California city's drastic foreclosure remedy: Seizure

Richmond Mayor Gayle McLaughlin said the city is "stepping into the void with a local principal reduction program" after other attempts to stem foreclosures failed.

NEW YORK (CNNMoney)

As a first step, the San Francisco Bay city said it will work with an investment firm to try to purchase mortgages of underwater homeowners at a price well below their current balances. It would then try to get those loans restructured to make them affordable.

But if the holders of the loans, who are mostly investors, refuse to sell by Aug. 14, the city said it will invoke eminent domain to seize the mortgages so it has more control over the process of making them affordable.

Eminent domain is the legal principle that lets government entities purchase land or structures, usually from reluctant owners who don't want to sell. It is typically invoked for public uses such as parks, roads or utilities -- not mortgages.

In the case of Richmond, the city argues that eminent domain is in the public interest because it could let people stay in their homes and help keep neighborhoods, especially minority communities and low-income neighborhoods, from fraying.

"After years of waiting for a comprehensive fix, we're stepping into the void with a local principal reduction program," said Gayle McLaughlin, mayor of Richmond.

The idea is controversial and reflects the frustration, seven years after the housing market started to collapse, of homeowners and officials in areas that are still reeling.

The Richmond plan was proposed by a private backer, Mortgage Resolution Partners, which will find the money the city needs to buy the mortgages. It stands to profit by taking a cut when the loans are refinanced.

Related: Borrowers in Obama's housing program re-defaulting, watchdog says

There's no question the housing meltdown has thwacked Richmond.

The median home price peaked at about $460,000 in early 2006, according to real estate website Zillow. Today, it is $206,000.

That means a family that purchased at the top of the market could still owe twice the current value of its home.

The idea of invoking eminent domain has been considered but rejected by other localities, including Chicago and San Bernardino, another California city hit hard by the real estate collapse.

Related: 10 great foreclosure deals

Richmond's efforts are likely to draw court challenges from investors and others who hold the current mortgages and stand to lose financially, experts said.

And banks could be scared off lending to homeowners in Richmond in the future.

"Eminent domain refinancing may offer temporary benefits to underwater borrowers in specific markets, but there will be longer-term harm as lenders are likely to pull out of those markets and mortgage financing costs across the board are likely to rise," said Jaret Seiberg, a banking analyst at Guggenheim Partners.

Richmond homeowner Morris LeGrande, however, said the city is already paying a big price for the severely underwater mortgages.

Borrowers paying off bloated loans have less money to spend at businesses in town. And the homes lost to foreclosure can blight entire neighborhoods, lower property values for every homeowner and contribute to crime.

"We want the city to purchase the loans at fair market value so we can manage our lives more effectively and economically," he said.

First Published: July 30, 2013: 2:28 PM ET

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More ho-hum economic growth ahead

NEW YORK (CNNMoney)

Economists surveyed by CNNMoney are forecasting that growth slowed to 1.2% in the second quarter. That would be even worse than the already modest 1.8% gain in the first three months of the year.

Four of the 18 economists who responded expect growth to fall below 1%, while only two expect it to be faster than the first quarter's anemic gain.

That would make three straight quarters of what most would consider an economy performing below potential, despite a rebounding housing market. Worries about cutbacks in federal spending, known as the sequester, and higher taxes that went into effect at the start of the year are the biggest headwinds for the struggling economy, the survey showed.

"The economy has shown some animal spirits in housing and new car demand, but still faces headwinds, not the least of which is mandated spending cuts," said David Nice of Mesirow Financial.

But the news isn't all bad. The economists think better growth is ahead. For the full year, they expect growth of 2%, despite the sluggish first half, and 3% in 2014.

The report on second quarter growth, which will be released Wednesday, will also be the first to implement a new measure of the U.S. economy. The Commerce Department will now factor in additional services -- such as research and development and the production of artistic properties -- which should increase the size of the entire economy. The expanded methodology will apply to previous quarters, and is not likely to have a major effect on the rate of growth.

Related: Why the housing market could grow even if economy slows

The recovery in the long suffering housing market will be a major driver of better growth ahead. Fueled by record low mortgage rates and a drop in foreclosures, major housing indicators like home prices, home building and home sales have all been rebounding throughout 2013. The recent rise in mortgage rates might slow the pace of recovery, but not enough to kill off the rebound entirely, the economists said. And despite a 12.2% jump in home prices over the last 12 months, few of the respondents are worried about the threat of a new housing bubble.

"Home prices are recovering at a 'Goldilocks' pace that should enable the sector to extend its recovery out over many years," said Russell Price of Ameriprise Financial. "There is a very healthy dynamic in our view as it should enable the sector to avoid too rapid a rebound and thus the risk of another boom and bust."

