DailyFinance.comhttp://www.dailyfinance.comDailyFinance.comhttp://o.aolcdn.com/os/df/2013/img/2-dailyfinance_logo_m.pngDailyFinance.comhttp://www.dailyfinance.comen-usCopyright 2013 Weblogs, Inc. The contents of this feed are available for non-commercial use only.Blogsmith http://www.blogsmith.com/Extended Unemployment Benefits Don't Discourage Job Seeking: Studyhttp://www.dailyfinance.com/2013/05/15/extended-unemployment-benefits-dont-discourage-job-seeking-stu/http://www.dailyfinance.com/2013/05/15/extended-unemployment-benefits-dont-discourage-job-seeking-stu/http://www.dailyfinance.com/2013/05/15/extended-unemployment-benefits-dont-discourage-job-seeking-stu/#commentsFiled under: , , ,

Job seekers
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By Senior Editor

Despite arguments to the contrary, giving unemployed Americans extended jobless benefits of up to 99 weeks didn't prevent them from taking jobs, according a new report.

Released last month through the Federal Reserve Bank of San Francisco, the study says that the extended benefits given from 2009 to 2012 to the unemployed increased the overall employment rate by only 0.04 percentage points, which the report says is small in comparison to the peak recession unemployment rate of 10 percent.

"There was some criticism that people on long-term unemployment benefits would not want to go back to work," said Henry Farber, a professor of economics at Princeton University and co-author of the report.

"But that's not true. We could find no real effect of the benefits from keeping people wanting to work," said Farber. "People are not staying on unemployment to avoid taking jobs."

Farber said his report looked at previous downturns in the economy when extended unemployment benefits were shorter -- up to 79 weeks in early 2001-2002 -- than came out of the recession of 2007-2009. The findings for both periods were similar, he said.

"There was never much serious work done to look at this issue of extended benefits and the effect on the jobless rate," Farber said. "That's why we did this. We wanted to find out if there was a correlation and we didn't find one."

'They Add to the Long-Term Unemployment Situation'

The current rate of unemployment is around 7.5 percent according to the Bureau of Labor Statistics, down from the 10 percent recessional peak in 2009.

Still, while the job picture is improving for some, the long-term unemployed aren't so lucky. That's because as the jobless rate improves, the federal government -- which funds much of the unemployment benefit extensions -- cuts back spending for benefits.

Congress has traditionally extended unemployment benefits in times of recession. In 2010 and 2011, benefits in some states reached 99 weeks of combined state and federal benefits -- the highest extension on record.

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But less than half of the 11.7 million unemployed in April received state or federal benefits, according to the Labor Department.

Any current extended benefits will continue for those receiving them, but they will not be renewed at the end of this year. And there will be no more extended benefits for those going on unemployment now, unless job losses mount to recession-era levels.

California and Nevada are among the states that have the highest duration of benefits, at 76 weeks, while Utah, Wyoming, South Dakota and Kansas are among the states with the lowest duration, at 40 weeks.

Not every one sees extensions as beneficial -- despite any evidence to the contrary. Timothy Nash, an economics professor at Northwood University, said he believes extended benefits keep the unemployed from looking for work.

"There's a lot of debate about the impact of extensions but my gut feeling is that giving them hurts the job picture," said Nash. "If we look at countries like Sweden that had long term extensions and high unemployment, when they ended the extensions the jobless rate went down."

"I think some people need them," Nash went on to say. "People with certain skills that can use the extensions to take the time to find a job that's right for them. But without extensions, people feel a better sense of urgency that they have to find a job."

"Having these extensions, while they give some people a way to live, are not the best thing to do," Nash argued. "I think they add to the long-term unemployment situation instead of ending it."

Currently, there are some 4.4 million Americans listed as long-term unemployed-defined as those who have been out of work for 27 weeks or more., according to the BLS.

While that's better than the high of 6.7 million in April of 2010, it's still not enough of an improvement, said Chris Rhomberg, a sociology professor and labor expert at Fordham University.

"The long-term unemployed need help, and they're not getting it," Rhomberg argued. "You've got a situation where employers can reject people who have been out of work for a long time and they don't suffer any consequences."

"Businesses are not hiring and extensions are down. It's cruel," said Rhomberg.

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]]>Bureau of Labor Statisticschanging jobseconomic recoveryextended unemployment benefitsFederal Reserve Bank of San FranciscoFinanceHealthhiringjob searchrecessionunemploymentunemployment benefitsunemployment rateCNBCWed, 15 May 2013 12:33:00 ESTBillion-Dollar Start-Ups Should Be Thanking the Federal Reservehttp://www.dailyfinance.com/2013/05/15/billion-dollar-startups-federal-reserve-low-interest-rates/http://www.dailyfinance.com/2013/05/15/billion-dollar-startups-federal-reserve-low-interest-rates/http://www.dailyfinance.com/2013/05/15/billion-dollar-startups-federal-reserve-low-interest-rates/#commentsFiled under: , , , ,

Waze
Waze
By , Technology Editor

It seems like the list of start-ups valued at more than $1 billion just keeps getting longer.

Facebook (FB) is reportedly expected to offer the social mapping company Waze $800 million to $1 billion to acquire it.The room rental start-up Airbnb has been reported to be worth $2 billion and Evernote is reported to be at $1 billion.

The list goes on and on. But how exactly are these young companies reaching the billion buck mark? Well, they've had some help driving up their valuations from the Federal Reserve.

Fed Chairman Ben Bernanke has kept short-term interest rates near zero since 2008. While many expected rates would have gone up by now, rocky economic numbers have many speculating that rates aren't changing anytime soon. For young entrepreneurs, low interest rates can translate into easy funding.

Basically, securing large investments from private-equity firms is a lot easier when interest rates are low because the opportunity costs are low. Basic macroeconomic theory suggests that bonds are an alternative to equity investments, which include venture capital investments. When bond returns fall, the relative attractiveness of investing in venture capital funds increases.

Once you've locked in one private investor, well, it doesn't take very long for bidding to start to take-off.

In addition, because a growing number of high valued start-ups -- such as SurveyMonkey, which is also valued at more than $1 billion -- are focused on the enterprise market and not just consumers, taking a stake in a young company is lot more reasonable to investors because the business model is seen as less risky.

And yet, while it doesn't currently look like tech has reached the full-blown bubble stage, there is some disturbing behavior when it comes to later-stage investments in private companies that is becoming "frothy," said Bill Gurley of Benchmark Capital last month at the Disrupt TechCrunch conference.

"The late-stage private market continues to be the most frothy thing I've seen since the late nineties. And I thought it was going to go away when you had these iconic IPOs that ended up trading at a fraction of the private rounds, but it hasn't," Gurley said.


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"If you have a hot company that is in the select chosen one, you've got people knocking on your door, begging you take money ... historically, overtime, it's been shown to become a bad thing," he said. According to a recent MoneyTree report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters data, late-stage investments have been steadily increasing.

However, once the Fed takes away the massive liquidity it is putting into the system and interest rates head higher, it could have a negative impact on the venture community, Gurley said. That doesn't bode well for the start-ups looking for funding.

The easy money isn't as easy as it once was, said Sanjeet Paul Choudary, a venture advisor who analyzes start-up strategies.

During the three years leading up to the Facebook IPO -- from 2009 to 2012 -- investors were putting large sums of money into early stage start-ups because more conventional forms of investments, like housing, weren't profitable, he said.



But after the botched Facebook IPO, early-stage investing took a dive, Choudary said.

"Large investments at the early and seed stage pushed valuations up. But optimism has gone down in recent times," Choudary said. "There was a correction in the market."

A lot of the companies who received funding before Facebook's IPO didn't get later stage investments, he added.

