they're too smart to get cheated are often the easiest marks.

One of the first things a trained con man or woman will do to victims is lavish them with praise. ("I can't believe this great deal I'm giving you," says the auto dealer as he walks away with your money.) So if you think you can't be scammed, you are probably next in line. And for that other group, I say simply, "Stop wiring money to people." Doesn't matter how elaborate the cover story is.

Because I've interviewed thousands of victims during the past two decades, I'm often asked why people fall for scams or corporate rip-offs. Here are my top five reasons. "People are stupid," a popular refrain, is never my answer. On the other hand, "Because people think they are smart" is No. 1.

1. If It Sounds Too Good to Be True, It's Your Fault

Like a good wrestler, con artists know how to use a person's strength against them. One hard-to-confess truth about nearly every scam victim I've ever spoken to is this: We all have a little criminal in us. There's a piece of us that's anxious to get in on an investment before anyone else knows about it, or to get that new gadget at a price others could only dream about.

Yes, the bad guy taking the money is a big criminal. But virtually never have I interviewed a victim who wasn't a little criminal. People wire money to Africa or re-mail a stolen computer to London because they are a willing accomplice. Don't think you deserve special treatment; don't think you are smarter than everyone else. That's when the trouble begins.

2. We Are All Smart in Different Ways

Everybody is good at something. And everyone is dumb at something. Maybe you are a slick investor, but you don't realize your dentist is overtreating you. Maybe you have an elegant spreadsheet of monthly expenses but haven't yet noticed your cable bill has risen from $50 to $150 per month. Maybe you are a business reporter but you are terrible with money (very common).

Nobody is good at everything, which means there will come a time when you have to flat-out trust someone else not to cheat you. The plumber. The auto mechanic. The surgeon. At these times, you have to keep in mind reason No. 1: When you are information-poor, you are a potential victim. Yes, you, who thinks you are above all this. And that's where reason No. 3 comes in.

3. You Don't LIsten to That Little Voice

Of all our scam-fighting skills, one is far more important than all the rest: that little voice inside that tells us whether someone is trustworthy. As I've just explained, there will come a time when you have to rely on an expert. Your ability to discern between honest and dishonest will be all that stands between you and a rip-off.

And guess what? Many people overestimate their ability to do this. In fact, that probably explains most of the victims I've ever spoken with. How many times have you heard the phrase, "But he/she seemed so trustworthy?" A little mirror gazing is your biggest ally on this one. Have you ever fallen for a lying lover, a cheating used car salesman, or a cellphone kiosk kid who misled you about a data plan? You might want to re-examine your skills at judging people. And perhaps you should take a friend the next time you buy a car.

On a related note, most victims will also say, "Well, I did have this strange feeling ... ." Those people, for some reason, have learned to not trust the little voice inside them that issues warnings. If that's you, ask yourself why before it's too late. That little voice is usually pretty smart.

One class of folks who make such mistakes deserve a pass -- and a lot of empathy -- the elderly. Recently, a UCLA professor used a machine to examine the brains of old and young people and found that a region called the anterior insula lit up less in older folks than younger folks. That's the part that lights up if the brain perceives danger, or more specifically, if it perceives a person to be potentially dangerous. Researchers call it a diminished "gut" response.

What does this mean for you? As you age, you almost certainly will fall for things that you didn't when you were younger. So don't be overconfident. And please, talk to your aging parents often about money.

4. You Rely Too Heavily on Friends' Advice

The other common phrase uttered by victims is, "But he/she was recommended by a friend!" For some reason, many people turn off their evaluative systems when a friend's recommendation is in play. In the computer hacking world, they call this "third-party validation," and it's very effective. Just look at the list of Bernie Madoff "friends."

Here's why: Once people decide to go with a money manager, car mechanic or dentist, they hate encountering "cognitive dissonance" that might suggest they've made a mistake. So they often become blind to signs that the person they trust is taking advantage of them. Behaviorists call this "confirmation bias." People are biased toward information that shows they are right (naturally). So if you pick the money manager they recommended, that makes them even more right.

Personally, I often ignore friends' suggestions and head to the phone book and online reviews. I like to pick people with a fresh slate and make my own judgments. If you choose to follow a friend's advice, just know there's a high likelihood your friend has a blind spot.

5. You Fall for "Limited Time Only"

Every criminal training manual (or sales manual) you ever read will stress this very important point: Create a sense of urgency. Convince the consumer (or victim) that they must do something right now. The deal expires the second they leave the room, hang up the phone, shut the door or close the chat room. Never let them walk out the door -- or even talk to anyone outside the room.

Well, malarkey. Trust me, the once-in-a-lifetime deal for a new car will become a twice-in-a-lifetime deal tomorrow. The surest sign that something is wrong in any deal is pressure. If I taught personal finance classes in U.S. high schools, I would skip all the boring lessons on U.S. bonds and teach one skill, over and over, just like the firefighters taught us as little kids: Stop, drop and roll.

Stop talking, drop the pen, and roll on out of that office, or roll the mouse away from the computer, until tomorrow when you've had time to sleep on it. Don't let someone back you into a corner. Ever. Even if they say your roof is leaking.

