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Stocks: Clawing toward a positive start

Written By limadu on Senin, 27 Januari 2014 | 23.11

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NEW YORK (CNNMoney)

U.S. stock futures edged higher ahead of the open, while global markets remained under pressure.

Last week was a rough one for U.S. stocks. The Dow Jones industrial average shed around 2% Friday to end the week down 3.5%. The Nasdaq and S&P 500 both closed more than 2% lower Friday, and also posted losses for the week.

Emerging markets extended recent losses Monday amid worries about an economic slowdown and liquidity shortfalls.

"So the tide is coming out of emerging markets," said Dominic Rossi, chief investment officer for Fidelity Worldwide Investment, in a market report. "The prospect of the end of cheap money in the west, with the certainty of the end of even cheaper money in China, is forcing up the cost of capital across the [emerging markets] asset class."

Related: Fear & Greed Index slides into fear

Corporate news: Google (GOOG, Fortune 500) announced it acquired London-based artificial intelligence firm DeepMind Technologies. It's the latest in a series of start-up purchases by the tech giant as it looks to beef up its expertise in artificial intelligence and robotics.

Sony (SNE) shares lost 2.3% in premarket trading after the firm's debt rating was downgraded to 'junk' by Moody's, with the agency warning that profitability at the tech company would likely remain weak and volatile.

Shares of Caterpillar (CAT, Fortune 500) rallied after the company easily blew past earnings and sales estimates, and approved a new $10 billion stock buyback program.

Apple (AAPL, Fortune 500) is scheduled to report results after the closing bell.

In economic news, data on new home sales will be announced at 10 a.m. ET.

Related: Emerging markets rattled as anxiety rises

World markets: European stocks fell in morning trading, with London FTSE 100 index losing 1%.

Shares of Vodafone (VOD) tumbled 5% in London after AT&T (T, Fortune 500) said Monday it would not purchase the British telecom company. There had been recent speculation that a bid was imminent.

British oil and gas firm BG Group (BRGYY) was another weak spot, with shares plunging 15% after the company warned investors that it faces challenging business conditions.

Related: Tata Motors exec dead after Bangkok hotel fall

Asian markets ended in the red. The biggest loser was Japan's Nikkei index, which closed down 2.5%. To top of page

First Published: January 27, 2014: 5:55 AM ET


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Google snaps up artificial intelligence firm DeepMind

google deepmind

Google is acquiring London-based artificial intelligence firm DeepMind.

HONG KONG (CNNMoney)

A Google spokesman confirmed the acquisition on Monday, but declined to comment on the purchase price. Tech website Re/code, first to report the news, said that Google was paying $400 million.

Privately held DeepMind describes itself as a "cutting edge artificial intelligence company" that specializes in machine learning and systems neuroscience. The company's founders include Demis Hassabis, a former chess prodigy who has built a reputation as a game designer and artificial intelligence programmer.

An earlier version of the company's website, which consists of a single page, said that DeepMind was "building general-purpose learning algorithms" and that the company's first commercial applications would be in mobile social gaming.

Google (GOOG, Fortune 500) is on a campaign to beef up its expertise in artificial intelligence and robotics, related fields that have been a research and development focus for the company. Over the past year, Google has snapped up at least seven robotics firms.

Artificial intelligence improvements could benefit products across Google's product lineup, including driverless cars.

Late last year, Google bought Boston Dynamics, a company known for developing super-fast, animal-like robots with strong ties to the U.S. military. Google's broader push into the field of robotics is being led by Andy Rubin, the man responsible for developing the Android platform for smartphones.

Related: Your Hackable House

And in January, Google bought Nest, a company that develops "smart" home appliances like thermostats and smoke detectors that can program themselves and communicate with smartphones.

The acquisition follows a series of efforts by Google to break into the connected home business, none of which have proven particularly successful. To top of page

First Published: January 27, 2014: 1:45 AM ET


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Tata Motors exec dead after Bangkok hotel fall

tata

Tata Motors Managing Director Karl Slym, shown here on the left in a file photo, has died.

HONG KONG (CNNMoney)

Slym joined Tata Motors in October 2012 after holding senior positions at General Motors (GM, Fortune 500) in India, and had been implementing an ambitious turnaround plan at the time of his death.

"Tata Motors deeply regrets to announce the untimely and tragic demise of its Managing Director, Karl Slym, in Bangkok," the company said in a statement.

Police Lt. Somyot Boonnakaew, the Thai officer leading the investigation, said the death was being treated as a possible suicide, and that a note had been found in Slym's 22nd floor hotel room.

Boonnakaew said that an autopsy will take about one week to complete. Slym was in Bangkok to attend a board meeting of Tata Motors Thailand, a company spokeswoman said.

Shares of Tata Motors (TTM) tumbled almost 5% in morning trading in Mumbai as investors reacted to news of Slym's death. Tata Motors also owns Jaguar and Land Rover brands.

Related story: Biggest risk to markets? Global politics

Tata Motors has been hard hit as part of the broader global economic slowdown, and posted a 42% sales decline in December over the previous year. The automaker is expected to release third quarter earnings on Feb. 10.

--CNN's Kocha Olarn contributed reporting. To top of page

First Published: January 27, 2014: 3:03 AM ET


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Sony downgraded to 'junk'

sony

Moody's is concerned that Sony will not be able to maintain the profitability levels it had experienced years ago.

LONDON (CNNMoney)

Shares in Sony (SNE) dipped by 3% in Japan as most Asian markets experienced significant losses Monday.

Moody's (MCO) explained that the Japanese company was facing extreme pressure in its TV and PC units, due to "intense global competition, rapid changes in technology, and product obsolescence."

Ultimately, Moody's concluded that it would be difficult for Sony to improve and stabilize its profitability.

"We expect the majority of [Sony's] core consumer electronics businesses -- such as TVs, mobile, digital cameras and personal computers -- to continue to face significant downward earnings pressure," Moody's wrote.

Sony released its Playstation 4 ahead of the Christmas period and recently announced it would introduce streaming games. While Moody's acknowledged that the successful launch of the Playstation 4 would help boost profitability, this wasn't enough to push profitability back to 2010 levels.

Related: Sony files patent for a "SmartWig"

Sony shares rose 57% in 2013 as the Japanese markets rallied, though investors acknowledge that the company faces many competitive pressures from the likes of Microsoft (MSFT, Fortune 500) and Apple (AAPL, Fortune 500).

The downgrade comes in the same month that Nintendo (NTDOF) warned investors that it was expecting an operating loss of 35 billion yen ($335.2 million) for the fiscal year ending in March, following disappointing software and hardware sales in the busy end-of-year buying season. To top of page

First Published: January 27, 2014: 7:01 AM ET


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2015 Honda Fit: The secret star of the Detroit auto show

2015 honda fit

The 2015 Honda Fit

(Fortune)

As for the Fit, it is a four-door subcompact hatchback in a market that reserves its enthusiasm for big displacement engines and sport coupe styling. Americans bought only 53,513 in 2013 (Ford (F, Fortune 500) sold more than 763,000 F-series trucks during the same time), making the Fit little more than a niche model in a small and profit-challenged segment.

But competitors take note. Overlooking the new Fit will be a big mistake. Consider:

• In a remarkable achievement in packaging, the 2015 Fit is smaller on the outside but significantly larger on the inside. Offering the interior room of a compact-size car in a subcompact body will boost Honda's fuel economy and give it a leg up in the mileage wars.

• The Fit represents a spirited return by Honda to its sporty small car roots with edgier styling, peppier powertrains, and greater functionality. It is the first tangible evidence that the Japanese manufacturer has shucked off its recession-driven, cheap-and-cheerful mindset and recaptured the energy that has made it the U.S.'s fourth bestselling brand.

• When Honda starts producing the Fit in North America later this year, it will nearly quadruple the supply of available vehicles, making Fit the spearhead of Honda's drive to boost U.S. sales.

Too much corporate and reputational baggage to pile on to a tiny car? Not at all.

The new Fit is faster, smarter, and thriftier. With its new 1.5-liter engine, the Fit will generate 130 horsepower, an increase of 13 hp over the engine of the 2014 car, while reducing weight and improving efficiency.

MORE: 14 auto predictions for 2014

The combination of the new powertrain with a new chassis is expected to enable the Fit to have class-leading EPA-estimated fuel economy ratings of up to 36 miles per gallon combined -- 33 mpg city and 41 mpg highway. That will get Honda far down the road toward meeting 2025 CAFE standards that dictate a stiff 54.5 mpg fleet average

Electronics play a leading role in the new Fit: Bluetooth provides smartphone connectivity, a multi-view rear camera improves visibility, and a blind-spot camera is available, along with keyless entry and start -- all this in a car that will likely have a starting price around $16,000.

Best of all, in a feat akin to stuffing dozens of circus clowns into a Volkswagen Beetle, Honda has shrunk the overall length of the 2015 Fit by 1.6 inches and at the same time created more space inside. Even though its width is up by a scant 0.3 inches, and its height remains unchanged at 60 inches, the Fit's rear-seat legroom has been increased by nearly five inches, and overall passenger volume has gained 5%.

