Edelman Names Personal Finance Guru David Bach Vice Chairman

Edelman Financial Services announced Thursday that personal finance author, educator and former advisor David Bach has become vice chairman of the advisory firm.

Ric Edelman, who will continue as CEO and chairman, says Bach will serve alongside him to boost the firm’s educational activities, which already include weekly radio and television programs, media interviews, seminars, newsletters, blogs and personal finance books.

The duo also plans to recruit “hundreds of advisors” from around the country to join the firm’s 35 current offices or manage new ones that the firm plans to open, which Edelman says is “all part of the firm’s goal of serving 1 million Americans.”

Edelman says Bach joins the firm as it continues “remarkable growth.” The firm has more than 24,000 clients nationwide, with more than $12.75 billion in assets under management, has added 4,500 clients last year and “is on pace to do the same in 2014.”

Edelman has written written eight books and is a No. 1 New York Times bestselling author, while Bach is the author of twelve consecutive national bestsellers, including the No. 1 New York Times bestsellers, The Automatic Millionaire and Start Late, Finish Rich. Bach also appeared numerous times and was a regular contributor to NBC’s The Today Show.

“I’ve dedicated the past 20 years of my life – first as a financial advisor and now as a financial educator – to providing objective financial advice to millions of Americans via my books, seminars and media appearances,” Bach said in a statement. “Teaming with Ric now is a professional thrill as it allows me to leverage my experience and financial education platform to reach more people and connect them nationwide to this premier advisory firm.”

Edelman and Bach will also deliver practice management training and consulting services for advisors to help them improve their practices and the services they provide to their clients.

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Fed: U.S. Economy Needs to Tighten Up Before Rates Can Rise

Andrew Harrer/Bloomberg via Getty ImagesFederal Reserve Governor Jerome Powell LONDON -- Federal Reserve Governor Jerome Powell said Friday that he wanted to see signs that the U.S. economy was tightening up before interest rates could be raised. While acknowledging that employment in the United States had rebounded, Powell highlighted "significant" slack, referring to unemployed or underutilized workers. The Fed hopes to end its stimulus program for the U.S. economy by the end of the year, clearing the way for it to eventually raise interest rates. "I'm looking for some sign the economy is getting tight before we can start thinking about raising rates," Powell said at an event in London. Powell added there was a "significant amount of slack in the labor market" in the United States at present. In brief prepared remarks, Powell said the Fed's evolving statements about the future path for rates have played an important role in shaping market expectations about U.S. monetary policy. With the overnight federal funds rate stuck near zero for years, he said the management of expectations has been important in allowing investors to buy and sell bonds with confidence that rates wouldn't unexpectedly increase. That, for example, has lowered the premium charged for longer-term loans, and helped tamp down volatility as well, Powell said. "Forward guidance has generally been effective in providing support for the economy at a time when the federal funds rate has been pinned at its effective lower bound," said Powell, who is awaiting Senate confirmation to a new 14-year term on the Fed board. Powell added that markets were "well aligned" with the guidance the central bank has offered about the likelihood that its asset-buying program will be stopped by the end of the year. -.

Frequent Flyer Smiles: It's Easier to Redeem Miles

Getty Images @Lebeaucarnews Here's something those trying to cash in on frequent flyer miles or points seldom hear: It's now easier to book the flight you want to the destination you want. The annual Switchfly Reward Seat Availability Survey, which gauges the frequent flyer programs at 25 of the world's largest airlines, found seats were available for frequent flyer redemption on 72.4 percent of the flights checked. That's a 1.3 percent increase compared with the prior year. "I was surprised by this year's results," said Jay Sorensen, president of IdeaWorks consulting firm, which surveyed 7,640 flights in March. "Typically, when you see the industry recovering from financial duress, one of the things they cut back on is giving away free seats." Instead, many airlines have actually made frequent flyer seats available on more of their flights. Sorensen credits the boost to the independent credit cards many flyers now use to rack up award miles that they can redeem without restrictions. Those credit cards, like the one offered by Capitol One, have become popular with consumers, and have forced airlines to make it easier for members of their own frequent flyer programs to cash in miles or points in order to compete. "[The airlines] want to compete against the bank-issued credit cards, so this is one way for them to do that," Sorensen said. Another factor is an accounting rule that says airlines can book revenue from the sale of frequent flyer miles only after the passenger has traveled. Low-cost carriers offer the most options As has been the case in past years, low-cost carriers have the most flights offering seats for frequent flyer redemption, according to the study. On average, 95.8 percent of the low-cost airline flights surveyed had seats available. By comparison, traditional airlines had frequent flyer award seats on 65 percent of their flights. That's up 4 percent from last year, but still well below the availability offered by low-cost airlines. Airlines with the most flights with seats open for redemption

Rank	Airline	% of flights with seats open
1	Air Berlin	100
1	Southwest	100
2	Virgin Australia	99.3
3	JetBlue	92.9
4	AirAsia	92.1
5	GOL	90.7

Credit: IdeaWorks "The low-cost carriers tend to have a lot of frequency into the markets they serve, so they do have an inherent advantage," Sorensen said. The frequent flyer programs offered by airlines such as Southwest (LUV) and JetBlue (JBLU) are also younger than the programs at older, legacy carriers. As those airlines have merged and become bigger over the years, so have the number of members in their loyalty programs. That means there are more miles in those programs than in the programs offered by competitors. Among the largest airlines in the world, Delta (DAL) and United (UAL) flew in different directions in the latest report. Delta, which finished dead last in the 2013 survey, moved up to 16th place. IdeaWorks found frequent flyer seats available on 55 percent of the Delta flights it surveyed, an increase of 18.6 percent compared with last year. "I think Delta finally got around to looking at the health of their frequent flyer product and said, 'You know, we need to make some changes here,'" Sorensen said. By comparison, United Airlines slipped to 14th place in the survey. IdeaWorks found frequent flyer seats available on 71.4 percent of flights, down 8.6 percent.

Kellogg trading raises concern about takeover

DETROIT — Heavy trading volume of Kellogg stock continued Friday, but the shares retreated sharply from Thursday, when they surged 6% — the Battle Creek, Mich., cereal maker's biggest one-day gain in five years.

So speculation that Kellogg is a potential acquisition target cooled.

In an e-mail today to the Free Press, Kellogg spokesman Kris Charles said: "We don't respond to rumors and speculation."

The nearly century-old company that grew out of failed attempts to make granola that ended with Corn Flakes, has a market value of more than $23 billion. It has a global reach with many well-known brands, but is still deeply intertwined with Battle Creek and Michigan.

