Saturday, February 28, 2015

What to Do When Your Ex Won't (or Can't) Pay Child Support

Baby boy chewing on cotGetty Images Andi Kimbrough would have an easier time budgeting if her ex-husband was paying the child support he owes her. Currently, his tab is $11,000, which she doesn't expect to be repaid soon. Her ex is unemployed, and his location is unknown. In fact, there's a warrant out for his arrest. Kimbrough, 43, is gainfully employed at a local television network in Dallas/Fort Worth and is married to a service director for a car dealership. So she is part of a two-income household, which helps offset the financial challenges of not receiving regular child support for her 14-year-old and 10-year-old sons. Still, it isn't easy. Her household is sending out child support money as well. Kimbrough's husband has three children of his own: two sons, ages 18 and 15, and an eight-year-old daughter. His ex-wife is trying to get her amount of child support increased. Right now, Kimbrough says, they're paying somewhere between $500 and $600 a month in child support. "We struggle to pay it already and feel like there is no recourse," Kimbrough says. Those child support issues are one of the main reasons the couple has made a big decision regarding their lifestyle going forward. "We're actually moving out of our house and into an apartment," she says. It would help if Kimbrough's ex-husband paid his child support. It's $500 a month, almost the amount her husband sends to his ex-wife. Recent national numbers on unpaid child support are hard to come by, but $108 billion in back payments was owed to parents with custody of children in 2009, according to the federal Office of Child Support Enforcement. Unfortunately, if your ex-partner is determined not to pay child support or has few assets and can't pay, there isn't much one can do. A deadbeat or broke parent can be thrown in jail for not paying child support, but garnishing prison wages won't get you very far. Still, if you are owed child support, here are some strategies that are worth employing. Keep the other parent involved. If you have primary custody and your ex isn't paying child support, it may be tempting to punish the other parent and prevent him (usually, it's him, but not always) from seeing your child. That's not a good move, says Sheri Atwood, founder of SupportPay.com, an automated child-support payment platform. (It's free, unless you use premium services such as sending money to a third party, in which case it's $19.99 a month.) "A lot of parents feel if you're not going to pay, you're not going to be involved in their life, but it works against you," Atwood says. "By keeping them involved in your children's day-to-day activities and the things going on, that helps them stay invested in your children, and if they can't pay you today, at least they're more likely, when they can afford it, to pay." Shel Harrington, a family law attorney and an adjunct professor teaching family law at the Oklahoma City University School of Law, seconds that. "Child support issues and visitation issues are independent of each other," Harrington says. She adds that it isn't right for a child to not see a parent because that parent isn't paying child support, and "on the flip side, a parent should not stop paying child support because the other parent is denying them visitation," Harrington says. And either parent in this situation could find themselves in legal hot water, Harrington says, even if they feel their reasons are sound for withholding money or visitation rights. Don't budget for your child support. That is, if your ex isn't dependable. "Never build it into your budget," Kimbrough advises. "Keep it completely separate, and that way if it stops, it doesn't change your day. If it's there, you can let it build up for the necessities that you need for your children." Don't run to your lawyer. That is, it shouldn't be your first instinct, Atwood says. Talking things out -- and picking your battles -- should be. Atwood says she knows of one customer who spent more than $12,000 in attorney fees, fighting with an ex about who would pay for a $100 pair of glasses for their child. "He said to me, 'I know this is dumb,'" Atwood says. But, of course, emotion often trumps intellect in post-divorce universe. If your ex can't pay you everything, ask him to pay some. Not that you want to let him off the hook, but something is better than nothing. And if you ex is truly broke, it may be better for everyone if he or she gets the child support reduced (it can always be raised if he or she gets a better job). And it's in your ex's best interest to get things straightened out with the court right away. "All states have anti-retroactive modification laws," says Ron Lieberman, a family law attorney in Haddonfield, N.J. "Meaning that a modification of child support can't be made retroactive beyond the date of the filing of a motion in court ... so the payer has every incentive to seek immediate court action instead of ignoring his or her payment situation." When to get the courts involved. If your ex isn't making any effort to pay, it's usually after six months when a county sheriff will begin enforcing child support, assuming the support is currently being paid through wage execution or the probation department, Lieberman says. If child support is not being paid through those two ways, you can still file a motion in court for enforcement, Lieberman says. The filing fee in New Jersey is $30, he says, adding: "In extreme cases, a parent can ask for the waiver of the filing fee." Then, assuming an ex isn't willing to pay child support, law enforcement has methods to try and reason with the parent, Lieberman says, including suspending his or her professional license. The courts can take away the deadbeat parent's driver's license, grab any tax refunds, garnish wages and, yes, throw the person in jail. That still may not convince the parent, says Bruce Ailion, an associate broker with Re/Max in Atlanta and father of three who has been trying to get child support for more than a decade and can attest to how difficult it is. His ex-wife, who owned a real-estate brokerage company with him when they divorced in 2002, owes around $80,000 in child support, he says. She has wound up in jail numerous times, and what Ailion finds amazing is that he can afford to pay for legal representation to collect his child support income -- and has still come up empty.

Friday, February 27, 2015

Madoff victim pool expanded

madoff victims

Bernie Madoff is currently serving a 150-year prison sentence.