The extra room comes partly from stretching the wheelbase by 1.2 inches and stealing some space from the cargo area, but otherwise Honda engineers have been closemouthed about how else they got there. All they acknowledge at this point, according to published sources, is a 57-pound reduction in the weight of the basic floor pan attributable to more extensive use of high-strength steel. The improved structural stiffness should benefit both ride and handling.

In the race for greater fuel economy, boosting the usable interior space while making the car smaller overall is like drawing to an inside straight in Texas hold 'em. As traffic tightens and electronics connect more cars, drivers will spend more time behind the wheel, making the quality of their accommodations more important.

MORE: The next thin slice of luxury from Ford

Safety is an issue too, and Honda engineers claim to have improved the dismal performance of the second-generation Fit in crash tests performed by the Insurance Institute for Highway Safety. The 2013 Fit was the only vehicle that ranked "poor" in both categories of lower-body injuries, prompting Consumer Reports to yank its "recommended" rating. Honda says the 2015 car will attain a "good" rating for all IIHS test modes.

The Fit is that rare automobile whose U.S. sales potential is untested. The car has been made in Japan since it was launched in 2001 (it came to the U.S. in 2006), and production limits have caused its U.S sales to be rationed. That will change in February when Honda starts up operations at a new plant in Celaya, Mexico for the U.S. market. The additional capacity comes just in time. The new Fit became the bestselling car in Japan during its first full month on sale, beating out the Toyota Prius (TM).

Once it is running at full capacity, the Mexico plant will be capable of building 200,000 Fits and a Fit-based crossover annually. Their success in the showroom will be key to Honda reaching its goal of selling 1.8 million to 2 million cars, crossovers, and SUVs in the U.S. by 2017. Right now, that target looks far away. In 2013, Honda-brand sales amounted to just 1.36 million units. But Honda's ability to move the metal should not be underestimated. It isn't widely appreciated, but of the seven bestselling passenger vehicles in the U.S. last year, three are made by Honda: the Accord, Civic, and CR-V crossover. The new Fit will find itself in rarefied company. To top of page

First Published: January 27, 2014: 7:14 AM ET


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FAA orders inspections of Boeing 767s

boeing 767

The FAA has ordered inspections of the Boeing 767 for possible safety problems.

NEW YORK (CNNMoney)

The problem being cited is something that the FAA and Boeing have been looking into since 2000, and the planes have already been subject to earlier inspections.

But the FAA, in a notice in the Federal Register on Monday, said it has determined that potential problems with rivets could cause "failures or jams" that affect the plane's ability to climb or descend. The failure could result in "possible loss of control of the airplane," the FAA said.

The problem has not been cited as a cause in any crash of a 767, which is one of the most widely-used Boeing jets. Boeing has delivered 1,061 of the long-range, widebody planes since it went into service in 1982.

Related: Airbus calls for wider seats on long flights

Some of the airlines objected to the proposed FAA action. United Continental (UAL, Fortune 500) filed comments arguing that previous inspections ordered by the FAA, along with service bulletins from Boeing, have addressed the risks being cited by the FAA in its new order. But the FAA rejected that argument.

Boeing (BA, Fortune 500) said it is working closely with the FAA on potential safety issues. "This is an ongoing and continuous process," it said.

The order takes effect March 3, and airlines must perform the inspections within 6,000 flight hours of that date for each aircraft. To top of page

First Published: January 27, 2014: 7:35 AM ET


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Turkey turmoil prompts central bank meeting

turkish lira

The sell-off in emerging market currencies including Turkey's lira have deepened in recent days.

LONDON (CNNMoney)

The news helped the currency find firmer footing against the U.S. dollar Monday, but not enough to fully claw back recent losses.

Over the past month the Turkish lira has sunk to record lows against the dollar, and weakened sharply against the euro.

Stocks in the country have also been battered as a wide-ranging probe into public sector corruption continues to spook investors.

Related: Emerging markets rattled as anxiety rises

Police have so far detained scores of high-profile suspects, including the sons of three ministers, a mayor and the chief executive of a major state bank.

The investigation has undermined the government of Prime Minister Recep Tayyip Erdogan ahead of national elections in August.

Related: Turkey corruption crisis pushes lira to record low

The crisis meeting comes one week after the central bank decided to hold interest rates steady at 7.75%.

Tuesday's session has been called to "discuss recent developments and take the necessary policy measures for price stability," according to a statement on the bank's website.

Capital Economics emerging markets economist William Jackson said the central bank appears to be preparing to tighten monetary policy in order to shore up the lira.

Turkey has been among the hardest hit in the recent emerging market sell-off and Jackson says a lack of confidence in the country's central bank has been a big contributor.

Other emerging market currencies, including Argentina's peso and India's rupee, have also been hit by expectations that the Federal Reserve, Bank of England, and Bank of Japan will pull back on stimulus measures used to prop up their own economies.

Such moves could lead to higher bond yields in developed markets, as well as stronger currencies.

Emerging markets have come to rely on global central banks to steady exchange rates so they can borrow aggressively to fund their economies. To top of page

First Published: January 27, 2014: 10:16 AM ET


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How spending has fallen under Obama

NEW YORK (CNNMoney)

As a share of the economy, spending on domestic and defense programs has been on the decline since 2010, and is on track to reach the lowest level in more than 50 years by 2023.

At its height in 2010, "discretionary spending" under Obama reached 9.1% of GDP. That was largely due to the stimulus law intended to dig the country out of a deep recession. But even at that high level, it wasn't that much higher than the 40-year average of 8.4% and was still below the 40-year peak of 10% reached in 1983.

Today, levels are well below the long-term average. And the Congressional Budget Office projects that by 2023 discretionary spending will fall to 5.3% of GDP, the lowest since 1962.

Related: 7 setbacks for the middle class

Of course, Obama can't take all the credit (or blame, depending on your perspective) for the downward trend in discretionary spending.

A big driver of that trend is the Budget Control Act, which both parties agreed to in 2011 to avert a disaster over the debt ceiling.

The Budget Control Act gave birth to the ill-conceived sequester -- the arbitrary budget cuts that primarily hit domestic and defense spending and put a restraint on discretionary spending levels for much of the next decade.

Deficits, too, are falling. That's because of the lower discretionary spending but also various tax hikes on very high-income households and the recovering economy.

Under Obama, the deficit peaked in 2009 at 9.8% of the overall size of the economy, but has fallen every year since. This year, the CBO projects it will come in at 3.4% of GDP and drop to 2.1% by 2015.

Then deficits will starting to climb again, reaching 3.5% by 2023. And in the decade after, they will get bigger still.

That's partly due to an expected rise in interest rates -- and hence higher interest payments on the country's accumulated debt.

But two other big reasons: Obama and lawmakers have yet to tackle the growth in spending on entitlements and to figure out how to overhaul the tax code. To top of page

First Published: January 27, 2014: 10:18 AM ET


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SodaStream ad keeps ScarJo, drops Coke and Pepsi

n b SodaStream Scarlett Johansson_00011915

Fox initially rejected a Super Bowl ad featuring Scarlett Johansson, until SodaStream dropped references to competitors Coke and Pepsi.

NEW YORK (CNNMoney)

"One of the lines of the ad was asked to the removed," wrote SodaStream spokeswoman Nirit Hurwitz, in an email to CNNMoney, identifying the rejected line as: "Sorry, Coke and Pepsi."

The SodaStream ad was initially rejected by Fox, which will broadcast the Super Bowl on Sunday. But now that Coca-Cola (KO, Fortune 500) and PepsiCo (PEP, Fortune 500) are on the cutting room floor, Hurwitz said that the ad is cleared to air.

"A censored version of the ad with Scarlett Johansson will therefore appear on game day, and will exclude this mention of competitors," she said.

Related: ScarJo sizzles in SodaStream spot

A spokesman for Fox declined to comment.

SodaStream (SODA) makes machines for producing carbonated beverages at home. The Israeli company's original Super Bowl ad for last year was also rejected by CBS (CBS, Fortune 500) for touting its use of reusable bottles as greener than the bottles used by Coke and Pepsi.

"With SodaStream, we could have saved 500 million bottles of game day alone," said last year's rejected ad, which depicted deliverymen for Coke and Pepsi making a mess with exploded bottles.

Related: Behind the scenes of Apple's '1984' ad

Advertisers are paying up to $4.5 million for a 30-second spot, a record high. As Super Bowl ad spots have grown more expensive, some advertisers have drummed up cheap publicity by submitting ads that were promptly rejected, often because of raunchy or inappropriate material.

SodaStream spokesman Yonah Lloyd denied that the ad was intentionally submitted with the purpose of being rejected. He told CNNMoney that the line, "Sorry, Coke and Pepsi," which is spoken in the uncensored version by Johansson, "is a legitimate form of comparative advertising."

