If you thought the recent #AlexfromTarget social storm triggered by teen fangirls was over the top, get ready for selfie-snapping newborns. New social toys from the Netherlands called New Born Fame let babies post to Instagram and tweet from the crib. The fuzzy-wuzzy GPS and camera-loaded toys also let babies take selfies and automatically upload them to Facebook (FB).
On the heels of Huggies TweetPee, which allowed babies to tell their parents via Twitter (TWTR) when their diaper is wet, comes this next step in recording every moment of our lives. Did baby turn over? Babble her first da-da? No worries, no one will miss it. Not mom, dad, grandma, or the billions of people on the Internets.
As babies are too young to use laptops or smartphones, Netherlands grad student Laura Cornet developed a crib mobile with soft toys dangling down in an infant-engaging way. Each of the toys interacts with the baby's social profiles, which are created and synched by parents. Isn't that birdie cute? Pull on it and baby tweets! Pull on the Facebook logo and baby updates his status along with his current location (3:13 a.m., Crib, left corner). Pull on the toy that looks like a camera and an up-close-and-personal video is taken and lands on Instagram.
Internet-famous by 3 months? What a concept. Design innovator Cornet came up with the idea to encourage parents to start thinking about what they post about their children online. All of which is obviously done without baby's consent. This new generation will have an Internet footprint before they can walk. Apply to an elite kindergarten? Oh-oh, those drooly selfies could block that acceptance. Star in the middle school play? Too many potty-shots online. Eventually, prospective employers may have a digital record of their potential employees diapers and drool.
And while Cornet developed all this in the name of social research, for marketers this is truly the proverbial cradle-to-grave strategy. Does baby have flushed cheeks? Better send that Amazon drone over with some Pedialyte and flu medication. Look how cute baby looks in pink!
Getty ImagesEvery one of us has had "aha! moments." Epiphanies. Days when we reach a crossroads and realize that we have to make some changes. For the next two months, we're sharing moments like those in our Life Stage Lessons series: Real stories straight from the financial lives of our DailyFinance contributors about times when they realized they were due for a serious course correction. So read on, learn from our mistakes, and get inspired to improve your relationship with your money.
In my recent post about my high school and college years, I told you how I didn't make much money back then, and blew what I had. Maybe some of you can relate. This trend held true pretty much for all my saving in my 20s. But around the time I turned 30, I woke up to the reality of my financial situation. Here's what I had managed to accumulate:
A new sports car, for which I would still be making payments if I hadn't gotten it out of my life.
An enviable home entertainment system with a big, expensive HDTV. The TV is almost totally obsolete now, the technology having improved a lot in the past few years. At the time, I thought I could see atoms at this resolution. Today I'd be lucky to get $200 for it.
Plus or minus $1,000 in savings, depending on what I was wasting money on at the moment. I also had slightly more than this in a poorly chosen mutual fund, generating minimal profits.
Of course, I had other things too, but this picture probably feels very familiar to some of you. Lots of young guys live this way. And it feels fine while you're doing it. But I realized that if I kept living this way, I could never retire. I say "I realized." It was more like "I panicked." So I got serious.
New Decade, New Me
First I got rid of the car. I had paid down the loan enough that I actually got a little bit back. It was still a stupid move to have the thing in the first place. It had cost me a lot by the time I sold it, and being out from under those payments was a huge relief. Moreover, I found I didn't even need a car. Between my bike and public transportation, I could get everywhere I needed to for next to nothing. Why hadn't I been doing this all along?!
Next, I fundamentally changed my lifestyle. I quit eating out (I learned to cook and tried to live on $60 of groceries a week), cut out live concerts and sporting events from my schedule and canceled my cable. Was I a hermit? Maybe sorta. But I started a business. I learned about finance. I learned a lot of things that I'd always had on my "I'll do that someday" list.
It all added up to a major difference in my savings. After I sold my car, I redirected that $564 a month straight into my portfolio. Awesome! I was honestly really excited to start seeing this pile up in my new cheaper, higher-yielding mutual fund. (I would learn more about investing in the years that followed, but at that point, it was a solid home for this money.) I was also saving about $225 a month by not eating out, which also went straight into the savings pot. Add to that another $200 a month or so for concerts, games and drinks, and I found that I was able to save $1,000 or more, without even trying that hard.
Once you have a little money (and this was the first time in my life I had any at all), you begin to realize how many things you can do with it. I'll tell you more in the next installment about how I spent and invested some of my money in what I think are really good ways.
I'm here to tell you that you can make big changes in your life too, to start preparing for the future. I learn more every day, and every day, I get more excited about what is to come.
Virginia Mayo/APLuxembourg's Finance Minister Pierre Gramegna, left, speaks with EU Commissioner for the Economy Pierre Moscovici during a meeting of the eurogroup finance ministers at the EU Council building in Brussels on Thursday.By RAF CASERT
BRUSSELS -- Luxembourg, one of the world's wealthiest nations, came under fire Thursday after leaked documents allegedly revealed the extent to which it has attracted multinationals and the super-rich with sweet tax deals, depriving other countries of valuable tax revenue.
The government defended itself saying it had done nothing illegal in its deals with corporations like Pepsi (PEP) and IKEA. But other European nations, including neighbor France, criticized the tiny country's tax practices -- particularly when they have to impose austerity cuts on their citizens to make ends meet.
Tax 'optimization' -- companies that legally find solutions to pay little or no taxes -- that is no longer acceptable for any country.
"Tax 'optimization' -- companies that legally find solutions to pay little or no taxes -- that is no longer acceptable for any country," said French Finance Minister Michel Sapin. "I wish that in a few years we never have to talk about something like this again."
Luxembourg's other neighbors, Belgium and Germany, and the Netherlands were equally quick to condemn the practice, which gained center stage Thursday when a group of investigative reporters produced documents allegedly showing that scores of major multinational companies have won such advantageous deals.
The practice can include offering low corporate tax rates to companies that have their European Union headquarters in Luxembourg, a nation of 520,000 that otherwise doesn't have a big economy.
But Luxembourg isn't alone in being aggressively competitive in attracting companies. Ireland and the Netherlands itself are being investigated by the European Union executive for their tax practices. The issue has come to the fore since the financial crisis saw governments scrounge for money to refill their coffers -- and tolerance for such practices waned.
Luxembourg Finance Minister Pierre Gramegna insisted his country had not broken any law. "What has happened here is totally legal," he said.
He said Luxembourg would cooperate with others to make sure tax standards are better coordinated on a global level as soon as possible. "The moment the rules change globally, it is evident that Luxembourg will apply them quickly," Gramegna said.
Uncovering Evidence
The International Consortium of Investigative Journalists said the practice in Luxembourg was widespread after it pored through some 28,000 pages of confidential documents covering some 340 businesses that could be linked to the Grand Duchy for special tax deals.
