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Real Estate Investing Without Tenants, Toilets or Trash

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A common investment strategy is to buy a house or apartment and rent it out for income. Frankly, this seemed like too much work. My mother's third husband was a landlord, and he had his share of headaches: tenants who were late with the rent; plumbing that needed repair; and trash left in the units that my mother had to clean up.

Having been exposed to that as a young adult, I decided that an easier and cleaner way to build wealth was via stocks. I could sit in the privacy of my home, do research on my computer and buy and sell investments with a click of the mouse. But I always wanted to add real estate to my portfolio to diversify my assets and reduce my risk, should stocks lose value. While both stocks and real estate generally go up in value over time, they don't move in lockstep.

Investing in REITs

My first foray into real estate investing was purchasing publicly traded real estate investment trusts. REITs generally invest in income-generating properties, trade like a stock and often pay high dividends. A few shares of a REIT or of an exchange-traded fund that holds shares of different REITs is a quick way to diversify. It's also a liquid investment and can be sold five days a week when the stock market is open if an investor needs cash. The price of REITs can go up and down just like individual stocks so like all investing, it has its risks.

Investing in Raw Land

A year and a half ago I attended a presentation by land banker Jenny Flynn on Antelope Valley, about 60 miles from Los Angeles. It's one of the few areas in Los Angeles County that hasn't been fully developed, and many parcels have been zoned for different types of construction.

Warren Buffet has investments in Antelope Valley, which has become a hub for solar developers. One of his companies, MidAmerican Energy Holdings, is reportedly spending nearly $3 billion to build a project. When completed in 2015, one solar project will provide 579 megawatts of clean energy, enough to power 400,000 homes.

Buffet also has a stake in BYD, a Chinese company specializing in rechargeable batteries and vehicle manufacturing, which selected the Antelope Valley city of Lancaster for its first manufacturing facilities in North America. The company is manufacturing electric buses and large-scale battery systems in two facilities totaling 160,000 square feet.

She also discussed how Walmart (WMT) now has several locations in the area, and rapid construction is occurring on health care facilities and residential communities. If I were going to buy raw land, this seemed like a pretty good place to do so.

Taxes Must Be Paid, and No Income Is Generated

Investing in raw land is risky. No income is generated from the asset, and property taxes must be paid. An investor is speculating that economic and population growth will occur, pushing up real estate prices.

When Flynn indicated she had parcels for sale starting at $20,000, I knew something would fit within my budget. I had an individual retirement account that I had rolled over from a 403(b), and it contained $44,000 worth of stocks. Selling my stocks would not create a taxable capital gain since the funds were held within an IRA. So I sold the stocks, bought a parcel and kept some cash in the IRA to pay property taxes for a few years. Based on the testimonials of other investors, some choose to pay in cash, while others prefer to own land within an IRA.

I only invested in raw land after I was confident I had enough investments in liquid assets. I also had no plans to withdraw from the IRA until retirement age, so I had time to wait for the land to increase in value. The majority of my wealth is still invested in U.S. and international stocks and ETFs. Investing in real estate can be risky, but can also provide much needed diversification to an all-stock portfolio.

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, property, or asset.

 

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It's Time for More of Us to Party with the Boss

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There are all sorts of indicators about the health of the economy, but one of the more fun ones is holiday parties. And a new survey shows that more companies are throwing holiday parties than at any time since the recession began. As Prince sang, it's time to "party like it's 1999."

"This is the fifth year of the recovery, but for some employers and many of their workers this is the first year it actually feel like one," said John Challenger, chief executive officer of the outplacement consulting firm Challenger, Gray & Christmas. Its survey shows 89 percent of the companies that responded plan to host holiday parties this year, up from 82 percent in 2012 and just 68 percent in 2011. (Challenger didn't conduct the survey last year)

"The evidence suggests that times are good. Companies that in tough times might be Scrooge-like and cancel parties now have a sense that the labor market is hot and they want their people to stay," he said. "They want to show their people they are valuable to them."

Better Parties, Too

Not only are more parties being planned, but 18 pecent plan to spend more this year, and nearly 60 percent are using an outside caterer or event planner. "The bottom line is that companies are looking ways to create ties, to cement people to their organizations," according to Challenger. "Having an holiday party is an opportunity not to be missed." He says companies have to engage their workers and make them feel valued to hold on to them as the job market improves.

Jonathan Peters, owner of the high-end catering service David Ellis Events, agrees. He says budgets for corporate holiday events are a bit looser this year, perhaps enabling full bar, high-end decor and valet parking. "They want to service the guest a bit more." However, he says many corporate clients "are still semi-conscious about how they're perceived by the shareholders and clients. It's not the same as it was before the recession, but it is on an upward trend."

Peters says the level of extravagance often depends on the industry. He says technology companies, consulting firms and service businesses are spending more, while other industries are still keeping a tight grip on the budget. Private clients are throwing the most lavish parties. "I have some clients doing a Cirque de Soleil theme. They want to make it seem different. They want a little bit of the wow factor." But he says businesses are not throwing those multimillion dollar bashes of old. "They don't want to be that showy."

Be Our Guest, Network and Behave

No matter the level of extravagance, holiday parties provide a great opportunity for employees to network with their bosses' boss or other higher-ups. While many people may want to party with their co-workers -- the people they know best -- workplace experts say they should break from their comfort zone. Challenger said you should introduce yourself to those who might help your career. "Arrive early and work the room," he advises. "Use it as an opportunity to do some networking inside the company."

But the advice also comes with a warning. More than 40 percent of the companies provide free booze. While this can add to the party's fun, it can also lead to some embarrassing situations if you over-indulge. Challenger says you don't want to do or say something that will hurt your reputation and your chance for advancement. "There are always people who do something that is inappropriate," he said, noting that the "nightmare situation" is something that could be labeled sexual harassment.

 

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Preapproval's the Secret for Not Dinging Your Credit Score

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The almighty FICO score has a big impact on how we make financial decisions, and for good reason. Not only is the score used in more than 90 percent of all lending decisions, but it also impacts other parts of our life, including how much we pay for auto insurance.

Some people like to pretend that FICO does not exist. If you are incredibly wealthy (and have, for example, your own radio show and millions in the bank), than you can safely ignore your FICO. However, if you need to borrow money to buy a home or a car, than having a good FICO is helpful. And, fortunately, it is not hard to do. If you pay on time and don't max out your credit cards, than you will have a good score.

Contrary to many rumors, you do not need to carry a balance and pay interest on your debt to have a good credit score. You need to use your credit cards, but you can pay them in full every month. If someone tells you that you need to borrow money to have a good score, they don't understand how the calculations work.

How Your FICO Score Is Calculated

The three biggest components of the FICO score are on-time payments, utilization and the length of your credit history.
  • Making payments on time is approximately 35 percent of your credit score, and even a single missed payment can have a massive impact. For example, being 30 days or more late one time could take over 100 points off your credit score.
  • Utilization, which is about 30 percent of your score, is calculated by dividing your total statement balance by your available credit. For example, if you have $10,000 of available credit and a statement balance of $2,000, then you have a utilization of 20 percent. Utilization is a much-maligned part of the credit score. If you only have one credit card, and use it every month for your everyday spend, than you could end up being punished. And, if you open a bunch of credit cards without using them, then you can have a very low utilization and a better score. But utilization is actually a subtle way of calculating whether you have the discipline to avoid using all of your available credit. The banks give you temptation: utilization measures how easily you succumb to that temptation.
  • And 15 percent of your credit score is calculated by looking at how long you have had credit history. This is the easiest component to get right. Every day that you are alive is a day that this part of your score improves.
So, 80 percent of your credit score simply measures your ability to pay on time without maxing out your credit cards. As long as you follow these simple rules, you will have a great score. And life will cost you a lot less as a result. Having a good credit score means you will have the lowest interest rate on your mortgage, car loans and the lowest price on your auto insurance.

Don't Worry About 'New Credit' Most of the Time

Unfortunately, we tend to obsess about the 10 percent of our credit score that is often labeled "new credit." Every time you apply for credit, your score will decrease. The fact that you are looking for credit can send out a warning signal. And, if you apply for a lot of credit, that can become a very big warning signal.