Total U.S. venture capital investment has fallen for three straight quarters, according to the PricewaterhouseCooper report.

Overall VC activity slowed in the U.S. during the first quarter of this year with total investments coming to $5.9 billion in 863 deals, a 12 percent decline in funding and a 15 percent decline in deals from the previous quarter. The decline is likely because venture capitalists are having a hard time cashing out in their prior investments.

Since 2012 the number of VC backed exits has steadily declined.



However, you shouldn't read too much into the deal slowdown in the private market, said Tracy Lefteroff, global managing partner of the venture capital practice at PwC US, because there are positive signs that the deal market for tech is about to make a comeback.
(Read More: The Next Big Tech IPOS Will Be in These Businesses)

"People have to remember the venture capital business is a cyclical business," Lefteroff said. "There have been tough times in space before, but one thing that continues to drive business is there is always a demand for innovative young technology companies and I truly believe that we will see a return very vibrant return to investment. This is just a bottoming out of the cycle."

Software companies that build their business model around enterprise are primed for more VC investments, he said. Not to mention that there are also some software company IPOs on the horizon, which will ultimately enable investors to reinvest more capital, he added.

With the market at all-time highs-up about 15 percent since a year ago and at its best start since 1999 -- investors are hungry for more risk.
(Read More: The 10 Biggest Internet IPOs)

"The thing that is propping up U.S. equities right now is interest rates being so low, anytime interest rates are so low, equities perform well ... so people are seeing liquidity," Gurley said. "The venture community has long been a trailing indicator to the Nasdaq, because it's a cyclical business."

However, while the long-term outlook for the VC business is good, investments in social networking companies that rely strongly on being the most trendy company do seem unrealistic, Lefteroff said.

"I don't see a bubble, but the social network genre has the potential to get out of control and frothy," he said.

-- Follow Cadie Thompson on Twitter @CadieThompson.

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]]>AirbnbBen BernankeBenchmark CapitalEvernoteFacebookFacebook IPOFederal ReserveFinanceinterest ratesInvestingMarc AndreessenNational Venture Capital AssociationPricewaterhouseCoopers International LtdThomson Reutersventure capitalWazeCNBCWed, 15 May 2013 12:00:00 ESTWhy Rich Consumers Will Dominate Spending in 2013http://www.dailyfinance.com/2013/04/30/consumer-spending-wealthy-americans-economic-recovery-2013/http://www.dailyfinance.com/2013/04/30/consumer-spending-wealthy-americans-economic-recovery-2013/http://www.dailyfinance.com/2013/04/30/consumer-spending-wealthy-americans-economic-recovery-2013/#commentsFiled under: , ,

Customers carry an Apple Inc., iMac computer in front of an Apple Inc. store in San Francisco, California, U.S., on Friday, April 19, 2013. Apple Inc., is expected to release earnings data on April 23. Photographer: David Paul Morris/Bloomberg
Getty Images
By Robert Frank

The consumer economy may look weak. But the affluent and wealthy consumers are ramping up their spending -- and that could help drive the broader economy this year. Two new studies show that wealthier consumers plan to increase their spending despite higher taxes and a generally skeptical view of economic growth and government.

A study from the American Affluence Research Center looked at the top 10 percent of consumers by income who account for more than half of consumer spending. It found that the majority of them plan to spend the same or more in 2013 as they did in 2012.
(Read more: Stocks Widening Gap Between Rich and the Rest)

A separate survey from the Harrison Group and American Express Publishing found among the top 10 percent of earners, 25 percent plan to spend more on luxury this year -- up from 15 percent last year. Among the top one percent, nearly a third plan to spend more, up from 21 percent last year.

The main reason: rising stocks, better incomes and more job security.

While the wealthy remain fairly pessimistic about the overall economy and country, they are increasingly bullish on their own fortunes and finances. Fully 55 percent said their household assets have improved, while 41 percent say their incomes are higher.

About two thirds say the performance of the national government is worse than last year and more than half say America's reputation in the world is worse.

Jim Taylor, vice chairman of the Harrison Group, said that the affluent have high savings rates and generally feel insulated from the problems of the broader economy.

"When you look at their balance sheets, they're in the black and looking very robust," he said.
(Read more: Will an 'April Surprise' Bail Out Washington?)

That doesn't mean, however, that the wealthy are throwing money around with reckless abandon. For many, memories of the recession still linger. Harrison Group found that today's affluent consumers come in two species: "worth dominant" consumers and "deal dominant" consumers. Jim Taylor, vice chairman of Harrison Group, said that "worth" consumers buy based on quality, craftsmanship and service and are expected to spend $58 billion on luxuries this year.

The "deals" consumers have been shaped by the recession and are looking for discounts. Taylor said they are driven by resourcefulness, self-reliance and a deep sense of financial responsibility.

"The lessons learned from the recession continue to dominate purchasing strategies in some of the country's most successful households," Taylor said. "They're not going back to unreasonable self-indulgence."

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]]>consumer spendingeconomic recoveryeconomyGDPwealthyCNBCTue, 30 Apr 2013 09:19:00 ESTAsia's Wacky Business Ideas: Really Odd Products That Sell Like Madhttp://www.dailyfinance.com/2013/04/22/asias-wacky-business-ideas-seriously-quirky-products-that-foun/http://www.dailyfinance.com/2013/04/22/asias-wacky-business-ideas-seriously-quirky-products-that-foun/http://www.dailyfinance.com/2013/04/22/asias-wacky-business-ideas-seriously-quirky-products-that-foun/#commentsFiled under: ,

Getty Images
By Rajeshni Naidu-Ghelani

They may be wacky and weird but sure make business sense. What are we talking about? Bizarre "Made in Asia" innovations that have caught the consumer's imagination.

Quirky and odd, these products have found a niche in the marketplace as they cater to a need or simply to a fetish.

We have scouted around and come up with a list of eight such fascinating ideas that make you wonder "why couldn't I think of that?"

Click ahead for a sample of some of the craziest yet successful businesses out of Asia.

Gallery: Asia's Wacky Business Ideas

Modern Toilet RestaurantSquare WatermelonsCanned Fresh AirKopi Luwak9gag.com

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]]>American DreamAsiaEntertainmentCNBCMon, 22 Apr 2013 17:00:00 ESTHow Much Financial Advice Do You Need? (Hint: Less Than You Think)http://www.dailyfinance.com/2013/04/18/how-much-financial-advice-do-you-need/http://www.dailyfinance.com/2013/04/18/how-much-financial-advice-do-you-need/http://www.dailyfinance.com/2013/04/18/how-much-financial-advice-do-you-need/#commentsFiled under: , , ,

Financial Advice
Alamy
By

How much financial advice do we need? It's a question we all ask ourselves, whether we pay a certified financial planner handsomely or go it alone.

But with a troubling national shortfall in retirement savings and the lingering effects of a foreclosure crisis, policymakers and researchers are asking the same question in the hope of coming up with low-cost ways to keep people on the right track.

The answer, to judge from a rash of recent studies, is not much.

The credit-rating agency Experian recently conducted a study with Neighborworks, a nonprofit that helps lower-income families buy homes, measuring the effectiveness of Neighborworks' weekend workshops. It showed that as little as eight hours of counseling on real estate basics reduced mortgage delinquencies by more than a third.



The study included experienced homeowners as well as first-time buyers, and Experian was careful to control for those who required remedial advice.

"The study looked at pre-home ownership credit behavior, so you didn't only have people who already had bad credit," said Douglas Robinson, a Neighborworks spokesman. He added that middle- and even high-income buyers could also benefit from a brief acquaintance with what to expect from home ownership.

"We reduce the 'unknown knowns,' " Robinson said.