European Parliament President Martin Schulz said that what was most worrying was that nations could simply come out and say it was all perfectly legal.
"This reality means that we need to urge the [EU] member states to work with us to end systematic tax evasion practices in Europe, be it in Luxemburg or any other country," he said.
The EU has already broadened its crackdown on multinationals' tax avoidance schemes, with a probe against Amazon's practices launched last month. The ICIJ allegations now add many more high-profile names, including FedEx (FDX), Pepsi and IKEA.
The European Commission said that it was specifically targeting any deal that would sidestep market conditions and give an unfair edge to one company over others.
At a time of stringent austerity cuts, the tax advantages for multinationals and the wealthy are seen as evidence of an unfair society punishing the poor and rewarding the rich.
At a protest march of 100,000 workers against further austerity in Brussels, the issue of Luxembourg's tax deals was raised time and again.
Socialist trade union leader Rudy De Leeuw said it amounted to "stealing from the common man while at the same time capitalists take their money to Luxembourg. This is unacceptable."
Do you want to talk to your speaker? Amazon.com (AMZN) has launched "Amazon Echo," a speaker you leave on all day and give it voice directions, like Siri on an Apple (AAPL) iPhone.
As well as taking commands such as "Play music by Bruno Mars" or "Add gelato to my shopping list," Amazon said the device accesses the Internet to answer questions such as "When is Thanksgiving?" and "What is the weather forecast?"
Amazon said the speaker, which runs on Amazon Web Services, continually learns a user's speech patterns and preferences.
Users start the speaker up saying the wake up word, "Alexa."
They can then feed Amazon Echo commands or questions or, if they want, wirelessly stream music Web services such as Spotify, iTunes and Pandora via their mobiles.
Amazon Echo is priced at $199, or $99 for members for the online retail giant's Amazon Prime loyalty scheme. It is available on an invitation-only basis in coming weeks.
Amazon has had an unusually busy year, developing a smartphone, video productions and grocery deliveries.
Last month, the company forecast sales for the crucial holiday quarter that disappointed Wall Street and investors who are eager to see Amazon curtail its ambitions and start delivering sustainable profits.
Nike has dropped its partnership with Minnesota Vikings running back Adrian Peterson amid accusations of child abuse. A spokesman for the sportswear company confirmed the termination of the contract to ESPN on Thursday.
Nike (NKE) initially suspended its contract with Peterson as one of the company's spokespeople on Sept. 17. The contract suspension meant they stopped paying the football player and he would not be considered for advertising. According to the company, moral clauses in the contract allow for the company to terminate deals with its athletes depending on the details of a case.
Castrol and EpiPen have already pulled their endorsement deals with Peterson when charges were initially brought up.
Peterson has been embroiled in controversy after being accused of child abuse. On Tuesday, he managed to avoid jail time after reaching a plea deal, but will still face repercussions at the hands of the NFL.
"The NFL advised Adrian Peterson this afternoon that following his plea agreement to resolve his criminal case in Texas his matter will now be reviewed for potential discipline under the NFL's Personal Conduct Policy," the league said in a statement.
Peterson has missed eight of this seasons games but has still been collecting his salary while being benched. The New York Daily News estimates that he has earned $5.5 million during his suspension.
Nike has severed several deals lately with some other sports personalities whose reputation has been mired in scandals.
The sports retail giant has cut ties with UFC light heavyweight champion Jon Jones, paralympic champion Oscar Pistorius and Baltimore Ravens running back Ray Rice.
But Nike has held on to soccer star Hope Solo, and she's also still playing for the U.S. national team despite child abuse charges.
WASHINGTON -- U.S. job growth increased at a steady clip in October and the unemployment rate fell to a fresh six-year low, underscoring the economy's resilience in the face of slowing global demand.
Despite the strengthening labor market, wage growth remained tepid, suggesting little need for the Federal Reserve to hurry to start lifting interest rates.
Employers added 214,000 new jobs to their payrolls last month, the Labor Department said Friday. The unemployment rate fell to 5.8 percent from 5.9 percent, even as more people entered the labor force -- a further sign of strength.
The report confirms that the U.S. remains the bright spot in a global economic picture filling with clouds.
"The report confirms that the U.S. remains the bright spot in a global economic picture filling with clouds," said Michael Griffin, managing director at CEB in Arlington, Virginia.
The jobless rate has dropped by 0.8 percentage points since January, and employment gains have now topped 200,000 for nine straight months, the longest stretch since 1994.
Last month's increase was a bit smaller than economists on Wall Street had expected, but that was offset by a combined 31,000 upward revision to data for August and September.
In addition, the hiring was broad-based and most of the measures Fed Chair Janet Yellen tracks to gauge the amount of slack in the labor market improved.
The U.S. central bank last week struck a relatively upbeat tune on the jobs picture as it ended a bond-buying stimulus program, but even after the employment data, financial markets held to their view that benchmark rates would stay near zero until the second half of 2015.
"Continued progress in labor markets will likely keep the Fed on a path to normalization, but it will likely remain patient ... given modest wage and inflation pressures," said Michael Gapen, a senior economist at Barclays in New York.
Prices for U.S. Treasury debt rose, while the dollar retreated from a 4½ year high against a basket of currencies. U.S. stocks were little changed.
Wages Still Sluggish
Average hourly earnings rose only three cents last month, leaving the year-on-year increase at 2.0 percent, the level it has been around for the last few years.
The muted wage growth partly reflects the types of jobs being created. In October, about a fifth of the new jobs were in the food services sector.
But other data have begun to show wages picking up and economists said further gains should be forthcoming.
Not only are more people working, but they are also putting in longer hours. Last month, the average workweek hit a near 6½ year high.
With both payrolls and the workweek expanding, a proxy for take-home wages rose 0.6 percent, a gain that put it 4.8 percent above its year-ago level, the largest increase since March 2012.
"When viewed in combination with rising household wealth and improving consumer confidence, we expect on-going gains in consumer spending," said Robert Hughes, senior research fellow at the American Institute for Economic Research in Great Barrington, Massachusetts.
Lynne Sladky/AP
The U.S. economy's vigor stands in sharp relief to many other major economies around the globe. The euro zone and Japan aren't far from recession, and even China is slowing.
In the United States, the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, increased by 0.1 percentage points to 62.8 percent after two straight months of declines.
The employment-to-population ratio touched its highest level since July 2009, while the ranks of the long-term unemployed were the smallest in nearly six years.
A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell three-tenths of percentage point to a six-year low of 11.5 percent.
Hiring in the factory sector picked up after two sluggish months, and construction payrolls also expanded.