"Rushed" leads to another concept that befalls even the cleverest of clever consumers: the "momentary lapse of reason." Often, circumstances conspire to make a very smart person temporarily dumb. We do this all the time. We eat doughnuts late at night, we buy clothes we don't need, we pay twice the price for something because we don't feel like shopping around.

Remember, you can be sensible 23 hours and 55 minutes a day, but a criminal needs only five bad minutes to raid your bank account. All a bad guy needs is one moment of weakness to exploit you. You must remain ever-vigilant.

 

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Week's Winners and Losers: Netflix, Microsoft Get Worldly

September 19, 2014, 4:12 am

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Filed under: Company News, Earnings, Market News, Scandals and Lawsuits, Investing

There were plenty of winners and losers this week, with the world's largest software company making a major gaming acquisition and one mall retailer once again turning to notoriety to draw attention. Here's a rundown of the week's smartest moves and biggest blunders.

Netflix (NFLX) -- Winner

Netflix took the next step in its global invasion by launching its service in France, Germany, Austria, Switzerland, Belgium and Luxembourg this week. These will be competitive markets in Old World territories that are protective of their homegrown talent, but it's important for Netflix to keep stamping its passport by pushing into new countries.

Netflix is also beefing up its catalog of original content. This week it struck a deal to carry two seasons of a new show that Judd Apatow co-created and wrote. The initial 10-episode season of "Love" won't be made available until 2016. The 12-episode second season will follow in 2017. However, it's one more reason that Netflix should be able to retain its growing subscriber base.

Urban Outfitters (URBN) -- Loser

The edgy mall retailer has gone too far again. Urban Outfitters took down the product page for a vintage Kent State University sweatshirt that it was selling online on Monday. It featured splattered red splotches that make it seem as if they are blood stains. Obviously this will hit too close to home to anyone who remembers the tragic 1970 massacre at Kent State.

Urban Outfitters knew what it was doing. It had priced the sweatshirt at $129, claiming that only one was available. Urban Outfitters has left the public shaking its head at some of its edgier decisions, which have included an outfit that mocks depression and shirts that read "Eat less" and "Jesus, I'm drunk." This one seems to have outdone those earlier stunts in its pursuit for negative publicity.

Microsoft (MSFT) -- Winner

Microsoft is a company that has never shied away from 10-figure acquisitions, and it's at it again with the $2.5 billion purchase of Sweden's Mojang. This is the company behind the popular "Minecraft" gaming franchise that's been downloaded 100 million times on PC alone since launching in 2009.

Microsoft knows all about Minecraft's success. More than 2 billion hours have been spent playing the game on Xbox alone. It's also a smart move because Microsoft has nearly $93 billion in cash parked overseas, and snapping up an international company puts some of that money to work.

Sony (SNE) -- Loser

The Japanese consumer electronics giant continues to struggle. Sony announced this week that it's now targeting a $2 billion loss for the year. It also announced that it will be suspending its dividend. This will be the first time that Sony doesn't pay out a dividend since 1958.

Sony can't seem to get it right these days. A couple of years ago it was its TV business stringing together several years of losses, and now it's taking a big write-off in its smartphone business. Yes, the Sony PS4 is doing well in taking the lead in the latest generation of gaming consoles, but there seems to be far more going wrong than right at the once iconic bellwether.

Coca-Cola (KO) -- Winner

Millennials have spoken, and they miss Coca-Cola's Surge soda. The world's largest soft drink company put out the highly caffeinated citrus-flavored Surge in 1996 to take on the success of rival Mountain Dew. It didn't work. Surge was off the market by 2002. On Monday Surge came back through a special partnership between Coca-Cola and Amazon.com (AMZN).

The 12-packs available exclusively through Amazon sold out quickly. More are on the way. With more than 140,000 followers cheering the move on Facebook's Surge Movement fan page, it was easy to see why this was a no-brainer move by Coca-Cola. What remains to be seen is if Surge will continue to be made available after this stunt, and if it will achieve broader distribution.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends Amazon.com, Coca-Cola, Netflix, and Urban Outfitters. The Motley Fool owns shares of Amazon.com, Microsoft and Netflix and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. For some winning dividend stock ideas, check out our free report.

 

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10 Signs You Are Headed Toward Financial Ruin

September 19, 2014, 4:33 am

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Filed under: Personal Finance, Credit Cards, Auto Loans, Credit Score, Debt Assistance

By Ellen Chang

NEW YORK -- Too many Americans are following a trend of saving woefully too little and spending too much -- thus racking up loads of debt.

Consumers are still saving too little despite watching their lifestyles change during the recession and having only meager savings for emergencies while nearly one in four people would run out of money in 30 days, according to a NeighborWorks America survey, the Washington, D.C.-based trainer of community development and affordable housing professionals.

This lack of savings means millions of adults are faced with minimal options such as obtaining high-cost loans such as payday or title loans if an emergency occurs.

The survey also found that 40 percent of consumers say that their cash reserves would last only for three months and 28 percent expect their emergency fund to hold them over for a year.

"These data have to light a fire under all of us who want to see Americans better able to withstand a financial crisis, especially a recession as devastating as the one we're climbing out of now," said Eileen Fitzgerald, NeighborWorks America CEO.

The personal savings rate in the U.S. remains anemic at 5.3 percent in June, according to the U.S. Bureau of Economic Analysis. Between 1959 and 2014, the average rate was 6.82 percent. In 1975, a high of 14.6 percent was reached while April 2005 reported a record low of 0.08 percent.