NEW YORK (CNNMoney) Victims of infamous Ponzi schemer Bernie Madoff who had money invested through outside "feeder funds" are now eligible to seek compensation, the Manhattan U.S. Attorney's office announced Monday.

Over 10,000 people -- the so-called "third party" investors -- lost money they had invested with outside financial firms that in turn invested it with Madoff.

These investors have been ruled ineligible for compensation being distributed by liquidation trustee Irving Picard. But they can now submit claims with a separate fund controlled by a Department of Justice-appointed administrator.

"The process we have put in place opens the door for thousands of defrauded victims who otherwise might never have recovered anything," Manhattan U.S. Attorney Preet Bharara said in a statement.

The DOJ-appointed administrator, Richard Breeden, controls some $2.35 billion obtained in various criminal and civil forefeiture actions associated with the case. Among the assets seized were Madoff's yacht, his personalized New York Mets jacket, a penthouse in Manhattan, a beachhouse in Montauk, N.Y., and posh homes in Florida and the South of France.

Worked for Madoff, can't find a job   Worked for Madoff, can't find a job

Picard controls a separate pool of money collected primarily from settlements with former investors who withdrew more from Madoff's firm than they deposited. Picard has recovered over $9.5 billion, and has already distributed over $4.8 billion to victims.

A federal judge ruled last year that only victims who invested directly with Madoff's firm were eligibl! e for awards from Picard, whose work is governed by the Securities Investor Protection Act. Picard has authorized 2,515 claims so far.

Ironically, the feeder funds themselves are considered direct investors, and are therefore potentially eligible for compensation from Picard's fund.

Together, Breeden and Picard have collected $11.9 billion. Madoff's Ponzi scheme defrauded investors of roughly $17.5 billion.

Madoff's scheme came crashing down with his arrest on Dec. 11, 2008. He pleaded guilty three months later and was sentenced to 150 years in prison.

His brother, Peter, is serving a 10-year sentence for helping to cover up the scheme. To top of page

Friday, February 13, 2015

What Do We 'Owe' Our Parents?

By Suzanne Gerber, editor of the Living & Learning channel for Next Avenue

Talk about a hot-button issue. With almost 6 million Americans 85 or older, a number expected to jump up to more than 14 million by 2040, our country is struggling to provide adequate care.

Last June, More magazine conducted a nationwide survey of 751 men and women 18 and older with the hopes of giving some definition and parameters to this situation. In their September issue (and coming to More.com on October 22) they published the results of this enlightening study.

If you could reduce the findings to one sentence, it would be that most Americans (81%) plan to help care for their aging parents. That's the good news. But the not-so-good news is that more than a quarter said they didn't know what was involved or how to plan for it. (Obviously they're not reading NextAvenue.)

(MORE: How to Care for Your Parent Without Losing Your Job)

How Will We Care for Mom and Dad?

The survey also found that men are more optimistic about eldercare than women are. "The reason men have a more positive attitude is that a lot of them take a can-do approach to family life," noted Lisa Gwyther, director of the Family Support Program at Duke University Center for the Study of Aging. "They view it as 'This is a problem to be solved; I can fix this.' Women may be more aware of grief, sadness and loss, as well as how the burden of eldercare is affecting them."

Many experts also feel there could be a "perception vs. reality" gap. They note that women still do the bulk of the work. As More reported, women tend to "assume an emotional, nurturing role and handle personal tasks such as bathing, while men take on more practical chores, like handling finances or house repairs."

It's not that women aren't willing to take on financial responsibility. It's just that across every age group they don't always have the means, or the confidence in their financial future, to make the offer.

Another question the survey asked was what people would be willing to give up to care for their parents. The findings: daily lifestyle, 55% (60% women, 50% men); big-ticket items like car, vacations, electronics: 38%; retirements savings: 23%; value of own home: 15%; children's education fund: 7%.

But the question that really got me thinking — and feeling and projecting into my own life — was about motivation: why the respondents would act the way they said they would. Almost half (46%) said it was out of a sense of duty, a quarter (26%) said out of love, and 11% said they felt it was their moral obligation.

(MORE: How to Be a Loving Advocate for Your Parents)

What Do You Feel You Owe Your Parents?

Among my peers, conversations about our parents are frequent, but interestingly, the question "what do we 'owe' them" has never come up. So when I heard about the More survey, I reached out to a number of them to hear their thoughts.

A younger friend with still-robust, independent parents doesn't feel any sense of debt. "But I want to give them love and friendship and all the support that I can give them (and that they are willing to accept from me)." Her story is complicated by the fact that her folks, who live 3,000 miles away, are fundamentalist Christians and she's gay.

Investor to be ready for more risk in MFs: Lovaii Navlakhi

Below is the edited transcript of his interview to CNBC-TV18.

Q: Can invest Rs 4,000 per month for 10-15 months. Where should I invest?

A: He should remember that when he is investing in something which is other than a bank deposit, which is giving better rate of return, there will be some higher risk. As long as he is prepared for that, that is number one.

He is a businessman. So, possibly, he is paying tax at a higher tax slab so he should try and find an alternative where he gets a better post tax return. There are companies fixed deposits which are available, but if he is going to invest on a monthly basis I would suggest that he looks at debt or fixed income mutual funds which are short-term variety.

