Market Update

Weekly Recap - Week ending 10-Aug-12

Dow +42.76 at 13213.06, Nasdaq +2.22 at 3020.86, S&P +3.07 at 1405.87

Equity markets started today's session lower by nearly 0.5%. The losses held early on before the S&P 500 got a lift from a strengthening euro. Challenged by low volume, stocks then staged a slow climb off their lows resulting in a marginally positive close. The S&P 500 ended higher by 0.2%.

Two companies saw heavy selling after reporting their quarterly results. Ubiquiti Networks (UBNT 8.71, -6.30) fell 42.0% despite an earnings and revenue beat. However, the company issued lower guidance which was responsible for today's heavy selling which has dropped the stock to its lowest level since the shares started trading in October 2011.

Elsewhere, Grocery store operator Roundy's (RNDY 7.71, -2.52) plunged 24.6% after missing on earnings. Revenues were slightly below expectations and the company lowered their full-year outlook. The disappointing report combined with multiple analyst downgrades puts the stock at its all-time low, near $7.70.

The telecommunications sector has managed to stay positive today. As most sector components traded in-line with the broader market, Level 3 Communications (LVLT 21.94, +1.76) spiked 8.7% after securing additional financing. In addition, analyst coverage of the stock was initiated at Goldman Sachs with a buy rating.

Financials underperformed the broader market before rallying into the close. The SPDR Financial Select Sector ETF (XLF 14.94, +0.01) gained 0.1%. Within the sector, American Express (AXP 55.85, -0.62) and Morgan Stanley (MS 14.61, -0.10) slipped 1.1% and 0.7% respectively. Barclays (BCS 11.52, +0.31) outperformed other banks as shares gained 2.8%. Today's advance came on the heels of an announcement that Sir David Walker will be the next Chairman.

Manchester United (MANU 14.00, 0.00) was flat on its first day as a publically traded company as underwriters supported the stock at $14.00. This week's other IPO, Bloomin' Brands (BLMN 12.86, -0.63) dipped 4.7%. Shares of the company saw their first down day since it began trading on Wednesday.
J.C. Penney (JCP 23.40, +1.30) gained 5.9%. The company delivered disappointing earnings and reported a 21.7% decrease in same store sales. However, an upbeat earnings call and likely short-covering led to a reversal in the stock. The stock lifted off its pre-market lows as company's Chief Executive Officer Ron Johnson indicated that last quarter's earnings do not reflect the success of recent pricing and marketing changes which have only been in effect for less than a month.

The economic calendar was light today as well. Export prices, excluding agriculture, declined by 0.3% in July after they had decreased by 1.4% in the prior month. Excluding oil, import prices were down in July by 0.4%, which follows the 0.3% decrease experienced in the prior month.

The Treasury Budget for July showed a $69.6 billion deficit, which is better than the deficit of $71.0 billion that had been broadly expected. The report has mattered little to market participants as equity indices did not respond to the news.

Stimulus chatter continues as markets make slim advances
Looking back on the week, Monday started with headlines indicating that The People's Bank of China suggested it would take monetary policy up a notch in the back half of the year and vowed to bolster the economy with improved credit. It also sees a broader use of currency in cross-border trade and investing. Knight Capital Group (KCG 2.90, -0.17) confirmed weekend reports that it will raise $400 million in convertible preferred stock. The preferred stock will be convertible into approximately 267 million shares of common stock of the company. The S&P 500 ended higher by 0.2%
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Tuesday began with comments out of Germany where a spokesperson out of Angela Merkel's camp indicated that the German Chancellor has conceded her hard stance and will back the ECB's bond buying program. Most notable earnings report was Chesapeake Energy (CHK 19.68, -0.63), which gained 9.4% for the day after missing earnings estimates by $0.03 but beating revenue expectations handily. The company also made positive commentary on asset sales. With no economic data of note being released, the S&P ended up 0.5%.

On Wednesday, European macro data was light, with Germany's Trade Balance exceeding expectations. In the UK, Bank of England Governor Mervyn King spoke in favor of David Cameron's conservative budget and said that further rate cuts may be counterproductive. Priceline.com (PCLN 563.16, +0.90) plunged 17.3% after missing on revenues. The company issued lower third quarter guidance, blaming the cloudy outlook on the persisting European debt crisis. The S&P 500 finished near the unchanged level.
Thursday's latest weekly initial jobless claims count totaled 361,000, which was lower than the expected 375,000. The trade deficit narrowed to $42.9 billion during June after an upwardly revised prior month deficit of $48.0 billion. Economists polled by Briefing.com had expected that the June deficit would come in at $47.5 billion. Consumer staples were Thursday's main laggard. Monster Beverage (MNST 54.27, -6.93) plunged 9.7% after missing earnings expectations by $0.02 and missing revenue forecasts by $3 million. The S&P was nearly unchanged on the day.