Although experts continue to urge Americans to save 10 percent to 15 percent of their salary, too many aren't living within their means. One factor that affects the ability of consumers to save more money is that many people wait until the end of the month to save what is left over instead of trying to save daily, said Greg McBride, Bankrate.com's chief financial analyst.

"Too often nothing is left over," he said. "You need to automate the process by having direct deposit from your paycheck into a dedicated savings account. It is easy and doable, but no one is going to do it for you. You have to have the discipline to make tough decisions on your spending, so you can funnel money toward debt repayment rather than adding to your debt load."

If you are worried that you are getting in over your head, here are 10 warning signs that you need to reevaluate your financial situation:

 

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Could McTablets Help McDonald's Start Paying $15 an Hour?

September 19, 2014, 5:30 am

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

McDonald's (MCD) is not in a good place these days, with sales slumping, quality concerns rising, and activists pushing for it to start paying its employees a living wage. It's against this backdrop of McDespair that a radical tech-fueled test may be the ticket to giving customers and some -- but not all -- employees what they want.

The world's largest burger chain is expanding a test that started in two stores in California's Orange County where patrons could build customized gourmet burgers using tablets -- but still heading to the cashier to ring up the sale. The test is expanding this month in geography -- to two stores in San Diego -- and in scope.

According to U-T San Diego, the new experience is upscale and convenient. Customers use the touch-screen devices to assemble gourmet burgers with 20 toppings like guacamole and garlic aioli and two roll choices (artisan or brioche). The cost? $5.49 plus tax. "Bacon, the only extra that costs extra, adds 80 cents," U-T San Diego reported. But, wait, there's more:

• The tablets now allow customers to scan credit and debit cards so orders are processed right away.
• Guests don't have to wait by the counter. Employees bring orders to the table on metal baskets.
• Employees bus the table afterward.

In short, this tablet test finds McDonald's behaving more like a fast-casual chain or gourmet burger shop than the struggling fast-food behemoth that it is today.

Take Two Tablets and Call Me in the Morning

Folks who want to order meals outside of the custom-built upscale sandwiches still have to hit up a cashier. However, it's not much of a stretch to see these tablets eventually being able to handle the entire menu. A single person troubleshooting questions or tech issues can replace an army of cashiers. If McDonald's is able to run efficiently with fewer employees, couldn't it take these savings and give "Fight for $15" activists what they want: better wages for the folks whom they do keep around?

In its present state, McDonald's can't afford to pay $15 an hour without dramatically boosting its prices. However, the one-two punch of tablets that can give the chain the flexibility to reduce its staff while also encouraging customers to spend more could make McDonald's the darling instead of the dog that it is in the eyes of the public.

McDonald's would get some grief from the unions pushing for higher wages by scaling back on its staffing requirements, but automation is already taking place. McCafe smoothie orders are fulfilled at the touch of a button. Cups are put into a carousel that are filled with drive-thru soft drink orders. If McDonald's could do more with less -- and pay more along the way -- the public would likely approve and applaud the process.

However, even if the automation push falls flat, it's easy to see how tablets could get customers to spend more -- another result that could give McDonald's franchisees the leeway to reward their front lines without the potentially negative backlash of trimming its headcount.

McTech the Future

McDonald's has become ground zero in the battle to increase wages in the fast-food industry. It's the country's largest burger chain, making it a logical poster child. It's not entirely fair. As rich as McDonald's may be, 80 percent of its restaurants are owned by independent franchisees that don't have the legal flexibility in their current operations to roughly double starting wages.

However, if the tablets get folks to spend more and provide the means to lower optimal staff counts, it would be a real game changer for a company that needs to reinvent the rules. This will likely be the first year in over a decade that McDonald's comparable-restaurant sales decline. Consumer polls are unflattering to the quality of McDonald's food and its brand. If McDonald's can lead the way to $15 at a time when competitors can't, won't it also help draw the industry's best workers to McDonald's? Won't it help with retention? Won't this buzz generate a more positive opinion of a company that's already taking steps to improve the quality of its menu?

McDonald's may not be a tech giant now, but a fleet of tablets can change that in some pretty dramatic ways.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends McDonald's. Try any of our Foolish newsletter services free for 30 days. For a list of high-yielding dividend stocks like the 3.4 percent that McDonald's is presently yielding, check out our free report.

 

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Market Wrap: Stocks End Mixed After a Sizzling Alibaba IPO

September 19, 2014, 10:17 am

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Filed under: Market News, IPOs, Investing

By Chuck Mikolajczak

U.S. stocks closed little changed on Friday after Alibaba's strong debut was offset by falling technology shares as Oracle (ORCL) and Yahoo (YHOO) stumbled, but the Dow managed to edge higher to set a record for a second straight session.

Alibaba took the spotlight after its initial public offering priced at $68 a share and rose as high as $99.70 before ending the session up 38 percent to $93.89. Shares of Yahoo, which is selling part of its Alibaba stake but will remain a top shareholder, were volatile in heavy volume and closed down 2.7 percent at $40.93.

"Alibaba was awesome. The Alibaba deal was done correctly, which is, you leave something on the table for investors to enjoy," said Phil Orlando, chief equity market strategist at Federated Investors in New York.

