NEW YORK (Reuters) - Spot gold turned higher on Thursday, reversing initial sharp losses on technical buying and weaker equity markets.
Bullion was up 0.1 percent at $1,751.49 an ounce, having hit a near two-week low of $1,702.44 earlier in the session.
Wall Street is telling Main Street now that everyone wants to invest in Government Motors, and Haryley Davidson, and Toll Brothers Homes, "so dump your gold." Apparently, the Street did a good job in convincing the naive and proftit takers. Folks, we are just at the beginning of the meltdown of this economy. If this country doesn't experience a Ruby Ridge, every weekend, and a Waco, every month, and an Oklahoma City in 2012, then all I have to say is that American men have truly been chickafied, and are essentially zombies, with blank stares totally paralyzed. The dollar will collapse, and gold will soar to $5000.00 to $50,000 per ounce before this is all over. This meltdown of the economy has been in the planning stages since George Bush Sr days when he and the ruling class got Clinton to sign onto Nafta. It's all been a slide into the abyss.
Thursday, August 25, 2011
Wednesday, August 24, 2011
Get out of the Market
The fundamentals of the Stock Market are gone and ethics are out of the window - the only way for the average investor to make money in the stock market is by buying dividend stocks. When the Stock Exchange was formed it created as a way for business to raise capital and allow you to share the risk along with the reward. In addition to an appreciation of the stock price there was the concept of a dividend - the reason was obvious - with a dividend you would continue to own the stock instead of selling and getting out as soon as you made your money and thereby not deflate the stock.
However; the Tech Bubble changed that philosophy; dividends became a thing of the past and that horse was out of the barn and not going back. The problem is you as investors let it happen - we were told that the company could make better use of the money than we could and grow profits even more and raise the stock price even higher and you believed them.
What happened: every got greedy and every one got rich except for you. Instead of that money pouring back into R&D salaries skyrocketed and executive pay compensation went through the roof. Wall Street Firms became the companies biggest lobbyist and you the small investor got screwed. Much like what has happened to politics over the last 150 years has happened in Wall Street. In politics business learned long ago that they could get better deals by funding certain candidates - and unfortunately the well funded candidates almost always win because they can sway the most voters with their airtime. Then our right to vote became watered down much like our right in the stock market.
Today a few hundred or even few thousand investors can make a blip in the market - but a single hedge fund or bank playing with millions of people money can and do manipulate stocks which is why the market has been in a constant sway up and down over the last 5 years. And while most of you have lost a significant portion of your retirement it has been banner years for the investing arms of all of the banks. They have been leveraging the ups and downs with options and can buy and sell options and make hundreds of millions each week on a few dollar swings.
However; the Tech Bubble changed that philosophy; dividends became a thing of the past and that horse was out of the barn and not going back. The problem is you as investors let it happen - we were told that the company could make better use of the money than we could and grow profits even more and raise the stock price even higher and you believed them.
What happened: every got greedy and every one got rich except for you. Instead of that money pouring back into R&D salaries skyrocketed and executive pay compensation went through the roof. Wall Street Firms became the companies biggest lobbyist and you the small investor got screwed. Much like what has happened to politics over the last 150 years has happened in Wall Street. In politics business learned long ago that they could get better deals by funding certain candidates - and unfortunately the well funded candidates almost always win because they can sway the most voters with their airtime. Then our right to vote became watered down much like our right in the stock market.
Today a few hundred or even few thousand investors can make a blip in the market - but a single hedge fund or bank playing with millions of people money can and do manipulate stocks which is why the market has been in a constant sway up and down over the last 5 years. And while most of you have lost a significant portion of your retirement it has been banner years for the investing arms of all of the banks. They have been leveraging the ups and downs with options and can buy and sell options and make hundreds of millions each week on a few dollar swings.
Sprint to start selling iPhone 5 mid-Oct: report
NEW YORK (Reuters) - Sprint Nextel will start selling the next version of the Apple Inc iPhone in mid-October, according to a report in the Wall Street Journal that cited unnamed sources.
This would make Sprint, the third U.S. operator to become a cellphone distributor for Apple, the only iPhone provider offering unlimited use data services for a flat monthly fee if it sticks with its current wireless data offerings.
Verizon Wireless and AT&T will also start selling the device -- dubbed the iPhone 5 -- in mid-October, according to the story. Sprint, AT&T and Verizon declined comment and an Apple spokesperson was not immediately available for comment.
A mid October launch for the next iPhone agrees with Verizon's expectation, announced in July, that it would have a new iPhone in the fall.
AT&T Inc and Verizon Wireless already sell the iPhone 4 but these companies have eliminated flat-fee data plans and instead charge more for customers who use more data services.
Sprint shares closed 10.1 percent higher on Tuesday. An iPhone with unlimited data services is expected to help Sprint, which has been losing subscribers to its rivals, to start reporting net customer additions again, one analyst said.
"Combined with the company's marketing focus on its unlimited plan, iPhone would drive a rebound in subscriber growth," said Mizuho analyst Michael Nelson who said it could help Sprint exceed his expectation for fourth-quarter net subscriber additions of about 190,000.
Since Verizon and Sprint use the same network technology, analysts have long speculated that it made sense for Apple to widen its distribution to Sprint. While Sprint executives have previously said they would like to sell the iPhone, they have never confirmed they were in talks with Apple to do so.
If Sprint gets iPhone in October, T-Mobile USA, the no. 4 U.S. service will be the only national U.S. operator without rights to sell the device. But T-Mobile USA, a unit of Deutsche Telekom, is seeking regulatory approval for its plan to be bought by AT&T for $39 billion.
Asked about iPhone a T-Mobile USA spokesman Tom Harlin said that "ultimately that's Apple's decision." Harlin also said: "We're still focused on Android as our number one priority."
Smartphones based on Google's Android operating system outsold the iPhone in the second quarter of this year.
One problem that money-losing Sprint would face when selling the iPhone is the higher costs associated as operators tend to pay Apple higher subsidies for the device than for other phones.
"If they were to receive the iPhone I would expect their handset subsidies would increase and it would have a near term negative impact to margins," Nelson said.
This could be a tough sell for some investors, especially those who pushed its shares down 20 percent when it reported quarterly results on July 28 as many were skeptical it could meet its profit target for the year.
"Some investors would welcome subscriber growth and others would worry about the increased cost," said Nelson. "The bulls would argue it's well worth the cost because it would be accretive to long term margins."
Verizon Wireless -- a venture of Verizon Communications and Vodafone Group Plc -- started selling iPhone in February, ending AT&T's three years of exclusive U.S. rights to the the device.
Sprint shares closed up 33 cents at $3.59 on the New York Stock Exchange.
This would make Sprint, the third U.S. operator to become a cellphone distributor for Apple, the only iPhone provider offering unlimited use data services for a flat monthly fee if it sticks with its current wireless data offerings.
Verizon Wireless and AT&T will also start selling the device -- dubbed the iPhone 5 -- in mid-October, according to the story. Sprint, AT&T and Verizon declined comment and an Apple spokesperson was not immediately available for comment.
A mid October launch for the next iPhone agrees with Verizon's expectation, announced in July, that it would have a new iPhone in the fall.
AT&T Inc and Verizon Wireless already sell the iPhone 4 but these companies have eliminated flat-fee data plans and instead charge more for customers who use more data services.
Sprint shares closed 10.1 percent higher on Tuesday. An iPhone with unlimited data services is expected to help Sprint, which has been losing subscribers to its rivals, to start reporting net customer additions again, one analyst said.
"Combined with the company's marketing focus on its unlimited plan, iPhone would drive a rebound in subscriber growth," said Mizuho analyst Michael Nelson who said it could help Sprint exceed his expectation for fourth-quarter net subscriber additions of about 190,000.
Since Verizon and Sprint use the same network technology, analysts have long speculated that it made sense for Apple to widen its distribution to Sprint. While Sprint executives have previously said they would like to sell the iPhone, they have never confirmed they were in talks with Apple to do so.
If Sprint gets iPhone in October, T-Mobile USA, the no. 4 U.S. service will be the only national U.S. operator without rights to sell the device. But T-Mobile USA, a unit of Deutsche Telekom, is seeking regulatory approval for its plan to be bought by AT&T for $39 billion.
Asked about iPhone a T-Mobile USA spokesman Tom Harlin said that "ultimately that's Apple's decision." Harlin also said: "We're still focused on Android as our number one priority."
Smartphones based on Google's Android operating system outsold the iPhone in the second quarter of this year.
One problem that money-losing Sprint would face when selling the iPhone is the higher costs associated as operators tend to pay Apple higher subsidies for the device than for other phones.
"If they were to receive the iPhone I would expect their handset subsidies would increase and it would have a near term negative impact to margins," Nelson said.
This could be a tough sell for some investors, especially those who pushed its shares down 20 percent when it reported quarterly results on July 28 as many were skeptical it could meet its profit target for the year.
"Some investors would welcome subscriber growth and others would worry about the increased cost," said Nelson. "The bulls would argue it's well worth the cost because it would be accretive to long term margins."
Verizon Wireless -- a venture of Verizon Communications and Vodafone Group Plc -- started selling iPhone in February, ending AT&T's three years of exclusive U.S. rights to the the device.
Sprint shares closed up 33 cents at $3.59 on the New York Stock Exchange.
Is Tech Bubble 2.0 in the Works?
The late 90's was a magical time in the United States. The Cold War "Peace Dividend" was burning a hole in our pocket, owning a home was still the American dream, and for the most part, citizens were fond of our deeply-flawed but undeniably smart and likable President Clinton. The country had what was called a "budget surplus" and the Internet bubble made all things seemingly possible.
I can't emphasize the last point hard enough. Everything seemed possible in the age of the bubble. Forget the worn-out derision of the completely awesome Pets.com sock puppet as a symbol of the era. Pet food delivery? Pffft. There was a fully-funded company called Kozmo.com that promised to deliver you almost anything legal in an hour. Seriously. A person could get a sandwich, a soda, and a DVD delivered directly to their desk in less than 60-minutes without even making the new kid run out and fetch it. And Kozmo was actually thought by some to be a good investment.
So don't tell me about Internet Bubble 2.0. We've got to live in the here and now and figure out a way to make money with the hand we're being dealt. To help Breakout viewers better understand the forces driving the latest round of technology start-ups, I welcomed Mark Mahaney, a top notch analyst with Citigroup, and fellow greybeard who's been covering dotcoms since 1998.
Mahaney sees three or four major drivers of growth for the next wave of the Internet. Social media is obvious. But getting less attention is anything related to mobility. This is the nuts-and-bolts backbone stuff where the real engineers and inventors are putting together the networks and devices that are going to bring a truly mobile online world to you. 4G and wi-fi are for children; mobility is about clouds, credit card-sized tablets and phones, and your basic Buck Rogers stuff being patented, squatted on, and packaged. Google's (GOOG) acquisition of Motorola Mobility (MMI) is in this broad category. Mahaney regards mobility as bigger than broadband was in the early aughts; which is to say HUGE.
But mobility is the steak. The sizzle is all about Social Media. If the current era in any way resembles the late 1990s, it's in social media. Networking of a human sort enabling cheap reservations, a faux life, and a chance to catch up with people you intentionally lost track of after elementary school is where the real lunatic start-ups lurk. Is there anything more to these companies than an overrated movie and a slew of terrible IPOs in the pipeline?
Mahaney says yes. His basic argument is that the companies of today have benefited from the lessons of the last bubble. Social media start-ups are competing earlier and more viciously with one another, leading to a Darwinian process of culling the herd before outside investors get hurt. The relatively low cost of starting a social media company means those rising to the top have already destroyed would-be competitors, making them relatively battle-tested and more investment worthy. As an obvious example, Facebook didn't become the rage it is today before it destroyed Friendster, Myspace and the Winklevoss twins' psyche.
The low costs of social media concerns also means there's less of a gold-rush mentality in the race to the IPO. A well-run social media company isn't based on the idea of losing money on every transaction but making it up in volume; it's about making money on all free-standing transactions and building a customer base of rabid users.
Facebook doesn't much need to go public. The company prints cash, can offer early investors liquidity through firms like SecondMarket.com (itself a start-up, of course), and has more than enough deep pocket VCs to fund operations long before needing to tap the public market.
According to Mahaney, the bottom-line is a higher level of companies coming to the public markets after much more thorough vetting. It's less manic fun than the real Internet bubble and it's not quite ready for primetime just yet, but this round of start-up fever is off to a much more rational start. Forget LinkedIn (LNKD) and Groupon; those looking for guys like me and Mahaney to start talking about bubbles are going to have to wait until at least the likely IPO of Facebook in 2012 before we even begin throwing around the b-word.
If you need me before then I'll be forlornly listening to my Barenaked Ladies CD and wistfully recalling my Egghead.com short position.
I can't emphasize the last point hard enough. Everything seemed possible in the age of the bubble. Forget the worn-out derision of the completely awesome Pets.com sock puppet as a symbol of the era. Pet food delivery? Pffft. There was a fully-funded company called Kozmo.com that promised to deliver you almost anything legal in an hour. Seriously. A person could get a sandwich, a soda, and a DVD delivered directly to their desk in less than 60-minutes without even making the new kid run out and fetch it. And Kozmo was actually thought by some to be a good investment.
So don't tell me about Internet Bubble 2.0. We've got to live in the here and now and figure out a way to make money with the hand we're being dealt. To help Breakout viewers better understand the forces driving the latest round of technology start-ups, I welcomed Mark Mahaney, a top notch analyst with Citigroup, and fellow greybeard who's been covering dotcoms since 1998.
Mahaney sees three or four major drivers of growth for the next wave of the Internet. Social media is obvious. But getting less attention is anything related to mobility. This is the nuts-and-bolts backbone stuff where the real engineers and inventors are putting together the networks and devices that are going to bring a truly mobile online world to you. 4G and wi-fi are for children; mobility is about clouds, credit card-sized tablets and phones, and your basic Buck Rogers stuff being patented, squatted on, and packaged. Google's (GOOG) acquisition of Motorola Mobility (MMI) is in this broad category. Mahaney regards mobility as bigger than broadband was in the early aughts; which is to say HUGE.
But mobility is the steak. The sizzle is all about Social Media. If the current era in any way resembles the late 1990s, it's in social media. Networking of a human sort enabling cheap reservations, a faux life, and a chance to catch up with people you intentionally lost track of after elementary school is where the real lunatic start-ups lurk. Is there anything more to these companies than an overrated movie and a slew of terrible IPOs in the pipeline?
Mahaney says yes. His basic argument is that the companies of today have benefited from the lessons of the last bubble. Social media start-ups are competing earlier and more viciously with one another, leading to a Darwinian process of culling the herd before outside investors get hurt. The relatively low cost of starting a social media company means those rising to the top have already destroyed would-be competitors, making them relatively battle-tested and more investment worthy. As an obvious example, Facebook didn't become the rage it is today before it destroyed Friendster, Myspace and the Winklevoss twins' psyche.
The low costs of social media concerns also means there's less of a gold-rush mentality in the race to the IPO. A well-run social media company isn't based on the idea of losing money on every transaction but making it up in volume; it's about making money on all free-standing transactions and building a customer base of rabid users.
Facebook doesn't much need to go public. The company prints cash, can offer early investors liquidity through firms like SecondMarket.com (itself a start-up, of course), and has more than enough deep pocket VCs to fund operations long before needing to tap the public market.
According to Mahaney, the bottom-line is a higher level of companies coming to the public markets after much more thorough vetting. It's less manic fun than the real Internet bubble and it's not quite ready for primetime just yet, but this round of start-up fever is off to a much more rational start. Forget LinkedIn (LNKD) and Groupon; those looking for guys like me and Mahaney to start talking about bubbles are going to have to wait until at least the likely IPO of Facebook in 2012 before we even begin throwing around the b-word.
If you need me before then I'll be forlornly listening to my Barenaked Ladies CD and wistfully recalling my Egghead.com short position.