However, a single application for new credit usually only takes 10 to 20 points off your score. And, so long as you don't max out your new credit card and build up your debt, the impact on your credit score is minimal and will be reversed over time. There are really only two times when you don't want to lose 10 points: if you are applying for a mortgage or auto loan in the next six to nine months. Otherwise, the worry about applying for credit is overdone.

However, I know that people will still be afraid of applying for new credit, because they fear the impact that it will have on their credit score. And, although one new application for credit is not a big deal, many people fear the impact that multiple applications have on their score. If they have to apply five times before they are approved, that will have a big impact.

Preapproved or Prequalified?

So, to reduce your chance of being rejected, you can visit a bank's website and see if you are preapproved for an offer. Checking to see if you are preapproved has no impact on your credit score. You can then check several banks and only apply once you know your are on the list. At MagnifyMoney, we have compiled a list of where you can check for preapproved or prequalified credit card offers.

If you are not on the list, that doesn't mean that you will not be approved. But this is a nice way to see where you can get credit without worrying about the impact on your credit score.

However, there is one final warning. Just because you are prequalified, does not mean that you will be pre-approved. When you decide to apply for a credit card, a bank will do a full hard inquiry. If your situation has changed since the bank last looked at your credit report, then you could be rejected. In addition, you will be providing information on your application that includes your employment status and income. If you are unemployed, of if your income does not look sufficient to service your debt load, the bank can still reject you.

However, if you want to see where you have a good chance of being approved, these prequalification lists can be helpful.

Nick Clements is the co-founder of MagnifyMoney.com, a price comparison website that helps you find the best deals in banking. He spent nearly 15 years in consumer banking, and most recently he ran the largest credit card business in the U.K.

 

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5 New Realities of Planning Your Retirement

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By Tom Sightings

Pensions are a distant memory for many of us. We all worry about the future of Social Security and the escalating cost of health care. Meanwhile, our life expectancies have increased, and we can look forward to a longer, healthier and more expensive old age. But Americans are practical. We adjust our lives to deal with changing times. Here are some of the new realities of retirement.
  • The traditional career path is a relic of the past. The experience of a decades-long full-time job that is followed by full-time retirement is now the exception rather than the rule. Instead, many employees are leaving work in their 50s and taking lower paying temporary jobs for several years before full retirement. People in this stage of their working life have different attitudes and expectations compared to full-time employees, which presents new challenges and opportunities for both management and workers.
  • Employees have less control over the timing of their retirement. Age discrimination is illegal. Yet, many workers in their 50s and early 60s have lost their jobs and been passed over for new positions. Other people jump into retirement, even if they can't really afford it, because they are sick of their jobs and dream of an easier life -- if only they could survive without a paycheck.
  • More people choose semi-retirement. Due to economic uncertainties, a significant number of retirees now hold part-time jobs. Just over a third (35 percent) of Americans work full time at age 62 and about 14 percent work part time, according to the National Institute on Aging, By age 68, only about 13 percent work full time while 19 percent work part time. Retirement is not an all-or-nothing proposition. The downside of a part-time job is that you're still working. But for many people a part-time job cushions the blow of a layoff, or allows them to leave behind the drudgery of an old job to try something new and more interesting. A part-time job also supplements income from Social Security and a pension and extends the life of their retirement savings.
  • Many people enjoy more flexibility. In 1970, Social Security introduced the delayed retirement credit, meaning that employees working beyond normal retirement age continue to build up Social Security credits. Now workers have the flexibility to retire anywhere between ages 62 and 70 without financial penalty. Theoretically, no matter when you retire, you collect the same amount of Social Security benefits (depending, of course, on how long you live). Also, the decline in defined-benefit pension plans may have a silver lining. Today, fewer companies require workers to retire at a specific age, so you can often stay on the job longer if you want to. The net result is more choice for workers. You can keep working, but if you harbor a dream to do something different -- try a new job, open your own business, make your own crafts or pick up some extra cash as a dog sitter or house sitter -- then early retirement is more feasible today than ever before.
  • People who are semi-retired spend more time in part-time careers. Those who leave the full-time workforce early need to make more income, largely because they have spent fewer years earning a salary. Therefore, instead of taking full retirement at 66, many people keep their part-time jobs until age 70 or beyond to make up for lost wages earlier in their career. So, if you do take a part-time job later in life, make sure you really enjoy what you're doing.
Some people question: If you're still working, how can you say you're retired? The answer is not to think of retirement as a time to sit around and do nothing. Instead, it is a time, at last, to do what you want. For increasing numbers of Americans this means scaling back and working fewer hours on a less stressful basis, either for your old company or in an entirely new environment.

Working in retirement can provide the best of both worlds. You're free from the daily obligations you've been shouldering for years, but you're still making money. You have some structure in your life, and you're meeting new people. You are also doing something useful and making a difference in the world.

Tom Sightings blogs at Sightings at 60.

 

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Guac Fans: Stock Up on Avocados Before Price Hike

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Operations During An Avocado Harvest At Stehly Farms Organics As Calfornia Gets Drought Relief
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By Hailey Lee | @haileylee139

Avocados may be harder to come by in the coming months, or they may become more expensive due to bad timing on a series of unfortunate events.

California's drought takes a bulk of the blame as the state produces 95 percent of avocados in the U.S. Farmers are abandoning the fruit because water is too costly and avocados require too much of it to grow, according to news site Mic. Rising temperatures are also expected to lower California avocado production by as much as 40 percent in the next three decades, Mic reports. Outside the U.S., avocado exports from Mexico are being disrupted by gang violence.

On top of supply challenges, avocado popularity is at an all-time high, outpacing production -- similar to what happened with demand pressure on quinoa.

Earlier, fast-casual restaurant chain Chipotle (CMG) sparked jitters when it threatened to nix guacamole from its menu if avocado prices continue to rise. If current trends persist, the company's threat may become reality.

 

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Fake Emails Foul Up Holiday Shopping for Many Consumers

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Millions of emails a day are being sent to consumers around the country with confirmations of what appear to be online shopping orders but are really fakes tied to damaging computer malware and other trickery.

Because so many real order confirmations are flying into in-boxes, these phony emails aren't as obvious as they might otherwise be. And those behind the phony emails make them resemble those sent by legitimate retailers, including Target (TGT), Walmart (WMT), Best Buy (BBY), Home Depot (HD) and Costco (COST), according to security blogger Brian Krebs.

I am afraid more people will fall victims to hackers this year than ever before.

"The holiday season make us feel better. We become more trusting and, of course, more vulnerable," said DeVry University information sciences professor Rajin Koonjbearry. "We are also in a rush to get things done before the end of the year. Hackers seize the opportunity to prey on our holiday mood."

And he had a stark prediction: "I am afraid more people will fall victims to hackers this year than ever before."

The first wave of emails connected to the scam went out around Black Friday and Cyber Monday but have shown no sign of abating. The emails come with such subject lines as: "Thank you for your order," "Order Confirmation," "Acknowledgment of Order" and "Order Status," according to the computer security company Malcovery Security.

Those who click on the links risk triggering malware that can infect their computers and steal such things as your passwords. In addition, computer security experts like Krebs say the malware can put victims' computers under the control of cyber-thieves.

Before clicking on any links in an email, be sure it's from a legitimate source. The phony emails might say they're coming from a retailer that you could have used, but the email addresses that they're being sent from won't match up with Walmart.com, Target.com and other obviously authentic addresses.

DeVry's Koonjbearry offers the following tips:
  • If an email looks suspicious, delete it.
  • Be cautious clicking email links.
  • Keep your passwords secure.
  • Update anti-virus software regularly.
  • Shop on secure websites.
  • Get rid of apps you don't use.

 

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Senate to Take Up $1.1 Trillion Spending Bill

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J. Scott Applewhite/APHouse Speaker John Boehner of Ohio
By ANDREW TAYLOR

WASHINGTON -- A battle between the Senate's old school veterans and new-breed freshmen such as tea partier Ted Cruz and liberal Elizabeth Warren is taking shape Friday as leaders push for passage of a $1.1 trillion spending bill needed to keep the government running.

