April 17, 2024

U.S. Consumer Prices Rise as Expected in July

The Labor Department said on Thursday its Consumer Price Index rose 0.2 percent as the cost of goods and services ranging from tobacco to apparel and food increased. The CPI had increased 0.5 percent in June.

July’s increase in consumer inflation was in line with economists’ expectations.

In the 12 months through July, the CPI advanced 2.0 percent, the largest increase since February, after increasing 1.8 percent in June.

The push in inflation to the Fed’s 2 percent target could offer some comfort to some central bank officials who have warned on the potential dangers of inflation running too low.

Stripping out energy and food, consumer prices rose 0.2 percent for a third straight month.

That took the increase over the past 12 months to 1.7 percent. The core CPI had gained 1.6 percent in June.

The uptick in prices fits in with Fed Chairman Ben Bernanke’s views that the low inflation was temporary.

The U.S. central bank has said it plans to start trimming the $85 billion in bonds it is purchasing each month to keep borrowing costs low later this year.

Most economists anticipate the Fed will make an announcement in September on the future of the bond purchasing program.

In July, prices for new motor vehicles, apparel, tobacco, medical care and shelter increased.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

Article source: http://www.nytimes.com/reuters/2013/08/15/business/15reuters-usa-economy-consumer.html?partner=rss&emc=rss

Sketch Guy: It’s Not Everyone’s Time to Buy a Home

My family and I are renters, and most of the time that feels fine. But last week I found myself in a state of temporary panic when I read this Twitter post from the financial journalist Felix Salmon: “John Paulson: if you rent, buy. If you own, buy a second home.”

When I read it, I immediately felt anxious. I recognized the feeling. It’s the feeling you get when you think you have to act on something right away or you’ll miss out. After all, if John Paulson, the guy who made “The Greatest Trade Ever,” was saying I should rush out and buy a house, I’d better get on it!

After allowing myself to get all worked up about this, I did what I’ve done several times before. I pulled out a piece of paper and a pencil and worked through the emotions and the numbers. In the end, I was reminded of something incredibly important.

John Paulson doesn’t know me or my situation.

There is absolutely no reason I should be making decisions based on something he said. The same is true for any other “expert” who decides to share his guess about what he thinks will happen next in the housing market.

The same holds true for the other three people who just happened to express similar concerns to me about buying right now. Two were convinced that if they didn’t buy a house now, they’d be priced out of the market, and maybe they will be. But I heard that argument a lot in 2005-6.

Then there was the third conversation I had.

It’s time for this person to downsize to a different home. The children have all moved out and the house just takes too much work. But even though it’s the right decision to sell now (given her individual situation) and buy a smaller home, a decision has been made to wait because the news, the forecasts and even the guesses are implying that the house could be worth substantially more sometime in the next 12 months.

This is madness!

Buying a home is one of the biggest financial decisions that most of us will make in our lifetimes. And yet it’s often a decision in which the person with the most knowledge about what makes the most sense gets overlooked: You.

There’s a simple way to fix this problem. As I was reminded last week, all it takes is a piece of paper, a pencil and some time. So if you’re struggling with this decision to buy (or sell), take a minute to think through these questions and write down the answers, because I suspect you’ll need to refer back to them the next time somebody decides to share what he thinks will happen with housing market. This list is not meant to be prescriptive. It is meant to get you thinking about something other than forecasts and guesses.

■ Can you afford it, and do you have enough saved for a down payment? Make sure you include the cost for things like property taxes, homeowner association fees and utilities.

■ Can you qualify for a loan? If the answer right now is no, then you can stop torturing yourself, because it doesn’t matter if the market is about to take off. You can’t buy a house.

■ How long do you plan to live in the home? There’s some debate about the minimum time you should live in a home for it to be worthwhile, but if it’s less than five years, forget about it.

■ What guess are you making about housing prices? It is a painful reality that the one variable that makes a huge difference in this decision is unknowable. What is going to happen to housing prices in the short term is anyone’s guess. But for your own sanity, just assume that housing prices will continue to increase by about the long-term average of inflation, or 3 percent. You really can’t afford to buy a house if the decision depends solely on what the house might one day be worth.

The answers to all of these questions will depend on you and your individual situation. And that’s the point. Hopefully it’s clear now how ridiculous it is to buy a house based on some stranger’s advice.

Through this process, you may discover that buying and owning a house isn’t for you, and that’s O.K., too. But these questions can also help end your anxiety around what is probably the biggest financial decision you’ll make. Don’t you think that’s worth a piece of paper, a pencil and a little time?

