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/Think Tank's Radical Idea to Cut Defense Budget: Fire 'Slacker' Soldiershttp://www.dailyfinance.com/2013/05/24/sequester-defense-budget-cuts-soldier-reductions/http://www.dailyfinance.com/2013/05/24/sequester-defense-budget-cuts-soldier-reductions/http://www.dailyfinance.com/2013/05/24/sequester-defense-budget-cuts-soldier-reductions/#commentsFiled under: , , ,

Navy soldiers
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What is the best way for America to maintain its military in an era of declining spending and the sequester? A new report out of the nonpartisan Stimson Center think tank in Washington, D.C., has one surprising proposal: Get rid of all the slacker soldiers.

According to Stimson, only about 16 percent of servicemen and servicewomen in the American military today actually "fight." These are the proverbial "tip of the spear" that go into combat, and are essential to the nation's security.

But that leaves 84 percent of America's 1.2 million-man military as a potential place to trim fat, and save money.

Shooters Versus Paper-Pushers

In one sense at least, this argument seems spurious. It doesn't take a degree from West Point to realize that you need a lot of people trucking bullets from Point A if you want your shooters at Point B to have ammo to shoot with.

Similarly, it takes highly trained mechanics to keep the tanks running and the fighter jets flying. Nuclear technicians to keep the submarines and aircraft carriers from melting down -- and so on and so on. As Napoleon Bonaparte reportedly said, "An army marches on its stomach." A more modern equivalent might be "It takes a village to drop a smart bomb on a Qaida cell."

Making Cuts That Will Cause the Least Blood Loss

So in other words, even soldiers who aren't technically "fighting" are still necessary to win wars. That said, the Stimson does make a few good points.

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For example, the $42 billion in defense cuts planned at the Pentagon for this year thanks to the sequester are a mere prelude to much more significant reductions in spending over the decade to come. In all, Congress looks likely to reduce defense spending by $500 billion or more over the next 10 years -- so cuts are going to come somewhere, and it's high time we figure out which cuts will cause the least blood loss.

Stimson thinks there are several places where defense spending can be rolled back with minimal harm. In all, the report outlines some $900 billion in cuts that could be made, a number equivalent to 20 percent of the projected base Defense budget over the next 10 years -- and nearly twice what Congressional cost-cutters are calling for.

Demanding "Free Return Shipping"

Roughly $500 billion of the think tank's proposed cuts fall upon gross levels of military manpower. As for the balance, they consist largely of applying market principles to military spending.

Stimson thinks $100 billion can be shaved off the defense acquisitions process, for example, by improving the efficiency of how weapons systems are bought and paid for. The paper points out that when, say, United Technologies (UTX) sells someone in private industry a faulty engine, the customer will complain, and UTC will pay to have the engine shipped back to its factory, repaired, and returned to the customer. When the U.S. Navy gets stuck with a bum engine, however, it gets stuck with the bills for repair and shipping (both ways).

The think tank also has a few choice words to say about how slowly the Pentagon moves from ordering a new weapons system to getting it developed and delivered and putting it into service -- and how it piles on new requirements (and costs) all along the way. A glance at a Defense Acquisition University flowchart of the current procedure suffices to tell you there might be some merit to the criticisms.

Pentagon

Correcting Compensation Inefficiencies

Stimson's final set of cost-cutting suggestions focuses on how servicepeople are compensated. Among the suggestions here are rolling back some of the multitude of "fringe benefits" -- pensions, medical care, low-cost supplies at the PX, and so on -- accorded to servicemen.

The think tank makes the observation, already accepted in the private sector, that employers and employees both do a better job of managing their money when "work" is compensated in cash rather than in kind.

Accordingly, the recommendation here is to pay higher wages to servicemen and -women, and let them decide for themselves where to buy their health care, groceries, and so on.

Will It Work?

The prospect of cutting $900 billion worth of government spending sounds appealing in principle. Still, it's hard to miss the fact that Stimson's proposals basically boil down to $8 out of every $9 saved coming out of the benefits packages and paychecks of U.S. soldiers, sailors, Marines, and airmen, while saving only one dollar in nine by building fewer unwanted Abrams tanks and redundant fighter jet engines.

When you consider that the soldiers, sailors, Marines, and airmen all have the right to vote, while the tanks and engines don't ... it's hard to see Stimson's suggestions passing muster in Congress.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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]]>budget cutsdefense spendingfederal budgetHenry L. Stimson CentersequestersequestrationRich SmithFri, 24 May 2013 11:45:00 ESTHow to Use Glassdoor's Employee Survey to Pick Stock Winnershttp://www.dailyfinance.com/2013/05/24/glassdoor-employee-survey-pick-stock-winners/http://www.dailyfinance.com/2013/05/24/glassdoor-employee-survey-pick-stock-winners/http://www.dailyfinance.com/2013/05/24/glassdoor-employee-survey-pick-stock-winners/#commentsFiled under: , , , , ,

Google Inc. signage is displayed as an employee rides a
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Who knows a company -- any company -- better than the employees who work for it?

There's no need to answer. That's actually a rhetorical question, and the answer is "Nobody." So if you're wondering about a company's business prospects, and the prospects for its stock price, there's probably no better guide you could hope for than a bit of insight from the folks who spend most of their waking hours working for that company.

As luck would have it, those folks are more than happy to share that insight.

Over at online jobs and career community Glassdoor, they just published the results of a survey of employee sentiment at some of the world's most popular companies. This is information that could prove a gold mine for stock market investors looking to separate winning companies from the losers.

'Talking Their Book'

In investing circles, there's a concept known as "talking your book." It basically translates as saying nice things about the stocks you own (or the company you work for, and perhaps own stock options in), in hopes of gulling the rubes into thinking it's worth more than it really is -- so that you can cash out at a profit.

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It's not nice behavior, but here's the surprising thing -- in Glassdoor's survey, very few employees actually do "talk their book" about the companies they work for.

In fact, that across the 250,000 companies that Glassdoor covers, only 38 percent of employees are saying publicly that they believe their companies' prospects will improve over the next six months.

This fact alone lends extra credibility to the few employees who are pointing at their own employers and whispering to you: "Psst! Over here! This company I work for, Google (GOOG)? We're different. We're actually doing pretty well."

Google Class

I'm not picking Google's name out of a hat. In fact, Google tops the list of companies scoring well in the eyes of their employees.

Fully 86 percent of the Internet search giant's employees say they expect Google's prospects to improve over the next six months. That's more than twice the average percentage. It's at least 10 percentage points better than the No. 2 and No. 3 finishers on Glassdoor's survey -- Qualcomm (QCOM) and Yahoo (YHOO), respectively.

More interesting still, a grand total of 0 percent of their employees who took the survey -- not a one of them -- thinks these three companies' businesses will deteriorate over the next six months.

Rather than keep you in suspense, let's take a look at the rest of the list of Glassdoor's top 10 companies with the best business outlooks:

Company employee sentiment

What's It Mean to You?

It's all fascinating information. But how do you put it to use?

The most obvious way to make the most of Glassdoor's survey results is to start taking a good, hard look at the companies where employees are most optimistic, with an eye to buying the stocks.

Google, Yahoo, General Motors (GM), Home Depot (HD) -- all of these companies have outperformed the stock market over the past 12 months, which lends support to their employees' expressions of confidence.

But there may be an even smarter way to play this data.

On this list, in addition to the already-winners named above, are several companies whose stocks have not, in fact, outperformed the rest of the stock market -- nor even matched its returns.

If you really want to make some money in the stock market, and if you believe what their employees are telling you, there might be even greater profits to be found in a few of the market's recent laggards -- Amazon (AMZN), Whole Foods (WFM), and Qualcomm.

Trust, but Verify

Personally, I plan to take good, hard looks at each of these three businesses in the months ahead, with an eye to buying. But I'll also be watching, and wondering, if the stocks will in fact perform as well as (their employees have) promised.

And here's my promise to you: In six months, I'll come back and lay out the results in a follow-up column. Stay tuned.



Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, General Motors, Google, Home Depot, and Whole Foods Market. The Motley Fool owns shares of Amazon.com, Google, Qualcomm, and Whole Foods Market.

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]]>Amazonemployee satisfactionFinanceGlassdoorGMGoogleHome Depot Incmarket outlookQUALCOMM Incstock picksStocks to buyWhole Foods MarketRich SmithFri, 24 May 2013 10:30:00 ESTAmazon Just Gave You 500 Coins. Now What?http://www.dailyfinance.com/2013/05/15/amazon-coin-virtual-currency/http://www.dailyfinance.com/2013/05/15/amazon-coin-virtual-currency/http://www.dailyfinance.com/2013/05/15/amazon-coin-virtual-currency/#commentsFiled under: , , ,

Amazon coins
Amazon
If you own an Amazon Kindle Fire, then chances are, today you're 500 coins richer. Not $500 richer, mind you. Or 500 euros, yen, yuan or even bitcoins richer.

Amazon.com (AMZN), you see, is starting its own virtual currency -- Amazon Coin -- and to kick-start the effort this week, it emailed registered owners of its Kindle Fire tablet informing them that they've each been credited with 500 of the new coins, to do with what they will.

The coins can be used to make electronic purchases of virtual goods at Amazon's app store. They will never expire. Nor does Amazon charge any fees for their use, or for maintaining a balance month-to-month, for example. So the coins are yours to use whenever you get around to it.

And when your e-wallet is empty, Amazon will happily sell you more at the going rate of a penny apiece. The company will even give you a discount on that price if you buy the coins in bulk.

Amazon's Gambit

Why the sudden act of generosity? Well, in a nutshell, this is Amazon's latest gambit aimed at securing customer loyalty, and convincing you to do your shopping on Amazon, rather than elsewhere.

