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From the leading athletic footwear maker hoping that it's all laced up ahead of its latest quarterly report to a homebuilder hoping to keep the housing boom rolling, here are some of the things that will help shape the week that lies ahead on Wall Street.
Monday -- Test Drive
The new trading week kicks off with AutoZone (AZO) reporting quarterly results. The retailer sells auto parts across its growing universe of more than 5,000 stores. This has been a fragmented industry that's been ripe for consolidation, and AutoZone joins other larger players in snapping up regional faves.
Auto parts remains one of the more all-weather industries out there. If the economy's buzzing, there are more cars on the road. If the economy's tight, drivers hold on to their cars longer, and that requires more maintenance.
Tuesday -- The Great Beyond
Bed Bath & Beyond (BBBY) is a leading retailer of housewares. It was on fire during the early stages of the housing recovery, but growth has slowed, and profitability is starting to go the wrong way. Analysts see a profit of $1.14 a share when it reports its latest quarterly financials on Tuesday, below the $1.16 a share it earned a year earlier. It could be worse. Bed Bath & Beyond has missed Wall Street's profit forecasts in two of the past three quarters.
Wednesday -- Home on the Range
Wall Street has been kind to homebuilders since the housing market started to bounce back in recent years, and KB Home (KBH) has gone along for the ride. The shares have more than tripled since bottoming out three years ago. KB Home is one of the country's larger real estate developers, having built more than half a million homes over the past 57 years. It reports on Wednesday morning.
We have already seen at least one of its peers show signs of slowing activity, with orders for new homes slowing and cancellations on the rise. This doesn't mean that KB Home's report will be a stinker. In fact, homebuilder confidence is at a nine-year high according to the National Association of Home Builders/Wells Fargo housing market index. It will still be a report that bears watching.
Thursday -- Swoosh, There It Is
One stock checking in with fresh financials on Thursday is Nike (NKE). These are interesting times for the maker of athletic footwear and apparel, given the tumultuous state of the NFL. Nike suspended its contract with Minnesota Vikings running back Adrian Peterson on child abuse allegations last week.
However, Nike isn't one to hang its name on just one star athlete in just one sport. It has long moved on from its days of relying heavily on Air Jordans. It's expected to report modest top- and bottom-line growth on Thursday, but it's highly likely that at least one analyst will ask for its take on the NFL situation.
Friday -- Phoning It In
It's merely a coincidence that BlackBerry (BBRY) reports its latest quarterly results exactly a week after the iPhone 6 hit the market. There was a time when BlackBerry dominated the then-nascent smartphone market, but we're living in a world of Android and iPhone handsets now.
The report isn't likely to be pretty. We've been seeing quarterly losses and cascading revenue for some time. BlackBerry has done a capable job of shaving costs in an attempt to trim its deficits, but it remains to be seen if there's still time to make BlackBerry matter again in the now-booming niche that it used to rule over several years ago.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond and Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.
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If you've been paying your babysitter or other household worker in cash, you just might be the unassuming neighborhood evader of what's nicknamed the "nanny tax," which also applies to babysitters, housekeepers, private nurses and gardeners.
Don't panic just yet. If you pay a household worker less than $1,900 per year, you qualify for what's called the "casual babysitting exemption."
But $1,900 per year can be a very low threshold, especially if you live in a big city like New York. My 17-year-old stepdaughter's standard hourly rate for babysitting is $12, but she lives in laid-back San Diego. I wouldn't be surprised if parents on the Upper East Side of Manhattan routinely pay $20 or more, especially to caregivers older than 18.
Let's do the math. If the annual exemption threshold is $1,900 and you're paying $20 per hour, that's less than two hours a week of care before you cross the line. Leaving the kids with the sitter to dine out with your spouse one night a week could end up costing you well more than two orders of pad Thai and a large Singha if you pay under the table and the Internal Revenue Service catches you.
Getting Caught and Being Penalized
How would the IRS catch you? These two are the most common ways, especially when considering nannies and other employees who work full-time or close to full-time:
If your employee files for unemployment benefits after her employment with you ends.
If your employee retires and applies for Social Security and Medicare benefits.
If your former employee provides her work history to state or federal agencies to collect benefits, the gig is up. By not accepting your duties and obligations as a household employer, not only are you hurting your former employee's ability to obtain these important government benefits, you are also setting yourself up for fines, penalties, back taxes and interest. In certain cases, penalties can include losing professional licenses, which should make lawyers, accountants, doctors and dentists particularly attentive to this issue. Aspiring government officials and politicians have also lost out.
Consider current employees, too. If they want to qualify for health insurance subsidies under the Affordable Care Ac, they need to have a record of verifiable income.
What the IRS Says
Think you can classify your nanny as an independent contract and avoid all the fuss? Think again.IRS Publication 926 states who is and isn't considered an employee, and in nearly all cases nannies are considered employees. When you are a household employer, you have obligations to withhold and pay taxes. The employer contribution includes Social Security, Medicare, federal unemployment and state unemployment taxes. The employee withholding includes Social Security and Medicare and sometimes federal, state and city income taxes.
Companies such as Care.com can calculate the numbers and process all the paperwork. According to Tom Breedlove, director of the site's HomePay service, "For many families, the available tax breaks will offset most if not all of the employer's tax cost and families can come out ahead." If your employer offers a Flexible Spending Account, you can pay for some or all the care using pre-tax dollars. Many families might also be eligible for the Child and Dependent Care tax credit. Referring to the available tax credits, Breedlove notes, "What we find is that people are almost always pleasantly surprised."
Let's say I live in Southern California and I'm a telecommuting employee of a corporation who has to travel to the physical office one day a week. I hire an adult babysitter who stays at my house with my toddler for eight hours every Monday. I have two choices: I can pay her in cash under the table at $10 per hour (or $80 per week) or I can leverage government tax breaks and my company-provided FSA and pay her legally. According to Care.com's HomePay calculator, I can maintain my $80 per week budget by setting her gross pay at $95 a week. I pay $10 in taxes, $17 to Care.com HomePay for providing the payroll, filing and related services, and receive $42 in tax breaks. Instead of earning $10 per hour, my babysitter earns $9.55 per hour. That's pretty close.
The $6,864 Question
What about a couple who needs more care? Let's say I live in Brooklyn, and my husband and I need three days of care a week (eight hours a day) for our two small children. If we have a budget of $500 per week for care but neither my company nor my spouse's offers an FSA, according to the calculator, I'll be able to pay her $15.34 an hour legally. If I pay her under the table at $15.34 per hour, it will cost me $368 a week -- much less than $500.
The $132 a week difference adds up to $6,864 annually. It's up to you if you want to take the risk of being caught, but the law is the law. Besides, Breedlove advises that recently passed and pending federal and state legislation, such as New York's Domestic Workers' Bill of Rights, is raising awareness of household employer's obligations among employers and domestic workers.
So the next time you interview a potential babysitter or any type of household worker, you might be surprised to find that he or she wants to be put on your payroll.
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HOUSTON -- German electronics and engineering company Siemens AG has reached a deal to acquire oilfield equipment maker Dresser-Rand for $7.6 billion.
Under the deal announced early Monday in Germany, Siemens will pay $83 per common share of Dresser-Rand Group (DRC), $3.09 more than the company's closing share price on Friday. Dresser Rand's market capitalization is $6.12 billion. The deal includes assumption of debt.
Dresser-Rand's board of directors unanimously recommended the offer to shareholders, and Siemens expects to close the deal by summer, according to a statement from the company.
Siemens said in a statement that Dresser-Rand's portfolio of compressors, steam and gas turbines and engines complements Siemens' existing offerings mainly in the growing global oil and gas and power generation businesses.
Dresser-Rand, based in Houston and Paris, has annual revenue of around $3 billion and employs about 8,100 people.
