Can You Pass This 3 Question Test of Basic Money Smarts?

July 16, 2015, 10:00 pm

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Filed under: Investing Basics, Personal Finance, Inflation, Financial Education

By Marilyn Lewis

Two money experts have quizzed people around the world to test their understanding of basic financial concepts like risk, compounding interest and inflation. The results aren't pretty. Americans don't do well at all: Just a third could answer all three questions correctly, and that includes 44 percent of those with college degrees and 64 percent of people with post-graduate degrees.

Most People Struggle With This

Americans aren't alone. People worldwide struggle with basic financial concepts: More than half who took the test missed at least one answer.

The test is the brainchild of two financial experts, professor Olivia S. Mitchell, who directs the Pension Research Council at the Wharton School of the University of Pennsylvania, and professor Annamaria Lusardi, academic director of George Washington University's School of Business' Global Financial Literacy Excellence Center.

You can test your knowledge with these questions. They're included in a Wharton article, Three Questions with Implications for Your Financial Future. After taking the quiz, read further for the answers and how to reach them.

After that, you'll see how your answers to this quiz predict your chances of being richer or poorer and where to find free personal finance education online.

Question 1

Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow?

• A) More than $102.
• B) Exactly $102.
• C) Less than $102.
• D) Do not know/refuse to answer.

Question 2

Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After one year, how much would you be able to buy with the money in this account?

• A) More than today.
• B) Exactly the same.
• C) Less than today.
• D) Do not know/refuse to answer.

Question 3

Please tell me whether this statement is true or false: Buying a single company's stock usually provides a safer return than a stock mutual fund.

Answer to Question 1: More than $102.

Here's why: On savings of $100 a year at 2 percent interest, your money earns $2 a year (100 x .02) for five years: a total of $110.41.

Why is the total more than $110? The reason is compound interest, interest earned added to the account balance so that the interest also earns interest. As your account balance grows, each new interest payment is based on a larger amount. Compounding speeds up earnings.

Use this compound interest calculator at Investor.gov to see how compound interest works.

Answer to Question 2: Less than today.

Here's why: Your interest rate on savings is 1 percent a year, or $1 a year on every on $100.

Inflation (rising prices) reduces the value of money. At the rate of 2 percent, inflation reduces the value of your $100 savings by $2.

So, you earn $1 (for every $100) in interest, but lose $2 to inflation, for a net loss of $1, giving you effectively less than your savings are worth today.

Answer to Question 3: False

For most investors, mutual funds are a better investment than stocks because, as Money Talks News founder Stacy Johnson says, "You can do perfectly well with a mutual fund, while at the same time lowering your risk and reducing your hassle."

A mutual fund is a huge pool of investments. Stacy explains in Ask Stacy: How Do I Invest in the Stock Market?:

It could be a pool of stocks -- a stock fund. It could be a pool of bonds -- a bond fund. Or it could have both stocks and bonds -- a balanced fund.

Mutual funds are superior for most investors because:

• They spread the risk of stock investing by diversifying investments among many stocks with a variety of risk profiles.
• The work of managing, researching, buying and selling stocks is done by professional managers, not by you.
• Mutual funds do the record-keeping you'll need for taxes for you.

Wake-Up Call

Mitchell and Lusardi's little quiz can serve as a wake-up call to alert you to the need to learn more about money basics. Concepts like risk, inflation and compounding go beyond basic arithmetic, and few of us were exposed to them in school. They matter because of two trends: the loss of private pensions and the explosion of financial products, both of which require everyday consumers to make sophisticated choices about complex loans, credit cards and investments.

Fortunately, these subjects aren't difficult to understand, and there are excellent free resources for learning.

Financial Ignorance Cripples

Financial ignorance is a crippling handicap. It makes people buy high and sell low, make poor investments, mismanage budgets, overspend and become trapped in unmanageable debt.

If the growing wealth gap between rich and poor has you worried, consider this: Lusardi and her colleagues find that a third of wealth inequality is because of the financial-knowledge gap separating the well-to-do from those with less money. "[M]ore knowledgeable individuals invest in more sophisticated assets, suggesting that they can expect to earn higher returns on their retirement savings accounts," the Wharton article says.

Money savvy consumers:

• Take on less credit card debt.
• Pay off balances each month.
• Refinance their mortgage at the best moment.
• Avoid high-cost debts like payday loans.
• Plan for retirement.

Get Educated, Free

Here are several sources for free personal-finance education:

• Money Talks News. Learn money savvy on subjects like Credit & Debt, Retirement, Taxes, Investing, Insurance and subscribe to daily newsletters with articles like:
  • Does Money Lingo Make Your Head Spin? Here's What It Really Means.
  • Ask Stacy: How Do I Invest in a Mutual Fund?
  • How to Talk Money With Your Spouse.
  • 8 Secrets to Building a Budget You Can Live With.
• The National Endowment for Financial Education's Smart About Money. The nonprofit explains how to save, invest, pay off debt and borrow safely.

How many answers did you get right on the three question quiz of money smarts? Tell us by posting a comment below or on our Facebook page.

 

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China's Market Collapse Could Save You Money

July 16, 2015, 10:00 pm

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Filed under: Global Economy, China, International Trade, World Markets, Investing

China's stock market has lost 30 percent of its value in the past three weeks, and until a rally late last week, $3 trillion of wealth was wiped out on the stock market. The meltdown had a muted impact on U.S. stock markets, but there could be a lasting impact beyond stocks if China's markets don't recover.

The reason comes down to why investors are worried about China in the first place. The central government controls a lot of the banking industry in China, choosing where and when investments happen. But that strategy is prone to mistakes, like overinvestment and choosing the wrong industries to finance. For years there's been worry that China is due for a correction, and last week's events could reveal some signs of where China's problems are rearing their ugly heads. Ironically, the results could actually be good for Americans' pocketbooks.

Here are three ways in which China's economy could impact your wallet, even half a world away.

Driving the World's Energy Prices

The collapse in energy prices over the past year has been blamed primarily on OPEC. But actually, it's worry that China's economy was slowing that sent energy markets into a frenzy.

For a decade now, China has been the driver of global energy growth, particularly in oil. The U.S. and Europe are actually cutting oil consumption, but China's middle class is just getting used to the idea of everyone owning a car. That meant global demand was growing even though the developed world was using less oil.

Even the thought that China's economy could go into a tailspin sent oil prices nearly $10 lower last week. Whether gasoline is cheaper or more expensive the next time you go to the pump, you might have China to thank -- or blame.

Making Everything You Buy Cheaper

You may not buy commodities like iron ore, steel, aluminum, or copper on a daily basis (or ever), but nearly everything you buy is affected by their prices. These are major inputs in construction and raw-material costs for businesses, so when their prices fall, it can make the finished goods you buy less expensive. The good news is that iron ore, aluminum, and copper prices are hitting six-year lows, so input costs for businesses are falling.

Computers, soda cans, televisions, and cars are just a few of the items that use these metals as inputs, and if their costs remain low, it will keep product prices low for consumers. You may not see the savings today, because it takes time for these materials to move through manufacturing, but look for inflation to remain low late this year and into 2016 because of low commodity prices.

The other major use for metals is building construction. If you're building a home or remodeling, the price of copper alone can account for thousands of dollars of input costs, so it may be cheaper to do construction today than it was a year ago. By the same token, with raw-material costs falling and interest rates low, businesses may be more willing to invest in capital expenditures. That should be good for U.S. jobs as well.

For years now, China has been the one bright spot in the economy that miners and commodity manufacturers could point to for increasing demand. If cracks begin to form in that thesis, then prices fall. That's what the market is reacting to right now.

Making International Travel Cheaper

When countries get into economic trouble, one of the main remedies they use is devaluing their currency. A strong currency (like the U.S. has today) means consumers can buy more with each dollar, but a weak currency means exports look cheaper to other countries, which can boost economic growth.

A declining currency can also make it cheaper to travel to foreign countries -- and that's a great side effect if China decides to devalue the yuan, as they've been rumored to be considering.

China still pegs its currency to the U.S. dollar, and with all of the country's growth over the past decade, it was planning to slowly increase the value of the yuan, something it's done slowly since the recession ended. But if China goes into a recession of its own, one remedy could be reversing course and making its currency cheaper.

That would be great news for U.S. travelers, who have already seen the cost of traveling around the world drop in 2015 as the euro is in decline. If China's yuan falls, it would make an expensive trip to Asia just a little cheaper.