Much like a Starbucks (SBUX) loyalty card or a prepaid debit card for Apple's (AAPL) app store -- or the Chuck E. Cheese (CEC) tokens our kids beg us to buy them for the arcade -- Amazon Coins can be spent at only one place: Amazon.com. That basically locks users into patronizing Amazon with their coins. It's a use-it-or-lose-it currency.

Spending Coin to Pick Up Customers

Valued at a whopping penny apiece, the coins that Amazon gave away this week amount to all of $5 for each Kindle Fire owner -- so this is hardly a promotion that will break Amazon's bank.

According to the company, it's given away just a few "tens of millions of dollars" so far -- literal, if virtual, pocket change for a company that does $64 billion in sales annually. Thus, this is a pretty small gamble for Amazon to make on hopes of boosting customer loyalty, and potentially revenues.

These coins are a revenue driver for Amazon. By securing customers' coin purchases for its own app store, where customers buy items from third-party developers, Amazon boosts the number of transactions from which it takes a 30 percent cut. (When a customer buys an app, 70 percent goes to the app's seller, 30 percent to Amazon.)

One possible bonus for Amazon: Continual visits to its app store for coin shopping could have a "rub-off" effect on customers and boost sales of dollar-denominated goods. After all, if you're there already, why not pick up a few things on your shopping list?

Another potential bonus for Amazon is that it might spur a small round of belated Kindle Fire buying, as consumers who've sat on the tablet fence till now decide to buy a Fire rather than an iPad or Android device, in hopes of getting in on future promotions.

What's It Mean to You?

For you, the consumer, however, there's little reason to play Amazon's game and lock yourself into the Amazon ecosystem.

After all, you can still shop on Amazon with dollars, and a greenback will still buy you 100 coins' worth of apps at the Amazon app store. So why lock yourself into making your purchases there by buying Amazon's funny money?

Seriously, folks, statistically speaking, you've probably got six credit cards in your wallet, a couple of debit cards, electric bills, gas bills, a mortgage and the kids' college tuition to keep track of already. Do you really need to add "domestic currency transactions" -- and the conversion rate of coins to greenbacks -- to your financial to-do list?

I don't think so.

A better way to play this is to turn the tables on Amazon and beat them at their own game. Spend your initial 500 coins, sure. $5? Go wild.

But going forward, do your shopping in U.S. dollars. On the off chance that at some time in the future you need to make a big virtual purchase at the app store -- and Amazon delivers on its promise of selling bulk purchases of coins at a discount -- you can always buy a million coins ($10,000 worth) just before you need them, pay, let's say, $9,000 with a hypothetical discount, and spend them immediately.

Under that scenario, Amazon Coins really could help you to win the lottery. They just won't help Amazon much.

Motley Fool contributor Rich Smith owns shares of Apple. The Motley Fool recommends Amazon.com, Apple and Starbucks. The Motley Fool owns shares of Amazon.com, Apple and Starbucks.

Gallery: 17 Things You Should Always Buy New

Bike helmetsCribsLaptopsFootwearCookware

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]]>amazonAmazon Coinsandroidapp storeApplebitcoinecommercegoogleipadkindle fireonlineretailstarbucksvirtual currencyRich SmithWed, 15 May 2013 12:53:00 ESTAmerica's First Big-City Bankruptcy of 2013http://www.dailyfinance.com/2013/05/15/first-big-city-bankruptcy-2013/http://www.dailyfinance.com/2013/05/15/first-big-city-bankruptcy-2013/http://www.dailyfinance.com/2013/05/15/first-big-city-bankruptcy-2013/#commentsFiled under: , , ,

Detroit city bankrupt
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In the early days of the financial crisis, banking analyst Meredith Whitney famously predicted the near-death experience of Citigroup (C). But when Whitney came back on the national stage to warn of a similar financial apocalypse striking the municipal debt markets in 2011, that warning fell flat.

The wave of municipal bankruptcies never happened. The "hundreds of billions" of dollars lost to investors were not, in fact, lost. America dodged a bullet -- but none of that is going to help Detroit.

The Motor City Stalls

You see, according to Kevyn Orr, the state-appointed financial manager charged with saving the Motor City from itself, Detroit's in pretty dire straits right now. The population upon which it levies taxes to pay its bills has shrunk by two-thirds from its apex. And of those few Detroiters still living in the city, 18 percent are unemployed -- and consequently paying little or no taxes.

Meanwhile, the city is saddled with $15.7 billion in bond debt, pension liabilities and other long-term obligations on its balance sheet. Just keeping up with the interest payments on all this debt, and paying the health benefits of public employee retirees, cost Detroit $461 million of the $1.1 billion it's expected to collect in tax revenue this year.

That leaves less than $640 million with which to pay for all the daily services required by a city of more than 700,000 -- just $905.76 per citizen.

Lies, Damn lies and Damnably Difficult Statistics

That's not enough -- not without borrowing money to pay for the services these citizens need. As a result, if things keep on going as they have been, then by June 30, Detroit will have spent $380 million more than it collected in tax revenues.

Orr says that already, the city is "insolvent on a cash basis." And all this, of course, is before you even consider how to try to tackle Detroit's debt and start digging out of the hole the city's in.

According to Orr, if Detroit took every revenue dollar it collects for the next 20 years, and devoted all of it to paying down debt -- turned out the lights, let the potholes pot and the retirees eat cat food -- it still wouldn't collect enough money to pay off its debt.

Stating the obvious, Orr warned: "No one should underestimate the severity of the financial crisis."

Anybody got the number for AAA?

So what is the solution? Orr has a laundry list of ideas, none of which is going to be popular.
  • The city can cut the benefits it pays its retirees -- essentially breaching the contracts it's signed with its workers over the years.
  • It can lay off workers now on the job, breaking the social contract with its citizens (and probably eroding its tax base further as these citizens flee a deteriorating city).
  • Last but not least, Detroit can try to renegotiate payment terms with its lenders, and cut its "debt principal" -- which both sound like reasonable options ... until you realize that they're really just a polite way of saying: "Default on the debt."
On one hand, yes, default can dispose of a debt problem rather quickly. On the other hand ... good luck borrowing money in the future, once you've proven to lenders that you're quite willing to stiff them when the bill comes due.

The Endgame

The likely endgame for all of this, of course, is that Detroit will probably have to follow Harrisburg, Pa., Jefferson County, Ala., and Stockton, Calif., into Chapter 9 bankruptcy court. It won't be the first U.S. city to go this road. It probably won't be the last.

But (for the time being, at least) Detroit can claim the distinction of having been the biggest U.S. city to ever go completely bust.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup Inc.

Gallery: Municipal Bankruptcies

Central Falls, R.I.Jefferson County, Ala.Prichard, Ala.Gould, Ark.Moffett, Okla.

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]]>bankruptcyDetroitinsolvencykevyn orrmichiganmotor cityRick Snydertax revenuesunemploymentRich SmithWed, 15 May 2013 05:00:00 ESTHelp the Planet and Save Money: Have Your Supermarket Deliverhttp://www.dailyfinance.com/2013/05/13/supermarket-delivery-save-money-environmentally-friendly/http://www.dailyfinance.com/2013/05/13/supermarket-delivery-save-money-environmentally-friendly/http://www.dailyfinance.com/2013/05/13/supermarket-delivery-save-money-environmentally-friendly/#commentsFiled under: , , , ,

Shopping cart car traveling to buy food
ZUMAPress
Why do students ride to school on buses? Why do parents commute to work in carpools? Why, for that matter, does the U.S. Postal Service bring our mail to us in trucks, rather than have each of us trek individually to the post office to pick up our junk mail?

In each case, the answer's as obvious as you think: Using a single vehicle to move multiple people (or objects) to a single destination (or to bring those objects to multiple people) is simply more efficient. It saves time, gas, and helps preserve the environment.

This is the upshot of a recent study published in the Journal of the Transportation Research Forum.

On the off chance you're not already a subscriber, here's a quick summary of the findings: JTRF crunched the numbers on multiple U.S. and international test cases, in which trucks were used to deliver groceries to homeowners. What they discovered was that centralized distribution of groceries cut carbon emissions by anywhere from 17 percent to 90 percent in comparison to having grocery shoppers travel individually to the store to buy their orange juice and Oreos.

Weighing Convenience, Cost and Carbon

On the surface, this seems obvious. It is, after all, the reason the aforementioned pupils, parents, and postmen all ride their daily rounds according to a centrally planned system.

But there are a few observations contained in JTRF's study worth highlighting.

For example, companies such as Peapod, the online-ordering, truck-delivering home grocery service owned by Koninklijke Ahold, started out delivering groceries in dense urban environments. That's because, as JTRF confirms, corporate profits are greatest when groceries can be delivered within a city environment.

But today, these services are able to serve suburban and rural markets too. And from a consumer's perspective, the biggest gains in efficiency -- in greenhouse gases not emitted, and in gasoline not burned (or bought) -- are found when grocers deliver goods to multiple households out in the country.

Think about it. When your nearest suburban Kroger (KR) is just a few miles away, a grocery store can make a killing by lining up multiple customers to deliver to, all within, say, a 10-mile radius. Those customers, however, only save a few dimes' worth of gasoline each per shopping trip by having a grocer deliver to them rather than having to drive to the grocer.

Where It Really Pays Off

The scale tips in favor of the consumer out in the sticks, though, where the nearest supermarket (or increasingly, the nearest Target (TGT) or Walmart (WMT)) may be 25 miles distant, a grocer may not see as much profit in driving a far-flung rural route. But customers save a bundle -- as much as a two-gallon gas bill per delivery -- or easily $7 at today's gas prices.

If that sounds like a good deal to you, it's because it is.

Peapod, for example, charges $6.95 to deliver groceries to its customers. (Rates may vary based on the size of an order, and in different locations.) At this rate, rural customers to whom Peapod delivers pay essentially no extra cost for their deliveries. To the contrary, they save money on the delivery service (in the form of the cost of wear and tear on their cars), in addition to saving time.