Handful of earnings scheduled to come in
There will be a considerable drop off in the number of companies reporting earnings next week. Just over 20 companies in the S&P 500 are expected to report their quarterly results. Going forward, earnings will largely be dominated by retailers whose fiscal periods end in July. Local deal website Groupon (GRPN 7.44, +0.79) will report Monday after the close, while Home Depot (HD 53.06, -0.09) TJX (TJX 44.46, -0.54) and Michael Kors (KORS 42.32, -0.68) will report on Tuesday morning.

Index	Started Week	Ended Week	Change	% Change	YTD %
DJIA	13096.17	13207.95	111.78	0.9	8.1
Nasdaq	2967.90	3020.86	52.96	1.8	16.0
S&P 500	1390.99	1405.87	14.88	1.1	11.8
Russell 2000	788.48	801.55	13.07	1.7	8.2

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The Old Get Richer, the Young Get Poorer

The old have gotten wealthier, while the young have become poorer. That’s the conclusion of “The Old Prosper Relative to the Young,” a recent report by economists and researchers at the Pew Research Center.

In documenting a rising age gap with regard to economic well-being, the authors compare households headed by adults over age 65 to households headed by adults younger than 35. They examine data over time–particularly from 1967, 1984, 2005, and 2009-2010. (The comparison between 2005 and 2009-2010 illustrates the impact of the Great Recession.)

Here are some of their conclusions:

• From 1984 to 2009, the median net worth of older households rose 42%. For younger households, it declined by 68%.

• The gap in wealth between older and younger households widened over time. In 1984, the median net worth of older households was $108,000 higher than that of younger households. But by 2009, the median net worth of older households was $166,832 higher than that of younger households, the “largest (gap) in the 25 years that the government has been collecting this data.” (All figures are expressed in 2010 dollars.)

• In younger households, median adjusted annual income rose 27%, from $38,555 in 1967 to $49,145 in 2010. (Again, the figures are in 2010 dollars.) At the same time, income for older households rose 109%, from $20,804 to $43,401.

• From 2005 to 2009, median net worth for older households declined 6%, versus a 55% decline for younger households.  Meanwhile, the adjusted median income of the oldest households rose 8%, while the youngest households experienced a 4% drop.

Housing plays a big role in the trend, the authors say. Older Americans have been “the beneficiaries of good timing, in the form of the long run-up in home values that enabled them to accumulate wealth via home equity,” the report says. While older homeowners purchased “long ago, at “pre-bubble” prices” many younger adults “bought as the bubble was inflating,” and now owe more on their mortgages than their homes are worth. (They have also been saddled with higher college loan debt than their same-aged peers of past decades, the report says.)

There are labor market trends at work, too. Due in part to the recession, today’s young have experienced a “delayed entry into the labor market.” But older adults are staying in the job market longer. Currently, 16% of those ages 65 and older are employed, versus 10% in 1985.

With Social Security as a steady income source, older Americans have experienced less poverty and earnings volatility than their younger counterparts.

Still, the report documents hopeful signs for younger Americans: A growing number, the authors note, are college graduates, “and college education has been found to confer a significant financial payoff over the course of a lifetime.”

How to Tell if Your 401(k) Plan Is Great or Lousy

What if your 401(k) plan stinks?

You got the job. Good show. You even managed to eke out an extra $5,000 a year in base pay during the negotiation process.

You're going to need it, too, to compensate for that sorry excuse for a 401(k) plan.

"It's important for working Americans to know how their retirement plan stacks up because unfortunately, nowadays, it's the only source of retirement income we have," says Veronica Lee, senior vice president of client services with 401(k) Advisors in Aliso Viejo, Calif., an independent consulting firm.

Plan participants who get little in the way of an employer match, for example, will need to defer more of their monthly income to meet their long-term savings goals, she says.

Likewise, those who job-hop without regard to their vesting schedule may leave tens of thousands of retirement dollars on the table, money that could help supersize their 401(k) plan through compounded growth.

Generous match a good thing

There's no single feature that defines a "good" 401(k) plan, of course, but a generous employer match is a nice start.

According to a 2011 survey by trade publication PlanSponsor.com, nearly 89 percent of companies that offer 401(k) plans provide some kind of a match, in which the company matches a percentage of the employee's contribution. Employers are not required by law to do so.

About one-third (almost 32 percent) of employers match less than half of their employees' contributions up to 6 percent of their salary.