"SodaStream is a real player in the carbonated beverage industry, competing with Coca-Cola and Pepsi," said Lloyd, in an e-mail. "We want consumers to know that there is a smarter alternative to these Big Soda companies, and we see Fox's directive to be nothing less than pure censorship."

Related: Boycotting SodaStream: Righteous protest or empty gesture?

SodaStream is a fast-growing company that inspired a boycott from some consumers because it has a factory located in the Israeli-occupied West Bank. Defenders say the company employs Palestinians and Israeli Arabs, and houses both a mosque and a synagogue.

In the 48th Super Bowl, the Seattle Seahawks will face the Denver Broncos at MetLife (MET, Fortune 500) Stadium in East Rutherford, N.J. To top of page

First Published: January 27, 2014: 9:51 AM ET


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Stocks mixed as techs get hit hard

Dow 1020

Click for more market data.

NEW YORK (CNNMoney)

The Dow Jones industrial average and the S&P 500 were flat in mid-morning trading. Strong earnings from Dow component Caterpillar (CAT, Fortune 500) helped to keep the broader market's losses at a minimum. Shares were up nearly 6% after the construction equipment company easily blew past earnings and sales estimates, and approved a new $10 billion stock buyback program.

The Nasdaq was down more than 1% and CNNMoney's Tech 30 index also fell. Shares of Twitter (TWTR) plunged. Fellow social media companies Facebook (FB, Fortune 500) and LinkedIn (LNKD) also were markedly lower, as was online streaming giant Netflix (NFLX).

Last week was a rough one for U.S. stocks. The Dow shed around 2% Friday to end the week down 3.5%. The Nasdaq and S&P 500 both closed more than 2% lower Friday.

The market's so-called fear gauge, the CBOE Market Volatility Index, or VIX (VIX), shot up 25% on Friday, the biggest one-day percentage jump since last year's Boston Marathon bombings. But the stress eased slightly Monday, with the VIX falling about 5%.

CNNMoney's Fear & Greed index, which looks at the VIX and six other gauges of sentiment, hit a level indicating "extreme fear" in the market.

Related: Buckle up! 2014 will be a bumpy ride

Is a correction brewing? Many investors say stocks could be headed for a correction, typically a drop of 10% or more. Following last year's big rally, stock prices -- as measured by how they trade relative to expected earnings -- have risen to levels that are considered slightly expensive.

Jack Ablin, chief investment officer at BMO Private Bank, said stocks could slide further if corporate results fail to move the needle. "If earnings and revenue don't move at all, the market could drop 10% or more," he said.

So far, corporate earnings have beaten analysts' modest expectations. Of the 123 S&P 500 companies that have reported results through Friday, 68% have had earnings above expectations, according to FactSet Research.

Investors will get results from 130 of the companies in the S&P 500 this week. Apple (AAPL, Fortune 500) is scheduled to report results after the closing bell. The stock was up 1%, making it one of the top performers in CNNMoney's Tech 30 index.

In economic news, new home sales plunged 7% in December from November, according to the Commerce Department. December new home sales were up 4.5% from a year ago. New home sales data can be volatile, and some of the drop could be due to colder-than-normal temperatures last month, said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.

Related: Fear & Greed Index slides into extreme fear

Emerging markets in turmoil. Meanwhile, emerging markets extended their recent losses Monday amid worries about an economic slowdown and liquidity shortfalls.

Last week's sell-off was driven by "well known boogeymen," including market turmoil in Argentina and Turkey, as well as concerns about stress in China's shadow banking system, said David Lutz, head ETF trader at Stifel Nicolaus.

Emerging market currencies fell again, building on a trend from last week that hit the Argentinian peso, Turkey's lira and India's rupee especially hard. However, the lira regained some ground Monday after Turkey's Central Bank announced plans to hold an emergency meeting Tuesday.

European markets were mixed following heavy losses in Asia overnight.

Corporate news: Google (GOOG, Fortune 500) announced it acquired London-based artificial intelligence firm DeepMind Technologies. It's the latest in a series of start-up purchases by the tech giant as it looks to beef up its expertise in artificial intelligence and robotics.

Related: Emerging markets rattled as anxiety rises

Sony (SNE)shares slid after the firm's debt rating was downgraded to 'junk' by Moody's, with the agency warning that profitability at the tech company would likely remain weak and volatile.

Shares of Vodafone (VOD) tumbled after AT&T (T, Fortune 500) said Monday it would not purchase the British telecom company. There had been recent speculation that a bid was imminent. To top of page

First Published: January 27, 2014: 9:49 AM ET


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Guess who's coming to America?

Written By limadu on Senin, 20 Januari 2014 | 23.11

NEW YORK (CNNMoney)

Based on customer data from UniGroup Relocation, the international arm of the United Van Lines, 15% more people moved into the U.S. than left the country. That's up from 7% in 2012.

We're coming to America!

These 10 countries are sending the most people to the U.S.

United Kingdom
Germany
China
Australia
France
India
Singapore
Canada
Switzerland
Japan

Source: UniGroup Relocation

"It's a reflection of the strength of the economic recovery in the United States," said Richard McClure, UniGroup's CEO.

The number one place new residents are coming from: the United Kingdom. Up next: Germany, China, Australia and France.

The U.S. economy has rebounded faster than most of the Eurozone, spurring an inflow of workers from that region, explained Michael Stoll, economist and chair of the Department of Public Policy at UCLA. In addition, more U.S. companies are looking farther afield for highly skilled workers, he said.

Related: More people are moving to Oregon

UniGroup's customers tend to be people who are hired for well-paid jobs. "The traffic is almost entirely corporate management," said UniGroup spokeswoman Melissa Sullivan. "People don't relocate internationally unless it's for a job."

There are some exceptions, however. The company moved quite a few elderly Chinese to America last year, McClure said. Most of them were parents of Chinese businessmen working in the U.S., he said.

Last year was the first time in four years that more people from China moved to the U.S. than the other way around. Part of that was due to the slight cooling of the Chinese economy. Another factor, is that American firms operating in China are increasingly switching to local workers so there's less need to move American employees into the country, said McClure.

Related: How far will my salary go in another city?

"As U.S. investments in China have matured, there's has been a movement toward homegrown talent," he said.

The total number of international moves Unigroup did fell during the Great Recession. Yet, since the recovery, the total number of moves has risen.

"You see more companies needing a presence overseas to access the increasingly global economy," said Sullivan. To top of page

First Published: January 19, 2014: 2:45 PM ET


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Nintendo shares tumble after loss warning

nintendo shares

Nintendo shares dropped 20% on Monday before mounting a comeback.

HONG KONG (CNNMoney)

Nintendo (NTDOF) said Friday that it expects an operating loss of 35 billion yen ($335.2 million) for the fiscal year ending in March, following disappointing software and hardware sales in the busy end-of-year buying season.

That's a significant downturn from the profit of 100 billion yen ($957.7 million) previously forecast. The electronics maker also slashed estimated figures for global sales of its Wii U console to 2.8 million from 9 million, even after it cut the price of the device last year in a bid to draw buyers.

Nintendo shares in Tokyo pared some morning losses, but closed more than 6% lower on the day.

The Wii U has struggled to lure consumers as the appetite for mobile and tablet gaming grows, underscoring problems with the company's strategy and ability to keep up with gaming trends.

Related: Nintendo's big problem

Stiff competition from rival devices -- Microsoft's Xbox and Sony's PlayStation -- has also hurt Nintendo. Microsoft (MSFT, Fortune 500) and Sony (SNE) have turned their gaming consoles into integrated, computing devices, and new models of the devices released late last year were in hot demand.

At the same time, Nintendo, maker of a string of best-selling games including Mario Bros. and Wii Fit, has shied away from online gaming and entertainment-based features.

Nintendo shares got a boost earlier this month when China loosened restrictions on video game consoles. The new market could be a boon for Nintendo, but it's not yet clear whether the company will embrace the experiment. To top of page

First Published: January 19, 2014: 11:03 PM ET


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Are you ready for some earnings?

SP ytd

After last year's big rally, the S&P 500 has been off to a rocky start in 2014

NEW YORK (CNNMoney)

The U.S. markets will be closed Monday for the Martin Luther King, Jr. holiday.

Stocks ended last week mixed, though it was a bumpy ride. The S&P 500 briefly moved into positive territory mid-week, before falling back into the red. The Dow Jones industrial average is also down for the year, while the Nasdaq has outperformed.

Banks were the main focus, with five out of the six largest U.S. banks reporting quarterly results that topped expectations.

But the week ahead brings quarterly reports from a more diverse group of companies, including Dow components Johnson & Johnson (JNJ, Fortune 500), Verizon (VZ, Fortune 500), McDonald's (MCD, Fortune 500), Microsoft (MSFT, Fortune 500) and Procter & Gamble (PG, Fortune 500).

Related: Big banks beat expectations, but ...