Should Washington Step Into the Stockroom?

JTRF worries that the benefits of grocery delivery services aren't piling up fast enough. It thinks governments should "incentivize" the establishment of grocery delivery services -- perhaps through tax breaks for businesses that set them up.

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This may not even be necessary. Peapod's business has gained traction in many areas even without incentives, after all. And other grocers may move even faster to take advantage of the big savings associated with centralized delivery.

Amazon.com (AMZN) has already stuck its toe in the water of nonperishable grocery delivery. As national legislation to require online retailers to collect sales tax gains support, Amazon should become more willing to build warehouses in states where it formerly feared to do so (lest it create a taxable "nexus" within a state). It's possible that Amazon will then move further into the grocery delivery business -- perhaps even rolling the service into its $79-per-year Amazon Prime free delivery service.

For shoppers who've failed to take advantage of the savings in gas, in time, and in the toll taken on the environment made possible by grocery delivery services, a free grocery delivery service from Amazon -- or if they're smart, from Peapod or one of the other existing players -- may be the final straw. Remove that last lingering concern that grocery delivery requires payment of a fee, and we could finally see more shoppers move to board the grocery delivery train.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com.

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]]>AmazonAmazon Primedeliveryenvironmentally friendlygroceriesKrogerPeapodsupermarketsWalmartRich SmithMon, 13 May 2013 13:17:00 ESTClaire's Stores: All Dressed Up and Ready to IPOhttp://www.dailyfinance.com/on/claires-stores-IPO-apollo-global-management/http://www.dailyfinance.com/on/claires-stores-IPO-apollo-global-management/http://www.dailyfinance.com/on/claires-stores-IPO-apollo-global-management/#commentsFiled under: , , ,

Claire's
Alamy
Lovers of costume jewelry rejoice: Claire's Stores is coming back to market.

It's been more than six years since private equity powerhouse Apollo Global Management (APO) paid $3.1 billion to take Claire's Stores private. But in an "S-1" IPO Prospectus filed with the SEC last week, Apollo revealed that it's planning to re-IPO the seller of tween costume jewelry and accessories and raise $100 million in the process.

Billions of Baubles Served

Claire's is a pretty huge business, operating 2,705 of its eponymous stores itself and franchising out a further 392 locations. Claire's also owns and operates 380 Icing stores targeting women shoppers age 18 to 35. Claire's does business in 41 countries, including recent expansions into Italy and China.

So what should you expect to get if you decide to buy shares in the IPO? Here's a quick summary of the company's 2012 finances:
Sales $1.6 billion
Gross profit $801 million
Operating profit $236 million
Annual interest payments on its $2.3 billion in debt $206 million
Income taxes $15 million
Net profit $6.2 million
Source: Claire's Stores S-1. All figures for 2012.

Yes, you read that right. Last year, Claire's sold $1.6 billion worth of baubles and gewgaws.

Cheap Thrills and Continuing Growth

Don't get too excited about that $1.6 billion sold. Claire's made all of $6.2 million in profit off those sales -- a net profit margin of just 0.4 percent. As in, less than half of one percent. As in nine times less profitable than Walmart (WMT), and 10 times less profitable than Target (TGT).

That's the bad news. Now here's the good.

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Claire's is growing. From 2009 to 2012, the company opened 443 new stores -- so nearly one out of every seven stores open today opened in just the last three years.

Claire's is also growing its sales, irrespective of new store growth. Over the past three years, total sales have increased a bit faster than 5 percent per year. Same-store sales -- i.e. sales growth coming from existing stores, rather than from simply opening new stores -- have been positive in 10 of the last 13 quarters, and amounted to 1.8 percent growth in 2012.

And of course, even with its huge debt load, Claire's is profitable, albeit barely.

Should You Buy It?

At this point, it's impossible to say whether Claire's stock will make for a good investment. Why? Because we have no idea what the shares will be worth -- or even what owning "a share" of Claire's means.

While Claire's prospectus gives us a good picture of annual sales and profits for the company as a whole, the prospectus is currently a work in progress and riddled with blanks that still need to be filled in. For example, the document does not say how many shares Claire's intends to sell to the public or how many shares will exist after the IPO.

IPO Math 101

Without knowing how many shares Claire's will be sliced up into, we do not know how much of the company's total profit "belongs" to any one share.

For example, if after Claire's IPO there were to be 6.2 million shares outstanding, then each share would own $1 worth of the company's 2012 profits. On the other hand, if Claire's ends up with 62 million shares outstanding after the IPO (it's got 60.8 million already), then each share will own only $0.10 of those profits.

620 million shares -- $0.01 profit. And so on, and so on.

The missing information will eventually be added to Claire's prospectus, and will certainly be in there before the IPO actually happens. All you need to do is check back periodically and look for it. You can do that here on the SEC website.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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]]>Apollo Global ManagementapparelClaires IPOClaires StoresIPOretailtween marketRich SmithMon, 13 May 2013 05:00:00 ESTHealth Care System's Biggest Problem Isn't Cost; It's Qualityhttp://www.dailyfinance.com/2013/05/08/health-care-system-problems-obamacare/http://www.dailyfinance.com/2013/05/08/health-care-system-problems-obamacare/http://www.dailyfinance.com/2013/05/08/health-care-system-problems-obamacare/#commentsFiled under: , ,

Doctor's visit checkup
Getty Images
Do doctor visits cost too us much? Do we need Obamacare to bring these costs down? A recent survey conducted by Consumer Reports suggests the answer is not the obvious "Yes!" you might think.

Three years after the Patient Protection and Affordable Care Act was signed into law, many of its major provisions have yet to take effect. And yet, we know the broad outlines: Once in full force, Obamacare will extend medical insurance to millions of previously uninsured Americans; eliminate the need for the nation's many currently uninsured patients to seek basic health care at expensive emergency rooms; enable patients to apply for new insurance coverage without being denied based on preexisting conditions; and ask everyone in America to sign up for a health plan or pay a penalty.

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There are other details to the law, of course. With the Obamacare document stretching past 2,000 pages in length, that stands to reason. But when you put all the parts together, the result is that the overall cost of health care for America as a nation is supposed to fall.

Now here's something that may surprise you: You know how the high cost of health care was the impetus behind Congress passing Obamacare in the first place? Turns out, when you ask actual patients what they dislike most about America's health care system, "cost" isn't always at the top of the list.

Here's What Really Gives Us Headaches About Health Care

Surveying the opinions of 1,000 Americans in a recent poll of their biggest "gripes" about doctor visits, Consumer Reports discovered that whether or not patients think medical care costs too much, they're pretty darn sure that they're not always getting what they're paying for.

What bothers many Americans -- maybe even more than the cost of medical care -- is the quality of that care.

You can read the entire report on CR's website here, but here are a few highlights to ponder:
  • Doctors who can't clearly explain what ails patients ranked as patients' No. 1 concern -- scoring 8.1 on a 10-point scale, with "10" being patients' biggest gripe.
  • Slow turnaround on medical test results was patients' second-biggest concern (7.9).
  • And the third most important concern?: "Billing disputes" with doctors and insurers -- scoring a 7.8.

As a broad category, problems with medical care "supply" ranked pretty high as well. Patients listed difficulty getting a quick appointment with a physician, "rushed" office consultations, and discharges from the hospital before they were ready as their fourth, fifth, and sixth concerns, respectively.

Complaints No. 9 and 10 -- long spells spent sitting in the waiting room, and inability to get a doctor to return phone calls and emails -- also fit within this category. And you can probably add complaint No. 12 -- inconvenient office hours -- to the category of too little medical "supply" as well.

The Upshot

Cynics may look at these results and dismiss them with a simple quip -- "So, newsflash: Sick people complain a lot." But when figuring out how to implement Obamacare so it makes the most people happy, to counterbalance all the people who are unhappy with the law, Congress might want to give this month's Consumer Reports poll a quick skim.

The upshot here seems to be that if cutting costs requires cutting corners on access and quality of care, voters might not be so eager to embrace Obamacare as legislators would like to think.

And referring back to that No. 1 concern: If you want to improve patient satisfaction with their quality of care, spending a bit of money teaching doctors to communicate better might be a good investment. While you're at it, see if you can get a few of these doctors signed up for a quick refresher course in penmanship. Because prescriptions don't write themselves.

Motley Fool contributor Rich Smith once spent more than a year trying to get a billing snafu between an insurer and a health care provider fixed. He'd bump that "billing dispute" gripe up from No. 3 to No. 1, if Consumer Reports had asked him.

Gallery: Obamacare's Reach - Which States Will Benefit the Most and Least

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]]>health care costshealth care reformhealth insuranceObamacareuninsuredRich SmithWed, 08 May 2013 10:24:00 ESTAre You Still Paying Too Much for Your Broker?http://www.dailyfinance.com/2013/05/07/cutting-stock-trading-costs/http://www.dailyfinance.com/2013/05/07/cutting-stock-trading-costs/http://www.dailyfinance.com/2013/05/07/cutting-stock-trading-costs/#commentsFiled under: , ,

Broker investments
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Just a few decades ago, anyone who wanted to invest in the stock market had to swallow the idea that buying a stock -- any stock -- would probably cost them a few hundred dollars. But in recent years, the "commissions" brokers charge for placing stock trades have dropped precipitously.

These days, it's not uncommon to find discount brokers urging you to set up an account with them for $10 a trade, because those guys across the street are charging $20 or $30, and that's just too much to pay.

My, how times have changed.

The More Things Change, the More They Don't

But could it be that paying even $10 has now become "too much"? It almost seems ungrateful to ask whether a stock trade that's already fallen 90 percent in price should actually be 99 percent cheaper. And yet, over at financial website NerdWallet, that's exactly what they're asking.