"Everyone isn't really sure what's going on," said Kara Beer, president of the Battle Creek Area Chamber of Commerce." People are just looking for answers. When something like this happens, everyone starts to wonder what's going to happen. But, nobody knows."

Kellogg, an active member of the local chamber, has about 2,000 employees in Battle Creek. But in February it said some jobs might be lost there after it opens a regional service center in Grand Rapids.

Kellogg shares rose to $66.39 by Thursday's close, just below its 52-week high of $67.98. But Friday some traders took profits and the shares fell nearly 4% to $63.77 while 6.8 million shares, or more than three times the average daily volume, changed hands.

Late Thursday Bloomberg News reported that more than 25,000 contracts giving investors the right to buy the stock changed hands.

"This is absolutely the kind of options action that could signal takeover activity," Christopher Rich, head options strategist at JonesTrading Institutional Services in Chicago said, according to Bloomberg. "Usually people sell out-of-the-money calls to generate extra income in a stock like this, but that was not what happened here this afternoon. There are definitely bullish Kellogg call buyers here."

In addition, Trade-Ideas — a company that tracks s! tocks — identified Kellogg as a "barbarian at the gate" candidate, TheStreet reported, referring to a 1989 book about the buyout of RJR Nabisco. The stock watcher drew this conclusion by looking at the company's average dollar volume and overall volume.

TheStreet said Trade-Ideas targets these stocks because it is "exhibiting an unusual behavior while displaying positive price action."

Still, high trading volume doesn't mean a deal is imminent.

Moreover, the company may be protected. One of Kellogg's largest shareholders is the W.K. Kellogg Foundation. The foundation was created in 1930 when the cereal pioneer W.K. Kellogg donated $66 million in company stock. Since then, it has grown to become one of the largest philanthropic foundations in the United States with more than $7 billion in assets.

Kellogg's began with cereal in 1906 as the Battle Creek Toasted Corn Flake Co.

W.K. Kellogg and his brother, Dr. John Harvey Kellogg, initially were trying to make granola. Instead, they created a recipe for cornflakes. Later, the company expanded to bran flakes.

Over the years, the company has grown to a global enterprise operating in 180 countries and diversifying its products to more than cereal, which declined in sales in recent years as Americans turn to alternatives such as fast food breakfasts.

In 2012, Kellogg purchased Pringles potato chips for about $2.7 billion, adding to its snack food brands. It makes Cheez-It, Townhouse crackers and Keebler snack foods.

But cereal is still important to Battle Creek residents.

"When you come to Battle Creek," Beer said, "you can roll down your windows and tell what is being made just by the smell."

What If Your Financial Planner Files for Bankruptcy?

By Hal M. Bundrick

NEW YORK (MainStreet) You trust your financial planner to be honest, knowledgeable and prudent, but financial setbacks can affect anyone even the wisest among us. What if your financial advisor files for bankruptcy? Would that impact your view of his advice?

Periodically, the Certified Financial Planner Board of Standards releases a list of CFP professionals who have declared personal bankruptcy within the last five years. The planners are not subject to disciplinary action, and the CFP Board does not investigate the filings.

"The CFP Board verifies the bankruptcy and notes the bankruptcy filing on the CFP professional's public profile, which is available through the search functions on CFP Board's website," a statement with the disclosure says. "The release of the information does not constitute discipline of these individuals and is provided only for the purpose of providing consumers with adequate information to make an informed decision with regard to engaging a CFP professional to assist with financial decisions." Michael Shaw, managing director for Professional Standards for the CFP Board reiterated the policy in a statement to MainStreet. "CFP Board believes its approach of publicly disclosing the names of CFP professionals who have filed for bankruptcy protection allows consumers to make a fully informed decision when choosing to work with [a] CFP professional," he wrote. But not all financial planners agree with the disclosure standards. In an anonymous comment to an article addressing the matter on the Financial Advisor magazine website, a writer took issue with the policy. "As someone who had been a CFP since 1986, I was stunned when the CFP Board came out with their 'publicize' position on bankruptcy," wrote the commenter under the name FormerCFP. "As a successful professional, I was bled to death by three Florida family-law attorneys in a 4 1/2 year divorce that cost me over $800,000 and forced me to file bankruptcy to keep me from being incarcerated (the laws in New Jersey and other states are equally abusive)."   The writer claimed the personal bankruptcy was not pertinent to his financial practice. "None of this had any impact on my clients or my profession," FormerCFP added. "Shame on you, CFP Board. You've overstepped your authority and the original purpose of the organization by doing this. I'd eliminate any action involving bankruptcies that can be tied to excessive medical bills or divorce proceedings. It's just not relevant to the certification." Some 42 certificants are listed on the CFP website's latest report as having filed for bankruptcy since 2008. But Andrew Wang, a portfolio manager and registered investment adviser in Mendham, N.J., believes the disclosure is not only proper, but necessary. "Because most CFP professionals fall under the jurisdiction of the Financial Industry Regulatory Authority (FINRA) and/or the U.S. Securities and Exchange Commission (SEC), consumers can and should perform a free search for their advisor at BrokerCheck," Wang told MainStreet. "Bankruptcy judgments within the past ten years are reportable events and will be reflected in the advisor's regulatory filings." "In my opinion, consumers deserve to know whether their financial advisor has filed for personal bankruptcy," Wang added. "Any blemish on an advisor's record should be taken seriously, because it has been reported that brokers have been able to successfully expunge black marks from their public records at an alarmingly high rate." Leanne Kramer, a CFP in Olympia, Wash., believes advisor credibility begins with being able to honestly say 'I walk my financial talk.' "In my opinion, a personal bankruptcy does not inspire confidence in the professional who is planning and managing the most important aspect of a client's life," Kramer says. "We are financial planners. We say 'live beneath your means, have emergency savings, have minimal debt, manage your risk, invest wisely.' If we are following our own advice, we should have a plan in place to weather many of the major life events. Isn't that what we tell our clients to do?"

Savvy moves give Fiat all of Chrysler — for a song

Fiat's agreement to buy the remaining 41.5% to own all of Chrysler reeks of financial savvy.

Fiat/Chrysler CEO Sergio Marchionne has engineered "a bit of a coup," said Max Warburton, industry analyst at Bernstein Research.

"He's being called 'Maestro,'" noted Bernard Swiecki, Industry analyst at the not-for-profit Center for Automotive Research.

The deal for Fiat North America to buy the rest of Chrysler for $4.35 billion from the United Auto Workers retiree health trust was disclosed in an announcement Wednesday.