In addition, investors will get fourth quarter results from two of last year's top performing S&P 500 companies. Delta Airlines (DAL, Fortune 500) reports Tuesday. Netflix (NFLX), which surged nearly 300% last year and was the biggest gainer in the S&P 500, reports on Wednesday.

Starbucks (SBUX, Fortune 500) and eBay (EBAY, Fortune 500) are other big names to watch for this week.

Overall, earnings in the final three months of 2013 are expected to be up 6.1% versus the same period in 2012, according to FactSet Research. But there have been a number of profit warnings from some bellwether companies, including UPS (UPS, Fortune 500)and Royal Dutch Shell (RDSA).

Meanwhile, the only economic data of note this week is Thursday's report on new home sales for December.

While the job market was much weaker than expected last month, most other indicators for December have been better than expected, including a solid report on retail sales last week.

Related: UPS warns Christmas delivery woes hit bottom line

After last year's spectacular rally, investors have been looking for signs the economy will be able to keep the bull market going in 2014.

In general, investors are expecting another good year for stocks, but not as strong as last year. Many are bracing for a correction, usually defined as a decline of 10% or more. But even then, investors seem confident that stocks will ultimately end the year higher than where they started.

"We do believe if a correction unfolds early in the year, it's more likely a buying opportunity than a sinister sign for the year and beyond," analysts at Schwab wrote in a report Friday. To top of page

First Published: January 19, 2014: 9:21 AM ET


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Kraft Velveeta product recalled

velveeta singles ultimate cheeseburger mac

Some boxes of Velveeta Cheesy Skillets Singles have been pulled from supermarket shelves.

NEW YORK (CNNMoney)

The U.S. Department of Agriculture's Food Safety and Inspection Service said that manufacturer Truitt Brothers is recalling 1.77 million pounds of Kraft (KRFT, Fortune 500)Velveeta Cheesy Skillets Singles - Ultimate Cheeseburger Mac. The macaroni and cheese product contains pasta and ground beef.

Some of the labels do not mention the presence of hydrolyzed soy protein and dried soy sauce, which are allergens.

"The inaccurate labeling is the only thing wrong with the product," said Kraft Foods spokeswoman Joyce Hodel. "If an individual has no allergies or sensitivities to soy, then the product is perfectly safe to consume."

Related: Possible Velveeta shortage looms

The recall applies to food with a sale date from March 2, 2014 to October 23, 2014.

It does not apply to other Kraft or Velveeta products, according to the government. To top of page

First Published: January 20, 2014: 8:32 AM ET


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How I emerged from bankruptcy to grow a thriving company

NEW YORK (CNNMoney)

In 2008, we had over 400 employees, financed and distributed movies, and had created, sold and produced 63 television shows, including Food Network's hit show "Chopped."

In 2009, nearly every independent film company in the U.S. collapsed, and my company did not escape the carnage. My world imploded: I had $1,700 in my checking account, no savings, and over $15 million in business debt that was personally guaranteed by me. I would need to file for personal bankruptcy, and that terrified me.

Yet personal bankruptcy ended up being a breath of fresh air, as I realized there was life -- and a career - still ahead of me. But the real question was: What was I going to do next?

I believed social media was key to my efforts at reinvention. I joined Facebook, friending prominent people I knew, and then sending personal messages to their friends. I also created a blog to document my efforts to rebuild my life and career. Over time, I amassed 5,000 friends who were largely industry colleagues: producers, film and TV executives, distributors and investors.

Related: French fry joint lures customers through Facebook

My blog hit a nerve, and I discovered that many people faced similar challenges -- and worse. Wall Street CEOs confided that they were broke, film producers were homeless, show runners were waiting tables and network executives were unemployed. I realized being broke -- but healthy, with family and friends -- made me the luckiest man alive. I was determined to succeed.

The next step was research. I studied the film industry carefully. My focus was the new world of digital distribution at a time of tremendous upheaval and uncertainty.

I reflected on the reasons for my prior collapse: What would I do differently the next time around? What mistakes would I avoid? High overhead, excessive debt and trying to do too many different things. I needed to focus on one thing -- and do that one thing extremely well.

Related: How to successfully launch a second startup

I formulated a business model for digital distribution. It included an algorithm I developed for acquiring films and techniques for using social media and viral marketing to promote film releases. I tested the model using spreadsheets -- and the backs of envelopes. The next step was obtaining startup capital.

One of the people who contacted me in response to my blog was Alan Klingenstein, a film producer and financier. In January 2010, we met and immediately bonded.

Al believed my model could work and was willing to give it a try, especially if we could find an investor to share the risk. One of my former investors, a kind, gentle man who reminded me of my father, had lost seven figures with the collapse of my business. But he believed Jack and I were people of integrity, and agreed to meet with us. At a diner in Brooklyn, I explained our model. He and Al agreed to invest $200,000 to prove the concept.

Related: Strangest places I've closed a deal

Jack and I began acquiring films on behalf of the investors using my algorithm, and we released films on digital platforms and DVDs. I used social media to promote our films, and also to network and expand relationships with producers, distributors and retail outlets.

The model worked. The initial capital was returned to the two initial investors within 18 months and they are well into profits.

Today, FilmRise is distributing over 5,000 titles. We've raised over $3 million in capital and have over 30 investors. Our current annual growth rate is close to 1,000%. Alan Klingenstein is chairman of the company, I am CEO, and my brother Jack is president. As we begin the new year, I reflect on how I've been given a second chance, and am grateful.

Danny Fisher is the CEO of FilmRise, a film distribution company he owns with Alan Klingenstein and Jack Fisher. To top of page

First Published: January 20, 2014: 4:05 AM ET


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Staples' mini post offices draw union ire

NEW YORK (CNNMoney)

Workers are concerned the experimental locations -- staffed by Staples (SPLS, Fortune 500) employees, not Postal Service employees -- will lead to the closure of traditional post offices and the loss of jobs with good wages and benefits.

"The Staples-USPS deal has to be looked at in the context of a drive towards privatizing the U.S. Postal Service," said Mark Dimondstein, president of the American Postal Workers Union. His group is a network of local unions that represents over 220,000 current and retired mail workers.

"We are willing to support this program as long as it's staffed with United States Postal Service employees," he said.

Staples declined to comment on the unions' concerns and said it doesn't discuss agreements with vendors, but said the pilot program is intended to offer "added convenience for our customers."

"Staples continually tests new products and services to better meet the needs of our customers," said spokeswoman Carrie McElwee.

Related: Price of stamps to go up more than expected

And Postal Service spokeswoman Darleen Reid-MeMeo rejected the idea that the Staples program was "an attempt to replace stand alone Post Offices."

The post office, whose financial struggles are well-known, is adapting, Reid-MeMeo said. The Staples pilot is the next step of a program that already has over 65,000 retail partners -- including grocery stores and pharmacies that sell stamps and village stores that sell flat-rate boxes in rural areas.

Sarah Ryan, a faculty member at The Evergreen State College in Washington, said she thinks the Staples partnership does little to help traditionally underserved postal customers.

"The interesting thing is this won't do anything to help people who are in rural or lower income neighborhoods," Ryan said. She has studied privatization and the Postal Service and is a former retail clerk at a Seattle post office and held elected positions in the local postal union.

Related: Can package delivery save the Postal Service?

"This is the first time since the Sears deal that there's an effort to move the retail into a national, corporate chain," she said.

In the 1980s, the Postal Service and Sears (SHLD, Fortune 500) struck an arrangement similar to the one at Staples today. Postal unions protested and the program was eventually canceled.

This time around, Dimondstein said, the union president, said workers want guarantees their jobs will be protected and not outsourced to Staples.

"We do not have any problem with the people of this country getting expanded access to postal service," said Dimondstein. "We are willing to support this program as long as it's staffed with United States Postal Service employees."

The Postal Service counters are currently available at just over 80 Staples stores in and around San Francisco, San Diego, Atlanta, Pittsburgh and Worcester, Massachusetts, said Reid-MeMeo, the USPS spokeswoman. She said the postal service is "always looking to expand access to postal products and services in locations where our customers frequent."

-- CNN's AnneClaire Stapleton contributed to this report To top of page

First Published: January 19, 2014: 9:04 PM ET


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China's 7.7% GDP growth beats official target

china gdp 4q

China's economy grew by 7.7% over the previous year in 2013.

HONG KONG (CNNMoney)

Gross domestic product grew by 7.7% in 2013 over the previous year, according to China's National Bureau of Statistics, a performance that matched the median estimate of a CNNMoney survey. Full-year expansion was supported by 7.7% growth in the final quarter of the year, beating the survey forecast of 7.6% by a whisker.

While last year's growth topped the government's official target of 7.5%, China's economy is stagnating after recording revised 7.7% GDP growth in 2012 and 9.3% in 2011. Looking ahead for 2014, expansion is forecast to slow to 7.4%.

"The data reinforce our view that growth is on a downtrend and we continue to expect GDP growth to slow [in 2014]," Nomura economists wrote in a research note.