You see, up on Wall Street, hedge funds and other high-frequency trading firms pay millions of dollars a year to rent office space close to computer servers at the New York Stock Exchange and Nasdaq. Even with stock trades traveling at the speed of light, it takes a few milliseconds for a trade order to go from trader to exchange. By locating their computers a few feet closer to the exchange's servers, a high-frequency trader hopes to get its automated, computerized stock trades "executed" a microsecond or two faster than the other guy.

Down here on Main Street, though, a recent poll of investors conducted by NerdWallet found that most people balk at the idea of paying even a dollar more in commissions for faster trade execution. By a margin of 6-to-1, investors assured NerdWallet that they couldn't care less whether a trade order executes at 12:01:01 p.m. or 12:01:02. In the grand scheme of things, a second's delay just isn't that big of a deal.

Chart
NerdWallet


And yet, according to NerdWallet, although the majority of online investors say that they prefer to invest with an online broker that imposes few "fees" and charges low prices on stock trades, barely 1 investor in 10 actually patronizes such brokers.

Most of us are paying for that extra second of fast trade execution ... and we don't even know it.

The Difference Between Day Traders and Regular People

How is it that we're paying for lightning-fast trade executions that we don't even need? Did anyone even ask us if we wanted to upgrade to that service?

No, they didn't ask. That's because most discount brokerages today were actually set up back in the '90s, when stocks were believed to only ever go up, never down, and when "day trading" was all the rage.

As a result, discount brokerages such as Charles Schwab (SCHW), E-Trade Financial (ETFC), and TD Ameritrade (AMTD) cut their teeth on the assumption that everyone wanted fast trade execution -- and they've built this assumption into their product offerings and their pricing.

And yet, if ultra-fast trade execution isn't important to most people anymore -- and isn't important to you -- it's entirely possible you are actually paying too much for a service you don't really want.

Investigating this possibility, NerdWallet has crunched the numbers, and examined everything from the speed at which a broker executes trades to their ability to offer "price improvement" (getting you a better price for a stock than you actually offered to buy or sell it for) to the firms they use to actually, logistically, place the trades they receive from clients.

NerdWallet's conclusion: Oftentimes, firms with names such as TradeKing, CobraTrading and Interactive Brokers (IBKR) -- most of which most of us have never heard of before -- are able to give investors all the services they really want from an online broker, and charge anywhere from $5 to as little as $1 for it.

Brand Names and Brokers

Maybe the name-brand "discount brokers" aren't giving such great discounts anymore, relative to the new breed of "deep discount brokers." Still, there's something in a name.

Consider: When shopping the grocery aisles, we gravitate toward trusted brands like Heinz and Clorox rather than unfamiliar labels and store-brand items. Similarly, investors seeking a discount broker may find themselves swayed by a catchy commercial advertisement, a brand name with a "good reputation," or failing that, at least a kind word of advice from a friend.
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Problem is, that kind of automatic defaulting to what seems safe and familiar can cost you. Obvious example: Placing a plain-vanilla limit order to buy a stock with one broker can cost as little as $7 ... or as much as $30.

But it goes beyond that. Some brokerages -- Bank of America's (BAC) Merrill Lynch being a prime example, will allow you to trade stocks for free on their website if you have a sufficiently large account with them. Others -- such as Wells Fargo (WFC) -- offer sizable discounts to customers with fat bank accounts. Still others, such as TD Ameritrade, can be negotiated with to obtain discounted or even free trading access.

When you add up all the possibilities, it's entirely possible that an investor who trades stocks, say, 10 times a month, could easily end up paying $3,600 more than he or she needs to simply by picking a "popular" broker instead of seeking out the best deal.

What It Means to You

Again, when you get right down to it, most brokerages today offer a pretty fantastic deal to investors relative to what we were raised to expect a broker to charge 30 or 40 years ago. And yes, when you're buying $1,000 or $10,000 worth of stock in a single trade, paying $10 or so for the privilege probably doesn't seem like much.

Even so, times change, and investors need to change with them. If this latest change means that many of us are now paying twice (or more) the going rate for simple, effective trading of stock, it's worth looking into.

It mostly comes down to the size of your account, the number of trades you place in a month, and whether you want to trade such esoteric items as futures and currency in addition to stocks.

Those are the exact questions NerdWallet asks you to input in its Compare Brokers tool. It then compares 67 brokers in its database to pop out an organized list of those that offer the best deals tailored to how you intend to invest.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends the stocks of Interactive Brokers, TD Ameritrade, and Wells Fargo. The Motley Fool owns shares of Bank of America and Wells Fargo.

Gallery: Ways to Get Rich Quicker

1. Start a New Business2. Create a Product3. Flip Real Estate4. Become a Landlord5. Go Viral With a Video

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]]>brokerscutting stock trading costsday tradingInvestinginvestment feesNASDAQstock marketstockstrading feeswall streetRich SmithTue, 07 May 2013 05:00:00 ESTIs Your Pack-a-Day Habit a Vice, or an Opportunity?http://www.dailyfinance.com/2013/05/06/vices-cost-smoking-drinking-fast-food-investing/http://www.dailyfinance.com/2013/05/06/vices-cost-smoking-drinking-fast-food-investing/http://www.dailyfinance.com/2013/05/06/vices-cost-smoking-drinking-fast-food-investing/#commentsFiled under: , , , , , , ,

Smoker smoking tax
Getty Images
Vices. We've all got them, or at least been tempted by them from time to time.

Whether your poison is a pack of smokes, a six-pack of Bud, a cup of coffee, or an ice-cold Coca-Cola, succumbing to your vices -- or succumbing to the temptation to start one -- can cost you.

How much? That's the question that a new micro-site that recently popped up on the eBay (EBAY) Deals Blog proposes to answer.

Titled simply costofyourvices.com, it poses visitors a series of six questions:
  • How many cigarettes do you smoke?
  • How much coffee do you drink?
  • How often do you drink alcohol?
  • How often do you eat fast food?
  • Do you buy Lotto tickets?
  • How many sodas do you drink in a week?

Tallying up the answers, and assuming the reader isn't fibbing, COYV then proceeds to crunch some numbers and break the bad news to the respondent.

"The true cost of your vices is ... X." (In the case of yours truly, for example, it's $4,521 annually, with the dread coffee bean bearing most of the blame.)

But that's really just the beginning of the story.

Beware the 'Secondhand Smoke' of Vice

COYV doesn't simply calculate your vice-oriented checkout receipt. At the bottom of each page of COYV's online questionnaire you'll also find a small infographic explaining the cost of that vice on society at large.

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For example, according to COYV (and varying, one presumes, with state and local taxes), smoking a pack of cigarettes a day is likely to cost you $511 a year. But the cost of smoking to the nation as a whole approaches $196 billion annually in unnecessary health-related expenditures. And believe it or not, the effect of alcohol consumption on the economy is even higher, with COYV postulating total costs of $223 billion annually.

To put those numbers in perspective, COYV calculates that college students in America spend only $22 billion annually on tuition, room, and board. The implication being that if we, collectively and as a nation, suddenly all quit drinking and smoking, we'd save enough money to put about 470,000 students through college.

We'd also finally know the answer to the question Adam Ant posed: "Don't drink, don't smoke -- what do you do?" Apparently, you pay to educate every young person in America.

There's Money to Be Made in Vices

Of course, there's another way you could spend all that loot saved from quitting your vices: You could invest the money in companies that sell to folks who don't quit. What could that get you? Here are a few possibilities:
  • Quitting a $511-a-year tobacco habit could buy you almost 14 shares of Altria (MO) -- every year.
  • $503 saved from switching from coffee to water could get you eight shares of Starbucks (SBUX).
  • More partial to burgers than java? Trading in a twice-a-week McDonald's habit could save $860 -- more than enough to buy eight shares of McDonalds (MCD) common stock.
  • Going cold turkey on even an occasional Coke habit ($165 a year) could pay for nearly four shares of Coca-Cola (KO).
  • Putting the brakes on your weekly beer run ($234 annually) could buy a couple of shares of Anheuser-Busch InBev (BUD).
  • And should you decide to stop throwing away money on a daily $1 lottery habit, you could save $365 annually.

On that last one, you should just hold on to that cash you save. I can't countenance investing that in lottery companies -- some vices are just too heinous to endorse.

Though he's afflicted by many of the vices covered in the COYV poll, there's at least one evil Fool contributor Rich Smith does not succumb to: the lottery. The Motley Fool recommends Coca-Cola, eBay, McDonald's, and Starbucks. The Motley Fool owns shares of eBay, McDonald's, and Starbucks.

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]]>alcoholAltria Group IncAnheuser Busch InBev NVSAcigarettescoffeecokecutting costsEBayMcDonaldssaving moneysodaStarbucks CorpThe Motley FoolvicesRich SmithMon, 06 May 2013 12:30:00 ESTThe Top 5 Reasons Americans Don't Invest Onlinehttp://www.dailyfinance.com/2013/04/29/investing-online-fears-financial-literacy/http://www.dailyfinance.com/2013/04/29/investing-online-fears-financial-literacy/http://www.dailyfinance.com/2013/04/29/investing-online-fears-financial-literacy/#commentsFiled under: ,

Investing online
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When inertia meets aspiration, nine times out of 10, inertia wins.

Nearly 600 individuals recently polled by NerdWallet offered all sorts of reasons they've avoided investing in stocks -- from fear of losing money to not knowing how to start, and back to fear (this time, that they don't have enough money to invest).

Here's a pictorial representation of the top five reasons investors gave -- when they could name a reason -- for not investing in the stock market:

Source: NerdWallet

Of course, all of this avoidance is to the detriment to one's financial footing -- both in the near- and long-term. And, frankly, the reasons people cite for avoiding stock market investing don't hold much water. So let's line those excuses up, and knock 'em down one at a time, beginning with...

1. "I don't want to risk losing any money"

On the face of it, that's a reasonable fear. Investors still licking their wounds over the Internet Bubble and the Great Recession certainly have reason to be leery of the stock market's ups and downs. But the cold, hard truth of the matter is that no matter how erratic the stock market can be -- up one day, and down the next -- avoiding investing in stocks because you "don't want to lose money" makes no sense at all.