Cruz and Warren each boast a national following, but the smart money is on Majority Leader Harry Reid, D-Nev., and GOP Leader Mitch McConnell of Kentucky, the veteran lawmakers who steer the Senate.

Once Reid and McConnell forge an alliance, the fix is in and passage is only a matter of time.

Still, liberals including Warren, D-Mass., and conservatives such as Cruz, R-Texas, will make their points. Warren strongly opposes a provision of the spending bill that loosens rules on banks, while Cruz is incensed that the measure doesn't block the president's plan to deport fewer immigrants.

The bill passed the House on Thursday after a day of drama but by a relatively comfortable 219-206 vote. The vote came after GOP leaders sent the House into a seven-hour recess to give the White House time to lobby Democrats angry that the measure weakens rules on trading risky financial products known as derivatives and allows wealthy donors to pour hundreds of thousands of dollars into political parties.

In the end, 57 House Democrats voted for the bill, including two of the party's top three leaders. Democrats argued that there was too much good in the bill to scuttle it and get a worse deal next year when Republicans seize control of the Senate.

"Hold your nose and make this a better world," Rep. Sam Farr, D-Calif., said.

The measure would fund nearly every Cabinet agency through September 2015, awarding increases for health research, securities regulation, processing a backlog of rape kits and foreign aid. Republicans won cuts to the IRS and the Environmental Protection Agency. The 1,764-page bill is thick with carefully negotiated trade-offs on spending and policy "riders" on the environment, abortion and the lead content of ammunition. Democrats succeeded in getting the most politically toxic riders off the legislation.

Reid said he hopes the measure will clear the Senate for Obama's signature on Friday, though a vote may not come until the weekend.

Terrorism Insurance
J. Scott Applewhite/APHouse Minority Leader Nancy Pelosi of California
Hours before the vote, House Democratic leader Nancy Pelosi of California delivered a rare public rebuke of Obama, saying she was "enormously disappointed" he had decided to embrace legislation that she described as an attempt at blackmail by Republicans. But Pelosi never lobbied Democrats to kill the bill, and Democratic Whip Steny Hoyer of Maryland and No. 3 Democrat Jim Clyburn of South Carolina were a steadying force in support of the measure.

Republicans, meanwhile, limited their defections to 67, mostly conservatives seeking an immediate confrontation with Obama over his moves to relax enforcement of immigration laws. Others simply refuse to vote for spending bills.

But Republicans scored many wins in the legislation, seizing on new leverage gained after their sweep in last month's midterm elections.

One provision particularly galling to many Democrats would relax new bank regulations that force riskier trades in financial instruments known as derivatives into separate affiliates unprotected by deposit insurance.

The White House stated its own objections to the bank-related proposal and other portions of the bill in a written statement. Even so, officials said Obama and Vice President Joe Biden both telephoned Democrats to secure the votes needed for passage, and the president stepped away from a White House Christmas party reception line to make last-minute calls.

In addition to the government funding, the bill also sets a new course for selected, highly shaky pension plans.

No Shutdown Threat

Despite the day's uncertainty, there was no threat of a shutdown in federal services -- and no sign of the brinkmanship that marked other, similar episodes. Instead, the House and Senate quickly passed a measure providing a 48-hour extension in existing funding to give the Senate time to act on the larger bill. Obama promptly signed it.

The spending measure was one of a handful on the year-end agenda, with the others including an extension of expiring tax breaks and a bill approving Obama's policy for arming Syrian forces fighting Islamic State forces. A bill extending the government's terrorism insurance backstop could get tripped up by procedural hurdles.

A provision in the big bill relating to financially failing multiemployer pension plans would allow controversial cuts for current retirees, and supporters said it was part of an effort to prevent a slow-motion collapse of a system that provides retirement income to millions.

"The multiemployer pension system is a ticking time bomb," said Rep. John Kline, R-Minn., who negotiated the agreement with Rep. George Miller, D-Calif., who is retiring after 40 years in Congress.

 

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U.S. Consumers Turn More Bullish on Spending

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Consumer Confidence
Matt Rourke/AP
By Jason Lange

WASHINGTON -- U.S. consumer confidence rose in December to a near eight-year high, a sign that falling gasoline prices and expectations of a better job market could give a boost to the economy.

The Thomson Reuters/University of Michigan's consumer sentiment index rocketed up to 93.8 this month, according to a preliminary reading released Friday.

That was above analysts' expectations and pairs with strong retail sales data for November in suggesting American consumers entered the holiday shopping season on better footing.

Surging expectations signal very strong consumption over the next few months.

"Surging expectations signal very strong consumption over the next few months," said Ian Shepherdson, an economist at Pantheon Macroeconomics.

Americans were the most bullish on their prospects for earning higher wages since 2008, survey director Richard Curtin said in a statement.

The data bolsters the view that the U.S. economy is turning a corner and that worker wages could begin to rise more quickly, laying the groundwork for the Federal Reserve to begin hiking its benchmark interest rate, which it has kept near zero since 2008 to help the economy emerge from a deep recession.

Many investors see the Fed raising rates in mid-2015, and central bank policymakers are expected to debate next week whether to keep a pledge that borrowing costs will stay at rock bottom for a "considerable time."

The Fed wants to get inflation back to 2 percent, while keeping any overshooting of that target to a minimum.

Friday's data suggested consumers expect faster inflation. The survey's one-year inflation expectation rose to 2.9 percent from 2.8 percent, while its five-year inflation outlook also rose.

That runs quite counter to recent price data. The Labor Department said Friday its producer price index for final demand dropped 0.2 percent in November.

The decline was driven by falling gasoline prices, but even excluding the drag from gasoline, prices were soft.

A core measure of producer inflation, which excludes food, energy and trade services, was flat. When compared to a year earlier, that core index was up just 1.5 percent, and the annual reading has been dropping 0.1 point each month since September.

Fed officials largely view the current low inflation environment as transitory.

U.S. stocks briefly cut losses after the buoyant sentiment data but stayed lower on the day as investors fretted about declining oil prices and what that said about global demand. U.S. Treasury prices were up, while the dollar fell.

-With additional reporting by Rodrigo Campos in New York.

 

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The Easy, Quick 20-Cent Greeting Card (for Christmas, Too)

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By Karla Bowsher

My mom taught me to buy greeting cards at the dollar store. She says she refuses to pay a threefold markup for a Hallmark logo when it's the thought that counts. And most people toss cards after reading them anyway.

Sometimes I take her advice. Other times I take it a step farther. When I discovered my local Barnes & Noble (BKS) sold plain photos slapped onto plain white pieces of folded stock paper as $5 greeting cards, I realized I could make better cards myself for even less than mom pays. They come out to about 20 cents apiece.

You might find greeting cards for less if you bought in bulk, but handmade cards have a personal touch and sometimes a story behind them. That doesn't meant they have to look homemade, though. When my mom gave one of my cards to my boyfriend as a birthday card, he didn't believe it was homemade -- or that it was made by his girlfriend.

What You Need
  • Blank card with envelope. I'm currently using DCWV cards. The cards are colored and textured on the outside but white and flat on the inside so you can write on them.
  • Photo. Don't pay more than 9 cents for a 4×6 print. That's the standard price through a service like Snapfish. Drugstore services like Walgreens (WAG) and CVS (CVS) often call anything from 10 to 12 cents a deal, but sometimes offer deals if you're willing to buy a few dozen prints.
  • Two-sided adhesive. Double-stick tape generally works and is probably the cheapest option, although I favor a brand of photo tape like this one meant for scrapbooks because it's very thin, yet holds. The roll has 81 feet, so I figure it'll make hundreds of cards.
  • Paper cutter (optional). You may want to trim the photo.
  • Corner punch (optional). I use a simple punch that rounds off the corners of my photos, which I think gives the card a more polished look. But you can get as fancy as you want.
  • Embellishments (optional). I've added googly eyes to a photo of a fanciful bug I took in the Amazon rain forest, for example. You can get as creative as you'd like.

