NEW YORK -- U.S. stocks ended slightly lower Thursday as the market digested the potential for an interest rate hike in December and some disappointing tech earnings reports.
The Federal Reserve, which kept rates unchanged at its policy meeting that ended Wednesday, downplayed concerns about global growth and indicated confidence in the U.S. job market's recovery.
Stocks had jumped Wednesday following the Fed statement and, after a strong run from the end of September, were due for a "reprieve," said Jason Ware, chief investment officer at Albion Financial, in Salt Lake City.
I would just say that we had a big move and this is a bit of a cooling pause the next day.
"I would just say that we had a big move and this is a bit of a cooling pause the next day," Ware said.
The three indexes are on track for their best month in four years.
S&P utilities, which tend to do worse when interest rates are rising, were the worst-performing S&P sector, off 0.6 percent.
The Dow Jones industrial average (^DJI) fell 23.72 points, or 0.1 percent, to 17,755.8, the Standard & Poor's 500 index (^GSPC) lost less than a point to 2,089.41 and the Nasdaq composite (^IXIC) dropped 21.42 points, or 0.4 percent, to 5,074.27.
The three indexes recovered much of the day's losses late in the session.
Stocks were "treading water" after the Fed statement, said John Mousseau, executive vice president at Cumberland Advisors in Sarasota, Florida.
"Low interest rates have been the anchor for stock prices for a while," Mousseau said.
Odds of a December hike increased to 50 percent from 43 percent Wednesday, according to the CME Group's FedWatch program.
The S&P health care sector rose 0.4 percent, making it the top-performing sector, as Allergan's (AGN) shares shot up 6 percent to $304.38. The Botox-maker confirmed it was in buyout talks with Pfizer. Pfizer (PFE) dropped 1.9 percent.
Sixty percent of the S&P 500 companies have reported quarterly results so far. Analysts now expect overall third-quarter profit to decline a modest 1.7 percent, compared with the 4.2 percent drop forecast on Oct. 1, according to Thomson Reuters data.
Movers and Shakers
NXP Semiconductors (NXPI) sank 19.7 percent to $73 after its bleak forecast. The slide took down other chipmakers, with the broader semiconductor index down 3 percent.
F5 Networks (FFIV) shares fell 9.3 percent to $110.08 after a disappointing outlook, making it the biggest percentage loser in the S&P 500 technology index.
GoPro (GPRO) slumped 15.2 percent to $25.62 after the action camera maker posted disappointing results.
Declining issues outnumbered advancing ones on the NYSE by 1,852 to 1,185, for a 1.56-to-1 ratio on the downside; on the Nasdaq, 1,820 issues fell and 959 advanced for a 1.90-to-1 ratio favoring decliners.
The S&P 500 posted 28 new 52-week highs and 6 lows; the Nasdaq recorded 102 new highs and 76 new lows.
About 7 billion shares changed hands on U.S. exchanges, about even with the 7.1 billion daily average for the past 20 trading days, according to Thomson Reuters (TRI) data.
-Caroline Valetkevitch and Abhiram Nandakumar contributed reporting.
What to watch Friday:
The Commerce Department releases personal income and spending for September, and the Labor Department releases the third-quarter employment cost index.
The University of Michigan releases its final survey of consumer sentiment for October at 10 a.m.
Earnings Season
These selected companies are scheduled to report quarterly financial results:
It's never advisable to rush out and take on debt, but there are times when it actually makes sense not to pay off debt.
Debt, it turns out, can be a kind of friend, even if it's just that flaky friend who can't really be trusted. You see, all debt is not alike. Some of the worst kinds, such as unsecured credit card debt, can wreck your budget, but even there, you have cases where it won't and could even work to your advantage. Other kinds of debt might seem imposing with those big red "Past Due" stamps but pose less of a threat to your financial future.
Here's a guide to handling that debt -- rather than bemoaning your inability to pay it all off -- either by slowing down the payment process or leveraging or reorganizing what you owe in clever ways. These are the nine instances where it might make sense not pay off debt.
1. Leveraging Zero Percent APR Credit Cards
Many zero percent APR credit cards have hit the market, and the idea behind them is great if you're part of the credit card industry: Lure customers in with a low-low introductory rate, and then make money off them when that rate expires and a new high interest rate soars into the double digits. While there are many dangers to treating a zero percent card properly -- from having new store purchases accrue at a high interest rate to overlooking the balance transfer fees -- there's a way to play this game and win.
Many zero percent offers have 12 months or more of interest-free financing -- even 18 months isn't uncommon. Keep in mind that if you tap the full amount available, you'll typically have a 3 percent fee to pay ($300 on $10,000). The idea here is to find a safe investment with a rate of return that will far outpace the transfer fee -- while taking advantage of the special offer's time frame. So if you're lucky enough to find a $10,000 investment with a 10 percent rate of return, and can liquidate the investment after a year, you'll have $1,000 in your pocket against the $300 you paid in transfer fees, while still paying off your credit card balance.
The only caveat -- and it's a big one -- is to make those minimum payments every month so you don't lose the zero percent perk. Then when the promo rate is finished, cut up the card and go in search of another similar offer. "If you are responsible and do not have a lot of debt, you can use this feature as a short term gap to fund something," said Bijan Golkar, senior adviser and principal at FPC Investment Advisory in Petaluma, California. The only caveat -- and it's a big one -- is to make those minimum payments every month so as not to lose the zero percent perk. Golkar cautions: "If you are not disciplined, do not even think about it."
2. Negotiating Medical Provider Debts
The decision to pay here depends on several factors including the medical provider, the amount of the debt and whether or not interest charges are applied. In many cases, especially with private practitioners, bills do not accumulate any interest, so it makes no sense to pay them off in full when you may have other high-interest debts sucking at your wallet.
That said, you don't want collection agencies flagging you down. In March, the three major credit bureaus -- Equifax, TransUnion and Experian -- also agreed not to report bad medical debts until after a 180-day waiting period. "This provides time for insurance to pay their portion and patients to pay their bills or work out a payment plan to pay them," says Todd Antonelli, managing director of Berkeley Research Group in Chicago. "When payment plans are devised and agreed to, this debt will not show up on your credit reports preventing one's ability to take out a loan, get a credit card, buy a car or a home."
Negotiate directly with the medical provider whenever possible to get a minimum payment schedule set up, and always see whether you can negotiate payment charges on a sliding scale -- so that $90 an appointment, for example, is reduced to $70 an appointment. This is common practice in disciplines such as psychology.
3. Fighting the Meter
In America's cash-strapped cities, a proliferation of red-light cameras and parking meter tickets has created a near epidemic of frustrated, frightened motorists. The sight of a ticket stuck to your window is enough to churn your stomach, but the next time you get one, use your head instead. Dispute every ticket you possibly can, because there's no telling how many will get thrown out by a judge or lost in the bureaucratic maze.
The Expired Meter website, for example, has become a big hit in Chicago, where motorists are taught how to fight back; many of the strategies here can be used in other cities as well. Every time you fight a ticket, you automatically delay the debt due without accruing a single cent of interest and penalty -- and you might just get off the hook.
4. Holding on to Mortgage Debt
Hurry up! Convert that mortgage from a 30-year loan to a 15-year loan! Your mortgage payments will skyrocket. But you'll pay a lot less in interest charges, and you'll own your home twice as fast. Sounds smart, right? Not so fast.
Assuming you live in an area where home prices are appreciating rapidly, the opposite strategy is more profitable. If a $300,000 home appreciates to $500,000 in five years, you'll get a much bigger return on investment a dollar when you actually put less money into paying your mortgage, not more. The uptick in local prices will still create gobs of new equity, and lower mortgage payments will give you breathing room to enjoy your home instead of being a slave to it.
5. Keeping up Low-Interest Car Payments
In recent years, low interest rates on car loans have been a boon to consumers, with some dealerships still offering zero percent promotional financing. If your interest rate is low, most of your payments will go directly into paying off the car as opposed to interest. And in this case, the debt is secured, meaning that the car acts as collateral to the loan money. If it's a long-term loan with low interest -- a five-year loan for example, which has an interest rate as low as 2.49 percent -- then please, pay off the car slowly to take advantage of the favorable rate.
6. Declaring Bankruptcy
If you find that bankruptcy is the one option you face due to your mounting debt, there's little sense trying to make a goal line stand. Virtually all of the 910,000 personal bankruptcies that were filed in 2014 were either Chapter 7 or Chapter 13 bankruptcies, according to the United States Courts website. What's the difference? With a Chapter 7, the debtor's nonexempt assets are gathered and sold, with the proceeds used to pay off creditors. Certain possessions are exempt, but this varies widely from state to state. It takes three to four months to complete a Chapter 7 bankruptcy and obtain a discharge.
With a Chapter 13 -- also known as a "wage earner's plan" -- individuals with regular income repay all or part of their debts. Under this chapter, debtors propose an installment plan to creditors over three to five years. It also offers individuals an opportunity to save their homes from foreclosure by catching up on delinquent mortgage payments over time. You must make all mortgage payments that come due during the Chapter 13 period on time. But if this bankruptcy succeeds in restructuring your debt for a smaller amount, you could come out paying off less in the end.