Siemens will operate Dresser-Rand as its oil and gas business under the Dresser-Rand brand name and retain its executive team, a Dresser-Rand statement said.
The oil and gas business will be based in Houston and the company will maintain a "significant presence" there, the statement said.
Also Monday, Siemens announced that Robert Bosch GmbH will buy Siemens' 50 percent stake in a household appliance joint venture between the two companies for 3 billion euros ($3.85 billion). The deal for BSH Bosch und Siemens Hausgerate must still be approved by regulators. It's expected to be finished in the first half of next year.
Siemens and Bosch also will each get 250 million euros from BSH before the deal is finished.
AP/Rajanish KakadeA group of people share a room as they eat a meal after a day's hard work in Mumbai, India. In 1981, nearly 1.7 billion Asians were living on less than $1.25 a day. Today, the figure is about 700 million. But vast numbers cannot aspire to rise much further.By ELAINE KURTENBACH and MARGIE MASON
JAKARTA, Indonesia -- Down a concrete path, between rail tracks that buzz with each approaching train and a river choked by plastic and raw sewage, Asih Binti Arif cradles her baby and reflects on dreams gone dark.
Five years ago, Arif and her husband left impoverished Madura Island, joining migrants throughout the Indonesian archipelago seeking a better life here in the capital.
Across the developing world, migration from country to city has long been a potential path out of poverty. Less and less is that true for Arif and millions of others in Asia, where the wealth gap is growing in many of the most densely populated cities in human history.
From India to Indonesia, Myanmar and the Philippines, overcrowded cities have become studies in extremes of deprivation and wealth.
The trend could worsen as the widening global gap between the richest and everyone else undercuts efforts to reduce poverty. When the rich capture a rising share of wealth, the poor and middle class typically suffer. Experts say other problems tend to follow: poorer health, less education, family breakups, crime and unstable societies.
"With inequality, the impact of growth on poverty eradication is muted," said Indu Bhushan, an Asian Development Bank official.
Indonesia's inequality measure rose from 30.8 in 1999 to 41.3 in 2013 on a scale of zero to 100 where zero means everyone has equal wealth and 100 means one person has all the wealth. Such sharp increases, which reflect wealth concentrating in fewer hands, have occurred in India, China and elsewhere, too.
Against the backdrop of Jakarta's gleaming office towers and luxury hotels, Arif's family lives in the Tanah Abang slum. They scavenge garbage for discarded bottles, cardboard boxes and frayed clothes.
"I can't even imagine or dream of that life," Arif said as a train thundered past. "The gap is so big. They are in the sky, and we are on the earth."
A Seemingly Permanent Underclass
In past decades, the power of industrialization allowed hundreds of million to emerge from extreme poverty.
In 1981, nearly 1.7 billion Asians were living on less than $1.25 a day. Today, the figure is about 700 million.
But vast numbers cannot aspire to rise much further. About 80 percent of the 3.6 billion people in developing Asian countries still live on less than $5 a day, many relying on day labor, rag picking or other meager livelihoods. Even migrants who arrived in cities years ago feel trapped in a seemingly permanent underclass.
At the same time, the numbers of millionaires and billionaires has burgeoned, creating elites that have more in common with the ultra-rich in cities such as Paris and New York than their own countrymen. Outside of eastern China and the advanced economies of South Korea and Japan, an Asian middle class has not taken widespread hold.
In Mumbai, India's financial capital, Pandurang Bithobha Salvi, 52, is a veteran migrant from Naganwadi, a village about 300 miles away. Villagers have been heading to Mumbai since the 1950s to work and supplement meager farm incomes. Despite India's ascent as a business outsourcing center, most migrants find only low-paying unskilled work.
Salvi and 20-odd men share the $130 monthly rent on their 17-square-meter (180-square-foot) room festooned with drying shirts and pants. Cramped as it is, the tiny room is a step up from Mumbai's slums.
Across town on tony Altamount Road, billionaire Mukesh Ambani and his family luxuriate in their 400,000-square-foot mansion. Three years ago, Ambani moved into the 27-story structure, with three helipads, a movie theater and recreation center for a price reported above $1 billion.
It's among the world's most expensive homes in a city of 21 million people where an estimated 40 percent live in slums without basic sanitation. The crisis has worsened since 2005, when slum dwellers made up 35 percent of the city.
Stagnant pay and runaway inflation are putting a decent life out of reach, said Salvi, who used to work as a bus conductor and for a time could afford to have his family live with him in Mumbai.
Having given up the job because of back problems, he earns much less now as a security guard. His family returned home, and Salvi squeezed back into the village's shared room, where sleeping arrangements are a nightly conundrum: six on a makeshift loft, 10 on a floor mat, one or two on a table, and occasionally several in the hallway.
One factor behind Asia's widening wealth disparities, said Bhushan of the ADB, is soaring real estate prices. Affordable housing has been squeezed out by luxury apartments, hotels and malls. India's home prices have soared 60 percent since 2009. Prices in Indonesia, China, Myanmar and the Philippines have surged, too.
"In the past, some of us have made a better life for ourselves and our families," Salvi said. "Such cases are becoming rarer now."
Increasing Inequality, Rising Inherited Wealth
Asia's ultra-rich and their offspring, with their private jets and platoons of servants, live in gated communities in a world prized by brands such as Cartier and Louis Vuitton, and educate their children overseas.
Some have been enriched by the rise of industries such as online commerce and by a property boom. But most of Asia's richest are second- and third-generation beneficiaries of family fortunes.
The World Bank and other global organizations have found that extreme poverty has declined over the past 30 years, in part because U.S., European and Japanese manufacturers brought work to poor Asian countries - textile factories to Bangladesh, for example, and electronics makers to China.
Yet experts say the decline in poverty has been slowed by the wealth gap. The Asian Development Bank estimates that an additional 240 million people in Asia would have risen out of the direst poverty if inequality hadn't increased.
For countries such as Myanmar that are latecomers to industrialization, the challenges are acute. A treasure land of gems and tropical timber that was the world's biggest rice exporter during Britain's colonial era, Myanmar stagnated for decades under generals who yielded power in 2011.
Economic reforms are transforming the skyline of its biggest city, Yangon, but not the lives of people like Thein Tun Oo, whose extended family of 10 subsists in a one-room bamboo shack on the muddy banks of Pazundaung Creek.
Thein Tun Oo, a carpenter who sold his farmland to pay for his father's failed cancer treatment, wagered everything in moving five years ago to Yangon from Bago, a region 100 kilometers (60 miles) away.
"At least here we can find some work," said Thein Tun Oo, 44.
The family feels it has been worth years of illness and hand-to-mouth living to secure education and opportunities for their four girls, ages 4 to 17. The eldest, Po Po Aung, left school at age 7. For a time, she worked with the next eldest hauling gravel for less than 4 cents for each 20 kilogram (44 pound) basket, earning money to pay for school fees.
"We work a day and eat a day," said their mother, Thin Thin Khaing, struggling to be heard over the engine of a gravel-hauling boat berthed beside their door.
Asked what she hopes will come of Myanmar's reforms, including plans for factory parks that might provide better-paying jobs, Thin Thin Khaing and her husband laugh.
"We are just manual laborers, and we don't know about such things," she said.
Little Hope for the Have-Nots
Some of Indonesia's super-rich are known for announcing their wealth by roaring down Jakarta's main roads in sports cars or stretching out in chauffeured Roll-Royces.
Amanda Subagio, 37, a socialite whose father founded a telecommunications and satellite empire, said the flaunting of extravagant wealth by "new money" is deepening the discontent of struggling Indonesians.
"You should be at least aware of how other people are living in this country," she said.