Article source: http://www.nytimes.com/2013/07/22/your-money/its-not-everyones-time-to-buy-a-home.html?partner=rss&emc=rss

Nudged by Gas Prices, Wholesale Inflation Rises

Wholesale prices rose 0.8 percent in June compared with May, when prices rose 0.5 percent, the Labor Department reported on Friday. It was the biggest gain since a 1 percent increase in September and was driven by a 7.2 percent surge in gasoline prices.

Outside of the volatile energy and food sectors, core inflation was up just 0.2 percent in June.

Core prices have risen 1.7 percent over the last 12 months. Aside from sharp swings in gas prices, inflation has increased very slowly over the last year, giving the Federal Reserve the room to keep interest rates low to lift the economy.

The government’s Producer Price Index measures inflation before it reaches the consumer. Consumer prices have been rising at a modest rate as well. Over the 12 months ending in May, consumer prices outside of food and energy were up just 1.7 percent, below the Fed’s 2 percent target for inflation.

For June, energy prices at the wholesale level were up 2.9 percent, reflecting the big increase in gas prices. It was the biggest increase since February.

Food costs rose 0.2 percent in June, a moderation after a larger 0.6 percent May increase in food that had been driven in part by a surge in the price of eggs. For June, egg prices retreated, falling 26.8 percent, the biggest one-month drop in seven years.

The wholesale price of passenger cars rose 0.8 percent in June, the biggest increase since November 2011, but most other categories showed moderation. Furniture prices were up 0.3 percent.

Total wholesale prices were up 2.5 percent in June compared with a year ago.

Article source: http://www.nytimes.com/2013/07/13/business/economy/nudged-by-gas-prices-wholesale-inflation-rose-in-june.html?partner=rss&emc=rss

Novelties: Estate Planning Is Important for Your Online Assets, Too

But you may want to provide for your virtual goods, too. Who gets the photographs and the e-mail stored online, the contents of a Facebook account, or that digital sword won in an online game?

These things can be important to the people you leave behind.

“Digital assets have value, sometimes sentimental, and sometimes commercial, just like a boxful of jewelry,” said John M. Riccione, a lawyer at Aronberg Goldgehn Davis Garmisa in Chicago. “There can be painful legal and emotional issues for relatives unless you decide how to handle your electronic possessions in your estate planning.”

Many services and programs have sprung up to help people prepare for what happens after their last login.

Google has a program called Inactive Account Manager, introduced in April, that lets those who use Google services decide exactly how they want to deal with the data they’ve stored online with the company — from Gmail and Picasa photo albums to publicly shared data like YouTube videos and blogs.

The process is straightforward. First go to google.com/settings/account. Then look for “account management” and then “control what happens to your account when you stop using Google.” Click on “Learn more and go to setup.” Then let Google know the people you want to be notified when the company deactivates the account; you’re allowed up to 10 names. You choose when you want Google to end your account — for example, after three, six or nine months of electronic silence (or even 12 months, if you’ve decided to take a yearlong trip down the Amazon).

Google has ways to make sure that your electronic pulse has really gone silent; it checks for traces of your online self, for example, by way of Android check-ins, Gmail activity and Web history. Then, a month before it pulls the plug, Google alerts you by text and e-mail, just in case you’re still there. If silence has indeed fallen, Google notifies your beneficiaries and provides links they can follow to download the photographs, videos, documents or other data left to them, said Nadja Blagojevic, a Google manager.

And if you just want to say goodbye to everything, with no bequests, you can instruct Google to delete all of the information in your account.

Naomi R. Cahn, a professor of law at George Washington University Law School in Washington, says Google’s new program is a step forward in digital estate planning. “People should carefully consider the fate of their online presences once they are no longer able to manage them,” she said.

Other companies may also be of help in planning your digital legacy. Many services offer online safe deposit boxes, for example, where you can stow away the passwords to e-mail accounts and other data. Accounts like this at SecureSafe, are free for up to 50 passwords, 10 megabytes of storage and one beneficiary, said Andreas Jacob, a co-founder. Accounts can be accessed from a browser, or from free iPhone, iPad and Android apps. The company also offers premium services for those who need a larger storage space, more passwords or more beneficiaries.

There is always your sock drawer or another physical repository to store a list of your user ID’s, should you be deterred from online lockboxes by fear of cyberattacks or the risk that computer servers that may not be there in a few decades, said Alexandra Gerson, a lawyer at Helsell Fetterman in Seattle.