The only thing that I need to warn him since he has mentioned that that he wants the money back in 10-15 months is that these funds will have an exit load of 12 months from date of entry. So, what he invests six months later he can only take out 18 months later.

As long as he can ignore the short-term volatility, one of the funds I would recommend is Birla Short-term Opportunities Fund. It has a yield of about 10.3 percent. As it is mutual fund it is also tax effective, he may get a fairly good rate of return especially when interest drops going forward he may make even better.

Q: You were talking about company fixed deposit or corporate deposits. Can you give us some names which ones are the most lucrative? Which ones have the highest rate of interest and are the most reliable?

A: All the three are not unfortunately available in one package, highest rate, most reliable etc. That is the first warning that if one wants really high returns there will be deposits with risk.

So, if one wants marginally higher returns, something more than a bank, then companies like Mahindra and Mahindra Finance or Dewan Housing are some of these which are rated fairly high.

The only warning is that don't lock into fixed deposits for very long period of time; one year, two year, three years is fine. Beyond that it is best to take the money out. We do not want the National Spot Exchange type of scenario.

Q: Need Rs 5-6 lakh via my portfolio of mutual funds. I invest Rs 8000 per month? Should make any changes in his portfolio whether it is good at its current stance or not?

A: There is a whole bunch of things in that portfolio. One of the things he talked about is largecap equity funds. I would look at largecap equity funds today possibly the better ones are Axis Equity, Birla Frontline Equity, ICICI Focused Blue chip among this lot; he has focused blue chip.

Maybe, the other two funds, is DSP Top 100 and HDFC Top 200; he could look at replacing. The SIP can happen in the other funds. He should possibly also look at a midcap fund like an ICICI Discovery, Mirae Asset Emerging Asset Fund.

In terms of his amount that he is looking at very roughly, if he is investing Rs 8000 a month and gets a 12 percent return on his investment, then over a three year period he is likely to get about Rs 3.5 lakh.

If he invest for a five year period then he is likely to get a return of about Rs 6.5-7 lakhs which matches what he really requires.

Insurance also needs to be bought from a protection point of view and not an investment point of view. Sometimes there is some mis-selling. I saw in his query that he had Jeevan Saral and he said after three years or five years he can withdraw, I don't see that in the product.

If I withdraw after 3-5 years I will only get 50-60 percent of the premium spread. Very- very important that people look at insurance from a risk protection point of view and keep the investments really separate.

Tuesday, February 10, 2015

Why Vantiv's Earnings Are Outstanding

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Vantiv (NYSE: VNTV  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Vantiv generated $452.1 million cash while it booked net income of $102.1 million. That means it turned 23.4% of its revenue into FCF. That sounds pretty impressive.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at Vantiv look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 25.8% of operating cash flow coming from questionable sources, Vantiv investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 19.5% of cash flow from operations. Overall, the biggest drag on FCF came from changes in accounts receivable, which represented 9.8% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

Is Vantiv playing the right part in the new technology revolution? Computers, mobile devices, and related services are creating huge amounts of valuable data, but only for companies that can crunch the numbers and make sense of it. Meet the leader in this field in "The Only Stock You Need To Profit From the NEW Technology Revolution." Click here for instant access to this free report.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

Add Vantiv to My Watchlist.

Monday, February 9, 2015

Will BMW Be Tesla's First Competitor?

Tesla Motors (NASDAQ: TSLA  ) has made a huge splash with its all-electric Model S luxury sedan -- its first big move in its effort to become the electric-car version of Germany's BMW (NASDAQOTH: BAMXF  ) .

But now, BMW is making its own first move on to Tesla's turf. Executives said this week that BMW already had 100,000 people signed up to test drive the all-electric car it plans to launch this fall. Is it time for Tesla to worry? In this video, Fool.com contributor John Rosevear takes a closer look at BMW's new electric car -- and gives his take on how it's likely to affect Tesla's sales.

Tesla's plan to disrupt the global auto business has yielded spectacular results. But giant competitors are already moving to disrupt Tesla. Will the company be able to fend them off? The Motley Fool answers this question and more in our most in-depth Tesla research available. Get instant access by clicking here now.

Sunday, February 8, 2015

Want a Big Paycheck to Switch BDs? Beware the True Price

How much importance do advisors give to upfront compensation when considering a move from one broker-dealer to another? 

At a time when the data shows that the population of financial advisors is both shrinking and aging, it can be tempting to accept the more lucrative packages that wirehouses, banks and even regional firms are offering to brokers looking to switch firms, particularly given the expenses of starting an independent advisory firm.

But the better the deal, the more onerous the commitment, warns Mark Elzweig, president and founder of the executive search firm Mark Elzweig Co.

Elzweig, who participated in a panel discussion titled “Recruiting Deals by Channels” during ThinkAdvisor’s Going Independent virtual conference, warned that “the more someone is giving you, the longer they want you to stay so that they can make a more reasonable return on their investment.”

Wirehouses do offer the biggest packages, but focusing just on the size of the signing bonus prevents many advisors from realizing that even though the independent channel may offer less money up front (Elzweig puts it at between 10% and 15%, with some of the larger firms perhaps topping out around 50% to 60%), their deal terms are actually less restrictive.

