Parents, get ready for some tax-free shopping

NEW YORK (CNNMoney)

The tax savings could amount to anywhere from 4% to 7% on everything from crayons to computers.

That savings could come in handy. Economic uncertainty, unemployment and a recent surge in gas prices are forcing parents to focus on necessities this school year, says Matthew Shay, chief executive of the National Retail Federation. Still, families with school-aged children are expected to spend an average of $635 on apparel, shoes, supplies and electronics during this year's back-to-school shopping season, down from $688 last year, the industry trade group found.

Related: Watch out bullies, you're about to get fined

Before heading to the stores, shoppers in the states where these temporary breaks are being offered should research which items are tax exempt and the restrictions that apply, said Carol Kokinis-Graves, senior state tax analyst at CCH, a global provider of accounting and audit information.

In Florida, for example, clothing that costs less than $75 qualifies. But any item that costs more than that amount does not. Want a personal computer? You can get a tax break in Florida, but only if you opt for something that costs less than $750 -- not that MacBook Air you may have been eying.

If you gotta' have that top-end Mac, try Missouri or North Carolina; those two states are offering breaks on computers worth up to $3,500.

Every single one of the 17 states offering tax breaks include exemptions on clothing, but most of the states limit the exemption to items that cost less than $100. However, in Connecticut, clothes horses can spend up to $300 an item. In Louisiana and South Carolina, there is no limit.

Another big difference: In most states, the tax holiday lasts only for a couple of days, while in others it lasts a full week.

While these tax holidays sound like a shopper's dream, some groups don't think they are very effective.

Related: Are you paying the iTunes tax?

In a report released in July, the Tax Foundation found that the price limit imposed on items during sales tax holidays encourages consumers to purchase cheaper goods -- even if they would prefer a better quality item.

"If you raise a poster advertising 5% off, that's not going to get people through the doors," said Joseph Henchman, vice president for state projects at the Tax Foundation. "But if you raise a poster saying 'tax-free' that will get people through the doors."

States offering summertime sales-tax breaks

Alabama

August 2 - 4

Clothing worth $100 or less; computers and software worth less than $750; school supplies of $50 or less; and books priced at $30 or less.

Arkansas

August 3 - 4

Clothing worth $100 or less, school supplies.

Connecticut

August 18 - 24

Clothing and footwear worth $300 or less. Items that aren't exempt include athletic clothing or footwear, jewelry, handbags, luggage, umbrellas, wallets, watches or similar items.

Florida

August 2 - 4

Clothing worth $75 or less; school supplies of $15 or less per item; computers and accessories worth $750 or less. Exemption does not apply to sales made within theme parks, entertainment complexes or airports.

Georgia

August 9 - 10

Clothing and footwear worth $100 or less; personal computers worth less than $1,000; school supplies of $20 or less.

Iowa

August 2 - 3

Clothing and footwear worth $100 or less. Exemption does not include athletic clothing or footwear.

Louisiana

August 2 - 3

All items worth $2,500 or less are tax free, with the exemption of vehicles and meals. Does not apply to local taxes.

Maryland

August 11 - 17

Clothing and footwear worth $100 or less. Accessories not tax-exempt.

Mississippi

July 26 - 27

Clothing and footwear worth $100 or less.

Missouri

August 2 - 4

Clothing worth $100 or less, computers worth $3,500 or less, software worth $350 or less, and school supplies worth $50 or less per item.

New Mexico

August 2 - 4

Clothing and footwear worth $100 or less, personal computers worth less than $1,000, computer accessories worth $500 or less, book bags, backpacks, maps and globes worth $100 or less and calculators worth $200 or less.

North Carolina

August 2 - 4

Clothing worth $100 or less, computers worth $3,500 or less, computer supplies worth $250 or less, school supplies worth $100 or less. Does not apply to accessories, furniture luggage, DVD players, stereos, educational software and luggage.

Oklahoma

August 2 - 4

Clothing and footwear worth $100 or less. Does not apply to athletic clothing or footwear or accessories.

South Carolina

August 2 - 4

Clothing, accessories, footwear, school supplies, computers, printers, software, linens, towels and rugs.

Tennessee

August 2 - 4

Clothing and school supplies worth $100 or less; computers worth less than $1,500.

Texas

August 9 - 11

Clothing and footwear worth $100 or less, backpacks worth $100 or less.

Virginia

August 2 - 4

Clothing and footwear worth $100 or less, school supplies of $20 or less.

Source: Federation of Tax Administrators; CCH, a Wolters Kluwer business

First Published: August 1, 2013

First Published: July 31, 2013: 6:03 AM ET

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Eurozone's employment crisis might have peaked

Unemployment in Spain remains stubbornly high. The country's unemployment rate was stuck above 26% in June.

LONDON (CNNMoney)

New figures for June indicate a slight decline in the number of jobless people across the region, though the unemployment rate remained steady at a record high of 12.1%.

Compared to the previous month, there were 24,000 fewer people looking for work across the 17-nation region, according to Eurostat data. That's not much of a change in the grand scheme of things, but it's certainly a start.

Related: U.K. economy picks up pace

"June's dip in unemployment is likely a reflection of recent increased signs that eurozone economic activity has stabilized, and it fuels hopes that the eurozone can eke out marginal growth over the second half," said Howard Archer, chief European economist at IHS Global Insight.

"Even so, we doubt that June marks a decisive turnaround in eurozone labor markets and we suspect that unemployment will trend modestly higher over the coming month," he said in a research report.

The unemployment rate in the eurozone has remained at the record 12.1% for the past four months. In April, unemployment was reported to have hit 12.2%, but that was later revised down by Eurostat.

The current data show 19.27 million people were out of work in the eurozone in June.

Related: The 10 hardest working countries

As has been the case for awhile, Spain and Greece have the highest levels of unemployment. The latest data show unemployment levels were above 26% in both countries, with youth unemployment well above 55%.

Meanwhile, Austria and Germany maintained the lowest jobless levels out of the 17 countries that use the euro currency. Austria's unemployment was 4.6% and Germany's unemployment was 5.4% in June.

This unemployment data come a day after official statistics showed Spain's economy contracted for a seventh consecutive quarter, although the data indicate the contraction in gross domestic product was very small.

"The GDP number from Spain showed that the rapid decline in growth has started to ease, raising the prospects for positive growth in the forthcoming months, if indeed, we continue to see solid signs of improvement in all facets of economic activity across the eurozone," said Ishaq Saddiqi, a London-based market strategist at ETX Capital.

First Published: July 31, 2013: 7:00 AM ET

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Ford to offer F-150 that runs on natural gas

The CNG tank that will now be offered on Ford F-150 pickups.

NEW YORK (CNNMoney)

The gas can be either compressed natural gas (CNG) or liquefied petroleum gas (LPG). Ford says that the lower cost of natural gas -- about the equivalent of $2.11 per gallon of gasoline -- means that customers will be able to save money within 24 to 36 months of ownership, even though they will have to pay nearly $10,000 more for the option.

"Businesses and fleet customers have been asking Ford to make F-150 available with CNG capability to take advantage of the fuel's low price and clean emissions," said Jon Coleman, Ford fleet sustainability and technology manager.

Related: Fill 'er up...with natural gas

The CNG tank will be located in the front of the pickup truck's bed. The truck will be able to run up to 750 miles on CNG or LPG, depending upon the size of the tank taken. Running on gasoline, the 2013 model year version of the truck averages 19 miles per gallon, according to the EPA.

The CNG option has already been available on the larger F-350 pickup, but the F-150 is Ford's No. 1 vehicle and the leader in the full-size pickup segment. The CNG option will be available starting in the 2014 model year.

Ford also plans to offer the CNG/LPG option on seven other commercial vehicles over the course of the next 12 months.

First Published: July 31, 2013: 8:11 AM ET

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Barclays raising cash to fill $20 billion gap

Barclays is hoping investors will help it fill a £12.8 billion ($19.6 billion) hole in its balance sheet.

LONDON (CNNMoney)

The bank plans to sell shares through a stock offering after British regulators discovered Barclays (BCS) had a gap of £12.8 billion ($19.6 billion).

Barclays is also going to be shrinking its balance sheet and raising £2 billion ($3 billion) in contingent convertible debt, which would convert to equity if the bank's capital ratio falls below a certain threshold.

The banks said the moves will help Barclays hit the 3% leverage ratio target, require by regulators. That target will ensure the bank has enough liquidity to handle difficult market conditions.

Related: Libor moving to NYSE Euronext

Shares of Barclays fell more than 8% in London trading, making it the worst performing company on the benchmark FTSE 100 index.

Barclays shares dropped nearly 4% in the previous trading session after the Financial Times first reported the plan, citing people briefed on the matter.

"Traders started the day as they ended yesterday - dumping shares in Barclays," said Marc Kimsey, a senior trader at Accendo Markets in London. "The company has bitterly disappointed with today's update."

Investors are widely unhappy that the rights issue will dilute their current stake in the bank, and many feel resentful that new shares are being offered at a huge discount.

"The Board and I are aware of the implications of a rights issue for shareholders," said Barclays CEO Anthony Jenkins in a statement. "We hope to balance this with reduced uncertainty in the outlook for Barclays and with enhancement of our dividend payout from 2014."