Triggering the praise for Marchionne:

•Fiat will have bought an entire car company — a healthy, profitable one now — for about $6.3 billion, including money it's already paid. That's relative peanuts. Daimler-Benz paid $37 billion for Chrysler in 1998. Cerberus Capital and a group of investors paid Daimler $7.4 billion for 80% of Chrysler in 2007.

•Among the Chrysler assets Fiat acquires is $12 billion cash.

•By using Chrysler's own cash for some of the purchase price, Fiat avoids borrowing.

•Chrysler also said it got promises of union cooperation in the ongoing rollout to all company plants of Fiat-Chrysler World Class Manufacturing programs and benchmarking .

That appears to mean Chrysler's North American plants will have to meet global quality and efficiency standards, Swiecki says. But "it should not be that big a challenge. Restructuring ... has driven North American manufacturing facilities to being very efficient."

It also probably means standardized processes so that Fiat and Chrysler models could be built at any of the company's plants worldwide. That's a big part of Ford Motor's successful "One Ford" strategy. "Standardized practices at every manufacturing facility allow you to be more efficient, have better quality," says Swiecki.

Getting 100% ownership of Chrysler is "a significant, full victory for Sergio Marchionne," says Stephanie Brinley, analyst at IHS Automotive. She calls him "a tough negotiat! or."

She cautions against overenthusiasm, pointing out, "Fiat and Chrysler independently were both weaker, smaller players. Combining two weak companies may not result in one strong company, even with the opportunities for better efficiencies of scale, plant utilization, and purchasing power."

Savvy moves give Fiat all of Chrysler — for a song

Fiat's agreement to buy the remaining 41.5% to own all of Chrysler reeks of financial savvy.

Fiat/Chrysler CEO Sergio Marchionne has engineered "a bit of a coup," said Max Warburton, industry analyst at Bernstein Research.

"He's being called 'Maestro,'" noted Bernard Swiecki, Industry analyst at the not-for-profit Center for Automotive Research.

The deal for Fiat North America to buy the rest of Chrysler for $4.35 billion from the United Auto Workers retiree health trust was disclosed in an announcement Wednesday.

Triggering the praise for Marchionne:

•Fiat will have bought an entire car company — a healthy, profitable one now — for about $6.3 billion, including money it's already paid. That's relative peanuts. Daimler-Benz paid $37 billion for Chrysler in 1998. Cerberus Capital and a group of investors paid Daimler $7.4 billion for 80% of Chrysler in 2007.

•Among the Chrysler assets Fiat acquires is $12 billion cash.

•By using Chrysler's own cash for some of the purchase price, Fiat avoids borrowing.

•Chrysler also said it got promises of union cooperation in the ongoing rollout to all company plants of Fiat-Chrysler World Class Manufacturing programs and benchmarking .

That appears to mean Chrysler's North American plants will have to meet global quality and efficiency standards, Swiecki says. But "it should not be that big a challenge. Restructuring ... has driven North American manufacturing facilities to being very efficient."

It also probably means standardized processes so that Fiat and Chrysler models could be built at any of the company's plants worldwide. That's a big part of Ford Motor's successful "One Ford" strategy. "Standardized practices at every manufacturing facility allow you to be more efficient, have better quality," says Swiecki.

Getting 100% ownership of Chrysler is "a significant, full victory for Sergio Marchionne," says Stephanie Brinley, analyst at IHS Automotive. She calls him "a tough negotiat! or."

She cautions against overenthusiasm, pointing out, "Fiat and Chrysler independently were both weaker, smaller players. Combining two weak companies may not result in one strong company, even with the opportunities for better efficiencies of scale, plant utilization, and purchasing power."

CBO: Real debt ceiling deadline could hit in March

Treasury Secretary Jack Lew this week again noted that political brinksmanship over raising the debt ceiling benefits no one. And he urged lawmakers to raise the limit soon to create certainty for the economy.

NEW YORK (CNNMoney) The budget focus on Capitol Hill is whether lawmakers will do the bare minimum and agree on a spending level for this fiscal year before funding runs out on January 15.

But soon enough, they will have to turn their attention to raising the debt ceiling.

If they don't they will risk a potential default on U.S. debt as early as March, according to a report released Wednesday by the Congressional Budget Office.

The deal lawmakers brokered in October to end the government shutdown let the Treasury Department continue borrowing new money through February 7 without regard to the debt limit. Then, on February 8, the debt limit will automatically reset to a higher level that reflects how much Treasury borrowed during the nearly 4-month debt ceiling suspension period.

At that point, however, Treasury will still be able to use "extraordinary measures," the special accounting maneuvers that let it keep paying the country's bills without going over the debt limit.

But the measures won't last very long.

"CBO projects that those measures would probably be exhausted in March. However, the timing and magnitude of tax refunds and receipts in February, March, and April could shift that date of exhaustion into May or June," the agency said.

Given how uneven the government's cash flow is from day to day and month to month, it's impossible to say with more precision when an actual default could occur.

CBO notes that the Treasury typically issues a large amount of tax refunds in February and March, which can lead to big monthly deficits. By contrast, April tends to c! reate a large surplus because everyone is sending in their federal tax returns along with checks for any additional taxes they owe for the previous year.

Treasury Secretary Jack Lew has noted many times that political brinksmanship over raising the debt ceiling benefits no one. And he suggested as much again this week at the Wall Street Journal CEO Forum, where he urged lawmakers to raise the limit without drama.

"I hope ... they just do the debt limit in a business-like way and give some certainty to the U.S. and global economy. That would be the right thing to do."

4 Nearly Painless Ways to Save on College Costs

If the idea of putting yourself into indentured servitude in order to obtain a college degree galls you, you should know there are alternatives to those gargantuan levels of debt many are incurring these days. A $35,000 debt load upon graduation is no small thing, so anything you can do to chip away at the burden that 70% of your college-graduate peers are taking on will put you ahead of the game.

With that in mind, here are four fairly straightforward methods to slash your college bills down to the bone, meaning you'll likely begin your post-graduate career virtually debt-free.

1. Start your college career at a community college, then transfer to a 4-year institution. Community colleges offer great educational value, costing thousands less per year than a typical four-year school, while giving students an excellent skill set and knowledge base. In fact, recent research shows that some two-year degrees enabled graduates to score higher salaries than their four-year-diploma-wielding counterparts.

If your goal is to attain a bachelor's degree, however, you can save a bundle by putting in the first two years at the community college level. For the 2010-2011 school year, two-year colleges averaged just under $9,000 per year, while four-year institutions charged an average of $22,000.