The "other people" are those like Arif, the scrap collector in Jakarta's slum, and her neighbor, Samia Dewi Baturara, who share the same shack divided by a plywood wall.
Baturara left the island of Sumatra alone last year to try to earn enough to support her two children, who stayed behind with their grandmother.
She said she earns too little to ever bring her children to the city. Yet unlike Arif, she still allows herself to dream.
As Baturara peddles coffee opposite the luxury Shangri-La hotel, she pictures herself as a guest in the exclusive world inside. She would have to work 40 days, without spending anything, to afford one night in the cheapest room.
"I imagine that I can come to the hotel and see the room," she said. "Almost every day, I imagine how I can sleep there."
Kurtenbach reported from Yangon, Myanmar. AP writers Esther Htusan in Yangon and Niniek Karmini in Jakarta and Business Writer Kay Johnson in Mumbai, India contributed.
The Chicago Federal Reserve has released its Chicago Fed National Activity Index (CFNAI) for the month of August. While this report is from a regional branch, it covers the nation, and some traders, economists and investors try to use it for direction on broader market indicators.
Unfortunately, the index showed that economic growth decelerated in August. That was led by declines in indicators tied to production. This CFNAI reading fell to -0.21 in August from a positive 0.26 in July. The consensus reading from Bloomberg was 0.35 for August, indicating that things went south in a hurry. We would also point out that July's 0.26 reading was revised down from a prior 0.39.
The Chicago Fed showed that two of the four broad categories of indicators that make up the index decreased from July, and two of the four categories made negative contributions to the index in August.
The release said:
The index's three-month moving average decreased to +0.07 in August from +0.20 in July, marking its sixth consecutive reading above zero. August's CFNAI-MA3 suggests that growth in national economic activity was somewhat above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year. The CFNAI Diffusion Index, which is also a three-month moving average, decreased to +0.14 in August from +0.23 in July. Forty-five of the 85 individual indicators made positive contributions to the CFNAI in August, while 40 made negative contributions. Forty-two indicators improved from July to August, while 43 indicators deteriorated. Of the indicators that improved, 12 made negative contributions.
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Knowing your credit score and knowing how to improve it are two of the most important things consumers can do ensure they reach their long-term goals. The three major credit rating agencies -- Experian (EXPN), TransUnion and Equifax -- collect information on all of us, looking at how we spend our money, pay our debts and mess up. They use that boatload of data to create your FICO score, which in turn is used by lenders to determine your credit risk. And that credit score can determine whether you will be turned down for a car loan -- or if you'll get the 0 percent interest incentive rate or if you'll have pay 18 percent.
Here are 11 steps you can take -- and they may take a few months -- to repair any damage you've done.
1. Get Going
The first thing is to review your credit report for accuracy. Mistakes can and do happen. Sometimes the information given to the credit agencies is simply wrong, and they don't fact-check unless you request it. Sometimes you're a victim of misidentification; perhaps someone with the same name fell behind on payments, and it ends up on your record. Each of the three credit agencies is obligated to provide you with a free report once a year. It's best to cycle through them every four months so you can regularly monitor the accuracy of the information.
2. React
If you find an error on your credit report, immediately file a free dispute form with the credit agency. It is then required by federal law to attempt to validate the information by checking with the creditor who reported it in the first place. That creditor has 30 days to respond, and if it cannot do so, the matter should be resolved in your favor. And while you can remove wrong items from your credit report, don't expect to game the system and erase mistakes that you really did make.
3. Be Responsible
This one is a no-brainer, but it may be the most important thing you can do: pay your bills on time. Greg McBride, chief financial analyst at Bankrate.com, calls it "the low-hanging fruit." Paying your bills on time and demonstrating responsible debt management over time accounts for two-thirds of your credit score. "If you're not doing that, it doesn't matter what else you do," said McBride. If you can't do that, at least make the minimum payment and preferably pay as much as you can. Missing a payment is a real black mark.
4. Avoid Deadly Sins
Some mistakes will ding your credit score -- but others will demolish it. Bankruptcies, defaults on a mortgage, some unpaid tax liens and defaults on student loans stay on your record for 10 years or longer. Most other mistakes get erased in seven years, and they tend to fade in importance over time. McBride says "the passage of time works to your benefit. Recent events count more and carry more weight than the missteps" you made in years past. He adds that "a credit rating is like a reputation: it takes a long to build, but it's easy to destroy."
5. Manage Credit Cards
If you are doing everything else right, think about card management. "Don't focus on the number of cards you have," says John Ulzheimer, credit expert at CreditSesame.com. "Focus on how you manage them." Your credit score is partly determined by what's known as the utilization rate. That's determined by dividing your outstanding balance by your credit limit. Ideally if you can keep that below 10 percent, it can boost your credit score, but letting it rise above 30 percent can work against you. Above all, don't max out on any cards. That is, don't spend 90 percent or more of your credit limit. Lenders tend to view this as irresponsible spending.
6. Get More Than One
Lenders like to see two or more cards on your credit report. It shows that you are able to manage your spending responsibly. Ulzheimer says having multiple cards is like having credit score insurance because it can help to lower your utilization ratio -- but only if you're still able to pay them off in full each month. However, "if you use credit cards as a supplement to your income," he says "then you're not doing yourself any favors." If you have cards that you're no longer using, don't cancel them; just shred them. Closing an account reduces your utilization rate.
7. Ignore Store Come-Ons
Chain stores lure you on with discounts (like 20 percent off your first purchase) if you apply for their store credit cards. Don't do it. It temporarily lowers your credit score each time you apply to open a new account. However, you're not punished for shopping around for a mortgage or car loan. McBride says the credit agencies assume that you're buying one home or one car if you submit more than one application within a 30-day period.
8. Ask, and You Shall Receive
If your account is in good standing for at least six consecutive months, you can usually request a hike of $500 to $1,000 in your credit limit. This is a good way for young people who are starting to establish a credit history by improving their utilization ratio. Again, this comes with a warning: it only helps if you don't use the extra credit as a signal to spend more -- but it's there if you really need it.
9. Do the Math
If your credit score is above 750, you're considered an elite borrower and usually eligible for a lender's best deal. But if your score is in the 600s, you may get the loan, but pay through the nose. Here's the difference: on a five-year car loan, a elite borrower might get a 0 percent deal, while the lower-rated borrower could pay as much as 18 percent. The difference adds up to thousands of dollars saved or lost. On credit cards, people with solid credit scores usually pay about 16 percent, while those with poor credit scores can be saddled with onerous annual percentage rates in the high 20s. There's a colossal difference in how much you'll pay in the long term.
10. Establish Credit
Young people are often in a Catch-22 situation: you need a credit history to get a lender to extend you credit. But there are some things you can do. The first option is to become an authorized user on the credit card of your parents or a really, really good friend. This establishes a baseline credit history that will help when you apply for your own credit card. The credit card company holds the other person (parent or friend) responsible for the payment. If you mess this up by charging too much, it can hurt their' score. On the other hand, if you're responsible, you get the benefit of their good credit history. Another option is to get a secured card. You deposit as little as $300 with a bank that issues a card that has that much money available to spend. You can "refill" the card, and once you've established that you can handle your money, you can apply for a real credit card.
11. Plan
If you're planning a big purchase -- a home or a car, for example -- work on these points three to six months ahead. "Every basis point of interest that you pay is real money," said Ulzheimer, suggesting that you also go on a credit hiatus by paying down cards as much as possible and avoiding any new debt.
Shizuo Kambayashi/APSony CEO Kazuo Hirai
Investors will no longer be rewarded for holding on to shares of Sony (SNE). The Japanese consumer electronics titan is holding off on paying a dividend this fiscal year. It's the first time that Sony won't be declaring a dividend since going public in 1958.