Ways to Watch TV for Free This Summer
broken television recently forced me to ponder the unthinkable: A summer without my favorite shows. As someone who consumes reality television with the passion that some reserve for five-star restaurants, I knew I couldn't resign myself to that fate. So I spent some time figuring out how to watch television online for free. (If we were going to have to buy a new television, we certainly didn't want to start squandering money on pay-per-episode shows.)
[In Pictures: 10 Smart Ways to Improve Your Budget.]
Here's what I discovered: There's enough free entertainment out there to make you wonder why you're paying $60 a month (or more) for cable. From the network news to serialized primetime shows to cable programming, the show you want can almost always be found online. In most cases, all the viewer has to do to access it is watch a short 30-second ad before the opening scenes, or a longer two-minute ad where a commercial break would normally be. Not a bad price, considering most of us watch ads anyway when we tune into our expensive cable channels.
If you're ready to cash in on these freebies yourself, here are my top four tips:
1. Use Hulu.com. As most people under age 25 know, the website Hulu.com makes it easy to watch many shows for free, including fan favorites such as The Daily Show with Jon Stewart, The Office, and Modern Family. With limited ads and easy streaming, the only downside is that not all shows are available at all times. That's when you might need to use the next option. [See also: The Economic Reality of Primetime Families.]
2. Before paying for a new episode of your favorite show on iTunes, do a Web search with the name of the show and the words "full episodes." Networks don't always make it easy to find the latest show through their websites, but a Web search with those terms will help turn it up. This technique helped us find the latest 60 Minutes, Survivor, and Amazing Race episodes, for example. But it can also turn up spam sites. Steer clear of any urls that you don't recognize.
3. Take advantage of the online content you might already be paying for. If you subscribe to a cable provider, you might be able to watch even more of your favorite shows online than you can find through your TV screen. For example, the HBO Go app allows users to access all episodes of shows such as Curb Your Enthusiasm and Sex and the City. We were happy to rediscover these long-lost (to us) shows. (To access to shows, you must be a HBO subscriber.)
[Teresa Giudice: Money Advice for the Real Housewife]
4. Check out iTunes, and not just for music. Networks often make their shows available through iTunes at low or no cost to the user. We also figured out that it was easier, and in some cases cheaper, to rent foreign films through iTunes than it would be through a video rental company (such as Netflix or Redbox). For just a few dollars, we downloaded an amazing French film (The Heartbreaker, for anyone who wants a recommendation) and watched it in high-definition on our laptop.
The good news: Our television started working again after a visit from the repair shop. So I'm back to watching Real Housewives and 16 & Pregnant on the big screen--but I'm still finding new ways to apply these TV-for-free techniques. We invested in a USB device that allows us to stream shows from our iPad onto the bigger television screen, so we can still watch all our new Internet shows for free. It's going to be a good summer.
[In Pictures: 10 Smart Ways to Improve Your Budget.]
Here's what I discovered: There's enough free entertainment out there to make you wonder why you're paying $60 a month (or more) for cable. From the network news to serialized primetime shows to cable programming, the show you want can almost always be found online. In most cases, all the viewer has to do to access it is watch a short 30-second ad before the opening scenes, or a longer two-minute ad where a commercial break would normally be. Not a bad price, considering most of us watch ads anyway when we tune into our expensive cable channels.
If you're ready to cash in on these freebies yourself, here are my top four tips:
1. Use Hulu.com. As most people under age 25 know, the website Hulu.com makes it easy to watch many shows for free, including fan favorites such as The Daily Show with Jon Stewart, The Office, and Modern Family. With limited ads and easy streaming, the only downside is that not all shows are available at all times. That's when you might need to use the next option. [See also: The Economic Reality of Primetime Families.]
2. Before paying for a new episode of your favorite show on iTunes, do a Web search with the name of the show and the words "full episodes." Networks don't always make it easy to find the latest show through their websites, but a Web search with those terms will help turn it up. This technique helped us find the latest 60 Minutes, Survivor, and Amazing Race episodes, for example. But it can also turn up spam sites. Steer clear of any urls that you don't recognize.
3. Take advantage of the online content you might already be paying for. If you subscribe to a cable provider, you might be able to watch even more of your favorite shows online than you can find through your TV screen. For example, the HBO Go app allows users to access all episodes of shows such as Curb Your Enthusiasm and Sex and the City. We were happy to rediscover these long-lost (to us) shows. (To access to shows, you must be a HBO subscriber.)
[Teresa Giudice: Money Advice for the Real Housewife]
4. Check out iTunes, and not just for music. Networks often make their shows available through iTunes at low or no cost to the user. We also figured out that it was easier, and in some cases cheaper, to rent foreign films through iTunes than it would be through a video rental company (such as Netflix or Redbox). For just a few dollars, we downloaded an amazing French film (The Heartbreaker, for anyone who wants a recommendation) and watched it in high-definition on our laptop.
The good news: Our television started working again after a visit from the repair shop. So I'm back to watching Real Housewives and 16 & Pregnant on the big screen--but I'm still finding new ways to apply these TV-for-free techniques. We invested in a USB device that allows us to stream shows from our iPad onto the bigger television screen, so we can still watch all our new Internet shows for free. It's going to be a good summer.
Cheapest Cars to Own
So you want to cut the cost of your commute. If you're looking to save money with a gas sipper, don't stop at the sticker price and fuel economy. Other ownership expenses -- from repairs and maintenance to depreciation and insurance -- can push up what you actually spend by hundreds of dollars a year.
We asked Vincentric, an automotive data firm, for a list of vehicles with the lowest five-year ownership costs in four categories. The data include all of the costs listed above, plus taxes and financing. Then we compared those vehicles with ones that did well in Kiplinger's ranking system -- considering performance, safety and value -- to determine the best bang for your buck.
Compact sedans. You can't find a cheaper car to own than the base-level, manual transmission Nissan Versa ($10,750). But in exchange for paying only $27,028 over five years, you get a car without air conditioning, anti-lock brakes or even a radio. We think a better choice is the sporty Nissan Sentra SR ($18,530). Despite an $8,000 difference upfront, the five-year ownership cost is only about $4,000 more. (The ownership cost assumes you are paying 5.6% interest on a five-year loan but that you recoup the cost of the car, minus depreciation, when you sell the vehicle after five years.) The Sentra boasts a full complement of safety equipment -- ABS, stability control, traction control and six airbags -- and has a 60/40 split folding rear seat. Plus, you can get an automatic transmission at no extra charge. The Sentra has more power than the Versa but gets about the same fuel economy (30 miles per gallon in combined city and highway driving).
Midsize sedans. The base model Toyota Camry ($21,630) is the cheapest midsize sedan to own, with a five-year cost of $34,388. It's comfortable enough, but its handling is lackluster and the interior is frumpy. On Kiplinger's value scale, the Honda Accord LX ($22,730) is the clear winner over the Camry. Its five-year cost is $1,236 more, but the Accord gets a five-star overall safety rating from the government versus four stars for the Camry, and its four-cylinder engine is more powerful and gets better mileage (27 mpg overall). Spot-on handling and a larger interior give it a boost, too.
Luxury sedans. Lexus's most recent entry in its hybrid series, the CT 200h ($29,995), has a five-year ownership cost of about $44,400. That is the lowest of the luxury class, partly because the CT 200h gets a thrifty 42 mpg overall. The downside: Both power and space leave much to be desired.
To find an entry-luxury vehicle that did well in our rankings, we had to move up the list to the Audi A4 2.0T ($33,175). It doesn't have the green cred of the CT 200h, but it gets our vote for value -- even with a five-year ownership cost of $51,217. The four-cylinder engine puts out 211 horses but manages 25 mpg combined. Legroom, headroom and cargo space are decent for a compact car, and resale value is 46% after three years.
Family crossovers. When it comes to holding a couple of kids and luggage, most of the midsize and large crossovers get the job done. And the Toyota Venza ($27,385) has the lowest five-year ownership cost in the segment: $38,733. Its four-cylinder engine gets an overall 23 mpg, making it a fine choice if fuel economy is your top goal. But its 182-horsepower engine lacks zip, and its handling feels less than precise.
If you want more power, more room and a better driving experience, consider Kiplinger's Best in Class winner for 2011, the Mazda CX-9 Sport ($29,930).
It seats seven, and it has three-zone climate control to keep everyone comfortable. The V6 puts out 273 horses, with about average fuel economy for the segment, at 19 mpg overall. The CX-9 offers nearly 50 cubic feet of cargo space with the third row folded, and more than most sedans with it up. Over five years, the ownership cost is $45,383.
We asked Vincentric, an automotive data firm, for a list of vehicles with the lowest five-year ownership costs in four categories. The data include all of the costs listed above, plus taxes and financing. Then we compared those vehicles with ones that did well in Kiplinger's ranking system -- considering performance, safety and value -- to determine the best bang for your buck.
2011 Nissan Sentra
Midsize sedans. The base model Toyota Camry ($21,630) is the cheapest midsize sedan to own, with a five-year cost of $34,388. It's comfortable enough, but its handling is lackluster and the interior is frumpy. On Kiplinger's value scale, the Honda Accord LX ($22,730) is the clear winner over the Camry. Its five-year cost is $1,236 more, but the Accord gets a five-star overall safety rating from the government versus four stars for the Camry, and its four-cylinder engine is more powerful and gets better mileage (27 mpg overall). Spot-on handling and a larger interior give it a boost, too.
Luxury sedans. Lexus's most recent entry in its hybrid series, the CT 200h ($29,995), has a five-year ownership cost of about $44,400. That is the lowest of the luxury class, partly because the CT 200h gets a thrifty 42 mpg overall. The downside: Both power and space leave much to be desired.
To find an entry-luxury vehicle that did well in our rankings, we had to move up the list to the Audi A4 2.0T ($33,175). It doesn't have the green cred of the CT 200h, but it gets our vote for value -- even with a five-year ownership cost of $51,217. The four-cylinder engine puts out 211 horses but manages 25 mpg combined. Legroom, headroom and cargo space are decent for a compact car, and resale value is 46% after three years.
2011 Toyota Venza
If you want more power, more room and a better driving experience, consider Kiplinger's Best in Class winner for 2011, the Mazda CX-9 Sport ($29,930).
It seats seven, and it has three-zone climate control to keep everyone comfortable. The V6 puts out 273 horses, with about average fuel economy for the segment, at 19 mpg overall. The CX-9 offers nearly 50 cubic feet of cargo space with the third row folded, and more than most sedans with it up. Over five years, the ownership cost is $45,383.
Easy Ways to Increase Your Savings
Banks and financial websites are offering more innovative tools, incentives and higher rates these days to help you pump up your savings.
Programs like Bank of America's Keep the Change even kick in some money to help you out in the beginning. Others like SmartyPig.com are dishing out cash-back rewards on their co-branded prepaid debit cards that you can shuttle into savings.
Even so, don't count on debit card cash-back rewards programs to help you for long. Chase, Wells Fargo and PNC are among the banks phasing out these debit card programs. Banks are looking at huge changes in revenue due to new regulations, says Ron Shevlin, a senior analyst at Aite Group LLC, a research firm in Boston. The upshot is they're less willing to hand out incentives.
But for consumers with hefty savings or multiple accounts, incentives can still be sweet.
Ultimately, building savings by paying yourself first with direct deposit is best, says Greg McBride, CFA, senior financial analyst at Bankrate.com. That tactic builds savings momentum, he says.
But for some extra oomph, here are five easy tips to build on your savings:
Get Paid Incentives for Saving
Bank incentives are alive and well.
With Bank of America's Keep the Change program, every time you make a debit card purchase, the bank rounds up the number to the nearest dollar amount and deposits it in your savings account. The bank also will match your savings for the first three months, up to $250.
"It's the electronic equivalent of dropping spare change in a glass jar," McBride says.
BBVA Compass has a similar program. When you link your checking account with its Build My Savings account, the bank matches a percentage of your transfers, up to $250 per year. And U.S. Bank has a S.T.A.R.T. savings program, which hands out a $50 Rewards Visa Card when your balance reaches $1,000.
Still, incentives may be more than offset by higher fees and lower yields, McBride says.
Opt for Credit Card Savings Accounts
Some credit card companies are offering tempting online savings deals.
For example, CapitalOne InterestPlus savings paid 1.1 percent on balances of $1,000 or more in late May 2011 for anyone who opens this type of account. That's compared to average savings yields of 0.68 percent offered nationally, according to Bankrate's rate comparison tool.
An American Express online savings account also paid a high yield -- 1.15 percent.
"Since they generally don't have physical branches, they can pay higher interest rates," says Ken Paterson, vice president of research operations at Mercator Advisory Group, a research firm based in Maynard, Mass. And the accounts are insured by the Federal Deposit Insurance Corp., to $250,000, he says.
Harness the Power of Social Networking
Social networking sites can turbocharge savings, especially for teens.
Take MatchFund.com, which lets parents match their teens' savings deposits. Teens also can create savings goals like saving for an iPod. And their spending is co-managed with parents via a categorized spending card, which organizes purchases into groups such as music, games and clothing for parents to approve.
"Kids can actually complete financial lessons and get rewards from mom and dad as a result," says Nick Mokey, a staff writer at Digitaltrends.com. "You're teaching kids about money with things that matter to them like an iPod."
Online savings site SmartyPig.com also lets you set financial goals to which people can contribute to help you meet them. And its savings account interest rate was a hefty 1.35 percent in May 2011.
Bigger Balances, Higher Rates
Balances of more than $25,000 usually earn you higher rates.
For example, Citibank's Ultimate Savings Account has rates that reward higher balances. If you stash at least $25,000, your interest rate is triple that of deposits under $10,000 (rates from May 2011).
And Wells Fargo's High Yield Savings Account pays four times more for balances of more than $25,000 than for deposits of less than $10,000 in New York; it may vary in other states. If you link to a PMA Premier Checking Account, the bank adds a bonus of 0.1 percent (also in New York).
Compare rates for other kinds of accounts like money markets via search engines to find the best yields, McBride says. "Higher-yield accounts may not automatically be the best return on your money," he says.
Also, Shevlin says consumers have more leverage to negotiate higher rates at smaller banks, especially if you have multiple accounts and big balances. "Negotiate better rates where you are," he says.
Link Cash-Back Rewards to Savings
Cash-back rewards are another way to pump up savings, especially for big spenders.
Take SmartyPig's prepaid cash debit rewards card. It lets you earn up to 10 percent back on everyday purchases at 9,000 local and regional retailers. That cash-back money is then applied to savings goals. Also, with the Fidelity Investment Rewards American Express card you earn 2 percent (May 2011 rate) cash back on purchases that is deposited into a cash account or brokerage account. "That's a great payout," McBride says.
Stay on top of your transactions, McBride says. "People with the biggest trouble saving are most inclined to trip up," he says. "If you pay your balance every month, it's a great way to get paid for everyday transactions."
Programs like Bank of America's Keep the Change even kick in some money to help you out in the beginning. Others like SmartyPig.com are dishing out cash-back rewards on their co-branded prepaid debit cards that you can shuttle into savings.
Even so, don't count on debit card cash-back rewards programs to help you for long. Chase, Wells Fargo and PNC are among the banks phasing out these debit card programs. Banks are looking at huge changes in revenue due to new regulations, says Ron Shevlin, a senior analyst at Aite Group LLC, a research firm in Boston. The upshot is they're less willing to hand out incentives.
But for consumers with hefty savings or multiple accounts, incentives can still be sweet.
Ultimately, building savings by paying yourself first with direct deposit is best, says Greg McBride, CFA, senior financial analyst at Bankrate.com. That tactic builds savings momentum, he says.
But for some extra oomph, here are five easy tips to build on your savings:
Get Paid Incentives for Saving
Bank incentives are alive and well.
With Bank of America's Keep the Change program, every time you make a debit card purchase, the bank rounds up the number to the nearest dollar amount and deposits it in your savings account. The bank also will match your savings for the first three months, up to $250.
"It's the electronic equivalent of dropping spare change in a glass jar," McBride says.
BBVA Compass has a similar program. When you link your checking account with its Build My Savings account, the bank matches a percentage of your transfers, up to $250 per year. And U.S. Bank has a S.T.A.R.T. savings program, which hands out a $50 Rewards Visa Card when your balance reaches $1,000.