7. Using Credit Counseling and Negotiation
If you are looking at $20,000 in credit card debt, for example, making minimum payments at 19.99 percent APR is the equivalent of spinning your wheels: The minimum payment will barely make a dent in the balance due. But nonprofits such as Money Management International can take on such cases and help you negotiate new payment plans with your creditors -- and at lower rates.
If you think this is a viable option -- especially after having positive conversations with a nonprofit counselor -- then you won't want to keep throwing good money down the drain just to keep up on the high-interest hamster wheel. You may even be able to negotiate a short break period where you take some time before resuming payments. In the short term, you can also try calling credit card companies directly to negotiate a lower interest rate.
8. Borrowing From Parents
Borrowing from your parents can be painful. And for sure, the idea here is not to borrow from your parents and stiff them, for hell hath no fury like the Bank of Mom and Dad when it has been scorned. You might, however, find your parents to be strong allies in your attempt to get rid of debt.
If you owe $5,000 on a high-interest credit card, be proactive. Go to them with a short review of how you accumulated the debt. Tell them that every penny of their $5,000 loan would go to zapping the high-interest card -- not even a slice of pizza or a can of beer would be deducted. Then you might try proposing repayment of only half the loan, with the other half taken out in grunt work. Does the house need painting? Can you perform basic home repair tasks or help out with a major family project? The barter system works well in scenarios where cash is short but the ability and willingness to pay back in other forms is not.
9. Letting Moldy Oldie Debts Lie
Some debtors will go after you with all the ferocity of a jet-powered hellhound, but even jet engines run out of fuel after a time. Again, this is not so much a way to game the system, as to start afresh. Federal law requires that credit-reporting companies remove most debts from your credit report after seven years from the time it became delinquent. Since the debt has already done its nefarious deed and put a dent in your credit score, by making a payment you only reaffirm the debt and reset the clock giving the debt collector more time to go after your cash.
Daylight saving time ends at 2 a.m. Sunday, giving back the hour that seemingly was taken from us in the spring.
For most of us, it's time to fall back this weekend. In addition to moving the clocks in your house back one hour before you go to bed Saturday night, use the end of daylight saving time as a reminder to check a few things around the house. After all, you're gaining an hour, why not put it to productive use?
Here's how to allocate your extra hour to get the most peace of mind, and bang, for your buck.
1. Smoke detectors: 10 minutes. The most important batteries in your house are those that power your smoke and carbon monoxide detectors. Even if they appear to be OK, replace them. But if those batteries are still good (because you changed them when daylight saving time began March 8, they probably are), don't toss them, save them for less critical household items like flashlights and TV remotes.
Did you know smoke detectors also expire? Check yours for an expiration date. If it's past its useful life, replace it. And speaking of fires ...
2. Home inventory: 20 minutes. When was the last time you made a list of all the things in your home? If your house burns down or is otherwise destroyed, a home inventory will be the most valuable thing you have left.
The ideal home inventory is a list of everything you have, along with the date you bought it and purchase price. If you lose all your possessions, you're ready to simply hand your list to your insurance company and get reimbursed. But if creating such a detailed list sounds onerous, at least walk through each room in your house with a video camera (even some smart phones will do) and create a video of your stuff, reciting the price and purchase date of the expensive items. Then you'll at least have the ability to create a list should the need arise.
Don't forget to store that video away from home, online would be ideal. If you'd like to use free software to create a more thorough inventory, you can get it from the Insurance Information Institute by clicking here.
3. Furnace filter: 5 minutes. You should be checking/changing your furnace filter every month. Clean filters can reduce heating costs by 10 percent, not to mention preventing expensive repairs. But if you haven't checked yours in a while, do it now. And keep doing it the first Saturday of every month from now on.
4. Retirement plan review: 10 minutes. It's been said many times: Most families spend more time planning a vacation than planning their retirement. Pull out your most recent 401(k), 403(b), IRA or any other retirement account statements: Do you have enough exposure to the stock market? Too much? One rule of thumb is to subtract your age from 100 -- that's the percentage you should have in some kind of stock fund. So if you're 35, you'd have 65 percent of your retirement savings in stocks. If you're 80, you'd have 20 percent.
But remember, this is a rule of thumb, not a rule. Do what makes you comfortable.
5. Insurance review: 15 minutes. Insurance can consume up to 9 cents of every dollar you spend. So it makes sense to ensure that you're getting your money's worth. You likely have (at least) four types of insurance: car, home, life and health. Pick one type every six months and make sure you're getting the best possible deal. There are plenty of places to compare insurance rates, including our insurance shopping tool. So pull out a policy and see if you can do better for the same coverage.
The simplest way to save on most insurance policies is to raise your deductibles to the highest number that you can comfortably afford. Remember, the purpose of insurance is to prevent financial catastrophe, not financial inconvenience. As I'm fond of saying, if you insure yourself so that you'll never lose a penny, you'll never have a penny to lose.
That's It!
If you did everything in the above list within the allotted time, you've accomplished some important stuff, and because you gain an hour this weekend, it theoretically took no time at all!
On the other hand, if all that seemed too ambitious and you end up simply spending an extra hour in bed, don't feel guilty. It's all good. But when you get an extra minute or two, do these things: It's truly time well spent.
How do you intend to spend your "free" hour? Share with us in the comments section or on our Facebook page.
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The best way to get a good deal is to shop around, right? But running from store to store can gobble up time and gas. That's where price matching comes in: Top retailers from Best Buy to Walmart have pledged to match competitors' prices, so consumers can get the best deals from around town with only one stop. Target recently expanded its policy to include a total of 29 online retailers. Problem is, these guarantees are far from straightforward. Cheapism.com examined eight retailers' price-match policies and found scads of rules and exclusions. Here are seven things every bargain shopper should know about price matching.
Only a few stores match online prices. Some retailers match local competitors' websites, but many policies exclude online pricing. Target is one of only a few stores that have agreed to match prices at select online retailers, even if there is no corresponding store nearby. The price-match guarantees at Best Buy and Walmart also extend to specified online competitors, including Amazon. Shoppers can scan items at these stores with the Amazon app on their phones to find out if they can get a better price without ordering online. One catch with online price matching: It does not extend to marketplace items listed by third-party sellers.
'Local' has different definitions. Most policies require the competitor to be a local store, but what qualifies as "local" may be up for debate. Retailers tend to leave it to store managers familiar with the area to decide what lies within the same market or within a "reasonable distance." Best Buy sets a specific radius of 25 miles, while JCPenney stores in Alaska will match the prices of any similar store in the entire state.
A competitor's print ad is the best evidence. Each retailer has its own rules about what qualifies as proof that another store is offering a lower price. A print ad with the competitor's price clearly displayed is the only verification accepted everywhere. A photocopy, picture or mobile version of the ad may not work. Walmart doesn't officially require any form of proof (an employee can call the other store to verify a claim), but shoppers suggest bringing in an ad to minimize the wait and hassle.
The items must be identical. The item you're buying and the item offered for less at the other store must be identical in every way -- brand, style, color, condition, size, weight and -- perhaps trickiest of all -- model number. Retailers such as Home Depot, Lowe's and Best Buy sell many high-priced appliances and electronics with store-specific model numbers, which rules them out for price matching.
Certain sales and promotions are excluded. Retailers won't match another store's going-out-of-business or clearance-sale prices. Limited-time promotions, rebates and offers of free products or gift cards with purchase are also unlikely to be eligible. One exception: Walmart matches buy-one-get-one-free offers as long as the ad lists the price of the item. In general, an ad must specify a price in order for a retailer to match it; a percentage or dollar amount off is not enough.
Many retailers offer price adjustments even after purchase. Shoppers may be able to request a price match for something they've already purchased, depending how much time has passed. Some policies include a specific time frame for price adjustment -- Target now allows 14 days, for example -- but often the decision is left to a store manager. Some stores offer a price adjustment only if they've dropped their own price, not if a customer spots a better deal from a competitor.
Policies are subject to employee interpretation. This can cut both ways. At JCPenney, Cheapism found that managers seem to have a lot of authority to match competitors' prices, so it may not hurt to stretch the limits of the store's price-matching policy. At Walmart, on the other hand, shoppers complain that employees deviate from corporate policy in denying customer requests. In either case, it helps to know the fine print going in. Cheapism's comparison of stores that price match highlights important features of each policy and offers some store-specific money-saving tips.
Getty ImagesDeferred-income annuity sales reached $2.7 billion in 2014, up from about $1 billion in 2012.By Jeff Brown
It's a dirty trick of modern life: escaping disease and accident to live long -- only to run out of money before the end.
With the withering of old-fashioned pensions combined with longer lifetimes and baby boomers flooding into retirement, the insurance industry is churning out a raft of new, deferred-income annuity products to provide guaranteed income later in life for a big payment upfront or over time. And new government rules allow investors to buy these products with money built up in tax-favored accounts, such as IRAs and a 401(k).
DIAs seek to overcome drawbacks in "longevity insurance," which has been around for decades without catching on.