"So the market got to focus on Alibaba, which was a positive."

But technology shares weighed on the S&P 500 with Oracle down after Larry Ellison, co-founder and leader for 37 years, stepped aside as chief executive. He will be replaced by co-CEOs Safra Catz and Mark Hurd, raising questions about a job-sharing arrangement that has had a mixed record elsewhere.

Oracle shares lost 4.2 percent to $39.80 as the biggest drag on the S&P 500 while the S&P technology index was the worst performing of the 10 major S&P sectors.

The Dow Jones industrial average (^DJI) gained 13.75 points, or 0.08 percent, to 17,279.74, the S&P 500 (^GPSC) lost 0.96 points, or 0.05 percent, to 2,010.40, and the Nasdaq Composite (^IXIC) dropped 13.64 points, or 0.3 percent, to 4,579.79.

Volume was heavy, with about 8.68 billion shares traded on U.S. exchanges, well above the 5.71 billion average so far this month, according to data from BATS Global Markets. Aside from Alibaba, volume also received a boost from "quadruple witching," the expiration of futures and options for indexes and stocks.

Dresser-Rand (DRC) jumped 9.4 percent to $79.91 after a report Germany's Siemens plans to offer more than $6.1 billion, or $80 per share, for the U.S. compressor and turbine maker.

Among the most active stocks on the NYSE were Alibaba, Coca-Cola (KO), up 0.62 percent to $42.05, and Bank Of America (BAC), down 0.53 percent to $16.95.

On the Nasdaq, Yahoo, Microsoft (MSFT), up 1.8 percent to $47.52 and Sirius XM (SIRI), down 1.8 percent to $3.57 were among the most actively traded.

Declining issues outnumbered advancing ones on the NYSE by 1,824 to 1,180, for a 1.55-to-1 ratio on the downside; on the Nasdaq, 1,796 issues fell and 951 advanced for a 1.89-to-1 ratio favoring decliners.

The benchmark S&P 500 index posted 75 new 52-week highs and 9 new lows; the Nasdaq Composite had 88 new highs and 117 new lows.

What to Watch Monday:

• The National Association of Realtors releases existing home sales for August at 10 a.m. Eastern time.

 

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Good News: 'Economy Is Starting to Fire on All Cylinders' Again

September 19, 2014, 10:45 am

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Filed under: Economic Indicators, Economic Recovery, Economy, This Built America

By Elena Holodny

David Rosenberg, Chief Economist & Strategist at Gluskin Sheff, surprised everyone when he adopted a more bullish view in 2013.

On Friday he released a research note that included a brief and pretty optimistic summary of the US economy.

Here's what it said:

United States

In the US, the economy is starting to fire on all cylinders for the first time this cycle.

The strong US dollar is a source of margin support for importers which is great news for many consumer cyclicals. Tack on stepped consumer credit growth, job and wage gains, gasoline price relief, and we have the makings of a solid backdrop to this consumer space heading into the most important shopping season of the year.

Capex growth is picking up and spending plans on the rise, and so Industrials and Tech should be price focal areas - earnings revision ratios are now rising the fastest in the Industrials space, followed by Health Care and then Financials.

The Fed may have sounded dovish but their forecasts point to rising rates ahead and so the rate-sensitives should largely be avoided.

The rising likelihood of stronger-than-expected growth in the next several months means the high-priced defensive areas of the stock market will face the prospect of an outward rotation into the more cyclical segment, though the parts that are more domestic focused than foreign (given soft global growth and firm dollar) make the most sense.

That's right. He said "rising likelihood of stronger-than-expected growth."

 

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How to Take the First Steps into Retirement

September 19, 2014, 11:00 pm

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Filed under: Retirement, Personal Finance, Travel, Career Change, Retirement Living

By Dave Bernard

Saving for retirement typically requires a lot of hard work and sacrifices. And leaving a job often means saying goodbye to co-workers who have become friends. But like every other transitional period, it is also the start of something new.

It is best to launch your retirement on a positive note. It makes sense to have a clear idea of what you will be doing on the first day of retirement. Retirement holds the promise of redirecting the rest of your life toward pursuits that stimulate your heart and mind. But setting up a fulfilling and engaging retirement often takes some effort. Before I take my first steps into my second act, I am considering the following questions:

Will I want to work part time? I know that I do not want to work full time during retirement, but part-time work deserves some consideration. Many retirees miss their interactions with co-workers. After spending eight hours a day with a group of people for years, strong bonds are often established. Finding yourself suddenly without these social connections can be a shock for the newly retired. I am open to part-time employment as long as it involves doing something I like or feel is worthwhile. A part-time job would get me out of the house for about four hours a day where I can engage with others, keep my mind sharp and bring in a little additional cash. On the other hand, life with no work also sounds quite attractive. I don't have a definite answer to this question yet.

Can we retire in place? My wife and I have picked the spot where we want to retire. It's a small community with lots of sunshine near a cozy downtown and a short drive to the coast. I would like to live here for a long time, but sometimes wonder if we will be able to stay here as long as we want. Baring some economic crash, we should be OK financially. We chose a one story home to avoid having to climb stairs. The community has a good support network for older folks including activities and public transportation. And there is always something going on within a walk or short drive. It's a good idea to make sure your current home and community will continue to meet your needs as you age, and to have contingency plans in case your health declines.