China's benchmark index, the Shanghai Composite, slipped 0.7% in afternoon trading, while Hong Kong's Hang Seng index dipped 0.8%.

Related story: China's growth expected to beat official target

The pace of China's GDP growth is the most comprehensive gauge of the country's economic health -- an important number to monitor as the government works to bring about stability after decades of runaway expansion. As part of efforts to find more sustainable growth, the government introduced last year a wide range of reforms that tackle everything from fiscal policy to family planning standards.

Economists think the reforms are necessary for China, but putting the plan into action won't be easy and gains may not be reflected in the economy for years.

Related story: Inside China's $2.2 trillion budget

How changes are implemented, and the order in which reforms are introduced, will determine whether or not there is any impact on the economy, said Wang Tao of UBS.

An emphasis should be placed on reforming state-owned enterprises and fiscal policy first, she said. If done successfully, Wang said the reforms could keep China's annual economic growth at 6% to 7% over the next decade.

Other experts are less optimistic. Nomura economists said some of the government's plans still remain vague, and more significant reforms are needed to reduce dependence on state-backed businesses.

Related story: China lifts IPO ban and relaxes rules

Economists surveyed by CNNMoney said that China's economy continues to face a number of threats, with credit growth and local government debt topping the list. Reining in credit could lead to an unexpected liquidity squeeze, while expansion could also spell disaster.

"With the rapid development of interbank and other 'shadow' credit activities in recent years, the task of managing liquidity and credit conditions has become increasingly difficult," said UBS's Wang. To top of page

First Published: January 19, 2014: 9:48 PM ET


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Life without benefits gets tougher for jobless

unemployment benefits brad bowman

Brad Bowman one of 1.3 million jobless Americans who are making really tough choices while Congress debates whether to extend federal benefits.

WASHINGTON (CNNMoney)

Jean Winsor borrowed money from a friend to pay car insurance this month, so she can drive to interviews. She can't pay her Shinglehouse, Pa., mortgage.

Marcus Wesley is a few months from finishing a course in his Houston suburb to transition into medical information technology, a field that's hiring. "If I had to, I would have to live in my car," said Wesley, who has rent coming due.

Kerstin Foster got a job that starts in February, but she can't pay the grocery bills now. She spent most of two days last week in a long line -- with dozens of other jobless workers who lost benefits -- waiting to sign up for food stamps in Waterbury, Conn.

"All of us in line, we were all cut off from unemployment," said Foster, who will go back to work as an administrative assistant in a few weeks. "I'm one of the lucky people who has a job coming. What's going to happen to all the rest?"

Related: 850,000 may have $90 less in food stamps

The week of Dec. 28, extended federal jobless benefits expired with the end of a recession-era program intended to help those who have exhausted six months worth of state payments.

In the meantime, Congress left Washington last week with little progress made to extend the federal program.

The federal benefits first went into effect during the recession in June 2008. They were put in place to help unemployed workers who couldn't find jobs and whose state unemployment insurance had run out.

Back then, the jobless rate was 5.6%. It later climbed to more than 10% in 2009, and the government extended or expanded the federal benefits 11 times into the weak recovery, most recently in January 2013.

Many jobless Americans say it's still tough to find a job. Wesley, 40, of Missouri City, Texas, said he needs a few months to finish job training.

He spent years working in information technology, most recently for Bank of New York Mellon, which ended his contract last spring. When he couldn't find work for financial companies, he decided to transition to health care, an area in need of IT help.

"I'm not looking for a handout, I want to work," Wesley said.

Related: Help! My unemployment benefits expired

Brad Bowman, 35, lost his job in July working for a non-profit that mentors youth at Detroit-area schools, a victim of budget shortfalls. His parents and grandparents have paid his health insurance premiums the past two months.

Lately, he's been able to pick up $20 to $25 a day through a service that allows him to rent out his Dodge Stratus a few days a week to those who need a car.

Related: Jobless workers plead with Congress for more help

"I can't rent it out every day because I need a way to get to an interview, should I get an interview," Bowman said.

Winsor, 49, has been paying her car insurance, Internet and phone bill so she can keep applying for jobs. But she has no idea how she'll make her $461 mortgage payment due in two weeks.

The home health care aide has been applying for dozens of jobs every day, she said. She's already turned off the heat in her part of her house, to keep the heating bill down.

"All I do is try and cry, and say 'Lord help me,'" Winsor said. "This government is going to make everyone break down." To top of page

First Published: January 20, 2014: 3:50 AM ET


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U.S. to be top destination for Chinese tourists

china tourists

Chinese tourists have named the U.S. as a top vacation destination.

HONG KONG (CNNMoney)

The number of Chinese visitors coming to the United States will more than triple by 2020, according to a new report from brokerage CLSA. The new wave will include a confident, more travel-savvy Chinese tourist that is willing to bridge out from traditional vacation spots like Hong Kong and Macau.

More than 17% of experienced Chinese travelers ranked the U.S. as their top vacation choice if money was no object -- higher than any other destination. For first time travelers, the U.S. is the second most popular vacation spot.

"It's all about bragging rights for Chinese tourists these days," said Aaron Fischer, an analyst at CLSA.

Chinese travelers have built a global reputation as big spenders. Lines of shoppers from Mainland China are a regular sight outside luxury stores in Paris and Hong Kong, a trend that could spread.

Shopping is at the top of the agenda for Chinese that visit the U.S., with 87% of visitors splashing some cash at retail outlets in 2012. CLSA said the Chinese spend an average of $4,400 per trip on everything from high-end hotels to cosmetics, making them the second-biggest spenders after visitors from India.

CLSA said that companies like Tiffany (TIF), Estee Lauder (EL, Fortune 500) and Coach (COH) could benefit the most, as they have excellent brand recognition in China and offer cheaper prices in U.S. stores.

Related story: Vatican tourism triples for new Pope

In addition to shopping, the new wave of Chinese tourists have another set of priorities that will make Las Vegas casino owners drool.

Mainland tourists are showing a greater interest in fine dining and gambling than others overseas visitors, and a growing appetite for concerts and shows, the CLSA report said.

With Las Vegas still struggling in the wake of a regional housing bust, casinos there have begun pulling out the stops to attract Chinese gamblers, introducing special food menus and concerts with Chinese speaking pop stars. The Palazzo is even now hosting a show called "Panda!" that features the China National Acrobatic Troupe.

Related story: Are U.S. companies ready for China's big spenders?

Still, catering to a three-fold increase in the number of Chinese tourists is no easy task. The language barrier is one problem; CLSA called a series of high-end hotels in New York and found only two had Mandarin speakers on site.

Chinese travelers have also developed a less than flattering reputation in some parts of world, thanks to a mix of cultural differences and, occasionally, bad behavior. In one high-profile case, an ancient Egyptian temple was vandalized by a young Chinese tourist.

China's National Tourism Administration has attempted to address some of these problems, and last year published a series of guidelines directed at the country's travelers.

Specific guidelines instructed tourists not to deface relics and to show courtesy and respect for other people's rights. To top of page

First Published: January 20, 2014: 5:16 AM ET


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Best places to get in shape

best places to get in shape

At left: A Fairfield, Conn. three-bedroom, 2½-bath, 1,458 sq. ft. home for $430,000. At right: A San Francisco three-bedroom, 2-bath, 1,600 sq. ft. home for $849,000.

(Money Magazine)

To find the best metros for getting fit, MONEY and Trulia crunched some health-centric data, looking for places with easy access to nutritious food, dietary advice, and plenty of exercise options.

We compare the top two.

To top of page

East Coast vs. West Coast

Two of the nation's healthiest metro areas face off.

Gyms and fitness centers per 10,000 households 5.3 3.8
Diet and weight loss centers per 10,000 households 0.36 0.28
Ratio of "slow food" to fast-food restaurants 1.41 1.6
Percent of population who walk or bike to work 3% 9.2%
Median home price $470,000 $829,000
Increase in asking price (2012 to 2013) 9.8% 15.2%
For-sale homes affordable to the middle class 36% 14%
Median square feet for affordable home 1,317 1,000

NOTES: Fitness-related data from 2010 and 2011. Pricing information as of November. Square footage and affordability data from October. SOURCE: Trulia

First Published: January 20, 2014: 9:51 AM ET


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Stocks, bonds? In 2014, think cash

Written By limadu on Senin, 06 Januari 2014 | 23.10

stocks and bonds 2

Bulk up on a forgotten asset -- cash.

NEW YORK (Money Magazine)

After a five-year rally that has more than doubled the value of the S&P 500, stock prices at least by one measure of valuation are among the frothiest in history. Speculation is back, as the use of borrowed money to invest is nearing pre-financial-crisis highs. And then there's the fact it's been nearly 2 1/2 years since stock prices fell significantly. Pullbacks of 10% or more typically occur at least once a year.

Normally when faced with overheated equities, you can simply sell some winners and buy more bonds, either to get you back to your target allocation or to invest more conservatively. That strategy paid off big in the 2000-02 bear market, when the S&P 500 lost 47% while government bonds maturing over four to 10 years returned 26%.