The economists are a bit more bullish about Friday's report on job growth. They predict employers added 180,000 jobs in July, down only slightly from the 195,000 gain in June. They expect that to trim the unemployment rate to 7.5% from 7.6% in June.

First Published: July 30, 2013: 3:12 PM ET

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Government shutdown won't shut Obamacare: Report

A federal shutdown wouldn't stop Obamacare, report says.

WASHINGTON (CNNMoney)

The new health care law draws funding from sources that are not subject to the congressional budget process, according to the nonpartisan Congressional Research Service. Also, the revenue collected under Obamacare is considered to be part of a category that ensures the "safety of human life or the protection of property," which makes it immune to government shutdowns, the report said.

Related: Who loses out under Obamacare

The report is significant because Republican lawmakers have been talking about opposing any measure to keep government running, if it means also funding Obamacare.

The current bill funding the government runs out on Sept. 30.

The expectation is that Congress will do what it has done in recent years: pass a temporary funding bill by Sept. 30 to prevent a government shutdown on Oct. 1, the first day of fiscal 2014.

Some Republicans are demanding that the 2014 budget withhold funding for Obamacare. The Senate and President Obama would not agree to such a budget, which could lead to a government shutdown.

"We have the potential to show real leadership -- and stand together and actually defund (Obamacare)," said Texas Republican Sen. Ted Cruz. "Republicans will be blamed for a government shutdown. . . but I think (the House) should fund the entirety of the federal government -- except Obamacare."

However, the congressional report underscores that shutting down the government will do little to stop Obamacare.

The Affordable Care Act was passed in 2010, with the goal of expanding health care coverage and affordability to millions by various mechanisms, including subsidies, mandates and setting up health care exchanges for the uninsured.

Obama economy speeches come ahead of budget battle

Obamacare has lately been in the spotlight, as it gets closer to taking full effect. States are setting up health exchanges for people to buy insurance. The individual mandate, which requires taxpayers to buy insurance or pay a government fine, takes effect Jan. 1. The mandate forcing employers was delayed by a year to 2015, allowing businesses more time to provide their workers with health insurance.

Not all Republicans want to shut down the federal government over Obamacare.

Sen. Tom Coburn, an Oklahoma Republican said on Tuesday that while he wants to defund Obamacare, threatening a government shutdown isn't the best way to end Obamacare, citing the new congressional report.

"I praise my colleagues in what they're trying to do," Coburn said. "What we need to do is delay (Obamacare) and get it to a point where we can kill it."

President Obama on Tuesday criticized Republicans in Congress who would "hurt a fragile recovery by suggesting they wouldn't pay the very bills Congress rang up, and threaten to shut down the people's government if they can't shut down Obamacare."

--CNN's Ted Barrett and Deirdre Walsh contributed to this report.

First Published: July 30, 2013: 5:31 PM ET

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Tax reform secrecy plan blasted

A 50-year cloak of confidentiality is "far longer than presidential records are sealed," 30 groups wrote, urging the Senate Finance Committee to make proposals public in real time.

NEW YORK (CNNMoney)

Thirty organizations urged the Senate Finance Committee in a letter to make all tax reform correspondence public in real time.

The committee has said that senators can propose which tax breaks they think should be retained without fear their views will be made public until Dec. 31, 2064.

A 50-year cloak of confidentiality is "far longer than presidential records are sealed," the groups said in their July 26 letter.

"[T]ransparency is essential for your final product to have credibility with the public rather than feed cynicism. Taxpayers across the United States have a right to know what their elected officials are advocating and what their justification," the letter said.

The letter was signed by Taxpayers for Common Sense, the Center for Effective Government, the American Sustainable Business Council and the Fund for Constitutional Government, among others.

Quiz: What do you really know about the tax code?

Christopher Bergin, president and publisher of Tax Analysts, which also signed the letter, put it more bluntly.

"[W]hile it may not be secret law, it gets a little close to making law in secret. I realize it may be a novel idea to argue that the people have the right to know what groups their lawmakers think should get favors from their tax laws, but it's a good idea," Bergin wrote in a blog post.

Some CNNMoney readers, reacting to news coverage last week, were not pleased.

"If a politician believes in a tax break they should have to stand for it publicly. If they can't do that, then they clearly shouldn't be supporting it to begin with," one reader wrote.

Others were more sympathetic to the idea that lawmakers might need some protection to discuss unpopular proposals, just not 50 years' worth.

"We are likely to get a better tax code out of something like this, but 50 years? Come on, it should be more like 12. You get two more terms without losing your job if you did something your [constituents] would've found distasteful ... not a life pardon," another wrote.