Other studies have shown that the unknowns can be reduced with far less effort.

At Stanford University's Institute for Economic Policy Research, a group looking for ways to spur higher retirement savings found that employees who got occasional, customized projections from their employer of how much income their IRAs and 401(k)s would provide them responded by increasing their annual contributions.

Similar results can be realized simply by using an online retirement calculator. A recent paper from the Employee Retirement Research Institute showed that those who figured their retirement needs with a Web tool increased the adequacy of their savings targets as much as 18 percent. In fact, those who used an online calculator ended up with more realistic savings targets than people who relied on a financial adviser.

That evidence raises another question: What kind of financial advice do we need?

Jack VanDerhei, research director of EBRI and co-author of the paper about online calculators, suspects that most people seek out advisers for guidance on other investment matters, such as asset allocation. "That tells me nothing as to what my overall savings targets should be," VanDerhei said.

And it does little to connect our picture of home ownership or retirement with reality.

"All of us sort of dream in color," said Anna Behnam, a financial adviser with Ameriprise Financial Services in Rockville, Md. "When we think about buying a house or car, we focus on what we want." The basic service of financial advice is to get us to think in black and white, Behnam said. It seem that even a little bit of cold, hard calculation can change our behavior by taking the emotion out of a home purchase or budgeting for old age.

The prevailing emotion in buying a home appears to be infatuation.

"We tell people, 'Don't fall in love with the first house you see, or even the last,' " said Robinson at Neighborworks. "Our counseling lays it out in almost spreadsheet form: You earn $50,000 a year. So here are your transportation costs, your daycare, food, what it costs to wear a suit and tie every day."

People also fall in love with their retirement dreams, but fear tends to be the principal driver of retirement planning mistakes.

"People think it is beyond their capabilities no matter what they do," said VanDerhei. When asked what percentage of their income they need to save for a decent retirement, he said, some respondents to EBRI's most recent Retirement Confidence Survey said 20 percent -- far higher than is practical or necessary.



The same fear can make people resistant to seeking financial advice. "People think they can't afford a planner," Behnam said. "They think a planner will tell them to do things that they can't afford to do." The promise of these recent studies is that people may be more receptive to a small injection of financial planning.

Some question whether these nudges will be enough to prevent future rounds of foreclosures or prevent America's coming retirement crisis.

Gopi Shah Goda, who led the Stanford study, noted that, after receiving retirement income projections, employees raised their annual contribution by an average of only $85. Still, the advice was more likely to lead to outcomes better than employees would have with default contributions set by human resources -- and far better than letting them guess how much to put aside, which EBRI found is the method used by 45 percent of workers.

Looked at that way, it's little wonder that a little advice goes a long way. "A lot of the problem is that people are so clueless," VanDerhei said.

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]]>asset allocationbudgetingFinancefinancial advicefinancial literacyFinancial Plannerhome buyingretirement planningCNBCThu, 18 Apr 2013 05:00:00 ESTWashington Lawmakers' Pensions: The Envy of a Nationhttp://www.dailyfinance.com/2013/03/14/washington-lawmakers-pensions-the-envy-of-a-nation/http://www.dailyfinance.com/2013/03/14/washington-lawmakers-pensions-the-envy-of-a-nation/http://www.dailyfinance.com/2013/03/14/washington-lawmakers-pensions-the-envy-of-a-nation/#commentsFiled under: , , , ,

congress pension plan retirementWhile extending the payroll tax cut through the end of last year, members of Congress last fall took what many feel was a long overdue whack at the cost of their retirement plan. They bumped up the rate at which federal employees contribute to their pension plan, saving an estimated $15 billion over the next 11 years.

They also made sure that none of the increase applied to themselves. Anyone in service before the law went into effect would pay into the pension plan at the old rate.

For all the talk you hear from Capitol Hill about running government more like a business, Congress has a retirement plan that would make any Fortune 500 executive blush. Members can retire younger, having contributed fewer of their own dollars, than almost any worker in the country -- even more than the generous terms other federal workers get.

At a time when traditional pensions are disappearing and many workers are struggling to save for retirement, the Federal Employees' Retirement System, an old-school defined benefit pension program, pays 215 former congressmen and women an average of $39,576, for an average of 16 years of service, according to a recent Congressional Research Service report.

That's about what the average private-sector worker makes in retirement from all sources after a lifetime of work, according to the Employees Benefits Research Institute. The average income that worker gets from a pension is about $8,800 -- if they have one. In 2010, fewer than 15 percent of private sector employees were enrolled in a defined-benefit pension.

"It's not keeping pace with what's happening in the private sector," said Veronique de Rugy, a senior researcher with George Mason University's Mercatus Center. "It's not sustainable."

It's inaccurate, in fact, to refer a single retirement plan, since any senator or representative elected after 1986 has access to three: Social Security, a 401(k) program that matches 5 percent of their contributions up to $17,500, and FERS, which as the name implies covers anyone paid from the federal till.

FERS alone is a plan any U.S. worker would envy. As Jim Kessler, co-founder of the think tank Third Way and a former congressional aide, said, "It's not wrong to have three plans, but the matching is one-to-one for two of them and the other [FERS] is one-to-14."

As a result, all federal employees get a return on their FERS contributions at a rate that's almost double what other workers do. (See chart.) But thanks to a faster accrual rate granted to elected employees -- how fast the value of their benefits pile up -- members of Congress even get a higher percentage payout on FERS for the same time served than other federal workers do.

federal versus private defined pension plans retirement

According to calculations by Pete Sepp, executive vice president of the National Taxpayers Union, who has been tracking congressional benefits for decades, an executive branch employee with 10 years of service and who is retiring at age 62 this year would begin his pension at roughly $15,600. But a member of Congress of identical age, salary and service would begin at approximately $26,600, reflecting his higher contribution. But for his extra $11,000 in the first year's benefit, the lawmaker will have contributed only $8,350 more to the plan.

Defenders of the system point out that elected politicians have less job security than appointees like our executive branch workers. Sepp doesn't buy it. "Not only do you get a lot more in benefits for the extra you pay," he said, "but how many Cabinet secretaries stay in government for even eight years?"

Some critics say congressional retirement plans are not only too numerous and too generous, but the wrong kind. One of them is Republican Rep. Mike Coffman, who has put forward a bill with a fellow Coloradan, Democrat Jared Polis, that would end FERS.

"It makes no sense for Congress to continue to reward itself using taxpayer dollars, with a defined benefit plan when ... much of the country has moved to a defined contribution plan like a 401K," Coffman said in a statement earlier this year.

But as Washington is consumed with the sequester, the chances that Coffman and Polis' bill, or the $25 million we spend to support our congressional retirees, will get much notice. More pundits have teed off on the fact that our senators and representatives -- the very people charged with averting the automatic cuts to the federal budget -- are among the few federal employees who won't be touched by them.

Congress didn't enjoy plush pensions until 1946, when it was thought that a gold-plated plan would induce members to cede their seats to young men who had been galvanized by the war. But if the current deal is no longer gold-plated, said Sepp, "it's silver-plated, and it hasn't been attractive enough to get them rotated out of office."

Photo Credit: Chip Somodevilla/Getty Images

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]]>401kcongressdefined benefit plansFERSlawmakerspension plansretirementretirement planningsocial securitywashingtonCNBCThu, 14 Mar 2013 11:45:00 EST3 Reasons America's Wealthy Don't Give More to Charityhttp://www.dailyfinance.com/2013/03/12/3-reasons-americas-wealthy-dont-give-more-to-charity/http://www.dailyfinance.com/2013/03/12/3-reasons-americas-wealthy-dont-give-more-to-charity/http://www.dailyfinance.com/2013/03/12/3-reasons-americas-wealthy-dont-give-more-to-charity/#commentsFiled under: ,

Warren BuffettBy Robert Frank

The American wealthy are hands down the most philanthropic in the world. Americans dominate global giving lists and surveys consistently show that the U.S. rich are far more likely to make philanthropy a priority.