Almost 31 percent match 50 percent of their employees' contributions up to 6 percent of their salary (effectively a 3 percent match), and more than 27 percent offer a match that is between 51 percent and 99 percent of up to 6 percent of their salary.

Few (10 percent) match 100 percent or more of their employees' contribution up to 6 percent of their salary, the survey shows.

Consider the vesting schedule

The best plans also offer immediate vesting of employer contributions, but that's not necessarily the norm.

Vesting refers to ownership of the employer match -- or the length of time you must remain with your company to be able to take that money with you when you leave.

Those who leave before they are fully vested forfeit all or part of any company contributions. The pretax dollars you defer to your 401(k) on your own are always yours to keep.

According to the Bureau of Labor Statistics, 22 percent of employers offer immediate full vesting, but nearly half (47 percent) use a graded vesting schedule, in which the employees' right to company contributions increases gradually (say, 20 percent per year) until they are fully vested.

Another 22 percent of employees are in plans with cliff vesting, in which employees become fully vested all at once on a specific date. Under the Pension Protection Act of 2006, that must occur no later than three years after the date of hire.

Low costs make a difference

Plan fees vary dramatically -- and can have a major impact on your 401(k) balance.

Administration fees cover record keeping, accounting, legal services, marketing and investor education services. Investment fees cover expenses associated with managing the plan's funds, and these get deducted directly from your assets. As such, they are often more difficult to identify on your investment statement.

New U.S. Department of Labor regulations, however, will require employers to disclose greater detail to their workers about the fees and expenses associated with their plan. The deadline for disclosure to plan participants is Aug. 30.

According to a study by the "401(k) Averages Book," the average total plan cost for a small retirement plan with 100 participants is 1.3 percent, while the average total plan cost for a large retirement plan (1,000 participants) is 1.08 percent.

The total cost for a 100-participant plan with average account balances of $50,000 ranges from 0.36 percent to 1.71 percent. Does that seem like chump change? It's not. Those expenses to the average participant would range from $180 annually at the low end to $855 a year at the high end.

Too many investment choices

Quality 401(k) plans also offer a carefully vetted selection of investment options and asset classes that are not limited to company stock, says Lee. Too many choices, however, can be a negative.

"Study after study shows the more investment choices a company gives their employees, the less likely they are to participate because they feel overwhelmed," says Lee.

The better plans select a handful of solid investment options for their participants that include target-date funds, many of which automatically become more conservative as the employees approach retirement, she says.

Tom Chipain, a retirement plan specialist with Metis Investment Strategies and president of ReviewMy401k.com, which implements corporate retirement plans, agrees. "An important component of the 401(k) is to take investment decisions out of the hands of the employees and give them the option of having actively managed accounts," he says. "Employers think the answer is to educate their employees to invest for themselves, but employees don't have the expertise or inclination to sit there and research funds."

Low-cost index funds, which seek to track the returns of a specific market index such as the Standard & Poor's 500 index, are also favored as 401(k) investment offerings, says Chipain.

Automatic enrollment feature

Even the most generous employer match and the best investment options, however, won't help you hit your savings goal unless you start contributing to your plan.

For that reason, says Nevin Adams, co-director of the Employee Benefit Research Institute's Center for Research on Retirement Income, 401(k) plans that encourage employees to save through automatic enrollment get the highest mark in his book.

Such provisions, in which workers are automatically enrolled in their employer's plan unless they opt out, have helped boost participation rates in 401(k) plans nationwide, says Adams, especially among younger workers who don't always feel an urgency to contribute.

PlanSponsor.com reports that 91 percent of plans offer automatic enrollment to new employees, while less than 30 percent offer it to existing workers who were not previously enrolled.

Plans that get automatic raises

Automatic escalation provisions, in which the amount of pretax money that employees contribute toward their 401(k) plan automatically increases annually, are also the sign of a company that looks after its own, says Adams.

"The difference that auto-enrollment and contribution increases can make on people's savings is really significant over time," he says. Low fees are important, he notes, but they can never compensate for undersaving.

Such features can increase overall 401(k) accumulations between 11 percent and 28 percent for participants in the lowest income quartile, and between 5 percent and 12 percent for those in the highest income quartile, according to EBRI.

EBRI concedes, however, it remains unclear how long employees would allow automated escalations to continue before opting out, making it difficult to quantify the true impact on 401(k) accumulations.
Other perks of some plans
Some plans also enable participants to make either pre- or post-tax contributions (the latter generally via a Roth 401(k) plan), helping them establish tax diversification in their retirement plan. Others review their investment options on a quarterly basis to ensure they keep pace with market performance. And still others allow plan participants to begin contributing from day one instead of having to wait for several months.