But what happens if both stocks and bonds are primed to deliver subpar returns? That appears to be the situation now. A big reason stocks have climbed so much is that the Federal Reserve has bought up more than $2 trillion in Treasury and mortgage bonds in recent years to try to boost growth by holding down long-term interest rates and thus promote risk taking.

So-called quantitative easing has worked, but it has also driven fixed income prices up and yields down. Doug Ramsey, chief investment officer for the Leuthold Group, says, "There's now joint overvaluation in U.S. stocks and bonds."

The immediate concern: Now that the Fed has started shutting off its spigot in the face of an improving economy, the chances of rising interest rates prompting a selloff in stocks and bonds inevitably increase. Shortly after the Fed ended its two smaller rounds of quantitative easing -- in 2010 and 2011 -- the S&P 500 declined 16% and 19%, respectively. (Bond investors discounted QE's impact then, but lately they've shown they're convinced.)

The bigger long-term worry: Above-average valuations mean the likelihood of disappointing returns over the next 10 years or so.

What do you do? If you have decades to ride out the market's ups and downs, you don't have to do anything.

But if retirement is closer than that, you want a strategy that offers some protection from a bad bear market and turns down the volatility in your portfolio at a time when you're unlikely to be richly rewarded for risk taking.

Jason Brady, a portfolio manager at Thornburg Investment Management, notes: "When the price of everything goes up, it stands to reason these investments become less attractive to own."

In this article, you'll learn not only about moves you can make within your stock and bond holdings to cut risk but also about the importance of re-embracing a long-forgotten asset class -- cash. Stocks don't rise 150% every five years; bond prices don't soar when interest rates rise. So prepare for skimpier returns and higher risk.

STOCKS: More expensive than you think

A popular way to tell if stocks are cheap or dear is to look at the market's price/earnings ratio using profit forecasts for the next 12 months. Based on this method, the S&P 500's P/E is 16, which is more than 15% higher than the market's long-run average.

That's worrisome, but here's what's truly scary. If you calculate the market's P/E based not on projected profits but on 10 years of averaged earnings -- a more conservative and more reliably predictive method championed by Yale finance professor Robert Shiller -- the S&P 500's ratio is actually above 25.

Over the past 130 years, there have been only a handful of periods in which the market's P/E has hit this level: 1901, 1928 to 1930, 1996 to 2002, and 2003 to 2007, just before the financial crisis. Each of those periods gave way to (or in the case of the irrational-exuberance era, included) a ferocious bear market.

This note of caution isn't about making a short-term market call. Those periods also show that stocks can remain at frothy levels for years.

Related: Where to make money in 2014

In the current case, the S&P 500 just topped 25 in November. "Sure, valuations can go higher from here," says Robert Arnott, chairman of the investment advisory firm Research Affiliates. "But that's a game I choose not to play."

That's because the long-term bet against the Shiller P/E is a loser. Since 1926, when the market's valuation has exceeded 25, the average inflation-adjusted annual return for stocks has been a mere 0.5% over the subsequent decade. (A five-year P/E calculated by the Leuthold Group yields a better, though still bad, result.) The average annual real return for stocks is about 7%.

Your best moves

Ease up on "Fed-dependent" stocks. That's what Mark Freeman, chief investment officer at Westwood Holdings Group, calls stocks that benefited most from the Fed's super-low rate policies.

Freeman says quantitative easing, by lowering the cost of capital dramatically, has driven investors toward smaller companies that tend to be heavy borrowers. Thus far, that has worked out fine. Small-company stocks, which had been outpacing shares of large companies since 2000, got a second wind after the Fed's latest bond-buying program started in the fall of 2012.

The problem is that valuations for small caps are way up. Historically, small stocks have traded at around the same P/E as blue chips, based on five years of average profits, according to the Leuthold Group. Today they're 25% more expensive.

While small stocks outperform large ones over long periods, this isn't the time -- or the price -- to be buying up the little guys.

Dial back your small-stock exposure, says Ramsey, by the amount they're overvalued -- say, 20% to 25%, and move that into blue chips. This is actually not a big step. Assuming you hold a fairly typical blend of mutual funds, for every $100 of your money invested in U.S. stocks, around $70 will be held in large-company shares and $30 in smaller names. A 25% reduction in this case works out to around an eight-percentage-point change.

Then trim your stock allocation five percentage points or so from sectors that have directly and disproportionately gained from artificially low yields. Among them: real estate, which got a boost from record low borrowing costs, and high dividend-paying utilities, which were considered an alternative source of income in a low-rate world.

Related: Quiz: Are you a markets whiz?

If you own a REIT or utility fund through a 401(k) or IRA, selling won't trigger taxes. Own them in a taxable account, though, and you'll have choices to make. You can offset capital gains by selling some emerging-market holdings, which are largely down over the past three years. If you don't have losses and don't want a tax bill, you can start putting new money elsewhere.

Freeman recommends shifting into shares of larger multinational companies with above-average sales and earnings growth. You can find these types of companies in T. Rowe Price Blue Chip Growth (TRBCX) and Primecap Odyssey Growth (POGRX), both on the MONEY 50 list of recommended mutual and exchange traded funds.

Move some money into foreign stocks. Sharon Hill, a portfolio manager with Delaware Investments, says relative to the U.S., foreign equities are downright attractively priced. Global stocks are selling at a 20% discount to domestic shares, even though historically they've traded on par with U.S. securities. So shifting out of U.S. stocks and into the broad foreign markets is a sound way to reduce risk, she says.

But do so within reason. Vanguard studied the usefulness of foreign stocks and found something interesting: While adding international exposure gradually reduces volatility in your portfolio, the diversification benefit starts to dissipate once your overseas weighting jumps above around 40%.

If you have only minimal international exposure, shift five to 10 percentage points toward overseas holdings using a broad-based fund such as Vanguard Total International Stock (VGTSX) or Dodge & Cox International Stock (DODFX), both in the MONEY 50. If you already keep more than a third of your equities abroad, go up to 40% but no more.

BONDS: This time they're not a safe bet

Look back over the major bear markets for stocks, and in almost every case bonds did an admirable job of limiting the damage. On several occasions, in fact, fixed income delivered double-digit gains. Yet with market interest rates at such low levels thanks to Fed policy, it's hard to imagine that bonds can offer you that kind of shelter this time.

Bull markets in stocks are usually killed by rising interest rates, which also crimp bond prices. In the past, however, bond yields were high enough to compensate you for the drop in value. For example, when the Fed lifted rates in 1973, which helped trigger the equity bear market of 1973-74, 10-year Treasury notes were yielding over 7%. So even though bond prices fell that year, intermediate government bonds returned nearly 5%.

Today the math simply doesn't work. If the 10-year note's interest rate was to rise by one percentage point, a broad-market bond fund would probably lose about 6% of its value. Tack on a yield of less than 3%, and you're losing money.

That's pretty much what happened last year when investors feared the Fed would start to taper its bond-buying program. And the average long-term government bond fund, which is very sensitive to interest rates, racked up a 12% loss.

Related: Tweak your bond mix in 2014

It's not just short-term returns you have to worry about. The Leuthold Group studied the historical performance of bonds and found that there is a simple rule of thumb: Whatever the yield on 10-year Treasuries currently is, that's about the annual total return you can expect from bonds over the next decade. Today that yield is a historically low 2.8%. That's around half the average return for bonds.

Your best moves

Lend less to Uncle Sam. You can diminish risks in your bond portfolio by taking 20% to 25% of your exposure to funds with big stakes in U.S. government debt and shifting that money into other segments of fixed income.

For instance, yields on municipal bonds look relatively attractive -- especially since the improving economy is strengthening state and city finances. So, too, do high-quality corporate bonds.

Don't buy a lot of junk. Just be careful with higher-yielding securities, such as junk bonds, strategists say. When yields are low, investors tend to plow money into higher-paying stuff. But eventually all that buying drives yields down, as we've seen in the past year. Now you're often not being paid enough for the extra credit risk you're taking, except possibly with debtors classified just slightly below investment grade.

It's not just the higher possibility of default that's a problem. "You take on a different level of risk that's more highly correlated with stocks," says Mary Ellen Stanek, director of asset management for Baird.

Indeed, U.S. government bonds often go up when stocks go down. Junk historically moves more or less in sync with equities. "At the end of the day," Stanek says, "you want your bond portfolio to truly behave like a bond portfolio when it most needs to."

CASH: Bulk up on a forgotten asset

Before the Federal Reserve under Alan Greenspan hammered interest rates into the ground starting in the 1990s, cash was a part of many prudent investors' portfolios. A savings account or money-market fund lowered portfolio volatility, provided income, and allowed holders to scoop up bargains when stocks fell.

Given today's stock and bond valuations and the fact that interest rates are bound to rise, "there's nothing wrong with pulling 10% off the table and sitting in cash," says James Stack, a market historian and editor of the InvesTech Research newsletter.