But some say they could give more. One recent study found that a large share of people making $200,000 or more give only 2.8 percent of their income to charity. Other studies show that multimillionaires donate only about one percent of their wealth to charity (though billionaires tend to give a higher percentage).

(Read more: Stars of 'Nerd Philanthropy' Dominate Top Giver List)

Warren Buffett and Bill Gates launched their Giving Pledge in large part to persuade the super-rich and the non-super-rich alike to give more to charity. As Buffett told me in 2011, "The hope is that our larger population ends up giving a larger proportion of their income to fund philanthropy."

So why don't the rich give more?


Charity's Biggest 2012 Spenders

CNBC's Robert Frank reports who were the nation's most generous donors last year.

A new study of multimillionaires offers some answers. The study, by SEI Private Wealth Management, found that 82 percent of wealthy families believe that having more money means you have a greater obligation to be philanthropic.

But the respondents (worth $10 million or more) listed three main reasons for not giving more. First, nearly half said they needed more confidence "that the level of their wealth would continue to support their lifestyle and their family." Second, they said they would give more if the markets improved.

Finally, a third of those polled said they needed to "find something they could be more passionate about."

(Read more: Did 2013 Tax Hikes Slow 2012 Charitable Giving?)

The first two reasons aren't all that surprising. If they had more money, the wealthy would give more of it away.

But the third reason is worth noting. While more money helps, it's also important to be motivated by a cause. And if you care enough about a particular problem, you'll be more inclined to sacrifice some of life's comforts to solve it.

Money, in other words, isn't the only driver of philanthropy. It's about the heart as much as the wallet.

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]]>Bill Gatescharitable givingcharitydonationsFinancephilanthropyRobert Franksuper richThe Giving PledgeWarren Buffettwealthiest 1 percentCNBCTue, 12 Mar 2013 05:00:00 ESTSaving, Spending, Investing: New Games Teach Kids About Moneyhttp://www.dailyfinance.com/2013/03/06/saving-spending-investing-new-games-teach-kids-about-money/http://www.dailyfinance.com/2013/03/06/saving-spending-investing-new-games-teach-kids-about-money/http://www.dailyfinance.com/2013/03/06/saving-spending-investing-new-games-teach-kids-about-money/#commentsFiled under: , , ,

JA Finance Park VirtualYou scrimped and saved, built a business, managed your growing fortune wisely. Now, according to studies of the super-rich and the merely wealthy alike, you have one overwhelming concern: How do get your well-off children or grandchildren to think more like you?

Relax: Your kids are probably getting these financial lessons of life on the Internet.

A host of digital entrepreneurs, banks and investment firms are building web and mobile platforms that educate youngsters about money-teaching grade-schoolers how to earn and save for things they want, middle-schoolers how to pay rent and college students how to trade stocks.

The trend is known as "gamification" because the learning comes through computer-game simulations of real-world financial events. Children adopt the personas of college grads getting their first apartment, young moms on a tight budget or small business owners. They pay for groceries and clothes, balance checking accounts and save for big-ticket items.

According to financial educators, gamification is designed not only to teach basic concepts but also to start conversations that let parents instill financial values in their offspring-or, often, to catch up with what kind of economic decisions their kids are already making.

"They have money already," said Eileen Reid, a middle-school family and consumer science teacher in Howard County, Md. "They are getting cellphones and dealing with which plan costs what. They are very aware of their lifestyle." Their parents are the ones who are uncomfortable talking about money, said Reid, whose own financial upbringing was of the "Do you think money grows on trees?" variety.

In her classroom, Reid uses a computer program called JA Finance Park Virtual, a collaboration of Capital One and the nonprofit organization Junior Achievement, to cement lessons she teaches from the blackboard.

JA Finance Park Virtual

"It's an eye-opener for them," she said. "They realize they can't afford what they want their [virtual] children to have. They want $120 tennis shoes, so they have to figure out how to pay for it."

Questions about sneakers quickly become discussions about how money represents priorities, Reid said. "What do you value? Is it really important to give to a charity? Should I continue with my education?" she said. "It's fascinating to watch them come to life when we get to the virtual experience."

The game, used in 468 schools nationwide, has been part of the curriculum at Maryland schools since 2010, after the financial crisis had made business leaders aware of the widespread ignorance about how mortgages, credit cards and other basic financial instruments work.

JA Finance Park Virtual

"The business community started going to the state legislature and said , 'We have to get people more literate,' " Reid said.

Other parents aren't waiting for schools to start the conversation.

Monica Giles, a hairstylist in Denver, has been using the accounting tool Tykoon.com with her 6- and 8-year-old boys. Giles and her husband set up profiles on the site listing household chores and the allowance paid for each task. The boys set savings goal, and fill their online shopping carts with toys and other treasures they hope to buy.

Tykoon turns parent-child "I want this!" battles into conversations about financial responsibility, Giles said. "When you're out shopping, you can turn it back on them," she said. "I ask them, 'Well, do you have enough Tykoon money?' "

Though Tykoon awards kids virtual "coins" for achieving their goals, the money they earn for chores is real-"from the Bank of Mom and Dad," said Mark Bruinooge, a former Bank of America executive who developed the site with The Lending Tree founder Doug Lebda, with help from family therapists.

At first, Giles said, she wanted her kids to see and use physical money. But as transactions become increasingly digital, she said, "kids need to realize that when you see the number on the screen go down, what they have left is real money, and you decide what to move over to savings and what you spend. It's a good transition to banks."

Of course, that's precisely what the companies promoting gamification are counting on.

When Tykoon is fully operational, it will be offered free to users if they link their account with the site to a partner bank. (An unlinked Tykoon subscription will cost $4.95 a month.) As families mingle their Tykoon activities with real savings accounts, "banks can build brand equity with the family," Bruinooge said.

The banks hope gamification will not only attract future customers but help convert them to using online services, which are cheaper to provide than in-person interactions. In Europe, where banks adopted gamification earlier than their American counterparts, there are games for adults as well as children-all aimed squarely at promoting web banking.

Some see educating the next generation about money as too serious to be left to games.

"Our viewpoint is that investment is a serious activity, and should not be driven by amusements," said Nicole Sherrod, managing director of TD Ameritrade's trading group. "We are investing in the knowledge of today's youth, as they are the clients of tomorrow."

For the past two years, the company has made its online trading platform, Think or Swim, available to students at 60 high schools and colleges across the country. The educational version comes with a play trading account with $100,000 in "paper money"-what others in the finance education business call virtual cash.

"They learn about the stock market using the same platform that their parents are trading on," Sherrod said. "It bridges the gap between academics and reality."

That gap is closed altogether at the University of Idaho. For the past seven years, finance students at the Moscow campus have used Think or Swim to build on a $1 million endowment to the state school by trader Rotchford Barker.

In a prerequisite course called Market Trading Strategies, students familiarize themselves with the program and trade using the system's paper money. In Trading 2, the 15 or so students in the Barker Capital Management Group make consensus decisions about investments and implement them using real money.

"We invest in all sorts of asset classes-equities, bonds, futures, derivatives" using "the gamut of investing ideas," said Mat Schaefer, a senior and chief investment officer of the group. The largest amount Schaefer recalls investing in one day is $100,000, and he says they haven't lost money in any semester. "We're not going really for radical growth. The main thing were learning is risk management."