Retail hiring advanced by 27,100 as stores gear up for a busy holiday shopping season, while government employment increased by 5,000.
The overall price of 16 items selected for the federation's price comparison is up 2 percent since 2013. "Of the 16 items surveyed, seven increased and nine decreased in average price," the federation said. Here's how some of those items changed in price:
Sirloin tip roast, up 27 percent to $5.52 per pound.
Deli ham, up 16 percent to $5.44 a pound.
Bacon, up 9 percent to $5.11 per pound.
Shredded cheddar, up 6 percent to $4.78 per pound.
Russet potatoes, down 15 percent to $2.72 for a 5 pound bag.
Whole milk, up 2 percent to $3.78 a gallon.
Flour, down 7 percent.
White bread, down 6 percent.
Extended drought and dwindling cattle herds pushed beef prices to record highs this year. Pork prices were affected by a virus that killed a portion of the U.S. herd.
The federation survey was done in September. Since then, the price that ag producers receive for hogs and cattle has risen, 24/7 Wall St. said.
Thank goodness for a bumper grain crop that's helping to provide some relief for consumers at the grocery checkout.
Daniel Acker/Bloomberg via Getty ImagesFast-Food Hikes Ahead
The soaring prices have hurt fast-food restaurants that feature beef as the centerpiece of their menus: Burger King (BKW), Wendy's (WEN) and McDonald's (MCD) -- the nation's three biggest burger chains -- all say they're dealing with higher beef costs.
But fast-food chains, which sometimes pass along additional costs for ingredients to customers, realize there's only so much people are willing to pay for a burger. So, they're taking other measures to help ease the pressure, such as slashing expenses elsewhere or trying to get people to order other things on their menus.
High Prices in the Dairy Aisle
Meanwhile, dairy prices are up 21 percent in the last year, and the price of butter will grab your attention as you prepare for holiday baking.
I paid nearly $4 for a pound of butter this week. Yikes. I also bought a half gallon of organic whole milk for my toddler, and it cost $4.58. It was an expensive grocery trip.
Have you noticed a change in your bill when checking out at the supermarket? Share your comments below or on our Facebook page.
Like this article? Sign up for our newsletter and we'll send you a regular digest of our newest stories, full of money saving tips and advice. We'll also email you a PDF of Stacy Johnson's "205 Ways to Save Money" as soon as you've subscribed. It's full of great tips that'll help you save a ton of extra cash.
-The Associated Press contributed to this article.
JPMorgan Chase (JPM), the largest U.S. bank by assets, said it would cut 3,000 more jobs than previously expected in its retail banking division.
The bank said it would reduce 4,000 jobs in its card, merchant services and auto unit, up from the 2,000 previously announced. The bank is also cutting 7,000 jobs in its mortgage banking unit, up from 6,000.
JPMorgan will have eliminated 27,000 jobs by the year-end from its consumer bank unit over two years, even after additions for more risk controls and regulatory compliance.
Some 18,000 jobs will have been taken out of mortgage banking, where the company has less work to do refinancing loans and handling troubled mortgages left from the financial crisis.
Many big banks, including Wells Fargo (WFC) and Bank of America (BAC), have been laying off mortgage workers as higher interest rates make refinancing less attractive to homeowners.
JPMorgan said it expects 146,000 Chase Bank jobs by the year-end, down by 11,000 from a year earlier.
The bank expects its 2016 retail banking expense base to be $2 billion lower than in 2014, JPMorgan's retail bank head Gordon Smith said in an investor conference Friday.
The company's shares were marginally down at $61.19 in morning trade on the New York Stock Exchange on Friday.
Online investment firms are cropping up frequently, giving investors more options on how they can allocate their income for retirement. Choosing a firm depends on your needs and willingness to manage investments on your own.
New startups and major players like Charles Schwab (SCHW) are now offering greater online transparency on their pricing and fees and have invested in offering user-friendly websites and mobile apps. Even traditional brokerage service companies are joining the sector. Schwab, for instance, has low-cost online managed account dubbed "Intelligent Portfolios," while TradeKing, the discount brokerage firm, rolled out a new managed account service dubbed "TradeKing Advisors."
Robo advisers, or firms that offer algorithm-based buy and sell advice, are a good fit for consumers who have a more complex portfolio spread across multiple accounts such has owning a self-directed brokerage account, a spouse's IRA and a managed account. These firms offer an investment advice model which uses read-only aggregation of outside accounts and proprietary algorithms to provide automated portfolio recommendations, said Grant Easterbrook, an analyst who tracks financial startups at Corporate Insight, a New York financial services research and consulting firm.
"These algorithm-based advice firms give specific buy/sell/hold recommendations for each of the client's holdings, recommend that they sell funds that are high-cost, poor performing and/or not in line with the user's investment goals," he said. "Then they suggest alternative products to buy to improve the portfolio, such as buying a REIT fund to add exposure to real estate." Some firms that give users automated buy and sell recommendations, include Financial Guard, Jemstep and FutureAdvisor.
A Picture of the Portfolio
Jemstep helps individuals take more control of their retirement, since it shows the investor a view of his projected future earnings and where he is losing money to excess fees, said Simon Roy, president of Jemstep. Investors can also easily see what mutual funds they are holding and the levels of their allocation among their stocks, bonds, commodities and cash.
"The service is designed to help people lock in more money for their retirement," he said. "It brings all the accounts together. This gives you a full picture."
A recent survey conducted by Jemstep and Harris Interactive with more than 2,300 participants examined the current attitudes of consumers about investing for retirement and found that 50 precent of investors manage their own money, while 9 percent obtain advice from a family member. The survey also showed that 70 percent of people do not have confidence in financial planners and want to manage their own money. Many investors are weary of the high fees charged by financial advisers in addition to the fees charged by companies selling the mutual funds, Roy said.
More Choices
Low-cost online managed accounts are an option for consumers who choose to invest a lump sum in a diversified portfolio and have their investments managed for them. Some firms in this group are Betterment, Invessence, MarketRiders, Wealthfront and WiseBanyan. The large hybrid brokerage firms such as Fidelity, Charles Schwab, E-Trade (ETFC) or TD Ameritrade (TD) all offer a more traditional managed account solution that are relatively more expensive. Investors can also consider a low-cost target date fund, said Easterbrook.
Online 401(k) advisers can benefit employees whose money is locked up in their company-sponsored retirement plan, where they often can only choose from a limited selection of funds. Employees who want specific advice to the funds in their company retirement plan include CoPiloted, Kivalia, 401K GPS and blooom. Investors should check first with their employer to make sure that do not have access already to guidance from firms like Financial Engines or the Morningstar Retirement Income Manager, he said.