China's Downturn Could Save You Money

There are a variety of ways that a slowdown in China could help save you money here in the U.S. So, watch how the economy there reacts after last week's market turmoil. A decline in China might worry global markets, but in the end it could be good for your pocketbook.

Travis Hoium is a Motley Fool contributor. Try any of our Foolish newsletter services free for 30 days. And check out our free report on one great stock to buy for 2015 and beyond.

 

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Aspen Foods Recalls Nearly 2 Million Pounds of Chicken

July 17, 2015, 1:02 am

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Filed under: Company News, Recalls, U.S. Government, Food & Beverage, Consumer Protection

WASHINGTON -- The U.S. Department of Agriculture says Illinois-based Aspen Foods is recalling nearly 2 million pounds of raw, frozen chicken products over concerns they might be contaminated with salmonella.

The federal agency announced the recall Thursday, saying in a news release that it determined there was a link between the products and three people in Minnesota getting infected with salmonella. The agency says the products are stuffed and breaded and may appear cooked, but they are raw.

The products were shipped nationwide and have the establishment number "P-1358" in the USDA inspection mark. Brands associated with the recall include Kirkwood, Roundy's, Safeway Kitchens and Spartan.

The Department of Agriculture said earlier this week that Barber Foods of Maine is recalling 1.7 million pounds of frozen chicken products over salmonella concerns.

 

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Inflation, Housing Data Bolster Rate Hike Argument

July 17, 2015, 1:40 am

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Filed under: Economic Indicators, Gas Prices, Inflation, Food & Beverage, Economy

By Lucia Mutikani

WASHINGTON -- Consumer prices rose for a fifth straight month in June as the cost of gasoline and a range of other goods increased, further signs of firming inflation that strengthen the case for an interest rate hike this year.

Other data Friday suggested the economy could support a tightening of monetary policy. Housing starts surged in June and building permits soared to a near eight-year high. Federal Reserve Chair Janet Yellen this week affirmed the U.S. central bank was keen to start raising interest rates later this year.

The barriers to a Fed hike are starting to crumble. The wait for the first rate hike may not be that much longer.

"The barriers to a Fed hike are starting to crumble. The wait for the first rate hike may not be that much longer," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The Labor Department said its Consumer Price Index rose 0.3 percent last month after increasing 0.4 percent in May. Last month's increase pushed the year-on-year CPI rate into positive territory for the first time since December.

The energy-driven disinflationary trend appears to have run its course, with producer prices rising in June for a second straight month.

In a separate report, the Commerce Department said groundbreaking for new homes increased 9.8 percent to a seasonally adjusted annual pace of 1.17 million units in June. Permits for future home construction increased 7.4 percent to a 1.34 million-unit rate, the highest level since July 2007.

The acceleration in housing activity should ease concerns that economic growth slowed at the end of the second quarter after a surprise drop in retail sales in June and continued weakness in manufacturing.

"We are seeing strong household formation by the millennial cohort, which is putting pressure on many local housing markets," said Peter Ciganik, managing director at real estate investment firm GTIS Partners in New York.

Economists anticipate that the housing market will mitigate the drag on the economy from the struggling factory sector.

Firming price pressures, together with a tightening labor market and strengthening housing could give the Fed confidence that inflation will gradually rise toward its 2 percent target.

The Fed has kept its short-term interest rate near zero for more than six years. Most economists believe the Fed will pull the trigger on rates in September.

The dollar rose against a basket currencies on the data, while prices for shorter-dated U.S. Treasuries fell. Stocks on Wall Street were trading mostly lower, though strong quarterly results from Google boosted technology shares.

Sentiment Slips

While a third report showed consumer sentiment ebbed in early July on international concerns, morale remained at lofty levels, which bodes well for consumer spending.

The University of Michigan's consumer sentiment index fell to 93.3 from a reading of 96.1 in June. The July reading was the eighth straight month above 90.

The acceleration in inflation in June was broad-based, with a steep increase in egg prices. In the 12 months through June, the CPI edged up 0.1 percent after being unchanged in May.

The so-called core CPI, which strips out food and energy costs, increased 0.2 percent last month after rising 0.1 percent in May. In the 12 months through June, the core CPI rose 1.8 percent after May's 1.7 percent increase. An inflation measure tracked by the Fed is running well below its 2 percent target.

"Inflation doesn't have to be at their target to begin normalizing interest rates, particularly as some Fed officials are concerned that long-term inflation expectations could become dislodged if the central bank is too complacent," said Sohini Chowdhury, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

Last month, gasoline prices increased 3.4 percent after jumping 10.4 percent in May. Food prices rose 0.3 percent, the largest increase since September 2014, as an outbreak of bird flu in some parts of the country caused a shortage of eggs. Egg prices surged 18.3 percent, the biggest gain since August 1973.

Elsewhere, the index for rent increased 0.4 percent, the largest rise since August 2013.

With the residential vacancy rate near a 22-year low as a firming labor market boosts household formation, shelter costs are likely to continue rising.

There were also increases in the cost of recreation, new motor vehicles, tobacco, airline fares and personal care. These offset declines in the prices for apparel, medical care, used cars and trucks and household furnishings.

 

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Week's Winners and Losers: Netflix Soars, Barbie Snores

July 17, 2015, 3:30 am

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Filed under: Technology, Netflix, Amazon.com, Earnings, Investing

There were plenty of winners and losers this week, with the leading premium video service proving ridiculously magnetic and a one-iconic doll continuing to fade in popularity.

Travelzoo (TZOO) -- Loser

There was a time when Travelzoo's Top 20 weekly email blasts were a viral sensation for deal seekers looking for bargains on last-minute getaways, but the online travel deals publisher has been struggling lately. The stock took a beating Thursday after posting disappointing financial results, shedding nearly a fifth of its value.

Revenue and earnings clocked in lower than during the prior year's quarter. The number of folks who have opted in to receive Travelzoo's deals has inched slightly higher over the past year to 24.8 million, but the fact that it's generating a lot less revenue per member is problematic.

Netflix (NFLX) -- Winner

Shares of Netflix hit yet another all-time high after the company split its shares and announced another blowout quarterly report. The leading premium video streaming service closed out the June quarter with nearly 3.3 million more streaming subscribers than it had at the end of June.

Most of Netflix's growth is coming overseas. It tacked on 900,000 domestic streaming subscribers during the period but a hearty 2.37 million internationally. This adds up to a lot more than the 2.5 million total net streaming subscribers that Netflix was forecasting. Profit margins continue to widen domestically, and its international operations are now two years away from profitability. Wall Street liked what it saw, with at least three analysts boosting their price targets on the stock.

Adobe (ADBE) -- Loser

Folks using Chrome or Firefox browsers began getting notices that Adobe's once-iconic Flash Player was being blocked as a plug-in due to security concerns. Reports indicated that running the plug-in made users susceptible to hackers.

Flash was once the multimedia platform of choice, but it's been starting to lose support in favor of HTML5. Obviously this isn't a good sign for Flash, and it might also come to burn Chrome and Firefox if users tired of the pop-up warnings on every page containing Flash and chose a different browser.

Amazon.com (AMZN) -- Winner

The leading online retailer hosted Amazon Prime Day on Wednesday, promising more deals than Black Friday as a way to celebrate the success of its Prime loyalty shopping offering. Initial reactions were mixed, with some customers hoping for better deals. However, at the end of the day it was a monster success.

Amazon revealed the next day that orders were 18 percent higher than November's Black Friday holiday shopping frenzy. Customers were ordering 398 items a second, on average. Amazon shares responded, hitting another all-time high.

Barbie -- Loser

Young girls are putting away their Barbie dolls. Mattel (MAT) posted another problematic quarter. Reported sales declined relative to the prior year's period, making this the seventh quarter in a row of year-over-year drops.

The results are kinder if you adjust for the currency discrepancies given the strong dollar, but let's talk Barbie. Worldwide gross sales of the Barbie brand posted an 11 percent year-over-year plunge for the quarter on a constant currency basis. Mattel is placing a big bet on an interactive talking Barbie that's coming out later this year. Let's hope it can say more than, "I've fallen, and I can't get up."

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

 

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Stop Budgeting! Do This Instead

July 17, 2015, 3:57 am

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Filed under: Careers, Personal Finance, Budgeting, Emergencies, Estate Planning

Budgeting is a lot like dieting -- and dieting sucks, which is why I don't do either of them. Yes, I'm a certified financial planner without a budget because I believe there are other things to do with your finances that will get you results faster.