More importantly, the independent channel offers greater long-term opportunities and rewards for those who really care about growing their own business and seeing it flourish.  

Consider that the average drop in production after a move is around 30%. That’s quite a significant amount, and unless an advisor has carefully planned his or her move and made sure they’re doing the best they can to retain a good percentage of their client book, it can be hard to make up the numbers required to meet the terms of a wirehouse or regional firm’s deal, even if these deals offered good money up front, said Jon Henschen, president of Henschen & Associates.

“Advisors too often fixate on transition dollars,” Henschen said, and this impedes them from seeing the bigger picture, that “culture is better than cash.”

Finding a good fit where an advisor can grow the business model they want with the requisite amount of support can actually turn out to be much more lucrative in the long term, Henschen said, even if upfront expenses are high and the initial payout is low.

An ideal advisory business, according to panelist Tom Kindle, vice president at Pershing, is one that relies on the strengths of an empowered team, transferable value and loyal clients, and the way in which they come together to maximize potential.

“You can get pretty close to those fronts at a wirehouse but can you get as close as you’d like?” he said.

In an independent structure, those three facets that are integral to business success are that much more accessible, said Kindle. So while taking a seven-to-nine year package with attractive upfront compensation at a wirehouse or a regional firm might seem like too good a deal to turn down, taking it means making an implicit long-term commitment to a larger firm that may not ultimately prove to be the best decision.

In an independent structure, “you can choose your technology, choose your brand, your office space, your custodian” and so much more, Kindle said. “You have choices with respect to compliance, you have access to tons of investment research; you’re not losing out. There are plenty of firms that, once you go independent, will help you monetize your business.”

Advisors should view a move toward an independent structure as a time of opportunity, Henschen said, a chance for new business possibilities, the uncovering of new assets and an even an opportunity to say goodbye to clients who may have been difficult to manage.

The freedom of choice can yield greater empowerment and the possibility to scale up a really successful and meaningful business, even if the initial days may be a little more painful.

Saturday, February 7, 2015

Why Vanguard Health Systems's Earnings May Not Be So Hot

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Vanguard Health Systems (NYSE: VHS  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Vanguard Health Systems burned $148.6 million cash while it booked net income of $89.4 million. That means it burned through all its revenue and more. That doesn't sound so great. FCF is less than net income. Ideally, we'd like to see the opposite.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at Vanguard Health Systems look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 21.7% of operating cash flow coming from questionable sources, Vanguard Health Systems investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 16.9% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

Is Vanguard Health Systems the best health care stock for you? Learn how to maximize your investment income and "Secure Your Future With 9 Rock-Solid Dividend Stocks," including one above-average health care logistics company. Click here for instant access to this free report.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

Add Vanguard Health Systems to My Watchlist.

Friday, February 6, 2015

FTC Sues AT&T Over Alleged 'Data Throttling' on Phone Plans

AT&T Cuts 2014 Forecast, Misses Estimates Amid Price Battles Andrew Harrer/Bloomberg via Getty Images WASHINGTON -- The U.S. government has sued AT&T, alleging the No. 2 U.S. wireless carrier sold consumers unlimited data plans but would reduce their Internet speeds once they exceeded a certain amount of data. The Federal Trade Commission said Tuesday that this throttling of Internet feeds was deceptive and that in some cases data speeds were slowed by nearly 90 percent. FTC Chairwoman Edith Ramirez said that AT&T (T) wanted to retain longtime customers and so allowed them to buy unlimited data plans, in some cases after new customers were no longer offered unlimited plans. Then they unilaterally changed the terms, she said. "They stopped providing the service that customers understood they had purchased when they entered into their contract," she said. "Customers would be subject to an early termination fee if they wanted to get out of their existing contract." AT&T called the allegations "baseless" and said the practice was needed to manage network resources. "We have been completely transparent with customers since the very beginning," said Wayne Watts, AT&T's general counsel. "This program has affected only about 3 percent of our customers, and before any customer is affected, they are also notified by text message." More than 3.5 million customers with legacy unlimited data plans had their Internet speeds slowed more than 25 million times by AT&T's practice, which began in October 2011, the FTC said. AT&T says on its support website that people with certain plans can experience data slowdowns once they exceed certain limits. Customers with a 3G smartphone will experience slowdowns after using 3 gigabytes of data in a month, while those with 4G LTE smartphones can use 5 gigabytes before potential slowdowns. Those who dislike the throttling can use Wi-Fi or switch to a different plan, AT&T says on its website. AT&T closed up 0.6 percent at $34.33 a share. Federal Communications Commission Chairman Tom Wheeler has said that his agency was troubled that some carriers singled out specific customers for throttling. The FCC is reviewing wireless carriers' data management practices after Verizon (VZ) in July announced that the top 5 percent of high-speed data users on its older unlimited data plans might experience slower speeds. Verizon, the largest U.S. wireless provider, ultimately scrapped the plan for the higher-speed 4G network, though the policy is in effect for unlimited subscribers on the 3G network. Sprint (S) and T-Mobile US (TMUS) continue to offer unlimited data plans. Earlier this month AT&T said it would pay $105 million to settle FTC allegations that it put unauthorized changes on customers' mobile phone bills. Separately, the Justice Department is currently reviewing AT&T's proposed purchase of DirecTV (DTV). The case in the U.S. District Court for the Northern District of California is FTC v. AT&T Mobility LLC.