There's a lot of history in that time. The company that got its start in 1946 as an electronics shop in a department store building would go on to usher in an era in which Japan became known as an exporter of quality consumer electronics. From televisions to camcorders to video game systems, Sony either pioneered new trends or hopped on existing ones and raised the bar. Steve Jobs, Apple's (AAPL) visionary, credited Sony as having been his inspiration in his youth.
This is the company that ushered in the era of portable media players with the Sony Walkman in 1979, following that up a couple of decades later by leading the development of the Blu-ray optical disc platform that gives video buffs a hi-def viewing experience.
Sony was great. It's not doing so well these days.
Getting It Wrong
Sony has bet on the losing side before. Its Betamax platform faltered when the market favored VHS. Its memory stick solution never took off relative to SD cards in the realm of data storage. However, it has been able to overcome its past miscues by rocking nearly everywhere else.
It's a different scene these days. Sony has posted losses in all but one year since 2008, and fiscal 2015 is shaping up to be another year of red ink. Sony just warned that it's looking at a loss of nearly $2.15 billion, fueled largely by an impairment charge as it writes down the value of its mobile communications unit. Smartphones were supposed to be the ticket for Sony to rejuvenate its fading electronics arm, but Sony's been no match for nimbler and more effective players outside Japan.
This has been a rough year for Sony. It sold off its unprofitable PC unit and it spun off the horrific television business, which hasn't posted an annual profit in the past decade. Earlier this year it shuttered most of the Sony stores in this country. Why not? It's not as if Sony has a lot of consumer electronics to sell in a world where VAIO PCs are gone -- and its TV business will likely be sold off if it's not discontinued.
Holding On to What It's Getting Right
Things aren't all terrible at Sony. After falling behind the Wii and Xbox 360 in the previous generation of gaming consoles, PlayStation 4 is crushing Wii U and Xbox One. This may not seem like a big deal outside of die-hard gamers, but it could be a way for Sony to begin to rebuild its brand with young teens and millennials who don't necessarily associate the company with quality consumer electronics.
Sony is also holding up well on the entertainment front. In its prime, Sony began to expand into movie studios and record labels. The music industry has been a challenging niche since folks began to swap MP3 files, but the video industry is benefiting from the digital revolution in which content creators can benefit beyond theatrical and retail physical media distribution.
All of this may not be enough. Sony brought in a new CEO two years ago, choosing to go with cost-cutting insider Kazuo Hirai as its new helmsman. Losses continue despite his initiatives, but there's always the hope that he's making the hard decisions now to cut loose money-draining divisions. The layoffs and subsidiary trimming may not be helping morale, but there are enough parts that are still working to serve as a foundation. The challenge here is for Sony to stop the bleeding. A turnaround can't begin until losses turn into profits. We're not there yet, and Sony may never get there.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. Check out our free report on the Apple Watch to learn where the real money is to be made for early investors.
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Peter Thiel is underestimating Twitter (TWTR). I should know; I made the same mistake.
On Sept. 17, Thiel, an early Facebook (FB) investor, used part of a wide-ranging CNBC interview to dismiss the microblogger. "Twitter is hard to evaluate. They have a lot of potential. It's a horribly mismanaged company -- probably a lot of pot-smoking going on there."
Let's be clear about what Thiel is saying here. He isn't commenting on cannabis so much as accusing Twitter of poor performance. A claim that any sober analysis of the numbers would instantly refute. Overall revenue growth is up 117 percent over the past 12 months. Ad revenue per 1,000 timeline views -- a key metric for the company -- doubled in the most recent quarter and is growing even faster overseas.
Of course, it would be easy to skewer Thiel if I hadn't been just as dismissive of Twitter and CEO Dick Costolo. But I was.
Dysfunctional and Slow
Back in 2011, a Fortune exposé told of a dysfunctional culture in which nothing moved fast enough. Even Costolo -- barely six months into the job as CEO -- had come off poorly for spending six weeks to craft a new mission statement. Naturally, I piled on in a follow-up column:
"At Twitter, arrogance seems to have manifested itself in the form of a confused mishmash of visions and product strategies. Six weeks to form a mission statement? Six weeks is a lifetime in tech, especially in the fast-paced microuniverse we call Silicon Valley."
I'd concluded that column by saying I would avoid the Twitter IPO, which looks like a smart decision on the surface. The stock is up about 13 percent since the offering vs. 15 percent for the S&P 500 (^GPSC), a small but likely transient win that will evaporate now that the business is performing as well as it is.
Costolo never responded to my finger-pointing. (As if he needed to.) But he did respond to Thiel, in the most hilarious way possible:
@goldman working my way through a giant bag of Doritos. I'll catch up with you later. -- dick costolo (@dickc) Sept. 17, 2014
How did he take the microblogger from dysfunctional to dynamite performer in three years? Here are four things Costolo says about managing and leadership that every current or would-be Twitter investor should know.
Crazy sometimes leads to innovation; let it happen. "I want people to always feel like [employees] can suggest whatever crazy idea they want to suggest, and whatever crazy design idea they have -- and let me worry about whether that is something we should do or not," Costolo said in a late-2013 conversation on Chris Hardwick's Nerdist podcast.
Admit mistakes so your reports don't repeat them. "Those are great teaching moments when the CEO is standing in front of you and saying, 'Here's a great example of someplace I screwed this up,'" Costolo said in a February 2013 interview with the Wall Street Journal, referring to the benefits of a two-day class he teaches to new Twitter managers.
Venture outside the management bubble. "I try to spend a lot of time with people outside my direct reports. The view from the top is totally distorted. If you only spend time with your directs, you have no perspective on what's really going on," Costolo said in a May 2013 interview with Inc.
Don't try to be popular. "As a leader, you need to care deeply, deeply about your people while not worrying or really even caring about what they think about you. Managing by trying to be liked is the path to ruin," Costolo said in a September 2013 speech at TechCrunch's Disrupt conference.
Sounds to me like pretty sober advice from a man accused of lighting up on the job. Then again, I've been wrong before. Pass the Doritos, please?
Motley Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Find him on Twitter as @milehighfool. The Motley Fool recommends and owns shares of Facebook and Twitter. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks, check out our free report.
Monday morning carried news that Charles Plosser, the president and CEO of the Philadelphia Fed, announced that he will retire as of March 1, 2015. Plosser served as the 10th president of the Philadelphia Fed since 2006. What stands out here is that this means that the Federal Reserve is losing one of its key hawks on interest rates and monetary policy. It is impossible to know if this really means that the Fed will become even more dovish until a replacement is announced, but one of the hawks is likely about to be less vocal and soon to be gone.
The Philadelphia Fed helps to formulate and implement monetary policy, and it supervises banks as well as loan holding companies. It provides financial services to depository institutions and the federal government. It, along with 12 other regional Reserve Banks and the Board of Governors in Washington D.C., make up the Federal Reserve System.
Plosser had this to say on his retirement:
For more than eight years, I have had the honor to work alongside many talented colleagues here at our Bank and throughout the Federal Reserve System during an extraordinary period in this nation's economic history. After more than three decades of economic research and teaching, this has been a unique opportunity and privilege to serve the nation.
Fed Chair Janet Yellen weighed in on the retirement saying that he was a "dedicated leader."
The search committee headed by the James Nevels, founder and chairman of the Swarthmore Group, and Michael Angelakis, vice chairman and CFA of Comcast, are set to review a list of candidates to fill Plosser's role.
The question remains whether a dove or a hawk will make its nest in this position.
ALSO READ: The 5 Things That Will Drive Stocks Higher
WASHINGTON -- Fewer Americans bought homes in August, as investors retreated from real estate and first-time buyers remained scarce.