“Make a private list of all your user names and passwords for all the accounts in which you have a digital presence, and make sure you update the list if you change login information” Ms. Gerson said. “Don’t put user names and passwords in your will, though, as it becomes a public record when you die.”

Make sure that your executor or personal representative understands the importance of preserving these digital assets, and knows how to find them, said Laura Hoexter, a lawyer at Helsell who also works on inheritance issues. “Preferably the person should be tech-savvy,” she said, and know about your online game accounts, your PayPal account, your online presence on photo storage sites, social media accounts and blogs, and even your online shopping accounts where your credit card information is stored so that the information can be deleted.

AFTER you die, an executor or agent can contact Facebook and other social media sites, establish his or her authority to administer the estate, and request the contents of the account.

“Most accounts won’t give you the user name and password, but they will release the contents of the account such as photographs and posts” to an executor, Ms. Hoexter said.

Transfer at death can depend on the company’s terms of service, copyright law and whether the file is encrypted in ways that limit the ability to freely copy and transfer it. Rights to digital contents bought on Google Play, for example, end upon the person’s death. “There is currently no way of assigning them to others after the user’s death,” Ms. Blagojevic said.

Encryption is a common constraint, but there are exceptions. Apple’s iTunes store, for example, has long removed its anti-copying restrictions on the songs sold there, and Ms. Gerson advises people to take advantage of this in their digital planning. “Get your music backed up on your computer,” she said.

Up to five computers can be authorized to play purchases made with one iTunes account, and a company support representative advises that users make sure that their heirs have access. At Kindle, too, family members with user ID information for the account can access the digital content.

Professor Cahn in Washington says the time to prepare for the digital hereafter is now, particularly if serious illness is a factor. “If someone is terminally ill,” she said, “in addition to getting emotional and financial issues in order, you need to get your Internet house in order.”

E-mail: novelties@nytimes.com.

Article source: http://www.nytimes.com/2013/05/26/technology/estate-planning-is-important-for-your-online-assets-too.html?partner=rss&emc=rss

DealBook: Regulator Cites Flaws in Ernst & Young’s Audit Procedures

Ernst  Young's headquarters in New York.Lucas Jackson/ReutersErnst Young’s headquarters in New York.

The United States regulator of accounting firms said on Thursday that a Big Four firm, Ernst Young, had been too willing to trust figures supplied by corporate executives instead of evaluating them independently and had failed to improve its procedures even after being told to do so.

The audits in question took place in 2009, covering the first year of the credit crisis. The regulator, the Public Company Accounting Oversight Board, did not identify the clients involved.

In nine of the 58 audits reviewed that year, the board said, Ernst “identified a fraud risk” and found a deficiency in the company’s statements. But in each of those cases, “the firm’s procedures did not sufficiently address the identified risk.”

The report did not say whether any fraud had taken place.

The Sarbanes-Oxley Act of 2002 established the board, which reviews audits by large firms every year and issues a limited public report that does not include board criticisms of the firm’s quality controls.

The accounting industry lobbied hard to prevent those criticisms from being disclosed, fearing they would damage public confidence in audits. Congress provided that they would remain secret unless the board determined that the firm had failed to remedy problems within the 12 months after the report was issued.

Ernst became the third member of the Big Four to face such a disclosure after failing to convince the board that it had made sufficient changes in procedures, joining Deloitte Touch and PricewaterhouseCoopers. Only KPMG has not been cited for failing to make needed improvements.

In a statement, Ernst said it had taken “significant remedial actions” in response to the board report, but added, “We recognize we can and will continue to improve.”

In the report, given to the firm in 2010 but not released to the public until Thursday, the board said its review raised “questions regarding the sufficiency, rigor and efficacy” of the firm’s evaluation of work done by its auditors. “The inspection observations suggest the possibility that more attention needs to be devoted to supervision and review activities in connection with the audits of areas involving a high degree of judgment,” as well as areas subject to management estimates.

That observation could be significant in the current climate as the board considers whether it should require that audit firms disclose the name of the lead auditor on each audit. Accounting firms have generally opposed that suggestion, saying that each firm stands by all of its audits and that all are of similar quality. A decision on the proposal is on the board’s agenda for this year, a board official said.

In the report, the board cited seven audits in which Ernst had not done enough work to verify assumptions used by management. “In numerous instances, the inspection team observed that the firm’s support for significant areas of an audit consisted of uncorroborated management’s views.” In some cases, the board said, companies used assumptions that were contrary to past experience, but the auditor had accepted them without challenge.