Still, incentives may be more than offset by higher fees and lower yields, McBride says.
Opt for Credit Card Savings Accounts
Some credit card companies are offering tempting online savings deals.
For example, CapitalOne InterestPlus savings paid 1.1 percent on balances of $1,000 or more in late May 2011 for anyone who opens this type of account. That's compared to average savings yields of 0.68 percent offered nationally, according to Bankrate's rate comparison tool.
An American Express online savings account also paid a high yield -- 1.15 percent.
"Since they generally don't have physical branches, they can pay higher interest rates," says Ken Paterson, vice president of research operations at Mercator Advisory Group, a research firm based in Maynard, Mass. And the accounts are insured by the Federal Deposit Insurance Corp., to $250,000, he says.
Harness the Power of Social Networking
Social networking sites can turbocharge savings, especially for teens.
Take MatchFund.com, which lets parents match their teens' savings deposits. Teens also can create savings goals like saving for an iPod. And their spending is co-managed with parents via a categorized spending card, which organizes purchases into groups such as music, games and clothing for parents to approve.
"Kids can actually complete financial lessons and get rewards from mom and dad as a result," says Nick Mokey, a staff writer at Digitaltrends.com. "You're teaching kids about money with things that matter to them like an iPod."
Online savings site SmartyPig.com also lets you set financial goals to which people can contribute to help you meet them. And its savings account interest rate was a hefty 1.35 percent in May 2011.
Bigger Balances, Higher Rates
Balances of more than $25,000 usually earn you higher rates.
For example, Citibank's Ultimate Savings Account has rates that reward higher balances. If you stash at least $25,000, your interest rate is triple that of deposits under $10,000 (rates from May 2011).
And Wells Fargo's High Yield Savings Account pays four times more for balances of more than $25,000 than for deposits of less than $10,000 in New York; it may vary in other states. If you link to a PMA Premier Checking Account, the bank adds a bonus of 0.1 percent (also in New York).
Compare rates for other kinds of accounts like money markets via search engines to find the best yields, McBride says. "Higher-yield accounts may not automatically be the best return on your money," he says.
Also, Shevlin says consumers have more leverage to negotiate higher rates at smaller banks, especially if you have multiple accounts and big balances. "Negotiate better rates where you are," he says.
Link Cash-Back Rewards to Savings
Cash-back rewards are another way to pump up savings, especially for big spenders.
Take SmartyPig's prepaid cash debit rewards card. It lets you earn up to 10 percent back on everyday purchases at 9,000 local and regional retailers. That cash-back money is then applied to savings goals. Also, with the Fidelity Investment Rewards American Express card you earn 2 percent (May 2011 rate) cash back on purchases that is deposited into a cash account or brokerage account. "That's a great payout," McBride says.
Stay on top of your transactions, McBride says. "People with the biggest trouble saving are most inclined to trip up," he says. "If you pay your balance every month, it's a great way to get paid for everyday transactions."
Meet the Credit-Card King With $300,000 in Credit
Meet Pete D'Arruda: A man with 25 charge cards, more than a quarter of a million dollars in available credit -- and a lot of financial self-control.
D'Arruda says he has more than $300,000 in available credit thanks to some 25 Visas, Mastercards, and individual store, airlines and gas cards -- or about $12,000 per card. If he throws in his home-equity line of credit, it's close to $400,000.
"It's not taboo to have a bunch of credit cards," said D'Arruda, a personal finance consultant who has been building his credit trove for about five years. "It's about how you manage them."
The founding principal of Capital Financial Advisory Group in Cary, N.C., and author of three personal-finance books is testing the more-is-better theory of credit cards: The more cards and available credit one has, the better the credit score -- assuming, of course, the bills are paid promptly.
With a FICO credit score in the 810-815 range, it's working for him. But credit-agency experts say it's unnecessary and could create a financial maelstrom for those less diligent with their money.
"For many people they would end up with $350,000 in debt and that would not be a very good thing," said Rod Griffin, director of public education for Experian.
D'Arruda charges everything from coffee to the rent for his office space on credit cards. He prides himself on his ability to manage them all and to pay them promptly, keeping himself from falling into a debt spiral.
"I like to pay my bills on time," he said. "Even though I have all those outstanding potential balances, I don't have many outstanding balances."
What he does have, he boasts, is hundreds of thousands of miles and points, numerous discounts and even freebies from retail stores and vacation spots, waived annual fees on some credit cards and better interest rates on insurance and car and home loans. Typically, the higher the credit score, the lower the interest rate. What's more, he's got a running tally through credit-card statements on where he's spent money both personally and for business.
"I'm getting paid to have a good credit score," he said.
He's got a Disney Visa card from Chase -- with Buzz Lightyear on it that entertains his daughter Carrie -- with which he's accumulated enough points to pay for a Disney cruise this Thanksgiving. His platinum American Express card points will cover the airfare to Orlando, Fla.
Even cards with fees are a bonus for D'Arruda. He's got a Visa Black Card, a new elite card with concierge service, access to airport lounges, cash-back rewards or airfare on any airline with no blackouts. He's assessing it for a year to determine if he'll use the rewards programs enough to cover the cost of the $495 annual fee, but he got the fee waived to do so.
"They pulled my credit score and saw that I was a good risk," he said.
Credit scores are calculated through a complicated and proprietary algorithm of measures that differ among scoring agencies. However, there are three major pieces of your credit-score picture that all follow to closely
The most important: Your bill-paying history. It will account for as much as 35% of your total score. Pay all your bills on time. Even if it's just the minimum payment, make sure that bill is marked paid on the designated date -- or sooner. D'Arruda said he sometimes makes two payments a month to keep his balances in order.
Next up is what credit-ratings agencies call the "utilization rate," or your debt-to-available-credit ratio. D'Arruda, who said his typically stands at about 10% to 15% and no more than 25%, began this credit-building experiment based on the simple notion that your credit score is mostly determined by the amount of available credit subtracted by the amount outstanding.
It's a fussier method than that, but your utilization rate is worth some 30% of your score. Creditors don't want to see the ratio over 30% and consider it an important link to your financial acumen and any lifestyle changes you may be facing.
"You don't need a lot of credit cards to have a good utilization rate," said Barry Paperno, consumer operations manager for myfico.com, the consumer arm of credit-scorer FICO. "And obtaining 25 credit cards for your score is overkill. Utilization looks at percentages more than dollars."
Consider it this way: If you have $300,000 in available credit and carried a $30,000 balance, your utilization rate is 10%; if the available credit stands at $3,000 and you charged $300, your utilization rate is the same.
What you must have are credit limits that meet your charging needs, said Steven Katz, senior director of operations for TransUnion, the credit- and information-management company. "You may need a smaller number of cards with higher limits or more cards with smaller limits to stay under that 30% utilization rate."
Don't max out one card over another either in order to keep the utilization rates under 30%, he added. If you take out a store credit card with a $5,000 limit and you charge $4,750 for a home-theater system, your utilization rate on that card will set off alarms.
"It's a good idea to try to keep the balance on each card under 30% of the limit," Katz said. "It will help guide your efforts to keep your overall credit use low."
A perfect score is near impossible to get and having credit but not using it won't get you there. That's doesn't mean that you have to carry a balance that you must then pay interest fees on each month. You just need to use the card and pay it off to maximize your credit score.
"The ideal place to be is under a 10% utilization rate but over 0%," FICO's Paperno said. "There needs to be some kind of recent activity" to activate a score.
Your credit mix and history contribute about 15% to your score. Creditors like to see how you handle revolving credit, or credit cards, and installment loans, like mortgages and car and student loans. They average the age of the accounts divided by the number of accounts. Surprisingly, income doesn't play a very significant part of the credit score.
D'Arruda had a long credit history before he started on this venture and said he was cautious about how much credit he applied for when. That's because your score gets dinged each time it's checked for new credit. Applying for too much credit at once has creditors worried that you're in a financial bind and getting ready to rely on credit you might not pay back.
New accounts opened also impact your score by about 10% for much of the same reason. "Taking on new credit has shown to indicate a higher level of risk," Paperno said. "People who go into default tend to have added new credit more recent than those who haven't."
D'Arruda admits he started collecting credit cards as a personal challenge to see how many he could get before he got cut off. The limits on each card vary, of course, and he's even got an American Express that has no limit, though he's not willing to test what that might mean.
"This is a lesson in discipline," he said. "When you get the credit card, it's like free money. You have to manage them well. It all comes down to not overspending because it's not your money."
And he said he only chooses cards that will help him with points, miles, cash back and other perks. He likes the 30% discounts he gets at Kohl's, for example, and the special sales offered only to Home Depot and Best Buy cardholders. He's a big fan of the Capital One card because it offers double miles.
His tool for limiting credit-card abuse? A metal money clip. It only holds five cards at a time, which helps him to monitor spending.
"You've got to treat it like cash," he said. "You have to pay it back and if you do it wrong, you have to pay a whole bunch more back."
D'Arruda says he has more than $300,000 in available credit thanks to some 25 Visas, Mastercards, and individual store, airlines and gas cards -- or about $12,000 per card. If he throws in his home-equity line of credit, it's close to $400,000.
"It's not taboo to have a bunch of credit cards," said D'Arruda, a personal finance consultant who has been building his credit trove for about five years. "It's about how you manage them."
The founding principal of Capital Financial Advisory Group in Cary, N.C., and author of three personal-finance books is testing the more-is-better theory of credit cards: The more cards and available credit one has, the better the credit score -- assuming, of course, the bills are paid promptly.
With a FICO credit score in the 810-815 range, it's working for him. But credit-agency experts say it's unnecessary and could create a financial maelstrom for those less diligent with their money.
"For many people they would end up with $350,000 in debt and that would not be a very good thing," said Rod Griffin, director of public education for Experian.
D'Arruda charges everything from coffee to the rent for his office space on credit cards. He prides himself on his ability to manage them all and to pay them promptly, keeping himself from falling into a debt spiral.
"I like to pay my bills on time," he said. "Even though I have all those outstanding potential balances, I don't have many outstanding balances."
What he does have, he boasts, is hundreds of thousands of miles and points, numerous discounts and even freebies from retail stores and vacation spots, waived annual fees on some credit cards and better interest rates on insurance and car and home loans. Typically, the higher the credit score, the lower the interest rate. What's more, he's got a running tally through credit-card statements on where he's spent money both personally and for business.
"I'm getting paid to have a good credit score," he said.
He's got a Disney Visa card from Chase -- with Buzz Lightyear on it that entertains his daughter Carrie -- with which he's accumulated enough points to pay for a Disney cruise this Thanksgiving. His platinum American Express card points will cover the airfare to Orlando, Fla.
Even cards with fees are a bonus for D'Arruda. He's got a Visa Black Card, a new elite card with concierge service, access to airport lounges, cash-back rewards or airfare on any airline with no blackouts. He's assessing it for a year to determine if he'll use the rewards programs enough to cover the cost of the $495 annual fee, but he got the fee waived to do so.
"They pulled my credit score and saw that I was a good risk," he said.
Credit scores are calculated through a complicated and proprietary algorithm of measures that differ among scoring agencies. However, there are three major pieces of your credit-score picture that all follow to closely
The most important: Your bill-paying history. It will account for as much as 35% of your total score. Pay all your bills on time. Even if it's just the minimum payment, make sure that bill is marked paid on the designated date -- or sooner. D'Arruda said he sometimes makes two payments a month to keep his balances in order.
Next up is what credit-ratings agencies call the "utilization rate," or your debt-to-available-credit ratio. D'Arruda, who said his typically stands at about 10% to 15% and no more than 25%, began this credit-building experiment based on the simple notion that your credit score is mostly determined by the amount of available credit subtracted by the amount outstanding.
It's a fussier method than that, but your utilization rate is worth some 30% of your score. Creditors don't want to see the ratio over 30% and consider it an important link to your financial acumen and any lifestyle changes you may be facing.
"You don't need a lot of credit cards to have a good utilization rate," said Barry Paperno, consumer operations manager for myfico.com, the consumer arm of credit-scorer FICO. "And obtaining 25 credit cards for your score is overkill. Utilization looks at percentages more than dollars."
Consider it this way: If you have $300,000 in available credit and carried a $30,000 balance, your utilization rate is 10%; if the available credit stands at $3,000 and you charged $300, your utilization rate is the same.
What you must have are credit limits that meet your charging needs, said Steven Katz, senior director of operations for TransUnion, the credit- and information-management company. "You may need a smaller number of cards with higher limits or more cards with smaller limits to stay under that 30% utilization rate."
Don't max out one card over another either in order to keep the utilization rates under 30%, he added. If you take out a store credit card with a $5,000 limit and you charge $4,750 for a home-theater system, your utilization rate on that card will set off alarms.
"It's a good idea to try to keep the balance on each card under 30% of the limit," Katz said. "It will help guide your efforts to keep your overall credit use low."
A perfect score is near impossible to get and having credit but not using it won't get you there. That's doesn't mean that you have to carry a balance that you must then pay interest fees on each month. You just need to use the card and pay it off to maximize your credit score.
"The ideal place to be is under a 10% utilization rate but over 0%," FICO's Paperno said. "There needs to be some kind of recent activity" to activate a score.
Your credit mix and history contribute about 15% to your score. Creditors like to see how you handle revolving credit, or credit cards, and installment loans, like mortgages and car and student loans. They average the age of the accounts divided by the number of accounts. Surprisingly, income doesn't play a very significant part of the credit score.
D'Arruda had a long credit history before he started on this venture and said he was cautious about how much credit he applied for when. That's because your score gets dinged each time it's checked for new credit. Applying for too much credit at once has creditors worried that you're in a financial bind and getting ready to rely on credit you might not pay back.
New accounts opened also impact your score by about 10% for much of the same reason. "Taking on new credit has shown to indicate a higher level of risk," Paperno said. "People who go into default tend to have added new credit more recent than those who haven't."
D'Arruda admits he started collecting credit cards as a personal challenge to see how many he could get before he got cut off. The limits on each card vary, of course, and he's even got an American Express that has no limit, though he's not willing to test what that might mean.
"This is a lesson in discipline," he said. "When you get the credit card, it's like free money. You have to manage them well. It all comes down to not overspending because it's not your money."
And he said he only chooses cards that will help him with points, miles, cash back and other perks. He likes the 30% discounts he gets at Kohl's, for example, and the special sales offered only to Home Depot and Best Buy cardholders. He's a big fan of the Capital One card because it offers double miles.
His tool for limiting credit-card abuse? A metal money clip. It only holds five cards at a time, which helps him to monitor spending.
"You've got to treat it like cash," he said. "You have to pay it back and if you do it wrong, you have to pay a whole bunch more back."
Retail Rewards
No money down: Retailers are adding free loyalty programs in addition to store-branded credit cards.
• Don't shop around: Shopping at just three or four stores racks up more loyalty points than buying at many stores.
• Elite perks: The Neiman Marcus credit card, InCircle, tracks what shoppers buy and how they cross-shop the company's different stores including Bergdorf Goodman.
• Combine to conquer: Avoid carrying all those rewards cards. The KeyRing app digitizes program barcodes onto a smartphone. At the register, just scan from the phone.
• Digital divide: Creating a separate email address to give to stores keeps a shopper's primary inbox clear.<
• Big pharma: CVS/Pharmacy ExtraCare rewards program has 67 million members.
• Rewards reapers: About 3 out of 4 Americans belong to a retail loyalty card program.
• Check receipts: Retailers often tack some of the best coupons to the end of a receipt.
• Don't shop around: Shopping at just three or four stores racks up more loyalty points than buying at many stores.
• Elite perks: The Neiman Marcus credit card, InCircle, tracks what shoppers buy and how they cross-shop the company's different stores including Bergdorf Goodman.
• Combine to conquer: Avoid carrying all those rewards cards. The KeyRing app digitizes program barcodes onto a smartphone. At the register, just scan from the phone.
• Digital divide: Creating a separate email address to give to stores keeps a shopper's primary inbox clear.<
• Big pharma: CVS/Pharmacy ExtraCare rewards program has 67 million members.