Sales of existing homes fell 1.8 percent to a seasonally adjusted annual rate of 5.05 million, the National Association of Realtors said Monday. That snaps a four-month streak of gains. August sales are down from a July rate of 5.14 million, a figure that was revised slightly downward.
Much of the decline came from the exodus of investors, who had been buying properties in the aftermath of the housing bust and recession. Investors accounted for just 12 percent of August purchases, compared to 17 percent a year earlier.
Overall, the pace of home sales has dropped 5.3 percent year-over-year.
The rebound from the housing bust that triggered the recession has been painfully slow. The share of Americans who own homes has trended downward over the course of the five year recovery, as more Americans are becoming renters. The ownership rate fell to 64.7 percent through the middle of this year, down from a peak of 69.2 percent toward the end of 2004, according to the Census Bureau.
Sales were curbed by winter storms earlier in the year. They began to accelerate through the summer as mortgage rates eased back from 52-week highs. But the combination of rising home prices last year and sluggish wage growth has limited sales.
Rising prices through much of 2013 and weak income growth priced out many would-be buyers. Only 29 percent of purchases in August came from first-time buyers, well below the historical average of 40 percent.
The median sales price has risen 4.8 percent over the past 12 months to $219,800, but it slipped slightly in August compared to prices in July and June.
Sales of existing homes continue to lag last year's pace of 5.1 million. Annual sales of 5.5 million are consistent with a healthy housing market, according to analysts.
Many consider home sales to be the missing link in a solid economic recovery. Federal Reserve Chair Janet Yellen recently told Congress that housing has proven to be disappointing this year.
Indicators heading into the fall and winter are mixed for real estate, however.
Home construction plunged 14.4 percent in August compared with the prior month, the Commerce Department said Thursday. Much of that decline was due to a drop-off in building apartment complexes, but single-family home construction also fell 2.4 percent.
Applications for building permits, a sign of future activity, dipped 5.6 percent to an annual rate of 998,000.
Yet builders expressed more confidence. The sentiment index from the National Association of Home Builders and Wells Fargo climbed in September to 59, the highest reading since November 2005. Readings above 50 indicate more builders view sales conditions as good rather than poor.
New-home construction increased 15.7 percent in July to a seasonally adjusted annual rate of 1.09 million homes, the Commerce Department reported Tuesday.
Home prices are also increasing at a slower clip, which should help ease affordability pressures.
Prices rose 7.4 percent in July from July 2013, according to real estate data provider CoreLogic. That was slightly below June's year-over-year increase of 7.5 percent and far below a recent peak of 11.9 percent in February.
Yet incomes remain weak, making it more taxing for would-be buyers trying to save for a down payment.
The Census Bureau said last week that median household incomes were $51,939 in 2013. Adjusting for inflation, that's 8 percent lower than in 2007, when the recession began.
And mortgage rates have begun to rise from recent lows.
Average rates for 30-year mortgages rose last week to 4.23 percent from 4.12 percent, according to mortgage company Freddie Mac. Mortgage rates are below the levels at the start of this year, yet they're up from their 52-week low of 4.1 percent.
Andrew Burton/Getty ImagesAlibaba founder Jack Ma at the New York Stock Exchange.
I was inundated with emails last week asking if I had any special connections. I'm certainly not the go-to-gal when it comes to sold-out tickets to concerts or sporting events, but it seems I'm top of mind when friends and acquaintances want to get in on an initial public offering. It happened with Facebook (FB), then Twitter (TWTR), and most recently, Alibaba (BABA).
Despite my being nothing more than a financial adviser at a boutique money management firm in southern California, within my professional, athletic and social circles, people conclude I'm the closest thing they know to a Wall Street investment banker and underwriter. "Sorry," I told them, "you'll have to wait until Friday, when shares are available to the public."
For the vast majority of initial public offerings, the ordinary investor has no shot of purchasing shares at the offering price. For some IPOs, that might be a good thing. Facebook is a famous example of a stock where average investors -- had they waited a day or two -- were able to buy shares at a substantial discount from the price that underwriters made available to their preferred clients.
But that was not the case with Alibaba. The stock price opened at $92.70, an impressive 36 percent above the $68 initial offering price and closed the day at $93.89, giving the company a market value of $231 billion, about the size of behemoths Procter and Gamble (PG) and JPMorgan Chase (JPM). That's bigger than e-commerce companies eBay (EBAY) and Amazon (AMZN) combined.
Investors who didn't get in on the early action are now wondering if they should shell out more than $90 a share to get a piece of the largest-ever IPO.
I'm not sure if his man-crush on Alibaba founder Jack Ma has any impact, but Jim Cramer doesn't think the company is particularly overvalued. Cramer on Saturday blogged, "Ultimately, though, if there is a swoon, and you can get the shares of this fast-growing, large-capitalization company at a market multiple (back in the mid-'80s), then I think you should do it. I believe in the company. I believe in the man." He does add, however, that he prefers "both Facebook and Google" (GOOG) to Alibaba.
The Case for the Bulls
Profitability. Alibaba is profitable. The company had $8.5 billion in sales in its latest fiscal year ending in March, with net income of $3.8 billion.
Growth. According to a July report by the McKinsey Global Institute, only 46 percent of China's consumers have access to the Internet, compared with 87 percent in the U.S. Despite the lack of Internet penetration, 632 million Chinese use the Internet, compared to 277 million in the U.S. There are 700 million activated smart devices in the country, and in 2013 Internet sales exceeded the equivalent of $300 billion. In a country that never developed a bricks-and-mortar mall infrastructure, Chinese Internet retailers have a captive --- and growing -- customer base. Growth potential isn't limited to only China; Ma has made no secret about his intentions to compete in foreign markets, including the U.S.
Market share. Alibaba is responsible for more than 80 percent of all online sales in China.
And to think that Ma, a former English teacher, started the company in his small apartment a mere 15 years ago. No wonder investors bid the share price up so high on Friday.
The Case for the Bears
Seasoned investors understand that no reward can be captured without taking risk. And Alibaba investors face many.
Corporate governance. Alibaba shareholders have limited rights and don't control the company due to Alibaba's unusual corporate governance structure. This "partnership" is empowered with granting board seats to nominees without shareholder approval. Also, shareholders don't hold interest in the company directly. Since Chinese law severely restricts foreign ownership, shareholders actually own interest in an entity that is registered in the Cayman Islands that is under contract to receive the profits from Alibaba's Chinese assets. This is similar to how Baidu (BIDU), China's dominant search engine provider, is structured.
Political environment. China is ruled by the Communist Party. Although the government has engaged in significant economic and market reforms over the past two decades, it still operates with a large degree of control over private enterprise. That risk, however, is not unique to Alibaba investors.
Investors who believe the stock is overpriced at the level of Friday's close will have an opportunity to obtain stock at a discount by using options when U.S. options exchanges begin to list contracts on the company, which is expected to begin in about two weeks. I anticipate that one of the most popular strategies will be writing covered calls -- where an investor purchases 100 shares of stock at the market price, sells a call option and receives call option premium for agreeing to sell the shares at a certain price in the future. The premium received will partially offset the price the investor paid for the shares, effectively providing a discount from the market price of the stock.
As of the date of publication, the author has no position in Ali Baba. The information contained herein is strictly for educational and illustrative purposes, providing commentary, analysis, opinions and recommendations and should not be considered investment advice for any specific subscriber or portfolio or an offer to sell or a solicitation to buy any security.
Bradley C. Bower/Bloomberg/Getty Images
In any given week, some stocks are sure to shoot up, and others will plummet. The big gainers inspire us to keep investing. The presence of the decliners keeps our greed in check while reminding us about the risks of the equity markets. Let's go over some of last week's best and worst performers.