Directions

  1. Buy any ingredients you don't already have. I recommend getting the cards, tape, paper cutter, punch, and embellishments at a brick-and-mortar craft store like Michaels (MIK) or A.C. Moore, which offer printable coupons worth at least 40 percent off one regular-priced item almost weekly. My cards came out to about 10 cents apiece that way.
  2. Pick out a photo to match the occasion and a card to match the photo.
  3. Trim the photo if needed.
  4. Punch the corners of the photo.
  5. Apply the tape to the back of the photo.
  6. Stick the photo to the card. Especially if the photo has a glossy finish, this can be difficult to do without leaving fingerprints on the photo, so I wrap a cloth meant for cleaning eyeglasses around my fingers before pressing down on the photo. A T-shirt could also work -- any lightweight fabric that wouldn't scratch.
  7. Add any embellishments.

 

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Is It Time to Roll the Closing Credits on the DVD?

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The curtain is starting to close on the optical disc. You probably noticed that during Black Friday: There weren't too many doorbuster deals for DVD or Blu-ray players. Folks just aren't buying them anymore. The big sellers in consumer electronics were smart televisions that stream movies, TV shows, and video clips. There were also plenty of Chromecast, Roku and Fire TV set-top devices on sale, more gadgetry that renders the optical disc obsolete.

DVD sales peaked in 2004, and it's been a slow fade. Some media platforms fall off the cliff when their consumption tenure is done, but optical discs have only seen unit sales decline by a third over the past decade.

They're still around, but it won't always be that way.

The Rise and Fall of the DVD

The DVD arrived before the turn of the century, easily besting VHS as the video platform of choice. Discs looked better. They were portable. There was also no need to rewind at the end of the viewing experience. The same thing could've been said about the LaserDisc, but DVDs came at the right time and eventually at the right price.

The compact nature of the DVD also helped breathe new life into the rental business. Blockbuster, Hollywood Video, Movie Gallery and other rental specialists were able to stock more titles in their small-box stores. Outerwall's (OUTR) Redbox likely wouldn't exist as a model if the automated kiosks had to spit out chunky VHS videocassettes.

Unfortunately for the optical disc, the disruptor can be disrupted. The same migration to digital that has turned CDs into MP3s, books into e-books and video game discs and cartridges into apps has taken hold of video.

Be Kind and Rewind

Movie studios aren't going down without a fight. They initially hoped to keep DVD sales alive by making rentals less desirable. They struck deals with Netflix (NFLX) and Redbox, offering them cheaper discs in exchange for holding back on rentals during the first four weeks of retail availability.

The plan was supposed to make it more compelling to buy a DVD, but it likely backfired by killing the rental industry. Blockbuster and its store-based peers eventually folded. Netflix saw its subscriber base receiving DVDs by mail peak at roughly 20 million four years ago, and it has plummeted to just 6 million members today.

Redbox has held up relatively better, but it's finally showing signs of peaking. Rental volume declined 13.7 percent in its latest quarter relative to the same period a year earlier. Redbox announced earlier this year that it would be closing hundreds of kiosks, and in an effort to make up for shrinking rentals, its rates went up this week.

Follow the Money

The nightly rental rate on DVDs went from $1.20 to $1.50 earlier this month, but that will likely only drive more of its customers to rely on the convenience of on-demand rentals from the cable providers or the growing number of marketplaces selling digital rentals.

The DVD revolution was important, and Hollywood will make out just fine in the digital revolution. Netflix alone has $8.9 billion committed to future streaming content obligations, and making it easier for customers snapping up smart televisions and set-top devices this holiday shopping season to stream premium video offerings will pay off nicely. However, the slow death of the DVD itself will likely accelerate in the coming years. It had its time, but now that time is up.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of Netflix. 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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Why Mattel Matters Less This Holiday Season

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Earns Mattel
Alan Diaz/AP
Barbie, the perennial favorite toy this time of year, might be a bit glum this holiday season. In a sign of the times, the doll has seen her popularity slip. Before 2014, she was No. 1 on toy wish lists for more than a decade running, according to the National Retail Federation's annual Holiday Top Toys Survey. Her crown has now been taken by rivals.

Her maker, Mattel (MAT), has had a tough year. Other Mattel offerings haven't exactly been flying off shelves in the run-up to the holidays. Why is the company falling behind?

Frozen Sales

One big reason Barbie's taking a hit is because this year, she's got some serious competition -- the main characters of the smash 2013 Walt Disney (DIS) film musical "Frozen."

Sisters Elsa and Anna are the star attraction of Disney's ubiquitous-in-toy-stores Princess line of dolls. They and the rest of the Frozen franchise are also the top choice of the nearly 6,600 parents surveyed for the NRF poll, knocking Barbie off her throne for the first time in the survey's 11-year history.

The company's struggles are not all the cheerful blonde's fault.

It's been quite a tumble. In Mattel's most recently reported third quarter, gross sales of the Barbie line dropped a steep 21 percent on a year-over-year basis, to $353 million.

The company's struggles are not all the cheerful blonde's fault, though. None of her fellow product categories has been doing well lately -- the "other girls" segment (meaning girl-targeted products that aren't Barbie) advanced by only 1 percent over that time frame.

The "wheels" division (including the small-scale toy-car line Hot Wheels, plus its onetime rival Matchbox) accelerated weakly by 4 percent.

And those were the better performers. Mattel's entertainment wing saw a Barbie-like decline of 23 percent, and the Fisher-Price line of infant and toddler products sank by 16 percent.

These are not new developments. The third quarter was the fourth straight quarter of falling overall revenues for the company.

Royalty Has Its Privileges

The future doesn't look especially bright, either. At the moment those popular-like-royalty "Frozen" dolls (as well as the rest of the Princess line) are manufactured by Mattel under license from Disney, but the clock is ticking fast -- the entertainment giant chose Hasbro (HAS) to be its next licensee for Princess, starting in 2016.

For Mattel, that's going to hurt -- the company takes a cut of around $300 million per year from sales of the various Princesses.

That'll leave a hole in net sales, which for the first nine months of this year were already down by 8 percent, to just over $4 billion. It'll also likely hit net profit, which really needs a lift. That line item tumbled by a worrying 35 percent (to $349 million) over the same period.

Stalling Vehicles

Toys are a trendy market, of course -- kids always want the most popular items of the season. As a hit movie that strongly resonated with young girls, "Frozen" remains durably popular more than a year after its release.

The same can't be said of other Disney titles, like the two animated films in the recent "Planes" series, or the pair of "Cars" movies (both made by Disney's Pixar unit). In the latter case, it's likely because the most recent one was released in 2011. Mattel's got plenty of toys connected to both franchises; not surprisingly, those lines saw year-over-year sales drops in its third quarter.

Meanwhile, Mattel's 2013 attempt at reviving a toy set and TV show from its recent past -- sci-fi action franchise Max Steel -- hasn't lit the world on fire. In its third quarter, products associated with the brand saw an 8 percent year-over-year decline in sales.

Blasted by Rivals

A lack of innovation could be blamed for Mattel's woes. The many current Barbie offerings, for example, aren't too much of a departure from what the company's been selling for years.

Contrast that with a toy series like Hasbro's Nerf, for example. Over the decades this has evolved from a simple foam sphere to versions of basketballs and footballs to a line of weapons powered by foam ammunition. The latter has been on the market for decades, yet is still expanding in clever directions; last year, Hasbro introduced the Rebelle Heartbreaker Bow, a Nerf bow-and-arrow set aimed at girls.

That demographic is the one that used to be owned by Mattel. If the company is going to reverse its declines, it'll have to either get more imaginative with its products or connect with more successful entertainment franchises to score hits.

If not, it risks sliding further down those holiday wish lists it dominated not so long ago.

Motley Fool contributor Eric Volkman owns shares of Walt Disney, but will almost certainly never own a Princess doll. The Motley Fool recommends Hasbro, Mattel, and Walt Disney. The Motley Fool owns shares of Hasbro and Walt Disney. Try any of our Foolish newsletter services free for 30 days. Check out The Motley Fool's one great stock to buy for 2015 and beyond.