Separately,t Barclays reported quarterly results showing it was setting aside an additional £2 billion ($3 billion) to settle claims related to its mis-selling of certain financial products.

First Published: July 30, 2013: 7:44 AM ET

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Herbalife shares up on strong earnings, guidance

Herbalife shares were higher Tuesday after a strong earnings report and raised guidance.

NEW YORK (CNNMoney)

Herbalife were up 7% in premarket trading. It reported late Monday that it earned $1.41 a share, up 29% from a year earlier. That easily topped even the most bullish forecasts of analysts surveyed by Thomson Reuters. It also raised its sales and earnings guidance for the remainder of the year.

The company is set to give more details during a call with investors later Tuesday.

Herbalife critics -- most prominently, hedge fund manager Bill Ackman -- have accused the company of being a "massive pyramid scheme," a charge vehemently denied by the company. It is a multi-level marketing company that uses a worldwide network of salespeople, or "distributors," that not only sell Herbalife's products but recruit new members, taking a portion of each of their sales.

But while Herbalife has its critics, it also has its supporters in the investment community, including Carl Icahn and Dan Loeb, who have both purchased stakes in the company.

First Published: July 30, 2013: 8:15 AM ET

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Stocks: Looking to rebound after Monday's losses

Click on chart for more premarket data.

NEW YORK (CNNMoney)

U.S. stock futures were nudging higher ahead of the opening bell.

U.S. investors will receive a variety of economic and corporate news Tuesday as they await the latest reading on economic growth and statement from the Federal Reserve on Wednesday, and Friday's jobs report for July.

The S&P Case-Shiller index, which measures home prices in 20 major markets, will be released at 9 a.m. ET. At 10 a.m. ET, the Conference Board will release its monthly reading on consumer confidence.

Related: Fear & Greed Index

Dow component Pfizer (PFE, Fortune 500) reported a drop in earnings that nonetheless beat analysts' forecast by a penny a share. Insurer Aetna (AET, Fortune 500) reported improved operating income that also beat forecasts as it raised its full-year earnings guidance.

Late Monday, controversial nutritional supplements company Herbalife (HLF) reported better-than-expected earnings and raised its guidance, sending its shares higher in premarket trading.

Sprint (S, Fortune 500) reported a loss for the quarter as it shut down its Nextel network and moved millions of subscribers to its Sprint platform. The loss comes even as the company boosted sales.

Shares of BP (BP) fell after the company's quarterly results missed market expectations. BP reported a drop in earnings due, in part, to lower oil prices and higher taxes. BP is also expecting to pay more in U.S. settlements related to the massive Gulf of Mexico oil spill in 2010.

Barclays (BCS) shares fell after the bank revealed it will be selling $8.9 billion in new shares at a discounted price to existing shareholders to meet capital requirements set out by regulators.

Shares of Mosiac Co. (MOS, Fortune 500), a major U.S. potash producer, plunged after a Russian potash producer pulled out of a cartel, a move expected to send prices of the fertilizer raw material sharply lower.

CBS (CBS, Fortune 500) and Time Warner Cable (TWC, Fortune 500) agreed to continue negotiations on the fee the cable operator pays to carry Showtime as well as CBS in the nation's largest markets. The new deadline that could see 3 million Time Warner Cable customers lose the networks was pushed back to Friday.

Related: BP fighting 'inflated' Gulf spill payouts

On Monday, all three indexes fell as investors reduced exposure to stocks ahead of this week's Fed meeting.

European markets were higher in midday trading, even as banking shares were under pressure. Meanwhile, Asian markets bounced back from Monday's losses, with all major indexes closing with gains.

First Published: July 30, 2013: 5:29 AM ET

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Why we're working less than our parents did

NEW YORK (CNNMoney)

But as a whole, Americans are working far less now than they did a generation ago, and have more leisure time than ever.

The average work week has gone from over 38 hours in 1964 to under 34 hours in 2013 -- a drop of nearly 12%, according to the Bureau of Labor Statistics.

A big reason for the decline is the growth in part-time jobs, which have surged as more women entered the workforce and the number of restaurants, shopping malls, and other establishments that employ part-time workers have exploded.

Another explanation is that people tend to stay in school longer and retire earlier, clocking fewer hours over their lifetime. Men in their 50s, for example, have been retiring or entering semi-retirement earlier and in greater numbers than those in previous generations, according to John Robinson, a sociology professor at the University of Maryland, and are partly responsible for driving down overall work hours per week.

And we're working a lot less than our grandparents, great grandparents and earlier generations. The average work week for a manufacturing employee in the 1860s was 62 hours, according to a paper from Robert Whaples, an economist at Wake Forest University.

In the 1600s, there were actually laws requiring a minimum work day, wrote Whaples. In parts of the country, most people had to work sun up to sundown -- part of the Puritanical "idle-hands-are-the-devil's-workshop" ethos.

Related: 10 hardest working countries

It wasn't easy to change that culture. Political battles that led to less religious influence over the nation's laws almost sparked a civil war. A century later, labor activists fought for decades to get the 40 hour work week.

Coinciding with the shorter work week is a rise in leisure time. Americans reported having just under 35 hours a week of "free time" in 1965 -- that's time not spent at work, doing housework, eating, sleeping or doing other activities necessary for day-to-day survival, according to research by Robinson, who directs the American's Use of Time Project at the University of Maryland.

By 2012, it had reached 42, according to the Bureau of Labor Statistics.

"People feel less rushed than they did even a decade ago," said Robinson.

And thanks to modern technology, the time we spend on housework and cooking is declining.

Just what are we doing with all these extra hours? Watching more TV, mostly.

Related: World's shortest work weeks

But technology certainly hasn't made all our lives easier.

Some people, especially those at the higher end of the earnings spectrum, report working more hours than they want to. This is particularly true for professionals who are now tied to their work by smartphones and email.

Also, many Americans are working part time not because they want to, but because their jobs have been replaced by automation, outsourced, or otherwise eliminated.

"The promise of technology is that we'd all get to work less," said Linda Barrington, head of the Institute for Compensation Studies at Cornell University's school of Industrial and Labor Relations. "But it's playing out differently for different people at different income levels."

Barrington believes the Affordable Care Act - a.k.a. Obamacare -- is the first real law intended to deal with some of the disruption of a changing workplace, as more Americans enter freelance or part-time positions that don't provide health insurance.

As happened during the industrial revolution, she feels other measures will need to take shape to make the technological revolution more beneficial to all workers.

"How are we going to change the rules again?" she asked.

First Published: July 29, 2013: 6:28 AM ET

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The secret to taking a real vacation

NEW YORK (CNNMoney)

According to a survey from American Express OPEN, just 49% of entrepreneurs planned to take vacations this summer, down from 54% last summer and 67% in 2006.

But it doesn't have to be that hard. Josh Golden, founder and CEO of Table XI Partners, found the secret to going off the grid: Delegation.

"Delegating takes practice," says Golden. "But every time I delegate something new to someone else in the firm, I wish I had done it sooner."

Letting go of the day-to-day details -- and trusting that employees can handle whatever pops up -- is one of those things business owners know they ought to do, but find incredibly difficult in practice.

Golden launched his Chicago web-development firm in 2002 with just a part-time assistant. Like many entrepreneurs, at first he did everything from strategic planning to emptying the wastebaskets -- but he quickly learned that wouldn't work for long.

"As you grow, you just can't do everything anymore," said Golden, whose firm now has more than 30 employees.

Related: 10 hardest working countries

The first step is analyzing your own strengths and weaknesses.

"It takes some honest introspection to identify the one or two things you truly are the best at," Golden said. "The goal is to spend 90% of your time on those things, while you hand over to others the tasks where you aren't really adding value."

Learning to delegate also means shushing your inner perfectionist.

"It took me a while to come to terms with the fact that other people can do perfectly acceptable work without being as passionate about the business as I am," Golden said. "And there are plenty of tasks in any company where 'good enough' really is just fine."

Related: How startups can get cheap office space

Carving out time for a vacation also means more than just delegating while you're gone -- you've also got to make it part of your business plan. Golden, whose strongest skill is marketing, was still running Table XI's accounting and finance until last fall, when he finally handed over the number-crunching to a newly-hired finance director.

To get her up to speed, he used a collaborative method, common in software development, called pairing. "It's like an apprenticeship. You train someone over time, sharing knowledge until that person is independent in that role," he said. "The main thing is to resist the impulse to helicopter in and do everything yourself."

Golden's work paid off. In June, he and his wife spent nine days in Waikiki, Kauai and Honolulu. Was he worried about the company? Not quite. "I could have stayed away for another week or even two," he said.

First Published: July 29, 2013: 6:32 AM ET

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Hottest trade on Wall Street: Detroit bonds

Detroit has roughly $8.3 billion in tradeable bonds.

NEW YORK (CNNMoney)

Detroit's bonds have become the hottest trade on Wall Street, since the Motor City filed for the largest municipal bankruptcy two week ago.