Sure, the stock market is a scary place. Sure, you might lose money investing in it. But when you consider that the No. 1 alternative to investing in the stock market is putting your money in a savings account, well, you're guaranteed to lose money doing that.

Consider: Right now, the average savings account pays less than 1 percent interest. Inflation in an average year is about 3 percent. So simple math tells you that any money you put in a savings account today is actually losing you about 2 percent a year, as the value of a dollar gets eaten away at by inflation.

In contrast, over long periods of time, the stock market tends to generate pre-tax returns of about 10 percent per year. So really, the choice is yours. Take the "risk" of earning 10 percent, or enjoy the "safety" of losing 2 percent.

2. "I don't want to spend the time to do it"

Time? Pshaw! At the most basic level, "investing in the stock market" can be as simple as setting up an online brokerage account and buying a single index fund that tracks the S&P 500 ... and never touching it again until you need it.

Sure, you can spend a lot of time investing. But you don't have to spend a lot of time investing. One step, and you can hitch your wagon to that 10 percent average rate of historical returns, and let the market take over from there.

3. "I wouldn't know how to get started"

Well, OK. Then look it up. Seriously -- there are like a million and a half investment advisory web sites out there (or at least it seems like it). Yes, many are clamoring for a chance to manage your money for you (and take a cut of the action). But there is a ton of free education available. If you'd like a quick tutorial on the basics, try checking out the free investing lessons here on DailyFinance, or running through the handy step-by-step guide at The Motley Fool.
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Read a little and the mystique surrounding the topic will melt away along with the excuse of "I don't know how to get started."

4. "I invest my money using a financial advisor or broker instead"

Well, there you go then. Assuming you don't mind handing your money over to a stranger to manage for you, knowing he'll probably charge you 2 percent of what you give him to do something you can just as easily do for yourself -- hiring a financial advisor or broker to do your investing for you certainly is an option. Maybe not the best option, but as a way to just get started with learning the concept of investing, it's a start.

Of course, the truth is that investing online is pretty simple, and you don't have to overpay an advisor to tell you how it's done. Check out those links above if you doubt.

5. "I don't have enough money to invest"

This is actually the most popular objection to the "Why aren't you investing in stocks online?" query -- and to an extent,
it's the one that holds most water. But you might want to qualify it and say, "I don't have enough money to invest ... yet."

You see, the key to successful investing is that you must give it time. As mentioned above, over long periods of time, the stock market tends to return 10 percent annual profits. But over short periods of time (like, say, 2000-2001, or 2008-2009), the declines can be scary before things perk back up again. So before investing in the stock market -- online or otherwise -- it's important to have first set up a reserve fund. Socking away three to six months' worth of living expenses is the general rule of thumb, which is enough money to cover your expenses in the event life throws a major curveball, and gives you a cushion so that you're not forced to withdraw money from the market at the worst possible time.

Once you've got that taken care of, though, "not having enough money" really isn't a problem. Don't believe it? Take a look at this list of online brokers that will open an account for you with no minimum initial deposit.

Turns out, "not having enough money to invest" isn't much of a problem after all.

Motley Fool contributor Rich Smith has been investing in stocks online -- exclusively online -- since 1997, and thinks that if he can figure this stuff out, probably anyone can.

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]]>Rich SmithMon, 29 Apr 2013 15:55:00 EST401(k) Fees Are Robbing You Blindhttp://www.dailyfinance.com/2013/04/24/401k-fees-are-robbing-you-blind-nerdwallet/http://www.dailyfinance.com/2013/04/24/401k-fees-are-robbing-you-blind-nerdwallet/http://www.dailyfinance.com/2013/04/24/401k-fees-are-robbing-you-blind-nerdwallet/#commentsFiled under: , , ,

401k Office desk problem
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Everybody knows you should be investing in your company's 401(k) plan, but here's something that almost nobody knows: Investing in a 401(k) could cost your three years' salary.

That's the surprising upshot of a new study by the financial folks at NerdWallet, whose InvestingNerd division just ran a study concluding that "9 out of 10 Americans (92.6%) dramatically underestimated the total 401(k) fees the average household will pay over the course of a lifetime."

According to NerdWallet, when posed the question "How much will the average American household with 2 working adults pay in 401(k) fees over the course of their lifetime?"
  • 38.1 percent of respondents thought a 401(k) might cost them less than $10,000.
  • 32.8 percent guessed somewhere between $10,000 and $50,000.
  • 13.8 percent thought $50,000 to $100,000.
  • 7.9 percent said $100,000 to $150,000.
  • And 4.1 percent tried "The Price Is Right" gambit, shooting the moon and guessing in excess of $200,000.
The correct answer is $150,000 to $200,000 -- but only 3.3 percent of respondents got it right.

The High Price of a Lifetime of Saving

NerdWallet underlies its findings with a report by public policy organization Demos from last summer, which added the further frightening fact that among folks investing in 401(k) plans, a full two-thirds had no idea they were paying anything at all for their 401(k) (which actually makes all of the folks who guessed wrong in NerdWallet's poll look pretty smart by comparison).

U.S. Census Bureau figures put the average household income in America today at just a hair over $50,000. Demos' report, however, shows that over the course of an investing lifetime, an average two-income family in the U.S. could spend as much as $155,000 paying the fees that managers charge for running the funds that make up your 401(k).

How does this happen? It's quite simple, really. When you invest in your company's 401(k), unless you keep the money in cash (and with cash yielding less than 1 percent today, good luck with that), what you're usually doing is buying various mutual funds that are held within your 401(k) account.

The 401(k) industry says expense ratios across all funds averaged about 0.78 percent in 2011. And according to Demos' calculations, deducting these fees year after year, every year, over the course of an investing lifetime, drags down the returns from investing in 401(k)s by the aforementioned $155,000.

That's a bit more than three years' salary for most Americans.

What It Means for You

This hardly seems fair. For years we've heard about the imminent demise of Social Security, with workers today paying money into the system -- and that money being immediately doled out to retirees today, rather than tucked away to pay back today's payers.
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We all know that corporate pension plans are a thing of the past, as companies all across the country try by hook and by crook to do away with them. Witness Boeing's (BA) contentious negotiations with its labor unions last year. (By the way, Boeing won, and its workers are slowly shifting to 401(k)s.)

Yet now we learn from Demos and NerdWallet that doing what you're supposed to be doing -- investing steadily in your future by making regular deposits in your 401(k) -- could cost you three years' salary. Unfair!

So how do you cut this cost, and keep more of your money for yourself? Actually, that's not too hard.

Most funds are "actively managed" by managers who pick and choose stocks for their funds, and the fees for these services add up to about 0.93 percent on average -- again, year after year, every year. Putting your 401(k) money in passive "index" funds, which simply and automatically track the returns of major stock market indexes, can cost as little as 0.14 percent per fund -- less than one-fifth the average cost.

Sound like a better deal to you? In many cases, it can be. Click here to find out more.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Gallery: Financial Terms You Need to Know

Net WorthInflationCost-Benefit AnalysisOpportunity CostSupply and Demand

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]]>401kboeingcensusexpensesfeesMutual fundsNerdWalletpensionsplanningretirementsocial securityRich SmithWed, 24 Apr 2013 15:10:00 ESTInvesting Basics: What You Don't Know Is Hurting Youhttp://www.dailyfinance.com/2013/04/22/investing-basics-what-you-dont-know-is-hurting-you/http://www.dailyfinance.com/2013/04/22/investing-basics-what-you-dont-know-is-hurting-you/http://www.dailyfinance.com/2013/04/22/investing-basics-what-you-dont-know-is-hurting-you/#commentsFiled under: ,

Traders work at the New York Stock Exchange (NYSE) in New York, U.S., Photographer: Scott Eells/Bloomberg
Scott Eells/Bloomberg
Less than 1 in 5 Americans knows that an online brokerage account can be used to invest in stocks.

That's the upshot of a new study by the financial experts at NerdWallet, whose InvestingNerd division just ran a study concluding that "4 in 5 Americans (81.4 percent) surveyed could not correctly identify the type of account to open in order to trade stocks online."

NerdWallet? InvestingNerd? These hardly sound like serious organizations, but the financial literacy situation they describe is no laughing matter.

Check Out These Stats

In a national poll conducted from Feb. 9 to Feb. 12, 2013, NerdWallet asked 869 American adults a series of 10 simple questions on a range of subjects including brokerage accounts, asset classes, investing strategies, stock trading costs, trade execution, and 401(k) plan fees.

What they found was surprising -- and even a little frightening.

Asked quite simply what kind of account they should open in order to trade stocks online, 27.3 percent (230 interviewees) had no earthly idea what kind of account they needed. (And most of the rest got the answer wrong).
  • 2.1 percent would try to buy stocks with a bank CD.
  • 6.2 percent figured a money market account could do the trick.
  • 8.2 percent said they can trade stocks through their bank savings account.
  • And 13.3 percent said "none of the above," meaning they ruled out the correct answer (a brokerage account), which was one of the options.
On the plus side, 18.6 percent of Americans did know that an online brokerage account was the correct way to trade stocks online. On the minus side, those 18.6 percent were vastly outnumbered.

Laughing All the Way to the Bank

Not everyone's upset with the results of this study, though. Fact is, a lot of people on Wall Street depend on our ignorance about the basics of investing -- and even make a living off our inability to invest for ourselves.

Studies show that as many as 80 percent of actively managed mutual funds underperform the average return on the stock market in any given year. Paid financial advisors routinely charge 2 percent (or more!) of any assets you hand them to manage. That's 2 percent of your money, vanishing, each and every year you give it to the pros to "manage" -- whether or not they earn you a profit. And if you happen to be rich enough to buy into a hedge fund, they can cost you even more.