 

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Week's Winners, Losers: Amazon's Golden, McDonald's Isn't

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2014 Summer TCA Tour Portraits - Day 5
Maarten de Boer/Getty ImagesActors Jeffrey Tambor (left), Jay Duplass, Amy Landecker and Gaby Hoffmann promote "Transparent," an acclaimed new Amazon series.
There were plenty of winners and losers this week, with the world's largest burger chain posting its worst monthly performance in more than 11 years and a revitalized airline offering a rosy forecast as jet fuel prices continue to drop. Here's a rundown of the week's smartest moves and biggest blunders.

Adobe Systems (ADBE) -- Winner

Adobe posted better-than-expected quarterly results on Thursday night, beating Wall Street's top- and bottom-line targets. The desktop publishing software giant also made a smart acquisition, snapping up Fotolia in an $800 million transaction.

Fotolia operates a popular marketplace offering royalty-free snapshots, graphics and video. Its catalog contains up to 34 million images and videos, and Adobe plans to incorporate Fotolia into its subscription-based Creative Cloud platform, which currently has roughly 3.5 million subscribers.

McDonald's (MCD) -- Loser

Things just continue to get worse at McDonald's. The world's largest burger chain suffered a 4.6 percent plunge in comparable-store sales for its domestic restaurants for the month of November relative to the same month a year earlier. It's the chain's largest year-over-year slide in monthly comps in more than a decade.

There were plenty of things that could have worked in the struggling eatery's favor. The food-prize redemption deadline for its popular Monopoly promotion ran into mid-November, and we can't forget the seasonal appeal of the McRib in its regional rollout. November of last year was also a negative month, making it easier to post improvement this time around.

Delta (DAL) -- Winner

One of the biggest plays on cheap oil is the airline industry. The economy's improving to the point where business and leisure travel is on the rise, and that's giving air carriers the flexibility to boost their fares at a time when lower fuel prices are improving flight costs.

Delta chimed in with encouraging insight on Thursday, pointing to improving profitability. It also sees $1.7 billion in savings next year on fuel costs alone if prices hold steady.

Abercrombie & Fitch (ANF) -- Loser

Critics of Abercrombie & Fitch won't have Mike Jeffries to criticize anymore. The struggling and once-trendy apparel retailer announced that Jeffries is leaving the company that he has helmed since 1992. He's been a controversial figure, going by everything from disparaging comments that he has made about consumers to some of the controversial shirts that A&F has put out over the years.

The only real surprise -- and the reason this move is listed as a loser -- is that A&F took this long to do it. Brand-tarnishing controversy aside, A&F has posted 11 consecutive quarters of negative comparable-store sales. Customers are flocking to H&M, Forever 21,] and other chains. A change at the top should have been made a long time ago.

Streaming Video -- Winner

The Golden Globe nominations came out this week, and it's no longer just Netflix (NFLX) turning heads. Amazon.com (AMZN) received a pair of nominations for its original content, including a nod for Jeffrey Tambor in the Best Actor category for his work as a transgender father in Amazon's "Transparent."

Not to be outdone, Netflix walked away with seven nominations. However, with the two premium streaming video platforms now gobbling up award nods that used to go to traditional TV shows, it's more validation for both companies.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends Adobe Systems, Amazon.com, McDonald's, and Netflix. The Motley Fool owns shares of Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. Want to make 2015 a winning investment year? Check out The Motley Fool's one great stock to buy for 2015 and beyond.

 

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American Items Spread Christmas, Hanukkah, Kwanzaa Joy

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a brightly lit small town...
Kenneth Sponsler/Shutterstock
From artisans across America, you can find decorations and other items that will help celebrate Christmas, Hanukkah and Kwanzaa.
  • Wendell August Forge of Mercer, Pennsylvania, has Christmas covered with hand-wrought metal ornaments and gifts. In operation since 1923, Wendell August is America's oldest and largest forge.
  • Hampshire Pewter of Somersworth, New Hampshire, is America's sole manufacturer of hand-cast pewter hollowware. Its line of ornaments covers many religious and personal preferences.
  • Since 1979, Steven Bronstein and his team of helpers have been handcrafting ironworks -- including menorahs and Judaica -- in Marshfield, Vermont, as Blackthorne Forge.
  • Africa Imports offers a pack of footlong American-made Kwanzaa candles. As the name indicates, the New Jersey company does not carry many American-made products.
  • Dreidels are essential to Hanukkah. Portland, Oregon's Stubby Pencil Studio offers one that is also eco-friendly -- like all its toys, books and stationery. Founded in 2006 by mother of twin daughters, Kate Rosenthal, Stubby Pencil Studio endeavors to raise awareness of Earth-friendly toys and games.
  • Uncle Goose of Grand Rapids, Michigan, offers Hebrew blocks for fun and education. Since 1983, the company has been handcrafting blocks in various languages and themes.
  • Dancing Bears Home & Gift started in 1998 as a toy company. Now a full-fledged tapestry and blanket brand, the Manassas, Virginia, firm offers products for all three holidays and other occasions. Its Ebony Art offers modern and traditional African images and settings that may be right for Kwanzaa. Look for "Proudly Made in USA!" in product descriptions.
  • "Absolutely everything we sell is made in America" is what you'll hear from Barrington, Illinois' Norton's U.S.A. The online and brick-and-mortar brand calls itself "a uniquely American general store," offering everything from toys and tools to an extensive Christmas line that includes cards, stockings and decorations.
  • Vaillancourt Folk Art of Sutton, Massachusetts, has been making nostalgic chalkware figurines the same way since Gary and Judi Vaillancourt founded the business in 1984. Its classics include the 25th annual Starlight Santa that benefits the University of Massachusetts Memorial Children's Medical Center.

 

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10 Unusual Ways to Use Your HSA Dollars

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By Paul Sisolak

When health savings accounts were created in 2003, anyone enrolled in a high-deductible health plan had a new way to buffer the financial burden of health-related costs not covered under their plan. HSAs can be a very beneficial personal finance tool, with a high APY, generous contribution limits, and tax-free deposits and withdrawals -- providing, of course, that they're used only for medical expenses that qualify under your insurance plan.

Aside from doctor's office visits, prescriptions and the like, we don't tend to hear too much about what else qualifies as an HSA-OK medical expense. Do you have an HSA and want to start putting your savings to good use? Scroll through this list to find out what you can use those funds for.

1. Acupuncture. It may surprise you to know that your HSA dollars can fund this procedure; it's a mainstream medicinal practice in China, but still considered alternative in the West. Acupuncture involves the insertion of fine needles just below the surface of the skin, placed at determined points to treat everything from chronic pain to allergies or depression. The intent is to channel and balance the patient's life force, or "chi," so it's not invasive in the same sense as needles usually are.

2. Guide Dogs and Service Animals. Disabled or sight-impaired people who've received authorization from their doctor for a seeing-eye dog or other medical service animal can use their HSA savings towards buying, training and maintaining them. Food, inoculations and veterinary care all qualify as expenses allowed under your HSA.

3. Sperm Storage. If you're looking to donate as much as possible to a sperm bank, it doesn't qualify for HSA reimbursement. But fees associated with temporary sperm storage for what's called "immediate conception" do qualify, with authorization from your doctor. (While we're at it, go ahead and ask him or her for that Viagra prescription -- HSAs will pay for those out-of-pocket costs, too, as well as other pregnancy-related items, like fertility treatments and pregnancy testing devices.)

4. Umbilical Cord Freezing and Storage. An HSA can also help pay for the sub-freezing storage of your newborn son or daughter's umbilical cord once they've been born. However, there are restrictions here, too; in order to qualify it as an HSA expense, parents must prove that the cord will be used to treat a particular medical condition. (Umbilical cord blood contains stem cells, which can be used as a treatment for children suffering from leukemia and other blood-related diseases.)

5. Home Improvements. HSA money can't comp you for a new kitchen remodel, man cave or hot tub. But it can finance any modifications you make to your house, like wheelchair ramps, railways, support bars, moved outlets, cabinets and doors, and other modifications for disabled residents that improve quality of life. The improvement costs must usually exceed the increase in your home's value to qualify for full HSA payment.