Prior to the bankruptcy filing, Detroit's emergency manager, Kevyn Orr, offered to pay bondholders roughly 10 cents on the dollar to help keep the city going.

That would result in huge losses for the city's original creditors. But hedge funds, particularly those that invest in troubled or bankrupt companies, think these bonds will turn out to be lucrative in the long run.

The problem is there aren't that many available. Few have traded, and the waiting lists are long.

Related: Detroit: After bankruptcy, then what?

"The biggest problem we have is how to allocate bonds," said a trader on a major bank's municipal desk. "Only major customers are getting the opportunity to buy."

Detroit has $18 billion of liabilities, but only about $8.2 billion in bonds you can trade. The rest of the city's liabilities are tied to unfunded pensions and retirees' healthcare costs.

Of the bonds, there are $1.4 billion that have funded some of Detroit's pension costs, and those are among the most coveted by hedge funds.

These taxable bonds, known as pension obligation certificates, were issued and sold to European banks in 2005 to help fund the city's pensions. It was an unusual move by Detroit, because cities typically use local revenue to fund these obligations.

Now, hedge funds are just waiting for the banks to sell. Given Detroit's financial mess, that could happen in the next month or so as banks get skittish about keeping that debt on their books, several market experts say.

Many funds are willing to buy small amounts just to get their foot in the door.

Shortly after Detroit filed for bankruptcy, several hedge funds managed to buy $5 million of pension bonds for 41 cents on the dollar. Those were some of the only pension obligation bonds available.

Related: Michigan court clears way for Detroit bankruptcy to proceed

Hedge funds are also eyeing about $1 billion in general obligation bonds backed by Detroit. More of these have changed hands, but also in small increments. One hedge fund manager said he was able to procure $30,000 of general obligation bonds at 75 cents on the dollar from a dentist in Milwaukee. The fund was hoping to buy several millions of dollars' worth, but so far, that's all they can get their hands on.

Most of Detroit's general obligation bonds are owned by retail investors. Since the bankruptcy, these bonds have been selling at between 69 cents and 92 cents on the dollar.

While Detroit's full faith and credit seems questionable right now, the city's bonds are backed by insurance firms, including Ambac (AMBC), Assured Guaranty (AGO) and the national finance arm of MBIA (MBI). Some investors are betting that these insurers will continue to pay Detroit's bondholders for now.

Other bondholders think Orr's initial projection for what they could recover was overly pessimistic. There's some speculation that he overstated the unfunded pension liabilities. Some hedge fund managers also think a portion of healthcare costs for Detroit's city workers will be able to be deferred under Obamacare.

Betting on Detroit's bonds is still a big gamble. There have been few municipal bankruptcies in the United States, and most have been small.

Still, Jim Spiotto, a partner at law firm Chapman and Cutler and a veteran of several municipal bankruptcies, said that overall, bondholders have recovered more in municipal bankruptcies than corporate ones.

But he cautioned investors should be wary of Detroit, because it might not follow suit. "Detroit has a long history of disappointing people. Detroit could very well be an aberration from other municipal bankruptcies."

First Published: July 29, 2013: 6:24 AM ET

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The government wants SAC Capital's billions

Steven Cohen's hedge fund SAC Capital was indicted for criminal insider trading.

NEW YORK (CNNMoney)

The U.S. Attorney for Southern District of New York's filing Thursday of civil and criminal charges against Cohen's hedge fund opens the door for the government to seek significant penalties.

"A criminal conviction would forever taint SAC and Steven Cohen, but ultimately the big financial penalties could come from the civil case," said John Coffee, a professor of securities law at Columbia University.

So far Cohen has escaped criminal charges and, as of now, faces no possibility of jail time.

The real penalty now could be a financial blow to the hedge fund manager, whose personal fortune is estimated at roughly $9 billion.

SAC Capital at its height had $15 billion in assets under management. This year, as the government's investigation expanded, up to $5 billion has been withdrawn from the firm, according to published reports. The majority of the firm's money comes from Cohen.

Several securities lawyers said the scope of the government's civil indictment indicate that prosecutors might try to go after all of the firm's assets.

Related: SAC indictment depicts culture of law-breaking

The government gets to that demand by painting a picture of rampant insider trading at a fund where "hundreds of millions of illegal profits" from insider trading were "commingled" with legitimate profits. The government is seeking not just the illegal profits but even legal profits that may have been generated from that money.

The 40-page civil indictment outlines how these profits infiltrate every level of the firm.

"I don't know how easy it will be to prove, but it may be frightening enough to get SAC to seek a settlement," said Coffee.

On Friday, SAC Capital's lawyers pleaded not guilty to the federal criminal charges against the hedge fund. SAC Capital said Thursday that it plans to continue to operate as it works through these matters.

Both SAC and Cohen face fines from several different lawsuits, but the civil penalties sought by the U.S. Attorney's Office are expected to be steepest. The government said the actual figure will be determined at trial, and U.S. Attorney Preet Bharara declined to comment on possible penalties during a news conference Thursday.

Related: Not guilty plea entered by SAC Capital

The government can also seek penalties from its criminal case, but the maximum penalty for each count of securities fraud is $25 million. SAC has been indicted on four counts of securities fraud.

The hedge fund was also indicted on a charge of wire fraud. In that case, the government can seek twice the gains or losses generated from illegal trades.

The indictment only specifies profits from one set of trades in the pharmaceutical companies Elan (ELN) and Wyeth in 2008 and 2009. The profit from those trades was approximately $275 million.

In a separate case against Cohen, the SEC is seeking financial penalties for what it says is a failure to supervise employees engaged in insider trading. Coffee estimates that any penalties from the SEC case would be smaller than those possible in the U.S. Attorney's case.

The SEC has already extracted one penalty from SAC. In March, the firm paid $615 million to the agency to settle insider trading charges.

Bharara has said that the government wants to extract meaningful penalties so this case and other insider trading cases can have a deterrent effect.

First Published: July 26, 2013: 4:27 PM ET

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JPMorgan to exit commodities businesses

NEW YORK (CNNMoney)

The announcement comes as the bank reportedly nears a settlement with the U.S. government over the manipulation of electricity markets in California.

JPMorgan (JPM, Fortune 500)said it "is pursuing strategic alternatives for its physical commodities business...including, but not limited to: a sale, spin off or strategic partnership."

The move will not affect the bank's trading activities, such as the buying or selling of futures contracts.

Earlier this week, the Senate held a hearing on bank ownership of physical commodities, during which several witnesses said involvement from the big banks is dangerous for the financial system and may be driving up prices for consumers.

The hearing followed a story in the New York Times on Sunday alleging Goldman Sachs (GS, Fortune 500) was stockpiling aluminum in Detroit, leading to higher prices for aluminum products like soda cans and cars.

People familiar with JPMorgan's involvement in California's electricity markets say the bank would bid to deliver electricity to a utility on a future day, and then raise the price, ensuring the power would not get bought.

Consumers would then have to compensate the bank for the cost of making the bid, under California's "make whole provision," which requires ratepayers to cover certain costs incurred by energy sellers.

It's not clear how JPMorgan made money on this arrangement, or if it was technically legal.

The government agency charged with policing electricity markets -- the Federal Energy Regulatory Commission -- and JPMorgan have declined to comment on the case.

Barclays and Deutsche Bank (DB) have also been recently fined by the government for improper electricity trading.

First Published: July 26, 2013: 5:51 PM ET

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Starbucks sees big growth in China

Starbucks is opening more stores in inland Chinese cities, such as this one in Chengdu, Sichuan Province in Southwest China.

NEW YORK (CNNMoney)

According to its latest quarterly report, Starbucks (SBUX, Fortune 500) saw a 30% year-over-year jump in revenues from its Asia-Pacific region, lifted by outstanding sales in China.

"The very strong sales volumes prove that the coffee concept can succeed in traditional tea-drinking countries," said R J Hottovy, director of consumer equity research at Morningstar, Inc. "It's resonating very well with [inland] cities."

Starbucks' solid sales growth in the region was driven by the 500 new stores it opened in China last year, and its Chinese expansion plans aren't slowing down.

The Seattle-based coffee giant said it plans to open its thousandth store in China by the end the year. In addition to already being in major cities like Beijing and Shanghai, the company says its stores will have penetrated lesser-known cities. By 2014, Starbucks said China will surpass Canada to become the second largest market, after the United States.

Related: Starbucks' caffeine-fueled expansion

In the last five years, overall retail coffee sales in China climbed by 10%, beating growth in Hong Kong, Japan and the 3% global average, according to data from research company Euromonitor International.

Starbucks said its marketing strategy in China is similar to that of its Western markets. It continues to focus on its core food and beverage products while also offering other locally oriented choices.

"The demographics they are targeting are younger and more affluent groups," Hottovy said.

Starbucks opened its first store in Taipei in 1998, followed by its first mainland China store in Beijing in 1999. But the coffee shop market is beginning to heat up. "Increasing competition will be the most pressing issue as more Western coffee brands enter the Chinese market," he said.

In 2012, an average Chinese person consumed about two cups of coffee per year. That's a far cry from the global average of 134 cups a year, according to Euromonitor. Coffee has less than 1% of the Chinese hot-drink market share. By contrast, tea makes up 54% of the market.