Article source: http://dealbook.nytimes.com/2013/05/23/regulator-cites-flaws-in-ernst-young-procedures/?partner=rss&emc=rss

DealBook: Comparing the Valuations Behind Amazon and Apple Shares

And people wonder why it’s hard to understand the stock market.

Take a consumer sitting at home buying stuff on Amazon.com with his iPhone. To him, Apple’s product is a clear leader in the market, while Amazon is the retailer he uses most. Amazon’s shares are up nearly 40 percent over the last 12 months, while Apple’s are down nearly 30 percent over the same period. So why have their stock prices diverged so much when both companies appear to be at the top of their game?

Growth is the most common answer you’ll hear. When a company convinces investors that its earnings can keep going up, an enthusiasm grows around the shares, and they tend to perform well. Wall Street analysts expect Amazon’s earnings next year to be 66 percent higher than the forecast for 2013. They project a 10 percent uptick for Apple.

But there’s another conversation you need to have.

It revolves around whether the market has already factored the hoped-for growth into the stock price. It is possible to pay too much for excellence.

There are all sorts of ways to gauge how much credibility investors ascribe to a company’s “growth story.” One is to look at what investors are paying now for a company’s free cash flows, or the hard dollars it takes in from profits (minus the spending it does on plant and equipment). The results are stark. Apple’s stock market value is nine times last year’s free cash flows. On this metric, Amazon is at over 300 times. Sane investors would never touch a stock with such a dear valuation unless they felt cash flows were going to soar in the future.

And this brings us to the part of investing that usually separates winners from losers: guessing whether companies will actually do what we expect them to.

Amazon’s believers don’t mind that it’s spending such huge amounts on setting up new operations for its retail and data businesses. At some point, hopefully in the not too distant future, that spending will fall as the expansion reaches its limits. In that case, Amazon will be churning out much bigger cash flows as it enjoys near unassailable dominance.

Sure, but how wondrous will those cash flows be? Amazon’s operations produced $4.2 billion of cash flows last year. Let’s generously assume 10 percent annual growth for them, which would take them to $5.1 billion by the end of 2014.

Let’s be kind again and assume that capital expenditures fall a lot, to, say, $1 billion a year, from last year’s $3.8 billion. Free cash flows in 2014 would therefore total $4.1 billion.

Now, remember, at this future point, Amazon’s growth in free cash flow will have slowed a lot. Investors will probably decide to attach a lower valuation to the company. Being generous, let’s assume they value those hypothetical 2014 free cash flows at 21 times, Google’s multiple today. That would give Amazon a market worth of about $86 billion. That’s 30 percent lower than today.

Of course, the stock market believes what it wants to believe. It may well decide to remain starry-eyed about Amazon and give it a much higher valuation for years to come. But Apple’s recent drubbing suggests even the strongest runs can end nastily.

Article source: http://dealbook.nytimes.com/2013/04/24/comparing-the-valuations-behind-amazon-and-apple-shares/?partner=rss&emc=rss

Bucks Blog: Dealing With Uncertainty

As Paul Sullivan writes in this week’s Wealth Matters column, 2012 was a year of uncertainty, and it looks as if 2013 will at least begin that way. And with investors’ memories of the collapse in equity markets in 2008 still fresh, financial advisers say they have spent much of the last 12 months trying to get their clients to let go of their fears.

As one adviser told Paul, the markets’ performance in the next five years will probably not be similar to its performance in the last five. So investors should move away from worrying about whether they will get their money back and start thinking about making money.

What about you? Do you feel confident in the markets, despite worries about the fiscal negotiations? What have you done with your investments and what are you planning to do in the new year?

Article source: http://bucks.blogs.nytimes.com/2012/12/28/dealing-with-uncertainty/?partner=rss&emc=rss

Economix Blog: Little Clarity on the Jobs Front

The jobs report for November has something for every side of the current economic argument. Are you convinced the economy is growing decently? The adding of 146,000 jobs in November sounds good. So does the unemployment rate falling to 7.7 percent.



Notions on high and low finance.

Are you convinced the recovery is in peril? The previous two months’ job numbers were revised lower, and the unemployment rate went down only because the labor force declined. The number of manufacturing jobs fell for the third time in the last four months — a string not seen since the depths of the credit crisis in 2009.

At the heart of the confusion is that there are two separated surveys every month, one of households and one of employers. To make things a little more confusing this month, the household survey covered the week of Nov. 4-10, a week earlier than it normally would have, so that the survey would be finished before the Thanksgiving holiday. That meant it covered the week after Hurricane Sandy, which must have had some impact in the affected states. The household survey also tends to be more volatile.