And not everyone is necessarily going to take advantage of the committee's offer for a half century of confidentiality.

Some lawmakers -- including retiring senator Jay D. Rockefeller, a Democrat from West Virginia, and Sen. Mike Enzi, a Republican from Wyoming -- have posted their recommendations on their own Web sites.

First Published: July 29, 2013: 1:23 PM ET

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Regulators accuse JPMorgan of manipulating electricity markets

In an official notice, the Federal Energy Regulatory Commission alleged that the bank had engaged in "eight manipulative bidding strategies" in California and Midwestern markets.

NEW YORK (CNNMoney)

In an official notice, the Federal Energy Regulatory Commission alleged that the bank had engaged in "eight manipulative bidding strategies" in California and Midwestern markets.

The strategies led to payments to JPMorgan "of tens of millions of dollars at rates far above market prices," according to the notice. JPMorgan is expected to pay a massive fine related to the allegations.

Related: Are big banks driving up commodity prices?

The strategies allegedly worked like this. In California, for example, the bank would bid to deliver electricity to a utility the next day at a low price of $30 per megawatt hour. When the next day came, JPMorgan would change its offer to a much higher price of $999 per megawatt hour, assuring the power did not get bought, according to the notice.

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

JPMorgan employed a similar strategy in the Midwest, according to the notice.

JPMorgan and FERC both declined to comment.

FERC also recently fined British bank Barclays and Deutsche Bank for other improprieties involving the sale of power.

First Published: July 29, 2013: 6:40 PM ET

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CBS/Time Warner Cable talks turn bizarre

Summer hit "Under the Dome" is one of many shows some Time Warner Cable customers would lose access to if a deal isn't reached.

NEW YORK (CNNMoney)

Contract negotiations between CBS and Time Warner Cable continued into the early morning Tuesday, even as both companies issued threats and accused the other of being unreasonable.

The companies have been battling in recent weeks over the transmission fee that Time Warner Cable pays to run CBS-owned stations, including network affiliates in major cities.

Negotiations appeared to reach an impasse at midnight, when Time Warner Cable said it was pulling CBS (CBS, Fortune 500) off the air in New York City, Dallas, Los Angeles and other cities.

Both companies issued sharply-worded statements confirming the breakdown in negotiations, only to reverse course a few minutes later and say that negotiations were back on. Bemused Twitter users reported that CBS channels were indeed blacked out in certain markets, while others then reported that service had resumed.

"At the request of CBS, we have halted going dark on their channels," Time Warner Cable spokeswoman Maureen Huff said in a statement.

The deadline to complete negotiations has now been extended at least nine times since the former contract expired on June 30.

Should the channels go dark again, Time Warner Cable (TWC, Fortune 500) customers won't be able to view CBS programs, including hit shows like "NCIS," "The Big Bang Theory" and this summer's "Under the Dome."

The 3 million customers affected by these talks are mostly in New York, Los Angeles and Dallas, but subscribers in Chicago, Boston, Pittsburgh, Detroit and Denver are also at risk.

Time Warner Cable has claimed that CBS is demanding too high a rate -- 600% more than what the cable provider has to pay for the network's programming in other parts of the country. In those areas, Time Warner Cable negotiates with local CBS affiliates that are not owned outright by the network.

Related: The 6 longest TV blackout wars

Although TV networks tend to attract fewer viewers in the summer season, "Under the Dome" has topped the ratings list, attracting more viewers than any other show last Monday night.

CBS had been running TV commercials warning customers in the affected cities that "Time Warner Cable is threatening to hold your favorite shows hostage."

Time Warner Cable and CBS are very likely to reach a deal -- especially if the dispute threatens NFL broadcasts scheduled to air on CBS later this year. The question is whether consumers will be forced to endure a blackout.

"In the end, of course, an agreement will be reached," CBS acknowledged in a statement issued Tuesday.

-- CNNMoney's Katie Lobosco contributed to this report.

First Published: July 29, 2013: 5:38 PM ET

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China and European Union strike deal on solar panels

China and the EU have reached a deal over solar panels.

HONG KONG (CNNMoney)

The deal, reached after weeks of negotiations, will allow Chinese solar panel producers to export their goods to Europe, provided they offer the products above a minimum price. Chinese companies that agree to the terms will avoid the severe tariffs that had been implemented by the EU.

EU Trade Commissioner Karel De Gucht praised the agreement as the solution that "both the EU and China were looking for."

"We have found an amicable solution that will result in a new equilibrium on the European solar panel market at a sustainable price level," he said.

The deal is not likely to please all parties. While the European Commission has not announced the full terms, media reports indicate that the minimum price for Chinese panels has been set at 74 U.S. cents per watt -- a much lower price than had been sought by European manufacturers.