Another group of companies gives investors the option of having an ongoing one-on-one relationship with a human financial adviser while maintaining their portfolio by communicating on the phone, email and/or video chat. This option is good for investors who want to work with a human adviser but do not feel the need to meet their adviser in person on a regular basis. The minimums and fees from these companies are generally lower than their in-person peers, Easterbrook said. Personal Capital, RebalanceIRA and Vanguard's adviser service provide this service.
Advice by Phone or Skype
A hybrid model gives investors the ability to compare fees and services, said Asheesh Advani, CEO of Covestor, an online marketplace where investors can invest online completely and can speak with advisors by phone or even via Skype. More than 140 portfolios on Covestor's marketplace are actively managed by experienced investors.
"People are gravitating to companies like Covestor, which offers actively-managed portfolios and alternative strategies that are less expensive than hedge funds with transparent holdings, verified track records, full liquidity and low minimums," he said. "Services like Covestor are leading the trend to transparency and also putting pressure on traditional advisers to justify their fees. These are major wins for investors."
www.youtube.comMatthew McConaughey in an ad for Lincoln.
There were plenty of winners and losers this week, with the leading online retailer introducing a new digital storage perk and another 3-D printer darling hosing down its near-term outlook. Here's a rundown of the week's smartest moves and biggest blunders.
Tesla's Model S sedan may be expensive, but its popularity continues to grow. Tesla delivered a record 7,785 of its electric cars during the third quarter. It managed to move the cars despite a factory shutdown in July for retooling.
Tesla is on track to move 50 percent more cars this year than it did last year. It also sees enough orders and deliveries for a 50 percent increase next year, and that's just for its flagship Model S sedan. Tesla expects to introduce its Model X crossover vehicle during the third quarter of next year.
Wireless Industry -- Loser
It isn't easy being a cellphone service provider these days. Sprint (S) posted a larger than expected quarterly deficit this week. It's not alone in failing to live up to Wall Street's profit targets. It joins AT&T (T), Verizon (VZ) and T-Mobile (TMUS) in falling short of analyst bottom-line estimates.
All four of the country's largest wireless carriers falling short isn't a coincidence. The marketplace has gotten competitive, and while that may translate into better rates for smartphone owners, it's going to be rough on the industry's margins.
Matthew McConaughey -- Winner
Comedians have had a field day poking fun at Matthew McConaughey's bizarre television commercials for Ford's (F) Lincoln, but it seems as if McConaughey and Ford are the ones getting the last laugh.
Lincoln had its best October in seven years, with sales soaring 25 percent over the prior year. McConaughey's odd ads and the even stranger parodies that have been done up by "Saturday Night Live," "South Park" and Ellen DeGeneres are drawing attention to Lincoln and its MKC crossover.
Ford itself wasn't as fortunate. Its namesake cars slipped in October, resulting in a total 2 percent overall decline. Lincoln is too small to move the needle at Ford, but its success is still refreshing to see.
The market has cooled on 3-D printing stocks, and this time it was former market darling Stratasys lowering its earnings outlook for the entire fiscal year. Stratasys also warned that capital expenditures will roughly triple in 2015, giving investors even more to worry about on the earnings front.
3-D printing has been one of this year's biggest losers. The printers that create physical objects are technological marvels, but they are still too slow and expensive for mainstream use. Stratasys has held up better than its smaller peers this year, but now it's proving mortal, too.
Amazon will now provide free unlimited cloud-based photo storage for its Prime members. Even videos can be uploaded as long as they are shorter than 20 minutes and take up less than 2 gigs of storage. Once the snapshots are up on Amazon's servers, they can be accessed from nearly any Web-tethered device.
Amazon raised its annual Prime price from $79 to $99 earlier this year. It's a great deal for regular shoppers, who receive free two-day shipping for Amazon-stocked merchandise through the service, but now loyalty is being rewarded with unlimited photo storage to go along with its growing catalogs of music and video that can be streamed.
Motley Fool contributor Rick Munarriz owns shares of Ford. The Motley Fool recommends and owns shares of Amazon.com, Ford, Stratasys and Tesla Motors. 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.
Susan Walsh/APFederal Reserve Chair Janet YellenBy MARTIN CRUTSINGER
WASHINGTON -- Federal Reserve Chair Janet Yellen said Friday that the Fed is striving to clearly communicate its intentions on interest rates in order to minimize surprises that could disrupt financial markets both in the United States and globally.
She said central bank policymakers understand that moving from a period of very low interest rates to more normal levels of interest rates will lead to some heightened volatility in financial markets.
But she says the normalization of rates will be an important sign that economic conditions are "finally emerging from the shadow of the Great Recession."
Yellen's comments came in a speech in Paris at a conference sponsored by the Bank of France. The Fed last week ended its bond buying program but its first increase in rates isn't expected until mid-2015.
"As employment, economic activity and inflation rates return to normal, monetary policy will eventually need to normalize too, although the speed and timing of this normalization will likely differ across countries based on differences in the pace of recovery in domestic conditions," Yellen said.
"For our part, the Federal Reserve will strive to clearly and transparently communicate its monetary policy strategy in order to minimize the likelihood of surprises that could disrupt financial markets, both at home and around the world," Yellen said.
She said that among the lessons learned from the crisis is that central banks need to be prepared to employ all available tools including unconventional policies such as bond buying to support economic growth and achieve optimal inflation rates.
Last week, the Fed announced the end of its bond buying program, which had been designed to keep long-term interest rates low, and upgraded its outlook for the U.S. labor market. The massive bond purchases have pushed the Fed's balance sheet up by more than $3 trillion to nearly $4.5 trillion.
In a statement after a two-day meeting, the Fed reiterated its plan to maintain its benchmark short-term interest rate near zero "for a considerable time." The Fed statement noted that the job market is strengthening. The statement dropped a previous reference to "significant underutilization" of available workers.
WASHINGTON -- Starting this weekend, consumers can get an early peek at 2015 premiums and plans under President Barack Obama's health care law, the administration said Friday.
HealthCare.gov's second open enrollment season starts Nov. 15, a week from Saturday. But spokeswoman Lori Lodes said that consumers will be able to "window shop" for plans before then.
"Window shopping is ready to go," said Lodes. "There is no log-in or application required."
After answering a few questions, consumers can look at plans in their area and get an estimate of how much their premiums will be, including any financial assistance they would be eligible for.
Consumers will later have to set up an account -- or go back to their existing account -- to actually enroll for 2015. Current customers who do nothing will be automatically renewed as of Jan. 1, but they may well miss out on potential savings.
The lack of a window-shopping feature was one of the initial problems last year for HealthCare.gov, and a puzzling one.
Our top priority this year is to improve the consumer experience.
Most e-commerce sites -- as well as Medicare.gov-- allow people to browse anonymously and don't require an account until consumers are ready to buy. As originally designed, the Obama administration's website worked exactly the opposite way. That contributed to overloading the balky system because everybody got funneled into creating an account, which overtaxed the system to the point of crashes.