What can I do to feel productive? I love the idea of relaxing and doing nothing. However, I also enjoy the feeling of accomplishment you get from doing something worthwhile. When I was working full time, my need to be productive was satisfied on a regular basis. But once retired, what will I do to find that same satisfaction? I plan to pursue a few avenues that help fulfill this need, including blogging, learning to speak (or at least better understand) French, taking a number of online courses and dedicating time every day to exercise and health maintenance. But will that be enough for the next 20 or more years? I plan to investigate volunteering, and we are considering living abroad for some period of time. Maybe I will take up painting or some other artistic expression.

What are my top 10 to-dos? If I want to get something done, I put it on a list. Before I retire, my goal is to have a list of the top 10 things I want to do now that I have the time. My hope is the exercise of generating the list will help me better identify what I really enjoy and how I can best spend my time. The beauty is I have the flexibility to add, delete or modify this list at any time. My list is a work in progress, but I do have a few options jotted down, including living in France for a month or two, writing a fiction novel, cultivating an awesome home garden where we walk outside to pick fresh tomatoes, apples and lemons and discovering the secrets of what entertains my grandchildren most. I have no grandchildren yet, but it sure is fun to imagine.

My wife and I want to take the right first steps when we begin our retirement journey together. We are trying to identify and cover all our bases ahead of time. For us, the key is to sustain an ongoing curiosity and willingness to explore new things. We hope our list can provide an overview while our imaginations fill in the blanks.

Dave Bernard blogs at Retirement-Only The Beginning.

 

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Should You Be Paying the 'Nanny Tax'? 3 Factors to Consider

September 19, 2014, 11:00 pm

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Filed under: Taxes, Personal Finance, Tax Laws, Planning

Whether it's for child care, lawn work or a host of other chores, millions of Americans hire people and bring them into their homes to do necessary work. But many people don't realize that doing so leaves themselves open to a potential tax liability, nicknamed the nanny tax. Let's take a closer look.

1. You Can Pay Up to Certain Amounts Without Triggering Nanny Tax

The nanny tax is designed to ensure that your household employees get credit for their work for purposes of Social Security, Medicare and unemployment benefits. As a result, the rules governing when the Internal Revenue Service collects the nanny tax track the income thresholds for various features of those programs.

Specifically, if you pay cash wages of $1,900 or more, then you have to pay Social Security and Medicare taxes of 15.3 percent. You're allowed to withhold half of that amount from what you pay your household employee, just as Social Security and Medicare taxes are withheld from most paychecks. Similarly, if you pay a household employee $1,000 or more in any calendar quarter, then you'll owe 6 percent in federal unemployment tax on up to $7,000 in annual wages.

2. Hiring Kids Under 18 Can Save You a Lot of Trouble

The nanny tax can be a huge hassle when you hire household employees, but there are some exceptions even if you pay more than the threshold amounts above. Paying members of your own family lets you take advantage of more lenient rules. If you pay your spouse or your under-21 child to do any household work, then any pay isn't treated as wages subject to the nanny tax.

A more common way to avoid the nanny tax is to hire babysitters, lawn-care providers and others under the age of 18. As long as the employee isn't primarily in the business of providing those services -- such as being a student in school at the same time -- then you won't have to pay the nanny tax on those wages even if they exceed the $1,900 limit.

However, the unemployment-tax component of the nanny tax isn't subject to the under-18 rule. So if you pay more than $1,000 in a quarter, it doesn't matter that the person is under 18 -- you still have to deal with the tax.

3. Using a Contractor -- Not an Employee -- Can Save You Money

The nanny tax only applies to those who qualify as employees as opposed to independent contractors. Although the distinction can be complicated, the primary way to understand when someone is an employee is to focus on the degree of control you have over their work. If you have control not just what type of work is done but also the specific way the worker does it, then you're more likely to have an employee. On the other hand, if you merely say you want a task done but leave the details to the worker, that resembles an independent contractor relationship more closely. In addition, if the worker provides tools and equipment rather than relying on you for them, that's another sign of a contractor relationship.

Properly classifying a worker is essential. If your worker isn't an employee, then you don't owe the nanny tax, as the worker is responsible for any self-employment taxes from earnings. But if the IRS disagrees with your characterization, then you can end up having to pay interest and penalties.

The nanny tax isn't generally a huge burden financially, but it can come as a surprise if you're not prepared for it. By being aware of when the nanny tax applies, you can take steps to avoid it and save yourself some money as a result.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+. Motley Fool retirement experts have created a free report on a simple strategy to use a little-known IRS rule to boost your retirement income.

 

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3 Myths About Trusts That You Can't Afford to Believe

September 19, 2014, 11:00 pm

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Filed under: Personal Finance, Estate Planning, Wills, Living Will, Planning

The recent deaths of Robin Williams and Joan Rivers have saddened millions of fans. But at the same time, they've also provided two positive models for helping to ensure that our loved ones won't have to face unnecessary complications in managing their finances after we're gone. And trusts played a crucial role in both comedians' estate planning.

They can be incredibly useful tools, and thanks to the publicity, more people may consider using them, but many people misunderstand how trusts work. Let's take a look at -- and dispel -- three common myths about them.