Know the rules before you sign up. Choose a major that fits in with a college transfer program, and find out whether the four-year school of your choice will accept your community college credits. You won't save much money if you wind up having to take several courses over again after you transfer.

2. Pick a state school over a private institution. The average yearly costs at a private college, at over $32,000, is more than double that for a public four-year school, which averaged just under $16,000 annually for the 2010-2011 academic year. If you can't find a college in your state that has the curriculum you desire, don't fret. Most states have academic reciprocity programs, which allow out-of-state students to attend schools in neighboring states without paying the higher costs.

Currently, there are the following programs to choose from: Southern Region, Midwestern Region, Western Region, and New England. Check out the details of each at NASFAA.org.

3. Save on textbooks. These necessities of college life are expensive, but you don't always have to buy new books at your college's onsite bookstore. Take that syllabus and book list and sit down at your computer -- and start shopping.

Websites that cater to college students and their textbook-acquisition needs abound these days, and I'm not just talking about Amazon and Alibris. Ebay, half.com, and sites that specialize in book rentals can help take a big bite out of that huge textbook bill -- without your having to endure downtime while your out-of-stock books are back-ordered. Check out a passel of good hits on Mashable.

4. Use your student discount. Flourishing your student ID can net you discounts of up to 20%, depending upon the store or vendor . Many major clothing retailers, such as J. Crew and Banana Republic, offer discounts of 15%, while food vendors like Pizza Hut and Papa John's give students a deal that varies from one location to another. Many local businesses will give you a break on price, as well. Many specials are unadvertised, so get into the habit of asking about a particular store or business's policy beforehand.

Taking advantage of these cost-saving measures will cost you some time and effort, but the payoff is stellar: When you toss your cap into the air on graduation day, you'll be celebrating not only the attainment of your degree, but the fact that you also got the best value for your education dollars.

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5 Companies Win $74 Million in Pentagon Contracts on Friday

The Department of Defense ended the week with a bang (if you'll pardon the expression) on Friday, awarding no fewer than 29 separate contracts worth more than $951 million in aggregate. Publicly traded companies securing contracts included:

United Technologies (NYSE: UTX  ) , which was awarded a $28.6 million delivery order to supply two F135-PW-100 conventional takeoff and landing ground test engines to the U.S. Air Force by June 30, 2014. This engine is used to power the F-35 Lightning II stealth fighter. General Dynamics (NYSE: GD  ) , which won a $15 million contract to supply the U.S. Navy with an additional nine high-gain, high-sensitivity systems under the Surface Electronic Warfare Improvement Program, or SEWIP, Block 1B3 low-rate initial production program. SEWIP aims to improve Navy ships' defenses against anti-ship missiles. This contract is scheduled to be complete by March 2015. Northrop Grumman (NYSE: NOC  ) , awarded a $12.8 million to study ways to reduce in-flight refueling risk for the Navy E-2D Advanced Hawkeye airborne early warning aircraft. This contract runs through September. BAE Systems (NASDAQOTH: BAESY  ) , awarded $9 million as an add-on to a cost-plus-award-fee contract to perform maintenance work and upgrades on the guided missile destroyer USS Gridley (DDG-101). Work should be completed by Oct. 9. Additional options on this contract could raise its value to $9.2 million and extend the contract length. Rolls Royce Group (NASDAQOTH: RYCEY  ) , which won an $8.4 million modification to a previously awarded firm-fixed-price contract to perform up to 11,020 additional flight hours' worth of engineering work on Marine Corps MV-22 Osprey tilt-rotor aircraft, through November, and in support of Operation Enduring Freedom.

Deere Beats Expectations, Disappoints Investors Anyway

Deere (NYSE: DE  ) reported earnings last week, but it was the guidance for the rest of the year that drove the stock down about 7%. The company reported record earnings and 9% sales growth, but it lowered guidance for the full year from 6% sales growth to just 5%. As my colleague Rick Munarriz notes, if you read between the lines, it seems that management is predicting a gradual slowdown in sales to a completely flat fourth quarter.

Analysts on the conference call expressed worry that Deere was losing market share, given that broader economic fundamentals seem to be improving. But a look at Deere's competitors shows this is an industry problem. Caterpillar (NYSE: CAT  ) recently revised guidance from a range of $60 billion to $68 billion in sales to a range of $57 billion to $61 billion, and while AGCO (NYSE: AGCO  ) raised its guidance, it and CNH (NYSE: CNH  ) are both still expecting only about 5% growth, similar to Deere.

The main problem is that uncertainty regarding government spending is slowing down construction, and the little construction that's going on in North America is further slowed by prolonged wet weather. The spending uncertainty isn't specific to just North America, though. Each of these companies gets its sales from a different mix of geographic regions, but they're all affected by slow growth globally, especially in developed markets such as Europe and North America.

Analysts on the call also questioned what Deere is doing with its historically high levels of cash. At a trailing P/E of 11, the company's stock is fairly cheap right now, so it might make sense to authorize share repurchases. While Deere is investing some of its cash into building capacity in India, China, and Brazil, regions it believes will be essential to future success, it's still holding on to a lot of cash to maintain liquidity in its financial services business.

That sounds like a good idea, if not for the fact that AGCO is making a bold bet by expanding in Africa, which will be a huge opportunity over the next few decades, and both AGCO and CNH have been taking over Latin America. With revenues greater than AGCO and CNH combined, Deere is perhaps big enough to run them out of town whenever it becomes a priority, but the longer Deere waits, the more time its competitors have to establish brand loyalty.

In all, Deere gave investors little to be excited about, despite record earnings. The long-term picture for agriculture companies is still good, but in the short term, Deere may be somewhat disappointing. Add these companies to My Watchlist to see how the picture improves over the coming quarters.