By ferreting out the features of your own 401(k) plan, you'll be far better positioned to maximize your savings and, if necessary, lobby for change, says Chipain.

"That way, the employees can say, 'Hey, Mr. Employer, we really love working here, but do we really have the best plan out there for us?'" he says, noting employers don't always evaluate their investment options as often as they should. "Employers pass many of the fees along to the employees, so they don't have any skin in the game anymore, and that's part of the problem."

You can ask your employer to switch to a plan with lower fees or well-designed target-date funds, he adds.

Or you can ask for a selection of very inexpensive index funds to get broad exposure to the market while paying as little as possible for it.

College Radio

College radio can be your best friend as an up and coming artist. These stations are the most accessible radio option for indie artists, so targeting college radio in your promotion campaign makes sense. There are a few things you can do to increase your chances of getting playlisted at the college stations you approach. As you package up your CDs, keep the following in mind: 

• Yes, send promo CDs. You'd be surprised how many college radio stations still operate by pulling the CD off the shelf and playing it.
  
• Include a list of songs that include profanity. Your list should say the song title, the track number and the profane words used. It takes station staffs a long time to wade through everything to find out what they can and cannot play according to FCC rules, so doing this task for them will get your music on air sooner. FCC rules are different at different hours of the day, so if you list the profane words, the station can figure out which songs they can't touch and which they can play during safe harbor hours.
  
• Put a sticker on the front of the CD with your band name, album name, two sentences about yourself and three or so suggested tracks. They won't have time to listen to your whole album, so direct them to the stand out songs.
  
• Sending promos is fine, but put them in a jewel case. Even if there is no artwork, write the name of your band and the album title on the spine of the jewel using a marker. If you do have artwork and this info is not easily readable on the spine, write it in. This helps DJs find your album on the big station shelves.
  
• Start with your local stations. Write on the envelope that you are a local band - it may help get your CD listened to first.
  

States ask help collecting Internet sales taxes

WASHINGTON (AP) -- More than 21 states have simplified how they collect taxes in hopes of recovering an estimated $20 billion in sales taxes that go uncollected by out-of-state online merchants every year. But the nation's governors say they still need help from Congress.

Speaking on behalf of the National Governors Association, Tennessee Gov. Bill Haslam told the House Judiciary Committee on Tuesday it isn't fair to local businesses that online sellers are not required to collect and distribute state sales taxes for purchases made where they don't have a physical presence.

In states with sales tax, online buyers are required to pay a "use tax" for items upon which no sales tax has been paid, but often sellers don't enforce it or buyers are not aware of the requirement.

"This discussion isn't about raising taxes or adding new taxes," Haslam said. "This is about states having the flexibility and authority to collect taxes that are already owed by their own in-state residents."

Through the Streamlined Sales and Use Tax coalition, around 21 states are in full compliance with the laws and regulations set forth by the cooperative and have agreed to implement the policies and software technology that would make it easy for even the smallest businesses to collect and forward sales taxes across state lines.

Reps. Steve Womack, R-Ark., and Jackie Speier, D-Calif., urged the House to pass the Marketplace Equity Act of 2011, which is co-sponsored by 48 House lawmakers from both parties.
The act was in response to a 1992 Supreme Court decision that restricted states from collecting sales taxes on Internet transactions with online retailers that are not physically connected with the state.
Similar online sales tax legislation discussed in Congress during at least the past decade all have lacked enough support to become law. As both parties remain unwilling to let the other claim legislative victory, the bill's fate is dubious.

Some Republican governors such as Chris Christie of New Jersey and Terry Branstad of Iowa have endorsed legislative action to make out-of-state Internet merchants charge and collect state taxes.
Yet, ideological disagreements between conservatives have become more evident in the bill's two sister Senate measures: the Main Street Fairness Act and the Marketplace Fairness Act.

Republican Sens. Kelly Ayotte of New Hampshire and Jim DeMint of South Carolina have argued that any federal law that allows states to require the recollection of online sales tax would impose an unwarranted burden on struggling families and recovering businesses.

Steve DelBianco, executive director of NetChoice, a coalition of e-commerce companies, said the Marketplace Equity Act of 2011 does not provide enough guidelines to simplify the process of collecting and distributing taxes.

The bill "does not adequately protect America's small businesses, for whom new collection burdens would be disproportionately complex and expensive," DelBianco told the committee.