• Rewards reapers: About 3 out of 4 Americans belong to a retail loyalty card program.
• Check receipts: Retailers often tack some of the best coupons to the end of a receipt.
Why Pay Full Price?
With retailers' rewards programs getting increasingly sophisticated, preferred customers can get discounts: points they can turn into store credit, coupons printed on sales receipts, the opportunity to buy merchandise before the general public -- even secret password and birthday sales.
At Talbots, Black Card customers -- anyone with a store-branded credit card who spends $1,000 annually -- were given a sneak peek and chance to order the spring collection early. Old Navy, the bargain-priced division of Gap Inc., had a secret sale last year, with its $8.50 camisoles for $2. To receive the discount, shoppers had to flash a coupon or say to a sales associate "Cami for me." The clothing store Anthropologie offers discounts to Anthro card members on their birthdays. DSW does as well, along with another coupon on shoppers' half-birthdays.
[More from WSJ.com: The Online World of Female Desire]
What began as a barcode fob for grocery store coupons in the 1990s has evolved into a high-tech way for retailers to track the every move of their biggest, most-frequent spenders. Stores can market to shoppers directly based on the products they buy, aiming to win an even greater share of their wallets, in retailer parlance. Of course, to reap rewards, shoppers must first establish themselves as frequent customers. About three out of four Americans belong to a retail loyalty card program, according to ACI Worldwide, which handles electronics payment for hundreds of retailers and financial institutions.
This discounts are worth it to stores in order to keep the most loyal customers happy. Fifteen percent of a retailer's most loyal customers can account for as much as half of its sales, says Keith Jelinek, director in the retail division of consulting firm AlixPartners. It takes between 12 and 20 new customers to replace a lost loyal customer, says Keith Colbourn, vice president, global loyalty practice leader at Dunnhumby, an analytics firm that works with retail giants Tesco PLC and Macy's Inc.
CVS/Pharmacy connected its rewards program with its social media efforts. Just before Easter, CVS/Pharmacy asked its Facebook fans to vote on whether they liked Cadbury Creme Eggs or marshmallow Peeps. Coupons for the winning item -- $1 off two eggs -- were loaded into the in-store coupon center for one day. "We delivered real value, instantaneously, on the basis of their interests," says Rob Price, chief marketing officer for CVS/Pharmacy, the retail division of CVS Caremark Corp. (NYSE: CVS - News).
To get discounts, shoppers must hand over personal data. Often, the more details given, the more discounts received, which brings up the issue of data privacy and the corresponding pitfalls.
Floor staff at J.Crew, Ann Taylor and other retailers routinely ask shoppers for their email addresses and nearly every chain store, from Walgreens to Wet Seal, has a spot on its website for consumers to sign up to receive store emails. It's a quick, cheap way for a retailer to tell shoppers about deals and discounts -- and arguably the least invasive piece of information a shopper can give a retailer.
In order to receive their emails, many retailers also will require a name and, in some cases a ZIP code or a date of birth. Some take it a step further and ask users to set up an online account that requires a login, allowing a retailer to track how often they visit the site, as well as what items draw their attention.
At J.C. Penney, shoppers can give a cellphone number to receive as many as eight mobile coupons a month. Old Navy shoppers can receive text messages with details on the featured item of the week.
[More from WSJ.com: Looking to Speed Security for Frequent Fliers]
To sign up for a retailer's loyalty program usually requires name, mailing address and telephone number. These programs assign shoppers a number, often a barcode or a phone number, essentially applying a digital tracking number to each customer.
DSW uses this barcode-generated purchase data to make its marketing more relevant. "If someone is only interested in buying hiking boots, there's probably not a lot of point in talking to them about the latest high heels that have come in," says Derek Ungless, chief marketing officer.
Supermarket chain Kroger Co. (NYSE: KR - News) sends individualized mailings to millions of its rewards program members several times a year. The packets of coupons from the store as well as its suppliers are based on each shopper's habits. "Like snowflakes, no two are alike," says Ted Sarosy, vice president of loyalty for Kroger.
Now, retailers are devising ways to track barcode holders outside the store. CVS, which has 67 million loyalty card members, recently offered fans of its Beauty Club Facebook page a free antibacterial product. For the voucher, shoppers had to enter their ExtraCare number and email address. "That's another way for us to fingerprint the customer to give them more personalized value," said CVS's Mr. Price.
More than 7,100 CVS locations have in-store coupon centers, computerized columns that, when shoppers swipe a rewards card, spit out personalized coupons. The center is designed to "influence their shopping visit that day," says Mr. Price. The deals attached to a receipt are meant to encourage another visit.
The most details a consumer gives are through a branded credit card, which provides detailed financial information. To encourage use of its credit card, Target Corp. (NYSE: TGT - News) began last fall offering shoppers 5% off every purchase with its branded credit card, the only loyalty program offered by the big box chain.
With Gap Inc.'s credit card program, shoppers get advance notice of sales, exclusive offers and 10% off all Tuesday purchases. Shoppers receive five points for each dollar spent at one of the company's brands.
Neiman Marcus Group Inc.'s loyalty program, InCircle, is a credit card that can only be used at Neiman Marcus's five divisions, which include Bergdorf Goodman and Last Call. The card allows the retailer to keep track of purchases, as well as shopping frequency and any cross-shopping among its brands. The loyalty program "can retain customers, it can get new customers, it could win back anybody who has lapsed," says Maggie Lucas, director of marketing.
[More from WSJ.com: Do's and Don'ts for Online Fashion Shopping]
Although the majority of apparel and accessories retailers tie their loyalty program to a credit card, some companies have begun to unbundle the two as skittish customers have shunned credit in favor of cash or debit payments.
By adding a non-credit-card loyalty program with free enrollment, retailers widen the appeal of the rewards program. Chains with non-credit card loyalty programs include Sears Holdings Corp., which includes Kmart, Modell's Sporting Goods and teen retailer American Eagle Outfitters Inc.
Women's clothing chain Talbots Inc. split its rewards program into three parts in 2009 as part of a brand overhaul. Along with its existing charge card, the company added a non-credit card, allowing it to capture information about its in-store shoppers similar to that of online shoppers. If someone makes a purchase online or through the catalogue, "we instantly capture her information," says Lori Wagner, chief marketing officer.
Most systems dole out points based on the amount spent. Members of the DSW Rewards program earn a $10 certificate for every 1,500 points earned. (Points differ based on full price or clearance items, but equate to roughly 10 points per $1 spent.) Customers who rack up more than 6,000 points each year achieve Premiere Rewards status. That top tier of customers can receive triple points on purchases two days a year of their choosing.
The company mails out certificates to its 16 million rewards members because customers have said they prefer that method. "It's not a bill," says Kelly Cook, vice president of customer strategy and engagement. "It is happiness."
Unrewarding
Privacy concerns: Each rewards program has a statement outlining a retailer's privacy policies. Read it carefully to know what information is being collected, where your information will be used and what other companies it may be given to without your knowledge.
To unsubscribe: Getting off a retailer's email list is usually pretty easy. Find an email from the retailer in question, scroll to the bottom and look for a link that says "Unsubscribe," often in tiny print. If you have an account on a retailer's website, login and search for the unsubscribe option in your account settings.
Opting out entirely: Opening a loyalty card is much easier than closing one. To opt out, shoppers often need to take their card to a store to speak to an associate or send a written request to the company directly to close an account. Ask the retailer to discontinue use of your information entirely, including third-party distribution.
At Talbots, Black Card customers -- anyone with a store-branded credit card who spends $1,000 annually -- were given a sneak peek and chance to order the spring collection early. Old Navy, the bargain-priced division of Gap Inc., had a secret sale last year, with its $8.50 camisoles for $2. To receive the discount, shoppers had to flash a coupon or say to a sales associate "Cami for me." The clothing store Anthropologie offers discounts to Anthro card members on their birthdays. DSW does as well, along with another coupon on shoppers' half-birthdays.
[More from WSJ.com: The Online World of Female Desire]
What began as a barcode fob for grocery store coupons in the 1990s has evolved into a high-tech way for retailers to track the every move of their biggest, most-frequent spenders. Stores can market to shoppers directly based on the products they buy, aiming to win an even greater share of their wallets, in retailer parlance. Of course, to reap rewards, shoppers must first establish themselves as frequent customers. About three out of four Americans belong to a retail loyalty card program, according to ACI Worldwide, which handles electronics payment for hundreds of retailers and financial institutions.
This discounts are worth it to stores in order to keep the most loyal customers happy. Fifteen percent of a retailer's most loyal customers can account for as much as half of its sales, says Keith Jelinek, director in the retail division of consulting firm AlixPartners. It takes between 12 and 20 new customers to replace a lost loyal customer, says Keith Colbourn, vice president, global loyalty practice leader at Dunnhumby, an analytics firm that works with retail giants Tesco PLC and Macy's Inc.
CVS/Pharmacy connected its rewards program with its social media efforts. Just before Easter, CVS/Pharmacy asked its Facebook fans to vote on whether they liked Cadbury Creme Eggs or marshmallow Peeps. Coupons for the winning item -- $1 off two eggs -- were loaded into the in-store coupon center for one day. "We delivered real value, instantaneously, on the basis of their interests," says Rob Price, chief marketing officer for CVS/Pharmacy, the retail division of CVS Caremark Corp. (NYSE: CVS - News).
To get discounts, shoppers must hand over personal data. Often, the more details given, the more discounts received, which brings up the issue of data privacy and the corresponding pitfalls.
Floor staff at J.Crew, Ann Taylor and other retailers routinely ask shoppers for their email addresses and nearly every chain store, from Walgreens to Wet Seal, has a spot on its website for consumers to sign up to receive store emails. It's a quick, cheap way for a retailer to tell shoppers about deals and discounts -- and arguably the least invasive piece of information a shopper can give a retailer.
In order to receive their emails, many retailers also will require a name and, in some cases a ZIP code or a date of birth. Some take it a step further and ask users to set up an online account that requires a login, allowing a retailer to track how often they visit the site, as well as what items draw their attention.
At J.C. Penney, shoppers can give a cellphone number to receive as many as eight mobile coupons a month. Old Navy shoppers can receive text messages with details on the featured item of the week.
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To sign up for a retailer's loyalty program usually requires name, mailing address and telephone number. These programs assign shoppers a number, often a barcode or a phone number, essentially applying a digital tracking number to each customer.
DSW uses this barcode-generated purchase data to make its marketing more relevant. "If someone is only interested in buying hiking boots, there's probably not a lot of point in talking to them about the latest high heels that have come in," says Derek Ungless, chief marketing officer.
Supermarket chain Kroger Co. (NYSE: KR - News) sends individualized mailings to millions of its rewards program members several times a year. The packets of coupons from the store as well as its suppliers are based on each shopper's habits. "Like snowflakes, no two are alike," says Ted Sarosy, vice president of loyalty for Kroger.
Now, retailers are devising ways to track barcode holders outside the store. CVS, which has 67 million loyalty card members, recently offered fans of its Beauty Club Facebook page a free antibacterial product. For the voucher, shoppers had to enter their ExtraCare number and email address. "That's another way for us to fingerprint the customer to give them more personalized value," said CVS's Mr. Price.
More than 7,100 CVS locations have in-store coupon centers, computerized columns that, when shoppers swipe a rewards card, spit out personalized coupons. The center is designed to "influence their shopping visit that day," says Mr. Price. The deals attached to a receipt are meant to encourage another visit.
The most details a consumer gives are through a branded credit card, which provides detailed financial information. To encourage use of its credit card, Target Corp. (NYSE: TGT - News) began last fall offering shoppers 5% off every purchase with its branded credit card, the only loyalty program offered by the big box chain.
With Gap Inc.'s credit card program, shoppers get advance notice of sales, exclusive offers and 10% off all Tuesday purchases. Shoppers receive five points for each dollar spent at one of the company's brands.
Neiman Marcus Group Inc.'s loyalty program, InCircle, is a credit card that can only be used at Neiman Marcus's five divisions, which include Bergdorf Goodman and Last Call. The card allows the retailer to keep track of purchases, as well as shopping frequency and any cross-shopping among its brands. The loyalty program "can retain customers, it can get new customers, it could win back anybody who has lapsed," says Maggie Lucas, director of marketing.
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Although the majority of apparel and accessories retailers tie their loyalty program to a credit card, some companies have begun to unbundle the two as skittish customers have shunned credit in favor of cash or debit payments.
By adding a non-credit-card loyalty program with free enrollment, retailers widen the appeal of the rewards program. Chains with non-credit card loyalty programs include Sears Holdings Corp., which includes Kmart, Modell's Sporting Goods and teen retailer American Eagle Outfitters Inc.
Women's clothing chain Talbots Inc. split its rewards program into three parts in 2009 as part of a brand overhaul. Along with its existing charge card, the company added a non-credit card, allowing it to capture information about its in-store shoppers similar to that of online shoppers. If someone makes a purchase online or through the catalogue, "we instantly capture her information," says Lori Wagner, chief marketing officer.
Most systems dole out points based on the amount spent. Members of the DSW Rewards program earn a $10 certificate for every 1,500 points earned. (Points differ based on full price or clearance items, but equate to roughly 10 points per $1 spent.) Customers who rack up more than 6,000 points each year achieve Premiere Rewards status. That top tier of customers can receive triple points on purchases two days a year of their choosing.
The company mails out certificates to its 16 million rewards members because customers have said they prefer that method. "It's not a bill," says Kelly Cook, vice president of customer strategy and engagement. "It is happiness."
Unrewarding
Privacy concerns: Each rewards program has a statement outlining a retailer's privacy policies. Read it carefully to know what information is being collected, where your information will be used and what other companies it may be given to without your knowledge.
To unsubscribe: Getting off a retailer's email list is usually pretty easy. Find an email from the retailer in question, scroll to the bottom and look for a link that says "Unsubscribe," often in tiny print. If you have an account on a retailer's website, login and search for the unsubscribe option in your account settings.
Opting out entirely: Opening a loyalty card is much easier than closing one. To opt out, shoppers often need to take their card to a store to speak to an associate or send a written request to the company directly to close an account. Ask the retailer to discontinue use of your information entirely, including third-party distribution.
Things Your Neighbors Won't Tell You
1. "Complaining will cost you dearly."
When Richard Laermer and his partner moved into a Manhattan co-op, his next door neighbor invited them over to dinner. "We had a lovely wine-infused time," recalls Laermer, a PR executive. But those good times didn't last. A few short weeks after breaking bread, Laermer left a Post-It note on the neighbor's door asking if her kids could be quieter in the mornings. The neighbor responded by cutting off all contact.
Falling out with your neighbors can mean more than just uncomfortable meetings in the hallway or front yard, added stress and sleepless nights. A bitter neighbor has the power to block renovations that could improve the value of your home and sue you over anything from a barking dog to street parking. When Laermer, for example, wanted to change the position of his apartment's front door to create an alcove, his neighbor threatened to sue because it would infringe on her privacy. "It would have added $75,000 to the value of our home," he says. After five years of the silent treatment, the couple moved in 2007 to friendlier climes in Connecticut, he says. "Try to build a good relationship with your neighbors because friends usually don't sue friends," says Robert W. Zierman, a lawyer who practices boundary dispute law in Seattle.
2. "I will use your Wi-Fi -- and get you arrested."
Nearly one-third of Americans admit to using their neighbor's Internet service, nearly double the number from two years ago, according to a national survey by the non-profit Wifi Alliance Trade Alliance. Such thieving can push your data usage above its monthly limit and increase your Wi-Fi bill, says McCall Butler, a spokeswoman for AT&T, who recommends that customers protect their Wi-Fi network with a password and change it regularly. Worse, there's no controlling what Wi-Fi thieves do with your signal, and if what they're doing is illegal, you could be in hot water.
Barry Covert, a lawyer based in Buffalo, N.Y., is currently representing two clients -- one in Buffalo, N.Y. and one in Milford, Mass. -- who he says had their wireless internet hijacked by neighbors to download child pornography. The clients are no longer facing charges -- the U.S. Attorney's Office and Immigration and Customs Enforcement, a division of the Department of Homeland Security, issued an official apology in March to the family in Buffalo, and the Federal Bureau of Investigations told SmartMoney.com that the agency believed the people in Milford were innocent. Neither case went to court, but if they had, Covert says legal fees could have run to $100,000.