"Our top priority this year is to improve the consumer experience," said Lodes.
One important piece that's still not clear is the overall trend on premiums. Early analyses of states that have published rates show modest increases, with opportunities for consumers to shop around for lower-premium plans. The catch with the low-cost options is that people who have a serious illness or injury will face higher out-of-pocket costs.
The health care law offers taxpayer subsidized coverage to people who don't have access on the job. HealthCare.gov is the online portal for 37 states where the federal government is taking the lead running the insurance markets. The rest are operating their own insurance exchanges.
About 7 million people are signed up this year through the insurance markets. Even more have gained coverage under the law's Medicaid expansion for low-income people, which so far has been implemented by 27 states and Washington, District of Columbia.
Joe Raedle/Getty ImagesA Telsa gallery in a Florida mall.
Buying one of Tesla Motors' (TSLA) sleek electric cars can usually only be done online. That's because in most American states, auto manufacturers are severely limited or banned outright from selling their goods directly. This is why we've traditionally been forced into buying cars from a middleman -- an independently owned, licensed and franchised dealer.
But Tesla has been fighting hard for the right to sell its vehicles the direct way, against a determined, well-funded and connected group of dealerships. The fight that will last for years, but in these early days the upstart is already racking up body blows. And although it's still a relatively small enterprise, Tesla is enough of an adversary to worry the incumbents.
Expensive Franchising
Car dealerships hold a privileged position in the American economy, with legislative protections not enjoyed by other businesses. Among other advantages (depending on the state), they are guaranteed a certain radius of exclusivity for their chosen make, are often recompensed by the manufacturer -- at a profit -- for parts and services for their customers and can be compensated for unsold inventory.
The dealership model came about in the 1920s, when manufacturers realized that setting up and maintaining nationwide sales/service operations was prohibitively expensive and resource-heavy. Franchising these parts of their business helped Fiat Chrysler (FCAU), Ford (F), and General Motors (GM) become the powerhouses they are today.
New-car and -truck dealers boasted collective sales of $676 billion in 2012 -- 15 percent of U.S. retail activity that year.
But there was a price to be paid. Gradually, the independent dealerships grew in size, power and influence. Entrenching the status they enjoy today is their economic strength -- according to the National Automobile Dealers Association, the roughly 17,600 new-car and -truck dealers boasted collective sales of $676 billion in 2012 -- a whopping 15 percent of U.S. retail activity that year.
They tend to spend some profits on keeping favor with lawmakers; data from the National Institute on Money in State Politics found that dealers and their employees have donated nearly $87 million on state-level political campaigns from 2003 through 2013, and $57 million on federal elections. That's significantly larger than the $500,000 Tesla has shelled out for the same activity.
That wealth comes at the expense of consumers. Buying at a dealership is a difficult, stressful and costly process. According to a study by investment bank Goldman Sachs (GS) in 2000, buying a built-to-order car directly from a manufacturer would theoretically save just under 9 percent of the total cost. At an average sticker price of $26,000, that shakes out to $2,225.
Walk Into a Mall, Buy a Car
Tesla doesn't have an independent dealer network. At the moment, there's no compelling reason that the company should. Its state-of-the-art electric cars are still luxury items, and compared to the giant manufacturers, its volume sales are tiny.
Rather, it sells directly to consumers in the few states it's allowed to. Where it's not, the company operates what it calls "galleries" in locations such as shopping malls. These are small storefronts that usually feature just a single car model for test drives, with employees who only provide information on the vehicles; potential customers are directed to Tesla's website if they inquire about purchasing.
The purchase and delivery process is essentially a more elaborate version of the typical ordering of goods online. Via the Tesla website, the customer chooses vehicle specifications, selects the method of financing, pays a deposit for it and arranges delivery. If the process is done correctly, the car arrives within a few weeks.
Dealerships Fight in Court, Legislatures
All of this is scary for the dealerships, and they're reacting accordingly. In many states where Tesla has attempted its direct approach, incumbents have banded together to fight Tesla in court and in legislatures.
A recent defeat in Massachusetts notwithstanding, the dealerships have had some success. In a move that didn't come as a great surprise, car manufacturing center Michigan enacted a bill that strengthened its ban on direct auto sales, notching an important win for the dealerships.
But they're fighting an enemy that has plenty of allies. Tesla's models enjoy very high approval ratings and good reviews in the automobile press.
Meanwhile, more drivers are plugging in and turning on to the cars; yes, those volume sales are relatively low, but in its most recent quarter the company's deliveries of its signature Model S sedan notched a new record at 7,785 vehicles, a robust 42 percent higher than in the same quarter one year ago. Although the company cut its full-year delivery estimate to 33,000 cars (from the previous 35,000), the former number is still well above the 22,477 the company delivered in 2013.
Dealerships or Dinosaurs?
So even those most onerous, dealership-friendly legal restrictions can't do much to prevent Tesla from selling its wares to interested clientele.
Not that the determined electric-car maker is going topple the old system anytime soon. Big carmakers used dealerships to move more than 13.7 light vehicles so far this year -- a 5.5 percent increase over the same time period of 2013. Matched against those figures, Tesla's potential 33,000 deliveries for this full year look downright puny.
Tesla is a niche player at best in the auto industry; however, in terms of disruptive power, it punches well above its weight class. The dealerships are sure to return to their corner with at least a few more bruises over the coming rounds.
Motley Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors, Goldman Sachs, and Tesla Motors, and owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. Find out the easy way for investors to ride the new mega-trend in the automotive industry in our free report.
www.starwars.com
Things are heating up at the company behind "Frozen." Disney (DIS) may have posted mixed quarterly results after Thursday's market close, but there are also plenty of reasons to be optimistic about its future.
Let's go over five things that could make the family entertainment giant even bigger in the coming months and years.
1. You've Got a Friend in "Toy Story 4"
Disney waited until Thursday afternoon's earnings call to announce that "Toy Story 4" will hit theaters three summers from now. Disney fans had mixed feelings about the announcement. As much as many would love to see the characters back in more than just an animated short, there was also something satisfying and final about the way that "Toy Story 3" ended.
Pixar has proven that it can make a sequel without sacrificing quality, but is Disney pushing things too far here? I don't think so. History will likely shine kindly on this move. With studio chief John Lasseter returning to direct, the excitement will be there. The movie won't hit theaters until June 2017, giving the anticipation plenty of time to build. "Toy Story 3" rang up $1 billion in global ticket sales and nearly $10 billion in retail sales. It'll work. Purists initially complained about "Toy Story 2" and "Toy Story 3," too.