States that have no income taxes and those that rely on sales taxes for their revenue have a strong interest in the bill due to the additional income that could be generated if states start collecting online sales taxes.
Retailers' e-commerce sales increased by 16.3 percent between 2009 and 2010 to $169 billion, according to the Census Bureau. The Forrester Research company estimated that around 25 million more Americans are expected to shop online in the next four years.

8 common tax-time goofs that can delay your refund

Here are eight common errors and the IRS' comments about how to avoid them:

1. INCORRECT OR MISSING SOCIAL SECURITY NUMBERS.
When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards.
2. INCORRECT OR MISSPELLING OF DEPENDENT'S LAST NAME.
When entering a dependent's last name on your return, make sure to enter it exactly as it appears on his or her Social Security card.

[Related: What if You Can't Pay Your Taxes?]
3. FILING STATUS ERRORS.
Choose the correct filing status for your situation. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. See Publication 501, Exemptions, Standard Deduction and Filing Information, to determine the filing status that best fits your situation.
4. MATH ERRORS.
When preparing paper returns, review all math for accuracy. Or file electronically; the software does the math for you.
5. CARELESS ERRORS.
Take your time. Many taxpayers make mistakes when figuring their taxable income, withholding and estimated tax payments, Earned Income Tax Credit, Standard Deduction for age 65 or over or blind, the taxable amount of Social Security benefits and the Child and Dependent Care Credit.
6. INCORRECT BANK ACCOUNT NUMBERS FOR DIRECT DEPOSIT.
Double-check your bank routing and account numbers if you are using direct deposit for your refund.
7. FORGETTING TO SIGN AND DATE THE RETURN.
An unsigned tax return is like an unsigned check - it is invalid. Also, both spouses must sign a joint return.
8. INCORRECT ADJUSTED GROSS INCOME.
If you file electronically, you must sign the return electronically using a Personal Identification Number. To verify your identity, the software will prompt you to enter your AGI from your 2010 federal income tax return or last year's PIN if you e-filed. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math-error correction made by the IRS.

6 Ways to Save on Home Energy in the Heat of Summer

Summer is upon us, and while I'm sure we all hope for mild weather, chances are that your home energy costs may be rising--especially if you live in an area of the country affected by the recent heat wave. However, it's always a great idea to save money any way you can. So even if your energy costs aren't skyrocketing, consider the following ideas to make your electric bills more manageable this summer:

1. Adjust the Thermostat
Air conditioning costs a fortune, and if it runs around the clock, you can surely expect a huge bill. To reduce the expense, gradually raise the temperature of your thermostat by at least three degrees. Doing so will save you approximately 20 percent on your summer electric bills.
2. Request a Home Energy Audit
Many power companies can come to your home and perform a home energy audit for free. Providers have to borrow power from other companies at peak usage times in order to meet demands, which cost them a lot of money. Therefore, they have just as much motivation as you do to save energy at home. The audit typically takes about an hour, and the tips and advice provided can help you save a significant amount.
3. Switch Providers
If the power industry has been deregulated in your state, you have options of where to purchase your electricity. Therefore, check out the competition. Review your bill and find out what you're paying per kilowatt-hour, and see if you can find a better rate. However, be sure to look for any extra charges or hidden fees before you make the switch.
4. Turn on Ceiling Fans
If you have ceiling fans, utilize them. They cost pennies to run, and by doing so, your air conditioning unit runs more efficiently. If you don't have them, consider installing them--it's a one-time cost that will pay for itself quickly. Just be sure to run your fans counter-clockwise in the summertime, as this draws cooler air upward.
5. Adjust Your Habits
Typical household duties, such as running the dishwasher or washer and dryer, can significantly heat up your home and run up your electric bill during each use. Consider doing these chores during the early morning or late evening hours to minimize the effect on your cooling bills. Furthermore, only wash full loads of laundry, and only run the dishwasher when it is entirely full. By using these appliances less, you save even more money on your monthly utility bill.
6. Open and Close Doors and Windows
Track the hourly local temperature, and determine at what time the outdoor temperature will rise above the desired temperature inside your home. Open the doors and windows early in the morning, and don't close them until the outside temperature reaches the level of your thermostat. In the evening, open your doors and windows to let in the cool night air. This lessens your reliance on air conditioning.

Final Thoughts
When it comes to saving money, hitting a financial home run is always great--just don't ignore the small ways to save. The average American household spends roughly $2,200 per year on home energy costs. So even if you only save 10 percent, you'll still have an extra $220 in your pocket at the end of the year.

You don't need to make a huge sacrifice to save money. Reducing your electric bill only requires a change in habits. By putting some or all of these ideas into place, you're likely to see your energy bills taking a smaller chunk out of your checking account each month.
Do you have any other ideas on how to save on home energy bills?