The solution is simple: Secure your Wi-Fi, and change the password regularly. It's not failsafe, but it sets up an obstacle, and that can be enough to encourage a thief to move on to the house down the block. "If you use technology, you need to know how it can be used against you," Covert says.
3. "Good luck blocking out our din."
Unofficially, the biggest complaint people have about their neighbors is noise, says Bob Borzotta, who has conducted online polls on the issue at his website NeighborsFromHell.com. That includes barking dogs, loud music, car and house alarms and domestic arguments. And these aren't the constant complaints of a neighborhood killjoy. "I know two people who ended up having intestinal surgery because of anxiety related to long-running disputes with neighbors over noise," Borzotta says. Lost sleep and noisy neighbors can mean hefty doctor's bills to deal with anxiety and stress. People who suffer from psychological distress spend an average of $1,735 more on health care each year than lower-stress folks, according to research published last month by researchers at the Medical University at South Carolina. Another option -- soundproofing -- can cost $200 for one wall between you and the noisy neighbor and $300 for the ceiling, according to Ted White, president of the Michigan-based Soundproofing Company. Soundproof Windows range from $350 to $900 per window, according to Reno, Nevada-based Soundproof Windows Inc.
4. "I'm a registered sex offender."
For obvious reasons, this may be the last thing in the world your neighbor will tell you, but it's important, even for people who don't have children. Thanks to the Sexual Offender Act of 1994, also called "Megan's Law," people convicted of sex crimes must notify local law enforcement of any change of address or employment post-prison. That information is then made public, via the National Sex Offender Registry. And as would-be home buyers use these tools right along with Zillow to evaluate their future neighborhoods, the presence of a convicted sex-offender can hurt property values. A study by the researchers in Longwood College and Longwood University in Virginia said that registered sex offenders living nearby can reduce your home's value by 9% and homes near registered sex offenders can take over 70% longer to sell.
5. "We're ripping up the flower beds and planting corn."
Forget Farmville. About 43 million Americans now grow their own fruits, vegetables, berries and herbs, according to a 2009 National Gardening Association report, up 19% over the previous year. But what's good for the farmer isn't necessarily so good for his neighbors. A Virginia Tech study from 2009 suggested that landscaping and pristine lawns help increase property values by an average of 7.5%. A home valued at $150,000 with no landscaping could be worth up to from $8,000 to $19,000 more with a sophisticated landscape with color and large plants, the study said: "Relatively large landscape expenditures significantly increase perceived home value and will result in a higher selling price than homes with a minimal landscape."
At least if your neighbor decides to plow her garden, perhaps she'll share the harvest. Cat Rocketship, 27, ripped up her lawn when she moved to a settled neighborhood in Des Moines, Iowa, and planted soy beans, corn, squash, tomatoes and peppers. But now, she says, "we're feeding at least two families with the vegetables we're growing."
6. "My apartment has bed bugs."
It only takes one embarrassed and silent neighbor with a mattress full of bed bugs to infect an entire apartment building. In one recent study, the arrival of a single suspected bedbug resulted in infestation in 45% of the units in a 233-unit apartment building within three years. Getting rid of the pests is hard -- it may take several cycles of extreme extermination, and around $550 for a typical one-bedroom apartment, according to San Francisco-based exterminator Dan Fitzsimmons.
In some cases, landlords have to tell new tenants about infestations. New York, which has suffered from a rise in bed bugs infestations in recent years, requires it by law. But neighbors can keep their own bed bug problems to themselves, and if the critters creep from their apartment to yours, it's not always clear who's on the hook. In some cases, the landlord will cover the costs; in others it's the tenant's responsibility. The only thing would-be tenants can look for, beyond asking the landlord, is obvious signs of filth: The more unhygienic the neighbor, the greater the odds of an infestation.
When Richard Laermer and his partner moved into a Manhattan co-op, his next door neighbor invited them over to dinner. "We had a lovely wine-infused time," recalls Laermer, a PR executive. But those good times didn't last. A few short weeks after breaking bread, Laermer left a Post-It note on the neighbor's door asking if her kids could be quieter in the mornings. The neighbor responded by cutting off all contact.
Falling out with your neighbors can mean more than just uncomfortable meetings in the hallway or front yard, added stress and sleepless nights. A bitter neighbor has the power to block renovations that could improve the value of your home and sue you over anything from a barking dog to street parking. When Laermer, for example, wanted to change the position of his apartment's front door to create an alcove, his neighbor threatened to sue because it would infringe on her privacy. "It would have added $75,000 to the value of our home," he says. After five years of the silent treatment, the couple moved in 2007 to friendlier climes in Connecticut, he says. "Try to build a good relationship with your neighbors because friends usually don't sue friends," says Robert W. Zierman, a lawyer who practices boundary dispute law in Seattle.
2. "I will use your Wi-Fi -- and get you arrested."
Nearly one-third of Americans admit to using their neighbor's Internet service, nearly double the number from two years ago, according to a national survey by the non-profit Wifi Alliance Trade Alliance. Such thieving can push your data usage above its monthly limit and increase your Wi-Fi bill, says McCall Butler, a spokeswoman for AT&T, who recommends that customers protect their Wi-Fi network with a password and change it regularly. Worse, there's no controlling what Wi-Fi thieves do with your signal, and if what they're doing is illegal, you could be in hot water.
Barry Covert, a lawyer based in Buffalo, N.Y., is currently representing two clients -- one in Buffalo, N.Y. and one in Milford, Mass. -- who he says had their wireless internet hijacked by neighbors to download child pornography. The clients are no longer facing charges -- the U.S. Attorney's Office and Immigration and Customs Enforcement, a division of the Department of Homeland Security, issued an official apology in March to the family in Buffalo, and the Federal Bureau of Investigations told SmartMoney.com that the agency believed the people in Milford were innocent. Neither case went to court, but if they had, Covert says legal fees could have run to $100,000.
The solution is simple: Secure your Wi-Fi, and change the password regularly. It's not failsafe, but it sets up an obstacle, and that can be enough to encourage a thief to move on to the house down the block. "If you use technology, you need to know how it can be used against you," Covert says.
3. "Good luck blocking out our din."
Unofficially, the biggest complaint people have about their neighbors is noise, says Bob Borzotta, who has conducted online polls on the issue at his website NeighborsFromHell.com. That includes barking dogs, loud music, car and house alarms and domestic arguments. And these aren't the constant complaints of a neighborhood killjoy. "I know two people who ended up having intestinal surgery because of anxiety related to long-running disputes with neighbors over noise," Borzotta says. Lost sleep and noisy neighbors can mean hefty doctor's bills to deal with anxiety and stress. People who suffer from psychological distress spend an average of $1,735 more on health care each year than lower-stress folks, according to research published last month by researchers at the Medical University at South Carolina. Another option -- soundproofing -- can cost $200 for one wall between you and the noisy neighbor and $300 for the ceiling, according to Ted White, president of the Michigan-based Soundproofing Company. Soundproof Windows range from $350 to $900 per window, according to Reno, Nevada-based Soundproof Windows Inc.
4. "I'm a registered sex offender."
For obvious reasons, this may be the last thing in the world your neighbor will tell you, but it's important, even for people who don't have children. Thanks to the Sexual Offender Act of 1994, also called "Megan's Law," people convicted of sex crimes must notify local law enforcement of any change of address or employment post-prison. That information is then made public, via the National Sex Offender Registry. And as would-be home buyers use these tools right along with Zillow to evaluate their future neighborhoods, the presence of a convicted sex-offender can hurt property values. A study by the researchers in Longwood College and Longwood University in Virginia said that registered sex offenders living nearby can reduce your home's value by 9% and homes near registered sex offenders can take over 70% longer to sell.
5. "We're ripping up the flower beds and planting corn."
Forget Farmville. About 43 million Americans now grow their own fruits, vegetables, berries and herbs, according to a 2009 National Gardening Association report, up 19% over the previous year. But what's good for the farmer isn't necessarily so good for his neighbors. A Virginia Tech study from 2009 suggested that landscaping and pristine lawns help increase property values by an average of 7.5%. A home valued at $150,000 with no landscaping could be worth up to from $8,000 to $19,000 more with a sophisticated landscape with color and large plants, the study said: "Relatively large landscape expenditures significantly increase perceived home value and will result in a higher selling price than homes with a minimal landscape."
At least if your neighbor decides to plow her garden, perhaps she'll share the harvest. Cat Rocketship, 27, ripped up her lawn when she moved to a settled neighborhood in Des Moines, Iowa, and planted soy beans, corn, squash, tomatoes and peppers. But now, she says, "we're feeding at least two families with the vegetables we're growing."
6. "My apartment has bed bugs."
It only takes one embarrassed and silent neighbor with a mattress full of bed bugs to infect an entire apartment building. In one recent study, the arrival of a single suspected bedbug resulted in infestation in 45% of the units in a 233-unit apartment building within three years. Getting rid of the pests is hard -- it may take several cycles of extreme extermination, and around $550 for a typical one-bedroom apartment, according to San Francisco-based exterminator Dan Fitzsimmons.
In some cases, landlords have to tell new tenants about infestations. New York, which has suffered from a rise in bed bugs infestations in recent years, requires it by law. But neighbors can keep their own bed bug problems to themselves, and if the critters creep from their apartment to yours, it's not always clear who's on the hook. In some cases, the landlord will cover the costs; in others it's the tenant's responsibility. The only thing would-be tenants can look for, beyond asking the landlord, is obvious signs of filth: The more unhygienic the neighbor, the greater the odds of an infestation.
The Tricks Behind Infomercial Get-Rich Pitches
As an impulse buy, you might plunk down a few bucks for a Shamwow, an Aluma Wallet or a Shake Weight. But would a TV infomercial persuade you to part with thousands of dollars on a get-rich-quick scheme?
There are many thousands who would and do. If there were no suckers, there wouldn't be so many get-rich ads on TV.
The persuasiveness of infomercials works on multiple levels. They often appear on reputable financial news channels, giving them an air of respectability and, perhaps, giving naive viewers a sense they are either regular programming or geared to the "insiders."
At a time many Americans are out of work and overextended by debt, the prospect of a streamlined path to wealth can be an easy sell. The offerings promise lucrative earnings and back up those testimonials with satisfied customers bragging of stellar successes.
As is so often a rule to live by: If it sounds too good to be true, it probably isn't. No amount of celebrity endorsements or alleged success stories can change that when it comes to infomercials.
Broadly speaking, this subset of infomercials creeps along the fine line between common advertising hyperbole and outright misrepresentation. For the most part, these are not fly-by-night con artists or overseas spammers. Many of the familiar faces in infomercials have been at it for years. There really are books, charts, DVDs and mentoring services, as promised; the catch is that you won't always get them by calling a phone number or attending a free seminar. The deal you see on TV is typically no more than a means to hook you into buying added materials that can cost hundreds or thousands of dollars over time.
And as for those promised results, echoed in rose-colored testimonials, they are often either exaggerations, aberrations or outright lies.
Last month, the Federal Trade Commission went after one prominent infomercial king and joined forces with Colorado Attorney General John Suthers to take the uncommon step of going after a woman who offered a testimonial.
Russell Dalbey, CEO and founder of the company behind the "wealth-building" program "Winning in the Cash Flow Business" is charged by the FTC with defrauding consumers with what were described as "phony claims that they could make large amounts of money quickly."
"When someone is selling a program designed to help people make money, they have to accurately describe how much consumers can expect to make and be truthful about how quickly they will be able to do so," says David Vladeck, director of the FTC's Bureau of Consumer Protection. "None of that happened in this case, and people who bought the program paid the price."
According to the FTC, "millions of consumers nationwide" saw infomercials for Winning in the Cash Flow Business hosted by TV personality Gary Collins. The program claimed to teach customers how to find, broker and earn commissions on seller-financed promissory notes -- privately held mortgages or notes often secured by the home or land that is the subject of the loan.
"You'll be amazed at just how easy it is to generate a stream of extra income every month. Build financial freedom and a better quality of life in just minutes a day. Or even retire earlier than you ever dreamed possible. Order now and you'll be ready to profit in minutes," one of the infomercials claimed.
The complaint says consumers spent approximately $40 to $160 on the initial program and were later encouraged to spend hundreds or thousands of dollars more on additional products and services.
Promoting the "system" were testimonials from consumers who claimed to have made "$1.2 million in 30 days," "$79,000 in a few hours" and "$262,216 part time."
The FTC and Colorado's AG charged Marsha Kellogg with falsely claiming she earned $79,975.01 from one transaction using Dalbey's program, and that her total earnings were more than $134,000. The complaint alleges she earned $50,000 less than what she claimed.
The charges faced by Dalbey come as no surprise to Suzann Bacon, vice president of operations for the Better Business Bureau's Denver office.
"We've been working with this particular case since 2003. It has been a long time," she says. "It is not just the infomercials, it is the whole business model in this particular case. It is a really small handful of folks who made money with what they are selling."
The BBB did initially accredit Dalbey's company in 2003, but revoked that seal of approval within a year.
Bacon's office has collected 170 complaints related to infomercials in the past three years, most about service, sales practices and false advertising.
A common tactic the BBB looks for in its reviews are fraudulent claims that may not relate directly to the content of what is offered -- claiming something is a "limited time offer" or a "$100 value," for instance, even though the promotion is constant and the pricing arbitrary.
"In an economy of today, when people are looking for jobs and everything is so slow, people are looking for something that is too good to be true," Bacon says.
Dalbey is not the only infomercial star to face legal woes.
In 2008, Utah residents Linda Woolf and David Gengler were charged in connection to the "Teach Me to Trade" stock-picking system. Customers paid between $3,000 to $40,000 to learn the system, even though the duo were, in the words of the Securities and Exchange Commission, "unsuccessful traders." Combined, they earned more than $6 million selling the product.
An SEC complaint alleges that at their workshop presentations between 2003-06, Woolf and Gengler made false and misleading statements to sell TMTT packages of personal mentoring, software and classes, often targeting retirees. In his workshops, Gengler urged investors to borrow against their retirement accounts to buy these products, the SEC says.
This month a federal judge in Texas sentenced Eric Rulack Farrington, another infomercial star, to 11 years in prison for "orchestrating a multimillion-dollar mortgage fraud scheme in the Dallas area." He was also ordered to pay approximately $1.6 in restitution and forfeit approximately $1.2 million to the U.S.
Author Kevin Trudeau's infomercial for "Free Money -- They Don't Want You to Know About" is a variation of the infomercials once made popular by Martin Lesko (known for wearing a Riddler-like suit adorned with question marks).
Trudeau, perhaps trying to appeal to a tea party sensibility even as he espouses how to collect no-strings-attached money from the government, spends much of the infomercial promoting these secrets as though they were divined from the "Da Vinci Code." The government wants him taken down, you see, because the information he espouses is dangerous. In reality, it appears to be a revisited list of various government programs, most of which can be easily found with an Internet search.
The consumer news and advocacy site ConsumerAffairs.com, however, has logged numerous complaints that ordering Trudeau's books has led to pushy upsells and being charged for additional, unwanted products.
Real estate, in particular, is a ripe category for infomercials, with many offering tips on how to buy and flip distressed property. It's a theme many may have first seen via the late-1980s infomercials featuring Tom Vu, a Vietnamese immigrant who claimed to have amassed a fortune by flipping property.
Dean Graziosi's "Real Estate & Foreclosure Profits" program is a near constant presence on late-night TV.
Graziosi, a self-proclaimed real estate mogul who rose to that status after a poverty-ridden childhood, seeks to inform those who buy his system of how the current housing downturn can be tapped.
He claims various methods allow users to buy property for as little as a few hundred bucks, and that the housing market has already bottomed out and is ready to soar once again. For $19.95 you can order a copy of Graziosi's book and learn his secrets. One can be assured, though, that the disclaimer that "Some students may have purchased optional support program. Results not typical" means buyers will get still more sales calls promoting more expensive materials. To Graziosi's credit, the majority of complaints logged with the Better Business Bureau in his home base of Arizona were "resolved," and he retain a sizable Internet following.