De Gucht, the EU trade chief, is bound to face questions from producers over the price minimum. He must also move to patch up fissures between EU member countries -- some of which had publicly questioned the wisdom of taking China to task over solar panels.

The agreement still needs approval from the European Commission.

The deal should cool tensions between China and the EU, which had been engaged in tit-for-tat retaliatory actions that raised the specter of a trade war.

Related story: China and Europe risk trade war

In recent months, China had launched investigations into European wine and chemical producers. The EU, meanwhile, said in May that it had enough evidence to begin an investigation into Chinese telecoms.

A full-blown trade spat would have resulted in profound consequences for both economies. China is the EU's second biggest trading partner behind the United States, and the EU is China's biggest market. Trade in goods and services between the two totaled nearly 480 billion euros ($638 billion) last year.

The solar panel issue had been by far the most contentious dispute, covering Chinese exports worth about 21 billion euros ($28 billion).

Analysts will now looking for concrete signs that the relationship is on the mend. It's possible, for example, that China will halt its investigation into European wine prices.

Related story: China, OPEC and the future of energy

The trade spat between China and the EU was playing out against an evolving trade landscape, with China, the United States and other countries jockeying for power in Asia.

A slew of trade agreements are currently being negotiated, with the United States working toward the Trans-Pacific Partnership, a pact that many analysts in China view as a hedge against growing Chinese influence.

At the same time, China is pursuing its own objectives and increasing its engagement with international trade arbiters.

First Published: July 29, 2013: 12:35 AM ET

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JPMorgan to exit commodities businesses

NEW YORK (CNNMoney)

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

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

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

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

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

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

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

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

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

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

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

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Starbucks sees big growth in China

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

NEW YORK (CNNMoney)

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

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

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

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

Related: Starbucks' caffeine-fueled expansion

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

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

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

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

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

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

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

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Samsung's record profit isn't good enough

The Samsung Galaxy S4 has sold well, but analysts worry the market might be saturated.

HONG KONG (CNNMoney)

Samsung is learning that difficult lesson Friday after reporting a record profit that nonetheless fell short of investor expectations.

The South Korea-based smartphone maker reported net profit of 7.8 trillion won ($7 billion) in the second quarter. Even though that figure was a 50% increase over the previous year, it fell short of analyst expectations of 8 trillion won.

Samsung shares declined slightly after the earnings report was released. So far this year, shares have lost 14% of their value.

Investors and analysts remain worried about slowing demand for top-shelf smartphones like the Samsung Galaxy S4. The phone, which competes with Apple's iPhone and HTC's One, has sold well.

But the future profitability of the device remains a question -- and Samsung's legacy businesses in television and electronics production don't appear poised to pick up the slack.

Related story: Want to invest in Samsung? Good luck!

The problem is not unique to Samsung. Apple's (AAPL, Fortune 500) iPhones have also been selling well, but growth has slowed and investors have punished the stock lately.

BlackBerry (BBRY) has also struggled to gain traction with its new Z10 smartphone, and its stock has plummeted.

Related story: Samsung and HTC smartphone momentum comes to screeching halt

Now that Samsung is mirroring that trend, industry analysts believe that the top tier of the market is becoming saturated.

Apple is rumored to be creating a lower-end version of its smartphone to expand its share and better compete with No. 1 Samsung, whose phones run on the Android operating system from Google.

First Published: July 25, 2013: 11:21 PM ET

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SAC indictment depicts culture of law-breaking

SAC built a reputation as one of the world's most profitable hedge funds.

NEW YORK (CNNMoney)

That's according to the criminal indictment announced Thursday against the hedge-fund firm, which for years has been one of the most profitable in the world. SAC, run by billionaire investor Steven Cohen, is accused of fostering a culture of law-breaking in which employees plied corporate insiders for illicit investment tips.

Six former portfolio managers or research analysts from SAC have already pleaded guilty to insider trading while at the firm, with two more awaiting trial. But prosecutors say this conduct couldn't have persisted for so long without a stunning lack of oversight from the SAC's management, and in particular its compliance department, the division tasked with policing the firm internally.

"Compliance at SAC, to the extent that it existed, was woefully inadequate," FBI assistant director Geroge Venizelos said.

Despite the bevy of former employees who have admitted to insider trading, SAC's compliance department has caught only one incidence of insider trading in the firm's history, the indictment says. In that case, the two employees allegedly involved are said to have faced fines while avoiding being reported to law enforcement or dismissed.

The indictment excerpts a number of emails and instant messages from SAC traders suggesting they had information from corporate insiders.