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Critics: Extending Corporate Tax Breaks Costs $80 Billion

jupiterimages The House passed a bill earlier this week that would retroactively extend tax breaks, worth $45 billion over the next 10 years, which expired at the end of 2013. Individuals and companies would then be able to take advantage of them for 2014, as Time reported. The Senate isn't happy, and many senators would rather take permanent action on what has become a nearly annual legislative ritual of re-authorization or, better yet, undertake fundamental tax reform. So far a compromise is nowhere in sight. That's just fine for a group of organizations working under the common name Financial Accountability & Corporate Transparency Coalition. They claim that two of the proposed extensions are nothing more than rampant corporate giveaways that let multinationals avoid taxes by stashing profits overseas. Forget $45 billion. The two extensions together are "loopholes" that could cost the federal government up to $80 billion in tax revenue over ten years, according to Jaimie Woo, a tax and budget associate with U.S. Public Interest Research Group, a member of FACT. "The tax breaks are [nominally] meant to stimulate the economy and business, but at the end of the day these two loopholes really don't," Woo said in an interview with DailyFinance. "The reason they're put back in is because of these serious corporate lobbying effort." CFC Look-Through Rule The first provision is called the CFC look-through rule, which provides exceptions in laws that govern controlled foreign corporations, or CFCs. These wholly owned subsidiaries of American companies are set up to operate in other countries. Under the law, so-called active income of CFCs, like money made selling services or goods, is only recognized as taxable income by the U.S. parent when that money is brought back to this country, or repatriated. Passive income from interest, royalties and licenses is immediately recognized and taxable. The look-through rule says that certain passive income, such as rents or royalties on patents and other intellectual property, is treated differently and does not have to be immediately taxed. The rule allows companies to create complex structures, such as an Irish subsidiary that owns intellectual property initially created by the American firm, leases it back for a substantial royalty payment, and then pays a large cut to a division in Bermuda that has no corporate taxes at all. The Irish CFC gets to deduct that payment under Ireland's tax laws. "Now the income isn't taxed anywhere," Woo said. Active Financing Exception The active financing exception is a rule specially written for the financial services industry. Interest on money lent by CFCs would normally be considered passive income and something that would immediately be taxable for U.S.-based corporations. Because the interest and fees, the primary income of institutions like banks, are now treated as passive income, all that profit can be held overseas as well and not taxed. "Our position is no corporate should be allowed to defer those taxes offshore until they repatriate the money back," Woo said. "All the companies get that as a special giveaway. These American corporations use American infrastructure, education, our economy, and then manipulate a lot of their CFCs and tax bills. They should pay the taxes they owe." As DailyFinance has previously reported, in comparison with tax avoidance techniques like these, widely criticized corporate inversions are chump change. "We have a system in place presently that shelters companies from U.S. taxes on their foreign earnings, and through the system we also have a continuing exportation of American jobs," said Martin Press, a tax attorney with the law firm Gunster, Yoakley & Stewart. "The Democrats and the Republicans have tried to make some attempts at reform in this area, but many of these attempts are more political than corrective. What the United States needs is a really thoughtful review of our policies in regard to American companies operating overseas, and we're not politically at that point yet." For close to a decade, Democrats and Republicans have agreed to kick this particular can down the road. With the amount of lobbying pressure the business community brings, even with all the acrimony in Washington at the moment, chance are eventually the can will again sail off into the horizon. More from Erik Sherman
•Starbucks Doubles Down on Selling Beer, Wine and More Food •Chances Are You'll Be in the Dog House Over a Present •Don't Say a Word: Pizza Hut Knows Which Pie You Want

This Company Can Provide Good Returns In Future

Cisco (CSCO), makes and offers web convention-based systems administration and different items identified with the interchanges and data engineering industry, and furnishes administrations connected with these items and their utilization. Cisco's PE degree is underneath the interchanges supplies industry normal and indicators that financial specialists are not ready to pay a premium for this stock, making it a quality story. Also, amid the previous year, income development has outpaced its authentic five year development rate.

Impressive quarter

Cisco's results will shake off some pessimism in any event for a couple of months. Prior to the income report, I definite why long haul speculators may have needed awful news from Cisco's profit report. An alternate terrible report could have brought some greatly required change, including the takeoff of CEO John Chambers.

That being said, Chambers has purchased himself some tremendously required time with the most recent round of results. For Q3, Cisco reported incomes of $11.545 billion, which was pleasantly in front of examiner assessments for $11.38 billion. On how the money adds up, non-GAAP income came in at $0.51 for every offer, beating expert gauges by three pennies.

For Cisco, Q3 item deals just fell by something like 8%, short of what the 11% decay seen in financial Q2. Terrible edges additionally came in much higher than desires, which helped filled the EPS beat. Cisco purchased back 90 million shares amid the quarter at a normal of $22.24. Cisco's money stream articulation indicates about $8 billion in shares repurchased in the initial nine months of the financial year, contrasted with simply over $1.5 billion in the year prior period.

Dividend getting better

Cisco has enhanced its profit amusement. Cisco is poised to convey annualized payouts of $0.76 for every offer, which works out to a 3.1% yield. That is an above-normal yield actually for the world class Dow club, and pay speculators adore Cisco's dedication to consistent (and extensive!) payout builds.

In addition, the organization used $6 billion of its trailing money stream on offer buybacks. While offer repurchases are frequently an indication of solid insider trust in the organization's future prospects, they aren't generally the best utilization of extra money. Redirecting some of these advantages into considerably stronger profits may not be a terrible thought through the following few years.

At long last, profits get a decent measure of broadcast appointment in Cisco's quarterly profit calls. In the latest call, profits were singled out as a focal center of Cisco's shareholder esteem creation. Administration additionally guaranteed to proceed with its "forceful" buyback and profit techniques going ahead.

In short, Cisco has a huge amount of headroom for further profit development - and a direct longing to keep the helps impending. That is music to any profit speculator's ears.

Outlook

While the Q3 beat was pleasant, this report required more, and Cisco conveyed with superior to expected direction. As far as income direction, Cisco guided to a 1% to 3% decrease in Q4 incomes over the earlier year period. Examiners were searching for a 5.2% decay, so this direction was much superior to anticipated. On how the money adds up, EPS direction was for non-GAAP EPS of $0.51 to $0.53. Experts were searching for $0.51, so this direction is nice also. One negative piece of the direction was regarding terrible edges, where direction called for a consecutive decrease.

Since we are presently in financial Q4, monetary 2014 may not appear that critical to speculators any longer. For that gathering, its about setting up monetary 2015 for an income bounce back. While a bounce back has been normal by experts, this late report gives speculators and investigators more trust. Back in February 2014, appraisals for monetary 2015 were for $48.22 billion in incomes and $2.08 in non-GAAP EPS, individually. At this moment, those numbers stand at $49.00 billion and $2.15, separately. On the off chance that Cisco proceeds with this positive force through Q4 and early monetary 2015, perhaps those assessments will get closer to $50 billion and $2.20.

Conclusion

Cisco bears huge numbers of the signs of a phenomenal profit stock. Anyhow there's a whole other world to effective wage contributing than simply exceptional returns and relentless development. The most astute financial specialists realize that profit stocks basically pound their non-profit paying partners over the long haul.

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Is It Finally Time to Buy a House?