It's like losing weight. A lot people get up early, go to the gym, work out really hard and still don't see the progress they're looking for on the scale, so they give up. But if they got 8 hours of sleep every night and cut out soda, they'd make a bigger impact and see the pounds start to drop.

I recently lost 5 pounds by cutting out soda and cutting back on eating other carbs. So how can you apply this idea to your finances?

The Biggest Secret Towards Improving Your Finances

Earn more money. There are a lot of ways you could be improving your finances but one of the easiest is to increase your income. If you were making more money you could pay down debt faster, build your savings rapidly, increase your retirement contributions and more! And you could do all of this without having to change your current spending.

9 Other Big Wins to Rock Your Finances:

• Set up an automatic contribution from your checking to your emergency savings.
• Open a Roth IRA and contribute to it monthly.
• Increase your 401(k) contributions by 1 percent.
• Run life insurance quotes and then apply for a 20- or 30-year term life insurance policy. Once the new term policy is in place, cancel old whole life insurance policies.
• Revamp your company benefits during open enrollment at your employer. This could save you serious tax dollars!
• Submit any outstanding reimbursements from your company, an insurance provider, or mail in rebates.
• Pay $200 extra payment on your highest interest rate debt (credit card, student loan, car loan, etc.) every month and make it automatic. (Here are 20 Tips to save $200 if you're not sure where to get that money from.)
• Put a system in place to pay your bills in full and on time every month.
• Schedule an appointment with an estate planning attorney in your area to put wills, health care directives, and other important legal documents in place.

Instead of agonizing over your monthly budget, figure out how you earn more money. Or take 10 minutes and do one of the other 9 big wins if you want to see some seriously results.

Sophia Bera is a virtual financial planner for millennials and the founder of Gen Y Planning. She is location-independent but calls Minneapolis "home." She offers a free Gen Y Planning newsletter and published her first ebook to provide Gen Y guide to empowered personal finances.

 

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T-Mobile to Pay $17.5 Million to Settle 911 Outage Probe

July 17, 2015, 5:08 am

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Filed under: Company News, U.S. Government, Telecommunications, Scandals and Lawsuits

By Alina Selyukh

WASHINGTON -- T-Mobile US (TMUS) will pay $17.5 million to settle a U.S. investigation of two 911 service outages last year, marking the largest such fine levied by the Federal Communications Commission.

The FCC said Friday it found that better safeguards in T-Mobile's 911 network architecture would have prevented the outages, which together lasted for about three hours on Aug. 8 and affected almost all of the wireless carrier's 50 million customers nationwide.

The regulator also said it found T-Mobile, a unit of Deutsche Telekom, didn't notify affected 911 call centers in a timely manner, as required by FCC rules.

"We have made significant changes and improvements across a number of our systems since last year, and we will continue working to improve these critical systems with our partners to provide the standard of service our customers rightly expect from T-Mobile," the company's spokeswoman said in a statement.

T-Mobile, the fourth-largest U.S. mobile carrier, also agreed to set up a compliance program to better prevent and detect potential outages, notify affected call centers and resume service as quickly as possible, the FCC said.

Previously, the FCC reached a $16 million settlement with CenturyLink (CTL) and a $3.4 million settlement with Verizon Communications (VZ) related to a multi-state six-hour 911 outage in April 2014.

"The commission has no higher priority than ensuring the reliability and resilience of our nation's communications networks so that consumers can reach public safety in their time of need," FCC Chairman Tom Wheeler said in a statement.

 

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Google Gains $50 Billion in Value, May Set a Record

July 17, 2015, 7:22 am

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Filed under: Technology, Google, Internet, Stocks, Investing

NEW YORK -- Google is already one of the largest companies in the world, and Friday it's making one of the largest stock market moves ever.

The Internet giant reported strong second-quarter results Thursday and its shares are up about 15 percent in afternoon trading. That pushed Google's Class A stock above $700 for the first time.

Google's market capitalization, already around $400 billion, rose $52 billion during the day, according to S&P Dow Jones Indices.

Including the gains in Google's Class A (GOOG) and nonvoting Class C (GOOGL) shares, that puts the company on pace for the biggest single-day market cap gain ever.

Not adjusting for inflation, the current record holder is Apple. Apple's (AAPL) market cap rose $46.4 billion in value on April 25, 2012, after a better-than-expected first-quarter report.

 

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Market Wrap: Google Propels Nasdaq to Another Record Close

July 17, 2015, 9:40 am

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Filed under: Energy, Technology, Earnings, Market News, Industrial

By Noel Randewich

NEW YORK -- A major rally in Google pushed the Nasdaq to a second straight record high Friday while weak energy stocks weighed on the Dow and S&P 500.

Google (GOOGL) surged 16.3 percent to end at an all-time high of $699.62, a day after reporting strong ad revenue growth. It was Google's largest one-day percentage gain since April 2008.

Facebook (FB) rose 4.5 percent to a record high of $94.97 on hopes that it could mirror Google's ad growth. Etsy (ETSY) spiked 30 percent thanks to a nod from Google during its conference call.

But a drop in oil prices limited gains on the broader stock market, with the S&P 500 energy index down 1.1 percent to its lowest level since January 2013. Chevron (CVX) lost 1.4 percent. The utilities index dropped 1.1 percent.

Wall Street insiders were cautiously optimistic about upcoming quarterly reports after some results this week came in above expectations.

"It's going to be better than what the consensus numbers were pointing to," said Kurt Brunner, a portfolio manager at Swarthmore Group in Philadelphia. "Our economy is doing okay. We're not growing at 5 percent but we have slow, steady growth and I think that continues."

The Nasdaq composite (^IXIC) added 46.96 points, or 0.9 percent, to end at 5,210.14, its second straight record high close. The Standard & Poor's 500 index (^GSPC) gained 2.35 points, or 0.1 percent, to end at 2,126.64, just shy of its record high of 2,130.82. The Dow Jones industrial average(^DJI) fell 33.80 points, or 0.2 percent, to end at 18,086.45.

Gainers and Losers

Boeing (BA) fell 1.1 percent and was the biggest drag on the Dow after it said it will take a second-quarter charge related to problems with its KC-46 aerial refueling tanker aircraft program.

General Electric (GE) shares rose 0.7 percent after raising its 2015 outlook for its industrial manufacturing businesses.

The technology index was the sole gainer among the 10 major S&P 500 indexes, up 1.8 percent, mostly because of Google.

For the week, the Dow gained 1.8 percent, the S&P added 2.4 percent and the Nasdaq rose 4.3 percent, its largest weekly gain since October 2014.

The dollar saw its biggest weekly gain in two months due to expectations of a Federal Reserve rate hike this year. However, a strong dollar reduces the value of U.S. companies' overseas income.

U.S. companies have been expected to post their worst sales decline in nearly six years in the second quarter, in part due to the strong dollar. Profit is expected to have fallen 2.9 percent, according to Thomson Reuters (TRI) estimates.

Declining issues outnumbered advancing ones on the NYSE by 2,000 to 1,076, for a 1.86-to-1 ratio; on the Nasdaq, 1,676 issues fell and 1,115 advanced for a 1.50-to-1 ratio favoring decliners.

The S&P 500 posted 21 new 52-week highs and 25 new lows; the Nasdaq saw 107 new highs and 87 new lows.

Volume was a bit light, with about 6.1 billion shares traded on U.S. exchanges, below the 6.6 billion average so far this month, according to BATS Global Markets.

What to watch Monday:

Earnings Season
These selected companies are scheduled to release quarterly financial results:

• Halliburton (HAL)
• Hasbro (HAS)
• IBM (IBM)
• Morgan Stanley (MS)

 

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How to Save 25% on Your Total College Costs

July 17, 2015, 10:00 pm

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Filed under: Student Loans, Personal Finance, College, Scholarships, Education

Recent high school grads, what if I told you that you could save 25 percent on your college costs? Not only that, but in addition to saving all that money, you could earn some, too -- a full year's worth of salary, in fact. It's easy: Just finish college in three years.

Sounds crazy, right? College is supposed to be fun. Who would trade one of the best years of their life for more studying? Well, I did, and it was one of the best financial decisions I made. With college costs on the rise, I think more students should consider it.