"It's still too early to say that coffee is going to replace tea, or that the Chinese flavor profile is changing," said Dana LaMendola, analyst of hot drinks at Euromonitor.

First Published: July 26, 2013: 6:24 PM ET

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The government wants SAC Capital's billions

Steven Cohen's hedge fund SAC Capital was indicted for criminal insider trading.

NEW YORK (CNNMoney)

The U.S. Attorney for Southern District of New York's filing Thursday of civil and criminal charges against Cohen's hedge fund opens the door for the government to seek significant penalties.

"A criminal conviction would forever taint SAC and Steven Cohen, but ultimately the big financial penalties could come from the civil case," said John Coffee, a professor of securities law at Columbia University.

So far Cohen has escaped criminal charges and, as of now, faces no possibility of jail time.

The real penalty now could be a financial blow to the hedge fund manager, whose personal fortune is estimated at roughly $9 billion.

SAC Capital at its height had $15 billion in assets under management. This year, as the government's investigation expanded, up to $5 billion has been withdrawn from the firm, according to published reports. The majority of the firm's money comes from Cohen.

Several securities lawyers said the scope of the government's civil indictment indicate that prosecutors might try to go after all of the firm's assets.

Related: SAC indictment depicts culture of law-breaking

The government gets to that demand by painting a picture of rampant insider trading at a fund where "hundreds of millions of illegal profits" from insider trading were "commingled" with legitimate profits. The government is seeking not just the illegal profits but even legal profits that may have been generated from that money.

The 40-page civil indictment outlines how these profits infiltrate every level of the firm.

"I don't know how easy it will be to prove, but it may be frightening enough to get SAC to seek a settlement," said Coffee.

On Friday, SAC Capital's lawyers pleaded not guilty to the federal criminal charges against the hedge fund. SAC Capital said Thursday that it plans to continue to operate as it works through these matters.

Both SAC and Cohen face fines from several different lawsuits, but the civil penalties sought by the U.S. Attorney's Office are expected to be steepest. The government said the actual figure will be determined at trial, and U.S. Attorney Preet Bharara declined to comment on possible penalties during a news conference Thursday.

Related: Not guilty plea entered by SAC Capital

The government can also seek penalties from its criminal case, but the maximum penalty for each count of securities fraud is $25 million. SAC has been indicted on four counts of securities fraud.

The hedge fund was also indicted on a charge of wire fraud. In that case, the government can seek twice the gains or losses generated from illegal trades.

The indictment only specifies profits from one set of trades in the pharmaceutical companies Elan (ELN) and Wyeth in 2008 and 2009. The profit from those trades was approximately $275 million.

In a separate case against Cohen, the SEC is seeking financial penalties for what it says is a failure to supervise employees engaged in insider trading. Coffee estimates that any penalties from the SEC case would be smaller than those possible in the U.S. Attorney's case.

The SEC has already extracted one penalty from SAC. In March, the firm paid $615 million to the agency to settle insider trading charges.

Bharara has said that the government wants to extract meaningful penalties so this case and other insider trading cases can have a deterrent effect.

First Published: July 26, 2013: 4:27 PM ET

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JPMorgan to exit commodities businesses

NEW YORK (CNNMoney)

The announcement comes as the bank reportedly nears a settlement with the U.S. government over the manipulation of electricity markets in California.

JPMorgan (JPM, Fortune 500)said it "is pursuing strategic alternatives for its physical commodities business...including, but not limited to: a sale, spin off or strategic partnership."

The move will not affect the bank's trading activities, such as the buying or selling of futures contracts.

Earlier this week, the Senate held a hearing on bank ownership of physical commodities, during which several witnesses said involvement from the big banks is dangerous for the financial system and may be driving up prices for consumers.

The hearing followed a story in the New York Times on Sunday alleging Goldman Sachs (GS, Fortune 500) was stockpiling aluminum in Detroit, leading to higher prices for aluminum products like soda cans and cars.

People familiar with JPMorgan's involvement in California's electricity markets say the bank would bid to deliver electricity to a utility on a future day, and then raise the price, ensuring the power would not get bought.

Consumers would then have to compensate the bank for the cost of making the bid, under California's "make whole provision," which requires ratepayers to cover certain costs incurred by energy sellers.

It's not clear how JPMorgan made money on this arrangement, or if it was technically legal.

The government agency charged with policing electricity markets -- the Federal Energy Regulatory Commission -- and JPMorgan have declined to comment on the case.

Barclays and Deutsche Bank (DB) have also been recently fined by the government for improper electricity trading.

First Published: July 26, 2013: 5:51 PM ET

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Starbucks sees big growth in China

Starbucks is opening more stores in inland Chinese cities, such as this one in Chengdu, Sichuan Province in Southwest China.

NEW YORK (CNNMoney)

According to its latest quarterly report, Starbucks (SBUX, Fortune 500) saw a 30% year-over-year jump in revenues from its Asia-Pacific region, lifted by outstanding sales in China.

"The very strong sales volumes prove that the coffee concept can succeed in traditional tea-drinking countries," said R J Hottovy, director of consumer equity research at Morningstar, Inc. "It's resonating very well with [inland] cities."

Starbucks' solid sales growth in the region was driven by the 500 new stores it opened in China last year, and its Chinese expansion plans aren't slowing down.

The Seattle-based coffee giant said it plans to open its thousandth store in China by the end the year. In addition to already being in major cities like Beijing and Shanghai, the company says its stores will have penetrated lesser-known cities. By 2014, Starbucks said China will surpass Canada to become the second largest market, after the United States.

Related: Starbucks' caffeine-fueled expansion

In the last five years, overall retail coffee sales in China climbed by 10%, beating growth in Hong Kong, Japan and the 3% global average, according to data from research company Euromonitor International.

Starbucks said its marketing strategy in China is similar to that of its Western markets. It continues to focus on its core food and beverage products while also offering other locally oriented choices.

"The demographics they are targeting are younger and more affluent groups," Hottovy said.

Starbucks opened its first store in Taipei in 1998, followed by its first mainland China store in Beijing in 1999. But the coffee shop market is beginning to heat up. "Increasing competition will be the most pressing issue as more Western coffee brands enter the Chinese market," he said.

In 2012, an average Chinese person consumed about two cups of coffee per year. That's a far cry from the global average of 134 cups a year, according to Euromonitor. Coffee has less than 1% of the Chinese hot-drink market share. By contrast, tea makes up 54% of the market.

"It's still too early to say that coffee is going to replace tea, or that the Chinese flavor profile is changing," said Dana LaMendola, analyst of hot drinks at Euromonitor.

First Published: July 26, 2013: 6:24 PM ET

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Dollar coin advocates renew push to replace dollar bill

The Sacagawea Golden Dollar was put into circulation in 2000 but never caught on in a big way.

NEW YORK (CNNMoney)

The switch, which has been discussed for years, could save taxpayers $13.8 billion over 30 years, according to a report released this week by Aaron Klein, a former deputy assistant secretary of Treasury.

On the one hand, it costs only 5 cents to produce a $1 bill and 18 cents to produce a $1 coin, the report states. But the lifespan of a $1 bill is much shorter -- 4.8 years compared to 30 years.

Klein prepared the report for the Dollar Coin Alliance, a group of small businesses, mass transit agencies and others who support transitioning to the one dollar coin.

Bill Christian, director of government affairs for Council for Citizens Against Government Waste, said the report is just the latest evidence that it's time to make the switch. "Once again, the result is clear: eliminate the $1 bill and save billions."

Related: Dollar headed for 'multi-year rally'

The nonpartisan Government Accountability Office has said that replacing the $1 bill with a $1 coin would save hundreds of millions of dollars annually. The United States is one of the few western nations still using paper dollars.

"Over the last 48 years, Australia, Canada, France, Japan, the Netherlands, New Zealand, Norway, Russia, Spain, and the United Kingdom, among others, have replaced lower-denomination notes with coins," according to the GAO report.

Last month, a bipartisan group of senators including Democrats Tom Harkin and Mark Udall and Republicans John McCain and Tom Coburn reintroduced the Currency Optimization, Innovation, and National Savings Act -- or COINS Act.

Related: It's official: Jack Lew's new signature

The bill aims to "improve the circulation of $1 coins, to remove barrier to the circulation of such coins, and for other purposes."

"With our nation's debt now standing at $16.8 trillion, Congress must look at every area of the federal government, big or small, to save money," McCain said this week. "And this simple bipartisan bill will do just that -- save money."

The idea of moving away from dollar bills is not new, but dollar coins have not gained wide public acceptance apart from collectors.

The Susan B. Anthony dollar, introduced in 1979, was discontinued in 1999 although some remain in circulation. The Sacagawea Golden Dollar was put into circulation in 2000 but never caught on in a big way.

One of the main complaints about dollar coins is they are heavy and cumbersome. The conversion would also add costs, the GAO report noted.

Cash-intensive businesses would have to modify vending machines, cash register drawers and night depository equipment to accept $1 coins. Over the longer term, some businesses would have to buy coin counting and coin wrapping machines. Others would bear higher transportation and storage costs because of the heavier and bulkier coins.