Managed to get that raise or promotion? Fantastic -- now don't go out there and spend it all immediately. In classic "keeping up with the Joneses" fashion, too many of us see an increase in salary or a sudden windfall (like an inheritance) as an excuse to take our lifestyle up a notch. We buy bigger houses than we need, get the latest gadgets even though ours work just fine,and spring for fancy steak dinners just because we can.

Wednesday, February 4, 2015

Week's Winners and Losers: Fresh Coffee, Plus a Chinese Data Breach

SUBWAY Fred DeLuca Diane Bondareff/Invision for Subway/AP There were plenty of winners and losers this week on Wall Street, with one restaurant chain improving its coffee and and another one suffering a data breach. Here's a rundown of the week's smartest moves and biggest blunders. Keurig Green Mountain (GMCR) -- Winner If you're craving a really fresh cup of coffee with your next $5 footlong, Subway has an answer. It's teaming up with Keurig Green Mountain to outfit all of its nearly 30,000 sandwich shops in the U.S. and Canada with Keurig brewers to serve coffee in single-serve doses. Roughly half of Subway eateries already use Keurig brewers to make coffee to order, instead of brewing entire pots that may go unused. That Subway is adopting it chain-wide is a win for both companies, but Keurig Green Mountain will benefit more from the spike in coffee makers and K-Cup sales. P.F. Chang's -- Loser P.F. Chang's is under the heat lamp after thousands of stolen credit and debit cards appeared on an underground marketplace for swiped plastic. Reports indicate that the one thing tying the cards together is that they had all been used at the casual Chinese chain between early March through mid-May. A new company webpage offers updates. Whether or not P.F. Chang's is vindicated, the headlines are likely to keep some customers away from the growing restaurant chain that offers American tweaks to Chinese cuisine. I guess those diners wound up with a misfortune cookie at the end of their meals. Too soon? Then adding an Orange "You Glad You Didn't Eat Here This Spring" Chicken entree to the menu is probably also out of the question. Amazon (AMZN) -- Winner Amazon Prime -- the popular loyalty shopping program with more than 20 million customers paying $99 a year -- has added another free perk. Amazon is adding a digital catalog of 1.2 million music tracks for streaming. Prime Music has its limitations. Not all of the major labels aren't on board, and those that are participating aren't allowing their newest and more marketable releases into the smorgasbord. Still, it makes Prime even prime-ier, which is always a win for the e-tail giant. McDonald's (MCD) -- Loser Grimace is doing a bit more grimacing these days. McDonald's reported on Monday that comparable restaurant sales slipped 1 percent at its domestic eateries in May. Stateside weakness isn't really much of a surprise. McDonald's is coming off of three consecutive quarters of negative comps, and store-level sales had been negative every month since last October before clocking in flat in April. Stability in April may have led some to believe that the chain was back, but now we see that McDonald's continues to fail at wooing hungry bargain hunters with its expanding menu. There's no Happy Meal here. Yum! Brands (YUM) -- Winner Yum! Brands' Taco Bell has become one of the most innovative players in fast food, having introduced Doritos Locos Tacos in 2012, Waffle Tacos three months ago and Quesaritos on Monday. And unlike other fast food giants, Taco Bell has been rewarded with a spike in sales whenever it rolls out something new. . More from Rick Aristotle Munarriz
•Don't Laugh at Amazon's Smartphone - You're Going to Want It •The Big News at E3 From Video Gaming's 3 Giants •Our Vanity Is a Beautiful Thing for Ulta Shareholders

Tuesday, February 3, 2015

Why Petrobras Braseileiro (PBR) Stock Is Down Today

NEW YORK (TheStreet) -- Petrobras Braseileiro (PBR) was falling -0.4% to $14.55 Monday on news that the company cut its workforce by 12.4% through a voluntary separation program.

The program, launched in January, offers an early retirement plan to employs. Petrobras said 8,298 employees agreed to be bought out, and 55% of them will leave the company in 2014.

Petrobras expects the program to save the company 13 billion Brazilian reais, about $5.85 billion, from 2014 to 2018. The company will write off 2.4 billion reais in the first quarter as a result of the program.

Must read: Warren Buffett's 10 Favorite Growth Stocks SELL NOW: If you own any of the 900 stocks that TheStreet Quant Ratings has identified as a 'Sell'...you could potentially lose EVERYTHING in the next 6-12 months. Learn more. TheStreet Ratings team rates PETROBRAS-PETROLEO BRASILIER as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation: "We rate PETROBRAS-PETROLEO BRASILIER (PBR) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins." Highlights from the analysis by TheStreet Ratings Team goes as follows: Regardless of the drop in revenue, the company managed to outperform against the industry average of 0.2%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share. PBR's debt-to-equity ratio of 0.76 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.98 is weak. Net operating cash flow has decreased to $4,734.00 million or 16.58% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower. The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 26.6% when compared to the same quarter one year ago, falling from $3,763.00 million to $2,760.00 million. You can view the full analysis from the report here: PBR Ratings Report STOCKS TO BUY: TheStreet's Stocks Under $10 has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Stock quotes in this article: PBR 

ELS Stock: Live Large With This REIT

RSS Logo Lawrence Meyers Popular Posts: 3 High-Yield Stocks on the Road Less TraveledAMZN Stock: What Do Amazon Earnings Have in Store?Why Retirement Investors Should Always Hold Energy Stocks Recent Posts: Rent-to-Own Stocks Look Compelling ELS Stock: Live Large With This REIT Why Retirement Investors Should Always Hold Energy Stocks View All Posts

Just imagine nice houses with resort-style amenities, situated in a nice community, probably with a pool — and maybe even a golf course nearby.