Along with their cousins, immediate-income annuities, which start smaller payouts immediately after purchase, DIAs can provide dependable retirement income for life.
"Go back a generation or two. Did anybody not like having a pension?" says Douglas Dubitsky, vice president of retirement solutions at The Guardian Life Insurance Company of America. "We are saying, 'Well, you can create that yourself.'"
DIAs "are a good thing," says Anthony Webb, senior research economist at the Center for Retirement Research at Boston College. "They enable households to insure [against] the risk of living exceptionally long."
DIA sales are up. LIMRA International, the insurance trade group, says DIA sales reached $2.7 billion in 2014, up from about $1 billion in 2012. That's still a minuscule share of the multi-trillion-dollar financial services market, but many experts expect sales to continue growing as consumers catch on to the new offerings.
The old-fashioned longevity policy, which is still available as a plain-vanilla DIA, is simple. For example, you could spend $100,000 to buy a policy at 65, and 20 years later start receiving an income as high as $50,000 to $60,000 a year. The high payout is possible because the insurer has that 20-year "deferral period" to grow the initial $100,000 before payouts begin, and because many policyholders will die before they receive much income, if any. Once spent, the premium is gone for good.
Old-style longevity insurance never really caught on, largely because consumers didn't like giving up that big upfront payment for an income stream they might never receive.
In the past few years, insurers have addressed these concerns by offering optional features to allow the income to start earlier -- at 65 in many cases. With add-on features, the income stream, once it begins, will rise with inflation. Other features allow joint coverage for a couple, and some return the premium to survivors if the policyholder dies before payouts start, or before income received equals the initial premium. Providers say many people are purchasing DIAs in their 40s or 50s, with payouts to begin in their 60s or 70s rather than 80 or 85.
"We have a lot of clients who think of it as a health care coverage possibility" for old age, says Liz Forget, executive vice president of MetLife Retail Retirement & Wealth Solutions.
Add-ons, of course, come at a price: a smaller payout. One firm, for example, offers a 64-year-old man $55,584 a year at age 85 for a $100,000 premium. Add a feature to return the premium to heirs if the policyholder dies early, and the payout falls to $36,228.
Among the add-ons, premium return has proved the most appealing to purchasers, says Chris Blunt, president of the investments group at New York Life Insurance Co. Inflation protection, which can reduce the payout substantially, has less appeal, being adopted by only about 10 percent of policyholders.
That shows many consumers have things backward, Webb says. "Inflation protection is expensive but probably worth it. Return of premium is definitely not worth it."
Annuities generally have fees associated with them that make them more expensive than comparable mutual funds or [exchange-traded funds], and this negates any advantage in many cases.
That's because the whole idea is to insure against the risk of living a long time. If you die soon after buying a policy, you won't face that risk, but live a long time and inflation can chew up the buying power of your DIA payout.
DIAs have their critics, too. DIA critics typically worry that policies are hard to understand and that not enough policyholders will live long enough to make them pay off. David Weinbaum, associate professor of finance at Syracuse University, warns of costs embedded in DIA-payout calculations.
"Annuities generally have fees associated with them that make them more expensive than comparable mutual funds or [exchange-traded funds], and this negates any advantage in many cases," he says. "In other words, they are just too expensive for what they are, and most investors would be better served in traditional low-cost index funds. I would recommend that most people not invest in annuities at all."
Experts who do recommend DIAs generally say a purchase shouldn't exceed 10 to 30 percent of one's retirement assets.
In July 2014, the U.S. Treasury department issued new rules permitting DIA purchases with IRA and 401(k) assets, in a "qualified longevity annuity contract," or QLAC. This allows investors to tap what for many is the largest or only source of retirement funds. And the rules also allow the policyholder to wait until age 85 to begin taking required minimum distributions that IRAs and a 401(k) normally require after age 70½. The maximum QLAC purchase is $125,000, or 25 percent of IRA and 401(k) assets, whichever is smaller. (Note that if your 401(k) does not offer a DIA, you would have to first transfer the funds to a rollover IRA, which cannot be done until you have left the employer.)
These new rules are gradually being reflected in product offerings. "Advisers are very interested," Forget says.
While a DIA can be a useful tool, experts say that these days, some potential customers are holding off in hopes that higher interest rates over the next few years will make DIA payouts more generous.
Blunt says it's true that premium pools largely hold interest-paying securities like corporate bonds. The more the insurer earns on the pool, the more likely the firm will offer a larger payout for a given premium. "If you had a sense that rates were going to skyrocket in the short term, then you are better off waiting," Blunt says.
But he and other experts argue that what would be gained from a modest increase in interest rates could be more than offset by the payout cut from shortening the deferral period by waiting to buy.
"Most of the time, the people who have been waiting [to purchase a DIA] got crushed in the last six or seven years," Blunt says. Some DIAs offer a recalculation option or dividend payment to counter the effect of rising rates. And Dubitsky suggests buyers make several DIA purchases over time to improve odds of benefiting from higher rates later.
For those who live long enough, a DIA can be a good investment, as the payout relative to the premium far exceeds what can reasonably be expected from bonds, or even stocks. It would take a double-digit investment return for a $100,000 nest egg to grow enough to spin off $50,000 a year after 20 years.
A DIA purchase should be considered carefully, as payouts and other terms can vary considerably between providers. Many major life insurers offer DIAs. Online services like WebAnnuities Insurance Agency provide quotes, and financial services firms like Vanguard and Fidelity offer plans from multiple insurers. But before buying, it may be worthwhile to talk to a trusted insurance broker who can evaluate products from a variety of providers.
Jeff Brown spent nearly 40 years as a newspaper reporter, columnist and editor, including 20 years writing about investing, personal finance, the economy and financial markets. He spent 20 years at The Philadelphia Inquirer and has been freelancing since 2007.
In the seven years since Lehman Brothers failed, tipping the world into a financial crisis, the U.S. government has enacted a plethora of regulations to prevent another one.
But trauma aside, there are some tangible benefits to such a crisis, from a Darwinian winnowing of weak businesses to curbing extreme risk-taking. Here are some:
1. They often provide investors willing to take a gamble with tremendous bargains. Just look at the deals available on stocks in March and April of 2009. Without the meltdown, when would you expect to buy at such reduced prices?
If you invested in the SPDR S&P 500 (SPY) exchange-traded fund, which tracks the Standard & Poor's 500 index (^GSPC), at the beginning of March 2009, you'd have done well. It would now be worth three times as much, not including dividends. Not bad for 6.5 years. Of course, you needed the nerve to invest when the investing world seemed finished forever.
2. Financial crises often cull the weakest firms, forcing them out of business. OK, so that didn't quite happen in 2008 and 2009 because the government decided to bail out some large financial firms and others to prevent further damage to the economy.
But a cleansing of companies that aren't succeeding isn't all bad. As has been said many times, the reason that Silicon Valley is so successful is that the investors there embrace the idea that many companies will fail. If an idea works, then they run with it.
If the new firm fails, then the funding is pulled and the people involved go find a more productive project on which to work. For every Facebook (FB) or Twitter (TWTR) that becomes a pop culture touchstone, there are hundreds or maybe thousands of startups on the scrap heap.
3. Meltdowns often highlight weaknesses in the system. Think about a 3-year-old child trying to destroy a piece of your furniture. All small children are budding engineers, and their antics often seem aimed at testing objects to the point of destruction. So if they succeed in breaking a chair, you know it wasn't particularly robust.
Likewise, in a financial crisis, you can see where the weakness is because weak companies simply can't hide.
One example is my former employer, General Motors (GM) , which went through a reorganization (aka bankruptcy) in 2009. I think it was clear to many that something needed to change at the automaker, and the financial crisis merely sped up the process. Ultimately, the Obama administration stepped in rather than allow the giant automaker to collapse.
4. Crises remind others to be prudent. Taking risks is important in capitalism, but it's important to weight the potential danger to your company: Is the risk something that will simply curb next quarter's earnings or one that might sink the company altogether?
Financial giant New York Life Insurance Co. uses the tag line, "The company you keep," seemingly as a reminder that many others before it haven't survived.
5. The alternative to crises can be worse. Financial meltdowns have a high cost in both money and social upheaval. I have friends who were at Lehman, and I know the hardship its collapse caused.
But avoiding the inevitable isn't necessarily a better alternative over the long term.
Look at Japan, where the economy has stagnated for decades now. There are many reasons for that, but a significant part of the problem in Japan was the presence of so-called zombie companies, firms neither alive enough to do business nor dead enough to get liquidated. They simply take up space and resources.
It's far better to take a company through the bankruptcy courts and let its resources be used more efficiently by new owners, than to be haunted by zombies. Countries that let firms fail tend to do better economically than those that don't.
The United States is still by far the richest country in the world, and companies are frequently being either created or liquidated. Where the failure rate is high, the wealth created often is also -- see my comments above about Silicon Valley.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
Daniel Acker/Bloomberg via Getty ImagesBy Lucia Mutikani
WASHINGTON -- U.S. consumer spending in September recorded its smallest gain in eight months as personal income barely rose, suggesting some cooling in domestic demand after recent hefty increases.