2. C-3PO and See Three "Star Wars" Movies
Disney also turned heads on Thursday by announcing a name for next year's "Star Wars" movie. "Star Wars VII: The Force Awakens" will hit theaters in 13 months. This is the moment that should make Disney's decision to pay more than $4 billion for Lucasfilm pay off.
It won't stop there. The eighth chapter in the saga will follow in 2017, with the ninth chapter hitting what will likely be record audiences come 2019. Between now and then we will likely see a larger presence of the "Star Wars" franchise in some of Disney's theme parks.
3. Shanghai Disney
Speaking of Disney theme parks, Shanghai Disneyland will open in late 2015 or early 2016. Most of us will never see the resort, but it will go a long way toward cementing the Disney brand in the world's most populous nation. Hong Kong Disneyland opened in 2005, but the new resort will be more accessible to all those people on the mainland. Disney announced during Thursday's call that it will announce a firm opening date in early 2015.
4. Bibbidi Bobbidi Boom
"Cinderella" is one of Disney's earliest animated classics, and in April it will get a new spin as a live-action theatrical release. This could sound hokey in the wrong hands, but with Kenneth Branagh directing and a critically acclaimed international cast that includes Helena Bonham Carter and Cate Blanchett, there may actually be some favorable buzz from critics.
Disney had a hit when it gave "Sleeping Beauty" a live-action tweak with "Maleficent" earlier this year. It wouldn't be a surprise if it catches lightning in a bottle again, in a way that draws even more attention to the thriving Disney Princess line.
5. Theme Parks Celebrate Hot Movies, Characters
Disney's stateside theme parks are posting record attendance, and things should get even better in the coming years. A "Frozen" ride is coming to Epcot's Norway pavilion in 2016, and Animal Kingdom's "Avatar"-themed attractions will open in 2017. That's really just the beginning.
Disney announced this summer that it will reveal its plans for "Star Wars"-themed additions come early 2015. Given the way that it has been closing up attractions at Florida's Disney Hollywood Studios, it's a safe bet that something will go there to fill the void. Let's also not forget Marvel. Disney is restricted from tapping certain franchises in Florida given the existing licensing deal between Marvel and Comcast's (CMCSK) Universal Orlando resort, but those restrictions don't apply in California or internationally.
From its MyMagic+ technology to its ambitious new attractions, there will be plenty of things drawing consumers to one of Disney's growing number of theme parks in the coming years.
Motley Fool contributor Rick Munarriz owns shares of Walt Disney. The Motley Fool recommends and owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. Bring the magic of dividends to your portfolio: Check out our free report on our favorite high-yielding dividend stocks.
DETROIT -- A judge cleared Detroit to emerge from bankruptcy Friday, approving a turnaround plan that will require discipline after years of corruption, mismanagement and an exodus of residents brought this one-time industrial powerhouse to financial ruin.
"What happened in Detroit must never happen again," Judge Steven Rhodes said in bringing the case to a close a remarkably speedy 16 months after Detroit -- the cradle of the auto industry -- became the biggest city in U.S. history to file for bankruptcy.
The plan calls for cutting retiree pensions by 4.5 percent, erasing $7 billion of debt and spending $1.7 billion to demolish thousands of blighted buildings, make the city safer and improve long-neglected basic services.
In signing off on the plan, Rhodes made a fervent plea to residents who expressed sorrow and disgust about the city's woes.
"Move past your anger. Move past it and join in the work that is necessary to fix this city," he said. "Help your city leaders do that. It is your city."
Move past your anger. Move past it and join in the work that is necessary to fix this city.
The Motor City was brought down by a combination of factors, including misrule at City Hall, a long decline in the auto industry, and a flight to the suburbs that caused the population to plummet to 688,000 from 1.2 million in 1980. The exodus has turned entire neighborhoods into desolate, boarded-up landscapes. With more square miles than Manhattan, Boston and San Francisco combined, Detroit didn't have enough tax revenue to cover pensions, retiree health insurance and buckets of debt sold to keep the budget afloat.
"Detroit's inability to provide adequate municipal services runs deep and has for years. It is inhumane and intolerable, and it must be fixed," the judge said.
Rhodes praised decisions that settled the most contentious issues in the bankruptcy case, including a deal to prevent the sell-off of world-class art at the Detroit Institute of Arts and a consensus that prevented pension cuts from getting even worse for thousands of retirees. He said the pension deal "borders on the miraculous," though he acknowledged the cuts could still cause severe misfortune for some.
Politicians and civic leaders, including Michigan Gov. Rick Snyder, hailed Friday's milestone. Museum leaders said it means "there are good days ahead for our city," while Detroit Regional Chamber President and CEO Sandy K. Baruah declared Detroit to be "on the cusp of a new era and primed to reinvent itself in a way many people did not think possible."
"Exiting bankruptcy so effectively and thoughtfully has wiped out decades of mismanagement and created a historic opportunity to move the city without mortgaging its future," Baruah said.
The case concluded in lightning speed by bankruptcy standards. The success was largely due to a series of deals between Detroit and major creditors, especially retirees who agreed to accept smaller pension checks after the judge said they had no protection under the Michigan Constitution. Also, bond insurers with more than $1 billion in claims dropped their push to sell off art and settled for much less.
It took more than two years for a smaller city, Stockton, California, to get out of bankruptcy. San Bernardino, a California city even smaller than Stockton, is still operating under Chapter 9 protection more than two years after filing.
Rhodes had to accept Detroit's remedy or reject it in full, not pick pieces. His appointed expert, Martha "Marti" Kopacz of Boston, said it was "skinny" but "feasible," and she linked any future success to the skills of the mayor and City Council and a badly needed overhaul of technology at City Hall.
The most unusual feature of the plan is an $816 million pot of money funded by the state, foundations, philanthropists and the Detroit Institute of Arts. The money will forestall even deeper pension cuts and also avert the sale of city-owned art at the museum -- a step the judge warned "would forfeit Detroit's future."
Mayor Mike Duggan, in office less than a year, is the fourth mayor since 2008, when Kwame Kilpatrick resigned in a scandal. A dreadful debt deal under Kilpatrick that locked Detroit into a high interest rate when rates were falling during the recession contributed to the bankruptcy.
WASHINGTON -- The Supreme Court agreed Friday to hear a new challenge to President Barack Obama's health care law - a case that threatens subsidies that help millions of low- and middle-income people afford their health insurance premiums.
The justices said they will review a federal appeals court ruling that upheld IRS regulations that allow health-insurance tax credits under the Affordable Care Act for consumers in all 50 states. Opponents argue that most of the subsidies are illegal.
Second Time Before the Court
The long-running political and legal campaign to overturn or limit the 2010 health overhaul will be making its second appearance at the Supreme Court. The justices upheld the heart of the law in a 5-4 decision in 2012 in which Chief Justice John Roberts provided the decisive vote.