Avanir Pharmaceuticals (AVNR) -- Up 64 percent last week
Last week's biggest gainer was Avanir Pharmaceuticals. The volatile biotech soared after revealing favorable clinical trials data on its AVP-923 drug candidate that treats agitation associated with Alzheimer's. This is a major hurdle cleared on the long path to gaining regulatory approval, but this is just the second of three clinical trial phases that Avanir needs to shine through to get its treatment on the market.
Novatel Wireless (NVTL) -- Up 33 percent last week
Novatel Wireless moved higher after IT products distributor and services provider Synnex announced an expanded deal to offer Novatel products throughout the U.S. and Canada. H.C. Wainwright followed by initiating coverage of Novatel with a buy rating and a $4 price target that it deems as conservative and one that it's likely to raise "sooner rather than later."
Apogee Enterprises (APOG) -- Up 14 percent last week
There weren't too many companies reporting quarterly results last week, but Apogee was one that managed to shine through. The provider of value-added glass products and services saw revenue soar 30 percent in its latest quarter. Adjusted earnings climbed 67 percent to $0.35 a share, beating Wall Street expectations. The strong showing finds Apogee raising its outlook for fiscal 2015.
VirnetX (VHC) -- Down 65 percent last week
The market's biggest loser was VirnetX, shedding nearly two-thirds of its value after an unfavorable patent ruling. The U.S. Court of Appeals for the Federal Circuit rejected a jury award of $368.2 million that VirnetX initially won against Apple (AAPL) in 2012 for patent infringement related to virtual private networking and FaceTime.
Investors were hoping that VirnetX would not only hold on to the initial jury award but also see it expanded in light of subsequent Apple product releases.
Drugstore operator Rite Aid posted better-than-expected results -- the chain's eighth consecutive quarterly profit -- but came undone with a problematic outlook for the balance of the year. Lower reimbursement rates and leaner margins on new generics are forcing Rite Aid to lower its profit guidance for the entire year.
Web-hosting specialist Rackspace was booted offline after announcing that it is no longer looking to be acquired. Rackspace excited investors in May by announcing that it was putting itself up on the block, but a lack of interested buyers willing to pay an acceptable premium didn't help.
It also introduced a new CEO to oversee Rackspace's newfound emphasis on making things work as a stand-alone company. The market wasn't happy with the announcement.
Top-line growth hasn't been an issue at Rackspace. The problem is that profitability has taken a step back in recent years as intensified competition from tech giants has resulted in margin-smashing price wars. Rackspace may think that it's better off as a swinging single, but the market doesn't seem to think so.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple and Rackspace Hosting. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days.Check out our free report on where the real money is to be made from the just-announced Apple Watch.
Confluence Partners/APAn artist's rendering of the proposed tramway.
A plan to develop 420 acres at the Grand Canyon has split members of the Navajo Nation, the 25,000-square-mile reservation that would host the project. Grand Canyon Escalade is planned for the western edge of reservation land between the Colorado and Little Colorado rivers, 100 miles from Flagstaff, Arizona.
Confluence Partners says its $150 million proposal includes multiple features: a gondola tramway from the Canyon rim to a location near the Colorado River; an educational and sightseeing experience at the bottom of the canyon; a themed cultural and historical arts, events, education, dining and shopping experience; lease sites for hotels and other services; and exhibit and sales areas for Navajo artisans and jewelry vendors.
Confluence Partners claims the development would bring 3,500 jobs (2,000 on-site) to the severely impoverished Navajo people. It says the Navajo Nation would earn $40 million to $70 million annually through tourism, Accuweather reports. "The project would be nearly 10 miles from the nearest South Rim viewpoint. At that distance, Escalade's buildings and tram will not be visible to the naked eye," Confluence manager R. Lamar Whitmer told Accuweather. "It would be 23 miles from the South Rim's Grand Canyon Village and 15 miles from the North Rim facilities."
Neither responded to interview requests, but both are actively promoting their views online.
Split Support
What do Navajo Nation leaders say? President Ben Shelly, who has personally supported the project while trying to appease both sides, in May said it wouldn't happen due to unspecified future lawsuits. (The project is also under Nation review.) Deswood Tome, special adviser to the Navajo Nation president, supports the project for tourism revenue. Pastor Ellson Bennett believes the project will give the Navajos more control of the area so it can be better protected.
But at this time, more voices don't want the development. The opposition believes Grand Canyon Escalade will desecrate the land and disturb the East Rim ecosystem. Confluence Partners rebuts such claims and says the area is is a busy commercial stretch for hikers and rafters.
Sam Hodgson/Bloomberg via Getty Images Charles Plosser, president of the Federal Reserve Bank of Philadelphia.By MARTIN CRUTSINGER
WASHINGTON -- Charles Plosser, a leading inflation "hawk" at the Federal Reserve, announced Monday that he plans to retire March 1.
Plosser, who has been president of the Fed's Philadelphia regional bank since August 2006, has been a leader of the officials known as hawks for their concerns that a continuation of low-interest rate policies could ignite inflation.
He has dissented at the past two Fed meetings, when the central bank voted to maintain its plan to keep a key short-term rate at a record low for a "considerable time."
Plosser, 66, would have given up his vote on the Fed's policymaking committee next year as part of the normal rotation of votes among the regional bank presidents. And the rules governing the Fed's 12 regional banks would have required his retirement in 2016.
The regional bank presidents face mandatory retirement at age 65 or 10 years after first being appointed if they were appointed after 55, as Plosser was.
Another leading hawk, Richard Fisher, president of the Dallas regional Fed bank, is also expected to step down early next year. Fisher faces a mandatory retirement by April 30 but has yet to announce his plans.
The presidents of the regional banks are selected by the board of directors for each bank. James Nevels, head of the Swarthmore Group and chairman of the Philadelphia Fed's board of directors, said a search committee would begin looking for a successor to Plosser.
In a statement, Fed Chair Janet Yellen praised Plosser as an "insightful and dedicated leader" and said his "keen insights, deep analysis and good humor" would be missed in the Fed's deliberations.
Plosser and Fisher dissented at last week's policy meeting. They, along with Presidents Esther George of the Kansas City Fed and Jeffrey Lacker of the Richmond Fed, have warned of the risks they see in keeping rates too low for too long. The worry that a result could be runaway inflation or dangerous asset bubbles like the one in home prices that triggered the last recession.
Yellen enjoys broad support among other Fed officials who tend to think the risk of inflation remains low and that the greater threat to the economy comes from subpar growth and a still less-than-healthy job market.
NEW YORK -- Worries about the outlook for growth in China and a slide in the price of oil pushed the stock market to its biggest loss in almost seven weeks Monday.
Investors are nervous about China following a run of soft economic data that suggests growth in the world's second-largest economy is slowing. The worries about China helped push down the price of oil. That in turn weighed on energy stocks.
The stock market has struggled to gain traction this month as investors have weighed signs of an improving economy in the U.S. against evidence of slowing growth in both Europe and Asia.
"We've got China weighing down on stocks," said Kristina Hooper, U.S. investment strategist at Allianz Global Investors. "The lack of transparency there always creates greater uncertainty."
The Standard & Poor's 500 index (^GPSC) dropped 16.11 points, or 0.8 percent, to 1,994.29. The loss was the biggest one-day decline for the index since Aug. 5. The index is down 0.5 percent this month.
The Dow Jones industrial average (^DJI) fell 107.06 points, or 0.6 percent, to 17,172.68. The Nasdaq composite (^IXIC) dropped 52.10 points, or 1.1 percent, to 4,527.69.
The losses were broad, and all 10 industry sectors that make up the S&P 500 declined. Energy stocks were the second-biggest decliners, slumping 1.4 percent as the price of oil fell. Companies that rely the most on consumer spending, such as entertainment and media conglomerates and retailers, fell the most.