Myth 1: Trusts Only Make Sense for Rich People

When many people hear about trusts, they think of the ultra-rich, with images of trust-fund babies who will never work a day in their lives. Indeed, many people worry in their estate planning that leaving too much money to their children will sap their kids' personal ambition and leave them less motivated to make their own way in their lives. Moreover, there's a sense that having a trust prepared is so expensive that it only makes sense for those who have extensive assets.

Yet having a trust in place or ready to take effect when needed is something even those of limited means should consider. From the perspective of paying a lawyer to have estate planning documents prepared, trusts can indeed be more expensive, but in many cases, those higher upfront costs help produce valuable savings later on by avoiding costly probate. Also, if a family member is willing to act as trustee, then the administration of a trust can be very inexpensive.

Myth 2: Trusts Involve Too Much Effort to Work Effectively

Some people hesitate to use trusts because of some hassles involved in their creation. At some point during the trust's existence, assets have to be moved into the trust, and that typically involves changing the formal designation of ownership from one or more individuals to the name of the trust. If assets don't get retitled properly, it can force surviving family members to bear the brunt of a probate proceeding after all.

But getting assets into a trust doesn't have to be complicated, according to estate planner John Kitzke of Kitzke & Associates. In many cases, Kitzke notes, you can use simple methods like naming the trust as a payable-on-death or transfer-on-death beneficiary to fund the trust without having to take immediate action. Because those designations also avoid probate, using them achieves the goal of saving on court costs and delays while also giving you maximum flexibility to handle your own affairs as long as possible

Myth 3: There's No Need for a Trust Before Death

Because most people associate estate planning with death, it often comes as a surprise to people that trusts can play a role in your financial life even while you're still living. But the challenges that your family can face if an illness or injury incapacitates you to the level that you're unable to handle your finances can be even harder to address than suffering the death of a loved one.

A trust put in place before your death can handle your affairs while you're still alive, providing for the management of your money if you're unable to do it on your own. With total latitude to give instructions on what you'd like done under what circumstances, considering a trust to take place during your lifetime rather than after your death can have substantial long-term benefits.

The biggest advantage of using trusts for your estate planning is that they're inherently flexible, allowing you to meet a wide variety of specific needs. Even though trusts do have their flaws, many of the myths that keep people from using them simply aren't true. If you believed any of these myths, take a closer look at trusts and whether they might play a useful role in your estate planning.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+. For more on ensuring a comfortable retirement for you and your family, see our free report in which Motley Fool retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule to boost your retirement income.

 

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10 Sneaky Gimmicks Stores Use to Get You to Spend More

September 19, 2014, 11:00 pm

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Filed under: Shopping, Deals

By Maryalene LaPonsie

Every time you walk into the mall, the grocery store or a big-box retailer, remember it's you against them.

"Them" are the marketers, sales professionals and CEOs who are determined to make you buy more than you planned. They spent $60 billion worldwide in 2013 on market research and business intelligence, all with the goal of putting more money in their coffers. For retailers, their research may include what you buy, when you buy and even what displays catch your eye.

In addition, retailers have an arsenal of sales tactics that may seem silly but serve as heavy-duty artillery when it comes to persuading you to part ways with your money.

1. Free-Shipping Offers

Shopping online is so convenient, but paying for shipping is a real drag. Beyond that, it can be downright expensive at some stores.

Web retailers know that many of us have an aversion to paying shipping costs, so they often offer free-shipping deals. However, these may come with a catch: You have to spend $30, $50, $100 or some other amount to get the free shipping.

How many people have spent precious time searching for extra items to add to their order to reach the amount needed for free shipping? I'll raise my hand and admit to spending an ungodly amount of time looking for a $15 item (that I really didn't need) to add to my $35 purchase in order to get free shipping. In hindsight, I should have stuck with my $35 buy, paid the $5 in shipping and come out $10 ahead.

2. Multiple Purchase Pricing

My go-to grocery store loves to run a 10-for-$10 promotion. Not only are the sale items a mere dollar each, you also get the 11th item free. There are often at least a dozen products included in the sale, and you can mix and match items! How cool is that?

It's awesomely cool for the grocery store when we load up on 11 items we don't need. It's even better when those items regularly sell for $1 or $1.09 anyway.

I'm not saying multiple purchase pricing is always bad. It's just that when we see two-for-$3, four-for-$5 or 10-for-$10 sales, we tend to buy two, four or 10 items even if we only need one.

Case in point: I was recently at the gas station and wanted to buy a 20-ounce pop (or would that be soda?). The bottles were two for $3 or $1.89 each. I only wanted one, but I bought two. Why? Because even though I would be saving $1.11 by purchasing only one, I felt like I would be losing money by giving up the discount on two.

3. BOGO, B1G2 and B2G1 Deals

BOGOs -- that would be buy-one-get-one-free sales for those who don't know -- work similarly to multiple purchase pricing. They entice you to buy more than you normally would.

Now, if you're planning to already make a purchase and the second one is free, by all means, take the freebie. But if you find yourself suddenly justifying the purchase of unneeded new shoes because of a BOGO ad, well, the marketers can pat themselves on the back for a job well done.

B1G2 and B2G1 deals involve, respectively, buying one item and getting two free or buying two items and getting one free. Another common variation involves buying one item and getting the second for half off.