What it Means for You

So what's the alternative? If you're not one of the 18.6 percent who already knew how to invest without calling a professional, it's time to join them. By opening a low-cost, online brokerage account, you should be able to at least match, and probably even beat, the pros at their game -- and do so at a cost measured in only tens of dollars a year.
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How? It's simple. If so many financial "professionals" are turning in performances worse than the average returns on the stock market, then you can beat them simply by matching the market's returns. The easiest way to do this is to open an online brokerage account, and buy yourself a few shares of a simple, low-cost index fund or index-fund imitating ETF -- such as the SPDR S&P 500 (SPY) ETF or "Diamond" SPDR Dow Jones Industrial Average (DIA) ETF.

You can do a lot more than just buy plain-vanilla index funds and index ETFs once your account is open, of course. But if you can beat 80 percent of mutual fund managers, and even more hedge fund managers, with this single, easy step -- that's a good day's work already.

Ready to get started? Head over to the DailyFinance Investor Center for more information.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Gallery: Financial Terms You Need to Know

Net WorthInflationCost-Benefit AnalysisOpportunity CostSupply and Demand

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]]>DJIAETFFinancefinancial advisorfinancial literacyindex fundsNerdWalletRich SmithMon, 22 Apr 2013 10:07:00 ESTMark Zuckerberg Is America's Best Bosshttp://www.dailyfinance.com/2013/03/21/mark-zuckerberg-americas-best-boss-glassdoor-survey/http://www.dailyfinance.com/2013/03/21/mark-zuckerberg-americas-best-boss-glassdoor-survey/http://www.dailyfinance.com/2013/03/21/mark-zuckerberg-americas-best-boss-glassdoor-survey/#commentsFiled under: , ,

PALO ALTO, CA - OCTOBER 06: Facebook founder and CEO Mark Zuckerberg (C) greets Facebook employees before speaking at a news conference at Facebook headquarters> on October 6, 2010 in Palo Alto, California. Zuckerberg announced changes to the popular social networking site. (Photo by Justin Sullivan/Getty Images)
Justin Sullivan, Getty ImagesFacebook founder and CEO Mark Zuckerberg greets his employees before speaking at a news conference at Facebook headquarters.
Since coming public at a first-day offer price of $38, shares of social networking site Facebook (FB) have dropped more than $10 in price, losing 32 percent of their value for early investors.

In contrast, Facebook's CEO has gained 14 percentage points in a recent poll of the world's top-rated CEOs.

According to the poll, conducted by jobs and career website Glassdoor, Facebook CEO Mark Zuckerberg is now the top-rated company chief executive out of all companies polled. Nipping at his heels are, in order:
  • No. 2-ranked SAP (SAP) co-CEOs Bill McDermott and Jim Hagemann Snabe
  • A pair of consulting firm CEOs -- No. 3 Dominic Barton at McKinsey & Co. and No. 4 Jim Turley at Ernst & Young
  • No. 5: Northwestern Mutual boss John Schlifske.

What puts these CEOs at the top of the heap? Glassdoor CEO Robert Hohman, explains: "While anyone can assume a position in leadership, not everyone garners their employees' support for how they lead the company."

And in contrast to many other company-ranking surveys out there, that's exactly what Glassdoor measures: the anonymous opinions of companies' rank-and-file about how their own bosses perform.

Glassdoor gives each voter the chance to pronounce himself "very satisfied," "satisfied," "neutral," "dissatisfied," or "very dissatisfied" with their bosses. In the case of Facebook, for example, out of 423 employees polled, 325 -- that's 77 percent -- say they're very satisfied with Zuckerberg's performance. That's compared to only two disgruntled souls who say they're very unsatisfied.

How to Use the Rankings for Personal Gain

So, after patting the winning CEOs on the back -- and looking with envy at the employees who've lucked into jobs with such wonderful bosses -- what use can you make of Glassdoor's poll data?
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Well, from an investor's point of view, there are a couple of key takeaways here. First and foremost, it's unlikely that employees are going to say they're utterly thrilled with the CEO's performance if the firm is going down in flames. Chances are, a company that scores highly in the estimation of its employees is a company you might want to invest in yourself.

While not all of the companies on Glassdoor's list are soaring in the stock market, few have performed quite as poorly as Facebook. And shares of several of the higher-ranked companies -- No. 11-ranked Google (GOOG), No. 13-ranked salesforce.com (CRM), and No. 16-ranked Amazon.com (AMZN), for example -- have all outperformed the S&P 500 quite handily over the past year.

This suggests that while it might not be advisable to just buy shares of any company on Glassdoor's list willy-nilly, the list could serve as a good starting point for researching potential investments.

Cheap Thrills

Another point that suggests itself: Why exactly might it be good for a company to appear on Glassdoor's list?

Well, think about it in business terms -- say, from the perspective of a hiring manager. If your company has a reputation as "one of the top places to work," it's possible you can use that fact to convince a desirable employee to join up -- and in particular, leverage the company's sterling reputation to avoid having to pay a higher salary. Hire enough new employees at below-market salaries, and you begin dropping serious coin to the company's bottom line.

Similarly, happy workers can be expected to stick around longer, reducing employee turnover, and cutting a company's cost to advertise for, recruit, and train replacement employees. Over time, these kinds of HR savings can start to add up -- especially in manpower-intensive operations like software programming (Salesforce and Facebook), retail (Amazon), and consulting (McKinsey and E&Y).

Long story short, if you're looking for your next stock to invest in, it might be work taking a peek through the Glassdoor to see what they have to show you.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Facebook, Google, and salesforce.com. The Motley Fool owns shares of Amazon.com, Facebook, and Google. To find great investments, try any of our newsletter services free for 30 days.

Gallery: Facebook - A Timeline


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]]>FacebookFinanceGlassdoorMark ZuckerbergMcKinsey & CompanyRobert HohmanSalesforceSAP AGThe Motley FoolRich SmithThu, 21 Mar 2013 15:00:00 ESTBill Gates Was Right: Green Energy Wasn't Ready for Prime Timehttp://www.dailyfinance.com/2013/03/20/bill-gates-green-energy-skeptic-solar/http://www.dailyfinance.com/2013/03/20/bill-gates-green-energy-skeptic-solar/http://www.dailyfinance.com/2013/03/20/bill-gates-green-energy-skeptic-solar/#commentsFiled under: , ,

MIcrosoft chairman Bill Gates. (Elaine Thompson, AP)
Elaine Thompson, AP
It's been nearly two years since Bill Gates came out with his famous dismissal of "green energy" in general, and solar power in particular, as "cute" but too inefficient, too expensive, and too small in scale to actually make a dent in global warming. And once again, it appears the founder and chairman of Microsoft (MSFT) was ahead of the curve.

In an article in this month's edition of The Wall Street Journal's WSJ.Money magazine, the newspaper outlined a swelling backlash against solar, wind, and biofuels -- among investors at least: "Burdened by global overcapacity, slowing demand and the resurgence of fossil fuel production, clean-tech investments have fallen heavily out of favor" on Wall Street, lamented the Journal.

Wind and Sun and Batteries, Oh Well!

And no wonder. While energy experts predict that wind power contributions to global energy production will continue rising, and may account for more than 30 percent of global energy production by the year 2050, the pace of growth in other green energy sectors is already showing some slack.

Take solar power systems installations, for example. After growing nearly six-fold from 2007 to 2012, growth in the solar power market is expected to slow in the coming years, and to barely double in size from 2011 through 2016.

Other green-energy niches are encountering headwinds as well. While electric cars saw sales spike 26 percent last year as Tesla (TSLA) and Nissan, and even Ford (F) and General Motors (GM) brought e-cars to market, sales are expected to grow only 6 percent this year. After rapidly burning through their supply of early adopters -- and as the vehicles' limited driving range and high sticker prices, plus the lack of charging infrastructure along major transportation routes becomes more clear -- automakers are hitting a wall as they seek further growth.

The Fallout

Meanwhile, a surge in investment in shale gas and oil is helping ignite a boom among traditional energy companies, expanding supply, driving down prices, and making green energy look all the more expensive in comparison.
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Result: One pioneer of green energy investing, Sun Microsystems co-founder and green energy investor Vinod Khosla, has seen the value of his green-energy investments fall by half.

And that's the good news.

The bad news is that many ventures in the industry have done much, much worse. Solar panel maker Solyndra was only the highest profile of these failures. More recently, we've also seen bankruptcy filings of battery makers A123 Systems and EnerDel parent Ener1. The death of automotive start-up Th!nk Global. The slow fade of Pacific Ethanol and its peers.

What Does It Mean to You?

The good news among all this doom and gloom, of course, is that as the hot air rushes out of the overinflated green energy balloon, what remains should be a more solid core. Once the unprofitable dross have been cleared away, any profitable companies that remain should be easier to spot -- and considerably cheaper, should you still feel inclined to invest in them.

Meanwhile, the future for investments in oil and gas companies like ExxonMobil (XOM) is looking shinier than ever.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford, Microsoft, and Tesla Motors. Try any of our newsletter services free for 30 days.

Gallery: 5 Surprising Stocks Hitting New Lows

1. Apple: When Androids Attack2. Skullcandy: Fashion victim3. Millennial Media: In a Sophomore slump4. Select Comfort: A Lumpy Mattresses5. The Fresh Market: Perishing perishables

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]]>A123 Systems IncBill Gatesclimate changeEner1 IncEnerDelExxonMobilFinanceFordglobal warminggreen energyMicrosoftNissansolar energySolyndraSun MicrosystemsTesla MotorsThe Motley FoolVinod KhoslaRich SmithWed, 20 Mar 2013 05:00:00 ESTPity the Rich Investing in Hedge Funds. Seriously.http://www.dailyfinance.com/2013/03/18/hedge-funds-bad-investments-roi/http://www.dailyfinance.com/2013/03/18/hedge-funds-bad-investments-roi/http://www.dailyfinance.com/2013/03/18/hedge-funds-bad-investments-roi/#commentsFiled under: , , ,

Akos Stiller, Bloomberg via Getty Images George Soros, founder of Soros Fund Management.
Hedge funds. Everyone wants to invest in them, but if you want to get into one, you generally have to meet either one of two conditions, laid down by the Securities and Exchange Commission: Either you must earn $200,000 or more a year, or you must have net worth of more than $1 million.