Equity Lifestyle Properties ELS 185 ELS Stock: Live Large With This REITI'm talking about manufactured home communities. In the case of Equity LifeStyle Properties (ELS), 70% are communities for those 55 years of age or older. It's a great niche, and this REIT has grown into 370 communities and resorts in 32 states and British Columbia, which contain 140,000 actual sites. The properties certainly look nice on the company's home page, and community living for seniors has taken on increased popularity over the past twenty years.

This is the kind of operation that I like, because once someone moves into a community like this, they are very likely to remain for quite some time. Not that someone who chooses to move out won't get replaced by another buyer (the average home cost is only $75,000), but the company reduces its market price risk by effectively capturing long-term homeowners.

And because ELS stock must pay out 90% of income as a dividend anyway, it's particularly reassuring to know that such income should be relatively consistent.

ELS stock just reported results for Q1. Funds from operations increased $6.4 million to $71.4 million (78 cents per share), compared to $65.0 million, year-over-year. Net income increased $3.1 million to $38.1 million, or 46 cents per share. That's a solid gain of 10% across the board.

These increases came on rather modest revenue gains in the 6% range. ELS stock reports "property operating revenues," which increased $10.5 million to $186.4 million. Income from property operations increased $6.7 million to $111.0 million.

A big concern for most REITs is mortgage debt. Equity LifeStyle's debt structure is prudent, and the company is always trying to pay off more expensive debt and/or replace it with lower-cost debt. In fact, ELS stock paid off $20.7 million in mortgages in Q1, which carried a 5.63% weighted average interest rate. That was done in conjunction with a year-long refinance, which netted the company $430 million in proceeds at a mere 4.54% weighted average.

The best part is that the debt doesn't mature until 2034 at the earliest. That's the beauty of mortgage debt: It costs very little, so if a company can generate more than enough revenue to pay that debt and make money to boot, it's a real business.

And the company is indeed able to cover those interest payments — almost four times over. ELS also has a cash backstop of $56 million and continues to expand via acquisition. It completed two purchases in the quarter for $61 million. The advantage of this niche market is that an entire community can be scooped up for eight figures, from which multiples can be earned over the life of the property.

With a 3.2% dividend yield and a solid business model, ELS stock is a good choice for core and retirement portfolios alike.

Lawrence Meyers does not own any security mentioned.

Monday, February 2, 2015

AIG cyber insurance covers bodily harm

cyber insurance NEW YORK (CNNMoney) Who says the digital world and the physical one are separate?

On Wednesday, AIG announced it's expanding cyber insurance offering to cover property damage and bodily injury. It's a watershed moment. A major insurer is saying the virtual and corporeal are now, in some cases, one and the same.

In a statement, AIG (AIG, Fortune 500) acknowledged the closing gap.

"Cyber risk goes well beyond data privacy concerns covered by stand-alone cyber insurance offerings prevalent in the market," said Tracie Grella, who leads AIG's professional liability division. "The physical risk of a cyber attack or cyber event to property and people is very real."

Related story: Tesla car doors can be hacked

Researchers have accessed control systems for heart rate monitors, traffic lights, home security apps, swimming pool acid tanks and gondola rides -- none of which had security protocols of any kind built in. Imagine the damage that could be done if the wrong people tinkered with those systems.

The nation's critical infrastructure of utilities -- power plants, water treatment centers, dams, etc. -- runs on cyber platforms. Much of it is Internet-accessible.

The best proof that cyber hacks lead to physical damage actually comes from a U.S. offensive. The United States famously dealt a serious setback to Iran's nuclear ambitions with a cyberattack called Stuxnet that made many of the nation's centrifuges spin out of control.

In another case, Iran is believed to have attacked Saudi Oil company Aramco in 2012, ruining 30,000 computers. The company had to trash three-quarters of their PCs.

The repercussions of a cyber-to-physical hack could be fatal. A dam told to ignore pressure readings could burst. A power plant taken offline could pull the plug on hospitals.

  Hackers control car's steering and brakes

And on a personal level, consider how our cars are essentially computers at this point. The average car has 50 or more microprocessors inside of it. And recent research has shown they're just as hackable as our PCs. If something goes wrong on the highway, it's not like a malfunctioning app you just close. Your life is at risk.

Cybersecurity insurance is a relatively new phenomenon. It's a hedge against getting hacked, which is now seen as an inevitability.

Companies are starting to add cybersecurity insurance to their policies. Most have already bought it or will soon, according to a Ponemon Institute report last year. A survey discovered 31% of companies have a policy, and another 39% are planning to get one. The practice is getting so much attention even the Department of Homeland Security is weighing in.