The lack of public acceptance of the $1 coin is in part because the $1 bill remains in circulation, according to the GAO. Canada and Britain found that once paper notes were taken out of circulation, public resistance dissipated within a few years.

First Published: July 26, 2013: 5:43 AM ET

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4 questions to ask a money manager

NEW YORK (CNNMoney)

Asking a few important questions of a prospective money manager is a great first step, one that can mean the difference between meeting or falling short of your financial goals.

Indeed, a money manager can play an incredibly important role. Not only do some serve as financial planners, helping you to save for certain goals -- such as your kid's college or retirement -- but their main goal is to make investment decisions that directly affect your ability to meet those goals.

Related: Finding financial planning professionals

That's why it's so important that you find a person who is the right fit for you. In fact, most experts recommend that you interview several managers before making a commitment. Here are some important questions to ask:

How will you go about investing my money?

While some money managers will focus on your particular goals and circumstances, others may use the same basic market strategy or philosophy for all of their clients, said Eleanor Blayney, a consumer advocate at the CFP Board, a nonprofit organization that sets standards for certified financial planners. So it's important to find out whether your stock market investments will be tailored to your particular savings targets and time horizons.

"The distinction is: 'Are my financial circumstances taken into account or are you managing money by a specific overall objective?'," she said.

How do you get paid?

It's essential you understand how much money the arrangement with your money manager will cost you.

Money managers are typically paid through client fees, which are usually based on a percentage of your total managed assets. Even a 1% management fee, which is pretty standard, can add up to thousands of dollars of year.

Related: How much does your money manager cost you?

There may be other fees as well though, so it's a good idea to ask for a copy of their ADV form, which should disclose all fee details. Investors should be wary of any manager who does not freely provide the form when requested. It can also be viewed in the SEC's Investment Adviser Public Disclosure database.

In addition to fees, the form will also contain information about any disciplinary actions or conflicts of interest.

What are your other clients like?

You don't want to be someone's smallest or biggest client in terms of available assets, Blayney said. Instead, an ideal money manager will have experience helping people with similar financial circumstances and goals.

How will you add value?

Few money managers consistently outperform much cheaper index funds, especially once fees are taken into account.

If you're paying a money manager, you're likely looking for someone who is going to do more than you feel you could do on your own. So be sure to ask them: How will they do that? How will they help you manage risk? Will they change your investments if your goals are in jeopardy?

"I think it's important to understand at what point do they have a sell discipline, as well as a buy discipline," Blayney said.

The right answer will match your own level of risk tolerance, she said.

Asking about past performance is also important, but beware of anyone claiming to be able to beat the market year after year. If it sounds too good to be true, it probably is.

First Published: July 26, 2013: 6:17 AM ET

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Zynga drops U.S. online gambling plans

Click on chart for more information on Zynga shares.

NEW YORK (CNNMoney)

Chief Operations Officer David Ko told investors on a conference call late Thursday that Zynga would continue its online gambling efforts in the United Kingdom, but that it was"making the focus choice" not to pursue it for the United States.

The company, which is best known for the online social media game FarmVille, announced in December that it had filed an application for a gaming license in Nevada. It also has been offering online gambling in the U.K. since April.

Shares had been up 50% since the announcement of the Nevada license application through Thursday's close. But the stock plunged 19% in premarket trading Friday.

Related: Online gambling toes a confusing legal line

Problems in getting its U.S. online gambling started have not been the only ones for Zynga.

It announced in June that it would lay off 18% of its workforce as part of an effort to stabilize finances. In July, CEO and founder Mark Pincus stepped down.

The company reported a second-quarter loss Thursday that was wider than the loss in the first quarter. It also warned of more losses in the current quarter.

"As we looked at the social gaming, free-to-play opportunity which continues to grow, we're not executing against that," said Ko on the call with investors. "And so, we really just centered around focus."

First Published: July 26, 2013: 7:21 AM ET

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Enter the disrupters

(Fortune)

"Yo," the hipster replied with a smarmy aura of self-importance. "I suppose I should introduce myself. I'm a disrupter, and I'm here to disrupt whatever it is you think you're doing, drain it of value, and replace it with something else entirely."

"Get off my property," I replied as cordially as I could. "Not only are you trespassing, but you're obnoxious."

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Time Warner Cable delays CBS cut-off

CBS shows such as "Under the Dome" are at risk of not being seen by Time Warner Cable customers due to a dispute between the network and cable operator.

NEW YORK (CNNMoney)

The dispute between the network and cable operator could also cut off pay cable network Showtime for all Time Warner Cable customers. Showtime is owned by CBS.

Time Warner Cable spokeswoman Maureen Huff said the agreement to extend talks came about 11 p.m. ET Wednesday. The new deadline is 5 p.m. ET Monday. Huff said there is still no long-term deal and that negotiations are continuing.

The dispute is over the fees that CBS (CBS, Fortune 500) receives from Time Warner Cable (TWC, Fortune 500) for carrying the affiliates that it owns and operates itself. The 3 million customers affected by these talks are mostly in New York, Los Angeles and Dallas, but subscribers in Chicago, Boston, Pittsburgh, Detroit and Denver are also at risk.

CBS affiliates elsewhere are owned by other companies that hold their own negotiations with cable operators.

The dispute threatens to cut off access to shows such as CBS' summer hit "Under the Dome" as well as Showtime original series "Dexter" and "Ray Donovan"

Related: What digital network TV execs fear most

CBS could not be reached for comment. It has been running TV commercials warning customers in the affected cities of the negotiations and that "Time Warner Cable is threatening to hold your favorite shows hostage."

Time Warner Cable, which was spun off from CNNMoney parent Time Warner Inc. (TWX, Fortune 500) in 2009, has responded with its own Web site saying that CBS is demanding 600% more than the cable operator pays for the network shows in other cities.

First Published: July 25, 2013: 7:45 AM ET

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GM narrows European loss, improves profit at home

General Motors reported strong earnings in North America and smaller losses in Europe.

NEW YORK (CNNMoney)

GM said Thursday it earned $1.2 billion, or 75 cents a share, in the quarter, down from $1.5 billion it earned a year earlier. But excluding special items, the drop in earnings was not as bad as forecast by analysts surveyed by Thomson Reuters, and shares of GM (GM, Fortune 500) rose in premarket trading.

Revenue rose $1.1 billion to $38.2 billion, as the number of vehicles sold worldwide rose 4% to 2.5 million. Sales volume was flat in China, now the largest market for car sales, and down in Europe, but increased 7% in North America.

Related: J.D. Power ranks GM tops in quality for first time

Earnings in North America rose 4% to just under $2 billion on the improved sales, and the company also hired 6% more North American workers from a year earlier, primarily white collar jobs such as engineers. It also trimmed prior-year losses in Europe by 72%, taking losses down to $110 million. But earnings in the international unit that includes China and Asia tumbled 64% to $228 million.

The results were similar to those reported Wednesday by rival Ford Motor (F, Fortune 500), which also beat forecasts and raised its earnings guidance on reduced losses in Europe and strong North American results.

First Published: July 25, 2013: 8:15 AM ET

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Europe's factories signal return to growth

Factories across the eurozone, including German carmakers, reported rising output for the first time since February 2012.

LONDON (CNNMoney)

Markit's purchasing managers' index surprised economists with a jump to 50.4 in July, signaling a return to growth in output by breaking back above the neutral 50 level for the first time since January 2012.

The eurozone has been grinding through recession for six consecutive quarters since the economy started to contract in late 2011.

Unemployment rocketed to record levels as the region's debt crisis forced governments to slash spending and raise taxes, and as bank lending to consumers and companies fell.

Economists expect the economy to have stagnated in the second quarter of this year. But Wednesday's survey data -- based on a broad upturn in manufacturing -- point to a return to growth in the July-September period.

"If we assume the index broadly stays at its current level, that would already imply a slight positive quarter-on-quarter GDP reading for Q3," noted Gizem Kara, European economist at BNP Paribas.

Related: Recovering U.K. opens gap over Europe

Germany, the region's biggest economy, saw the strongest increase in overall business activity for five months and manufacturing output was at its highest level since February 2012. Demand from autos and construction firms helped offset weakness in key export markets such as China.

There was also evidence in the Markit survey that the French economy is stabilizing. Overall private sector output fell at its slowest rate in 17 months, while manufacturing saw output increase at its fastest pace for over two years.

Sentiment may be improving thanks to a greater emphasis by European leaders on growth over austerity, a slower pace of budget-tightening in some countries, and the European Central Bank's pledge to keep interest rates low for an "extended period."

An ECB lending survey published Wednesday gave more support to the view that the eurozone will be growing again by the end of the year. Still, the pace of recovery is likely to be slow, given fragile global growth, continued austerity, high and rising unemployment and limited consumer purchasing power.

"This is particularly true of the southern periphery eurozone countries, but France and the Netherlands also still face significant headwinds," said Howard Archer, chief UK and European economist at IHS Global Insight.

First Published: July 24, 2013: 7:16 AM ET

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IPhone chip designer's sales surge 24%

Click chart for more information on ARM Holdings.