This is especially true, he says, for investors who are within 10 to 15 years of retirement or are already retired.

Younger investors with more time to recover from subpar returns don't have to play as much defense. But, Stack says, they may choose to go to cash to be opportunistic -- to jump on stocks once prices fall substantially.

Greg Schultz, a principal with Asset Allocation Advisors, thinks you can go even higher -- to around 15% cash, by reducing both stock and bond holdings. That may sound radical, but even at today's depressing cash yields, many successful portfolio managers keep 5% to 10% of their assets in cash when they can't find attractively priced investments to buy.

And there are plenty of things that a stash of cash can do for you.

Your best moves

You'll turn paper profits into actual ones. Since selling winners will trigger capital gains taxes, do it in your tax-sheltered 401(k)s and IRAs as part of your rebalancing, along with the stock and bond moves suggested above. Alternatively, you can simply start putting money into an online-only bank savings account that now pays close to 1% interest and build up a position during the year.

You can hedge your bond holdings. In a rising interest rate environment, cash will progressively gain value at the same time as some of your bonds are apt to lose ground.

You'll still be in the game. Even if the stock market continues to climb, having a 10% stake in cash won't prevent you from taking part in the gains. A balanced portfolio with a 60% stock/40% bond allocation, for instance, returned 15.3% last year. Had you shifted that to a 55% stock/35% bond/10% cash allocation, you'd have earned one point less.

And you will stay strong. Because cash will cut losses and volatility, it just might help you stay the course in the rest of your portfolio, says Schultz. "Yes, there's an opportunity cost, but common sense tells you that if things are richly priced today, there will come a time when they will be cheaper," he says.

Money in the bank will help you handle the selloff while positioning yourself for the eventual rebound. To top of page

What, you worry?

There's a troubling sign that can't be ignored -- P/E ratios are above 25. This bodes poorly for future stock performance.

Average 0.5%
Worst -6.1%
Best 6.3%

NOTES: P/Es based on 10-year profits. SOURCE: AQR Capital

First Published: January 6, 2014: 9:29 AM ET


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Millennials turn up heat against low wages

millennials union protest

Janah Bailey, 21, has participated in several strikes for higher pay at her fast food job over the last year.

NEW YORK (CNNMoney)

Stuck in low-wage or part-time jobs with mountains of student loans to pay off, the generation that came of age in the new millennium finds itself in a hopeless situation. Despite being better educated than previous generations, many young people are shut out of the middle class with no road map of how to get there.

So many of them are joining protests, showing up at rallies, or forming unions to improve their situation.

In the past year, millennials turned up the heat against low wages at Victoria's Secret, Wal-Mart (WMT, Fortune 500), McDonald's (MCD, Fortune 500), Wendy's (WEN), KFC (YUM, Fortune 500) and others like Kaplan (GHC), which runs tutoring centers.

Some achieved a measure of success. Debbra Alexis, a 27-year-old Victoria's Secret employee with a bachelor's degree in health sciences, gathered more than 800 signatures in support of her campaign for higher pay at her New York City store. The store, part of L Brands (LB), ended up giving across-the-board raises of about $1 to $2 per hour to all workers in the Herald Square store.

A group of Kaplan tutors in New York City also formed a union to bargain for higher pay.

Some fast food workers wrangled wage increases or better hours. But union-organized rallies are calling for broad-based change and minimum wages of $15. Wal-Mart workers nationwide have also protested, calling for higher pay and more hours.

Related: The real budget of McDonald's workers

Janah Bailey has participated in several strikes in Chicago, where union-backed groups Fast Food Forward and Fight for 15 have been calling for $15 an hour pay.

Bailey, 21, is studying to be a cosmetologist and works two jobs -- 40 hours at Wendy's (WEN) and 12 to 16 hours a week at McDonald's (MCD, Fortune 500). Her weekly paycheck is usually about $400, or about $20,000 a year.

Bailey is the primary caregiver of her family of two younger siblings and mom. She pays $750 a month for rent, $50 for heat and $300 for groceries. Her checking account has $5 and her savings account is empty.

Related: Worker wages: Wendy's vs. Wal-Mart vs. Costco

Bailey worries about her future and whether her education will land her a better job.

"We see a lot of people who get degrees and they're still struggling to find better paying jobs," she said. "I'm speaking out because my plan may not land me where I want to go."

Bailey's concerns are not unfounded. The number of minimum wage workers with associates degrees, or in occupational programs like she is, more than doubled to 223,000 from 2007, according to the U.S. Labor Department.

The number of college graduates in minimum wage jobs also doubled during the recession to 284,000 in 2012 from 2007.

"They're coming out of college with huge debts and having to take low-wage jobs. [So they're] trying to fight back," said Bill O'Meara, president of the Newspaper Guild of New York, which represents a group of Kaplan tutors in New York City who unionized hoping to bargain higher pay.

Middle class jobs have lost ground just as millennials have entered the workforce. Some 58% of the jobs created during the recent economic recovery have been low-wage positions like retail and food prep workers, according to a 2012 report by the National Employment Law Project. These low-wage jobs had a median hourly wage of $13.83 or less.

Median household income has also dropped by more than $4,000 since 2000, according to the Census Bureau.

Heidi Shierholz, an economist at the Economic Policy Institute, said more young people are joining protests now because the unions' demands resonate with them. Raising the minimum wage and securing better hours, or speaking up for better working conditions, are a big part of the public discourse of the times.

President Obama has lately talked about rising inequality and called for a higher minimum wage.

In a speech earlier this month, Obama said, "We know that there are airport workers and fast food workers and and nurse assistants and retail sales workers who work their tails off and are still living at or barely above poverty. And that's why it's well past the time to raise a minimum wage."

Bailey, the Chicago fast food worker, said such political backing gives her hope that things can change.

"Every time I think of the campaign, I think ... it would be a victory," she said. "It would mean financial freedom." To top of page

First Published: January 6, 2014: 7:10 AM ET


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Stocks flat as investors return from break

dow 1030

Click for more market data.

NEW YORK (CNNMoney)

The Dow Jones industrial average, the S&P 500 and the Nasdaq were all mostly unchanged.

And there's a new index in town! CNNMoney's Tech 30 Index made its debut Monday. The index is designed to give investors a snapshot of 30 tech industry leaders around the globe.

The index includes U.S. tech heavyweights such as Apple (AAPL, Fortune 500), Google (GOOG, Fortune 500), Microsoft (MSFT, Fortune 500) and Facebook (FB, Fortune 500) as well as international companies Baidu (BIDU) and SAP (SAP). The Tech 30 was down slightly.

After starting the year with a lackluster performance last week, stocks could continue to tread water in the run-up to Friday's big jobs report.

Investors are also awaiting the release of minutes from the Federal Reserve's December meeting, when it announced plans to trim its monthly bond purchases by $10 billion to $75 billion beginning this month.

"Investors, I think, will stay on the sidelines until we get the Fed minutes out of the way," said Peter Cardillo, chief market economist at Rockwell Global Capital.

Related: Read more about CNNMoney's new Tech 30 index

Gold prices fell sharply before bouncing back, in what some traders said was probably an erroneous move or "fat finger" trade. The metal was trading slightly higher at about $1,240 an ounce in mid-morning trading.

Later Monday, the U.S. Senate is expected to confirm Janet Yellen to serve as the next chair of the Federal Reserve, after Ben Bernanke's second term ends in January.

In corporate news, Men's Wearhouse (MW) launched a hostile bid for rival suit seller Jos. A. Bank (JOSB). After a series of friendly offers and counter offers, Men's Wearhouse made a $1.6 billion cash offer and notified that it will nominate two members for its board of directors.

Related: Fear & Greed Index still shows greed

Liberty Media Corporation (LMCA) unveiled a complex proposal to take full control of satellite radio company Sirius XM Holdings (SIRI) by swapping stock. Liberty already owns a controlling stake in Sirius, but one analyst said the move is linked to a potential deal between cable companies Charter Communications (CHTR, Fortune 500) and Time Warner Cable (TWC, Fortune 500).

Charter, which Liberty also owns a stake in, has reportedly been in talks with major banks to borrow money to fund a possible bid for Time Warner Cable.

Shares of Twitter (TWTR) fell sharply after the stock was downgraded by several analysts. Twitter had a strong rally last month, but shares have been volatile recently as analysts have warned that the stock is overvalued.

SolarCity (SCTY) shares jumped after being upgraded by Goldman Sachs. SolarCity's chairman is Tesla (TSLA) CEO Elon Musk.

European markets were slightly higher in midday trading after the latest purchasing managers' survey showed the euro zone services sector lost some momentum in December. Many Asian markets ended lower. The latest report from HSBC on China's services sectors showed a slower rate of growth in December, adding to the downbeat tone. To top of page

First Published: January 6, 2014: 9:50 AM ET


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Meet CNNMoney's new Tech 30 stock index

tech 30 tout 2

The CNNMoney Tech 30 index measures the performance of 30 major technology stocks around the world.