The Commerce Department data and another report Friday from the Labor Department also showed weak inflationary pressures, which would argue against the Federal Reserve raising interest rates at the end of the year.
U.S. central bank policymakers this week put a rate hike in December on the table with a direct reference to their final meeting of the year. The Fed has kept benchmark overnight interest rates near zero since December 2008.
It will be difficult for the Fed to justify a rate hike at a time when income, consumption and inflation are trending lower...
"It will be difficult for the Fed to justify a rate hike at a time when income, consumption and inflation are trending lower, leaving a December rate hike less likely than prior to the data," said Jay Morelock, an economist at FTN Financial in New York.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 percent last month after rising 0.4 percent rise in August. September's consumer spending data was included in Thursday's third-quarter gross domestic product report.
Consumer spending rose at a brisk 3.2 percent annual pace in the third quarter, helping to lift GDP growth to a 1.5 percent rate. Consumption has increased at a rate of more than 3 percent in each of the last two quarters.
Third-quarter growth was constrained by business efforts to whittle down an inventory bloat, a strong dollar and ongoing spending cuts by energy companies.
Stocks on Wall Street were trading marginally lower, while prices for longer-dated U.S. government debt rose. The dollar fell against a basket of currencies.
Weak Inflation
When adjusted for inflation, consumer spending rose 0.2 percent in September after increasing 0.4 percent in August, suggesting consumption will continue to support the economy through the rest of the year.
That view also was bolstered by a separate report showing the University of Michigan's consumer sentiment index rebounded in October from September. Consumer spending growth, however, is unlikely to maintain the brisk pace witnessed in the second and third quarters in the absence of a significant rise in income.
Income ticked up 0.1 percent as wages and salaries fell last month, especially in manufacturing, after rising 0.4 percent in August.
"Stronger income growth is needed to support stronger consumer spending," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
With spending sluggish, inflation was weak last month. A price index for consumer spending slipped 0.1 percent, the first decline since January, after being flat in August.
In the 12 months through September, the personal consumption expenditures price index rose 0.2 percent, the smallest increase since April, after increasing 0.3 percent in August.
Excluding food and energy, prices rose 0.1 percent for a fifth straight month. The so-called core PCE price index rose 1.3 percent in the 12 months through September after a similar gain in August.
Inflation has persistently run below the Fed's 2 percent target. A report from the Labor Department showed the Employment Cost Index, the broadest measure of labor costs, increased 0.6 percent after a 0.2 percent gain in the second quarter.
In the 12 months through September, labor costs held steady at 2 percent, below the 3 percent threshold that economists say is needed to bring inflation closer to the Fed's target.
"We are still in a modest compensation-gain environment and that implies inflation is not likely to accelerate sharply soon," said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania.
"The labor market may be tight but firms appear to be in no great hurry to raise compensation."
Danny Moloshok/APYouTube Chief Business Officer Robert Kyncl unveils 'YouTube Red,' at the company's offices in Los Angeles.
YouTube is building a new paywall, but it doesn't mean that everyone will have to start shelling out cash to watch kids slipping off skateboards or cats being cats. YouTube Red rolled out on Wednesday, giving those with money to burn on digital media a premium experience on the iconic website.
Alphabet's (GOOG, GOOGL) video-sharing site will charge $9.99 a month for YouTube Red. Most clip-culture disciples will continue to consume the site in its original free incarnation, but there are some pretty good reasons to pay up if you have the means and spend a lot of time on YouTube's site or app.
1. We Are Now Used to Paying for Ad-Free Digital Content
Rolling out YouTube Red at the same $9.99 monthly price point as Netflix (NFLX) may seem risky, but Hulu just introduced a new pricing tier that at $11.99 a month will strip ad blocks from its streams. YouTube is pricing its product competitively, and it's happening at a time when folks are growing more receptive to paying up for streaming media.
Netflix expects to top 74 million subscribers worldwide by the end of the year. Spotify has more than 20 million premium users for its streaming music platform. The numbers are there.
2. YouTube Content Is Different
Netflix has led the push by premium video services to add original content. Netflix and Amazon.com (AMZN) have won Emmy awards for their proprietary shows.
This has raised the bar in terms of differentiation. If folks are expected to subscribe to more than one streaming service, each one has to have stuff that you can't find anywhere else. Well, differentiation is what YouTube is all about.
Anyone can upload content to YouTube, something that naturally doesn't apply to Netflix, Amazon or Hulu. Is a lot of it junk? Sure. However, the site's good about bubbling up compelling content to the top. At the end of the day, YouTube has more original content than any other platform -- and it isn't even close.
3. Your Time Matters
It's probably not a surprise that Netflix has become so popular because it offers ad-free content. Cable and satellite television providers that charge substantially more than Netflix even slap commercials on their on-demand content. You don't want that. You deserve better than that if you're willing to pay up to go through more content.
If you think TV commercials are bad, just spend a day on YouTube. Many of the shorter clips have ads, and while the ads are often skippable, it can be a hassle to actively select to end some commercials prematurely. The time you save is probably worth more than $9.99 a month, and it will make the overall experience even better.
4. Content Creators Will Make the Most of the New Revenue Stream
There are more than a billion active users on YouTube, and many of them -- like me and possibly even you -- upload original clips to the site. It pays to be a content creator. My Moonpies channel has let me pocket thousands of dollars over the years. I have more than 15,000 subscribers and am closing in on 4.6 million views, but that still makes me a small fry on the site. There's a growing number of magnetic personalities generating six figures a year through the site's ad-sharing platform.
YouTube Red will give them a new way to cash in. It remains to be seen if it will generate more or less revenue than having ads display on those premium accounts, but diversification is usually a good thing.
5. There Are Perks for Going Premium
YouTube Red isn't just about the ad-free experience and encouraging creators to upload more content to cash in on the new monetization platform. Folks paying $9.99 a month for the new offering will be able to access Google Play Music for streaming tunes. They also have the ability to save videos to watch offline. That may not seem like much of a perk in these Web-tethered times, but just think about the next time that you're hitting the road or experience an Internet outage.
YouTube hasn't fared well in the past when it has tried to offer premium channel subscriptions or pay-per-view streams, but things are different now. It's the right product at the right time. I signed up for the free one-month trial of YouTube Red on Wednesday. You will probably do so, too.
Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Amazon.com 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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There are plenty of things that put strain on a relationship. If you are a grown up person in some sort of partnership with another grown up person, you already understand this. You also know that money problems are at the root of a great deal of disharmony, which seems to be a universal trait.
Having your money under control means greater personal security, a better chance at happiness, more options for the feature, more leisure time and a whole host of other life benefits. But when couples feel the pinch, sparks can fly. In fact, one recent study found that arguments about money are the single greatest predictor about whether married couples will one day divorce.
That's an interesting finding, seeing as the researchers found that it didn't matter if the couples were rich or poor, had debt or were debt-free. Fundamental disagreements about money transcend socioeconomic status, and when you and a partner don't see eye to eye, your relationship may pay the price. If you and your partner are on the rocks due to financial stress or if you want to avoid these problems in the future, here are some things to work on.
Don't Be So Materialistic
A BYU study found that people with the highest measure of "materialism," or the perceived importance of having lots of money and things, had the lowest measure of happiness. When one or both members of a romantic relationship scored high on the materialism index, the relationships seemed uniformly miserable. How do you be good with money without being materialistic? There's no easy answer. In the same way some people are intelligent without being arrogant, while other intelligent people are full of themselves, some people just seem to pull off the feat.
Practically speaking, investing money in meaningful shared experiences, maintaining a reasonable lifestyle regardless of income and becoming more charitable are all ways of staving off the creeping effects of materialism. It may require some attention and personal change, but anybody can learn to better prioritize money and things, in favor or human relationships and happiness.
Have the Same Money Goals
Partners who don't share money goals and spending strategies tend to have problems ... to put it mildly. Some research indicates that when one partner perceives the other partner's spending habits to be foolish, the couple is 45 percent more likely to break up. Going from financial harmony to cooperation is easier said than done. It may take a financial catastrophe, money education, or counseling. Both partners need to recognize the problem and work to correct it. It can be hard work, but establishing a workable budget and planning together for the future is integral to the stuff that makes lasting relationships.
In addition to shared goals, every couple should help manage money. One partner can cover daily inflow, while the other invests and makes sure the bills are paid. Whatever jobs you choose for yourselves, it's essential that both partners be involved daily. It's not enough to make a plan, then pass it on to one partner while the other partner ignores it completely.
Set the Problem Aside (for a Minute)
Money troubles have a way of sucking the air out of the room. If you and a partner are in debt, you likely don't enjoy fun times outside of the house, away from your problems, very often. If money trouble has taken its toll on your relationship, find a way to get a breath of fresh air. Go for a hike, spend time with close friends, have your parents watch the kids while you take a breather. Doing the work or rehabilitating your joint financial life is tough. This work can be as stressful as the money problems themselves. If you're doing the work of making your shared finances work better, take some time for yourselves. If your relationship can survive this time in life, it can get through anything. Give it all the help you can.