Think about it. If you're starting college this fall, you're looking at an average ticket price of $23,410 a year for a public school and an astounding $46,272 at a private school. Yes, I know many students don't pay full freight, but even at the average "net" cost, you're looking at nearly $13,000 a year for public college and more than $23,000 a year for a private institution.

I'm not the only one who thinks early graduation is a good strategy for saving money. Johns Hopkins University Professor Paul Weinstein is one of many in the education field advocating for a three-year degree. As he recently said in an NPR interview: "The fact is that four-year degrees are simply a matter of tradition. We designed four-year degrees because high schools are four-year degrees. But many schools even in the U.S. at one time offered three-year degrees." He adds that most European university programs are three years, including those at the prestigious Oxford and Cambridge Universities.

It's not the right option for every student, of course, but for those who are interested in graduating a year early, here are a few strategies to consider.

AP Courses: Thanks to my high school's extensive Advanced Placement program, which allows high schoolers to take college-level classes, I started my freshman year at Swarthmore College with a full semester's worth of course credits.

It's not enough to do well in an AP course: Students must also take the AP exam and get a score of 3 or higher to receive credit. And not all schools accept AP test scores for credit, so those planning to go this route must be sure their chosen college does. Some schools also accept international baccalaureate courses and dual-enrollment classes for credit.

Summer School: Starting college with a semester of credit gave me a great head start, but I still had to make up another semester's worth of courses. I needed my summers to work, so full-time school wasn't a viable option. But I was able to squeeze in a summer French class at the University of Pennsylvania, which had a credit transfer program with my college. This is key -- schools don't always accept one another's courses toward students' degree requirements, so it's essential to confirm that any courses taken elsewhere will transfer.

Extra Classes: This is how I made up the remaining credits, and it's the aspect of the plan that causes most people to write off early graduation as something only geniuses can do (and I assure you, I'm not a genius!). I was used to juggling six or seven high school courses, so taking just four at a time like most of my peers wasn't unusually challenging. Once I knew I could handle that workload, I added one additional course per semester, generally an elective or other "lighter" class to balance out my more demanding political science and philosophy seminars.

Accelerated Degrees: Weinstein advocates that colleges actually overhaul their requirements so that students can more easily finish early. Formal three-year degree programs have been slow to catch on despite support from several states, but they do exist. Bates College and Wesleyan University are among the more than 20 private colleges that offer them. Others, like American University's Global Scholars program, offer combined bachelor's and master's degrees that let students graduate with a master's in four years.

Make the Most of That Extra Year

What can you do with the year you'll save? You could start working a year early, and with less debt, you might be able to afford to take a lower-paying job in a field you love. That's what I did, turning down lucrative paralegal and consulting jobs to intern at a political magazine. You could also get a head start on graduate school.

Even better, many students could use that extra year before starting school rather than after graduation. A recent Washington Post article makes the argument that "the best investment you can make in your kid's college education might be to delay that education." Veteran college admissions consultant Parke Muth says this so-called "gap year" allows kids to mature enough to get the full benefit of their college education.

If you're an overachiever, knowing you could finish college in three years might give you more confidence that you can take a year off without falling behind your peers. That year can be spent working, volunteering or traveling. The goal is simply to take a break from the academic hamster wheel, mature a little and arrive at college ready and focused.

Depending on your situation, you can either apply on time for college admissions and then defer enrollment (Muth recommends this path), or wait and apply during your gap year. Many students opt for the first option and the certainty of knowing where they'll be matriculating. A few colleges, including Princeton, Tufts and the University of North Carolina, even offer scholarships to help fund a gap year.

But don't rule out waiting -- an interesting gap-year experience might just set you apart from the herd and win you admission to an otherwise "reach" school.

Robyn Gearey is a Motley Fool contributor. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.

 

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4 Reasons to Hold Off on Buying a New PC This Year

July 17, 2015, 10:00 pm

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Filed under: Technology, Shopping, Computers, Consumer Electronics, Investing

"I need to get a new computer," you or someone you know may be saying these days, and it might seem to make sense to buy one later this month, when Microsoft (MSFT) updates its operating system with the rollout of Windows 10.

However, many consumers are realizing that they may not want or need a new desktop or laptop at all. Let's go over a few of the reasons that it makes sense to hold back on springing for a new PC.

1. The PC Itself is Fading

Industry tracker Gartner (IT) recently reported that 68.4 million personal computers were shipped during the last three months. That's a big number, but it's actually 9.5 percent fewer PCs than the industry shipped during the same quarter a year earlier. It's the largest decline since the summer of 2013.

Gartner isn't saying that the sky is falling. It points to folks waiting for Windows 10 and to a strong dollar as temporary setbacks for an industry that it sees bouncing back. We'll get to Windows 10 shortly, but let's talk about the strong dollar.

Most PC shoppers aren't foreign currency experts, but fluctuations do have an impact on what desktops and laptops cost in different countries. The dollar has appreciated against most currencies, making U.S. machines more expensive in those countries. That hasn't had an impact on U.S. markets; in fact, the stronger dollar makes it cheaper to source components. However, if we go from the 9.5 percent decline in worldwide shipments to the 5.8 percent drop in this country, we still see a remarkable slide. Consumers and corporations aren't buying computers the way they used to, and you probably shouldn't either.

It's not just a matter of being in the minority. (Enjoy season two of "True Detective" even if all of your friends hate it.) However, if PC sales continue to fade, you're going to see support and software development also take a step back. The signs are there. Until PC sales bounce back, your best bet is to follow the masses in holding off on a new purchase.

2. You May Want to Wait and See on Windows 10

There are plenty of neat features in Windows 10, overcoming some of the perceived shortfalls of Windows 8. However, it wouldn't be a surprise if there are a few bugs in the system despite the extensive beta testing taking place right now.

Microsoft has promised free Windows 10 upgrades for the first year for PC users running legal versions of Windows 7 or Windows 8, but that may not be much of a treat if Windows 10 is initially buggy or if it fails to catch on.

3. The Cloud Computing Revolution Is Less Taxing on Your End

You've been hit with the "cloud computing" buzzword for years, and it essentially means that software is migrating from running on your computer to running on an Internet-based server. Even Microsoft has caved in, offering its key Microsoft Office suite of programs on the cloud.

That's good news for your old PC. All of the heavy lifting is taking place on the software company's server, making a good Internet connection more important than an updated computer. This means that you don't need a faster computer or more hard drive space. The cloud is extending the lifespan of your PC.

4. Your Computer May Already Be in Your Pocket

PC sales have been slumping for a couple of years, and it's not a coincidence that the demise of the desktop has coincided with the rise in mobile computing. The smartphone market is booming, and tablets are now widely owned.

Are smartphones and tablets enough for you? If all you're doing is surfing the Web, checking email, and playing online games, you may not realize how little you rely on your PC these days. For some people, there is no alternative to a trusty desktop. If you're a die-hard PC gamer or your job requires programming or architectural design software, you need your PC. There's no way around that. However, see if you can get by without your PC for a few days. If you're perfectly fine, then your smartphone or tablet is already your new computer.

If your smartphone screen isn't conducive to some of your computing needs and you don't own a tablet, consider getting one -- and invest in a Bluetooth or attachable keyboard to scratch that itch. The future doesn't look so bright for the PC, and your future looks bright without one.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.

 

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Want to Improve Your Quality of Life? Move to Central America

July 17, 2015, 10:00 pm

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Filed under: Family Money, Personal Finance, Retirement Living

By Chuck Bolotin

NEW YORK -- A sizeable number of U.S. citizens have moved to Central America.

Estimates from the United Nations Population Division in mid-2013 showed 13,000 Americans living in Costa Rica, 12,000 in Panama, 4,000 in Nicaragua and 3,000 in Belize.

Costa Rica has long been attractive destination for U.S. retirees, but the latter three countries have become increasingly popular in recent years and often turn up on lists of the best places to retire abroad, including one from AARP.

Why would someone pull up stakes to live in a foreign country with perhaps a different language and culture (English is the official language of Belize)?

A recently published study, "Expats: Expectations & Reality," by Best Places In The World to Retire, provides some answers.

It summarizes the responses of 389 expatriates living in Central America, the vast majority of whom live in Panama, Belize and Nicaragua. The survey was hosted on SurveyGizmo and was conducted between April 17 and April 27. Among respondents, 73.5 percent said their home country was the U.S., while 12.9 percent came from Canada, 4.6 percent from the U.K., 3.9 percent from elsewhere in Europe and the remainder from other countries.