Armando Montelongo parlayed exposure as former host of the A&E network's "Flip This House" into a national slate of free seminars promoting the tactics needed to buy and fix up run-down property for profit. His infomercial boasts that he is "America's No. 1 and top real estate investing expert."
An investigation by a Nashville TV station WTVF, Channel 5, however, found that the seminar was little more than a pitch to buy a follow-up event for $1,500. Despite infomercial claims Montelongo would be present at the seminars (free or paid), he failed to appear.
The reporters learned that Montelongo had 30 seminars that week across the nation and didn't go to any. Actual face time, they said (citing complaints received by the Texas Attorney General's Office) would set you back upward of $20,000.
The news team also uncovered that one of the star pupils in the infomercial faced eviction and multiple foreclosures in Nevada. Another claimed to have made $110,000 in eight months, despite the reality of having declared bankruptcy and not having earned more than $17,000 a year.
Also, while it may be possible to buy distressed properties and flip them when the economy improves, do you have the means to travel to where the properties are, assess them and the surrounding neighboring, buy them, fix them up and maintain them, pay the taxes on each and sell them for a profit possibly years later when the time comes? if you have a job already, the answer is almost certainly not.
There are many thousands who would and do. If there were no suckers, there wouldn't be so many get-rich ads on TV.
The persuasiveness of infomercials works on multiple levels. They often appear on reputable financial news channels, giving them an air of respectability and, perhaps, giving naive viewers a sense they are either regular programming or geared to the "insiders."
At a time many Americans are out of work and overextended by debt, the prospect of a streamlined path to wealth can be an easy sell. The offerings promise lucrative earnings and back up those testimonials with satisfied customers bragging of stellar successes.
As is so often a rule to live by: If it sounds too good to be true, it probably isn't. No amount of celebrity endorsements or alleged success stories can change that when it comes to infomercials.
Broadly speaking, this subset of infomercials creeps along the fine line between common advertising hyperbole and outright misrepresentation. For the most part, these are not fly-by-night con artists or overseas spammers. Many of the familiar faces in infomercials have been at it for years. There really are books, charts, DVDs and mentoring services, as promised; the catch is that you won't always get them by calling a phone number or attending a free seminar. The deal you see on TV is typically no more than a means to hook you into buying added materials that can cost hundreds or thousands of dollars over time.
And as for those promised results, echoed in rose-colored testimonials, they are often either exaggerations, aberrations or outright lies.
Last month, the Federal Trade Commission went after one prominent infomercial king and joined forces with Colorado Attorney General John Suthers to take the uncommon step of going after a woman who offered a testimonial.
Russell Dalbey, CEO and founder of the company behind the "wealth-building" program "Winning in the Cash Flow Business" is charged by the FTC with defrauding consumers with what were described as "phony claims that they could make large amounts of money quickly."
"When someone is selling a program designed to help people make money, they have to accurately describe how much consumers can expect to make and be truthful about how quickly they will be able to do so," says David Vladeck, director of the FTC's Bureau of Consumer Protection. "None of that happened in this case, and people who bought the program paid the price."
According to the FTC, "millions of consumers nationwide" saw infomercials for Winning in the Cash Flow Business hosted by TV personality Gary Collins. The program claimed to teach customers how to find, broker and earn commissions on seller-financed promissory notes -- privately held mortgages or notes often secured by the home or land that is the subject of the loan.
"You'll be amazed at just how easy it is to generate a stream of extra income every month. Build financial freedom and a better quality of life in just minutes a day. Or even retire earlier than you ever dreamed possible. Order now and you'll be ready to profit in minutes," one of the infomercials claimed.
The complaint says consumers spent approximately $40 to $160 on the initial program and were later encouraged to spend hundreds or thousands of dollars more on additional products and services.
Promoting the "system" were testimonials from consumers who claimed to have made "$1.2 million in 30 days," "$79,000 in a few hours" and "$262,216 part time."
The FTC and Colorado's AG charged Marsha Kellogg with falsely claiming she earned $79,975.01 from one transaction using Dalbey's program, and that her total earnings were more than $134,000. The complaint alleges she earned $50,000 less than what she claimed.
The charges faced by Dalbey come as no surprise to Suzann Bacon, vice president of operations for the Better Business Bureau's Denver office.
"We've been working with this particular case since 2003. It has been a long time," she says. "It is not just the infomercials, it is the whole business model in this particular case. It is a really small handful of folks who made money with what they are selling."
The BBB did initially accredit Dalbey's company in 2003, but revoked that seal of approval within a year.
Bacon's office has collected 170 complaints related to infomercials in the past three years, most about service, sales practices and false advertising.
A common tactic the BBB looks for in its reviews are fraudulent claims that may not relate directly to the content of what is offered -- claiming something is a "limited time offer" or a "$100 value," for instance, even though the promotion is constant and the pricing arbitrary.
"In an economy of today, when people are looking for jobs and everything is so slow, people are looking for something that is too good to be true," Bacon says.
Dalbey is not the only infomercial star to face legal woes.
In 2008, Utah residents Linda Woolf and David Gengler were charged in connection to the "Teach Me to Trade" stock-picking system. Customers paid between $3,000 to $40,000 to learn the system, even though the duo were, in the words of the Securities and Exchange Commission, "unsuccessful traders." Combined, they earned more than $6 million selling the product.
An SEC complaint alleges that at their workshop presentations between 2003-06, Woolf and Gengler made false and misleading statements to sell TMTT packages of personal mentoring, software and classes, often targeting retirees. In his workshops, Gengler urged investors to borrow against their retirement accounts to buy these products, the SEC says.
This month a federal judge in Texas sentenced Eric Rulack Farrington, another infomercial star, to 11 years in prison for "orchestrating a multimillion-dollar mortgage fraud scheme in the Dallas area." He was also ordered to pay approximately $1.6 in restitution and forfeit approximately $1.2 million to the U.S.
Author Kevin Trudeau's infomercial for "Free Money -- They Don't Want You to Know About" is a variation of the infomercials once made popular by Martin Lesko (known for wearing a Riddler-like suit adorned with question marks).
Trudeau, perhaps trying to appeal to a tea party sensibility even as he espouses how to collect no-strings-attached money from the government, spends much of the infomercial promoting these secrets as though they were divined from the "Da Vinci Code." The government wants him taken down, you see, because the information he espouses is dangerous. In reality, it appears to be a revisited list of various government programs, most of which can be easily found with an Internet search.
The consumer news and advocacy site ConsumerAffairs.com, however, has logged numerous complaints that ordering Trudeau's books has led to pushy upsells and being charged for additional, unwanted products.
Real estate, in particular, is a ripe category for infomercials, with many offering tips on how to buy and flip distressed property. It's a theme many may have first seen via the late-1980s infomercials featuring Tom Vu, a Vietnamese immigrant who claimed to have amassed a fortune by flipping property.
Dean Graziosi's "Real Estate & Foreclosure Profits" program is a near constant presence on late-night TV.
Graziosi, a self-proclaimed real estate mogul who rose to that status after a poverty-ridden childhood, seeks to inform those who buy his system of how the current housing downturn can be tapped.
He claims various methods allow users to buy property for as little as a few hundred bucks, and that the housing market has already bottomed out and is ready to soar once again. For $19.95 you can order a copy of Graziosi's book and learn his secrets. One can be assured, though, that the disclaimer that "Some students may have purchased optional support program. Results not typical" means buyers will get still more sales calls promoting more expensive materials. To Graziosi's credit, the majority of complaints logged with the Better Business Bureau in his home base of Arizona were "resolved," and he retain a sizable Internet following.
Armando Montelongo parlayed exposure as former host of the A&E network's "Flip This House" into a national slate of free seminars promoting the tactics needed to buy and fix up run-down property for profit. His infomercial boasts that he is "America's No. 1 and top real estate investing expert."
An investigation by a Nashville TV station WTVF, Channel 5, however, found that the seminar was little more than a pitch to buy a follow-up event for $1,500. Despite infomercial claims Montelongo would be present at the seminars (free or paid), he failed to appear.
The reporters learned that Montelongo had 30 seminars that week across the nation and didn't go to any. Actual face time, they said (citing complaints received by the Texas Attorney General's Office) would set you back upward of $20,000.
The news team also uncovered that one of the star pupils in the infomercial faced eviction and multiple foreclosures in Nevada. Another claimed to have made $110,000 in eight months, despite the reality of having declared bankruptcy and not having earned more than $17,000 a year.
Also, while it may be possible to buy distressed properties and flip them when the economy improves, do you have the means to travel to where the properties are, assess them and the surrounding neighboring, buy them, fix them up and maintain them, pay the taxes on each and sell them for a profit possibly years later when the time comes? if you have a job already, the answer is almost certainly not.
Acer sees more losses as revamp charges hurt Q2
Taiwanese PC maker Acer Inc reported a worse-than-expected quarterly loss, the first in company history, as it took charges to reorganize in a troubled first half, and said it would be impossible to break even for the full year.
Acer has been a dominant force in the PC business, particularly in the low-cost notebook segment, but has failed to counter the runaway success of tablets such as Apple's hot-selling iPad that have cut into PC sales and hurt profits.
The company has been refocusing on mobile devices to drive growth after a first half that saw the acrimonious departure of its chief executive following a row over the company's strategy and a series of cuts to its shipment forecasts.
Shares of Acer, the world's No.2 PC vendor, closed down 2.92 percent on Wednesday ahead of the earnings announcement.
They have fallen 65 percent this year in a broader market down 16.4 percent. Rival Asustek has gained 6.8 percent.
Chairman J.T. Wang told an investor conference that the second-quarter was a "correction period" and its loss was worse than expected because the company cleared up excessive inventory and made severance payments for senior management resignations.
Among those who resigned was Gianfranco Lanci, the former CEO who left abruptly in April amid a row over strategy and after a sharp cut in Acer's revenue outlook that triggered an 18 percent fall in its shares in four days.
Wang did not say how much Lanci received.
The chairman said while he expects the "fever" for tablet PCs receding and notebooks regaining consumer interest, Acer will still see a loss in the third quarter, though it would be better than the second quarter.
"Today I have to say, trying to break even this year becomes impossible," Wang said, citing a worsening macro environment in Europe and the need for "more time and effort" for the restructuring.
In July, Wang had indicated that the company would report a loss in the second quarter before returning to profit in the third and posting a small full-year profit.
Acer said in June it would take a $150 million charge to write off inventory and doubtful payments in Europe and will cut 300 jobs there.
Macquarie analyst Andrew Chang said in a report that recent checks indicate Acer has no new competitive products to launch in the third quarter to lift momentum and margins.
Macquarie expects flattish revenue growth in the third quarter from the previous quarter and a 29 percent drop from a year ago.
Acer posted a net loss of T$6.79 billion ($234.3 million) in April-June, much wider than the consensus forecast of a T$3.3 billion loss from six analysts polled by Reuters.
The unaudited net loss figure compared with a net profit of T$1.19 billion in the first quarter and earnings of T$$2.65 billion in the same period a year ago.
Acer has been a dominant force in the PC business, particularly in the low-cost notebook segment, but has failed to counter the runaway success of tablets such as Apple's hot-selling iPad that have cut into PC sales and hurt profits.
The company has been refocusing on mobile devices to drive growth after a first half that saw the acrimonious departure of its chief executive following a row over the company's strategy and a series of cuts to its shipment forecasts.
Shares of Acer, the world's No.2 PC vendor, closed down 2.92 percent on Wednesday ahead of the earnings announcement.
They have fallen 65 percent this year in a broader market down 16.4 percent. Rival Asustek has gained 6.8 percent.
Chairman J.T. Wang told an investor conference that the second-quarter was a "correction period" and its loss was worse than expected because the company cleared up excessive inventory and made severance payments for senior management resignations.
Among those who resigned was Gianfranco Lanci, the former CEO who left abruptly in April amid a row over strategy and after a sharp cut in Acer's revenue outlook that triggered an 18 percent fall in its shares in four days.
Wang did not say how much Lanci received.
The chairman said while he expects the "fever" for tablet PCs receding and notebooks regaining consumer interest, Acer will still see a loss in the third quarter, though it would be better than the second quarter.
"Today I have to say, trying to break even this year becomes impossible," Wang said, citing a worsening macro environment in Europe and the need for "more time and effort" for the restructuring.
In July, Wang had indicated that the company would report a loss in the second quarter before returning to profit in the third and posting a small full-year profit.
Acer said in June it would take a $150 million charge to write off inventory and doubtful payments in Europe and will cut 300 jobs there.
Macquarie analyst Andrew Chang said in a report that recent checks indicate Acer has no new competitive products to launch in the third quarter to lift momentum and margins.
Macquarie expects flattish revenue growth in the third quarter from the previous quarter and a 29 percent drop from a year ago.
Acer posted a net loss of T$6.79 billion ($234.3 million) in April-June, much wider than the consensus forecast of a T$3.3 billion loss from six analysts polled by Reuters.
The unaudited net loss figure compared with a net profit of T$1.19 billion in the first quarter and earnings of T$$2.65 billion in the same period a year ago.
Toll Brothers Earnings Up 54%, Revenue Slumps
Toll Brothers Inc.'s fiscal third-quarter earnings jumped 54% with a boost from a bigger tax benefit, yet the luxury home builder saw a double-digit drop in revenue as it delivered fewer homes and saw an uptick in its cancellation rate.
With the housing downturn now in its fifth year, home builders remain pressured by a laundry list of economic head winds, including high unemployment, weakened consumer confidence and tightened bank lending standards. Sales of new homes have ...
With the housing downturn now in its fifth year, home builders remain pressured by a laundry list of economic head winds, including high unemployment, weakened consumer confidence and tightened bank lending standards. Sales of new homes have ...
Oil rises above $86 on stronger US manufacturing activity
NEW YORK (AP) -- Oil is rising on news of stronger manufacturing activity in the U.S.
Benchmark West Texas crude on Wednesday rose 57 cents to $86.01 per barrel in New York, while Brent crude was up 89 cents at $110.20 per barrel in London.
Prices climbed after the government reported that orders for long-lasting, durable goods like autos and aircraft increased 4 percent in July, the biggest increase since March.
An industry group also said that U.S. oil supplies grew more than expected last week. The government's supply numbers are expected later Wednesday.
At the pump, gasoline prices were flat at a national average of $3.575 per gallon.
crude inventories fell 3.3 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 2.0 million barrels.
WRONG AGAIN yet the market listens to these analysts
Benchmark West Texas crude on Wednesday rose 57 cents to $86.01 per barrel in New York, while Brent crude was up 89 cents at $110.20 per barrel in London.
Prices climbed after the government reported that orders for long-lasting, durable goods like autos and aircraft increased 4 percent in July, the biggest increase since March.
An industry group also said that U.S. oil supplies grew more than expected last week. The government's supply numbers are expected later Wednesday.
At the pump, gasoline prices were flat at a national average of $3.575 per gallon.
crude inventories fell 3.3 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 2.0 million barrels.
WRONG AGAIN yet the market listens to these analysts
CVS Caremark authorizes $4 billion buyback
WOONSOCKET, R.I. (AP) -- U.S. drugstore operator and pharmacy benefits manager CVS Caremark Corp. on Wednesday said its board has approved a share repurchase program for up to $4 billion of its stock.
The Woonsocket, R.I., company said it intends to complete buybacks this year under a $2 billion program authorized in June last year. It also expects to buy back about $1 billion in shares under the new authorization this year.
CVS Caremark's market capitalization is $45 billion, so $4 billion in buybacks represents 9 percent of the outstanding amount.
The shares rose 81 cents, or 2.4 percent, to $34.20 in morning trading. Over the past year, the stock has traded between $26.84 and $39.50.
The Woonsocket, R.I., company said it intends to complete buybacks this year under a $2 billion program authorized in June last year. It also expects to buy back about $1 billion in shares under the new authorization this year.