If money problems and miscommunication are weighing down your relationship, start investing in a better future. Money difficulty can be the most toxic element in an otherwise successful relationship. Fix these problems, and you and your partner with have a much greater chance at health and happiness.
Victor J. Blue/Bloomberg via Getty Images GoPro CEO Nick Woodman rings the opening bell for the release of the company's IPO at the Nasdaq MarketSite in New York last year.
There were plenty of winners and losers this week, with the world's leading maker of wearable cameras falling well short of its own guidance and a cable giant making another smart move at its theme parks division.
Comcast's Universal Studios theme park in Florida announced a new attraction will open come 2017. "Race Through New York Starring Jimmy Fallon" will replace the park's immersive "Twister" simulation.
Theme parks announce new rides often, but this particular addition makes the cut on its synergistic merit. Comcast owns the Universal Studios theme park chain and it also owns Fallon's late-night home of NBC. With the marketplace heating up for late-night shows, every little bit helps. Universal Studios Florida attracts millions of park guests a year, giving the new ride Comcast-friendly branding power.
This seems to be the year of auto recalls, and this week GM asked owners of 1.4 million older vehicles worldwide to bring in their cars to repair an issue in which drops of hot oil can cause engine compartments to catch fire.
Recalls are a part of the automotive industry, but this is the fourth time that GM has had a recall for the same problem.
It's been nearly two years since the Xbox One hit the market, but now it's going to get a feature that it should've had from the beginning. Microsoft revealed that an upcoming software update will make the console backward-compatible with some Xbox 360 games.
The inability to play discs from the previous Xbox generation likely led some die-hard gamers to hold back on making the initial investment. It's hard to buy an Xbox One when you know you can't trade in your Xbox 360 for credit because you'll need it to play your favorite games.
The software update isn't perfect. Many of the bigger Xbox 360 games still won't be compatible. It's still a step in the right direction, and just ahead of the holiday shopping season to boot.
You would think that posting quarterly results featuring a 43 percent surge in revenue to $400.3 million and adjusted earnings more than doubling to 25 cents a share would be a cause for celebration, but that didn't happen for GoPro -- and with good reason.
The leading maker of wearable camera's earlier guidance was calling for revenue of at least $430 million and a profit of at least 29 cents a share. It's not a good sign when you can't live up to your own historically conservative guidance and GoPro's guidance for the current quarter isn't very encouraging.
Taco Bell -- Winner
History books will claim that the Kansas City Royals won the first game of the World Series, but another winner was Yum Brands' (YUM) Taco Bell. The fast-food chain teamed up with Major League Baseball for a promotion where it would reward all customers with a free A.M. Crunchwrap if someone stole a base.
Of course someone stole a base, and of course Taco Bell will now be giving away a ton of its signature breakfast wrap next Thursday. It's a brilliant move, as Taco Bell is trying to stand out since entering the cutthroat breakfast market last year.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends GoPro. The Motley Fool owns shares of Microsoft and recommends General Motors. 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.
Did you know that last-minute grocery shopping can actually save you money? Here's how.
Store managers will discount meat, produce, dairy and bread up to 50 percent off when they don't think they will be able to sell these foods before they expire. These are usually marked with brightly-colored stickers.
To take advantage of these deals, ask your local grocer when they put out manager's specials -- they'll be happy to tell you when you can get the best prices. Using this strategy will require some flexibility in your cooking, but as long as you freeze or cook the food before its expiration date, it'll be perfectly safe to eat, and you won't be eating up your budget.
So, the next time you go food shopping, remember that buying your groceries at the last minute can pay off big.
CHICAGO -- "It pays to shop" is the message from the government, two days before the start of the third sign-up season under President Barack Obama's health care overhaul.
The Department of Health and Human Services released data Friday on next year's prices in the insurance markets established by the law. Returning customers to HealthCare.gov can save, on average, $51 a month if they switch to the lowest-cost plan within their coverage level, according to the report. Most can find a plan for $100 a month or less, after financial help from a tax credit.
To hear the administration tell it, there are deals galore. But experts say the monthly premium is only part of the story. They say consumers should examine the quality and coverage of health plans, as well as their prices.
The price message appeals to young uninsured Americans and will be stressed in advertising and enrollment drives this season as the administration tries to find, woo and keep 10 million paying customers by this time next year, a modest target announced earlier.
Beyond the sticker price, consumers should keep an eye on what they will get for their premium dollars, experts said. Shoppers should consider how many hospitals and doctors are covered, for example, and which prescription drugs are included.
"What the message should be is 'be a smart shopper,' " said Caroline Pearson of Avalere Health, a private market analysis firm. "All we really see in this report is price, price, price. That's what the government thinks will draw [consumers] to the market, but it may also be what disappoints them when they get sick."
People do switch plans. In 2015, nearly a third of returning customers changed to a new plan on the marketplace. That's a far higher rate of plan-switching than among people who get their coverage through a job, said HHS Assistant Secretary for Planning and Evaluation Richard Frank.
Some consumers are being forced into new plans because of plan cancellations and the collapse of some health insurance cooperatives. The data released Friday show a choice of 50 plans a county overall, compared to 58 a county last year, and an average decline of two plans per insurer.
"That's not a change that concerns us," Frank said, calling it a sign of a "maturing market" as insurers drop unpopular plans.
It will take more time to fully analyze how insurers have restructured health plans for 2016. In some markets, there are fewer "preferred provider organization" plans. Those PPO plans give consumers the most flexibility about which doctors they can see. Some counties have no PPO plans on the market for 2016, leaving customers with a choice of HMOs and other more limited types of policies.
"It means that generally the networks are smaller. ... You can't go to providers outside the network just because you want to without paying the full cost," said Gary Claxton of the nonpartisan Kaiser Family Foundation.
The government plans to add tools to HealthCare.gov to make it easier for people to check if their doctor or a drug is covered in a plan. But those tools aren't ready and are still being tested for accuracy.
The bottom line, said Claxton, is "do your own research."
NEW YORK -- U.S. stock indexes finished with their strongest monthly performances in four years Friday, even as they fell for the day amid a mixed bag of earnings reports.
For October, all three major indexes posted their biggest percentage increases since October 2011, with the S&P 500 rising 8.3 percent, led by energy and materials, while a measure of volatility fell.
On Friday, CVS Health (CVS) fell 4.8 percent to $98.78 after a disappointing profit forecast for 2016.
The S&P 500 energy index was the best performing sector, rising 0.7 percent. Exxon (XOM) rose 0.6 percent and Chevron (CVX) 1.1 percent after better-than-expected results.
It would be nice to have some clarity once and for all of what monetary policy is going to do over the foreseeable future.
Investors will be looking at data over the next several weeks, including next Friday's employment report, for clues about the economy's health. The Fed signaled Wednesday a rate hike in December was still possible.
"The market is being held a little bit hostage," said Jeff Buetow, chief investment officer at Innealta Capital in Austin. "It would be nice to have some clarity once and for all of what monetary policy is going to do over the foreseeable future."
The Dow Jones industrial average (^DJI) fell 92.26 points, or 0.5 percent, to 17,663.54, the Standard & Poor's 500 index (^GSPC) lost 10.05 points, or 0.5 percent, to 2,079.36 and the Nasdaq composite (^IXIC) dropped 20.53 points, or 0.4 percent, to 5,053.75.
For the month, the Dow gained 8.5 percent, while the Nasdaq rose 9.4 percent.
In a signal of a return to calm in markets, the CBOE volatility index fell 38.5 percent in October - its largest monthly percentage decline on record.
"We're not likely to see another month like this anytime soon," said Marshall Gause, chief executive of Geneva Fund Partners in Denver. "This month was a rebound off the lows."
For the week, the Dow inched up 0.1 percent, the S&P increased 0.2 percent, and the Nasdaq rose 0.4 percent. The S&P posted its fifth straight week of gains, its longest such streak this year.
Winners and Losers
The S&P health care sector index rose 3.1 percent for the week, the best weekly gain since March, spurred by strong pharmaceutical earnings.
Shares of drugmaker AbbVie (ABBV) jumped 10.1 percent Friday to $59.55, the biggest positive driver for the S&P 500 index, after better-than-expected profit and a strong long-term outlook.
Consumer staples slipped 1.1 percent. U.S. consumer spending barely rose in September and the University of Michigan's index on consumer sentiment came in below expectations.
The S&P financial sector index fell 1.4 percent, with Genworth Financial (GNW) tumbling 10.3 percent to $4.68 after results.
U.S.-listed shares of Valeant Pharmaceuticals (VRX) dropped 15.9 percent to $93.77, its lowest since July 2013, after cutting all ties with specialty pharmacy Philidor.
LinkedIn (LNKD) shot up 11 percent to $240.87 while Expedia (EXPE) jumped 7.3 percent to $136.30 after results beat estimates.
NYSE advancing issues outnumbered declining ones 1,647 to 1,404, for a 1.17-to-1 ratio; on the Nasdaq, 1,638 issues fell and 1,161 advanced, for a 1.41-to-1 ratio favoring decliners.