According to the most recent data, foreclosure activity in the U.S. is at its lowest level since July 2006. All foreclosure-related metrics dropped in September, including the number of homes repossessed, the number of properties set for foreclosure auctions, and the number of default notices issued.

Source: flickr user Nick Bastian.

While this is definitely a good sign, it doesn't necessarily mean that home prices are going to continue on their upward trajectory. Rather, it does mean that the housing market is returning to a "healthy" state. But what does that mean to you?

The data looks great
Foreclosure activity in the U.S. is now at an eight-year low. According to RealtyTrac, there were 106,866 foreclosure filings across the country, which is 8.6% less than in August, and represents a year-over-year drop of 18.6%.

In fact, overall foreclosure activity, which includes foreclosure notices, auctions, and repossessions, is now back down to pre-bubble levels, according to the report. The number of lender-repossessed homes in September dropped by 13% from the month before, default notices given to homeowners dropped by nearly 10%, and the number of homes set for foreclosure auctions dropped by 5.5%.

Why home prices may actually cool off now
Despite this good news, home prices aren't necessarily going to continue on their upward trajectory. Since bottoming in early 2012, U.S. home prices have gained nearly 25% in value, and have actually pulled back a little bit recently.

The foreclosure market was one of the big reasons for these gains. Generally, foreclosed homes sell for lower prices than traditionally sold homes. In fact, RealtyTrac also reports that the median sales price for a foreclosed home was 36% less than that of non-distressed sales. As foreclosures have been gradually working their way out of the market, home prices have naturally risen faster than they normally would, simply because there are fewer foreclosures holding the average price down.

There are other factors that could drive home prices a little lower in the short term. A big one is the seasonality of the housing market. Generally, summer is the peak selling time for homes, as kids are out of school, and it's simply more convenient to move. With summer ending, selling activity is probably going to cool off considerably.

Thanks to higher prices, activity may cool off even more this year than in most years. The recent mortgage application data shows purchase applications are actually 4% lower than they were at this time last year. The inventory of existing homes on the market has actually risen by about 24% in 2014 as sellers try to take advantage of higher prices, while the rate of sales has increased by just about 4%. The laws of supply and demand tell us that high inventory plus lower demand means prices are likely to drop a little bit.

What a healthy market looks like, and what it means to homebuyers
In a healthy market, real estate gradually appreciates by a low single-digit percentage. Gains like we saw before the market collapsed and the declines that resulted from the bubble bursting are not healthy.

Take a look at the chart below, which tracks U.S. home prices since 1991. The market of the 1990s was pretty healthy. The market of the past decade or so has not been healthy.

We may see a small drop in price as the market becomes healthy again as prices adjust to normal supply and demand dynamics again. However, without a massive amount of foreclosure activity, there should be much less volatility in the housing market going forward. In other words, if you have been putting off buying a home, you can now buy with a little more confidence.

Smart homebuyers take advantage of all of the tax "loopholes" 
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report, "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

SodaStream May Finally Have a Suitor or Two

Jonathan Leibson/PMC/Getty Images SodaStream (SODA) has been one of Wall Street's bigger disappointments over the past year, but shareholders may finally be catching a break. Sources were telling several different international publications last week that the company behind the namesake carbonated beverage maker is in talks to be acquired for at least $40 a share. The buyout would come as a welcome relief for investors who have seen the stock fall from its sudsy peak of $77.80 last summer to below $30 this summer. Inventory woes and cascading margins have slammed SodaStream, and investors know that soda is no good when the fizz is gone. Bottling Up Optimism Buyout chatter heated up last week when Israeli business publication The Marker reported that a British investor was in negotiations to acquire SodaStream in an $840 million deal that would swap common stock for $40 a share in cash. It seemed like just the latest in a long line of empty acquisitive talk, but then things began heating up in the U.K. media channels. The Independent reported that beer behemoths Diageo (DEO) and SABMiller (SBMRF) are considering an offer for SodaStream. The Times apparently has another source naming private equity firm KKR as an investor willing to shell out $46 a share for SodaStream. All of these conflicting rumors would seem to be turning this buyout symphony into a cacophony, and conspiracy theorists would argue that SodaStream itself could be behind this in an effort to smoke out a potential suitor. However, you don't often see three different international publications talking up SodaStream as a purchase. Pop a Cap Off We've been here before. It was originally Israel's Calcalist reporting last summer that PepsiCo (PEP) had the hots for SodaStream. Canned and bottled soda sales have been sluggish. Moody's Investors Service is reporting that carbonated soft drink sales declined 2.6 percent in the U.S. last year, with an even larger drop in diet sodas. Diversifying into SodaStream's growing global operations had some merit, especially as a way for PepsiCo to extend its brands into the faster-growing home-based carbonation market. It didn't happen. Calcalist came back five months ago, reporting that PepsiCo, Dr Pepper Snapple Group (DPS), or Starbucks (SBUX) could be taking a 10% to 16% stake in SodaStream. This followed just two months after Coca-Cola (KO) initiated a 10% stake in Keurig Green Mountain (GMCR), helping the single-serve java heavy with its upcoming Keurig Cold launch. That didn't happen either. Earlier this summer we had Bloomberg reporting that a private equity firm was looking to buy SodaStream at $40 a share, similar to the stories that would break in the U.K. and SodaStream's home turf of Israel last week. None of the stories have panned out, but someone seems to be aggressively trying to play Cupid given SodaStream's knack for being at the center of buyout chatter. It's easy to see why SodaStream would be receptive: Stateside sales have been slumping since late last year, and overall profitability has taken a hit. SodaStream is still gaining momentum in more established European markets, and perhaps that's why the latest round of potential acquirers is a global smorgasbord. If SodaStream isn't going to turn its U.S. operations around soon, it could be in the best interest of its investors if it does consider any serious proposals. However, after more than a year of empty chatter, the rumors are intensifying, but nothing is certain until SodaStream makes it official.

The Good, the Bad, and the Ugly of Coca-Cola's New Stake in Monster Beverage

By now you've likely heard that Coca-Cola (NYSE: KO  ) is coughing up $2.15 billion for a nearly 17% stake in energy drink maker Monster Beverage (NASDAQ: MNST  ) . The news sent both stocks higher last week, with Monster climbing more than 30% to trade around $93 a share on Friday. While the deal creates a unique opportunity for both Coca-Cola and Monster, it also comes with some added risk. Let's take a closer look to uncover the good, the bad, and the ugly of the soda giant's latest transaction.

Source: The Motley Fool.