CVS Caremark's market capitalization is $45 billion, so $4 billion in buybacks represents 9 percent of the outstanding amount.
The shares rose 81 cents, or 2.4 percent, to $34.20 in morning trading. Over the past year, the stock has traded between $26.84 and $39.50.
Options Traders Bet Big Against BofA
The options market is increasingly preparing for bad things to happen to Bank of America.
Implied volatility, which indicates expectations as to how likely a stock is to move up or down, keeps ominously increasing despite constructive developments like news of mass layoffs and corporate restructuring.
At about 105% overall implied volatility, Bank of America's (BAC - News) implied volatility has steadily increased from about 84% just a few weeks ago. The Select Sector Financial SPDR's (XLF - News) overall implied volatility is 54%. The options market is pricing Bank of America as if it is twice as risky as the overall financial sector.
Now, with the stock setting an intraday low of $6.01 early Tuesday, dipping below its previous 52-week low of $6.31 on speculation the bank may have to raise capital to cover bad mortgages, Bank of America's September put options are unusually active and trading at high implied volatility levels.
Bank of America's September $4 put, which will pay off if the stock falls below $4, has an implied volatility of about 199%, which indicates the stock is expected to move 12.4% each day until the puts expire.
With the stock around $6.26, some 23,700 September $4 puts have traded. The puts cost 25 cents. Strong buying interest is also evident in the September $3 puts that have a 225% implied volatility and are priced at 12 cents. More than 8,500 September $3 puts have traded, and almost 40,000 September $6 puts, and 31,000 September $5 puts. All of which shows put buyers are betting BofA's stock has a strong chance of falling significantly further in the very near future.
That view also is being reflected in credit-default swaps on BofA. The cost to insure the bank's debt against default surged sharply today, to 397 basis points from 371 basis points, according to Markit, a major CDS data provider. (That means it now costs $397,000 a year to insure $10 million of Bank of America debt for five years.) The CDS spread for the bank has more than doubled this month, from just 171 basis points on Aug. 1. The previous closing wide spread was 386 basis points, according to Dow Jones Newswires.
Meanwhile, bullish calls are also active on Bank of America as many investors are betting that the stock will snap higher. Rochdale Securities' influential bank guru, Dick Bove, came to the stock's defense Tuesday, saying deposits are pouring in and assets adequately cover liabilities, Dow Jones Newswires reports. "The company's balance sheet cannot be weakened by shorting the stock," Bove writes. "At some point, the fury against this company will weaken." In addition, Barron's magazine asserted in the Aug. 15 issue that it's "Time to Bet on Bank of America."
Many investors may interpret the unusually active bearish put trading volume as a sign that something terrible might happen soon to Bank of America. It is probably better to view the trading patterns as relatively inexpensive bets against the stock.
It is important to note that the crash puts that are actively trading on Bank of America often cost less than $1. Though the implied volatility levels are stratospherically high, very few people hesitate to make cheap bets against stocks — especially when those stocks keep declining.
Implied volatility, which indicates expectations as to how likely a stock is to move up or down, keeps ominously increasing despite constructive developments like news of mass layoffs and corporate restructuring.
At about 105% overall implied volatility, Bank of America's (BAC - News) implied volatility has steadily increased from about 84% just a few weeks ago. The Select Sector Financial SPDR's (XLF - News) overall implied volatility is 54%. The options market is pricing Bank of America as if it is twice as risky as the overall financial sector.
Now, with the stock setting an intraday low of $6.01 early Tuesday, dipping below its previous 52-week low of $6.31 on speculation the bank may have to raise capital to cover bad mortgages, Bank of America's September put options are unusually active and trading at high implied volatility levels.
Bank of America's September $4 put, which will pay off if the stock falls below $4, has an implied volatility of about 199%, which indicates the stock is expected to move 12.4% each day until the puts expire.
With the stock around $6.26, some 23,700 September $4 puts have traded. The puts cost 25 cents. Strong buying interest is also evident in the September $3 puts that have a 225% implied volatility and are priced at 12 cents. More than 8,500 September $3 puts have traded, and almost 40,000 September $6 puts, and 31,000 September $5 puts. All of which shows put buyers are betting BofA's stock has a strong chance of falling significantly further in the very near future.
That view also is being reflected in credit-default swaps on BofA. The cost to insure the bank's debt against default surged sharply today, to 397 basis points from 371 basis points, according to Markit, a major CDS data provider. (That means it now costs $397,000 a year to insure $10 million of Bank of America debt for five years.) The CDS spread for the bank has more than doubled this month, from just 171 basis points on Aug. 1. The previous closing wide spread was 386 basis points, according to Dow Jones Newswires.
Meanwhile, bullish calls are also active on Bank of America as many investors are betting that the stock will snap higher. Rochdale Securities' influential bank guru, Dick Bove, came to the stock's defense Tuesday, saying deposits are pouring in and assets adequately cover liabilities, Dow Jones Newswires reports. "The company's balance sheet cannot be weakened by shorting the stock," Bove writes. "At some point, the fury against this company will weaken." In addition, Barron's magazine asserted in the Aug. 15 issue that it's "Time to Bet on Bank of America."
Many investors may interpret the unusually active bearish put trading volume as a sign that something terrible might happen soon to Bank of America. It is probably better to view the trading patterns as relatively inexpensive bets against the stock.
It is important to note that the crash puts that are actively trading on Bank of America often cost less than $1. Though the implied volatility levels are stratospherically high, very few people hesitate to make cheap bets against stocks — especially when those stocks keep declining.
U.S. budget deal to slice deficits: CBO
WASHINGTON (Reuters) - A sweeping budget deal and lower interest rates will slice projected U.S. budget deficits nearly in half over the next 10 years, but the economy will remain sluggish in the near term, the nonpartisan Congressional Budget Office reported on Wednesday.
Unemployment will remain stubbornly high and economic growth will remain sluggish through 2012, CBO said. This could pose a challenge to President Barack Obama's re-election hopes.
"Although economic output began to expand again two years ago, the pace of the recovery has been slow, and the economy remains in a severe slump," CBO Director Doug Elmendorf wrote in a blog post.
CBO reported that the United States will rack up $3.487 trillion in cumulative deficits over 10 years, some $3.3 trillion below its previous projection.
It said the current 9.1 percent unemployment rate will only fall to 8.5 percent in the fourth quarter of 2012, when voters head to the polls for presidential and congressional elections.
Gross domestic product will grow by an annual rate of 2.4 percent this year and 2.6 percent next year, CBO said.
Stocks pared losses and Treasury bond prices fell as the figures revealed a stronger fiscal outlook than previously thought.
Unemployment will remain stubbornly high and economic growth will remain sluggish through 2012, CBO said. This could pose a challenge to President Barack Obama's re-election hopes.
"Although economic output began to expand again two years ago, the pace of the recovery has been slow, and the economy remains in a severe slump," CBO Director Doug Elmendorf wrote in a blog post.
CBO reported that the United States will rack up $3.487 trillion in cumulative deficits over 10 years, some $3.3 trillion below its previous projection.
It said the current 9.1 percent unemployment rate will only fall to 8.5 percent in the fourth quarter of 2012, when voters head to the polls for presidential and congressional elections.
Gross domestic product will grow by an annual rate of 2.4 percent this year and 2.6 percent next year, CBO said.
Stocks pared losses and Treasury bond prices fell as the figures revealed a stronger fiscal outlook than previously thought.
Wall Street extends gains as banks rise
NEW YORK (Reuters) - Stocks extended gains on Wednesday, with the Dow and S&P 500 briefly rising more than 1 percent on strength in bank shares.
The Dow Jones industrial average gained 92.94 points, or 0.83 percent, to 11,269.70. The Standard & Poor's 500 Index rose 11.18 points, or 0.96 percent, to 1,173.53. The Nasdaq Composite Index climbed 20.94 points, or 0.86 percent, to 2,467.00.
The Dow Jones industrial average gained 92.94 points, or 0.83 percent, to 11,269.70. The Standard & Poor's 500 Index rose 11.18 points, or 0.96 percent, to 1,173.53. The Nasdaq Composite Index climbed 20.94 points, or 0.86 percent, to 2,467.00.
The Real Reason The Debt Ceiling Fight Was Horrible News For Markets
The debt ceiling fight didn't end in default (thank god) and in all truth it didn't even result in severe austerity in the near term.
The cuts next year aren't actually all that dramatic, although they're certainly very unhelpful at a time when the private sector is weak and deleveraging.
But the fight did reveal some bad news.
See, people talk about the Bernanke Put (will the Fed chair step in to ease conditions if things get bad enough?) but throughout history you've always had a Washington Put.
When things get bad, governments do stuff. That's not just limited to America. There isn't a government in the world that doesn't try to ameliorate hard times, whether they be economic, natural disaster-related or something else.
The recent action in Washington really does call into question whether the Washington Put exists at all. One party was completely unyielding in its demands, and seemingly willing to seriously damage the economy to pursue its agenda. And it's not just the debt ceiling where you see this. This FAA nonsense shows again a total inability to do basic, obvious stuff.
The Republicans have even shown an unwillingness to deal with actual natural disasters. Remember when Eric Cantor said there would be no relief for Joplin Missouri unless there were budget offsets found?
Even if you agree with the GOP's hardcore stance, you must admit that when disaster relief comes with conditions, the usual buffers for the economy are eroding.
After Congress gets back from recess, there are a number of things which, theoretically, should be possible and palatable, including a continuation of the payroll tax holiday, and other jobs-type bills that would normally be agreeable. But the situation in Washington does not look as though it will be conducive to any of that until at least January 2013.
And if things get really bad -- you know, if the banking system starts creaking again -- you can forget about getting any more help there.
The Washington Put is no more. The market is realizing that, and has been since that Friday when talks first collapsed between Obama and Boehner.
The cuts next year aren't actually all that dramatic, although they're certainly very unhelpful at a time when the private sector is weak and deleveraging.
But the fight did reveal some bad news.
See, people talk about the Bernanke Put (will the Fed chair step in to ease conditions if things get bad enough?) but throughout history you've always had a Washington Put.
When things get bad, governments do stuff. That's not just limited to America. There isn't a government in the world that doesn't try to ameliorate hard times, whether they be economic, natural disaster-related or something else.
The recent action in Washington really does call into question whether the Washington Put exists at all. One party was completely unyielding in its demands, and seemingly willing to seriously damage the economy to pursue its agenda. And it's not just the debt ceiling where you see this. This FAA nonsense shows again a total inability to do basic, obvious stuff.
The Republicans have even shown an unwillingness to deal with actual natural disasters. Remember when Eric Cantor said there would be no relief for Joplin Missouri unless there were budget offsets found?
Even if you agree with the GOP's hardcore stance, you must admit that when disaster relief comes with conditions, the usual buffers for the economy are eroding.
After Congress gets back from recess, there are a number of things which, theoretically, should be possible and palatable, including a continuation of the payroll tax holiday, and other jobs-type bills that would normally be agreeable. But the situation in Washington does not look as though it will be conducive to any of that until at least January 2013.
And if things get really bad -- you know, if the banking system starts creaking again -- you can forget about getting any more help there.
The Washington Put is no more. The market is realizing that, and has been since that Friday when talks first collapsed between Obama and Boehner.
Glenn Hubbard: Economic Risks Have Risen but a Recession Isn’t Likely
U.S. markets tumbled nearly 4% Thursday erasing any gains made in 2011 on fears that the U.S. and global economy are headed for yet another recession two years after the "Great Recession" ended.
In a matter of just days, the overall outlook has gone from plugging along to a dramatically sever downshift. But after today's better than expected July jobs report, U.S. futures have rallied and time will tell where we go from here.
Glenn Hubbard, Dean of Columbia Business School and the top economic adviser to President George W. Bush during his first term, joined The Daily Ticker's Daniel Gross to shed some light on whether another recession is really ahead.
The Good News
Hubbard believes the "likeliest outlook for the economy is one of very slow growth over the next couple of years" and not a full-blown recession. Slow growth means 2% to 2.5% GDP each quarter. Those numbers may seem doable and like reasonable growth, but it is really not enough to bring the U.S. economy back from the lows of the last recession.
He also firmly believes that there are things the government can do to help fix the dire state of the economy such as eliminate uncertainties facing the business community. One instance would be to snuff out any worries that taxes may eventually rise.
The Bad News
That bad news is that "risks have risen" and the economy is still very fragile and susceptible to major shocks, Hubbard says noting the reason for such weak growth over the last two years was due to the fact that the last recession was not like any other in recent history. "If there were to be a shock — a real problem in Europe another budget issue in the U.S. that could be enough to tip the economy into recession," he says.
In a matter of just days, the overall outlook has gone from plugging along to a dramatically sever downshift. But after today's better than expected July jobs report, U.S. futures have rallied and time will tell where we go from here.
Glenn Hubbard, Dean of Columbia Business School and the top economic adviser to President George W. Bush during his first term, joined The Daily Ticker's Daniel Gross to shed some light on whether another recession is really ahead.
The Good News
Hubbard believes the "likeliest outlook for the economy is one of very slow growth over the next couple of years" and not a full-blown recession. Slow growth means 2% to 2.5% GDP each quarter. Those numbers may seem doable and like reasonable growth, but it is really not enough to bring the U.S. economy back from the lows of the last recession.
He also firmly believes that there are things the government can do to help fix the dire state of the economy such as eliminate uncertainties facing the business community. One instance would be to snuff out any worries that taxes may eventually rise.
The Bad News
That bad news is that "risks have risen" and the economy is still very fragile and susceptible to major shocks, Hubbard says noting the reason for such weak growth over the last two years was due to the fact that the last recession was not like any other in recent history. "If there were to be a shock — a real problem in Europe another budget issue in the U.S. that could be enough to tip the economy into recession," he says.
Europe’s in Crisis But Axel Merk Remains Bullish on the Euro
Financial markets were relatively calm Tuesday but all is not quiet on the Western front.
In Germany, investor confidence plummeted to the lowest level since 2008 on the heels of a nearly 25% decline in the DAX in the past four weeks.
Meanwhile, funding costs for European banks continue to rise while credit default swap prices have double since April, Bloomberg reports.
In addition, Greek 2-year note yields were re-approaching their all-time high levels despite myriad bailout efforts by the ECB and IMF.
Nevertheless, the euro was rallying vs. the dollar, and is expected to keep rallying into Friday's Jackson Hole conference. The euro continues to defy renewed speculation the single-currency is not long for this world. "The euro is breaking down and the process of its breaking down is creating very considerable difficulties in the European banking system," former Fed Chairman Alan Greenspan said today in Washington, Bloomberg reports.
There's plenty of problems in the eurozone but the euro's relative strength makes perfect sense to Axel Merk, president of Merk Investments and manager of the Merk Hard Currency Fund, which is the top-performer in its class for the past 3- and 5-year periods, according to Morningstar.
"People need to cut to the chase and see important steps are taken place" to address Europe's debt crisis, Merk says. "As a result, less money is being spent and printed in the eurozone and we believe the euro can thrive in this environment despite what everyone else is saying."
To be fair, there was some good news from Europe Tuesday, as German PMI beat expectations and Spanish borrowing costs fell as it sold 2.9 billion euros of bills.
But Merk is not Pollyanna about the situation in the EU.
"We believe this crisis is very real [and] won't be over tomorrow, next month or next year," he says. "There is no silver bullet."
Still, Merk takes solace in the efforts being undertaken in Europe both at the sovereign and individual bank levels. While "ugly, chaotic" and painful in the short-term, he believes this process will put the eurozone on steadier footing and bolster the euro.
The euro looks particularly good to Merk relative to the dollar as he sees few signs the U.S. is seriously tackling its long-term deficit issues. Thanks to the Fed's efforts, Treasury rates are artificially low which is giving U.S. policymakers a reprieve from making tough choices.
While the Fed continues its policy of money-printing and quantitative easing, "the eurozone is on the other side of the trade," he says. "Printing and spending less money will cause a lot of pain but it will give you a stronger euro. "
In Germany, investor confidence plummeted to the lowest level since 2008 on the heels of a nearly 25% decline in the DAX in the past four weeks.