The S&P 500 posted 18 new 52-week highs and 4 lows; the Nasdaq recorded 49 new highs and 78 lows.
About 7.4 billion shares changed hands on U.S. exchanges, above the 7.1 billion average for the past 20 trading days, according to Thomson Reuters (TRI) data.
-Caroline Valetkevitch and Rodrigo Campos contributed reporting from New York; Abhiram Nandakumar contributed reporting from Bangalore, India.
What to Watch Monday:
At 10 a.m., the Institute for Supply Management releases its manufacturing index for October, and the Commerce Department releases construction spending for September.
Earnings Season
These selected companies are scheduled to report quarterly financial results:
To buy or not to buy in November? That's the big question as the biggest shopping season of the year kicks off. Seemingly everything is on sale this month, from electronics to apparel to appliances and furniture. So, what's worth buying in November -- and when is it worth waiting?
Electronics. If you've been waiting for the right time to buy a new TV, November is your moment. With Black Friday and the holidays fast approaching, prices on HDTVs sink to their deepest discounts this month and good deals should continue through December. Tablets, laptops, digital cameras and other consumer electronics also see bargain pricing as the gift-buying momentum picks up.
Halloween novelties. When Halloween is over and done, retailers waste no time clearing the shelves. Now is the time to find next year's costume, often at 50 percent off. Deeply discounted Halloween decorations and candy also hit the sale rack in November. Load up for holiday baking, stocking stuffers and school snacks.
Tools. Tool kits such as drill, wrench, and screwdriver sets make welcome gifts for DIYers, and this month kicks off the prime time to buy an assortment of practical tools. Some of the best sales of the year generally surface in the Black Friday and Cyber Monday extravaganzas and continue into December.
Cookware. With home chefs getting a head start on holiday cooking this month, cookware deals also heat up. Be on the lookout for discounted cookware to equip your own kitchen, give as a gift or store away in anticipation of a wedding invitation.
Home goods. If you're cleaning the house for holiday gatherings and discover your upright vacuum is on its last wheel, good news: You can save on a new one this month. The same goes for large and small appliances and furniture all through the house. Sales and discounts crop up in November, especially around Black Friday and Cyber Monday.
Apparel. Clothing may be on a lot of wish lists, but unless it's a must-have item for someone special, wait until January for the biggest markdowns on winter clothes and shoes. Otherwise watch for enticing store coupons. Hats, gloves and winter sleepwear make good gifts and are deeply discounted in Black Friday sales.
Wedding dress. If you've recently gotten engaged, sew up that wedding dress now. November is a slow month for bridal retailers, who typically respond with lower-than-average prices. Getting a jump on the planning maelstrom leaves plenty of time to complete the critical alterations.
Entertainment. DVDs and Blu-ray movies make excellent stocking stuffers. With prices as low as $2 and $3 in Black Friday sales, shoppers can pick up a few and put the savings toward other items on their lists.
Toys. Toys see some modest discounts in November, but past years have shown that the best time to buy toys is closer to Christmas. During the two weeks leading up to the big day, even deeper markdowns show up on holiday toys. Wait as long as possible on this one -- unless you're on the hunt for a hot toy that's likely to sell out.
Collectibles. Are you angling for a "baby's first Christmas" ornament with the year prominently displayed? If so, wait until December to fork over the cash. Although dated collectibles go on sale in November, better deals pop up in December. And if you can hold out until January, the price declines will be steeper yet -- on a very limited selection, however.
Seasonal produce. November is a big month for food. Thanksgiving tables groan under the weight of hearty repasts that incorporate seasonal produce. Apples, pears, cranberries, plums, clementines, and pumpkins round out the fall assortment of fruit (yes, pumpkins are a fruit) while broccoli, leeks, cabbage, squash, cauliflower, parsnips, celery, chestnuts, potatoes, shallots, turnips and yams make companionable in-season vegetables to buy in November.
Meats. Turkey and other game, such as goose, pheasant, and venison, typically form the core of winter holiday meals. Despite high demand, these meats often sell for discounted prices leading up to the feast days. Buy one variety for Thanksgiving dinner and freeze a second for a December holiday spread.
Food holidays. November plays host to a handful of notable food holidays, which may help shoppers score bargains and coupons. Keep an eye out for deals associated with National Candy Day, National Cake Day and National Chocolates Day. National Nachos Day also pops up in November and local restaurants may advertise specials.
Do you feel as if you'll be in debt forever? Join the club. One survey found that 13 percent of Americans think they'll never pay back all their loans, and another 8 percent say they won't pay off what they owe until they're in their 70's.
Finding yourself buried in debt can be discouraging, but there's hope. We've rounded up three common reasons people can't get out of debt -- and offer advice on how to turn things around.
Your Mortgage Is Too Big
The American Dream can turn into a nightmare if you take on a bigger mortgage than you can afford. Today, the average homeowner's mortgage makes up 69 percent of total household debt. If your mortgage is too much of a load for you to carry, you might need to find a roommate to help cover costs, downsize to a less expensive home, or rent instead of owning until you can save enough for a big downpayment.
If your goal is to become mortgage-free as fast as possible, adding a little extra to your monthly payment is an easy to get there. Let's say you have a 30-year, $200,000 mortgage with 25 years remaining and a 4.5 percent interest rate. By paying just $100 more a month, you'd save nearly $21,000 in interest and be out of debt almost four years early.
Your Emergency Fund Is Too Small
A major health expense, surprise home repair or sudden job loss could deal a blow to anyone's finances. Yet, only 38 percent of the people polled by Bankrate (RATE) have enough cash on hand to cover such emergencies. Many people said they'd have to ask a family member or friend for the money or foot the bill with a credit card. Either way, you could end up drowning in debt if you have to borrow cash every time an unexpected expense surfaces.
That's why it's important to put away enough money to cover six months' worth of living expenses. If that sounds like a lot, you don't have to do it all at once. You can use a free service such as Digit to automatically set aside a little bit at a time. Once Digit is connected to your bank account, it analyzes your income and spending habits to determine how much you can afford to contribute to an emergency fund.
Your Interest Rates Are Too High
The higher your interest rates, the more you'll have to pay to wipe out your debt -- and possibly the more time it will take. Say you have a $10,000 balance on a credit card with a 15 percent annual percentage rate, which is typical these days. If you pay $225 a month, it will take 5½ years and almost $4,700 in interest to pay off your debt. But if your APR is 11.6 percent, which is the average for low-rate cards, you'd be debt-free seven months faster and save more than $1,500 in interest.
Call you credit-card company to see if your rate can be lowered. If not, consider taking advantage of a zero percent balance transfer offer from another credit-card company. A third option is to consolidate your high-interest credit-card debt into a lower-rate personal loan.
ShutterstockRecent studies show including diverse points of view and ways of thinking produces better decisions.By Joanne Cleaver
Viewing investment decisions through an LGBT lens can pay off. An expanding body of evidence indicates that what's good for lesbian, gay, bisexual and transgender employees is also good for investors. Analysts say companies that take the high road regarding sexual orientation tend to be progressive and thoughtful about other aspects of management as well.
The Workplace Equality index designed by Denver Investments portfolio manager John Roberts has annualized returns of 10.14 percent for the 10 years ending June 30, compared with 7.89 percent for the Standard & Poor's 500 index (^GSPC). The Workplace Equality exchange-traded fund (EQLT) includes 199 companies and tracks with the Workplace Equality index.
Julie Goodridge, founder and CEO of Boston-based NorthStar Asset Management, says companies are leading advocates for the LGBT community because they don't want to lose top talent. While she and others say shareholder activism has yielded some gains, change is now driven primarily because it makes good business sense.
For instance, numerous recent studies illustrate how diverse groups make better decisions, analysts say. And it's not just having "one of each" -- a woman, one person representing each major ethnic minority and a member of the LGBT community -- but including diverse points of view and ways of thinking.
Northstar, the Workplace Equality index and the LGBT advocacy group Human Rights Campaign share a common approach to analyzing companies' commitment to LGBT employees and business partners.
They start by examining official policies. Do the companies simply comply with the law or do they proactively champion equal rights for the LGBT community? The Human Rights Campaign's current report covers 366 businesses that earned top scores as "best places to work" for LGBT equality.
Employers not only set a standard for the workplace, but a precedent in their communities, Goodridge says.
This isn't an academic issue. Anti-LGBT culture and laws can collide with employees' career paths. For instance, if a rising staffer is in line for an overseas assignment, what is the obligation of the employer to craft an opportunity that fulfills employees' career goals while not putting them in an untenable or even dangerous position in a country hostile to the LGBT community?
That's exactly the kind of dilemma where progressive companies shine, Goodridge says.
"How are you protecting your talent globally? It's like divesting from South Africa -- it's a company's responsibility to say, 'This isn't a country we feel comfortable working in because our employees are not safe,'" she says.
Roberts says investment managers who use an LGBT lens are well-connected with employee advocacy groups and informal networks of employees, so money managers are quick to call out lip service -- and equally quick to recognize employer innovation.