A whopping 82 percent of respondents said they moved in order to lead "a simpler, less stressful life," while 55.8 percent were seeking "a less materialistic or more meaningful life" and 42.4 percent were seeking "a more romantic, exotic, or adventurous life."

Here are some more reasons why people had moved.

Among respondents, 86.6 percent said they thought they could lower their cost of living by moving. They also said they would enjoy a better quality of life as a result. Here's why:

• They would have less stress to pay bills. If they were retired, their retirement income would go much further, allowing them to travel and engage in other life-enriching activities they couldn't afford otherwise.
• They would have less stress because they would no longer have to do many of the things they didn't want to do in order to make more money. Now they wouldn't need as much money. They could avoid or eliminate, for example, driving in rush hour traffic to go to a job or spending lots of hours working.
• The ability to hire household help (gardeners, handymen, housekeepers) very inexpensively would mean an easier life with more free time.
• Not having to work at all or working less would allow them to have more time to do the things they enjoyed, such as being with friends, reading books, taking up hobbies or simply taking naps.

Richard Detrich, from the U.S., living in Panama: "I got tired of the rat race of Southern California and we wanted to escape and retire early. I told my wife, there comes a time when you need to cash in your chips and walk out of the casino ... and we did!"

Female, age 25-44, married, working full-time, from U.S., living in Nicaragua for less than 2 years: "Better quality of life and time with your spouse and children, able to afford private schools, people to help with home chores, and other things unaffordable in the U.S. Had to work twice as hard there and be more stressed just to be in debt at the end of the month. Cost of living is so low here, we save money so much quicker."

One of the more often occurring themes was the desire of many respondents (mainly baby boomers and older) who wanted to live like they remembered living in North America when they were growing up. In their view, the quality of life in North America had gotten worse overall, and the way to live life like they did in North America in the past was, ironically, to leave North America and move to one of these Central American countries.

Female, age 65-plus, married, fully retired, from U.S., living in Panama for more than 10 years: "The local people, in general, are wonderfully helpful. It's like living in the U.S. in the 1950s. People stop for you on the road if you look like you need help. Older women are especially respected and helped with carrying things or given a hand for support in walking over rough terrain, etc. Doctors give you as much time as you need during appointments. They give you their cell phone number and usually appointments can be made with little or no waiting time."

Ken Rucker, from the U.S., living in Nicaragua: "In spite of the 'poverty' (by our standards) the quality of life and cultural values are light years better than in the U.S. I see 'happy' everywhere and neighborhood communities reminiscent of when I was a child."

Respondents said the people in Central America in general put a greater emphasis on family and also have deeper, more meaningful friendships than in North America. The belief is that, in Central America, work takes a back seat to interpersonal relationships. They also believed that the pace would be slower, and therefore, more human and more enjoyable.

Female, age 65-plus, single, semi-retired, from U.S., living in Panama for two to five years: "After living to work I suddenly found myself unable to get a job. It was a blessing. Though I was concerned about making my dollars stretch further, it also made me focus on what I'd been missing. In short, I was receiving the gift of time and finally take a deep breath and say, 'How then shall I live?' The cosmic question resonates daily and often echoes the word, 'tranquilo.'"

There was a widespread view among respondents that they would have more freedom living overseas because of the absence of having to pay high taxes and comply with government regulations and cultural norms that many believed had evolved to the point that they were stifling.

Respondents said that having more freedom would lead to a more meaningful life, because the choices to be made would be made by the individual voluntarily, as opposed to having outcomes imposed on them. As a result, respondents said they would experience an increased sense of control and self-worth. This, of course, is the opposite of the traditional view that the U.S. has more freedom than anywhere in the world. Many of the expats just didn't believe this was still the case, and so they sought that freedom elsewhere.

Bonnie W. Hayman, from the U.S., living in Nicaragua: "The life in the U.S. strangles you. With all the rules and regulations, lawsuits, homeowners' association guidelines and more, you live a regulated, controlled life."

Nearly a third of respondents said they moved overseas believing that by doing so, they would be more engaged in charitable activities and helping others. Why didn't they just engage in these activities in North America? The reasons we were most often told were:

1. "They need us more over here";
2. "They're more grateful for the help over here"; and,
3. They could immediately and intimately see the results of their efforts, because the person receiving the help would be right in front of them.

Michael M., from U.S., living in Panama: "I aligned myself with a humanitarian organization and am thoroughly engaged in that activity. In Dallas, I seldom volunteered."

The respondents said the stress to "keep up with the Joneses" would be reduced by moving overseas for two reasons:

1. The great majority of nonexpats living among the respondents would have fewer material possessions, so the expats would be well-off by comparison; and,
2. The culture in their new home would be less concerned with material goods, sometimes because those goods were not viewed as important by locals and expats, and sometimes because they weren't available for purchase.

To take an extreme example, the entire country of Belize doesn't really have a single North American-style shopping mall or movie theater. You don't move to Belize to do luxury shopping; you go for other reasons and because you have other values. And, if you go to live in Belize, you will be among other people who have the same values as you.

Female, age 45-64, married, working full time, from U.S., living in Belize for more than 10 years: "I can't say enough about a fresh start and living a life completely different from where you left. Very simply you have to realize what is valuable to you ... the hubbub of the life you came from or a life where you actually have the kind of friends you did in the 1950's in the States ... and no one tapping on your shoulder for another fee or regulation. My mother once said, 'But honey, there are no shopping centers or movie theaters or symphony or anything.' I said, 'Yeah, I know ... great isn't it?'"

For more information on where Americans are going when they leave the U.S. and why, check out Best Places In The World To Retire.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

 

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Coming Soon to Pumps Near You: $2 Gallon Gas?

July 17, 2015, 10:00 pm

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Filed under: Energy, Transportation, Gas Prices, Global Economy, World Markets

By Karla Bowsher

The U.S., Iran and other nations have reached a historic deal that is intended to restrict Iran's nuclear program and expected to decrease oil prices.

Following the agreement, the Associated Press reports, President Barack Obama remarked from the White House:

"This deal offers an opportunity to move in a new direction. We should seize it."

The agreement now goes to the U.S. Congress, Reuters reports. Obama has said he will veto any attempt from Congress to block the deal.

If the deal goes through, Iran stands to gain billions of dollars in the form of relief from international sanctions. The freezing of Iran's assets has shrunk the Middle Eastern nation's economy.

In exchange, Iran will agree to curb its nuclear programs,

U.S. gas consumers are among those who stand to benefit from the deal, the AP reports:

Iran is an OPEC member, but its oil production has been affected for years by sanctions over its nuclear program. Any easing of the sanctions could see Iran sell more oil, which could bring down crude prices.

Reuters reports the mere possibility that the Iranian oil supply could return to the market has already helped push down global oil prices. Previously, Iran's oil exports were reduced by almost two-thirds due to sanctions.

Raymond James energy analyst Pavel Molchanov tells Yahoo News, however, that the Iran deal has little to do with recent oil-price drops:

"We've known exactly what the Iranian deal will look like since March 30. We've known for the last 90 days that once the deal is in place and once Iranian compliance is certified, the European Union is going to lift the oil embargo and that will enable Iran to increase its oil exports."

Molchanov estimates the Iran deal could increase Iran's oil production by 500,000 barrels a day, and other estimates say 1 million barrels a day -- "not a game-changer at all for the global oil market," Molchanov says.

For perspective, the U.S. consumed an average of just over 19 million barrels of petroleum products a day in 2014, according to the U.S. Energy Information Administration.

How do you feel about the deal with Iran, or the prospect of further falling gas prices? Share your thoughts with us in a comment below or on our Facebook page.

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5 Hidden Costs That Surprise First-Time Homebuyers

July 17, 2015, 10:00 pm

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Filed under: Mortgages, Real Estate, Housing Market, Home Buying, Home & Garden

By Andrea N. Browne

If you're considering becoming a homeowner, even years from now, recognize that there's a lot more to purchasing a house than saving enough money for a down payment. Additional expenses come up throughout the homebuying process. Some of these are upfront, out-of-pocket costs that are nonrefundable even if you end up not closing the deal. Others will hit your wallet after the home is in your possession. Experienced buyers probably are familiar with these charges, but first-time buyers can be caught off-guard.