Related story: Canadians arrest a Heartbleed hacker

It makes sense to insure against data breaches, because the cost of those incidents is increasing. Between 2011 and 2012, Ponemon saw the average cost of a data breach in the United States rise from $188 per-person to $194. If a massive database with thousands of names gets lost, that quickly gets multiplied.

The Target hack affected as many as 110 million shoppers -- a third of the United States. The Neiman Marcus hack hit 1.1 million customers. The most recent Michaels hack hit 3 million.

The damage in all those cases is monetary: thieves make fraudulent purchases, customer financial data is exposed and credit cards must be reissued. Target told senators it's investing $100 million to upgrade to a more advanced credit card system to avoid a repeat of last year's debacle.

But physical damage is seen as the next big liability. AIG didn't come up with th! is idea o! n its own. The company said it's responding to concerns from power plants, oil companies and hospitals. To top of page

Sunday, February 1, 2015

Staples closing 225 stores, sharpens online focus

Staples said Thursday it will close 225 stores in North America by the end of 2015 amid falling fourth-quarter revenue as sales increasingly shift online.

in morning trading, its stock is tanking, down nearly 16% to $11.27.

"With nearly half our sales generated online today, we're meeting the changing needs of business customers and taking aggressive action to reduce costs and improve efficiency," Staples CEO Ron Sargent said.

STOCKS THURSDAY: How markets are doing

RADIOSHACK: Closing up to 1,100 stores

For the fourth quarter ended Feb. 1, total company sales fell 10.6% to $5.9 billion a year ago, the nation's No. 1 office supply chain said. Earnings were $212 million, or 33 cents per share, compared to $78 million, or 14 cents a share in a year-ago period that included substantial one-time charges. Wall Street analysts expected net income of 39 cents a share in the fourth quarter.

The company said it expects per-share earnings in the current quarter of 17 cents to 22 cents, well below analysts's estimates of 27 cents and the 26 cents it earned in the first quarter of 2013.

The store closings will affect about 10% of the company's 1,500 U.S. outlets and are part of a plan to save $500 million in costs by the end of next year.

Like other retailers, Staples last quarter was hurt by soft consumer demand for electronics and heavy discounting, says analyst Scott Tilghman of B. Riley & Co. Also, its business customers are disproportionately located in the Northeast, which was battered by cold and stormy weather.

Staples is snaring a healthy share of online sales, but must trim its base of stores accordingly, Tilghman says. The retailer also has been hobbled by technological shifts at the office and home that have sharply reduced the need for bread-and-butter Staples products such as paper, ink and toner.

The company is responding with an increased emphasis on technology products, as well as new product lines for businesses, including industrial! and medical supplies. Staples today said it's adding eight new product categories and 1,600 items to its stores, representing 20% of its offerings. They include break-room supplies, gifts and cards for office parties and early education toys and learning aids.

"We think they're taking the right steps," Tilghman says. "It will take a little while before it shows up in the numbers."

A Staples store in Los Angeles.(Photo: Reed Saxon, AP file)

Estate Planning for Modern Families

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Traditional estate plans don't work well for many families these days. A traditional plan is for couples who are in their first and only marriage and have only kids from that marriage. Different plans, tools, and strategies might be needed for people with other life stories.

Let's start with planning for the single person. Many people now are unmarried for a substantial part of their adult years. They might be widowed, divorced, or never married. They might be in relationships that don't include legal marriage.

Several issues are the same for all of them.

The first focus of a single adult's estate plan should be to ensure that someone competent will manage the property and other matters if the individual is unable to. The best solution usually is a durable financial power of attorney or a living trust or both.

You also need a medical directive, which can include a medical power of attorney, living will, and other instructions. These documents designate one or more people to make decisions about your medical care when you aren't able to. We don't have space here to discuss these in detail. Detailed discussions are on the Retirement Watch members' web site.

These tools also are important for traditional couples, but they are more important for others. State and federal law often provide some protection and presumptions for married couples but not for others. As with married couples, the key to making these tools work is naming the right people to make the decisions for you and being sure the documents properly empower them.

Surprisingly to many, you're also likely to need a document naming people who can visit if you are in a hospital or other facility. This might be in the medical directive or a separate document. Many medical providers now interpret federal privacy law to restrict access only to family members unless there is a clear statement from the patient.

Lo! ng-term care insurance or some other plan for long-term care might be more important for an unmarried person than for a married couple. A single person doesn't have a spouse who might be able to assist him or her. While Medicaid will pay for nursing home care while allowing you to retain some assets, a married couple usually is allowed to retain more assets than a single person. In addition to a single person's being able to retain fewer assets for a legacy, the assets of any partner of the single person might be endangered under Medicaid, especially if the assets are owned jointly.

Those are common issues for all single persons and others in non-traditional families. Now, let's look at different situations they might face.

Unmarried estate planning candidates fall into three categories: Those who have children from a previous marriage or relationship; those who never had children; and those who are part of a couple but won’t be getting married or whose state doesn't recognize their marriage. The categories can overlap, but each category has some unique challenges.

As with a married person, a single person who passes away without a will has the disposition of the property determined by state law. If there are biological children, in most states the property will be divided equally among the children. If there are no children, the disposition can be very unexpected, depending on the state and which relatives are alive. The property could go to half-siblings, cousins, or nieces and nephews. Single adults, especially those without children, are more likely to have nonfamily and charities as objects of affection and so prefer a disposition different from that offered by state law.