While it's exciting to get a big winner, Schaefer added, the group's main concern is "to have money around for future students."For those worried about what's going to happen to their hard-earned money, it's the best lesson their children could learn.

Photo Credits: JA Finance Park Virtual


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]]>bank of americaboacapital onegamificationsavingsavingsspendingtd ameritradetykoonCNBCWed, 06 Mar 2013 14:00:00 ESTIs Budgeting the Best Way to Save? Seven Personal Finance Mythshttp://www.dailyfinance.com/2013/03/06/is-budgeting-the-best-way-to-save-seven-personal-finance-myths/http://www.dailyfinance.com/2013/03/06/is-budgeting-the-best-way-to-save-seven-personal-finance-myths/http://www.dailyfinance.com/2013/03/06/is-budgeting-the-best-way-to-save-seven-personal-finance-myths/#commentsFiled under: , ,

Money and happinessThink you're financially savvy? When it comes to their personal finances, people carry around notions all their lives that may or may not be valid. For example, you've heard that money can't buy you love, but can it buy happiness? Most people believe that it can't -- but science may prove them wrong.

Here are seven personal finance myths that happen to be everyday beliefs about the way we consider and handle money. Many of these myths fool even the smartest of savers. The latest research will help you discern the facts and see through the smoke.

Budgeting Is the Best Way to Save Money

A study by researchers from Brigham Young University and Emory University shows that consumers who shopped with a spending limit spent up to 50 percent more on a single item than consumers without a budget.

Jeff Larson, the study's co-author and an assistant professor of marketing at Brigham Young, says when consumers set a budget for a specific item, they oftentimes limit their searches to items priced close to the budget's upper limit. If given $1,000 for a flat-screen TV, for instance, consumers are likely to limit their selection to televisions priced between $800 and $1,000 before looking at each TV's features.

"We don't claim that this indicates that you shouldn't ever budget, that budgeting is overall a bad thing," Larson says.

The effect is only present when shopping for single items. "Aggregate budgets" used for multiple products, such as groceries, generally help the user save money, Larson says.

He adds that consumers can potentially reverse the effect by limiting their selection based on qualities and features before looking at price.

"Instead of saying 'I'm willing up to spend $1,000 on a TV,' you say 'I want a 42-inch TV,'" he says.

More Earnings Mean More Wealth

"The more people earn, the more they tend to spend," says Stephen Goldbart, co-author of the book "Affluence Intelligence" and co-founder of the Money, Meaning and Choices Institute, a San Francisco-based company that provides advisory services for wealthy clients. "As people acquire more money, they almost immediately start purchasing things that they've felt they've always wanted rather than thinking about what percentages that they should put away and the consequences of changing their spending habits."

This may explain why lottery winners are more likely to go bankrupt as those who didn't stumble into thousands, according to researchers from the University of Kentucky, the University of Pittsburgh and Vanderbilt Law School. Or why 78 percent of NFL players are bankrupt or under financial stress within two years of retiring and 60 percent of NBA athletes are broke within five years of leaving pro sports, according to data from Sports Illustrated.

To ensure that higher earnings translate into higher net worth, Goldbart says, "Be conscious as a consumer. (Ask yourself:) 'Is the purchase or spending of my money aligned with my values and moving me in the direction I want and need to go?'"

Higher Degrees Always Mean Bigger Salaries

A college degree pays off for almost everyone. Research from Georgetown University shows that the average college graduate earns nearly $1 million more than the typical high school graduate over a lifetime. For those with higher degrees, the discrepancy becomes greater. The average doctoral degree holder earns nearly $1 million more than those with four-year degrees and nearly $2 million more than high school grads.

"In general, (a bachelor's degree) will lead to higher earnings," says Stephen Rose, senior economist at Georgetown's Center on Education and the Workforce and co-author of "The College Payoff" study. But there are exceptions. According to Rose's research, a very select few professions, including postal service mail carriers and electricians, had no statistically significant pay hike between the bachelor's and high school diploma levels. In professions such as editing, those with a master's degree statistically earn less than workers with only a bachelor's.

Rose is quick to point out that those cases are few and far between. "The data is pretty overwhelming that higher degrees lead to higher earnings in the labor force," he says.

Money Can't Buy Happiness

The truth is, money is correlated to happiness, particularly for low- and middle-income earners. Research from Princeton University shows that as test subjects increased their incomes, their overall life outlook improved as well. Regardless of economic class, jumps in salary and happiness increased at the same rate, meaning that a 20 percent increase in salary resulted in the same amount of overall happiness for both low-income and high-income people.

Income increases also improved subjects' "emotional well-being" -- the quality of their day-to-day existences -- up until they reached the $75,000 mark. Earnings above $75,000 did nothing to improve subjects' daily attitudes. As income dropped below $75,000, test subjects also reported more stress and less happiness.

Research from the University of California, Berkeley also suggests that money may influence happiness, but it's not the most important factor. A series of four studies all show that the amount of respect and social influence a person wields has a significantly larger impact on their happiness level than their earnings.

Financial Aid Always Goes to the Neediest

While many federal and state aid programs are need-based, meaning that they go to families with the highest financial need, colleges and outside organizations also offer merit-based aid, which can go to families of all economic levels. According to data from the College Board (as analyzed by The New York Times), some schools, such as Hodges University in Naples, Fla., and Mississippi College in Clinton, Miss., award merit aid to more than half of their freshmen class. Students can get an estimate on how much merit aid they may qualify for by using the net-price calculator located on their school's website.

Dan Davenport, director of student financial aid services for the University of Idaho in Moscow, Idaho, adds that financial need is relative. "(Families) can't determine their need by their neighbor saying, 'Oh I already filled out the (Free Application for Federal Student Aid), and I didn't have need, so I know that you won't have need.'"

As financial need is determined by weighing a family's income and assets against its college costs, even high-income families may qualify for need-based aid at pricey institutions.

One Formula Determines Your Credit Score

Not so, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, the largest network of nonprofit credit counseling agencies in the country.

There are actually dozens of different scoring models, but "FICO is usually credited with being the granddaddy of them all," she says.

Many lenders use the FICO scoring model, but some organizations have their own formulas. Credit bureaus also have multiple methods of calculating your score. While most scoring models yield similar results, a study by the Consumer Financial Protection Bureau shows that there was a "meaningful difference" for 1 in 5 consumers between different credit-scoring formulas, which could translate to a better or worse interest rate on a mortgage, auto loan or credit card offer.

What scoring models have in common, Cunningham says, is that they're all based on information in your credit report, making it crucial to ensure that each of your reports from all three credit bureaus are error-free. Scoring models also use similar basic factors such as payment history and debt-to-credit ratio to calculate your creditworthiness. Instead of focusing on score, Cunningham says consumers should work on managing credit responsibly.

You're Financially Prepared

You may be, but there's a good chance that your neighbor isn't. A study by the National Foundation for Credit Counseling shows that 39 percent of U.S. adults don't have any savings outside of funds in retirement plans. The same percentage also carries credit card debt from month to month. What's more troubling than what we know about spending habits is what the U.S. public doesn't know. The NFCC study also says that more than 1 in 5 adults have no idea how much they spend on housing, food and entertainment, and more than 2 in 5 give themselves a grade of C, D or F when it comes to personal finance literacy.

"Most people simply do not financially plan," says Goldbart of the Money, Meaning and Choices Institute. "We tend to deal with money by looking in the rearview. 'Oh I see what I did;' nothing about what I am doing or what I could be doing."

Before creating a financial plan, Goldbart advises consumers to evaluate their core values about spending, saving and sharing money, and then devise a plan that's aligned with those beliefs.