Meanwhile, funding costs for European banks continue to rise while credit default swap prices have double since April, Bloomberg reports.
In addition, Greek 2-year note yields were re-approaching their all-time high levels despite myriad bailout efforts by the ECB and IMF.
Nevertheless, the euro was rallying vs. the dollar, and is expected to keep rallying into Friday's Jackson Hole conference. The euro continues to defy renewed speculation the single-currency is not long for this world. "The euro is breaking down and the process of its breaking down is creating very considerable difficulties in the European banking system," former Fed Chairman Alan Greenspan said today in Washington, Bloomberg reports.
There's plenty of problems in the eurozone but the euro's relative strength makes perfect sense to Axel Merk, president of Merk Investments and manager of the Merk Hard Currency Fund, which is the top-performer in its class for the past 3- and 5-year periods, according to Morningstar.
"People need to cut to the chase and see important steps are taken place" to address Europe's debt crisis, Merk says. "As a result, less money is being spent and printed in the eurozone and we believe the euro can thrive in this environment despite what everyone else is saying."
To be fair, there was some good news from Europe Tuesday, as German PMI beat expectations and Spanish borrowing costs fell as it sold 2.9 billion euros of bills.
But Merk is not Pollyanna about the situation in the EU.
"We believe this crisis is very real [and] won't be over tomorrow, next month or next year," he says. "There is no silver bullet."
Still, Merk takes solace in the efforts being undertaken in Europe both at the sovereign and individual bank levels. While "ugly, chaotic" and painful in the short-term, he believes this process will put the eurozone on steadier footing and bolster the euro.
The euro looks particularly good to Merk relative to the dollar as he sees few signs the U.S. is seriously tackling its long-term deficit issues. Thanks to the Fed's efforts, Treasury rates are artificially low which is giving U.S. policymakers a reprieve from making tough choices.
While the Fed continues its policy of money-printing and quantitative easing, "the eurozone is on the other side of the trade," he says. "Printing and spending less money will cause a lot of pain but it will give you a stronger euro. "
Markets Will Look for Hints in Bernanke’s Words
When the Federal Reserve chairman speaks at an annual gathering in Jackson Hole, Wyo., this Friday, markets will be searching for something, anything, that indicates whether more stimulus is on the way.
It was just a year ago, after all, that the economy was in almost exactly the same position: pitifully slow job and output growth, fears about another financial shock from Europe’s debt crisis, warnings of a double-dip recession. And a year ago, at this same conference, the chairman, Ben S. Bernanke, pointedly described all the weapons the Fed had available to rescue the economy — you know, just in case.
Several months later, the Fed opened its arsenal and began a major asset-purchasing program intended to stimulate growth.
Given Congress’s unwillingness to engage in more fiscal stimulus — in fact, it plans to pull back on spending — analysts and investors are wondering whether history will repeat itself, especially if the economy deteriorates further. Stock markets have been rallying this week, partly on hopes that Mr. Bernanke may signal more monetary stimulus is on the way, or at least under what conditions more stimulus would be likely. Broad stock indexes gained 3 percent or more on Tuesday, with the Dow industrial average pushing back above 11,000.
Among the options Mr. Bernanke is expected to lay out on Friday would be engaging in another round of major asset purchases, known as quantitative easing, which is meant to lower long-term interest rates; lowering the interest rate the Federal Reserve pays banks on their reserves; and extending the maturity structure of the Fed’s current portfolio of Treasuries, which analysts expect to be the most likely course of action. All these potential strategies would be intended to encourage more lending, among other goals, and thereby increase growth. The Fed might also raise its medium-term target for inflation, which would discourage banks, businesses and consumers from sitting on their cash, and so induce them to spend more.
But beyond such potential options, the announcement of a clear monetary policy road map seems unlikely. Fed speeches are constructed to cause minimal market excitement — either good or bad — and there are reasons to think Mr. Bernanke’s speech may be especially noncommittal.
First, only two weeks ago the board’s Federal Open Market Committee, which sets benchmarks on interest rates, severely dimmed its economic forecasts and took the unusual step of pledging to keep short-term interest rates near zero through at least mid-2013. It seems unlikely that the Fed would make major news so soon after that announcement, economists say.
“I don’t think the picture has changed all that much from two weeks ago,” said Paul Dales, senior United States economist at Capital Economics. “Suggesting more is in the pipeline already would smack of panic.”
Moreover, Mr. Bernanke could not unilaterally make a major policy change; he would need to seek approval from other Fed officials. Such consensus has become more challenging, since the composition of voting members on the Federal Open Market Committee has changed since last year.
Last year there was one steady dissenter, the Federal Reserve Bank of Kansas City president, Thomas M. Hoenig. Mr. Hoenig consistently voted against keeping short-term interest rates near zero for so long, and voted against the second round of quantitative easing begun by the Fed last November.
The voting members of the committee rotate each year, and now there is not one but three strongly hawkish voices: Narayana Kocherlakota, Charles I. Plosser and Richard W. Fisher, who are the presidents of the Federal Reserve Banks of Minneapolis, Philadelphia and Dallas, respectively. These three voted against the Aug. 9 announcement keeping short-term interest rates low through mid-2013, and so seem unlikely to endorse further easing measures.
There is also mounting political pressure from outside the Fed — on Capitol Hill and the presidential campaign trail — against expanding the central bank’s balance sheet.
Another reason Mr. Bernanke may be especially reluctant to signal commitment to further monetary stimulus is that inflation has picked up. Monetary stimulus, after all, generally increases inflation since it pumps more money into the economy and chases prices higher.
It was just a year ago, after all, that the economy was in almost exactly the same position: pitifully slow job and output growth, fears about another financial shock from Europe’s debt crisis, warnings of a double-dip recession. And a year ago, at this same conference, the chairman, Ben S. Bernanke, pointedly described all the weapons the Fed had available to rescue the economy — you know, just in case.
Several months later, the Fed opened its arsenal and began a major asset-purchasing program intended to stimulate growth.
Given Congress’s unwillingness to engage in more fiscal stimulus — in fact, it plans to pull back on spending — analysts and investors are wondering whether history will repeat itself, especially if the economy deteriorates further. Stock markets have been rallying this week, partly on hopes that Mr. Bernanke may signal more monetary stimulus is on the way, or at least under what conditions more stimulus would be likely. Broad stock indexes gained 3 percent or more on Tuesday, with the Dow industrial average pushing back above 11,000.
Among the options Mr. Bernanke is expected to lay out on Friday would be engaging in another round of major asset purchases, known as quantitative easing, which is meant to lower long-term interest rates; lowering the interest rate the Federal Reserve pays banks on their reserves; and extending the maturity structure of the Fed’s current portfolio of Treasuries, which analysts expect to be the most likely course of action. All these potential strategies would be intended to encourage more lending, among other goals, and thereby increase growth. The Fed might also raise its medium-term target for inflation, which would discourage banks, businesses and consumers from sitting on their cash, and so induce them to spend more.
But beyond such potential options, the announcement of a clear monetary policy road map seems unlikely. Fed speeches are constructed to cause minimal market excitement — either good or bad — and there are reasons to think Mr. Bernanke’s speech may be especially noncommittal.
First, only two weeks ago the board’s Federal Open Market Committee, which sets benchmarks on interest rates, severely dimmed its economic forecasts and took the unusual step of pledging to keep short-term interest rates near zero through at least mid-2013. It seems unlikely that the Fed would make major news so soon after that announcement, economists say.
“I don’t think the picture has changed all that much from two weeks ago,” said Paul Dales, senior United States economist at Capital Economics. “Suggesting more is in the pipeline already would smack of panic.”
Moreover, Mr. Bernanke could not unilaterally make a major policy change; he would need to seek approval from other Fed officials. Such consensus has become more challenging, since the composition of voting members on the Federal Open Market Committee has changed since last year.
Last year there was one steady dissenter, the Federal Reserve Bank of Kansas City president, Thomas M. Hoenig. Mr. Hoenig consistently voted against keeping short-term interest rates near zero for so long, and voted against the second round of quantitative easing begun by the Fed last November.
The voting members of the committee rotate each year, and now there is not one but three strongly hawkish voices: Narayana Kocherlakota, Charles I. Plosser and Richard W. Fisher, who are the presidents of the Federal Reserve Banks of Minneapolis, Philadelphia and Dallas, respectively. These three voted against the Aug. 9 announcement keeping short-term interest rates low through mid-2013, and so seem unlikely to endorse further easing measures.
There is also mounting political pressure from outside the Fed — on Capitol Hill and the presidential campaign trail — against expanding the central bank’s balance sheet.
Another reason Mr. Bernanke may be especially reluctant to signal commitment to further monetary stimulus is that inflation has picked up. Monetary stimulus, after all, generally increases inflation since it pumps more money into the economy and chases prices higher.
Saturday, August 20, 2011
Credit Cards Will not Let You Buy medical marijuana
A little-noticed move by American Express to ban the purchase of medical marijuana with its credit cards has reignited a longstanding debate: How much can a credit card company control what you buy?
No surprise of consumers, major credit card companies are making decisions about what they can and can't buy with their credit cards. What's off-limits? Legal purchases like gambling chips and donations to at least one controversial non-profit organization; in some cases, buying pornography is also restricted, and so, increasingly, is medical marijuana. Last month, shortly before Delaware became the 16th state to legalize medical marijuana, American Express told merchants that its cards could not be used to buy it.
Companies say they're protecting themselves against legal risk, but critics say this kind of corporate policy is an inconvenience for merchants, infringes on consumers' rights and amounts to moral policy-setting. "You ought to be able to use a credit card for any legal purchase," says John M. Simpson from the non-profit Consumer Watchdog. "It seems to me that credit card companies are imposing their moral values on the world."
The specifics of the companies' policies vary. American Express is the most conservative of the big three: it bans the purchase of medical marijuana in the 16 states that have legalized it and online pornography. Visa and MasterCard allow both for their credit and debit card holders. Last winter, Visa and MasterCard prevented cardholders from using their cards to donate to the whistleblower website WikiLeaks. (The site never accepted American Express.) All three forbid using their cards to buy chips in a legal bricks-and-mortar casino. (Paying for online gambling, which is illegal in the U.S., is also prohibited.)
But the gambling restrictions also point out the gray areas in these policies, which critics say don't always make sense. While cardholders can't charge gambling chips, they can use their cards to get a cash advance at a casino's ATM -- cash they might then use to buy chips. "It's arbitrary," says Curtis Arnold, founder of the credit card comparison website CardRatings.com.
MasterCard and Visa said that their cards can be used for any legal purchases, though they declined to comment on the legal purchase of gambling chips. A MasterCard spokesman also said that the company has a number of programs that it uses to "combat illegal or brand-damaging behavior."
American Express explained a more nuanced calculus: It said its business model, which primarily issues cards directly to customers instead of through a bank, requires it to be more conservative about risk. The company says it abides by federal law and prohibits transactions where the risk of dispute is unusually high.
The company also says its total ban on online pornography helps in the fight against child pornography, which is commonly disseminated or sold online. The ban on all pornography, even legal adult material, is "an additional safeguard," said company spokeswoman Christine S. Elliott. As for marijuana, American Express points to federal law, which still prohibits the use of marijuana even for medical purposes. "We wouldn't want to unduly inconvenience cardholders," Elliott says, "but we are adhering to federal law."
That's not unreasonable, says Warren Redlich, a lawyer in Albany, N.Y., who specializes in consumer issues and criminal law. If the federal government were to ramp up its efforts to stop the sales of medical marijuana in states, it could theoretically try to implicate financial services companies that support the industry, he says. "You could sympathize with Amex's position," Redlich says, "I wouldn't be surprised if MasterCard and Visa eventually go along with it."
Some of these policies have been longstanding. American Express first banned the purchase of online pornography in May 2000, saying it faced an unacceptably high level of disputed transactions. "It's a risk-based decision," Elliott says. "This is not a moral judgment." The company allows the purchase of pornography from brick-and-mortar stores.
No surprise of consumers, major credit card companies are making decisions about what they can and can't buy with their credit cards. What's off-limits? Legal purchases like gambling chips and donations to at least one controversial non-profit organization; in some cases, buying pornography is also restricted, and so, increasingly, is medical marijuana. Last month, shortly before Delaware became the 16th state to legalize medical marijuana, American Express told merchants that its cards could not be used to buy it.
Companies say they're protecting themselves against legal risk, but critics say this kind of corporate policy is an inconvenience for merchants, infringes on consumers' rights and amounts to moral policy-setting. "You ought to be able to use a credit card for any legal purchase," says John M. Simpson from the non-profit Consumer Watchdog. "It seems to me that credit card companies are imposing their moral values on the world."
The specifics of the companies' policies vary. American Express is the most conservative of the big three: it bans the purchase of medical marijuana in the 16 states that have legalized it and online pornography. Visa and MasterCard allow both for their credit and debit card holders. Last winter, Visa and MasterCard prevented cardholders from using their cards to donate to the whistleblower website WikiLeaks. (The site never accepted American Express.) All three forbid using their cards to buy chips in a legal bricks-and-mortar casino. (Paying for online gambling, which is illegal in the U.S., is also prohibited.)
But the gambling restrictions also point out the gray areas in these policies, which critics say don't always make sense. While cardholders can't charge gambling chips, they can use their cards to get a cash advance at a casino's ATM -- cash they might then use to buy chips. "It's arbitrary," says Curtis Arnold, founder of the credit card comparison website CardRatings.com.
MasterCard and Visa said that their cards can be used for any legal purchases, though they declined to comment on the legal purchase of gambling chips. A MasterCard spokesman also said that the company has a number of programs that it uses to "combat illegal or brand-damaging behavior."
American Express explained a more nuanced calculus: It said its business model, which primarily issues cards directly to customers instead of through a bank, requires it to be more conservative about risk. The company says it abides by federal law and prohibits transactions where the risk of dispute is unusually high.
The company also says its total ban on online pornography helps in the fight against child pornography, which is commonly disseminated or sold online. The ban on all pornography, even legal adult material, is "an additional safeguard," said company spokeswoman Christine S. Elliott. As for marijuana, American Express points to federal law, which still prohibits the use of marijuana even for medical purposes. "We wouldn't want to unduly inconvenience cardholders," Elliott says, "but we are adhering to federal law."
That's not unreasonable, says Warren Redlich, a lawyer in Albany, N.Y., who specializes in consumer issues and criminal law. If the federal government were to ramp up its efforts to stop the sales of medical marijuana in states, it could theoretically try to implicate financial services companies that support the industry, he says. "You could sympathize with Amex's position," Redlich says, "I wouldn't be surprised if MasterCard and Visa eventually go along with it."
Some of these policies have been longstanding. American Express first banned the purchase of online pornography in May 2000, saying it faced an unacceptably high level of disputed transactions. "It's a risk-based decision," Elliott says. "This is not a moral judgment." The company allows the purchase of pornography from brick-and-mortar stores.
Time to Sell
IF you have not learned yet - the hedge funds and banks run the market now and it is time to sell. Time to take what is left of your 401K sell it and invest in gold or something tangible. The only alternative to this is to buy some stocks that actually pay a divedend.
For investors who are panicking, T. Rowe Price Group Inc. (NYSE: TROW - News) suggests putting a process in place for liquidating portions of your portfolio gradually—such as liquidating 10% today, and then later, maybe in a week or a month, liquidating another 10%, until you "regain your emotional equilibrium,'' says Christine Fahlund, a senior financial planner at the Baltimore firm.
For a "balanced account'' with at least 30% bonds along with equities, he has reduced the projected rate of return to 3.5% to 4%, down from 5% to 6%.
For investors who are panicking, T. Rowe Price Group Inc. (NYSE: TROW - News) suggests putting a process in place for liquidating portions of your portfolio gradually—such as liquidating 10% today, and then later, maybe in a week or a month, liquidating another 10%, until you "regain your emotional equilibrium,'' says Christine Fahlund, a senior financial planner at the Baltimore firm.
For a "balanced account'' with at least 30% bonds along with equities, he has reduced the projected rate of return to 3.5% to 4%, down from 5% to 6%.
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