NEW YORK (CNNMoney)

The goal of the Tech 30 is to give CNNMoney readers a daily look at how shares of the most influential technology companies are faring.

The editors and writers of CNNMoney's technology team picked the 30 companies. To qualify, the stocks had to have shares publicly traded in the United States that are easy for the average investor to buy. (Sorry, Samsung!)

The Tech 30 is a mix of the industry's giants, such as Amazon (AMZN, Fortune 500), Apple (AAPL, Fortune 500), Cisco (CSCO, Fortune 500), Facebook (FB, Fortune 500), Google (GOOG, Fortune 500) and Microsoft (MSFT, Fortune 500).

But we also included Chinese tech titans Baidu (BIDU) and Sina (SINA), European heavyweights SAP (SAP) and ARM Holdings (ARMH) and leaders in more specialized industries such as video game companies Activision Blizzard (ATVI) and Electronic Arts (EA), security firm Symantec (SYMC, Fortune 500) and online travel king Priceline (PCLN, Fortune 500).

Check out the entire CNNMoney Tech 30 portfolio

The pure-tech focus differs from other tech stock barometers. The Nasdaq, for example, is often cited as a "tech index" but only 42% of the composite is made up of tech companies. The S&P 500 Information Technology index includes several stocks that aren't typically considered at the cutting edge of tech, such as MasterCard (MA, Fortune 500), money transfer service Western Union (WU, Fortune 500) and consulting firm Accenture (ACN).

To track the performance of the Tech 30 index, we "invested" $1,000 in play money in each of the 30 stocks on January 2, 2014. So the baseline for the index is $30,000.

The CNNMoney Tech 30 portfolio page displays values for both the index as a whole and the specific stocks. The graphic at the top of the page measures the stocks' performance relative to one another from the beginning of the year. The bubbles for the better-performing stocks will appear larger.

We don't plan to make regular changes to the Tech 30. But if a current Tech 30 company is acquired or goes private, we'll replace it by "investing" in a different stock.

We may also choose to add shares of newly public companies when appropriate. Twitter (TWTR), for example, was not on our original list when we first started thinking about creating the index last summer. But we knew we had to add Twitter to the Tech 30 once it filed for its initial public offering.

We'll include the Tech 30's performance in our daily market writes as well as in stories from our investing and technology writers about these 30 companies.

Check out the CNNMoney Tech 30 here. To top of page

First Published: January 6, 2014: 6:21 AM ET


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Stocks: Wary mood as investors return

sp 500 futures

Click on chart to track premarkets

NEW YORK (CNNMoney)

U.S. stock futures were swinging between modest gains and losses ahead of the opening bell Monday, after a lackluster start to 2014. Stocks ended mixed last week and trading volume was anemic.

U.S. investors and traders will likely be cautious Monday as they await Friday's jobs report and other economic news later this week.

Coming up Wednesday will be the release of minutes from the Federal Reserve's December meeting, when it announced plans to trim its monthly bond purchases by $10 billion to $75 billion beginning this month.

"Investors, I think, will stay on the sidelines until we get the Fed minutes out of the way," said Peter Cardillo, chief market economist at Rockwell Global Capital.

Related: It's time for investors to get back to work

Later Monday, the U.S. Senate is expected to confirm Janet Yellen to serve as the next chair of the Federal Reserve, after Ben Bernanke's second term ends in January.

Related: Fear & Greed Index, back to greedy

European markets were slightly higher in midday trading after the latest purchasing managers' survey showed the euro zone services sector lost some momentum in December.

Many Asian markets reopened after an extended holiday break Monday and pushed lower. Japan's Nikkei fell 2.4% over the course of the day, playing catch-up with other international markets that declined last week. Chinese stocks also dropped.

The latest report from HSBC on China's services sectors showed a slower rate of growth in December, adding to the downbeat tone.

Anti-government protests in Bangkok have inflamed fears that the turmoil could spread further in Asia, after the Thai stock index plunged 12% last month.

Related: Senate set to confirm Yellen as Fed Chair

On Friday, the Dow rose slightly while the S&P 500 and Nasdaq finished lower again, adding to Thursday's 1% declines. To top of page

First Published: January 6, 2014: 5:20 AM ET


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Biggest risk to markets? Global politics

ian bremmer

Ian Bremmer, founder of the Eurasia Group, is more worried about global political instability than a new financial crisis.

NEW YORK (CNNMoney)

Eurasia, which advises businesses on political and economic concerns, released its annual list of potential risks to global economic stability in 2014 -- and impending financial doom is not among them.

"That's over," the Eurasia analysts wrote in the report. "In 2014, big-picture economics are stable if not yet comforting."

Europe has emerged from recession and Japan's economy is shaking off decades of stagnation. The recovery in the United States is expected to accelerate this year even as the Federal Reserve gradually reduces its stimulus policies. China's new government is implementing reforms to make the world's second-largest economy more stable.

The relatively calm outlook comes after a period of heightened financial risks. Investors and economists have been on alert for another meltdown since 2008. But none of the dire predictions came to pass. The euro is still around. China has not crash landed. And the U.S. didn't fall off the fiscal cliff.

Despite all the partisan rancor in Washington, talk that political dysfunction would derail the economy was overblown, according to Eurasia.

Related: World markets: What's hot in 2014

"This year will be much less politically volatile, with further upside market implications," Eurasia analysts said.

So what should you be worried about? The main risks in 2014 are all geopolitical, according to Eurasia.

The report describes a shifting balance of power in which the U.S. is losing its influence abroad. Ian Bremmer, the political scientist that founded Eurasia Group, describes a clear lack of global leadership in his 2012 book "Every Nation for Itself: Winners and Losers in a G-Zero World."

The number one risk this year stems from U.S. foreign policy, specifically how Washington manages its relationship with key allies.

"U.S. allies perceive a poorly defined and vastly reduced U.S. role in the world," the Eurasia analysts wrote. "They question old assumptions about U.S. commitments and worry about Washington's reluctance to deploy military, economic, and diplomatic capital."

Eurasia is also concerned about the risk of unrest in emerging economies that will hold elections this year, including Brazil, Colombia, India, Indonesia and South Africa.

Related: World's best economies

There are also worried that China's new leaders will stumble as they overhaul the nation's economy. Iran is still a threat, despite signs of progress in talks with the West over the nation's nuclear program.

The Middle East will remain in turmoil this year, according to Eurasia. While the civil war in Syria is less of a risk to the broader region, the group predicts a resurgent threat posed by "Al Qaeda 2.0."

Other hotspots include Russia and Turkey, where political and economic forces are colliding.

Beyond geopolitics, the boom in unconventional energy could pose risks for "Petrostates," such as Saudi Arabia, as abundant supplies weigh on oil prices.

Eurasia also expects governments to surpass companies this year in the business of gathering "strategic data."

Of course, snooping by the U.S. government was the biggest stories of 2013 due to the revelation that the NSA had a massive surveillance program in place known as PRISM.

But Eurasia thinks that officials around the world will be collecting and aggregating more data on consumers' online behavior "both for purposes of domestic and international security as well as to support strategic economic priorities." To top of page

First Published: January 6, 2014: 8:00 AM ET


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Men's Wearhouse in hostile bid for Jos. A. Bank

mens wearhouse jos a bank

Men's Wearhouse has launched a hostile bid for rival Jos. A. Bank.

NEW YORK (CNNMoney)

On Monday, Men's Wearhouse launched a hostile bid, making a $1.6 billion cash offer and notifying Jos. A. Bank that it will nominate two members for its board of directors.

Jos. A. Bank made an offer to buy Men's Wearhouse for $2.4 billion last year. Men's Wearhouse rejected that bid and made an unsolicited bid of $55 a share for Jos. A. Bank -- a bid that was rejected.

Monday's offer by Men's Wearhouse would pay shareholders $57.50 per share, a premium of 6% from Friday's closing price for Jos. A. Bank (JOSB).

Shares of both companies were up 5% in premarket trading on the news.

"Although we have made clear our strong preference to work collaboratively with Jos. A. Bank to realize the benefits of this transaction, we are committed to this combination and, accordingly, we are taking our offer directly to shareholders," Men's Wearhouse (MW) CEO Doug Ewert said in a statement.

A spokesman for Jos. A. Bank said the company did not have any immediate response. The company previously said it believed the earlier $55 per share offer "significantly undervalued the company."

The hostile bid is not a surprise. On Friday, Jos. A. Bank announced a shareholders' rights plan, commonly known as a poison pill defense, to block a hostile bid by granting additional shares should any buyer acquire 10% of its shares.

It has been a bruising six months inside the board room at Men's Wearhouse.

Last June, Men's Wearhouse announced the firing of George Zimmer, its chairman, founder, largest individual shareholder and long-time pitchman.

Men's Wearhouse is under pressure from its largest shareholder, Eminence Capital, to push for a deal. To top of page

First Published: January 6, 2014: 8:19 AM ET


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