Photo Credit: Alamy

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]]>Brigham YoungBrigham Young UniversityCollege BoardConsumer Financial Protection Bureaucredit scoreearningearningseducationEmory Universityfinancial aidGeorgetown UniversityhappinessHealthhigher degreesHodges UniversityIdahoMississippiMississippi CollegemoneyNaplesNational Football LeagueNational Foundation for Credit CounselingOffice of Federal Student Aidpersonal financepowerofplanningPrinceton UniversitySavingsavingsSports IllustratedSteven RoseUniversity of CaliforniaUniversity of IdahoUniversity of KentuckyUniversity of PittsburghwealthCNBCWed, 06 Mar 2013 10:00:00 ESTOne Third of Parents Are Raiding Their Retirement to Pay for Collegehttp://www.dailyfinance.com/2013/03/05/one-third-of-parents-are-raiding-their-retirement-to-pay-for-col/http://www.dailyfinance.com/2013/03/05/one-third-of-parents-are-raiding-their-retirement-to-pay-for-col/http://www.dailyfinance.com/2013/03/05/one-third-of-parents-are-raiding-their-retirement-to-pay-for-col/#commentsFiled under: ,

College dormPaying for your child's education is a laudable goal, but may not be realistic for some parents who could wind up jeopardizing their own financial future in order to help put their sons and daughters through college.

Parents who are saving for college frequently raid retirement funds - or plan to do so - to pay their child's skyrocketing tuition bills, according to a new study released today from the nation's largest student loan provider Sallie Mae. More parents are currently saving for their retirement than for their children's education, but these families often plan to draw from retirement savings to help cover the costs of college, especially as other goals - from building up a "rainy day" fund to increasing general savings - take priority. "The economy is putting pressure on families in terms of whether they're saving, how much they're saving and where they're saving," said Sarah Ducich, senior vice president for public policy at Sallie Mae.

The report "How America Saves For College" surveyed more than 1,600 parents with children ages 18 or younger and found half of parents said they were focused on college savings, while 60 percent were focused on saving for retirement. But if they have to choose, parents are opting to boost their retirement savings - 42 percent of parents who are not saving for college said they are saving for retirement.

The good news: More than three-quarters of those parents surveyed who are saving for college are also focused on saving for retirement.

The bad news: Many of those families who say they are saving for college also admit that they are doing so through their retirement fund. One-third intend to use these savings for college. The other two-thirds say that they would use their retirement savings to pay for college, only if necessary.

Families are more likely to use retirement savings to fund college as their children get older and the urgency intensifies. Less than half (44 percent) of families with children under age 6 would use retirement savings to pay for college, while more than seven in 10 (74 percent) families with teens would use their retirement for college, the survey found.

How much retirement money are they putting toward tuition and other college expenses?

Nearly 6 percent of parents in the thick of paying for college are drawing on retirement funds by taking a loan or withdrawal of about $6,475 on average, according to a 2012 Sallie Mae survey.

Unforeseen Consequences

But here's the problem: Most parents don't realize paying for college with money withdrawn from a retirement account can result in a double whammy. First, the withdrawal can count as income which is taxable. Plus, with that additional income, you'll reduce your financial aid eligibility the following year.

"Between the tax impact and the reduction in aid eligibility, the family may net very little return on their investment," said Mark Kantrowitz, publisher of Fastweb.com, a free scholarship matching service. "It also sacrifices retirement funds," he said.

By borrowing from your 401(k) or IRA, parents not only reduce their retirement balance, but also miss out accruing interest. And if you're under age 59 1/2 and take a loan from your 401(k), you'll have to pay back the loan with interest in five years, or immediately, if you change employers.

Jump Start Your College Savings

So how can parents avoid raiding their retirement funds for college? It sounds very simple. Make a plan to save. The Sallie Mae study showed 70 percent of families with a set goal to save for college are confident they will save 10 percent of future college costs.

To ramp up college savings, start funding or add more money to a 529 college savings plan. A 529 college savings plan allows you to save money for college and then withdraw the funds for qualified college expenses tax-free. Studies show that people who use 529 college savings plans are more successful college savers than those without 529 plans.

The College Savings Foundation's 2012 parent survey found that 22 percent of 529 owners have saved between $10,001 and $25,000, while only 9 percent of non-529 account owners have saved a similar amount. Likewise, 18 percent of 529 plan owners reported saving between $25,001 and $50,000. Only 4 percent of non-529 account owners managed to save as much. Overall, parents who have not opened a 529 plan are the least effective college savers - nearly half have no college savings.

To help jump start your college savings, here are a few tips from Kantrowitz, who is also publisher of the financial aid information site FinAid.org:
  • Make savings automatic, so you don't have to think to save.
  • Increase the amount you save each year. You will quickly get used to not having the money in your checking account.
  • Whenever you get a windfall, such as a big income tax refund or inheritance, contribute all or part of it to the college savings plan.
  • When expenses change, resulting in some savings, devote the savings to college. "When your child no longer needs diapers or daycare, for example, redirect the savings to their college fund," Kantrowitz says.
  • Use a rebating program, like Upromise, to help build your 529 plan faster.
  • Finally, get grandparents and other relatives involved. Have them contribute to your children's 529 plans instead of giving gifts on birthdays and holidays.

Make college savings a true, family affair.

Photo Credit: Alamy

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]]>collegeeducationretirementretirement accountsretirement planningretirement savingretirement savingssavingsavingssavings accountstuitionCNBCTue, 05 Mar 2013 17:14:00 ESTMost Americans Have More Savings Than Credit Card Debthttp://www.dailyfinance.com/2013/03/04/most-americans-have-more-savings-than-credit-card-debt/http://www.dailyfinance.com/2013/03/04/most-americans-have-more-savings-than-credit-card-debt/http://www.dailyfinance.com/2013/03/04/most-americans-have-more-savings-than-credit-card-debt/#commentsFiled under: , , , ,

Money savings vs. credit cards debt

Rumors of the spendthrift American consumer may be slightly exaggerated. Bankrate's 2013 February Financial Security Index found that a majority of consumers -- by a narrow margin -- say they have more savings than credit card debt.

For more than half the country, 55 percent, an emergency fund outweighs credit card debt. Nearly a quarter, 24 percent, admit to having more debt on plastic than money in the bank, while 16 percent say they have neither credit card debt nor savings. That puts 40 percent of the population close to the edge of ruin while everyone else seems to be sitting pretty.

If most people have more savings than credit card debt, "Why are so many people broke?" asks Howard Dvorkin, CPA and founder of ConsolidatedCredit.org.

It's a curious question. The answer may be that although credit card balances came down through the financial downturn that began in 2007, consumers' fundamental behavior of not saving enough did not change.

According to the Department of Commerce, for 2012, the overall savings of the average household were 3.9 percent, much better compared to the 0.9 percent Americans were saving in 2001. However, this is down from the average 5.4 percent savings rate in 2008.

Even with a low savings rate, why wouldn't a supposedly low credit card debt rate put Americans in better financial shape?

"The fact of the matter is that America is broke -- whether it's mortgages, student loans or credit cards, we are broke. The old rule of thumb is that people should have six months' of savings," Dvorkin says."If you talk to people, most don't have two pennies."

Who's In Trouble?

In Bankrate's survey, men were more likely than women to say their emergency fund outweighed credit card debt, at 60 percent, compared to 49 percent of women.

But credit card debt hits all kinds of consumers. Bankrate's survey has found that roughly a quarter of all income levels has more credit card debt than savings.

"Credit card debt will eat you alive no matter who you are," Dvorkin says.