6. Massage Therapy/Chiropractor. Your HSA has got the back of those weekly or bi-weekly chiropractor's adjustments 100 percent. Massage therapy might also qualify for HSA compensation, with conditions; it's considered "dual purpose," meaning that your massage session must be for the treatment of a specific medical condition. You'll need a prescription from your chiropractor or M.D.

7. Preventive Dental Treatments. Considering the high costs of dentistry and orthodontic work, we should all be smiling our pearly whites if it was paid for by an HSA. According to the Internal Revenue Service, HSA-worthy dentist office visits include "teeth cleaning, the application of sealants, and fluoride treatments to prevent tooth decay. Treatment to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments." Procedures like teeth whitening or veneers don't qualify, since they're cosmetic in nature.

8. Transportation. HSA savings can also be used toward medical-related transportation expenses, like trips to doctors' offices or outpatient surgical procedures. Make sure to keep a very detailed record of your travel mileage, and any money spent on gas, parking garage fees or other vehicle maintenance, since the dollars out of your pocket can add up. If you don't own a car and take public transportation, get a receipt as proof. Are you in a recovery program like Alcoholics Anonymous? Group therapy transportation services are another qualifying expense an HSA will reimburse.

9. Lodging/In-Patient Costs. Like transportation fees, an HSA will pay for lodging fees incurred at hospitals or other facilities, if the primary reason for your stay is for medical care. Patients staying in a short- or long-term drug treatment center can also have their expenses repaid through their HSA fund. Like transportation, experts advise to be very specific in the information you provide to the IRS if you'd like to pursue complete reimbursement.

10. Wigs and Prosthesis. If you rely on the use of a prosthetic limb or device, or wear a wig due to hair loss from chemotherapy or medications -- or, your head needed shaving for surgery -- an HSA will pay the costs of the accessory. Like the other qualifying expenses in this list, a doctor's written permission will often be needed to submit to the IRS for reimbursement.

Know Your Health Savings Account

You've been putting time, effort and money into your HSA, so remember what you can and can't use those dollars for. If your insurance has already paid for a treatment or service, it doesn't qualify for HSA reimbursement. Over-the-counter, non-prescription medications also aren't qualified. HSA money can also be used toward your retirement funding, but it'll be taxed. Thinking of opening an HSA in the new year? Keep these fast facts in mind:
  • For 2014/2015, individuals can contribute a maximum of $3,350 to their HSA.
  • Families can contribute a maximum $6,650.
  • HSA account holders 55 and older can make annual "catch-up" contributions up to $1,000 until enrolled in Medicare.
  • Account holders 65 and older can withdraw their money for any reason, tax-free.

 

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Station Owners Like Low Gas Prices as Much as You Do

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Gas Stations Love Low Prices
Wilfredo Lee/APMotorists gas up at a RaceTrac service station in Hialeah, Fla.
By JONATHAN FAHEY

NEW YORK -- So you think you are finally getting one over on the gas stations as you pay well under $3 a gallon for the first time in four years? Guess again.

Gas stations love low prices, too -- and not just because customers are nicer when they are paying less.

We're in the same shoes as the consumer, the cost of fuel is less for us.

"We're in the same shoes as the consumer, the cost of fuel is less for us," says Kevin Beyer, who owns Performance Fuels, a filling station and convenience store in Smithtown, New York.

That means profits for Beyer and the nation's 127,000 filling stations are rising.

Before they sell gas to you, station owners buy gas on the wholesale market. When the wholesale price of gasoline falls quickly the difference between the cost of wholesale gasoline (including taxes) and the price at the pump gets wider, boosting profits for stations. The steeper the drop, the better.

"It's completely antithetical to what people believe," says Tom Kloza, chief oil analyst at the Oil Price Information Service.

That difference has stretched to 21.7 cents a gallon this year, the highest ever, according to an OPIS analysis of 16,000 U.S. stations. That compares to an average of 17.1 cents over the last five years. On a percentage basis, station profitability is at its highest since 2005. And profits on diesel sales are even higher. "They are off the charts," Kloza says.

Yes, that means you could be paying even less for gasoline than you are.

But before you cry foul, you should know that after all the ups and downs in a year, gas stations do not make much money from selling gasoline. After credit card fees and other operating costs, net profit for gasoline sales averages 3 cents a gallon, according the National Association of Convenience Stores.

Scraping By

When gas prices soar, and drivers think they're being gouged, stations are barely scraping by or even losing money. When the wholesale price is soaring, like it did in 2008, 2011 and 2012, station owners can't increase the price at the pump as fast as their costs are going up or they risk losing customers to competitors.

When the wholesale price is going down, like now, there isn't the same pressure to lower the price.

Drivers are so happy to see lower prices they don't search all over town for the lowest one. And then when they put gas in the tank, they fill 'er up instead of just putting in a few dollars' worth.

And drivers have some money left over to spend on what's really profitable for station owners: The drinks and snacks inside.

"As the pricing goes down, I don't see people shopping [for the cheapest price] as much as they do when it's going up," says Beyer. "They are still feeling a relief at the pump."

As a result, he adds, "People are more friendly."

The national average price of gasoline has fallen 78 days in a row to $2.60 a gallon. That's 65 cents less than last year at this time and $1.10 below its peak for this year of $3.70, reached in April.

Oil Price Slump

Gas has fallen because the global price of crude oil has dropped 45 percent since this summer. The U.S., Canada and other countries are producing more oil at time when world demand is weak because of sluggish economic growth.

This has drained profits and knocked down the share prices of oil producers -- the exploration and production divisions of the big oil companies such as Exxon Mobil (XOM) and Chevron (CVX), and companies such as ConocoPhillips (COP) and Marathon Oil (MRO).

Refiners, including refining division of the big oil companies and refining-only companies such as Phillips 66 and Valero, have held up better. They benefit from lower crude costs, but are also grappling with high fuel inventories.

Gas station owners, though, are thrilled. The vast majority of stations are owned by small independent operators, even if the sign out front says Exxon, BP (BP) or Shell (RDS-A). But shares of CST Brands (CST), which owns Valero and Corner Store filling stations are up 25 percent since mid-October.

"The big inning [for gas stations], which started after Labor Day, is going to extend through Christmas," Kloza says.

Here are the 5 cheapest and 5 most expensive states for gasoline in the lower 48 states as of Friday, according to AAA.

State by State


Lowest State Averages
  • Missouri: $2.32
  • Oklahoma: $2.36
  • Texas: $2.38
  • Mississippi: $2.39
  • South Carolina: $2.40
Highest State Averages
  • New York: $3.02
  • Connecticut: $2.96
  • Vermont: $2.94
  • California: $2.92
  • Washington: $2.90
Don't see your state? See AAA's Daily Fuel Gauge Report.

 

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Market Wrap: Wall Street Has Worst Week in Over 2 Years

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APTOPIX Financial Markets Wall Street
Richard Drew/AP
By Chuck Mikolajczak and Sinead Carew

NEW YORK -- U.S. stocks fell sharply Friday, leaving the benchmark S&P 500 with its worst weekly performance since May 2012, as investors pulled back from the markets in response to oil's free-fall and more weak data out of China.

Oil's declines have underscored concerns about global demand, and with the S&P 500 having hit a record high only last week, investors were loath to fight the downward pressure on stocks, which accelerated in the final minutes of trading. The S&P dropped 3.5 percent on the week after seven straight weeks of gains.

The S&P energy sector was down 2.2 percent on the day. It is down 16.5 percent this year, the worst performing of 10 S&P sectors. Dow components Exxon Mobil (XOM) and Chevron (CVX) both hit 52-week lows as U.S. crude oil fell below $58 a barrel, hitting five-year lows, on expectations of reduced worldwide energy demand.

Energy is at the top of the list in terms of the names getting crushed.

"Certainly as midday came the market did not stabilize at all, so sellers knew that," said Kenny Polcari, director of the NYSE floor division at O'Neil Securities in New York. "Energy is at the top of the list in terms of the names getting crushed."