"We'll challenge management if there's a culture disparity," he says. "We'd rather be collaborating and reaching out to company management rather than confronting them. We think it's much better to use engagement: 'Hey, we want you in our index, and here's what we think you need to do.' "
Debra Neiman, a certified financial planner in Arlington, Massachusetts, who specializes in LGBT issues, says wading into investing from this perspective can start with shopping. Pay attention to retailers and their suppliers, and how that ecosystem supports the LGBT community (or doesn't) to see the ripple effect of economic decisions, she says.
Often, family and friends of LGBT workers also decide to "vote their values," too. "This group has a great propensity for wanting to align its dollars with its morals," Neiman says. "It can be as simple as, 'I won't shop at a store that doesn't support my people.'"
Neiman, who is on the advisory board of the Workplace Equality Index Fund, recommends LGBT-minded investors buy into LGBT-oriented funds rather than pursuing individual stocks. "If you want to invest in a way that companies promote inclusive workplace policies using the individual stocks, there's only so much impact you can have, depending on how much money you have," Neiman says. "But you get more bang for your buck by using a fund like the Workplace Equality Index Fund."
One thing's for sure: There's no fund or company that occupies the sweet spot of delivering top returns while hewing to gender, sexual identity, environmental, energy, medical and human rights issues.
Roberts recommends using "several arrows for various causes, whether those funds are targeting workplace equality or green," By layering several investing lenses, "you screen out the alpha. You have a better chance of success by focusing than with a broad-based approach."
Here are five of the best-performing stocks in the EQLT ETF. Each of these were purchased in February 2014, although the number of shares held may have fluctuated, as EQLT is an equal-weight fund:
Nike Inc. (NKE). NKE stock has delivered a 37 percent return for EQLT and is up more than 42 percent so far in 2015. Nike is a leading athletic apparel company, despite some challenges from Under Armour (UA), Adidas (ADDYY) and privately held New Balance.
Raytheon Co. (RTN). A major defense contractor, Raytheon stock has delivered a 10.5 percent return to the ETF and is up more than 9 percent so far this year.
Navigant Consulting (NCI). The Chicago-based consultancy is up only 6.7 percent this year, but has given EQLT a great return since the fund opened a position nearly two years ago, delivering a 13.5 percent return.
Hartford Financial Services Group (HIG). The property and causality insurance sector isn't exciting, but the Connecticut-based insurer has delivered an eye-catching 18.5 percent return for the EQLT ETF. HIG stock is up 8.8 percent so far this year.
Chubb Corp. (CB). Another one of the major property and casualty insurers, New Jersey-based Chubb has given EQLT a hefty 28 percent return since February 2014. CB stock is up nearly 26 percent so far this year and is challenging its 52-week high.
Joanne Cleaver is a widely published business author and journalist. Follow her on Twitter @jycleaver.
Medicare covers the bulk of your medical expenses, but you must pay deductibles and co-payments for hospital stays and doctors' services; fees for doctors who charge more than Medicare pays; the cost of prescription drugs and other expenses, including dental; and care in a foreign country.
You can add coverage with both a supplemental, or medigap, policy and a Part D prescription-drug policy, or with a Medicare Advantage plan. In most cases, medigap policies only fill holes in the coverage Medicare already offers; Medicare Advantage may offer extra services, such as vision or dental care. Most people choose the medigap/Part D route. With that combination, you'll typically pay higher total premiums than with Medicare Advantage but have fewer out-of-pocket costs, and you can go to any doctor or facility that is covered by Medicare. You'll also have to pick up separate dental coverage.
Medigap policies are sold by private insurers and come in 10 standardized versions. The most popular is Plan F, for its good balance of coverage and cost. (For details, see Medicare.gov's Choosing a Medigap Policy.)
Every medigap plan with the same letter must provide the same coverage, but the price can vary enormously by insurer -- for example, from $1,529 to $3,667 a year for a 65-year-old Colorado man who buys a Plan F policy, according to Weiss Ratings. Look at the plans with the lowest premiums.
If you're healthy, consider going with a high-deductible version of Plan F (the only plan that offers this option). You'll pay $2,180 of Medicare-covered costs before the medigap plan pays anything, but premiums are lower, ranging from $348 to $1,075 a year for the 65-year-old man described above, according to Weiss. Another lower-cost option is Plan N, which provides coverage similar to that of Plan F but with a few more out-of-pocket expenses, including a $20 co-pay for each doctor visit and $50 for each emergency-room visit. For Plan N, the 65-year-old man would pay from $1,081 to $2,419 a year.
You can compare prices by using the Medigap Search tool at www.medicare.gov or at most state insurance department sites (find links at www.naic.org). Or, for $99, you can get a personalized report from Weiss Medigap (Kiplinger readers have access to a 30-day offer of $49, ending Oct. 26, at weissmedigap.com/kiplinger).
Choose your medigap policy carefully. In most states, insurers can reject you or charge more because of your health if more than six months has passed since you signed up for Part B.
You'll also need to get a Part D drug policy, which costs $33 a month, on average.
Medicare Advantage. These plans provide both medical and drug coverage through a private insurer. They tend to have lower premiums than medigap/Part D but also higher co-pays and more restrictions. The average cost is $38 a month above the cost of Part B, although some plans charge no premium beyond that of Part B.
As for coverage, the plan can't offer less than would be available through Medicare. You'll be restricted to a network of doctors and facilities and may have much higher costs (or no coverage at all) if you go out of network. You may also need a referral to see a specialist.
Look for plans that include your key doctors in the network, and compare the out-of-pocket costs for your usual medical care and prescription drugs (for cost estimates, use Medicare.gov's Medicare Plan Finder tool). Also look at star ratings, which rank plans according to customer service (five is the highest rating). For best values based on typical costs for people in good, fair and poor health, go to www.medicarenewswatch.com.
You can switch Medicare Advantage policies during open enrollment (Oct. 15 to Dec. 7, 2015, for 2016) or anytime for a five-star policy.
As the holiday shopping season commences, stores will ramp up offers for shoppers to obtain their credit cards. Retail store credit cards are often very alluring with lucrative discounts on purchases, but the hidden costs can outweigh the benefits.
Retail credit cards often carry high interest rates, which can quickly rise toward 30 percent. While the offers are tempting for consumers to chase special discounts, the higher interest rates pose a risk and can undo any savings if the balance isn't paid off quickly enough, said Bruce McClary, spokesman for the National Foundation for Credit Counseling, a Washington, D.C.-based non-profit organization.
"Some stores are offering deeper discounts for those using store-branded credit cards," he said. "The days of needing a different card for each store are long gone. Many bank-issued cards have fixed interest rates which are much lower than retail credit offers."
High Interest Rates Increase Debt Levels
Many shoppers are faced with carrying a balance each month because of other existing debt, and store-branded credit cards charge a hefty average interest rate of 23.43 percent making this an uneconomical option, according to a new report by CreditCards.com, the Austin, Texas-based credit card comparison company. The report examined the retail credit card terms and condition agreements of 64 cards from 42 different retailers.There are two stores in particular to steer clear of because their credit cards charge the highest APRs: Zales at 28.99 percent and Staples at 27.99 percent.
By contrast, the national average for all credit cards remains at 15 percent, much lower than the cards from retailers.
Two-thirds of store credit cards charge all cardholders an APR of 19.99 percent or higher. "If you carry a balance regularly, retail credit cards just aren't for you," said Matt Schulz, CreditCards.com's senior industry analyst. "Even with potential rewards and discounts, the math just doesn't work in your favor when interest rates are that high, so your best move is to shop around for lower cost options."
Depending on your credit score, there are 16 retail cards with the lowest possible APR that is under 16 percent. Even those rates remain very high, and interest charges can add hundreds if not thousands of dollars to the balance, extending the amount of time it takes consumers to pay off the debt. Some retail credit cards such as Sears pose an even greater problem, because the interest rates remain the same for all customers, treating those with exceptional credit scores exactly the same as those who are below average, McClary said.
Sears offers three cards, and two of them, the Sears and Sears MasterCard cards, offer a whopping APR of 25.24 percent. Only the store's Home Improvement account offers 14.4 percent or 18.4 percent based on creditworthiness.
If you are still shocked by the Sears interest rate, you won't find lower rates at JCPenney, which uses Synchrony Bank as its lender. The company's financing terms are not any better with an interest rate of 26.99 percent.
"The thing about those interest rates is not the fact that they are so high, it's that they are the same for everyone," McClary said. "Those with excellent credit have no incentive to apply if they are going to be treated the same as someone at the other end of the spectrum."
How Payment Amounts Are Affected
When a consumer has a $1,000 balance on the average retail credit card and sticks to making only the minimum payments, it would take 72 months to pay off the balance while incurring $833 in interest fees, said Schulz.
The expense of the interest alone drops to $370 with the national average APR of 15 percent for all credit cards. The payoff time also drops to 54 months. When the average low-interest APR of 11.62 percent is applied to the $1,000 balance, the interest falls to $257 and the payoff time shrinks to 50 months.