In a 2007 email, for example, former SAC analyst Jon Horvath emailed Cohen with a trading recommendation concerning Sun Microsystems, saying: "My edge is contacts at the company and their distribution channel." This email and similar communications apparently failed to spark concern over possible law-breaking from SAC management.

The "limited" number of internal investigations the compliance department conducted "were generally weak," the indictment says, "with a focus on 'confirming' with a SAC [portfolio manager] or SAC [research analyst] in an interview that an email implying access to Inside Information was an inartfully drafted e-mail."

The FBI's Venizelos said the compliance department "was effective in explaining away potentially troublesome employee e-mails that seemed to describe access to inside information."

SAC said Thursday that it "has never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously."

"The handful of men who admit they broke the law does not reflect the honesty, integrity and character of the thousands of men and women who have worked at SAC over the past 21 years," the firm said.

SAC's compliance department also allegedly failed to police employees' use of expert networks, firms that connect investment professionals and corporate insiders and have been implicated in a number of insider-trading cases in recent years.

Among new hires, SAC allegedly sought out traders with contacts in the corporate world who could offer trading tips. In one instance, the government says, portfolio manager Richard Lee was hired despite a reputation for being part of the "insider trading group" at his previous firm.

Related: Wall Street sheriff says no one too big to indict

A lawyer for Lee, who pleaded guilty this week to insider trading while at SAC, said Lee "is cooperating with the government and looks forward to moving past this episode in his life." The lawyer, Richard Owens, declined to comment on the allegations about Lee's earlier conduct.

SAC lawyers did speak up against Lee's hiring, the indictment says, but they were allegedly overruled by Cohen, who is portrayed as ultimately responsible for the firm's culture.

Cohen "fostered a culture that focused on not discussing Inside Information too openly, rather than not seeking or trading on such information in the first place," the indictment says.

In an instant message to Cohen in 2009, a new portfolio manager allegedly recommended shorting Nokia stock due to some "recent research." The trader apologized for being "cryptic," the indictment says, telling Cohen that SAC compliance head "was giving me Rules 101 yesterday - so I won't be saying much."

CNNMoney's Maureen Farrell and Chris Isidore contributed reporting.

First Published: July 26, 2013: 1:18 AM ET

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Activision goes solo in $8.2 billion deal

World of Warcraft has attracted a cult following of almost 8 million subscribers.

HONG KONG (CNNMoney)

Activision Blizzard plans to buy back 429 million shares for about $5.8 billion from French media company Vivendi. Two company executives and a group of investors -- including China's largest internet company Tencent -- will purchase another block of 172 million shares for $2.3 billion.

The decision to separate from Vivendi represents a "tremendous opportunity" for Activision (ATVI), CEO Bobby Kotick said, further ensuring its foothold as the world's largest video game publisher. World of Warcraft, an online role-playing game, boasts a cult following of 7.7 million subscribers.

The acquisition will be funded with $1.2 billion in cash and $4.6 billion in debt financing from banks including JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500).

Paris-based Vivendi will retain a 12% stake, or about 83 million shares.

The deal should deepen the relationship between Activision and Tencent, an ambitious Chinese firm that has been engineering a foray into mobile gaming.

The Shenzhen-based company is currently testing mobile games platforms for its instant messaging software QQ and popular phone messaging app WeChat, which has had more than 300 million downloads since its debut two years ago.

Related story: Playstation boss is feeling good about the PS4

Tencent (TCEHY) and Activision announced last year that they would collaborate on an effort to bring the Call of Duty franchise to online players in China.

Earlier this year, Tencent CEO Pony Ma said the company continues to be interested in acquisitions, especially smaller U.S. startups. In 2011, the company purchased a majority stake in Los Angeles-based Riot Games for about $400 million.

Activision plans to report second-quarter results on Aug. 1 and estimates net revenue of just more than $1 billion.

First Published: July 26, 2013: 3:28 AM ET

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China leaders offer stimulus as growth lags

A construction worker helps build a hi-speed rail line in China.

HONG KONG (CNNMoney)

The measures include a tax break for small businesses, reduced export fees and a pledge to accelerate railway construction and investment. The policy shifts were announced by the State Council following a meeting of the group led by Premier Li Keqiang.

The strategy is something of a departure for China, which responded to a slowing economy in 2008 by unleashing a tidal wave of fiscal stimulus -- mostly in the form of government spending on infrastructure projects.

The stimulus measures announced Thursday are much more focused, hitting only a few key sectors of the economy. "I think [growth is slow] enough for them to start rolling out some so-called fine tuning measures," Standard Chartered economist Kelvin Lau told CNN. "I wouldn't even call it stimulus. It's very targeted."

Starting in August, some small businesses will be exempt from paying value-added tax -- which should leave more cash in the pockets of business owners and encourage hiring. Six million businesses will benefit from the tax break, according to government estimates.