That exclusivity has helped fuel explosive growth in America's hedge fund industry, which has expanded from $300 billion in assets under management 15 years ago, to $2.2 trillion today. Clearly, this is a popular investment party -- one that (statistically speaking) you probably aren't invited to.

Oh, the Unfairness of It All

At first glance, it seems unfair that average people can't invest in the rich-folk hedge funds. And, as explained in a recent article in The Wall Street Journal's WSJ.Money magazine, it is unfair ... not to us ordinary investors, but to the rich folks whose hedge fund investments consistently underperform the stock market.

How unfair is it? Here are a few facts and figures to draw you a picture:
  • The average hedge fund charges its clients 2 percent of whatever money they invest with it -- payable every year. Plus, if the hedge fund makes a profit, the manager skims 20 percent off the top of this profit. (Conversely, when a hedge fund loses money, the manager does not give money back to investors.) What it all works out to is that your average hedge fund manager has to earn 12 percent per year in profit in order for his clients to just match the 8 percent long-term average return they could get on a plain vanilla S&P 500 index fund.
  • That's not easy to do, and in fact, according to Hedge Fund Research (HFR), the average hedge fund does not outperform the market. Rather, over the past three- and 10-year terms, the average hedge fund underperformed it. Over longer periods of time, the results have been similarly bleak. A 2009 study conducted by Emory University and Harvard Business School determined that the average hedge fund investor earned just 6 percent annually on his investments.
  • What's worse, funds making it into HFR's underperformance study only included those funds still alive at the end of the study. Factor in the total losses of hedge funds that have gone bust, and the underperformance would look even worse.

So to answer the perennial question: Is the system for investing in hedge funds unfair?

Yes. It's unfair to rich folk.

Motley Fool contributor Rich Smith once considered investing in a hedge fund, but decided against it. Now you know why.


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]]>beat the marketFinanceGeorge SorosHedge fundshedge funds managersreturn on investmentROISoros Fund ManagementThe Motley FoolRich SmithMon, 18 Mar 2013 05:00:00 EST10 Reasons You're Not Feeling Better About the Economy Yethttp://www.dailyfinance.com/2013/03/13/economic-indicators-recovery-jobs-hiring-wages-debt-savings/http://www.dailyfinance.com/2013/03/13/economic-indicators-recovery-jobs-hiring-wages-debt-savings/http://www.dailyfinance.com/2013/03/13/economic-indicators-recovery-jobs-hiring-wages-debt-savings/#commentsFiled under: , , , , ,

Woman riding a metro to work. 10 Reasons Why You're Not Feeling Better About the Economy
(Melanie Stetson Freeman, The Christian Science Monitor via Getty Images)
The Dow Jones Industrial Average (^DJI) capped a historic run last week, closing at new highs all five days, and ending just shy of 14,400. Meanwhile, the Department of Labor reported that 236,000 jobs were created in February, another recent high.

So, America, are you happy now?

The economic experts and the Wall Street analysts all say you should be. Consumer confidence levels are up more than 11 points since January, and judging from the surveys, most people think things are only getting better. The Wall Street Journal says consumers are "freshly flush" from stock market gains, and starting to feel confident enough to take on debt again. The fourth quarter of 2012 saw consumers taking out new loans at their fastest rate since the economy crashed in 2008.

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In short, things are going great, and now that the stock market is up nearly 10 percent in the past two months, everyone would really appreciate it if you'd stop worrying so much, buy some stuff, invest in some stocks, and help keep this rally going.

Your 10-point reality check

And yet, if you're feeling somehow left out of the party, and wondering if you're missing something -- that somehow, someway, you are the crazy one.

Well, perhaps not. Turns out, once you remove the pink glasses, and don some green eye-shades instead, not everything looks quite so rosy.

What follows are just 10 examples of why you might be feeling down in the dumps when everyone else acts like you should be living high on the hog.


Gallery: 10 Reasons Why You're Not Feeling Better About the Economy

1. Gas Prices2. Higher Taxes3. Lower Wages4. Heavy College Costs5. Less Cash





Motley Fool contributor Rich Smith owns shares of Bankrate.com.

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]]>BankrateBureau of Labor Statisticsbuying stockscollege costscredit card debtDow Jones Industrial Averageemergency fundFinanceGas pricesGasBuddyHigher taxesInvestingjob securityLower wagessavingsSocial SecurityThe Wall Street Journalunemployment rateUnited States Department of Laborworkforce participation rateRich SmithWed, 13 Mar 2013 10:20:00 ESTSEC Charges Illinois With Securities Fraud -- and Settles Immediatelyhttp://www.dailyfinance.com/2013/03/12/sec-charges-illinois-securities-fraud-settles-immediately/http://www.dailyfinance.com/2013/03/12/sec-charges-illinois-securities-fraud-settles-immediately/http://www.dailyfinance.com/2013/03/12/sec-charges-illinois-securities-fraud-settles-immediately/#commentsFiled under: , , ,

(Alamy)
You may want sit down for this one. In an announcement that's certain to leave the good citizens of Illinois feeling shocked -- shocked! -- it appears their politicians have not been entirely honest with them about the state of the state's finances.

On Monday, the Securities and Exchange Commission published a notice that simultaneously charged the state of Illinois with committing securities fraud and also settled the charges, without requiring Illinois to either "admit or deny" the agency's findings.

As laid out in the SEC's announcement, the findings go more or less like this: Between 2005 and 2009, Illinois sold investors $2.2 billion worth of municipal bonds to finance government operations. Problem was, Illinois neglected to inform the investors buying its bonds (who often were local individual and corporate taxpayers themselves) that the state has gotten itself into perilous financial straits.

It turns out, when Illinois enacted a 50-year schedule for making contributions to its pension fund back in 1994, it backloaded the payments it was obligating itself to make so as to reduce its financial burden in the early years. As a result, from the start, planned contributions weren't sufficient to cover the state's eventual pension obligations.

Over time, this "condition ... worsened" says the SEC, and in particular, it took a turn for the worse when the state enacted certain "pension holidays" in 2005, exempting itself from the obligation to make its regularly scheduled contributions.

In so doing, alleged the SEC, Illinois set up a "statutory plan [that] significantly underfunded the state's pension obligations and increased the risk to its overall financial condition. The state also misled investors about the effect of changes to its statutory plan." In other words, the state failed to advise investors that the moves made in 2005 significantly increased the underfunding of the pension plan, which increased the risk of an eventual default, both on the pension promises and potentially on the payments it is obligated to pay to its bond investors as well.

In 2009, the SEC required Illinois to take "multiple steps" to fix the problem, primarily by improving its disclosures -- but not, notably, by requiring the state to fix its finances.

Without admitting or denying the SEC's charges, Illinois agreed to "cease and desist" from misleading investors. As for the underlying fiscal problems, those remain in full force.

Rich Smith is a Motley Fool contributing writer. Try any of our newsletter services free for 30 days.

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]]>FinancepensionsSECSEC Charges IllinoisSecurities and Exchange Commissionsecurities fraudThe Motley Foolunderfunded pensionsRich SmithTue, 12 Mar 2013 12:10:00 ESTDow 14,000 Is Back ... But Does That Really Mean Anything?http://www.dailyfinance.com/2013/02/28/dow-14000-economy-meaning-djia-explainer/http://www.dailyfinance.com/2013/02/28/dow-14000-economy-meaning-djia-explainer/http://www.dailyfinance.com/2013/02/28/dow-14000-economy-meaning-djia-explainer/#commentsFiled under: , , , ,

Market waveringOn Wednesday, the Dow Jones Industrial Average (^DJI) closed at 14,075, its highest close in the past five years -- its fifth-highest closing price ever, and within 90 points of its all-time high: 14,164, reached on Oct. 9, 2007.

So ... hurray?

There's no denying the psychological satisfaction of being able to point to a number and say: "Hey! Look! We crossed this line!" But this doesn't change the fact that the line is, in this case at least, really pretty arbitrary. Really, what does Dow 14,000 even mean?

Does it mean America is now worth 14,000 ... "Dows?" (No.)

Does it have something to do with the share price of Dow Chemical (DOW)? (Also no. As it turns out, Dow Chemical isn't even a component stock on the index.)

Does it mean something, somewhere, is now worth $14,000? (Well, the answer to that is probably yes -- but it's still got nothing to do with Dow 14,000.)

Actually, what "Dow 14,000" really means goes something like this:

A Brief Primer on the Dow

At its heart, the Dow Jones Industrial Average is a list of 30 big (not necessarily the biggest) American companies. The complete list is put together by the folks at The Wall Street Journal, and it varies over time as some stocks get bumped off the list and others get added. Kraft (KRFT), for example, recently exited, and UnitedHealth Group (UNH) took its place.

As of today, the list looks like this:
  • Alcoa
  • American Express
  • Boeing
  • Bank of America
  • Caterpillar
  • Cisco Systems
  • Chevron
  • DuPont
  • Disney
  • Exxon Mobil
  • General Electric
  • Home Depot
  • Hewlett-Packard
  • IBM
  • Intel
  • Johnson & Johnson
  • Coca-Cola
  • JPMorgan Chase
  • McDonald's
  • 3M
  • Merck
  • Microsoft
  • Pfizer
  • Procter & Gamble
  • AT&T
  • Travelers
  • UnitedHealth Group
  • United Technologies
  • Verizon
  • Walmart

Summing It Up

Of course, if you add up the stock prices of all 30 of these companies, what you get (as of this writing) is a grand total of $1,832.84. It's a big number. A nice chunk of change. But as you can clearly see, it's nowhere near $14,075.