Opportunities abound
Faced with slowing sales of soda in the U.S., Coke is looking to fast-growing beverage categories such as single-serve and energy libations for future growth. The energy drink market reportedly grew 4% in 2013, compared to a 3% decline in carbonated beverage sales over the same period, according to an article in Adweek..

Therefore, what better way to spark growth than by taking a stake in Monster, which, according to Euromonitor data compiled by The Wall Street Journal, currently controls roughly 35% of the $9 billion U.S. energy drink market? Under the terms of the agreement, Coke will have the option to increase its stake to 25% over the next four years.

Of course, Monster also stands to benefit from the deal. If there is one thing that Monster lacks it is international exposure -- something that Coke has an abundance of. In fact, Monster currently generates less than 25% of its sales outside of the United States, according to The Wall Street Journal. However, the company could nearly double its sales going forward with access to Coke's massive global distribution network, according to the Journal, which cites research firm Sanford C. Bernstein. . 

The global energy drink market is expected to grow at a compound annual growth rate of roughly 13.38% between 2013 and 2018, according to data from Research and Markets cited by Reuters.  For comparison, the global soft drink market is expected to grow just 4.3% between 2012 and 2017, according to research from Data Monitor. Going forward, Monster could leverage Coke's massive distribution network to expand its market share worldwide in this fast-growing beverage category. Coca-Cola, after all, boasts the world's largest beverage distribution system, which reaches customers in more than 200 countries today. Additionally, Coke sold a record 28.2 billion unit cases of its beverages last year through this distribution network . 

As part of the deal, Coke will put its energy drink brands including Full Throttle under Monster's control, whereas Monster will give its non-energy segment drinks such as Hansen's Natural Sodas to Coca-Cola.

The bad and the ugly
Given its strong balance sheet, Coke could have easily purchased Monster Beverage outright. However, the ugly truth is that doing so would have made Coke significantly more vulnerable to Monster's controversial products. The move also shields Coca-Cola's warm and fuzzy polar-bear-adorned brand image from being tarnished by Monster's brash branding.

Energy drinks have come under heavy scrutiny in recent years because of health concerns. The Food and Drug Administration launched an investigation in 2012 looking into five deaths that were reportedly linked to Monster Beverage. The FDA later said it found no problems with two primary additives, taurine and guarana, found in Monster drinks. However, the FDA said it has not reached any final decisions and is still investigating the health risks of energy drinks. This could lead to increased regulations on the sale of energy drinks down the road.

Yet, by simply owning a stake in Monster Beverage, Coke is able to take on less risk in this controversial drink category. The important distinction here is that Coke will now be distributing energy drinks but won't actually own them. Moreover, this arrangement gives Coke an opportunity to accelerate growth in the $9 billion domestic energy drink market without taking on all of the risk. "The Coca-Cola Company will become Monster's preferred distribution partner globally and Monster will become the Coca-Cola Company's exclusive energy play," according to a company press release. 

This strategy has worked well for Coca-Cola lately. If you remember, the king of pop also took baby steps when investing in Honest Tea and later Zico coconut water. Coke took a 40% stake in Honest Tea in 2008 before buying the remaining stake in 2011. The company followed a similar path with its calculated buyout of Zico in 2012.

Ultimately, taking a small stake in Monster with the option of adding to that position in the future is Coke's safest bet given the dark side of energy drink perception in the U.S. today.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Robin Williams Found Dead In Marin County Home; Suicide Suspected

Just hours ago, my local paper reported that Robin Williams was found dead in his home in Tiburon, Calif. The Marin County Sheriff Coroner's division said it suspected Williams had committed suicide by asphyxiation.

Many famous people live in Marin County, which is also my home, musicians and actors most notable among them. But none is as beloved a native son as Robin Williams, and no death has hit harder.

I met Robin Williams two years ago, only long enough for a warm greeting and gracious handshake, but I can tell you two things: He was kinder than he needed to be to someone he'd never met, and he had very, very sad eyes.

Here are the details, as currently known: Williams was found dead at noon today after a 911 call was placed from the home at 11:55 a.m.  The Marin County Sheriff's Office, the Tiburon Fire Department and the Southern Marin Fire Protection District sent emergency personnel to the scene, arriving almost immediately at 12:00 p.m.

Williams lived in the home on the Tiburon peninsula with his wife, Susan Schneider, but it isn't clear if it was she who discovered him; reports say only that he was found "by family." Williams had wed Schneider, his third wife, in the nearby Napa Valley on October 23, 2011. "I lost my husband and my best friend, while the world lost one of its most beloved artists and beautiful human beings," Schneider said in a statement released by his publicist. "I am utterly heartbroken."

The Mystery of Suicide

If Williams' death does prove to be a suicide, it would raise many questions. How could Robin Williams, with a life as successful as anyone could wish for, be depressed enough to take his own life? Or, put even more simply, how could someone who made us laugh so hard be so sad?

The answer, of course, is depression. Depression is why someone could laugh and smile on the outside, and yet feel his life is not worth living.

That Williams battled alcoholism, drug addiction, and depression is no secret. The actor gave many candid interviews describing his struggles with these demons, and his at least temporary successes. Williams' publicist, Mara Buxbaum, gave a short statement saying that Williams had been "battling severe depression" but stopped short of calling the death a suicide.

Last year Williams returned to television for the first time since his breakout hit Mork and Mindy, with a show called The Crazy Ones, in which he starred with Sarah Michelle Gellar as a father-daughter duo who ran an advertising agency. The show was cancelled after its first season due to low ratings and mediocre reviews.

It's always tempting to look at a person's life and professional situation for clues to possible "causes" of suicide. But the truth is, there is no cause of depression – it just is. And that's the problem – we still look at it as something linked to logic, something a person has control over, when in fact it's a mental illness (emphasis on illness) that takes control of the brain much as heart disease or cancer takes control over the body.

SAVE (Suicide Awareness Voices of Education) has some excellent information about depression and suicide, which admirably avoids the us-vs-them attitude that pervades much of the reporting and research on this topic. Like this explanation of why people who are severely depressed don't seek — or may not respond to — help and treatment.

"Many people who suffer from depression report feeling as though they've lost the ability to imagine a happy future, or remember a happy past. Often they don't realize they're suffering from a treatable illness, and seeking help may not even enter their mind. Emotions and even physical pain can become unbearable. They don't want to die, but it's the only way they feel their pain will end."

Local Hero Bar None

Robin Williams was not one of those celebrities who hide, or surround themselves with acolytes, or hire security guards to keep fans at bay. He ambled into bookstores in Marin, dropped in on fellow comics and musician friends backstage at local theaters, and visited Redwood High School, from which he graduated in 1969.