Over time, the two surveys give similar pictures, and that is true now. Over the last 12 months, the household survey says we have added 2.6 million jobs. The establishment survey puts the figure at 2.0 million. (That figure is after adjusting for the coming benchmark revision, which will add 386,000 jobs in the 12 months through March 2012. For purposes of this analysis, I assumed those jobs were spread equally over the period.)

The numbers will not get the fevered debate they did when they came out before the election, for reasons that are obvious. But on balance they indicate an economy that is growing, but that could be threatened if the European recession deepens, reducing the demand for American manufactured exports, or if the Congress and president end up slamming the brakes on fiscal policy with a combination of slashed spending and higher taxes.

Article source: http://economix.blogs.nytimes.com/2012/12/07/little-clarity-on-the-jobs-front/?partner=rss&emc=rss

Nation’s Home Prices Rose 2% in August

WASHINGTON (AP) — Home prices rose in August in nearly all American cities, and many of the markets hit hardest during the crisis are starting to show sustained gains. The increases were the latest evidence of a steady housing recovery.

The Standard Poor’s/Case-Shiller index that was released on Tuesday showed that national home prices increased 2 percent in August compared with a year earlier. This was the third straight increase and a faster pace than in July.

The report also said that prices rose in August from July in 19 of the 20 cities tracked by the index. Prices had risen in all 20 cities in the previous three months.

Cities that had experienced some of the worst price declines during the housing crisis are starting to come back. Prices in Las Vegas rose 0.9 percent, the first year-over-year gain since January 2007. Prices in Phoenix are 18.8 percent higher in August than a year earlier. Home values in Tampa and Miami have also posted solid increases over the period.

Seattle was the only city to report a monthly decline. Still, prices there fell just 0.1 percent in August from July and are 3.4 percent higher than a year earlier.

Prices in Atlanta have fallen 6.1 percent over the 12 months that ended in August, the largest year-over-year decline. But Atlanta has posted the largest price gain among the 20 cities over the last three months, according to Trulia, a housing analysis firm.

“The sustained good news in home prices over the past five months makes us optimistic for continued recovery in the housing market,” said David Blitzer, chairman of the Case-Shiller index.

The steady increase in prices has helped many home markets slowly rebound nearly six years after the housing bubble burst, lifted further by the lowest mortgage rates in decades.

The S. P./Case-Shiller index covers roughly half of American homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The figures are not seasonally adjusted, so some August gains reflect the benefit of the summer buying season.

Stan Humphries, chief economist at the housing Web site Zillow.com, expects the monthly price figures will decline in the fall and winter. “This doesn’t mean the housing recovery has been derailed,” he said. “This is exactly what bouncing along the bottom looks like.”

Other recent reports, on construction and sales, have also shown an improving market, albeit from depressed levels.

Article source: http://www.nytimes.com/2012/10/31/business/economy/housing-price-index-rises.html?partner=rss&emc=rss

Bucks: Few Americans Feel Better Off Than They Were Last Year

Just 17 percent of Americans say they are better off financially than they were last year at this time, according to a new Bankrate.com survey.

Greg McBride, senior financial analyst for Bankrate.com, cited the weak economy, sluggish housing sector and a volatile stock market in the results: “Americans’ feelings about their savings, debt and net worth continue to erode,” he said in a statement.

Bankrate.com’s Financial Security Index fell in October to 92.8 from 93.9 and is now at its second-lowest level of the year. (Any reading below 100 indicates feelings of less financial security relative to 12 months ago.)

The study was conducted in October by Princeton Survey Research Associates International, using landline and cellphone interviews with a nationally representative sample of 1,000 adults. The margin of sampling error is 4 percentage points. The full survey can be viewed here.

In other findings, just 11 percent of Americans are more comfortable with their savings now compared with one year ago, and only 20 percent of Americans are more comfortable with their debt now, a figure that has dropped every month since June.

Nineteen percent of Americans report higher net worth than one year ago, while 30 percent report lower net worth.

The survey found that older Americans have been hit hard by the economic turmoil. Thirty one percent of Americans from ages 50 to 64 feel less secure in their jobs, and 56 percent of those from ages 50 to 64 feel less comfortable with their savings, while only 5 percent are more comfortable.

One bright spot (for waiters, at least): 70 percent said their tipping habits haven’t changed due to the economy.

Do you feel your financial situation is better or worse than it was a year ago?

Article source: http://feeds.nytimes.com/click.phdo?i=c2e868c95ccee9e1b76e11b7905ee565