Paying Your Bills on Time
While consumers should stick to a strategy of always paying their bills on time, the consequences for people who are drawn in by introductory rates is even greater. Failing to even pay one month's bill on time could mean the tantalizing zero percent is revoked, said Schulz.
"I don't think most people realize that," he said. "Even if you're only in month one or two of a 15-month zero percent introductory offer, that offer can be pulled out from under you if you're late with a payment. That's a big deal and can cost a consumer a lot of money."
While consumers remain lured to the discounts, these reductions and rewards only really pay off if your balance is paid off each month, Schulz said.
"The truth is that these discounts and rewards can be a really great deal," he said. "After all, it doesn't make much sense to get a 20 percent discount if you're still going to end up paying 25 percent interest on that purchase." Store cards aren't a bad option for people who are rebuilding their credit or just starting their credit history, Schulz said.
Consumers who have good credit, but are looking for a new card, should opt for a general-purpose rewards card, such as the Citi Double Cash card or the Capital One Venture Rewards card.
"If you are interested in a store card, don't be pressured into making a quick decision," he said. "If after reading the fine print it still sounds like a good offer, apply next time you're in that store. Chances are that all of those perks you liked will still be there."
New York -- If food prices start taking a bigger bite out of your wallet in the near future, you can blame it on Mother Nature.
A confluence of events including strange weather from El Nino, activity on the solar surface and the effects of a U.S. drought years ago are reducing agricultural output, which may drive up grocery store prices for individual consumers and supply costs for dining chains such as Chipotle Mexican Grill (CMG) and coffee shops like Starbucks (SBUX).
The current El Nino weather system, which periodically forms off the Pacific coast of South America and alters weather patterns throughout the world, is projected to be the strongest in decades, according to AccuWeather.
Already, El Nino is causing drought in Asia, most notably in Vietnam, which is the second-biggest coffee producer in the world behind Brazil. Vietnam grows robusta beans and while their taste isn't typically as appealing as that of arabica beans, what happens in the robusta market matters.
"If robusta production is down, then it will drive up the price of arabica as well," says Nicholas Gentile, managing partner at New York-based commodity trading adviser Nick Jen Capital Management. It's possible that any production shortfall from drought in Asia could be made up by more output in South America, he added.
If all goes well, the rains will come to Asia in time, but if they don't, then expect coffee prices to rise.
If you want milk with your coffee, then things look even bleaker because that's likely to be more expensive as well.
Milk prices have already jumped in New Zealand and in the first six months of 2016, U.S. prices will catch up, Shawn Hackett wrote in a recent edition of The Hackett Money Flow Commodity Report. The problem is that due to a drought years ago, the price of milking cows is high while current American milk prices are low, which gives diary farmers little incentive to add cows to their herd.
Finally, the number of spots on the sun has started its periodic cycle of decline this year, which will likely lead to lower crop yields and hence higher prices for grains such as wheat and corn. The phenomenon is discussed in detail in a 1976 USDA report from the U.S. Department of Agriculture that examined data from 1866 to 1973.
The number of sunspots fluctuates in a fairly predictable cycle that tends to last around 10 to 11 years. NASA actually counts the spots and makes projections about how many there will be in future years. While the mechanism isn't understood, there does appear to be a high correlation between spot count and global temperatures, with fewer spots being associated with cooler weather.
NASA projects that the sunspot count is entering its cyclical decline and doing so from a fairly low peak. That doesn't augur well for crop yields next year.
"Lower-than-average yields are associated with low sunspot activity," according to the Agriculture Department paper, "Do Sunspot Cycles Affect Crop Yields?" by Virden L. Harrison. The report singles out corn, wheat and rice as particular examples of the phenomenon.
The effect, however it occurs, can be large, although it does vary by crop and the location within the U.S. Declines in average yield of 10 percent during low sunspot years were not uncommon in the study period.
"The bottom line is that the great U.S. crop production miracle of the last two years will not repeat in 2016," Hackett wrote in a recent report.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
Getty ImagesWhile 401(k)s may make you skittish, remember that you must find a way to take care of your 80-year-old self down the road.By Christine Giordano
Generation Y has already lived through two bear markets and had their job prospects shaped by the Great Recession, and Generation X watched helplessly as their stock investments plummeted by 40 percent during that recession.
And among people 55 and older, nearly 29 percent don't have retirement savings or a traditional pension plan, and many rely on Social Security, according to 2015 analysis from the Government Accountability Office.
But calculations show that those who start saving $2,000 a year at age 35 with an average annual return of 8 percent may only amass around $245,000 by retirement -- an amount that likely won't go too far 30 years from now, considering how prices rise.
"Pension systems are few and far between in the public sector. We are not sure what the Social Security system will look like in the future. The ability to successfully retire will solely be based on the financial decisions you made during your working years," says Brian White, a financial adviser at Mandell, White & Associates in Melville, New York.
Putting aside money for retirement is so important that Illinois is creating a savings program that requires companies with at least 25 employees to automatically transfer a set amount from employees' pay to a Roth IRA unless a worker opts out.
Regardless of your skittishness, you need to find a way to take care of your 80-year-old self someday. Here are a few considerations that can chase your investment fears away.
Regard the pain of loss as inevitable, but temporary, before a rebound. Some people remember pain more than profit. Investors may have gotten nervous when the average employee retirement account shrank from $91,864 in 2010 to $87,668 in 2011. But they may have missed it when balances plumped up to $119,804 in 2013 -- an increase of more than 30 percent from 2010, according to numbers from the Employee Benefit Research Institute. In those years, the median Roth IRA grew more than 51 percent, and traditional IRAs grew 28 percent.
"We are going to have bear markets, and you are going to lose money at some points; It's just a question of whether you have the stoicism and education to know the pain is temporary. You have to be ready to withstand it if you're going to reap the benefits in the long term," says Jesse Mackey, chief investment officer of 4Thought Financial Group, based in Syosset, New York.
If you hate risk, you can reduce it. Generally, the younger you are, the more your portfolio can take risks and the more stocks you can be invested in, as opposed to bonds and cash. The theory is that you won't need your retirement fund while you're in your 20s, 30s and 40s, and the stocks carry the highest rate of return despite being more volatile.
As you get older, you should change the ratio to maybe only 50 percent stocks, Mackey says. And, in case of a crash, you need to have the time to allow your investments to rebound, "You should expect to have to hold a portfolio for 10 years-plus."
But let's say you want to put aside money for a college fund without the risk. Consider investing in bonds that will mature when you need them to, Mackey says. "You can take a portion of a portfolio to do this. You can use individual bonds that are laddered to when you want them to mature."
Diversify not just by asset type, but also by method of investment.Different approaches work for different markets. In down markets, more active approaches tend to excel. Liability-driven investing, typically used by very large institutions like banks, insurance companies or public pension funds, transfers risk by finding assets to offset it. Selective or concentrated investing, used in private equity funds, focuses on the stocks they hold. Index funds should be a large piece of any investor's portfolio, but they tend to do best in bull markets, with asset prices rising and relatively low investor anxiety in the marketplace, Mackey says.
"Consider including an opportunistic or tactical element within your broader strategically allocated portfolio that will potentially be able to defend against or capitalize on volatility and market slides. This will require professional assistance or the purchase of a specialist fund," he says.
Take the free money. If you've got a 401(k) with an employer matching a percentage, consider it free money. "At a minimum, you should take advantage of the full match. For example, if your company provides a dollar-for-dollar match up to the first 4 percent, you should contribute at least 4 percent," White says.
Let's say you're making $40,000 and your employer offers you a match of 4 percent of your salary. That would likely amount to $1,600 in free money by the end of the year.
It's a no-brainer, yet leaving money on the table is more common than it seems, with Americans likely leaving $24 billion in unclaimed company-match dollars each year, according to a 2015 research report by the workplace financial advisory services firm Financial Engines. Overall, one out of four employees doesn't avail themselves of matching funds, with the typical employee leaving $1,336 of potential "free money" on the table each year, according to the report.
Think of compounding interest like a windfall. Compounding interest, which means you will earn interest on your interest, accrues much faster than stuffing money in your mattress. "Start with a penny and double it every day; in 28 days, you will have $1 million. So even saving a small amount every paycheck will make a big difference over time," White says.
The younger you are, the more time your money has to compound before you retire. One example of this is if your relatives placed $100 in a trust fund for you in 1927, at the average rate of return of the stock market. Seventy years later, that money would grow to $263,000, according to economic writer Stephen Moore.
Online investment calculator tools can tell you how much you will need to put away each month to likely reach your retirement target. If you start saving $2,000 per year at age 25 at an 8 percent annualized return, you'd have $560,000 -- more than double what you'd have if you start saving 10 years later.
Of course, you should always check out the fees associated with the funds, because a fee of 1 percent can quickly chip away at a 3 percent return. You also want to see how well your fund performed by checking out its performance and ratings. And consider fund managers who have been around two or more years.
Get started as soon as you can. After all, what could be scarier than waking up one morning with less than 10 years until retirement, and with no retirement savings?
Christine Giordano is a freelance business journalist with a passion to help consumers make educated decisions. Also a columnist for Newsday, you can follow her on Twitter@chrisgiordano.