Knowing how much you need on top of your down payment will help you plan how long you must save. Remember, it could take years. Talk with a potential lender about six to 12 months before your desired purchase date. "The lender should be able to help you outline what you need to be doing within that time frame to get your finances in check," says Mike Aubrey, a Gaithersburg, Maryland-based Realtor, who's also the host of HGTV's "Power Broker."

We've identified five costs that can catch first-time homebuyers by surprise and gathered expert advice on how to prepare your finances.

1. Home Inspection. After you've submitted an offer on a home and the seller has accepted, make sure the place you're planning to buy isn't a lemon. Hire a certified home inspector to examine the property from top to bottom before you go to closing. If you uncover hidden structural, mechanical or other issues, you can negotiate the repair terms with the seller before you finalize the deal. Otherwise, you will be solely responsible for any problems and the cost of fixing them.

Depending on your location, you can typically expect to pay between $200 and $600 for a home inspection -- an upfront, out-of-pocket cost that's nonrefundable if a deal falls through. While an inspection isn't mandatory, it's a precautionary measure that all homebuyers should take. "When you weigh the potential tens of thousands of dollars an unknown problem could cost later down the line, it's money well spent," says Anthony Saunders, a Lorton, Virginia-based Realtor with Exit Realty Associates.

2. Appraisal Fee. Your mortgage lender wants to be sure the home it's about to loan you many thousands of dollars to buy is worth every penny. That is why you need a home appraisal before finalizing a mortgage loan agreement. The lender will hire an independent certified appraiser to assess the property value of the home for sale. This includes documenting the various features that make a home valuable, such as a deck, as well as researching the prices of comparable homes sold recently in neighboring areas.

Appraisal fees can vary by state and the size of the home, but on average they run $250 to $600, Saunders says. This is an upfront fee charged directly to the borrower by the lender.

3. Escrow Account. Some lenders require that an escrow account be set up in conjunction with a mortgage loan agreement. The money that goes into the account is used by the lender to pay certain ongoing property-related expenses on the homeowner's behalf, such as homeowner's insurance premiums, private mortgage insurance, or PMI, premiums and property taxes. You might be required to make an initial deposit into the escrow account at the closing table. From then on, in addition to a mortgage payment, the homeowner will pay a little extra to the lender each month -- typically one-twelfth of the estimated annual bill for taxes and insurance, according to Nolo.com. Essentially, escrow accounts help protect the lender by ensuring that these critical homeownership expenses are paid in full and on time, Aubrey says.

First-time buyers might be taken aback when a lender mentions putting money into an escrow account. "Many younger buyers don't fully understand what it is," Aubrey says. Escrow accounts are mandatory for buyers who have a down payment of less than 20 percent and other types of loans, including an FHA loan. If you don't have an escrow account with your mortgage, you are responsible for paying your insurance premiums and property taxes on your own. Typically, homeowner's insurance premiums can be paid monthly or in a lump sum annually; property taxes usually come due once or twice a year, depending on where you live.

4. Closing Costs. While having enough money saved up for a down payment is great, it's not the only cash you'll need to seal the deal on a home purchase. You also need an additional 2 to 5 percent of the home purchase price to cover so-called closing costs, which can include everything from a loan origination fee and attorney fees to prepaid homeowners association fees and taxes.

For example, the average sale price for a new home in May was $337,000, according to the U.S. Census Bureau. A 20 percent down payment on that sale price amounts to $67,400. On top of that $67,400 down payment, though, you would need between $6,740 and $16,850 to cover closing costs.

5. Home Maintenance and Repair. Certain costs can creep up on you once you have the keys to your new home in hand. Unlike renting, in which a landlord foots the bill for maintenance, as a homeowner you're on the hook for any upkeep and repair costs.

For example, you may want to change the locks if you buy an existing home. In Washington, D.C., it costs $181 a lock to have a general contractor install a mid-grade entry door lockset, according to Homewyse.com, a website that estimates home-improvement costs by location. Or you might want a fresh coat of paint on your new home. Getting a professional to paint an average-size single-family home (2,598 square feet, according to the U.S. Census Bureau) will cost nearly $6,300, including labor and materials, in the nation's capital. If you buy a home with a yard, you also need to factor in the cost of maintaining it yourself (including the purchase of a lawn mower and other lawn-care equipment) or paying a landscaper. In Dallas, for example, the cost of hiring a pro to maintain a 1,000-square-foot lawn, including labor and materials, starts at $66 for two hours of service, according to Homewyse.com. Plus, further down the road of homeownership, you will need to replace kitchen appliances, water heaters, furnaces and more. Take our How Long Should It Last? quiz to get a sense of when replacements might be required.

Ready to Buy?

Now that you're aware of some of the bigger costs associated with homebuying, you may find that choosing a house priced comfortably lower than your maximum loan approval amount is the best route, Saunders notes. This strategy can help ensure that you have enough cash to cover any extras, if needed. Remember to ask your lender and real estate agent lots of questions throughout the entire buying process -- especially regarding costs. You don't want to get blindsided right before closing with unexpected expenses.

 

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What Higher Food Costs May Do to Your Grocery, Dining Bills

July 19, 2015, 10:00 pm

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Filed under: Shopping, Inflation, Food & Beverage, Restaurants, Consumer Issues

By Ellen Chang

NEW YORK -- While the surge in cost of eggs has stabilized and pork has become cheaper, consumers shouldn't expect a reprieve in the cost of beef.

Food prices have escalated gradually during the past 20 years and haven usually fallen in step with the rate of inflation at 2 to 3 percent, said Warren Graeff, the agriculture market manager for PNC, the Pittsburgh-based bank. The production of eggs were besieged in May by an avian flu, the first U.S outbreak, while beef producers will still face the effects of the drought in the western Great Plains in 2012 and 2013. These disruptions in supply affect producers, distributors and restaurant owners immediately, but consumers don't feel the effect for several months.

When the avian influenza spread across farms in many states, the supply of eggs was cut drastically by 10 to 12 percent to contain the disease, Graeff said. The shortage affected a wide range of businesses from family-owned restaurants that sell breakfast to companies that use egg whites to make mayonnaise, salad dressing and cake mixes. The adverse effect pushed prices to unprecedented uptick levels -- costing another 60 cents to $1 a dozen.

Prices have started to stabilize while demand tapered off and retailers started cutting prices for eggs, Graeff said. Although migratory waterfowl, which spread avian flu are in between their migratory season, poultry producers are already concerned about whether the containment was successful and could repeat itself when the birds start flying again in September.

"The industry is waiting anxiously what happens this fall and if the influenza is spreading more broadly in the population of the waterfowl and cross contaminating into the domestic flock, which could impact broilers and turkeys," he said.

Many restaurants are bearing the higher cost of eggs and have refrained from raising prices. The uptick in prices has taught Tom Fleming, chef of Crossroads Diner in Dallas, to be a "better operator" since a large portion of his business is dishing out breakfast items. The diner goes through 600 to 800 dozen eggs a week, so any price increase affects the business's bottom line.

Fleming has refused to raise prices so far due to "moral issues," even though the price of eggs doubled during the past six weeks. Although the prices have stabilized recently, they are still 35 percent higher than normal, which equates to paying 35 cents more per dozen for the past four to six weeks.

"There is a ripple effect on the food chain," he said. "Supply is short, and demand has not subsided."

While the surge in prices has flattened out, the future volatility of the price of eggs is unknown, Fleming said, echoing the sentiment of other retailers.

Jerry Clemmer, director of residential dining at University of Richmond in Virginia, has had to make adjustments of his own. Instead of serving summer school students scrambled eggs in the buffet line, he offers them the option to choose fresh omelets for breakfast, which cuts down on the supply of eggs consumed. Instead of offering egg foo young on the menu when classes start this fall, Clemmer will substitute in Philly cheese steak sandwiches.

Watching Prices

"We're used to becoming more efficient and we are getting prepared," he said. "We have to watch prices and our waste but not overreact and be prudent."

The iconic Waldorf Astoria New York, which touts itself as the original home of Eggs Benedict, said the egg shortage hasn't affected any of its restaurants, including Peacock Alley, which serves its infamous Sunday brunch.

We have chosen to absorb the increased cost instead of raising our prices.

"We have chosen to absorb the increased cost instead of raising our prices," said David Garcelon, director of culinary at the Waldorf Astoria New York. "We also are working with our suppliers to make sure our egg supply is not interrupted."