White House press secretary Josh Earnest promised a vigorous defense before the high court.
"This lawsuit reflects just another partisan attempt to undermine the Affordable Care Act and to strip millions of American families of tax credits that Congress intended for them to have," Earnest said.
In the appeal accepted Friday, opponents of the subsidies argue that the court should resolve the issue soon because it involves billions of dollars in public money.
"The need for a quick and final resolution of this question is undeniable. This 'subsidies-for-everyone' rule affects nearly every person across the country, health insurance policyholders, workers and employers, taxpayers, and state and local governments," said Sam Kazman, general counsel of the Competitive Enterprise Institute, which is paying for the legal challenges to the health care law.
Subsidies for Four Out of Five
The health care law provides taxpayer-subsidized private health insurance for people who don't have access to coverage on the job. More than 7 million people are currently enrolled and most are getting help, which is keyed to household income and the cost of a benchmark plan.
The issue at the Supreme Court is whether the wording of the law limits insurance tax credits only to consumers who live in states that have set up their own insurance markets, known as exchanges.
Only 16 states have set up their own exchanges, the Obama administration said in court papers. In the other 34 states, more than 4.5 million people are receiving subsidies to pay their insurance premiums. And the aid is considerable, covering an average of 76 percent of the premiums.
Customers now pay an average of $82 on total monthly premiums averaging $346. The federal subsidy of $264 a month makes up the difference.
What made the court's intervention on Friday surprising was the lack of disagreement among federal appeals courts that typically is a requirement for Supreme Court review. Justice Ruth Bader Ginsburg cited the absence of conflicting rulings when the justices rejected gay marriage appeals last month.
But at least four justices, needed to grant review, apparently agreed with the challengers that the issue is important enough to decide now.
'An Unusual Political Act'
Supporters of the health care law were flabbergasted and accused the court of veering into politics. The news came a week ahead of the second open enrollment season for subsidized private health insurance under the law.
"All of the general guidelines that the court traditionally uses in determining whether it should schedule an appeal are totally absent in this case," said Ron Pollack, executive director of Families USA, an advocacy group that supported Obama's health overhaul from its inception. Pollack called the court's action "an unusual political act."
The legal challenge to the subsidies is "the most serious existential threat" facing the Affordable Care Act, said Pollack.
When the court upheld the law in 2012, it still made a major change by ruling that the law's Medicaid expansion for low-income people was optional for states. So far 27 states and the District of Columbia have accepted it. This week's Republican election success makes it unlikely that the remaining 23 states will move any time soon.
The subsidies issue is being fought in several courts. In July, the Richmond, Virginia-based appeals court upheld Internal Revenue Service regulations that allow health-insurance tax credits under the law for consumers in all 50 states.
On that same July day, a panel of appellate judges in the District of Columbia, sided with the challengers in striking down the IRS regulations. The Washington court held that under the law, financial aid can be provided only in states that have set up their own exchanges.
In October, the entire Washington appeals court voted to rehear the case and threw out the panel's ruling, eliminating the so-called circuit split. The appeals argument has been scheduled for Dec. 17, but that case now recedes in importance with the Supreme Court's decision to step in.
The case, King v. Burwell, 14-114, probably will be argued the first week in March, with a decision expected by late June.
Associated Press writers Ricardo Alonso-Zaldivar and Darlene Superville contributed to this report.
WASHINGTON -- U.S. consumers increased their borrowing in September with gains in credit card debt, and auto and student loans.
The Federal Reserve says overall borrowing rose $15.9 billion following a $14 billion gain in August and a $22.8 billion July increase. The gains have pushed total consumer debt to a record level of $3.27 trillion.
The category that includes credit cards showed a $1.44 billion increase in September after having dropped by $201 million the previous month. The category that covers auto loans and student loans increased $14.48 billion after a $14.23 billion increase in August.
Rising levels of consumer borrowing coupled with strong employment growth are viewed as good signs that consumers are confident about taking on more debt to boost purchases.
The September increase in total borrowing put it 5.9 percent above a year ago. Auto and student loans are up 7.3 percent from a year ago while credit card debt has risen a much smaller 2 percent.
The large increase in student debt has raised concerns that young Americans are being saddled with student loans that will keep them from buying homes or spending as previous generations have after college.
Student loans have soared since the recession ended, topping $1.1 trillion in the second quarter of this year, according to data from the New York Federal Reserve. That's up from $700 billion in 2009 and in part a reflection of the number of people who either lost jobs or couldn't get a job after graduation and decided to go back to school.
The New York Fed reported that demand for auto loans reached the highest level in eight years this spring with more people with checkered credit histories obtaining the loans. That has raised worries about the potential for defaults down the road.
The Federal Reserve's monthly credit report doesn't cover mortgages or any other loans that are backed by real estate.
NEW YORK -- U.S. stocks closed little changed Friday, pressured by renewed uncertainty in health care stocks and by Disney shares, even as October payrolls data pointed to a resilient economy in the face of sluggish global growth.
The S&P 500 and Dow industrials closed at record highs and rose for a third consecutive week.
Health insurers fell sharply after the U.S. Supreme Court agreed to hear a challenge to a key part of the Obamacare health law that, if successful, would limit the availability of federal health insurance subsidies for millions of Americans.
Any kind of change in how the health care law is interpreted is going to affect health care stocks, probably insurers first.
"Any kind of change in how the health care law is interpreted is going to affect health care stocks, probably insurers first," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
"Whenever the rules have potential to change everybody gets nervous."
UnitedHealth Group (UNH) fell 2.7 percent to $93.61, ranking as the largest weight on the Dow industrials. Hospital operator Tenet Healthcare (THC) fell 6.5 percent to $47.85 while managed care facilities operator Humana (HUM) was down 6.6 percent to $130.58.
Health care stocks had been pressured from the opening bell by Salix Pharmaceuticals (SLXP), which closed down 34 percent at $91.47 in its biggest ever daily drop.
Salix on Thursday slashed its full-year forecast given swollen drug inventories, an issue that dissuaded Allergan from acquiring the drugmaker, people familiar with the matter said.
On the flip side, employers added 214,000 jobs last month, below the 231,000 expected in a Reuters poll of economists, while gains in the previous two months were revised higher. The unemployment rate fell to 5.8 percent, the lowest since July 2008, even as more people entered the labor force.
"With data like this the Federal Reserve doesn't feel compelled to come in and help, or squash a too-hot economy," said Fort Pitt Capital's Forrest. "No more Fed [asset] buying but also no rate hikes quite yet."
Walt Disney Co. (DIS) fell 2.2 percent to $90 a day after earnings met expectations. The stock had closed Thursday at $92, a record high.