The Dow Jones industrial average (^DJI) fell 315.51 points, or 1.79 percent, to 17,280.83, the Standard & Poor's 500 index (^GPSC) lost 33 points, or 1.62 percent, to 2,002.33 and the Nasdaq composite (^IXIC) dropped 54.57 points, or 1.16 percent, to 4,653.60.

Disappointing data that suggested China's economy softened in November pushed the materials sector down 2.9 percent, making it the worst-performing S&P sector on the day.

The drop in oil and weakness in China overshadowed strong U.S. consumer sentiment, which hit an eight-year high.

Some investors hope declining gas prices will boost consumer spending enough to offset the energy sector's woes.

However, there is concern that rising volatility in the energy market will migrate to equities as investors worry about slack demand worldwide. The CBOE Volatility Index, or VIX, rose 5 percent to 21.08 on Friday as investors paid up to hedge against losses.

Polcari, however, noted that the S&P 500's declines came to within a whisper of the 50-day moving average at 2,000, where he expects to see buyers emerge next week.

Adobe Systems (ADBE) rose 9 percent to $76.02, making it the biggest gainer on the S&P 500 after it announced plans to buy stock photography company Fotolia, along with a stronger quarterly report.

Declining issues outnumbered advancing ones on the NYSE by 2,468 to 647, for a 3.81-to-1 ratio on the downside; on the Nasdaq, 1,949 issues fell and 790 advanced for a 2.47-to-1 ratio favoring decliners.

The broad S&P 500 index posted 15 new 52-week highs and 35 new lows; the Nasdaq composite recorded 52 new highs and 160 new lows.

About 7.6 billion shares were traded on U.S. exchanges on Friday, compared to the 6.9 billion daily average so far this month, according to BATS Global Markets data.

What to watch Monday:
  • The Federal Reserve releases industrial production for November at 9:15 a.m. Eastern time.
  • The National Association of Home Builders releases its housing market index for December at 10 a.m.

 

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Marriage, Dowers and an Argument Against Diamond Rings

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Close up on hand of a man put on an engagement ring on the finger of the bride
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I once had a Kenyan co-worker who explained to me the "dower" practice in his culture. To get married, my friend had to invest a large amount of personal property in his bride-to-be. This property was intended to remain with her for the rest of her life, to be a kind of security in the event of his untimely death.

Variations on this tradition (sometimes known as bride price) exist all over the world, causing us and our modern values all kinds of discomfort. Most archaic of all may be the dowry tradition (not to be confused with dower), wherein the groom to be pays his bride's family a bunch of money or property in a kind of exchange for the woman. This simply won't fly these days, but I'm here to say that our current wedding traditions are no less irrelevant. Later on, I'll show how my friend's dower investment worked out to benefit both him and his wife.

Creating and Marketing a Tradition

While the archaic idea of trying to somehow make a valuation on a future spouse, one's love for her or her economic potential makes me queasy, Westerners have been duped into doing something equally misguided. Much has been made in recent months of DeBeers' invention of the diamond engagement ring tradition, as an essential part of every engagement.

In the 1930s, having secured the bulk of the world's supply of diamonds, the company just had to find a good way to sell them. And sell them it did, atop rings signifying men's eternal devotion to their future wives (the company tried to roll out diamond engagement rings for men, but it never caught on). Highly visible shiny rocks at celebrity weddings solidified the tradition in the mind of the public. Diamonds are forever. And if you want your marriage to be, you'd better have one of your own.

The 1930s marked a change in American marriage. A generation before, less than 10 percent of marriages ended in divorce. This number began steadily increasing until the '70s and '80s, when the divorce rate approached and sometimes exceeded 50 percent. But all the while, the expensive diamond engagement ring remained pervasive, though it frequently outlasted the relationship it symbolized. By this time, it was culturally accepted that a man spend three months' wages on a ring like this. That makes quite a statement, but is it really the best use of that money?

Three Months of Earnings

As a finance writer, I have to say, ardently, no. I'm not a married man, but if the day comes, I'm sure my betrothed will agree that two to three months' wages could be better used for nearly any other purpose. We could put a down payment on a house, start a business or have a honeymoon for the ages. While a diamond is certainly far from worthless, it's not a true investment. It's speculation.

Just as buying gold bars to sew into your mattress is just a wager that the price of gold will one day go up, a diamond can't do anything for you. When the day comes to (god forbid) sell it, you're bound to the fickleness of world diamond prices on that particular day. Now imagine if you took that same amount of money and used it to build a life for yourselves, together.

Back to my friend from Kenya. What makes his situation special is that he agreed with his wife's family to use the traditional dower to move with his wife to Canada, where he could get a good job and build a life for themselves and their future children. After some consideration, the family agreed, and the young couple moved here, where they have secured citizenship, mastered the language and built an enviable life for themselves.

I can think of no better example of a modern attitude toward symbolized love and commitment in a marriage. Whether Anasa has ever bought his wife a diamond, I don't know, but he could certainly afford one now. If you are reading this -- and believe yourself to be marriage material -- I urge you to consider the best allocation of your engagement and wedding capital. While rings and ceremonies can be beautiful symbols, I think there is nothing better than building something real, as a couple, with money that would otherwise just go to the diamond vendors.

 

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Don't Get Tricked by These 3 Dividend Growth Giants

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Bank Of America Profits Beat Expectations
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Investors love dividend stocks, especially when they increase their payouts consistently over time. But when you're looking at top dividend growth stocks, it's essential to look beyond simple percentage increases in quarterly payments to put a dividend increase into context. All too often, big dividend growth results from undesirably low starting quarterly payouts, and even a big increase won't necessarily boost the stock's yield to levels that would make it interesting to most dividend investors. With that in mind, let's take a look at three stocks that will show up on this year's lists of top dividend growth stocks -- but arguably shouldn't be there.

Bank of America

Megabank Bank of America (BAC) enjoyed one of the biggest dividend increases of any stock this year, with its quarterly payout jumping a whopping 400 percent. At first, the dividend rise appeared to be in doubt, as the bank said that its initial submission to the Federal Reserve seeking permission for the payout boost had accounting errors that required Bank of America to resubmit a new capital plan a few months later. But Bank of America eventually implemented its new payout, much to the satisfaction of impatient shareholders who'd endured tiny dividends for far too long.

Yet before you focus too much on the 400 percent increase, it's important to realize that Bank of America only raised its quarterly dividend from a penny per share to a nickel per share. Even after the boost, Bank of America's yield is only a bit above 1 percent, well below that of banking rivals Wells Fargo (WFC) and JPMorgan Chase (JPM). Investors will have to see another major increase in Bank of America's dividend before they're ready to sound the all-clear and trust the sustainability of its future payout.

Danaher

Danaher (DHR) isn't a well-known name to many investors, but the conglomerate has a number of different businesses, including environmental testing equipment, dental health care diagnostic products, industrial automation equipment and enterprise security solutions. In February, the company announced it would quadruple its quarterly dividend payout.

Even with the 300 percent boost, though, Danaher only pays 10 cents per share to its shareholders, which equates to an annual yield of just 0.5 percent. Given that the company will likely make between $3.50 and $4 per share in profits this year and next, even the new annualized dividend rate of 40 cents per share is just a tiny sliver of Danaher's available capital. The conglomerate could do a lot more to convince dividend investors of its good faith by implementing even more considerable dividend hikes next year and beyond.

Vulcan Materials

Cement and construction-aggregates producer Vulcan Materials (VMC) wins the race for the best dividend increase of the year, as the company made two separate boosts. One of them quintupled Vulcan's former payout, while the second added another 20 percent kicker on top of the previous raise. With home construction activity starting to rebound more strongly, times looked good enough for Vulcan to consider the shareholder-friendly move.

Pushing its dividend from 1 cent to 6 cents per share makes for an impressive 500 percent growth rate, but the yield on the stock remains a rock-bottom 0.35 percent. In Vulcan's defense, the company had to endure a long period of poor industry conditions that sapped its profitability, and so Vulcan's hesitation to overcommit to returning shareholder capital is understandable. Nevertheless, if conditions remain favorable, investors should demand further dividend hikes from Vulcan in the near future.