Issues about children from more than one relationship and nonbiological children are discussed later with patchwork family issues.

With a traditional couple in these situations, the solution is to draft a will, but single people might prefer having most assets pass through a revocable li! ving trus! t. Depending on the state, the probate process for a will might require notice to everyone who would have been eligible to inherit if there had not been a will. For an unmarried person, especially one without children, that can mean constructing a family tree and proving the demise or divorce of extended family members.

Property in a living trust avoids probate, and the terms of the trust determine who inherits the property. A will still is needed because it might not be possible to transfer all property to the trust, but the living trust might minimize delays and costs.

Another key issue for singles is the choice of an executor or successor trustee when there is no spouse or adult child to take the role. There might be friends or family members who are able and willing to handle the position. Otherwise, a trusted advisor, such as an accountant or attorney, might be the best choice.

There are a number of assets that aren't covered by a will or living trust. These assets include IRAs, retirement plans, annuities, and life insurance. Singles need to decide who they want to benefit from these assets, complete their beneficiary designation forms, keep copies of the forms, and update the documents when appropriate. The executor of your estate needs to know about these assets and where to locate your records.

Taxes are an interesting planning issue. The income tax law can be more generous for unmarrieds, but the estate tax is less generous to singles than to married couples.

Often a married couple pays higher income taxes than two single people with the same incomes. Partly for that reason, some seniors choose to live together without getting married. Staying unmarried allows them to file separate returns, and a couple might be able to shift some deductions to the one in the higher tax bracket.

Under the estate and gift tax, singles do not have the advantage of the marital deduction. An unmarried person still can use the annual gift tax exclusion, make unlimited gifts for! educatio! n and medical expenses, and use the $5.34 million lifetime estate and gift tax exemption. The lack of a marital deduction now matters only to fairly wealthy unmarried seniors, but for them it does limit the after-tax amount that can be left to noncharitable beneficiaries. For them, life insurance might be more attractive than it is for married couples.

The annual gift tax exclusion can be used to benefit anyone. Those without children often use it to benefit nieces, nephews, and other relatives.

Care must be taken when using the lifetime gift tax exemption amount. It often is better to make gifts early as long as sufficient assets are retained to support the standard of living. Yet, the objects of affection might change over time, especially in nontraditional families. So if the exemption is used early, be sure the recipients of the largess are likely to be permanent objects of affection.

For many single seniors, especially those without children, a legacy of charitable giving is more important than it is for marrieds. The singles' estate plans might contain more charitable gifts than others. In addition, they might make more lifetime use of strategies such as charitable trusts to generate current income tax savings and income during their lifetimes, reduce the size of their taxable estates, and leave charitable gifts.

Social Security and pensions leave few options. Social Security does not allow designation of a beneficiary other than the spouse, and a number of employer pension plans have the same restriction. The main options to replace this income for a surviving loved one who is not a spouse are to buy life insurance or have other assets to leave the person. Another possible strategy is to place assets in a charitable remainder trust that pays income to a beneficiary for life or a period of years, and then the remaining assets go to charity.

The population of single adults is increasing, and it faces unique estate planning challenges. These individuals should be sure! to work ! with an estate planner who understands their special situations.

Another type of nontraditional family often is called a "patchwork family." These are families in which at least one spouse is in a second or later marriage and there are children from one or more of the marriages or other relationships.

Estate planning issues generally are important in these families. The spouses usually want to provide for each other. But they might have different objectives beyond that.

A common situation is that a spouse wants his or her assets to provide for the surviving spouse during his or her lifetime, but wants any remaining assets eventually go to his or her biological children. There often is a concern that if property is left outright to the surviving spouse, the assets ultimately might not be distributed among the children as desired. Also, when there are children from more than one relationship, there might be a preference to favor one set (such as the younger children) over the other. Some people want to provide for stepchildren, while others don't.

For patchwork families, trusts are the usual way to resolve these issues. The primary goal of the trusts isn't tax reduction. Instead the trusts are used to control how the property is managed and distributed over time. The terms and number of the trusts vary based on the family situation. There might be one family trust or separate trusts that filter down to different members or branches of the family. The estate owner needs to determine his or her goals and have the estate planner write a plan that best meets those goals.

The downside to using trusts is that you probably can't make full use of both spouse's lifetime estate and gift tax exemptions. That's not an issue for most families, because of the $5.35 million individual exemption, but can result in trade offs for wealthier families.

Patchwork families also seem to have more will contests and other disputes than do traditional families. This risk can be red! uced if t! he spouses sign a premarital or postmarital agreement. Otherwise, if you have only a will, it is easier for your spouse or even your spouse’s children to challenge the terms. Also, let your children know generally how you intend to distribute the assets between the families. If you state this at the outset, it becomes much more difficult for one of them to challenge the plan.

When it's a second or later marriage, the spouses almost certainly should have separate attorneys for their estate plans. There are just too many potential conflicts for one attorney to serve the two spouses. In addition, to avoid potential conflicts and suspicions, many estate planners recommend that you give your durable power of attorney, health care proxy, or living will to one or more adult children or other people instead of your spouse.