Fastfood chain Whataburger reacted quickly to the shortage and drastically cut the hours it would serve breakfast entrees with eggs on May 31 to only four hours on the weekdays and six hours on the weekend. By July 19, the San Antonio-based company in 10 states reversed its decision back to its original schedule of selling the items from 11 p.m. until 11 a.m. and said it had increased its supply of eggs. Whataburger declined a request by TheStreet to comment on the company's decision.

Another Broken Egg Cafe, a chain based in Miramar, Florida, with 48 locations in 13 states, hasn't been affected, because its supply of eggs comes from local farmers who didn't have to cease production unlike larger manufacturers, said Jason Knoll, the company's director of operations. Prices have remained the same, because "there is an end, and the storm will be weathered," he said.

Restaurants have avoided increasing prices due to the egg shortage, which could be the result of watching how pork prices recovered quickly last year after a virus which infected hogs caused supply to shrink and pushed the price of pork up by 8 to 10 percent in 2014, said Peter Zaleski, an economics professor at Villanova Business School.

"We are not seeing much overreaction in the egg market," he said. "Restaurants are eating the loss so far. If the wholesale price increase is temporary, restaurant patrons won't even notice the change."

Supplying eggs to consumers hasn't been an issue for NestFresh, the Denver-based company that sells cage free and organic eggs from its network of local, family-owned farms to major grocery stores such as H-E-B, Vons, Albertsons, Harris Teeter, Walmart and Whole Foods.

NetFresh hasn't struggled with the increase in demand and is battling the specialty egg shortage problem by building 25 to 30 laying hen barns on 15 different farms in at least eight different states, said marketing manager Brandy Gamoning. The company's recent expansion put 600,000 new birds "into production" and 400,000 birds are scheduled to do the same within the next year, she said.

"The flocks there will be a combination of cage-free, free-rage, non-GMO, organic and pasture raised birds," she said. "The initial family farms for the expansion project are located in California, Colorado, Illinois, Pennsylvania, Texas, Iowa and Wisconsin."

Not a 'Budget Buster'

Since eggs are a smaller budget item than meat and poultry, the price increase wouldn't affect consumers' budgets as much, said Zaleski.

"Doubling the price of eggs means that a single egg that used to cost a dime would cost 20 cents -- not a budget buster for the typical household and still a great deal when you consider the nutritional value," he said.

Although ranchers are adjusting to the drought and the breeding herds have begun to "stabilize," beef prices remain higher than the average by 5.5 to 6 percent this year after increasing 12 percent in 2014, said Graeff. Chicken prices haven't been affected, and consumers can expect the 3 to 4 percent decline in pork prices to remain.

Since corn and soybeans will produce a plentiful supply, the cost of feeding livestock will be lowered, making pork, beef and poultry more profitable for farmers, which will increase the supply and prove to be "favorable" for consumers, he said.

Farmers and experts are keeping a watchful eye on the long-term effects of the California drought and how it will impact the produce -- with a close eye on citrus and almond crops, said Graeff.

"Right now things are pretty boring with respect to grocery food prices and that's good news," said Zaleski.

 

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4 Ways to Beat Soaring Baggage Fees

July 19, 2015, 10:00 pm

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Filed under: Travel, Travel Industry, How to Save Money, Airfare, Vacation Planning

The cost of air travel has always been a strain on many families' budgets, and in recent years, most airlines have added a host of additional fees to already pricey airfares that hit your wallet even harder. After having held out for a long time, JetBlue (JBLU) finally bit the bullet and joined most of its peers in starting to charge fees on checked luggage for some passengers as of July 1, with added costs of as much as $25 a bag.

For travelers, it has gotten harder to avoid getting nickel-and-dimed by airlines. With some effort, though, there are still a few things you can do to protect yourself. Let's look at four things savvy travelers can do to reduce their baggage-fee hit.

1. Look at upgrades that include free baggage. Many airlines that charge their coach passengers baggage fees have more lenient rules for those who buy more expensive airline tickets. In JetBlue's case, for instance, the Blue Plus fare includes one free checked bag and the airline says that the added cost should be less than a full $25 baggage fee.

In some cases, making the more extreme move to upgrade to first class or business class can actually make a lot more sense when you take baggage fees into consideration. For instance, at Delta Air Lines (DAL), travelers within the U.S. and Canada can get three free bags weighing up to 70 pounds each by buying a first-class or business-class ticket. By contrast, in the main cabin, you'll typically pay $25 for the first bag and $35 for the second and excess baggage fees of $150 for the third bag can apply. For a round-trip ticket, saving as much as $420 in baggage fees can often make a first-class ticket worth it, especially when you consider the additional perks involved.

2. Consider getting an airline credit card. Many airlines have branded credit cards that offer baggage-fee savings. American Airlines (AAL), Delta and United Continental (UAL) are among the major U.S. carriers whose cards offer at least one checked bag free. Some cards also give baggage-fee savings not just to the cardholder but also to family members and other companions flying on the same reservation. Delta in particular is quite generous, extending benefits to up to eight companions.

Several of these cards have substantial annual fees, which erodes the savings somewhat. Nevertheless, if you fly frequently, it can be worth it to pay these fees in order to save even more on baggage fees in the long run.

3. Get frequent-flier status in airline loyalty programs. Those who reach certain status levels in airline frequent-flier programs often get some of the same baggage-fee perks as first-class passengers. Again looking at Delta, the airline offers three free bags to Diamond and Platinum Medallion members even when they're flying coach, two free bags to Gold Medallion members and one free bag to Silver Medallion members. Similarly, United offers free baggage to Premier Platinum, Gold and Silver members, with higher tiers getting more bags.

4. Ship your stuff separately -- in advance. Some travelers have discovered the convenience of having bags shipped to their destinations separately. Although the fees that carriers like FedEx (FDX) and United Parcel Service (UPS) charge are sometimes even more than what you'd pay in baggage fees, you don't have to worry about lugging your bags into and out of airports or on your transportation to and from your home.

Shipping fees vary greatly depending on where you're going and how much advance time you can give before sending your baggage. For the right situations, though, separate shipping can be a great way to put the money you'd otherwise spend on airline baggage fees to better use.

These tips won't always allow you to pay no baggage fees at all. By giving you some alternatives, though, they'll at least offer a possibility of avoiding the worst the airlines can do to you.

Motley Fool contributor Dan Caplinger decided to beat baggage fees by becoming a pilot. You can follow him on Twitter @DanCaplinger or on Google Plus. He has no position in any stocks mentioned. The Motley Fool recommends FedEx and United Parcel Service. Check out The Motley Fool's one great stock to buy for 2015 and beyond.

 

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A&P Grocery Store Chain Files for Bankruptcy Again

July 20, 2015, 2:06 am

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Filed under: Bankruptcy, Company News, Shopping, Food & Beverage, Stores

By Tom Hals, Supriya Kurane and Yashaswini Swamynathan

Storied supermarket chain Great Atlantic & Pacific Tea Co., better known as A&P, has filed for bankruptcy protection for the second time in five years and put hundreds of its stores up for sale, bringing to an end the 156-year-old company.

A&P, which also owns Best Cellars, Pathmark and Superfresh stores, has been squeezed by discounters such as Walmart Stores (WMT) and up-market grocery chains such as Whole Foods Market (WFM). The company operates in six Northeastern U.S. states.

A&P agreed to sell about 120 of its 296 stores for about $600 million to Acme Markets, owner of Safeway and Albertsons grocery stores, Stop & Shop Supermarket Co. and Key Food Stores Co-operative.

However, the proposed buyers weren't willing to take on A&P's collective bargaining agreements or pension obligations, according to court documents. About 93 percent of A&P's 28,500 workers are unionized, the documents show.

The company will try to find buyers for about 150 other stores it hoped to sell as an ongoing business, according to the documents.

The company emerged from bankruptcy in 2012 with a big advertising push and lower prices but never met its financial targets, according to a court filing by Christopher McGarry, the company's chief restructuring officer.

A&P's high debt load and thin margins have prevented much-needed investment in upgrading its often-outdated stores.

A&P has proposed an auction in September for its stores, according to documents filed with the U.S. Bankruptcy Court in White Plains, New York.

The company said it will close 25 stores due to lack of interest and significant operating losses.

A&P had assets of $1.6 billion and debts of $2.3 billion as of the end of February, according to court documents.

Earlier Bankruptcy Filing

In its heyday in the early 20th century, A&P operated more than 15,000 stores. It first filed for bankruptcy in 2010, re-emerging two years later as a private company after obtaining financing from investors including Goldman Sachs and an affiliate of billionaire Ron Burkle.