4. Bundled Purchases

Another silly way retailers persuade us to buy more is by bundling purchases. So as part of a special sales bundle, for example, you might get a printer and office software along with a laptop. If you need a printer and software, this could be a cheaper option than buying all three separately.

However, you might have a perfectly good printer at home and maybe you only plan to use the laptop for Facebook (FB) and World of Warcraft. I could be wrong, but I don't think you need Microsoft (MSFT) Excel for either of those things.

Bundling works similarly to multiple purchase pricing and BOGOs. They aren't always bad deals, but they work on the premise we'd be idiots for bypassing them. After all, why wouldn't you want to buy $1,200 worth of computer gear for only $900? I know why. Because if all you need is a $700 laptop, you're $200 poorer for no good reason.

5. Coupon Savings

I love coupons, so I can't advise you to never use them. That said, coupons have a sneaky way of making you buy items you would never purchase at full price, or even sale price.

Witness the disastrous attempt to eliminate coupons and introduce what J.C. Penney (JCP) termed as "fair and square" pricing." Without coupons and deep-discount sales, shoppers stayed away, profits dropped through the floor, and CEO Ron Johnson found himself on the unemployment line.

Bottom line for you: Coupons make it feel like you're getting a deal even if you aren't. Double-check and make sure the after-coupon price is in fact a bargain and don't buy something only because you have a coupon.

6. Sales Events

Let's stay with J.C. Penney for a moment. In addition to dropping coupons, the other big mistake the company made was dropping its many sales events. Those would be the random holiday doorbuster sales and the ads that scream "lowest prices of the season." Apparently, we really like those sales.

But let's not lose our heads. The fact that a store declares a sale is phenomenal does not necessarily mean the sale is phenomenal. In fact, you could walk into a store that has announced sale prices "as much as 70 percent off" and find everything minus one lonely rack is only 20 percent off. It's not false advertising either; the ad clearly includes the qualifier "as much as."

I don't want it to sound as though you shouldn't shop sales. But you should be skeptical of sale claims and don't get caught up in the hype of a supposed once-in-a-lifetime deal. Trust me, there will always be another deal.

7. Rewards Programs and Loyalty Cards

Rewards programs are how retailers get you to keep coming back to their store when you have other options.

Maybe there is a better sale at Kohl's (KSS), but you have a Shop Your Way rewards card so you don't even bother checking Kohl's. You head straight for Sears (SHLD) instead.

It works the same way if you have a loyalty card for a gas station, grocery store or hotel chain. You stop comparison-shopping and simply go to the business offering the rewards. That's good for them, but it could be costly for you.

8. Psychological Pricing

You would think in this day and age that we would be savvy enough to not be tricked by seeing the number 9 at the end of a price. And yet, we continue to think something priced $19.99 is a better deal than an item priced $20.

Known as charm pricing, ending sales tags with a "9" is only one way businesses use psychological pricing to their advantage. They may also trick you into spending more by dropping the dollar sign, putting a per-customer limit on sales and using small type. Who knew we could be so easily manipulated by a price tag?

9. Upselling Everything

The movie "Super Size Me" might have you believe McDonald's was offering to super-size meals in an effort to make us all fat. However, I tend to think the only thing McDonald's was trying to super-size was its bottom line. The now-defunct supersize option was simply McDonald's upselling its meals to make more money.

Whenever you're asked whether you want an extra shot of espresso with your coffee or a bucket rather than a bag of popcorn at the theater, you're being upsold. They ask so casually, too. You almost feel as if they're doing you a favor rather than costing you more money.

In fact, even the language they use is finely tuned to maximize your chances of saying yes. When I worked as a mystery shopper, one specific chain required its workers not to ask "do you want anything else?" but to specifically ask "what else would you like?" By using those words, they created the expectation that you would in fact be buying more.

10. Point-of-Sale Add-Ons

The final seemingly silly sales tactic that drains our wallets are all those point-of-sale add-ons. These are the gum displays by the register, and the nice sales clerk who asks if we'd like to save 25 percent by opening a store credit card. It's the trial-sized lotions and lip balms at the department store checkout counter that make you think, "Wow, my lips are really chapped."

At a gas station in my town, the sales clerks are rather shameless about promoting the monthly candy deal, informing customers they are competing for who can sell the most. That tidbit is followed by an appeal to help the worker out by making a purchase. The only thing missing is some slight whimpering and big puppy dog eyes. I'm sure some heartless folks can say no to this plea for help, but it gets me every time.

Don't feel bad if you're a victim. Sometimes I walk out of the store with so many bags, it seems as though I should head home and fashion myself a dunce cap. But knowledge is power, and knowing retailers' sneaky tricks is the first step to keeping more money in your pocket and out of their registers. Did we cover all tricks? You can share in the comments below. We promise we won't laugh.

 

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Best of DailyFinance: The Week in Review (September 15 - 21)

September 20, 2014, 11:00 pm

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Filed under: Personal Finance

Michael Tullberg/Getty Image

Our top story of the week was around L.A.'s famous Sunset Strip and the plans for various hotel brands to set up shop there and take over the area. Also in the spotlight this week was Meijer supermarket who was found to be selling recalled products and Olive Garden who's standing up against Hedge Fund, Starboard Value's claims that they are wasting money and not satisfying customers.