The price of oil dropped on concerns that Libya's production is picking up at a time when global economic indicators point to weaker demand from countries including China. Benchmark U.S. oil fell 89 cents to $91.52 a barrel. Analysts say U.S. oil could test the $90 mark sometime this week.
Smaller companies were also among the biggest decliners as investors shunned the riskier parts of the market.
The Russell 2000, an index which tracks small-company stocks, fell 1.5 percent, more than other indexes. The Russell has dropped 3 percent so far this year, compared with gains of 7.9 percent for the S&P 500 and 3.6 percent for the Dow.
Some analysts say investors should regard any pullback in stock prices as an opportunity to add to their holdings. Recent reports on the manufacturing and the service industries have been strong. Hiring is picking up and inflation remains tame.
"The fundamentals in the U.S. have been coming in strong, beyond expectations," said Doug Cote, chief market strategist at Voya Investment Management. "It's a modest pullback. If anything I would take it as an opportunity to build positions."
On Monday, stocks were also hurt by a report showed that fewer Americans bought homes in August as investors retreated from real estate and first-time buyers remained scarce.
If the trend continues it could dent consumers' confidence, said Allianz's Hooper.
"It really speaks to much of middle-class America. The largest component of their net worth is their home," she said. "It could really put a damper on consumer spending and consumer sentiment."
The National Association of Realtors said sales of existing homes fell 1.8 percent to a seasonally adjusted annual rate of 5.05 million. That followed four months of gains. August sales fell from a July rate of 5.14 million, a figure that was revised slightly downward.
The report weighed on homebuilding stocks. Hovnanian (HOV) fell 14 cents, or 3.6 percent, to $3.80 and Beazer Homes (BZH) fell 52 cents, or 2.8 percent, to $18.09.
St. Louis-based chemical firm Sigma-Aldrich (SIAL) was among the day's winners. The company's stock surged $34.03, or 33.2 percent, to $136.40 after agreeing to be acquired by Merck, a German drug company. Merck is paying $140 a share from Sigma-Aldrich, a premium of 37 percent over Friday's closing price.
Apple (AAPL) also bucked the slump, logging a small gain of 10 cents, or 0.1 percent, to $101.06. The technology company said that it has sold more than 10 million iPhone 6 and 6 Plus models, a record for a new model, in the three days after the phones went on sale.
In other energy trading, wholesale gasoline fell 2.7 cents to $2.585 a gallon, heating oil dropped 3 cents to $2.687 a gallon and natural gas rose 1.3 cents to $3.85 per 1,000 cubic feet.
Metals remained weak. Silver continued its recent descent, falling to its lowest level since the summer of 2010.
The price of an ounce of silver fell 7 cents, or 0.4 percent, to $17.77 an ounce. Precious metals, including gold, have been pressured by the recent strength of the dollar, low global inflation and rising stock markets. Gold is trading close to its lowest price since the start of the year. Gold edged up $1.30, or 0.1 percent, to $1,217.90 an ounce. Copper fell five cents, or 1.7 percent, to $3.04 a pound.
U.S. government bond prices rose. The yield on the 10-year government bond, which falls when prices rise, dropped to 2.55 percent from 2.58 percent.
In currency trading, the dollar weakened against both the Japanese yen and the euro.
The Japanese yen has been trading at six-year lows against the dollar in anticipation that the U.S. Federal Reserve will raise interest rates next year while the Bank of Japan will maintain an easy monetary policy. On Monday, the dollar edged down to 108.77 yen. The euro rose a fraction to $1.2849.
Getty Images
When people get serious about retirement planning, they often buy bonds. That's because fixed income provides shelter from rocky stock market returns, offers stable income and a return of your capital if you wait long enough (and if the company that sold you the bonds stays in business).
Those characteristics do indeed describe bonds. But if you're retired, you still need to think twice before buying bonds. Rates are low today, and bonds won't help combat inflation -- the arch-enemy of every retiree. If you are willing to tie your money up for 30 years, you can earn a little better than 3.25 perecent with Treasury Bonds, as of Sept. 22.
That's just not enough for most people to live on. If you are willing to ratchet up the risk, you can earn a bit more -- but not a lot more -- with corporate bonds. Fortunately, retirees can use equity growth to boost your monthly cash flow by a third or more.
How Does It Work?
This is a very simple process:
Invest a portion of your nest egg in an equity growth or balanced portfolio.
Withdraw 4 percent of your account value each year.
Readjust your withdrawal amounts each year based on your new year-end balance. If your account grows, your income will increase, too. If your account values drop, you'll have to reduce your annual withdrawals.
The strategy has risks and problems.
What If Your Portfolio Doesn't Earn 4% In Given Year?
Forget the "what if." I can guarantee there will be years when equity won't deliver the minimum 4 percent. To make it worse, there will be years when this investment approach will lose money -- sometimes a lot. What do you do then? Stick to the plan. One year does not a retirement plan make.
This is a long-term proposition. Sure there will be years that show losses. So what? The odds are that there will be plenty more years that make up for those bad years and then some. Even if you are 65 on the day you retire, you still have 20 to 30 years ahead of you (hopefully). And you will need your capital to create retirement income for as long as you live.
People want to have stable investments but need income that will last all their lives. And what they need is an income stream that will grow to offset inflation. You don't get that with bonds. But you have that potential with equity growth.
How Do I Know That My Portfolio Will Sustain 4% Withdrawals?
We are talking about making investments today that will grow until you retire. Then once you retire, those investments have to create income for at least 20 or 30 years after that. When you talk about an investment timeframe of that length, it's hard to be certain about anything. Having said that, let's look at the research.
The most widely cited (but still controversial) research into safe retirement withdrawal rates is the Trinity Study. It concluded that a portfolio with at 50 percent to 75 percent allocation to equity has the highest probability of providing inflation-adjusted income for a retirement lasting 30 years.
Some argue that this withdrawal rate is too high, and others argue that it is too low. That's why I suggest that you adjust your annual withdrawals based on year-end values. This reduces your risk.
What Happens When the Market Drops?
When the market drops. your account values will likely drop, too. That means your income will take a hit as well. I realize that nobody likes to see their income drop, but we have to weigh the alternatives. And fixed income as a long-term alternative doesn't cut it. The Trinity Study proves that.
A few years back I ran a hypothetical retirement income plan based on investing $100,000 in 1988 in the S&P 500 (^GPSC). I studied withdrawing 4 percent of the value each year no matter what. If you look at the chart I created, you'll see that there were years when the income dropped -- sometimes significantly.
But from 1988 through 2011, the hypothetical investor saw his or her income increase from $4,000 a year to more than $14,000. That's more than a 300 percent increase, and no bond can deliver results like that. Of course, the past is no guarantee of the future -- and you can't invest directly in the S&P 500 -- but you get the idea.
Retirement income is a long-term proposition. So you have to think about your income and your capital over the long-run. What happens this year or next really isn't that important. Using equity growth to fund your retirement is a wonderful way to immediately bump up your monthly check. It's also a great option for people worried about long-term inflation -- and that should mean you.
It isn't perfect, and there are no guarantees. But if you think about your retirement and the pros and cons of each investment option, I think you'll agree that equity has a place in your portfolio. Are you using equity to provide income? Why or why not?
Laurie Dieffembacq/Belga Photos/Getty ImagesMick Jagger of the Rolling Stones
In the summer of 1968, the Rolling Stones were in financial trouble. Between an onerous (some would say unethical) contract with manager Allan Klein and a set of draconian U.K. tax laws, there was a real possibility that -- like some of their contemporaries -- they would be forced to pack it in. What they needed was a white knight. Instead, they got a prince.