LONDON (CNNMoney)

The Cambridge, U.K., based company said its second-quarter sales surged 24% from a year ago, and its adjusted pre-tax profit spiked 30%. Shares of the Cambridge, U.K.-based company jumped by 4% in pre-market trading on Wednesday.

ARM Holdings (ARMH) has been a stock market darling, with shares increasing more than 10-fold over the past five years. It has been boosted by strong demand for its chip designs, which are used in roughly 95% of cell phones and smartphones around the world. Apple (AAPL, Fortune 500), Qualcomm (QCOM, Fortune 500) and Samsung (SSNLF) are among the company's largest customers.

ARM's second-quarter results have silenced critics who worried that the company would soon face a slowdown in licensing its tech designs -- its main revenue driver.

"I think the key thing with ARM is that it has been doing well for a long time and it continues outperforming the industry," said London-based analyst Fatima Iu from Polar Capital. "Obviously that is a function of targeting the right areas."

Related: Intel profit tumbles 29% on PC sales slump

ARM's stellar financial report came a day after Apple announced that its iPhone sales grew by 20% last quarter.

It wasn't all sunshine and roses for ARM, which was hit by various charges over the quarter, including legal costs and a patent-related settlement. But ARM clearly outshined Intel (INTC, Fortune 500), ARM's struggling competitor.

Earlier this month, Intel, the world's largest chipmaker, reported its fourth straight quarter of sales declines and its third quarter in a row in which profit fell year-over-year. Intel's business has struggled as PC sales remain very weak. Worldwide, shipments of PCs fell by 11% last quarter, according to Gartner.

To counteract the trend, Intel has desperately been trying to get into the mobile computing business. It made some limited headway recently, partnering with a handful of brands to put its chips in smartphones and tablets.

This has led ARM to roughly double its spending on marketing and research to ensure it stays ahead of Intel and other competitors in key markets.

First Published: July 24, 2013: 8:09 AM ET

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SAC to face criminal charges - reports

Steven Cohen reportedly won't face criminal charges but SAC Capital, his hedge fund, may, according to published reports.

NEW YORK (CNNMoney)

Nine former or current SAC employees have already been charged with insider trading, and the firm has already paid a record $614 million civil penalty to the SEC. Most of the those who were charged have pleaded guilty.

The New York Time's report on the pending case against the firm say charges will include criminal conspiracy since the some of the alleged insider trading took place too long ago to bring new charges.

Even if Cohen avoids criminal charges, his personal legal problems are not over. He was hit with civil charges by the Securities and Exchange Commission last Friday. Regulators have accused him of failing to supervise employees who engaged in insider trading.

The regulatory agency cannot levy criminal penalties. But it is seeking to ban Cohen from overseeing investor funds. He could also be hit with fines and be barred from working in the financial services industry.

SAC was unavailable for immediate comment.

Related: Wall Street sheriff: No one too big to indict

It is rare that a firm itself faces criminal charges, and such an action in the financial services industry can cause severe problems for the firm even if the company winds up not being prosecuted.

Eleven years ago, accounting firm Arthur Andersen was hit by obstruction of justice charges because its employees destroyed records of its client Enron.

While its criminal conviction was eventually overturned by the Supreme Court, the firm, once one of the world's largest, became a mere shell of its former self due to the loss of clients that occurred during the criminal proceedings.

Investors have already been fleeing SAC. They pulled nearly $1.7 billion out during the first quarter. According to reports, as much as $5 billion has now been withdrawn. Blackstone Group (BX) and Morgan Stanley (MS, Fortune 500) are among those said to be pulling out.

Last month SAC executives reportedly assured employees that the firm would continue to accept funds from outside investors to combat rumors it would stop managing outside funds.

Cohen remains the largest investor in SAC, with roughly $9 billion of his own money invested in the fund.

-- CNNMoney's Maureen Farrell and James O'Toole contributed

First Published: July 24, 2013: 8:21 AM ET

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Ex-SEC enforcer joins law firm

Former SEC top cop Robert Khuzami is joining law firm Kirkland & Ellis.

HONG KONG (CNNMoney)

Corporate law firm Kirkland & Ellis is hiring Robert Khuzami, a former top cop at the Securities and Exchange Commission who announced six months ago he was leaving the agency.

Rohini Pragasam, a spokeswoman for the law firm, confirmed that Khuzami will join Kirkland, but declined to provide further details.

The New York Times, which first reported the appointment, said that Khuzami will earn $5 million per year at Kirkland.

The hiring could reignite a debate about cozy relations between officials at the SEC and the companies they regulate. At Kirkland, Khuzami could eventually represent some of the same companies the agency policed -- an arrangement that continues in Washington even as critics decry potential conflicts of interest.

Khuzami arrived at the SEC in 2009, as the chronically underfunded agency faced criticism for failing to do more to prevent the financial crisis and for missing the Madoff fraud. He took a new approach to enforcement, creating specialized units for various crimes and an Office of Market Intelligence to handle tip-offs and complaints.

Along with counterparts at the Department of Justice, the SEC focused on insider trading during Khuzami's tenure, and also brought charges against more than 150 individuals and entities in connection with the financial crisis.

Khuzami started his career as a federal prosecutor, working on several high-profile terrorism cases before joining Deutsche Bank in 2002.

In Washington, it's common for congressional staffers and regulators to leave the federal government for better pay and shorter hours at companies that seek to influence legislation. Many lobbyists, consultants and lawyers now working for banks and white collar defense firms once worked to craft legislation or enforce the law.

This phenomenon is often referred to as the "revolving door."

Khuzami, for example, hopscotched from prosecutor to bank lawyer to regulator before signing with Kirkland. After he left the SEC, Mary Jo White, who was Khuzami's boss during his stint in the United States Attorneys' Office, was nominated by President Obama to lead the agency.

One of White's first staffing moves was to hire Robert Rice as SEC counsel. Rice came to the agency from Deutsche Bank, the same firm that employed Khuzami until 2009. Like Khuzami and White, Rice had worked as a federal prosecutor in New York's Southern District.

Deutsche Bank's current general counsel, Richard Walker, previously served at the SEC as enforcement director -- the same position held by Khuzami until earlier this year.

Related story: SEC Chair Mary Jo White's first big test

The tendency of SEC officials to "switch sides" so frequently has attracted the attention of the Project On Government Oversight, a watchdog group that issued a report on the topic in February.

"The movement of people to and from the financial industry is a key feature of the SEC, and it has the potential to influence the agency's culture and values," the report said. "It matters because the SEC has the power to affect investors, financial markets, and the economy."

While at the SEC, Khuzami rejected the idea that the agency's enforcement actions were in any way influenced by future employment prospects.

"Enforcement staff, having landed a highly sought-after and difficult-to-obtain job, often passing up other opportunities in the process, would not risk reputation and career and even jail by undermining an investigation for a possible future job prospect," he wrote in a Reuters column.

Others argue that the revolving door encourages government regulators to perform well as a way of showcasing their competency for future employers. Defenders of the practice also say that it allows the government to hire candidates with direct knowledge of the industry they are assigned to police.

Government rules are likely to require Khuzami to avoid SEC-related work for a year.

The Obama administration, for its part, has sought to slow the revolving door by prohibiting staffers from lobbying the government for two years after they leave the White House.

But that hasn't stopped staffers from collecting generous speaking fees and taking jobs as consultants -- employment options that critics regard as loopholes.

First Published: July 23, 2013: 6:18 AM ET

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How Obamacare's 'privacy nightmare' database really works

NEW YORK (CNNMoney)

The prospect of one online system having access to so much personal information is making some watchdogs nervous. In a USA Today op-ed decrying the system as a "privacy nightmare," researchers Stephen Parente and Paul Howard penned these scary words: "This hub will achieve what has, until now, only appeared in pulp thrillers: a central database linking critical state and federal data on every U.S. citizen for real-time access."

The U.S. Department of Health and Human Services, the agency responsible for building the federal "data hub" underpinning the new network of state-based exchanges, says the reality is less Orwellian. For one thing, the system will only be able to access information on those who actually apply for health insurance coverage -- there's no vast database storing information on everyone who might be eligible.

In fact, there's no database at all. The data hub is designed to operate as a middleman, reaching out to seven different federal agencies to view information about those seeking coverage. Each of those agencies is responsible for maintaining and securing its own data -- and many of them already make this kind of information available to a wide variety of online systems.

Related story: Obamacare delay passes insurance burden onto workers

For instance, the HHS hub will be using data from the Internal Revenue Service to confirm the income information that applicants submit. That sounds risky: Your tax information will be available online, where skilled hackers could theoretically get access to it. But guess what? It already is. The IRS currently provides access to tax-return information over the Internet to nearly 300 federal and state agencies.

Likewise, the Department of Homeland Security will be verifying the citizenship status of Obamacare applicants in real time with an existing online system called SAVE (Systematic Alien Verification for Entitlements).

A congressional subcommittee last week summoned officials from the IRS, HHS and other agencies to a hearing investigating the privacy and security implications of the systems they're building and leveraging to support Obamacare. Those systems will need to be operational less than three months from now, on October 1, when all 50 of the new state-based exchanges are scheduled to open for enrollment. (Coverage will kick in on Jan. 1, 2014.)