Income Levels With More Credit Card Debt Than Savings.
Income Level $75K+ $50K-$74.9K $30K - $49.9K Under $30K
2011 22% 27% 29% 23%
2012 20% 31% 27% 30%
2013 23% 25% 30% 23%

Those people with incomes more than $75,000 were less likely to have no savings or credit card debt compared to those at the opposite end of the spectrum, with incomes less than $30,000. Only 7 percent of high earners have no credit card debt or savings, while 28 percent of the bottom rung of earners say they aren't in debt but have no savings.

While staying out of credit card debt is a good place to be,having no savings puts low-income earners in danger of falling into a payday-loan cycle or needing to borrow from family or friends.

"People who earn less than $30,000 may not have the credit score to get credit cards. That keeps them from getting into trouble with debt, but it also keeps them from saving," says Xavier Epps, CEO and founder of XNE Financial Advising in Woodbridge, Va.

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For the rest of the population, there may be a fundamental divide between consumers who are fine with carrying credit card balances and dedicated savers who strictly avoid debt.

"It tends to be that debt and savings are very lumpy; you rarely find someone that has both. It's either someone has a lot of debt and little to no savings, or someone has savings and very little debt,"says Elliott Orsillo, CFA, co-founder of Season Investments in Colorado Springs, Colo.

"There isn't much of a fluid spectrum of people with a ton of savings and no debt and a nice mixture down to people with no savings and lots of debt. It's usually either one or the other," he says.

"One of my clients had $400,000 in credit card bills. He came to me because it was impeding his ability to fuel his jet. The credit card companies would not allow him to charge his fuel anymore," he says.

No matter how much money you have coming in, learning to save and live beneath your means is the key to getting ahead.

Photo Credit: Alamy

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]]>Bankrate Inccredit cardcredit card debtcredit card debtscredit cardscredit scoreemergency fundFinancesavingssavings accountssavings ratesavings ratesCNBCMon, 04 Mar 2013 14:57:00 EST'Coupon Index' Suggests Tough Times Aheadhttp://www.dailyfinance.com/2013/03/01/coupon-index-economic-indicator-recession/http://www.dailyfinance.com/2013/03/01/coupon-index-economic-indicator-recession/http://www.dailyfinance.com/2013/03/01/coupon-index-economic-indicator-recession/#commentsFiled under: , , , ,

The Coupon IndexBy Stephanie Landsman

Consumers are clipping coupons at a rate not seen since before the 2007 recession, and that's a troubling sign, according to Coupons.com CEO Steven Boal.

The website tracks how often people view and print coupons and their redemption rate. Right now, Coupon.com's Internet Coupon Index, as it's called, shows a spike in coupon offers and demand.

This pattern is almost identical to the one that played out right before the last major economic downturn. The higher the index value, the more consumers are under economic pressure, Boal told CNBC.com.

"The index tends to run in a range," he explained. "In September, October, November in 2007, it popped out of its range for the first time... And, for the first time since then, we are seeing a tripping out of the range," said Boal, a former Wall Street executive.

Boal considers coupons a leading indicator because you don't need months of data to see consumer behavior patterns emerge. He said he expects that payroll tax hikes, rising food and gas prices are squeezing household budgets.

It also helps to look at the types of coupons shoppers are redeeming. The most popular ones right now are for soup, cheese, rice, pasta and M&Ms.

"When people are feeling tightened, they seek comfort food. But also things that make them feel better from personal care and beauty. Dove soap, Pantene and Vidal Sassoon are trending right now," said Boal.

Since the last recession, consumers have really changed their buying patterns, according to Boal. But the behavior Coupons.com is seeing now represents another shift. Those who weren't affected by the last recession are now tightening the reins.

"It indicates to us that people are feeling particularly anxious right now," Boal added. "As we headed into 2013, I really didn't expect this indicator to stand up."

Coupons.com's data is consistent with other recent surveys as well as comments from companies such as Wal-Mart Stores (WMT) and Darden Restaurants (DRI).

A recent survey from the National Retail Federation showed seven in ten Americans were adjusting their spending plans to cope with this year's payroll tax changes. Nearly half of those polled said they planned to comparison shop more often.

But not everyone believes the consumer is getting overly stressed.

Global Hunter Securities Macro Strategist Richard Hastings said growing labor demand is boosting the mood of consumers.

"In the mind of the consumer, the first priority is job retention and wage continuity. If those are in place, then the consumer will budget to spend, not to retreat, " said Hastings.

-By CNBC's Stephanie Landsman; Follow her on Twitter @StephLandsman.

Questions? Comments? Email us atconsumernation@cnbc.com.

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]]>couponcoupon indexcouponseconomysavingsavingsCNBCFri, 01 Mar 2013 05:00:00 ESTWill Ben Bernanke Give the Market What It Wants?http://www.dailyfinance.com/2012/08/31/will-ben-bernanke-give-the-market-what-it-wants/http://www.dailyfinance.com/2012/08/31/will-ben-bernanke-give-the-market-what-it-wants/http://www.dailyfinance.com/2012/08/31/will-ben-bernanke-give-the-market-what-it-wants/#commentsFiled under: ,

Will Ben Bernanke Give the Market What It Wants?By Patti Domm, CNBC Executive News Editor

Financial markets are likely to continue to expect another round of Fed easing for the time being, even if Fed Chairman Ben Bernanke just holds out hope for more without committing to it.

Bernanke gives his much anticipated speech at 10 a.m. ET in Jackson Hole Friday, and because he discussed quantitative easing at the Fed's annual symposium there two years ago, market expectations have been running high that he would promise more.

"I think the market is coming around to the right place in terms of much-reduced expectations of QE," said Alan Ruskin, head of G10 currency strategy at Deutsche Bank. "I don't think he'll close the door on QE, but I think there's a much more realistic perspective that Jackson Hole is not the place to come up with new policy initiatives, particularly when the next meeting is very contentious. There's a sense they'll have an active debate."

JPMorgan chief technical strategist Michael Krauss said stocks could look past Bernanke's speech Friday, if he just repeats previous comments.

"The market will wait, maybe there will be a little bit of disappointment. I think tomorrow is just too early. There are more important things that will happen in the first week of September. The highest probability is that he just repeats previous comments," said Krauss.

"It's hard to understand how much is discounted. With QE1 and QE2, the markets were very weak and he sort of saved them. Now the market has been going up and had a very spirited rally during the summer," said Krauss.

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Krauss said the critical level for the S&P to hold is above 1390 through the Bernanke speech and into September. Besides the Fed meeting Sept. 12, the European Central Bank meets Sept. 6. There is also the August employment report next Friday that will be the last big piece of data the Fed will consider before its meeting starts Sept. 12.

But Krauss said the market is also showing some technical warnings, such as narrowing leadership.

"The market feels like fewer and fewer stocks are driving the market up. If you look at small and mid-caps, they've been underperforming. Dow Transports have been making lower highs," he said. He said if there are two closes below 1390 the S&P would risk a downside acceleration to 1350, or even 1325. His upside target pre-November election is 1435, 1445.

"Clearly the market's fate is in the hand of policy makers and central bankers for the next three weeks," he noted.

Central banks have also kept markets supported, with just the idea more easing could be coming. "There's some warning flags," he said. "The market is bending, not breaking and you do have the carrot (of easing) out there."

Stocks slumped Thursday, after Spain indicated it may delay its request for a bailout, and also as traders talked down the idea that Bernanke would announce new stimulus. The Dow dropped 106 points to the key 13,000 level. The S&P 500 fell 11 to 1399, under 1400 for the first time since Aug. 6. The Nasdaq was off 32 at 3048.

Even though market expectations had been running high that Bernanke would hint at whether the Fed will pull the trigger on a new program of quantitative easing, Fed watchers have said Bernanke will not have enough information on the economy and probably not the agreement of the Federal Open Markets Committee when he speaks in Jackson Hole.