Rupert Louis Ferdinand Frederick Constantine Lofredo Leopold Herbert Maximilian Hubert John Henry zu Loewenstein-Wertheim-Freudenberg was technically a count, but everyone referred to him as "prince." Born to aristocratic parents, Lowenstein studied at Oxford and after school worked his way up through London's financial industry, first as a stockbroker, and then a financier when he and a group of investors bought the venerable bank Leopold Joseph & Sons in 1963.
The Stones? Who Are They?
Loewenstein was introduced to Mick Jagger by Christopher Gibbs, a London art-dealer and mutual friend, who thought the prince could help clean up the Stones' finances and extricate them from Klein's clutches. Though not familiar with him nor his band -- he had to ask his wife, who was younger and more in-tune with the music scene, who they were -- he immediately took a liking to Jagger
Getty ImagesRupert Loewenstein
"I realized there was something exceptional in his makeup, that his personality was able to convert his trade as itinerant performer into something far more intriguing," Loewenstein wrote in his 2013 autobiography "A Prince Among Stones."
The first order of business was avoiding England's punitive tax structure, which levied a rate of 83 percent on its top earners and as much as 98 percent on investments. Loewenstein accomplished convinced the Stones to relocate to the South of France -- where they recorded "Exile on Main Street" -- in effect becoming "non-residents" for tax purposes.
Keeping taxes down was a consistent theme during his tenure, by channelling the group's earnings through Dutch-chartered companies and encouraging the band to rehearse in Canada, rather than the U.S. He reduced the band's tax rate on hundreds of millions of dollars of earnings to just 1.6 percent.
Getting Rid of the New Jersey Businessman
The second order of business was unravelling the relationship with Klein, a hard-nosed New Jersey businessman, whom Jagger suspected was not paying them everything they were due. Through a series of tense negotiations, Lowenstein got the Stones released, but not without granting Klein the rights to all their music recorded before 1971, something Keith Richards described as "the price of an education."
With their new-found freedom, he was able to move them from Decca to Atlantic Records, where they could get major distribution, and began to maximize the group's touring revenue by enlisting sponsors and advertising deals. He also copyrighted the infamous red tongue and lips logo, which helped make the band an international brand.
In Keith Richards' book "Life," he describes what Loewenstein's moves meant. "On a fifty-dollar ticket, up till then, [the band got] three dollars. He set up sponsorship and clawed back merchandising deals. He cleaned out the scams and fiddles, or most of them. He made us viable."
Close in Body, but Not in Musical Tastes or Lifestyle
And for 39 years, "Rupie the groupie," as he was affectionately called in the Stones' camp, was present on every tour, always right next to the "glimmer twins," Mick and Keith.
Ironically, Prince Rupert was never a fan of the music produced by his star clients, nor their lifestyles, preferring Mozart to Mick, and a "good vintage wine" to Jack Daniels or cocaine.
Loewenstein's last bit of financial advice before parting ways with the band in 2008 was to sell their assets and massive back catalog for a tremendous amount of money and wind down their touring and recording careers. This was one bit of advice that the Stones did not take.
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!
Maria Cordeiro with the Chubb Group of Insurance Companies says that people should give limited information out when posting obituaries. "Identity thieves read obituaries looking for their next victim," she explains. "Don't include a complete address, date of birth, survivor names or professional history."
She says the living should notify the Social Security Administration, which keeps a "death master file" of Social Security Numbers to deactivate. "Funeral directors are supposed to do this, but doing it yourself can accelerate the process," Cordeiro said.
Finally, Cordeiro points out the importance of shutting down social media websites after your loved ones pass away. While you might want to leave this up as a tribute, it can be a potential treasure trove to identity thieves looking for identifying information about your loved ones.
How Do You Know Your Loved Ones Are Affected?
Learning about the problem is "similar to how you know a living person has been affected," says Robert Siciliano, a security expert with TheBestCompanys.com. "You start getting invoices or bills for products and services that were not procured."
The problem is that when these bills get racked up, there's no one to pay them and then you start getting calls from collection companies. "The problem isn't so much financial -- it's emotional," says Cordeiro.
"A lot of times debt collectors will start harassing you," says Siciliano. "They don't believe you that the person is deceased. Now you have to prove it."
How Do You End the Calls?
It's not easy to clear your late loved one's name and end the calls. "No two organizations are going to deal with it the same way," Siciliano says, adding that once you get all the documentation together, it's just a matter of sending it out to each respective organization that needs it. "It's a bit like Whac-a-Mole," he says.
If possible, get a credit report before the person passes away or as soon to it as possible. Cordeiro points out that this gives you a snapshot of what the person's credit report looked like at or around the tie of death. After that, you can order another credit report six months later or simply log in to a credit monitoring service. After six months, it's almost certain that your relative's name and Social Security Number have been added to the death master file.
One big benefit of shopping online is the ability to do comparison shopping. You don't have to drive all over town and walk into a bunch of stores to figure out who has the best prices for what you want.
While comparison shopping might work out just fine when you're looking at established online sellers and big retailers, it can fall apart pretty quickly when you're just looking for the best price. Counterfeit goods litter the web.
You might pay less, but you're not going to get the real item or anything remotely close in quality. Think you're going to get a refund after your disappointment? Good luck with that. If you didn't know it before you made your purchase, it's more than likely you'll find out later that the site you bought from is in China and far beyond the purview of your attorney general's office or the Better Business Bureau. In other words, you lose.
"Heaped on top of the potential disappointment of getting a fake, many too-good-to-be-true offers are just that," said Frederick Felman, chief marketing officer of the brand protection firm MarkMonitor. "Consumers often receive shoddy product, boxes full of rocks or even no shipment of any goods at all from scammers who prey on deal-seekers. And, sometimes the risk is even more insidious. We've heard tale of exploding batteries and fires started from faulty chargers. For some, that's just the beginning of the angst -- some corrupt sellers use financial data to run further transactions on credit cards or even sell your credentials to other criminals."
Crooks can be incredibly convincing when it comes to getting consumers interested in buying their phony goods. And they know what people want and jump in on items where price is an obstacle.
To avoid getting ripped off online with counterfeit products, consider this advice from MarkMonitor:
Be careful what you search for. Counterfeiters use seasonal keywords like "back-to-school" to their advantage. They also add terms like "cheap" or "discount" in front of a product name or category.
Check out the return policy. Most legitimate sites will fully disclose their return policy. If one isn't listed, it is most likely a counterfeit site.
Be wary of highly-discounted goods. As the saying goes, if it seems too good to be true, it probably is. Counterfeiters have become more sophisticated in their pricing techniques but still reel in unsuspecting consumers with the promise of the deal of a lifetime.
What is the reputation? Is the site or seller mentioned on any of the scam warning sites? Do a search for the vendor's name and "scam" and see what comes up.
Here are seven categories of goods that are frequently counterfeited:
Carolyn Jenkins/Alamy
Mars Chocolate North America announced on Friday a voluntary recall of its M&M's Milk Chocolate Theater Box for possibly containing undeclared peanut butter.
Potentially the cause of serious or life-threatening allergic reaction to some people, the peanut butter ingredient is not listed on the outside cardboard box, although the inside package is correctly labeled, the release said.
No adverse reactions had been reported as of the statement's release on Friday.
The Chicago Federal Reserve has released its Chicago Fed National Activity Index (CFNAI) for the month of August. While this report is from a regional branch, it covers the nation, and some traders, economists and investors try to use it for direction on broader market indicators.
Monday morning carried news that Charles Plosser, the president and CEO of the Philadelphia Fed, announced that he will retire as of March 1, 2015. Plosser served as the 10th president of the Philadelphia Fed since 2006. What stands out here is that this means that the Federal Reserve is losing one of its key hawks on interest rates and monetary policy. It is impossible to know if this really means that the Fed will become even more dovish until a replacement is announced, but one of the hawks is likely about to be less vocal and soon to be gone.