At the hearing, agency officials emphasized that the government routinely stores and shares personal information electronically, and has extensive safeguards in place. IRS official Daniel Werfel said in written testimony that all agencies with access to tax return data must comply with lengthy technical requirements for protecting tax filers' personal information.

Related story: New Yorkers to see 50% drop in health costs in Obamacare exchange

In response to a query from CNNMoney, HHS provided a list of the federal data sources its hub will be gathering, and from where:

• Internal Revenue Service: adjusted gross income, family size, filing status (married or single), calculation of any tax credits the applicant is eligible for to subsidize their health insurance premiums

• Social Security Administration: Social Security number validation, Social Security benefit payments, incarceration status

• Department of Homeland Security: verification of immigration status

• Department of Defense, Department of Veterans Affairs, Office of Personnel Management and Peace Corps: checks to see if the applicant is enrolled in health care programs run by these departments

Building this data hub isn't cheap: HHS is paying more than $55 million to Quality Software Services Inc. (a unit of United Healthcare), the contractor it hired to create the system. The project is on track to launch on time: A recent Government Accountability Office audit found that the data hub has hit its scheduled deadlines so far; HHS officials say they're confident they'll be ready to launch by October.

Critics say they'll be watching to see if this plays out as smoothly as the government promises it will.

Parente, a University of Minnesota finance professor who co-authored the USA Today op-ed, says he's somewhat reassured by the system's design -- most information will simply pass through, without being retained. But he remains wary about the information that will be stored -- particularly considering how long the information can be kept. Recent regulations call for the data to be stored for up to 10 years in some cases. Parente thinks that's excessive and he worries about the information being stolen or misused.

Rep. Patrick Meehan, a Republican from Pennsylvania, said he thinks the data trove could "place targets on every American who enters the exchange" and become a magnet for identity thieves.

"I have grave concerns about the ability to establish sufficient security in this massive, unprecedented network by October 1st, when our most secure networks are breached every day," he said at last week's hearing.

First Published: July 23, 2013: 6:20 AM ET

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Just how generous are Detroit's pensions?

NEW YORK (CNNMoney)

So how much money do Detroit's retirees actually get?

On average Detroit's firefighters, police officers and other city employees receive pension checks that are similar or slightly smaller in size than the national average of $30,000 a year, according to pension experts. But compared with larger cities that have higher living costs, like Chicago and Los Angeles, Detroit's pensions checks often pale in comparison.

"My basic takeaway was that [Detroit's] pension system itself was not overly generous," said Jean-Pierre Aubry, assistant director of State and Local Research at Boston College's Center for Retirement Research.

Related: Retired Detroit firefighter: "My pension is what I was promised"

While workers who reach the city's top posts, like police or fire chief for example, can retire with annual pensions that reach into the six-figures, the vast majority receive much smaller payments, Aubry said.

Retired general city workers, such as librarians or sanitation workers, received average payments of $18,275 a year in 2011, according to the Detroit General Retirement System. But those who put in the most time (or earn higher salaries) can see far healthier payments. A general city employee who retired in 2011 with an average ending salary of $60,000 and 40 years of service could receive around $45,000 a year.

Such benefits are more or less on par with the Detroit-area union auto workers. Retirees of the three big automakers receive average annual benefits of about $18,000 per year, in addition to another roughly $15,000 to $18,000 in Social Security payments, according to the United Automobile Workers, or UAW.

That's a big distinction: While retired Detroit firefighters and police officers receive more generous pension checks than auto workers -- checks averaged almost $30,000 a year in 2011 -- they often don't receive the added bonus of Social Security payments.

A 30-year veteran of the fire department who retired last year with an average ending salary of $60,000 would have qualified to receive around $44,000 a year, according to calculations using the plan's pension formula.

Related: state workers face smaller pension benefits

Police officers and firefighters in big cities often take home much more lavish pension checks. For example, with average annual benefits of $55,104, retirees of Chicago's police force took in nearly double Detroit's retirees. Meanwhile, retired Chicago firefighters had average annual payments of more than $60,000.

Chicago has its own budget woes, however. Last week, rating agency Moody's downgraded the city's credit rating, citing ballooning pension obligations.

Even retired police and firefighters in Kansas City, Mo. -- a city with roughly two-thirds the population of Detroit and a similarly affordable cost of living -- take in more, with average annual payments of almost $42,500.

Still, it isn't all bad news for city workers. Since Detroit's firefighters and police offers are able to retire a decade (or more) before they reach the typical retirement age of 65, retirees can receive their benefits for decades. In addition, many retired officers have time to pursue other careers and accumulate additional savings.

In addition to a lifetime of payouts, city workers also receive retiree healthcare, a benefit that is rarely offered by private sector employers.

They can also extend their pension benefits to a spouse after they die by opting for smaller monthly pension checks, said Don Taylor, president of the Retired Detroit Police and Firefighters Association. The amount the payments are reduced by depends on the spouse's age.

Related: Detroit's workers and retirees face big cuts

Taylor himself receives about $2,500 a month from his 26 years in the Detroit Police Department, about a few hundred less than he would receive if he hadn't opted to include his wife in the plan. Taylor, 64, will also receive a small Social Security check from his 10 years as a travel agent. But other than that, he has no other retirement savings.

Regardless of whether Orr's proposed cuts go through, pension checks for younger employees will be less generous, said Leon LaBrecque, founder of a Michigan-based wealth management firm, who has worked with hundreds of Detroit city retirees.

Current workers have already agreed to pension cuts. For example, in 2011, Detroit police and firefighters agreed to a roughly 15% cut for pension benefits accrued from future years of service.

"There's this myth that everyone in Detroit is getting a fat pension," LaBrecque said. "But that's clearly not true."

First Published: July 23, 2013: 6:18 AM ET

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SEC charges Miami with fraud, accuses city of lying about finances

The SEC sanctioned Miami for similar conduct in 2003.

NEW YORK (CNNMoney)

The SEC said Michael Boudreaux helped falsify Miami's financial reports for the 2007 and 2008 fiscal years and lied about the city's finances in a series of 2009 bond offerings worth $153.5 million. Boudreaux allegedly orchestrated the unlawful transfer of nearly $38 million out of Miami's capital improvement fund in order to mask deficits in the city's general fund.

The SEC sanctioned Miami for similar conduct in 2003. The case marks the first time the agency has alleged repeated wrongdoing by a city subject to a previous cease-and-desist order.

Related: SEC charges hedge-fund mogul Steve Cohen

"The fact that a city official would enable these false and misleading disclosures to investors merely a few years after Miami had been reprimanded by the SEC for similar misconduct makes this repeat behavior all the more appalling and unacceptable," George Canellos, the SEC's co-director of enforcement, said in a statement.

Lawyers for Miami and Boudreaux did not immediately respond to requests for comment, nor did spokespeople for the city.

Miami was forced to reverse most of the transfers from the capital improvement fund following a report issued by a city watchdog in November 2009, the SEC said. The city subsequently declared a "state of fiscal urgency" and had its debt downgraded by ratings agencies.

The SEC also charged the state of Illinois and the city of Harrisburg, Pa. earlier this year with misrepresenting their finances to investors.

First Published: July 19, 2013: 6:21 PM ET

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Be set when the Fed's help ends

When the Fed's training wheels come off and yields turn around, position yourself to take advantage of higher rates.

(Money Magazine)

Look at what happened in late May and June after chairman Ben Bernanke said the Fed would, eventually, assuming things get better, start to pare back its aggressive efforts to keep credit flowing. The rally on the Dow, which not long ago had crossed 15,000, pulled back sharply. Treasury rates jumped to a 20-month high by late June. (When yields go up, bond prices go down.)

For bond fund investors, the sell-off meant "their worst month since the Greek financial crisis," according to Lipper analyst Jeff Tjornehoj.

How can so much hang on the ambiguous words of one economist? As you'll see, the Fed has played such an extraordinarily large role in markets since the 2008 crisis that professional traders have a lot of short-term money riding on Bernanke's next move.

Behind all that, though, there's a big issue for long-term investors too. The Fed is suggesting that the economy is finally headed to a healthy new phase, one that doesn't need an extra push from central bankers. The portfolio that worked in the post-2008 emergency years is likely to be a poor fit for what comes next.

Below are answers to the three biggest questions raised by the market's latest Fed frenzy.

What exactly is the Fed doing?

Ordinarily the Fed tries to influence the economy by setting short-term interest rates, cutting them to stoke growth or raising them when inflation looms.

But after the financial crisis, even driving short-term rates essentially to zero didn't do enough to invigorate growth. So the Fed stepped into markets in a bigger way. It bought up trillions of dollars of fixed-income investments, including long-term Treasury bonds and mortgage-backed securities.

Economists have endless debates about how (not to mention how much) this "quantitative easing," or QE, helps the economy. One idea is that it pushes yields on safe-haven assets so low that would-be buyers look instead to riskier investments like junk bonds and stocks, making individual investors feel richer and, it is hoped, more willing to spend and invest.