Railway construction will be focused in poorer, mostly rural areas in China. Beijing also announced an initiative to attract more private investment by establishing a railway investment fund.

Earlier this month, China reported that GDP growth slowed to 7.5% in the second quarter. Expansion at that pace would make most countries green with envy, but was among the slowest rates China has reported in the past two decades.

China has more typically averaged growth of around 10% a year, and the slowdown, coupled with weak manufacturing data, has triggered alarm bells in some quarters.

Related story: Economic slowdown tests China's leaders

China's economy relies heavily on investment, a trend that has distorted the country's housing market and placed great emphasis on exports over consumption. In addition, the rules governing the country's equity markets make raising capital difficult for some businesses.

Weaker growth puts China's ruling Communist Party in a tough spot, and could derail efforts meant to shift the world's second-biggest economy to a more sustainable growth model. President Xi Jinping is by all accounts determined to proceed with reforms, even if it means tolerating slower growth for now.

"We have known for months that China is in a cyclical soft patch within a structural slowdown," Lau said. "The numbers just confirm that China is not turning around anytime soon."

-- CNN's Esther Pang contributed reporting.

First Published: July 25, 2013: 1:50 AM ET

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Sneaky credit card charges can cost you hundreds

NEW YORK (CNNMoney)

There are the charges that pop up when a subscription or membership is automatically renewed, the fees you're hit with when a free trial unknowingly turns into an ongoing membership, the extra charges tacked on to a purchase after you think you've been quoted a final price, and many other misleading and unwanted fees.

These so-called "grey charges" average $61 apiece and amounted to $14.3 billion last year, according to an analysis of 5,000 credit and debit card statements conducted by consulting firm Aite Group.

Related: Young Americans ditch credit cards

Approximately 35% of cardholders incurred at least one grey charge last year, averaging an annual total of $215 per person. One-third paid between $100 and $500 in charges, while nearly 10% paid $500 or more.

The growing use of credit and debit cards along with the popularity of online shopping have made it easier for retailers to charge these unexpected fees, said Ron Shevlin, a senior analyst at Aite Group. When using cash or a check, it's much harder for merchants to sneak in fees and to continue charging a customer after an initial payment is made.

The most common grey charge occurs when you sign up for a product or service you think is free, but after an initial grace period you start getting charged for it. For example, if you sign up for a 2-week free trial of a weight loss program but forget to send back the workout DVDs or cancel the service, you could be charged the full price of the item or an ongoing monthly fee. These "free-to-paid" fees represent nearly half of all grey charges, Aite found.

"Phantom fees," where you make a purchase online and are charged for an extra product or service that you didn't request (like a credit monitoring service that you somehow end up with after purchasing your credit score), account for 18% of grey charges.

Related: Credit card delinquencies lowest since 1990

Meanwhile, 7% of grey fees stem from unintended subscriptions, where a one-time purchase ends up triggering ongoing monthly payments. These can occur when you download what looks like a free app on your phone and agree to the terms and conditions without reading them carefully.

While they may be aggravating and expensive, these fees aren't necessarily fraudulent or illegal. Customers are typically notified about them -- even if that disclosure is buried deep within the fine print of the terms and conditions.

To avoid getting charged in the first place, be sure to read agreements and terms and conditions carefully before making an online purchase. BillGuard, which commissioned this study, has even made a business out of monitoring bank statements and flagging grey charges for consumers. If you do identify a fee like this on your statement, contact the merchant or your credit card issuer to challenge the charge.

Grey charges are a pain for card issuers too, costing them an estimated $562 million per year in related customer service, Aite found. That includes nearly 24 million calls from frustrated customers per month.

First Published: July 25, 2013: 2:04 AM ET

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Housing markets where cash is king

NEW YORK (CNNMoney)

In June, 58% of the sales in the state were made in all-cash, according to a report by RealtyTrac.

10 cities where cash rules

In these metro areas, 40% or more of all home sales in June were all-cash deals, according to RealtyTrac.

Miami/Ft. Lauderdale	64%
Las Vegas	62%
Tampa	58%
Detroit	56%
Orlando	53%
New York	49%
New Orleans	43%
Memphis	43%
Jacksonville	42%
Atlanta	42%

Source: RealtyTrac

But it's not just Nevada. All-cash deals in Florida comprised 57% of home sales during the month; in the state of New York, it was 51%, and in Vermont, a whopping 80%.

In markets like these, lingering foreclosures and depressed home prices are attracting private equity firms and other investors looking to buy before home prices go much higher, RealtyTrac said.