About 77 percent of the stock in A&P's parent company is owned by affiliates of Mount Kellett Capital Management, with affiliates of Burkle's Yucaipa Cos. owning the rest.

Mount Kellett, founded by Goldman Sachs (GS) alum Mark McGoldrick, has been struggling and earlier this year Fortress Investment Group invested $200 million in the fund and became a co-manager, according to The Wall Street Journal.

An affiliate of Fortress agreed to provide $100 million in debtor-in-possession financing to A&P to carry it through its Chapter 11 bankruptcy, documents show.

Consumer Reports magazine in May ranked 68 U.S. supermarket chains based on reader surveys of food quality, staff courtesy and store cleanliness. While Wegmans of Gates, New York, ranked No. 1, Pathmark ranked 65, A&P 66 and Waldbaum's 68.

For fiscal year 2014, A&P had a net loss of $305 million.

A&P has hired investment bank Evercore Partners to sell its stores.

The company was founded as a mail-order business in 1859 by tea and spice merchants George Huntington Hartford and George Gilman. In the same year, it opened its first store-warehouse operation in New York City, according to A&P's website.

 

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Last Week's Biggest Stock Movers

July 20, 2015, 2:56 am

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Filed under: Google, Netflix, Earnings, IPOs, Investing

Plenty of stocks go up and down in any given week. The gainers inspire us to keep investing. The decliners keep greed in check while reminding us about the risks of the equity markets.

Let's go over some of last week's best and worst performers.

Anacor Pharmaceuticals (ANAC) -- Up 72 percent last week

The market's biggest winner was Anacor, soaring on encouraging prospects for an atopic dermatitis treatment that could hit the market as soon as 2017. The Crisaborole skin cream fared well in late-stage clinical trials, achieving statistically significant results. It could be ringing up nearly $2 billion in revenue by 2020 according to one market projection.

Google (GOOG) (GOOGL) -- Up 27 percent last week

A gain for the record books took place on Friday when the leading online search engine moved higher on Friday after posting blowout quarterly results. Google's market cap appreciated by more than $65 billion on the report, the largest single-day increase in a company's value in Wall Street history.

The market got excited because it was the first time that Big G beat analyst profit targets in nearly two years. Google's been investing in growth initiatives that have held back profitability, but it finally got the balance right this time.

Books-A-Million (BAMM) -- Up 23 percent last week

The struggling bookseller got a boost when an offer was made to take it private. However, if Books-A-Million decides to pass, there may still be a future in selling leafy reads. A day after the deal to take Books-A-Million private to the tune of $3.25 a share was made, Harper Lee's "Go Set a Watchman" was released. It set a new sales record for Books-A-Million.

Rovi (ROVI) -- Down 18 percent last week

Netflix (NFLX) didn't just score with a huge quarter last week, it also scored in the courtroom as a U.S. District Court sided with the leading premium video service in a patent dispute with Rovi.

Rovi is rich in patents, and it's been able to carve a cozy living as it licenses technology for over-the-top TV services and television guides. Rovi plans to appeal after the U.S. District Court judge granted Netflix summary judgment governing the five relevant Rovi patents, but it's never good when a company counting on its intellectual capital gets schooled in the courtroom.

Ooma (OOMA) -- Down 13 percent last week

Some IPOs just don't pan out. Ooma was hoping to go public at an initial price range between $16 and $18, but underwriters struggled to find enough buyers. Ooma had to settle for going public at $13 last week and it wasn't low enough. Shares of the Internet-based telephone service plunged on its first day of trading, making it Wall Street's latest busted IPO.

Shutterstock (SSTK) -- Down 11 percent last week

An unflattering analyst note dealt Shutterstock a blow. Morgan Stanley initiated coverage of the photo-licensing platform with a bearish "underweight" rating, fearing that the competition could intensify. Morgan Stanley (MS) set a price target of $40 for Shutterstock, and that's not good news for those long the stock, since it began the week north of $50 when coverage was initiated.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends Google (A and C shares), Netflix and Shutterstock. The Motley Fool owns shares of Google (A and C shares) and Netflix. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.

 

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What America's Highest-Paid CEO Does in a Typical Day

July 20, 2015, 3:10 am

≫ Next: PayPal Valued at About $52 Billion in Nasdaq Return

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Filed under: CEOs, Mobile Technology, Investing

By Rachel Gillett

What started on a five-month-long surfing trip as a way to document Nick Woodman's adventures has since become a publicly traded company that sells $300-dollar cameras and made Woodman the highest-paid CEO in the U.S. in 2014, according to Bloomberg.

GoPro (GPRO) has humble beginnings as an 8-employee company that sold camera straps. But eventually the company began creating and selling its own cameras and mounts and now employs more than 800 people.

As Woodman explains in GoPro's "about us" video, it's not a little company anymore. "GoPro is a movement where more than ever before people around the world are capturing and sharing their life experiences."

As you can imagine, creating a movement takes a lot of work. During his recent Reddit AMA, Woodman, a husband and father of two, explained how he gets it all done:

Mornings start early with my little boys waking me up to play "the wall game," which is a multi-beanbag battlefest in their playroom. I protect my mornings as often as possible for family time and take them to school whenever I can 'cause once I am at work it's full on and often hard for me to get home in time for dinner.

At work, I'm lucky that I get to focus mainly on things I enjoy: product, marketing, and overall business vision and strategy. My days at work are awesome because I get to sit down with crazy smart and passionate people that help turn our ideas for GoPro into reality.

Product days are my favorite -- sitting down and imagining the future with engineers and designers that can make it happen is like a dream for me.

By the end of the day I'm completely zonked. I head home for a snooze and then wake up and repeat!

 

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PayPal Valued at About $52 Billion in Nasdaq Return

July 20, 2015, 4:10 am

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Filed under: eBay, Financial Services, Stocks, IPOs, Investing

By Devika Krishna Kumar and Mari Saito

PayPal Holdings shares jumped as much as 11 percent in their highly anticipated return to the Nasdaq after more than a decade in eBay's (EBAY) fold, valuing the digital payment processor at about $52 billion.

PayPal is a giant in the market it helped create - it processed 4 billion payments totaling about $235 billion in 2014. But the online payments landscape has changed drastically since the company was snapped up by eBay in 2002.

Freed from eBay, PayPal is now expected to partner with other e-commerce sites and try to seize market share from startups such as Stripe and Square and Apple (AAPL), which unveiled its own mobile payments service last year.

For eBay, the separation allows the company to focus on its struggling e-commerce marketplace.

PayPal shares soared to $42.55 in early trading. EBay's stock fell as much as 4.7 percent, valuing the company at about $32 billion.

"PayPal is the gorilla among independent digital payment service providers with more than 160 million active accounts, global scale and brand recognition," J.P. Morgan analysts said.

PayPal is also looking to compete with Western Union (WU) and other money transfer companies. CEO Dan Shulman said he was looking to use PayPal's size to offer affordable financial services widely.

"It's clear that the potential for mobile technology to transform money extends beyond commerce. The vast majority of the world's 7 billion people lack access to even basic financial services," Schulman told Reuters.

PayPal was founded in the late 1990s by venture capitalist Peter Thiel, Tesla Motors (TSLA) CEO Elon Musk and others. It went public in 2002 and was acquired by eBay soon after for $1.5 billion.

Bowing to pressure from activist investor Carl Icahn, eBay said last year it would split PayPal as this would give both companies more focus and flexibility.

The companies, however, are not severing ties altogether -eBay has agreed it won't cut the volume of transactions it channels through PayPal for the next five years.

Wall Street analysts were overwhelmingly bullish on the stock. Nine of the 11 starting coverage on the stock have a "buy" or similar rating. Only Evercore has a "sell." Price targets range from $36 to $48.

BMO capital Markets analysts said they expected investors to value PayPal relative to Visa (V) and MasterCard (MA), but added that PayPal had a relatively low earnings before interest, taxes, depreciation and amortization margin profile of 27 percent -- around half that of the credit card giants.

PayPal also faces a fight in the rapidly evolving mobile payments market.

"The competitive advantages PayPal enjoyed in the traditional online commerce channel do not necessarily carry over into the mobile and offline worlds, in our view," J.P. Morgan analysts said.

PayPal recently acquired Xoom, putting it in a position to take on Western Union and MoneyGram's online businesses.

 

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