At least as important, though, is the message such unprecedented intervention sends. "The Fed signaled it was committed to supporting the economy," says Moody's Analytics economist Nate Kelley. "It reassured the markets."

Given both the Fed's big position in bond markets and the complex mental chess games it plays with investors, it's not hard to see why Wall Street has been so skittish lately.

The Fed's intervention can't go on forever. Bernanke's reminders of this have been mild: He hasn't said he'd reverse QE, just slow it.

Still, that's enough to get traders pondering whether other investors want to own risky assets without the Fed's implicit encouragement. "Everybody is worried about what everybody else is doing," says BlackRock chief investment strategist Russ Koesterich. "Volatility is going to be hard to avoid."

Will a Fed shift crush stock market gains?

No one likes to sit through wild up-and-down markets. The important thing for long-term investors to remember, however, is the reason the Fed's talking about slowing QE at all: The economy is gradually looking better.

Unemployment, although still high, has fallen to below 8%, while other measures, such as household spending and the rate of home construction, have ticked up. And all this has happened without stoking inflation, which has hovered below 2%.

That means there's relatively little pressure for the Fed to aggressively choke off growth to keep prices under control.

Related: Stocks that can rise with rates

All that sounds like good news to some Wall Street bulls. They've been arguing that once lingering financial-crisis angst fades, stocks are poised to take off much the way they did in the early 1980s when investors finally overcame the trauma of the Carter-era inflation and oil shocks.

"It's almost a mirror image" of that time, says Oppenheimer chief market strategist John Stoltzfus. He predicts that the Standard & Poor's 500 could climb another 9% by year-end.

That's the bull case. Now for the caveats: First, Bernanke and the Fed could be wrong about the outlook for growth -- they have been before -- and as a result tighten much too early. Second, even if the economic situation bodes well, much of the good news may already be factored into today's prices, thanks to the Fed's prodding.

With the market up about 20% in the past year, stocks have been trading at about 14 times their expected profits over the next year. That's more or less in line with the historical average. This doesn't augur a terrible bear market, but it does suggest more modest long-term gains ahead.

Compared with what appears to be ahead for bonds, however, modest stock gains would count as banner news.

How risky are bonds now?

As the economy gets better, the Fed should allow longer-term interest rates to rise above their historically low levels. Those rates aren't set directly by the Fed, but by the bond market, so things could happen quickly once traders are convinced that the Fed's outlook has shifted and demand higher yields. Since rising yields mean falling prices, investors in bond mutual funds and ETFs could face sharp losses.

Related: Higher mortgage rates won't hurt recovery, Fannie finds

Some have already had a taste of this: When the yield on the 10-year Treasury jumped from 1.66% in early May to 2.41% in mid-June, long-term bond funds lost about 6% of their value.

Janney Montgomery Scott chief fixed-income strategist Guy LeBas expects rates to continue rising; even assuming sluggish economic growth, his firm forecasts rates at 2.7% next year. With yields so low, "it's a lot easier to go up than down," he says.

You can estimate how sharp your losses would be on your bond funds by looking at a statistic called duration. (Find it on the fund quote page at Morningstar.com.) A portfolio with a duration of six years -- about middle of the road for bond funds -- would see a drop of 6% if interest rates rise one percentage point.

This doesn't mean you should forgo fixed income in favor of stocks -- although bonds look risky now, that doesn't make stocks safe. The wiser move is to shift to shorter-duration funds, and even cash or money-market accounts for money you can't afford to lose.

By staying short, you have to miss out on some yield now, at a time when income is painfully hard to get. But when the Fed's training wheels come off and yields turn around, you'll be well positioned to take advantage of higher rates.

First Published: July 19, 2013: 6:24 PM ET

05.32 | 0 komentar | Read More

Be set when the Fed's help ends

When the Fed's training wheels come off and yields turn around, position yourself to take advantage of higher rates.

(Money Magazine)

Look at what happened in late May and June after chairman Ben Bernanke said the Fed would, eventually, assuming things get better, start to pare back its aggressive efforts to keep credit flowing. The rally on the Dow, which not long ago had crossed 15,000, pulled back sharply. Treasury rates jumped to a 20-month high by late June. (When yields go up, bond prices go down.)

For bond fund investors, the sell-off meant "their worst month since the Greek financial crisis," according to Lipper analyst Jeff Tjornehoj.

How can so much hang on the ambiguous words of one economist? As you'll see, the Fed has played such an extraordinarily large role in markets since the 2008 crisis that professional traders have a lot of short-term money riding on Bernanke's next move.

Behind all that, though, there's a big issue for long-term investors too. The Fed is suggesting that the economy is finally headed to a healthy new phase, one that doesn't need an extra push from central bankers. The portfolio that worked in the post-2008 emergency years is likely to be a poor fit for what comes next.

Below are answers to the three biggest questions raised by the market's latest Fed frenzy.

What exactly is the Fed doing?

Ordinarily the Fed tries to influence the economy by setting short-term interest rates, cutting them to stoke growth or raising them when inflation looms.

But after the financial crisis, even driving short-term rates essentially to zero didn't do enough to invigorate growth. So the Fed stepped into markets in a bigger way. It bought up trillions of dollars of fixed-income investments, including long-term Treasury bonds and mortgage-backed securities.

Economists have endless debates about how (not to mention how much) this "quantitative easing," or QE, helps the economy. One idea is that it pushes yields on safe-haven assets so low that would-be buyers look instead to riskier investments like junk bonds and stocks, making individual investors feel richer and, it is hoped, more willing to spend and invest.

At least as important, though, is the message such unprecedented intervention sends. "The Fed signaled it was committed to supporting the economy," says Moody's Analytics economist Nate Kelley. "It reassured the markets."

Given both the Fed's big position in bond markets and the complex mental chess games it plays with investors, it's not hard to see why Wall Street has been so skittish lately.

The Fed's intervention can't go on forever. Bernanke's reminders of this have been mild: He hasn't said he'd reverse QE, just slow it.

Still, that's enough to get traders pondering whether other investors want to own risky assets without the Fed's implicit encouragement. "Everybody is worried about what everybody else is doing," says BlackRock chief investment strategist Russ Koesterich. "Volatility is going to be hard to avoid."

Will a Fed shift crush stock market gains?

No one likes to sit through wild up-and-down markets. The important thing for long-term investors to remember, however, is the reason the Fed's talking about slowing QE at all: The economy is gradually looking better.

Unemployment, although still high, has fallen to below 8%, while other measures, such as household spending and the rate of home construction, have ticked up. And all this has happened without stoking inflation, which has hovered below 2%.

That means there's relatively little pressure for the Fed to aggressively choke off growth to keep prices under control.

Related: Stocks that can rise with rates

All that sounds like good news to some Wall Street bulls. They've been arguing that once lingering financial-crisis angst fades, stocks are poised to take off much the way they did in the early 1980s when investors finally overcame the trauma of the Carter-era inflation and oil shocks.

"It's almost a mirror image" of that time, says Oppenheimer chief market strategist John Stoltzfus. He predicts that the Standard & Poor's 500 could climb another 9% by year-end.

That's the bull case. Now for the caveats: First, Bernanke and the Fed could be wrong about the outlook for growth -- they have been before -- and as a result tighten much too early. Second, even if the economic situation bodes well, much of the good news may already be factored into today's prices, thanks to the Fed's prodding.

With the market up about 20% in the past year, stocks have been trading at about 14 times their expected profits over the next year. That's more or less in line with the historical average. This doesn't augur a terrible bear market, but it does suggest more modest long-term gains ahead.

Compared with what appears to be ahead for bonds, however, modest stock gains would count as banner news.

How risky are bonds now?

As the economy gets better, the Fed should allow longer-term interest rates to rise above their historically low levels. Those rates aren't set directly by the Fed, but by the bond market, so things could happen quickly once traders are convinced that the Fed's outlook has shifted and demand higher yields. Since rising yields mean falling prices, investors in bond mutual funds and ETFs could face sharp losses.

Related: Higher mortgage rates won't hurt recovery, Fannie finds

Some have already had a taste of this: When the yield on the 10-year Treasury jumped from 1.66% in early May to 2.41% in mid-June, long-term bond funds lost about 6% of their value.

Janney Montgomery Scott chief fixed-income strategist Guy LeBas expects rates to continue rising; even assuming sluggish economic growth, his firm forecasts rates at 2.7% next year. With yields so low, "it's a lot easier to go up than down," he says.

You can estimate how sharp your losses would be on your bond funds by looking at a statistic called duration. (Find it on the fund quote page at Morningstar.com.) A portfolio with a duration of six years -- about middle of the road for bond funds -- would see a drop of 6% if interest rates rise one percentage point.

This doesn't mean you should forgo fixed income in favor of stocks -- although bonds look risky now, that doesn't make stocks safe. The wiser move is to shift to shorter-duration funds, and even cash or money-market accounts for money you can't afford to lose.

By staying short, you have to miss out on some yield now, at a time when income is painfully hard to get. But when the Fed's training wheels come off and yields turn around, you'll be well positioned to take advantage of higher rates.

First Published: July 19, 2013: 6:24 PM ET

05.32 | 0 komentar | Read More