Dividend increases are always good news for shareholders, but it's important not to exaggerate the importance of any given hike based solely on a percentage rate. Simply by keeping in mind the base against which you measure dividend growth, you'll make sure you don't make bad conclusions about a particular dividend stock.

Motley Fool contributor Dan Caplinger likes high yields and dividend growth. You can follow him on Twitter @DanCaplinger or on Google+. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, JPMorgan Chase and Wells Fargo. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.

 

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How More Families Are Spurning Decadent Christmas Gifts

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By Kathryn Tuggle

If you're consistently dismayed at the growing pile of toys, clothes and electronic gadgets in your home, you're not alone. Since the holidays are often an unwelcome opportunity to add more "stuff" to drawers and closets, more families are getting creative with their celebrations, opting for nontraditional gift-giving and shared experiences rather than store-bought goods.

The Buy Nothing Project, a grassroots "gift economy" group that focuses on circulating goods through a community rather than buying new, had just one 400-member group 16 months ago. Today, the organization boasts more than 350 groups in nine countries and more than 80,000 members.

"More people are just saying no to the constant consumerism of the holidays," says co-founder Liesl Clark. "People have had an awakening that they own too much stuff. We're giving ourselves too much, we're giving our kids too much and we're all feeling kind of sick to our stomachs about it."

Here's how you can cut back on expensive store-bought gifts:

Bring It Up Gently

If you want to radically alter the way your family celebrates the holidays, it's a little late to bring it up this year, but you can plant the seeds of change for next year.

"If you want to break with tradition, you have to do it well in advance of the holidays, because people do their shopping in advance," says clinical psychologist Barbara Greenberg. "But this year you can start talking about how nice it would be to make homemade gifts, do charitable work or cook a meal together. Those things always mean more than material gifts anyway."

Whenever you approach your family and friends with your new holiday plans, you've got to sell it.
"Say, 'We love you and we want to make this fun. This year our family is making a change, and as always we want you to be a part of our celebrations,'" she says. "It's all in the presentation."

Be Patient

You may find that your friends and family would rather scale back on gift-buying slowly. "You have to honor what everyone is doing. You want to do it in the spirit of non-judgementalism. There are people who live and love to shop," she says. "If that is what they insist they want to do, then your idea might not catch on the first year. It may catch on the second or third year."

Emotions surrounding gift-giving often run high, Clark says. Some people are ashamed to say they don't want to give gifts, while others can't comprehend not showering a child with gifts at Christmas.
"When I told people we weren't giving my daughter gifts for her eighth birthday, some family friends were horrified. 'What do you mean you're not buying her a gift?' There is an expectation in these settings that you're going to give your child whatever they want," she says.

As you wait for your family and friends to catch on to your way of doing things, participate, but participate in your own way, says Marie Anakee, founder and editor of GaveThat.com.

"From an etiquette standpoint that's really the best thing each of us can do - be a gracious recipient and allow others to celebrate the holidays how they wish," Anakee says. "I think it's important to weigh their feelings. Some people are under the wrong assumption that when someone gives them a lavish gift they have to match it in kind. This is totally untrue."

Give Your Time or an Experience

When you look back on the holidays throughout your life, you remember experiences the most, not presents, Greenberg says. "You don't remember the stereo. You remember the time you went to a late movie, went out for Chinese food or went to the botanical gardens together," she says. "This is why experiences are such a meaningful present."

Instead of giving a store-bought gift, consider tickets to a concert, the ballet or a baseball game. If that's out of your price range, offer to babysit or cook a meal for your loved one. Any kind of service you can provide is not only a great present, it also allows you to spend more time with the recipient throughout the year, she says.

"Experiences almost always trump physical things because they really can never be taken away from someone," says Anakee, adding that an in-home movie night, baking cookies, making cards and ornaments together or putting together care packages for the elderly can be great holiday bonding experiences. "Just taking the time to listen, laugh and catch up in a warm and loving environment can be an amazing gift," she says.

Also, don't forget about the marketable skills you may have. Your friends and family might love a lesson or two. "Help someone start a garden or give them a knitting lesson," Greenberg says. "And this works for any age group. Young people could give their grandparents computer lessons."

Make Something or Give Something Sentimental

"I have yet to meet someone who feels that it's more appropriate to buy something for someone than to make something," Clark says. "We make candles every year, and our family really enjoys receiving them just as much if not more than something wrapped in plastic cellophane bought in a fancy shop."

With that said, it's important to be cognizant of the receiver's likes and interests, Clark says. Tweens probably aren't going to want bulky knitted sweaters every Christmas, but they might be into other types of arts and crafts.

Sentimental gifts also mean a lot, especially family heirlooms. If you have a child in your family who is old enough to take care of a nice piece of jewelry, consider rummaging through your jewelry box and passing something down. Likewise, newlyweds might appreciate an old painting or vase with a little family history. "These gifts have nothing to do with the value, and everything to do with the meaning behind them," Clark says.

 

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This Company Loves to Move Into Locations Where Sears Fails

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By John Jannarone | @jannarone

When Sears or Target abandon one of their big, underperforming locations, one retailer licks its chops: home decor chain At Home.

The Texas-based company, which sells 50,000 items ranging from patio furniture to carpeting, has increased its store count to 81 from 48 in the last five years. Most of the additions come from stores it rents or leases from retailers that decided to close their doors. At Home has scooped up stores from a range of retailers including Sears (SHLD), Target (TGT), Walmart (WMT) and Lowe's (LOW).

The plan is to keep growing at a 20 percent rate, with another 15 to 20 stores expected to open in 2015 -- most of them at locations other retailers have shuttered.

"There's still a lot of empty boxes out there and there will be for a long time," At Home CEO Lewis Bird III said in an interview this week. "We're the only retailer looking for a big box format."

While At Home isn't usually the only bidder for abandoned locations, supply has outweighed demand in recent years. A confluence of factors including the financial crisis and resulting recession, along with tough online competition, has forced many retailers to close stores that make little or no profit.

Bird acknowledges that struggling retailers have created an opportunity since the financial crisis. "It would have been harder 10 years ago," he said. These days, retailers simply get in touch with At Home when they plan to close stores, making the hunt even easier, he said.

Of course, it's not all about capitalizing on the failure of other retailers. At Home has built five out of 26 of the new stores added in the last two years, Bird said.

But it appears that abandoned locations are often too good to pass up. In 2013, for instance, Target closed eight stores and At Home took six of the locations, Bird said.

Bird pointed out that there are usually other bidders for the spaces he seeks, but they aren't his rivals. "There are churches and charter schools, but not retailers," he said.

If you want it to look like Restoration Hardware, we've got it. If you want it to look like Ethan Allen, great.

Low property costs allow At Home to keep prices down, which has supported sales growth. In addition to expansion, the company continues to generate positive same-store sales, Bird said.

How does At Home succeed where others failed? The strategy is to offer consumers absolutely every style of home decor imaginable at lower prices than narrowly focused rivals do. "If you want it to look like Restoration Hardware (RH), we've got it. If you want it to look like Ethan Allen (ETH), great," he said.

Big boxes are a perfect match for such a business because of the space required to store so many items. Someone shopping for, say, patio chair cushions, will have 65 styles to choose from.

The diverse selection helps At Home attract a wide range of customers from both high- and low-income brackets. The average customer shops in the stores for two hours a visit, Bird said.

Product costs are kept to a minimum by sticking mainly to private-label items that the company buys directly from their sources. The company also has to keep labor and corporate costs down to ensure profitability. "Gross margins are not great, so it's important to watch other costs," Bird said.

At Home appears to be holding up against online competition. Amazon.com (AMZN) has an extensive furniture and decor offering and offers very competitive prices.

Online shopping may eventually be available for At Home but Bird suggested the in-store experience seems to suit his model well. "We're testing delivery but customers aren't really jumping on it," he said.

Asked if the privately owned company would go public, Bird suggested At Home was still focused on rolling out the new store format. The company was bought by private-equity firm AEA Investors in 2011. At the time, the company operated a chain of stores called Garden Ridge, which was renamed At Home.

 

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