In other markets, where there are fewer distressed properties, the all-cash deals are a lot less prevalent. Nationwide, cash deals comprised 30% of home sales in June, down from 31% a year earlier, RealtyTrac reported. But in states like Texas, Utah and New Mexico, such deals were practically non-existent.

Related: Buy or rent? 10 major cities

"The U.S. housing market is slowly but surely moving toward a more normalized and sustainable pattern after a flurry of institutional and cash buyers flocked to residential real estate last year, pushing up prices and picking clean the best inventory available in many areas," said Daren Blomquist, vice president at RealtyTrac.

The biggest metropolitan hotspot for investors right now is Atlanta, where all-cash deals represented 42% of sales in June and investors represented 27% of buyers, the highest ratio in the country. Atlanta is still struggling with one of the highest foreclosure rates in the country, making it a prime target for investors.

Hit hard by foreclosures when the housing bubble burst, Phoenix was one of the first places investors flocked to. A year ago, 25% of all homes sold went to deep-pocketed investors. In June, that percentage dropped to 13% as most of the low-priced, prime properties had already been sold.

Related: 10 big, booming cities

"Prices in Phoenix are just too high now," said Tanya Marchiol, founder of Team Investments, a real estate investment firm based in the area. "Last year, I could buy a foreclosure, needing just new carpeting and a paint job, for $80,000, put $5,000 into it, and flip it for $120,000."

With fewer opportunities in her hometown, she has been buying and flipping in Orlando, where 53% of sales were all-cash deals last month, according to RealtyTrac. Other Florida metros ranked even higher for cash sales. In Miami, 64% of deals were done in cash and in Tampa, 58%.

A larger share of the deals in Florida, however, are going to individual buyers, according to Blomquist. Retirees come to the state looking to buy with the proceeds from the sale of their former home or cash from their retirement funds. There's also a huge cash-rich international contingent, especially in Miami.

Related: Venezuela money helps fuel Miami housing boom

The New York metro area is also something of a special case, said Blomquist. Not only is there a large number of international buyers, but there's also a very limited inventory of homes for sale in the high-demand areas of Manhattan and Brooklyn.

Even buyers who prefer to finance purchases may be forced into cash deals in order to have their bids taken seriously.

"To compete in a market like New York, cash is king," said Blomquist.

First Published: July 25, 2013: 2:10 AM ET

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Could bond losses derail my college savings plan?

NEW YORK (Money Magazine)

Though prices on existing bonds fall when interest rates rise, you're unlikely to face losses similar to what a bad year in stocks could generate.

Plus, 529 plans' age-based funds -- invested more conservatively as kids approach college age -- tend to hold bonds with short or intermediate maturities (less than 10 years), dampening possible declines.

Still, says Christine Benz, director of personal finance at Morningstar, if you're nervous about rates and college bills are less than five years out, you could move some of your 529 to a money-market or short-term-bond fund (maturities under five years) in your plan.

Related: Coverdell, 529, Roth: Which to tap first for college?

Leave money slated for college's later years or grad school untouched. And remember that you can move a 529's existing investments typically only once a year.

Bond losses vs. stock losses

The bond market has had down years over the past quarter-century, but its declines haven't matched those of stocks.

Total returns starting in worst years since 1988	One year later	Four years later
Bonds (starting January 1994)	-2.7%	30.4%
Stocks (starting January 2008)	-36.5%	-6.3%

Note: Bond market is measured by Vanguard Total Bond Market fund; stocks are measured by the S&P 500. Sources: Morningstar, Bloomberg

First Published: July 22, 2013: 5:34 PM ET

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Netflix's 'Arrested Development' grows subscribers - but not enough

'Arrested Development' delivered a disappointing subscriber boost to Netflix.

NEW YORK (CNNMoney)

Netflix's video streaming service netted about 630,000 new American subscribers in the second quarter. That's pretty good, considering that Netflix typically expects second-quarter subscriber numbers to sink year-over year. The subscriber additions were also on the high end of Netflix's outlook for the period: In April, Netflix said it expected to gain between 230,000 and 880,000 new domestic subscribers in the quarter.

The show did generate "a small but noticeable bump in membership when we released it," wrote the company in a prepared statement.

But Wall Street analysts were more optimistic, expecting Netflix to add about 700,000 subscribers. As a result, shares of Netflix (NFLX) fell by 6% in after-hours trading on Monday.

That's despite better-than-expected financial results for the quarter. Netflix's second-quarter profit, excluding one-time debt-related charges, came in at 49 cents per share. Analysts polled by Thomson Reuters were expecting earnings of 40 cents per share.

Netflix reported revenue of almost $1.1 billion, in line with expectations.