First Solar sank 10.8 percent to $50.29 as the biggest decliner on the S&P 500 a day after the company said it would not spin off its solar power plants into a separate, publicly traded entity as some of its competitors have done.
Energy shares on the S&P 500 were the day's strongest performers, rising 1 percent. The sector is down 1.4 percent so far this year.
The Dow Jones industrial average (^DJI) rose 19.46 points, or 0.11 percent, to 17,573.93, the Standard & Poor's 500 index (^GPSC) gained 0.71 points, or 0.03 percent, to 2,031.92 and the Nasdaq composite (^IXIC) dropped 5.94 points, or 0.13 percent, to 4,632.53.
For the week, the Dow rose 1.1 percent and the S&P added 0.7 percent in their third straight weekly gain. The Nasdaq closed the week up 0.04 percent.
Advancing issues outnumbered declining ones on the NYSE by 1,869 to 1,188, for a 1.57-to-1 ratio on the upside; on the Nasdaq, 1,370 issues fell and 1,321 advanced for a 1.04-to-1 ratio favoring decliners.
The benchmark S&P 500 index posted 52 new 52-week highs and one new low; the Nasdaq Composite recorded 101 new highs and 58 new lows.
Volume on U.S. exchanges totaled about 6.5 billion shares, compared to the 7.24 billion average in the last five sessions.
What to Watch Monday:
These selected companies are scheduled to release quarterly financial results:
Getty Images
With Veterans Day approaching, it makes sense that charities dedicated to helping veterans and their families are ramping up their efforts. That's not lost on crooks, who also will ramp up their efforts.
So, if you want to support those who have risked their lives for this country rather than enrich a bunch of crooks who are likely halfway around the world, heed the warning issued on Friday by the Better Business Bureau.
Watch out for pitches from supposed charities that want you to think they care about U.S. military veterans. The solicitations can come by mail, email, social media, or door-to-door, the BBB said.
Groups that say they're helping veterans and those they are helping them are two different things. So, the key is being able to recognize the scams as well as verify that where you intend to send your money is the real deal.
How to Avoid Being Duped
Here are some tips culled from advice dispensed by the Better Business Bureau's Wise Giving Alliance that can help you to avoid giving to a fraud and to ensure your money will do some good:
What's in a name? It's common for scams to use names that sound like real charities. One-word difference, and it's not the same.
What's the plan? Find the description of what the group is doing and how it accomplishes its goals. Seek examples of work the charity does.
Hold the phone. If the charity pitch comes by phone, resist. By all means, take their information if you're interested, but if you give yours (and money), expect that the telemarketer will be the one profiting.
There's always later. One hallmark of a scam is bolstering the idea that if you don't give now, you can't give at all. Nonsense. No upstanding charity will be any less happy to get your money tomorrow. The high-pressure is an attempt to keep you from doing the homework you need to do to find out that you're dealing with a scam.
Find them yourself. The best way to give to a charity is to pick one that you've researched and has a mission and accomplishments that you can get behind. Be sure to check third-party charity reviews sites like Give.org, Guidestar.org, and CharityNavigator.org to see what they have to say.
If you're like many shoppers, your bank account can't accommodate the long list of gifts you'd like to buy during the holidays. One option, aside from racking up credit card debt, is a layaway program.
Defining Layaway
Layaway plans are payment plans for merchandise you want to buy. Every week or month, you make a payment until your purchase is paid off -- then you get the merchandise. It's the opposite of the way a credit card works. With layaway, the item isn't yours until the last dime has been paid.
Layaway has been around in one form or another since the 1800s, although it gained popularity during the 1920s and 1930s when it seemed as if nobody, due to the Great Depression, had money. Back then, there were layaway programs for everything from winter coats and jewelry to tires for your car.
Layaway was also popular in the 1940s, when World War II vets began returning home to their families and careers. In the 1950s and 1960s, credit cards started to take off and push aside the need for layaway, but layaway made something of a comeback during the recent recession, which officially lasted from 2007 to 2009.
Kmart (SHLD), which has offered a layaway program for some time, really began promoting it in 2008, during the depths of the recession. After Walmart (WMT) ditched its program in 2006, the chain resurrected layaway in 2011. Sears gave its program up in the late 1980s, except for offering it on fine jewelry, but also brought layaway back. Toys R Us is yet another big retailer that offers layaway.
The Benefits of a Layaway Program
With a credit card, you might pay for your purchases in the months afterward while interest adds up, but you can't fall into any serious debt with a layaway program - in fact, the worst you might be out are some fees. And if you don't have a credit card, layaway may be the only realistic and responsible way you can afford to buy something expensive without wrecking your budget.
Layaway can also lock in a price. If you're eyeing an appliance or item of clothing you believe could be more expensive in a few weeks, getting it on layaway ensures you'll pay the current price.
The Drawbacks of a Layaway Program
There is that delayed gratification thing: You can't have your purchase immediately, but that may not be a big deal if it's a gift for the holidays. If you can't make the payments, many layaway programs have a cancellation fee. Walmart and Kmart both charge $10 to cancel a layaway transaction.
The justification for a cancellation fee is that you are putting merchandise on hold that the store might have sold otherwise. Plus, the store has to set the item (or items) aside for you, so in a sense, the store is serving as a storage unit. That said, in some states, cancellation fees for layaway programs are prohibited.
Some layaway programs charge other fees, including service fees, which usually range from $5 to $10 and are harder to defend. Fortunately, many chains have dropped those, especially for the holiday season. Just make sure to read the fine print before you sign up for a layaway program.
Another downside: The price is locked in. As noted, that's a plus if you're buying a TV that later increases in price, but if the price drops at the store or a competitor, you're locked in to the price you signed up for with the layaway program.
Of course, if the price decreases significantly (by more than $10) and the store won't budge on the terms, you can always cancel your layaway purchase, get your refund minus the cancellation fee and purchase the item elsewhere.
How to Sign Up
Every store's rules are different, but generally, the process isn't difficult. Either take your item to the register or look for the layaway program on the store's website. Some stores require a down payment, usually at least 10 percent of the item's cost, and the amount you can layaway must usually meet a certain threshold. For instance, many stores require an item's price to be at least $50 before they'll allow you to put it on layaway.
Typically, you can make payments any time between the start of the program and the time it ends, and most have a time limit, usually eight to 12 weeks. You'll probably have to make a payment at least once or twice a month. If you don't make the required payments on time, you may be hit with a restocking fee - or be dumped from the layaway program. But minus the fees, your money will be returned.
And, of course, if you're nervous that you might not be able to make payments on time, and you're concerned about the fees, you can always conduct your own layaway plan. Tuck your money in an envelope or separate bank account every week until you have enough to pay for what you want to buy.