"The speech title on the web site is 'Monetary Policy Since the Crisis,'" said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi. "It sounds like another review of what they've done. When he does hint at things it's always in context of 'yes, we could do X, Y and Z, and of course we'll be talking about this and that when we sit down at the Sept. 12/13 meeting.' The market really wants to see more than that at Jackson Hole. They want to see explicit mention of what they might do."

But Rupkey said it's most likely Bernanke leaves open the possibility for easing or other extraordinary measures, but repeats the caveats that the benefits will have to outweigh the costs, and that further action is dependent on the economy. "The market is going to remain hopeful on this for a while," he said.

Ruskin said the dollar could see slight gains if Bernanke does not lean more toward easing. Quantitative easing has weighed on the dollar while helping lift risk assets, like stocks and commodities. Fed watchers say if there's a new round of QE, it could include Fed purchases of mortgage-backed securities and Treasurys. Some say it could be smaller than previous programs, and run through December, or be open ended. Many economists expect the Fed to extend the end date to keep interest rates low into 2015, from mid 2014.

"The overall message will be we're not out of bullets. We still have the capacity if need be to pursue unorthodox measures, but not going out on a limb and suggest policy easing is inevitable," Ruskin said.

Fed officials have been holding their debate about further policy moves publicly. Early Thursday, Atlanta Fed President Dennis Lockhart told CNBC's Steve Liesman that more quantitative easing, or QE, is a "close call," and Philadelphia Fed President Charles Plosser told him on "Closing Bell" that he doesn't believe QE is what's needed now.

"I don't think it really beats the cost benefits test right now," Plosser said. Plosser said the trouble with the economy is that consumers want to save, and low rates makes that harder. At the same time, businesses don't want to spend because of the uncertainties surrounding fiscal policy, taxes and regulation. Those things, he said, can't be fixed with monetary policy.

Last week, St. Louis Fed President James Bullard said while the Fed's last meeting minutes showed many members favoring easing Aug. 1, the economic news has since improved with a fair amount of data coming in better than economists' forecasts.

There are a few economic reports Friday, including Chicago PMI at 9:45 a.m., consumer sentiment at 9:55 a.m. and factory orders at 10 a.m.

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]]>Ben BernankeCurrenciesDeutsche Bank AGEuropean Central BankFederal Open Market CommitteeFederal ReserveFinanceInvestment Strategyjackson holeOil and GasStock MarketThe Bank of Tokyo-Mitsubishi UFJCNBCFri, 31 Aug 2012 06:00:00 ESTFacebook Real-Time Wealth Tracker: What Are the Big Investors' Stakes Worth?http://www.dailyfinance.com/2012/05/18/facebook-real-time-wealth-tracker-what-are-the-big-investors-s/http://www.dailyfinance.com/2012/05/18/facebook-real-time-wealth-tracker-what-are-the-big-investors-s/http://www.dailyfinance.com/2012/05/18/facebook-real-time-wealth-tracker-what-are-the-big-investors-s/#commentsFiled under: ,

The Facebook IPO will make dozens of people rich -- some of them phenomenally so. How big a payday will major Facebook shareholders see? CNBC perused regulatory filings and media sources to determine the major shareholders and the number of shares they own. Check out the list of those shareholders and the amount of their Facebook windfall based on the real-time price of the shares.

CLICK OVER TO CNBC'S REAL-TIME WEALTH TRACKER

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]]>CNBCFacebookFacebook ipoFacebookIpoFinanceMark ZuckerbergMarkZuckerbergValue of Facebook stakesValueOfFacebookStakeswhat is Mark Zuckerberg worthWhatIsMarkZuckerbergWorthCNBCFri, 18 May 2012 13:10:00 ESTAs Investors Fawn Over Facebook, Poll Finds User Distrust, Apathyhttp://www.dailyfinance.com/2012/05/15/as-investors-fawn-over-facebook-poll-finds-user-distrust-apath/http://www.dailyfinance.com/2012/05/15/as-investors-fawn-over-facebook-poll-finds-user-distrust-apath/http://www.dailyfinance.com/2012/05/15/as-investors-fawn-over-facebook-poll-finds-user-distrust-apath/#commentsFiled under: ,

FacebookBy CNBC's Kayla Tausche and Jesse Bergman
(Associated Press contributed to this post)

Facebook's initial public offering will be the largest and perhaps the most highly anticipated Internet deal in history.

Faced with great expectations, however, Facebook is staring down some potentially unnerving obstacles when it comes to key areas of monetization and growth: public distrust and display advertising apathy.

More than half (57 percent) of Facebook users polled said they never click on ads or other sponsored content when they use the site, according to a new AP-CNBC poll. Another 26 percent said they hardly ever engage in such activity. Only 4 percent of users say they often click on ads - results that are only slightly better than the 2-3 percent clickthrough rate some experts consider the benchmark for effective banner ads.

While the company makes money, in part, simply by displaying sponsored content, user clicks are a critical part of an advertiser's calculus when gauging the effectiveness of those ads and how much they're willing to pay for them. In the first quarter, Facebook generated 82 percent of its $1.06 billion in revenue from advertising sales. In the company's online IPO pitch to retail investors, Chief Financial Officer David Ebersman said the company is working to make ads "more relevant, more social, and more engaging" as it looks to grow.

Facebook

While Facebook has been able to decrease its reliance on sponsored content (down from 98 percent of sales in 2009), the hopes of expanding the company's e-commerce footprint also faces public resistance, the poll showed. A majority of participants (54 percent) said they wouldn't feel safe using the platform for financial transactions such as purchasing goods or services; only 8 percent said they would feel extremely or very safe in doing so.

While Facebook currently has a limited market for real goods and services (most financial transactions are done for virtual goods and games), analysts cite e-commerce as an extremely lucrative, and untapped, market for the platform - one that could be vital for the company's future growth.
  • For complete poll results, click here
The public also remains wary of Facebook's valuation, widely bandied about as $100 billion, with just 3 percent of respondents saying they thought the company would be undervalued at such a number - half said they thought it would be overvalued (that view rises to 62 percent among active investors). Views are also split on whether or not shares of Facebook stock would make a good investment - with progressively less positive opinions for older age groups.

Facebook

The youngest respondents (age 35 and under) were most likely to say Facebook would be a good investment (59 percent said yes), followed by baby boomers and Generation X-ers (55 percent and roughly 50 percent, respectively), followed by seniors (only 39 percent).

As for Mark Zuckerberg, the wunderkind CEO who turned 28 on Monday inspires somewhat tepid confidence as a leader, with only 18 percent of respondents saying they were extremely or very confident in his ability to run a large publicly traded company like Facebook. Yet pinning down a specific reason was difficult for respondents, who neither cited his age, temperament, nor reputation as significantly affecting those abilities.

Facebook users have consistently cast a wary and suspicious eye on the platform: 59 percent of respondents said that they had little to no trust in Facebook to keep their information private. Yet despite those ongoing concerns, the number of users (and their engagement) continues to increase. Facebook has grown to 901 million monthly active users worldwide, with personal computer users spending six to seven hours per month on the site (compared to just 3 minutes for Google+ users), according to recent data from ComScore.

Gallery: Facebook - A Timeline
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For its part, the company has taken steps to combat certain user concerns, particularly on the issue of privacy. Last week, the site disclosed additional information about how it captures and utilizes data from users.

Charting a future course may prove more difficult than meets the eye for the company, according to the poll, and navigating that landscape under the daily pressures of a public company could prove even more difficult.

The AP-CNBC poll was conducted from May 3 through May 7, with a sample size of 1,004 participants ages 18 and over. The margin of error for the poll is +/- 3.9 percentage points.

The Facebook IPO is expected to price Thursday night, and the stock will start trading Friday.

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