1. L.A.'s Sunset Strip Goes Corporate: Whisky a Gone Gone
2. 29 Money Moves That Millennials Need to Start Making Now
3. Olive Garden Investor Says: Back Off on the Breadsticks
4. Grocery Chain Pays Big Fine for Selling Recalled Products
5. 3 Reasons to Check Your Credit Report Today
6. Can You Learn a Foreign Language for Free? ¡Sí, Se Puede!
7. Shinola Touts U.S. Production of Watch Straps in New Video
8. Why Your Parents Had an Easier Retirement Than You Will
9. En Garde! Olive Garden Defends Its Breadstick Policy
10. 3 Things Every Spouse Must Know About Social Security

 

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The 6 Most Costly Mistakes Individual Investors Make

September 21, 2014, 11:00 pm

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Filed under: Investing Basics, Investing

When you speak about money with individual investors every day for years, you learn a lot about how people make their decisions. You see why they're investing and what their goals are. You see different strategies and methods to investing. And you see many costly mistakes that can add up significantly when the play out and repeat over time.

Some of these mistakes are the result of simply not knowing the right things to do. However, many are the results of not taking an active interest in investing. So much money is lost when people assume things will simply take care of themselves. Here are the six costliest mistakes that individuals -- also known as retail investors -- make, and some ways you can counteract them.

1. Ignoring Investment Accounts

Likely one of the costliest mistakes is simply ignoring your investment account for years, even decades. This can result in a number of problems:

• Losing entire holdings.
• Not rebalancing to stay in line with current risk tolerance.
• Having accounts eaten away by fees.

I have seen investors lose tens of thousands of dollars because they ignored their accounts.

The solution: Schedule times at set intervals to check in on your accounts. It needn't be often; quarterly, every six months or even annually will suffice. You can even choose an online broker that will allow you to set up reminders for yourself or merely mark it on your calendar.

2. Not Paying Attention to Fees

The most frustrating mistake I saw investors make was not paying attention to fees. When overlooked, these fees add up to a significant drain on your portfolio. The two most common are from trading too often and from mutual funds themselves. Trading too often can be hard to counteract, especially if you consider yourself an active trader, but keep in mind those commission fees add up.

The big fee that far too many overlook is the mutual fund fee. According to a paper by two University of Pennsylvania Law School professors, the average mutual fund fee (as of 2013) is 1.31 percent and can vary anywhere from .05 percent to more than 2 percent. If you're investing in a mutual fund that charges that average, you'll lose roughly $1,500 of a $10,000 investment over 10 years.

The solution: The large majority of these fees can be avoided by seeking exchange-traded funds that charge considerably less in fees.

3. Improperly Diversifying

Diversification, when done right, is a hallmark of wise investing. However, many retail investors believe they're doing it correctly when they're actually over-diversifying and thus exposing themselves to more risk. The problem goes back to mutual funds.

Few investors realize that a relatively small number of popular stocks form the core of many mutual funds, albeit in different allocations. So, while attempting to diversify, many investors end up highly concentrated in that pool of stocks.

Other problems arise when you pick a number of stocks to invest in and believe that makes you diversified. That is unfortunately not the case, as many times the stocks you pick will fall in the same few industries. These decisions leave you less prepared to weather a market downturn and put you at risk for increased loss.

The solution: Review each fund's top holdings to avoid duplication, and consider a variety of industries when you buy individual stocks.

4. Being an Emotional Investor

We often hear about the perils of being an emotional investor. While it may make sense to follow the herd when you're investing in stocks, it'll generally only come back to harm you in the long run. Other signs of being an emotional investor:

• Holding on to a stock, thinking it'll come back at some point.
• Selling a stock at the first sign of a loss.
• Being glued to the financial news cycle.

Emotions cost you when it comes to money. Many investors who held out of the market over the past few years lost out significantly as a result. More often than not, they held out due to fear.

The solution: Stay the course and be rational -- your portfolio will thank you for it.

5. Not Investing Early Enough

I've been guilty of this myself. Many people think that either they can't afford to invest, have too little to invest for it to mean anything or can postpone investing. Whatever the excuse, the result is a lost opportunity to grow your money.

The solution: Find a way to start investing in your 20s, or earlier, even if it's in small amounts. If you have only a small amount to start investing with, many brokerages have either no minimum deposit or require as little as $250 to get started. Start with what you can and set a goal to put aside more each month. It might seem like nothing, but the point is to getting the discipline down.

6. Ignoring Taxes

I spoke with investors daily who were unaware there were taxable consequences to dividends or gains made through sale of investments. Whether we like it or not, the Internal Revenue Service wants its share -- and this can add up to hundreds of thousands of dollars when not watched.

The solution: Take advantage of tax savings available through vehicles like an individual retirement account. If you like getting dividends or trading, do so in an IRA to shelter yourself as much as you can. This also means knowing what not to hold in an IRA account, like tax-free investments like municipal bonds. Of course, this should be done in consultation with your tax adviser.

John Schmoll is the founder of Frugal Rules, a finance blog that regularly discusses investing, budgeting, and frugal living. He is a father, husband, and veteran of the financial services industry who's passionate about helping people find freedom through frugality. He also writes about wise ways to manage your money at WiseDollar.org.

 

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