Social Security Bankrupt in 2033; Medicare Outlook Brightens: Trustees’ Report

Unchanged from last year’s projection, Social Security’s combined retirement and disability programs have dedicated resources sufficient to cover benefits for the next 19 years, until 2033. However, the projected depletion date for Social Security's Disability Insurance Trust Fund is much sooner, according to the Social Security and Medicare Trustees report released Monday.

“Social Security’s disability program alone has dedicated funds sufficient to cover all scheduled benefits for only two years,” said Treasury Secretary and Managing Trustee Jacob Lew during a press briefing to discuss the annual report. “As was true last year, beginning in 2016, projected tax income will be sufficient to finance about 80% of scheduled benefits. Legislation will be needed to avoid disruptive reductions in benefit payments to this vulnerable population.”

While the projections in this year’s reports for Social Security are essentially the same as last year, the projections for Medicare have shown some improvement. 

According to the report, the Medicare Hospital Insurance Trust Fund will have sufficient funds to cover its obligations until 2030, four years later than was projected last year, and 13 years later than was projected in the last report issued prior to passage of the Affordable Care Act.

“As today’s reports make absolutely clear, Social Security and Medicare are fundamentally secure, and they will remain fundamentally secure in the years ahead,” Lew said. “The reports also remind us of something we all understand: we must reform these programs if we want to keep them sound for future generations.” 

Social Security

 “The long-term looks very similar to last year, but the short term picture has grown more urgent.” In public trustee Charles Blahous’ statements on Social Security during the public hearing, he said,

In the 2014 annual report to Congress, the Trustees reported that the combined trust fund reserves are still growing and will continue to grow through 2019. Beginning with 2020, though, the cost of the program is projected to exceed income. And, as projected, when the combined trust fund reserves become depleted in 2033, there will be sufficient income coming in to pay 77% of scheduled benefits. Once exhausted, the report stated, the annual revenues from the dedicated payroll tax will be sufficient to fund three-quarters of scheduled benefits through 2088.

Program costs are projected to exceed noninterest income throughout the remainder of the 75-year period, as this year’s report projected the actuarial deficit over that time to be 2.88% of taxable payroll, 0.16 percentage point larger than in last year’s report.

Current projections in this year’s report show that the “annual cost of Social Security benefits expressed as a share of workers’ taxable earnings will grow rapidly from 11.3% in 2007, the last prerecession year, to roughly 17.1% in 2037, and will then decline slightly before slowly increasing after 2050.”

Medicare

According to this year’s Medicare report, after the projected depletion date of the Medicare Hospital Insurance (HI) Trust Fund in 2030, the projected portion of scheduled benefits that can be financed with dedicated revenues is 85% in 2030 and declines slowly to about 75% in 2050 and beyond.  (The HI Trust Fund covers hospital, nursing, home health and hospice care under Medicare Part A).

Also improved from last year’s report, the 75-year actuarial deficit in the HI Trust Fund is projected at 0.87% of taxable payroll, down from 1.11% in the previous year. According to the report, “this improved outlook for HI is primarily due to lower than expected spending in 2013 for most HI service categories, which reduced the base period expenditure level and contributed to the Trustees’ decision to lower projected near-term spending growth.”

Medicare spending per beneficiary has grown slowly over the past few years and is projected to continue to grow slowly,contributing to the improved outlook.

“The outlook for Medicare has consistently improved since the passage of the Affordable Care Act, and this year, the Trustees have reduced the projections for near-term spending growth,” Lew said during his statement. 

As stated in the report, per capita Medicare spending growth has averaged 0.8% annually for the past four years, which is much slower than the average 3.1% annual increase in per capita GDP and national health expenditures over the same period.

The report also states that both supplementary medical insurance (Part B), which pays doctors’ bills and other outpatient expenses, and prescription drug coverage (Part D) are “projected to remain adequately financed into the indefinite future because current law automatically provides financing each year to meet the next year’s expected costs.”

The Board of Trustees comprises six members. Four serve by virtue of their positions with the federal government: Jacob J. Lew, Secretary of the Treasury and Managing Trustee; Carolyn W. Colvin, Acting Commissioner of Social Security; Sylvia M. Burwell, Secretary of Health and Human Services; and Thomas E. Perez, Secretary of Labor. The two public trustees are Charles P. Blahous III and Robert D. Reischauer.

---

Related on ThinkAdvisor:

Dow Climbs, S&P Surges as ‘Patient’ Replaces ‘Considerable Time’

Stocks are surging after the Federal Reserve added the word “patient” to its statement, while kind of leaving “considerable time” in place.

Associated Press

The S&P 500 has jumped 1.9% to 2009.97, while the Dow Jones Industrial Average has climbed 282.92 points, or 1.7%, to 17,350.70. The Nasdaq Composite has gained 1.8% to 4,630.96 and the small-company Russell 2000 is up 1.3% to 1,154.54.

CRT Capital’s David Ader explains the significance of the changes to the statement:

This is coming out a bit more dovish than expected, just a bit, with lower inflation forecasts running forward, a bit less aggressive in terms of hiking and no change in the GDP outlook.  While they still harp on energy they also say ‘partly’ the source of low inflation so not just about oil.

The Lindsey Group’s Peter Boockvar offers his two cents:

The FOMC statement again tried to thread a needle by maintaining the market's expectations of a 2015 hike but at the same time giving us no clue as to when.  The FOMC didn't change much their inflation commentary and repeated that "longer term inflation expectations have remained stable." This is noteworthy in that they won't respond to the sharp drop in commodity prices. They also continued to acknowledge the improving labor market with wording that was also similar to the October meeting but didn't get amped up after the 300k+ print in November. Where the markets got all excited about is the "Committee judges that it can be patient in beginning to normalize the stance of monetary policy" comment but with a December 2015 fed funds futures contract priced at about .50%, this was priced in. Also, markets got excited when they repeated that rates will stay at 0-.25% for a "considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee's 2% longer run goal. However, they said if things progress faster than expected, rate hikes will come sooner. Thus, "considerable time" has been neutered AGAIN with this back and forth

Capital Economics’ Paul Ashworth says the change is all about flexibility:

The Fed dropped the language that it would be a “considerable time” before it began to raise rates from near-zero and, as we expected, replaced it with the assessment that it “can be patient in beginning to normalise the stance of monetary policy”. The statement went on to stress, however, that this shouldn’t be interpreted as a sign that rates would begin rising sooner than expected. The change simply gives the Fed the flexibility to move sooner if the data warrant.

If that’s true, the statement was far more hawkish than the market is giving it credit for.