So how do we get from $1,832.84 to 14,075 somethings? Easy. Every time one of the stocks on the list up above rises in price by $1, "the Dow" gets adjusted up by 7.68 "points." Every time another stock goes down by $1, the Dow loses 7.68 points.

Add up all the changes in all the stocks on the Dow at any given moment, multiple the result by 7.68, and you get the day's change in the Dow. Tally up all the prices of all the stocks on the list at the end of the day, multiply by 7.68, and voila -- now you have the value of the Dow. For whatever it's worth. (In Wednesday's case, it was worth 14,075 somethings).

What Does It Mean to You?

So now that you know what the Dow is, what does it mean? What are you supposed to do with the information?

Some people will tell you that because the Dow hit a new five-year high, this is proof the economy's doing great, the stock market is even better, and now's a great time to buy stocks. Which, of course, is patently false.

After all, the last time the Dow was about as high as it is today, it began falling, and took five years to get back to where it was (or where it is).

We can see today that this was not a propitious sign back then, so there's really no reason to believe that Dow 14,000 means anything more profound today.

Other "experts" have other theories. For example, Marketwatch published a "Dow Theory" column on Wednesday arguing that because the Dow Jones Transportation Index (DJT) is hitting a high note, and outperforming the Industrials, this too is a bullish sign.

It's not. On the one hand, the Transports have outperformed the Industrials all year so far. So arguing that now is the time to buy begs the question: Wouldn't it have been just as good to buy stocks back in January? Indeed, since stocks have gone up, wouldn't it have been better to buy back then, than now?

Fact is, if you look at a chart of the two indices' performance over the past five years, you can find any number of examples when "Dow Theory" was just plain wrong. March 2012. July 2011. April 2010. And of course, September 2008.

When all's said and done, Dow 14,000 is just a number. You can read into this number anything you like. You can even choose to buy stocks because you like the number. But the number itself doesn't guarantee you any sort of success whatsoever.

Motley Fool contributor Rich Smith holds no position in any company mentioned.The Motley Fool owns shares of McDonald's, Cisco Systems, International Business Machines, Walt Disney, JP Morgan Chase, Bank of America, Intel, and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Chevron, American Express, 3M, Cisco Systems, Home Depot, Coca-Cola, Microsoft, UnitedHealth Group, Walt Disney, McDonald's, Johnson & Johnson, Procter & Gamble, and Intel.

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]]>3MAmerican ExpressBank of AmericaChevronCisco SystemsCoca Cola CoDJIADow Chemical CoDow Jones Industrial AverageDow stocksDow TheoryFinanceIntelJohnson & JohnsonJPMorgan ChaseMcdonald's CorpMicrosoftProcter & GambleThe Home DepotThe Motley FoolUnitedHealth GroupWalt DisneyWhat is the DowRich SmithThu, 28 Feb 2013 15:03:00 ESTAs Coffee Prices Decline Worldwide, Starbucks Bucks the Trendhttp://www.dailyfinance.com/2013/02/26/coffee-prices-fall-starbucks-prices-dont/http://www.dailyfinance.com/2013/02/26/coffee-prices-fall-starbucks-prices-dont/http://www.dailyfinance.com/2013/02/26/coffee-prices-fall-starbucks-prices-dont/#commentsFiled under: , , , ,

Coffee BeansCoffeehouse chain Starbucks (SBUX) reported its most profitable quarter ever last month, and do you know whom they have to thank for it? Consumer ignorance ... and you.

That's right, you. Across the country and around the globe, coffee bean prices are plunging. Arabica bean prices are now down 55 percent from their highs set in May 2011. In response, the companies behind such big-name grocery store packaged coffee brands as Maxwell House, Folgers, and Dunkin' Donuts are all slashing prices regularly, and passing the savings on to consumers.

In fact, just earlier this week, J.M. Smucker (SJM) announced it is cutting the cost of most of its packaged coffee brands by 6 percent -- its third such price cut in the last three years. If historic patterns hold, then in the coming days we should see Kraft Foods (KRFT) follow suit with a price cut of its own. Dunkin' Brands (DNKN), which licenses its coffee brand name to Smucker for retail sale in grocery stores, says it lets its doughnut shop franchisees set prices as they see fit.

Hot and Profitable

Meanwhile, Starbucks has stuck firmly to its sticker price, refusing to follow the market down, or share its good fortune with its customers.

It's been nearly four years since the company announced its last (and only) significant price cut.

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Indeed, bucking the trend toward lower prices, back in November 2011 Starbucks actually increased prices on its drinks at cafes in the Midwest, Pacific Northwest, California, and Hawaii. It followed these price hikes by upping prices in the Sunbelt and Northeastern regions in January 2012.

As a result, lower input costs combined with growing sales and steady prices helped earn Starbucks a healthy 10.5 percent net profit margin last quarter. As fiscal fourth-quarter sales climbed 10.6 percent, the company only had to pay about 8.4 percent more for its cost of goods sold. When combined with the lower effective corporate tax rate Starbucks had to pay in the quarter (30.4 percent), this helped lift profits to $432 million -- or $0.58 per share.

What it Means to You

Does this seem unfair? Uncharitable, at least? Well, perhaps it is. But if Starbucks customers are willing to overpay for their coffee while everyone else is cutting prices in line with the coffee market, that's their choice. Starbucks is fully within its rights to accept all the cash consumers want to hand over.

On the other hand, if you don't want to overpay for your coffee, there are a few options for keeping your coffee costs down. For example:
  • Most obviously, you could eschew Starbucks' pricey brew, and simply patronize the companies that are cutting prices instead. For the cost of just one of Starbucks' pricier offerings, you can buy an entire can of Maxwell House.
  • If you simply can't bring yourself to "trade down" in quality, consider buying your Starbucks at the grocery store, and brewing it at home. Your average 12-ounce package of Starbucks ground coffee may cost a bit more than a similar-size package of Folgers -- but it's a heck of a lot cheaper than buying a cup made to order in a Starbucks store.
  • Don't drink a lot of coffee? Consider switching to a one-cup-at-a-time Keurig brewer. The specialized Green Mountain Coffee Roaster (GMCR) machines cost a bundle up front, sure. But as for the coffee itself, well, a recent Consumer Reports article notes that when bought in bulk, K-Cups actually only cost you about $0.60 for a cup o' joe after the up-front purchase costs.
  • For even bigger savings, consider pairing a Keurig brewer with coffee bought at the store and poured into disposable or reusable K-Cup surrogates such as Simple Cups ($14 for 50) or a K-Cup adapter ($18).
Long story short, Starbucks' ability to dodge the trend of coffee cost-cutting shows that the company has real pricing power. But that doesn't mean consumers are powerless. If you don't like the high prices Starbucks charges, don't pay them.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Green Mountain Coffee Roasters and Starbucks. The Motley Fool owns shares of Starbucks. Try any of our newsletter services free for 30 days.



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]]>coffee beanscoffee pricescoffee prices fallDunkin' BrandsDunkin' DonutseconomyFinancegourmet coffeeGreen Mountain Coffee RoasterskeurigMaxwell HouseStarbucks CorpThe J.M. Smucker Co.The Motley FoolRich SmithTue, 26 Feb 2013 10:25:00 ESTThe Latest Patricia Cornwell Mystery: Who Lost the Author's Millions?http://www.dailyfinance.com/2013/02/20/patricia-cornwell-lawsuit-anchin-block-51-million/http://www.dailyfinance.com/2013/02/20/patricia-cornwell-lawsuit-anchin-block-51-million/http://www.dailyfinance.com/2013/02/20/patricia-cornwell-lawsuit-anchin-block-51-million/#commentsFiled under: , ,

Patricia CornwellA master of the forensic medicine mystery genre, Patricia Cornwell can take a reader from unsolved crime to resolution in 500 pages or fewer. But it's taken four years for Cornwell to solve her own personal financial mystery: the case of who stole the author's money.

On Tuesday, a jury in Massachusetts federal court awarded Ms. Cornwell $51 million in a lawsuit against money managers Anchin, Block & Anchin LLP, accused of bilking Cornwell of millions of dollars she'd entrusted to them.

Alleging various financial improprieties, from spending money on bat mitzvah gifts to interfering with the author's ability to meet a deadline on a new novel to simple improper accounting, Cornwell sued Anchin, Block in federal court in 2009 after discovering that they had reduced her net worth to only $13 million, despite having control over an income stream that ran to as much as $15 million annually over the previous four years -- call it $60 million in total.

In response, Anchin, Block cited its 90-year history of handling money for high-net-worth individuals as evidence of its "reputation for honesty and integrity." The firm blamed Cornwell's own extravagant living expenses, including the lease of a temporary New York apartment for $40,000 a month, and a generally poor stock market for the losses, denying any financial shenanigans on their own part.

It wasn't an impossible argument to make. After all, during the 2007-2008 financial crisis, the stock market did lose close to half its value. Now subtract a few years' worth of $500,000-a-year apartment living, and presumably similar extravagances on restaurants, haute couture, and entertainment. It's actually conceivable that a fund being diligently drained by its beneficiary on the one hand and eroded by a falling stock market on the other could lose 75 percent of its value without any need to infer foul play.

Still, such a loss wouldn't speak very well to the financial acumen of the money managers.

According to a statement from Anchin, Block, the firm is "exploring its legal options," and contemplating an appeal. It makes you wonder, though: Even if the money managers succeed on appeal and prove they're not crooks, will the net effect just be to prove themselves guilty of being really bad at managing money?

Rich Smith is a contributor to The Motley Fool.

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]]>anchin blockanchin block anchinfinancial misconductKay Scarpettapatricia cornwellpatricia cornwell lawsuitRich SmithWed, 20 Feb 2013 17:15:00 EST