Related story: Hulu still a tease when suitors come calling

Fox canceled "Arrested Development" in 2006, but its cult-like following convinced Netflix to create a new, fourth season and release all 15 episodes of "Arrested Development" on May 26. It's part of a larger original-content strategy that also included "House of Cards," "Hemlock Grove," and "Orange is the New Black." Another original series, Ricky Gervais' "Derek" will premier in September.

The company reportedly spent $100 million producing and shooting two seasons of "House of Cards," the first of which was released in February.

Evidently Netflix executives believe the original content is worth the cost, as it has ordered second seasons of all its first-season projects thus far, and the company plans to expand its homegrown content to include documentaries and stand-up comedy specials. CEO Reed Hastings said Monday that he would like to see Netflix continue to produce additional seasons of "House of Cards."

"We haven't yet turned it into a Harry Potter-esque global phenomenon ... we've only made progress on that" Hastings said.

Its original content even received 14 Emmy nominations last week, the first time Internet TV shows have done so, but the new content released in the past quarter did not translate into a huge jump in subscribers. Netflix netted more than 2 million subscribers in the first quarter of this year.

The company's executives said on a conference call with investors that they expect each individual original series to have a subtle, yet compounding positive impact on Netflix's subscriber growth.

"Even the most iconic TV brands, like The Sopranos, took years before they became brands," said Ted Sarandos, the chief content officer.

Investors have largely bought into the strategy, as Netflix stock prices have nearly quadrupled over the past 12 months.

The number of Netflix users now stand at nearly 30 million domestic and 8 million international subscribers.

Netflix accounts for 89% of the streamed-TV show market, way ahead of its competitors like Hulu and Amazon Prime Instant video, according to the NPD Group. But CEO Reed Hastings said the company is not taking its leading position for granted, noting that Netflix competitors are all getting better.

First Published: July 22, 2013: 4:45 PM ET

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Toyota wrongful death trial kicks off in California

Toyota has been forced to undertake a number of major recalls in the past few years.

NEW YORK (CNNMoney)

Jury selection began Monday for a case in which the family of a deceased California woman claims the 2009 crash that killed her resulted from her Toyota Camry's sudden and uncontrollable acceleration.

In a complaint filed in California Superior Court, the family of driver Noriko Uno says that as she was driving her car in Upland, Ca., it unexpectedly accelerated to more than 100 miles per hour despite her depressing the brake pedal, and eventually struck a telephone pole.

The Uno family's lawsuit is just one of dozens filed against Toyota (TM) in state and federal courts seeking damages over the alleged unintended acceleration of its vehicles. The trial, expected to take about two months, will provide an early test of the strength of claims against the Japanese manufacturer.

Toyota says there was "no defect in Mrs. Uno's vehicle," and that it was "equipped with a state-of-the-art braking system." The firm says claims about its vehicles' unintended acceleration are "wholly unsubstantiated."

"We believe the allegations being made against the company ... to be without merit, and we look forward to the opportunity to contest each of them vigorously," Toyota says on its website.

The controversy has already proved costly for Toyota. The company announced in December it would take a charge of more than $1 billion to settle claims from drivers who say their vehicles lost value as a result of the alleged acceleration problems.

Toyota said at the time that it settled simply to bring an end to the litigation, and denied all wrongdoing.

Toyota was forced to recall over eight million vehicles in 2009 and 2010 due to gas-pedal-related issues.

Of that total, 5.8 million were flagged over the potential for their accelerator pedals to become stuck in floor mats. Some 4.5 million were recalled because of the potential for their gas pedals, after wear, to become sticky.

More than two million vehicles were subject to both recalls.

Uno's 2006 Camry was not subject to these recalls, though her family's suit claims her model was also defective, and that Toyota failed to include a brake override system to guard against sudden and unexpected acceleration.

CNN's Maribel Aber and Polina Fishof contributed reporting.

First Published: July 22, 2013: 6:42 PM ET

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Recovering U.K. opens gap over Europe

LONDON (CNNMoney)

Second quarter GDP figures for the world's sixth-biggest economy due this week should show growth of about 0.6%, twice the rate of expansion seen in the first three months of the year.

By comparison, economists say the eurozone -- which publishes its own Q2 figures in August -- will struggle to do much better than stagnate or post the slimmest growth. It's on course for a second consecutive year of contraction as austerity measures, record unemployment and a wounded banking system continue to depress demand.

Just last week, the Greek parliament narrowly passed a law to sack thousands of public sector workers and Portugal is struggling to meet the terms of its bailout. Southern Europe's woes have hit sentiment in Germany again, and combined with slower growth in China, are weighing on exports from the eurozone's top economy.

The U.K. contracted for five consecutive quarters from the second quarter of 2008, and was back in recession for nine months in late 2011 and early 2012 when the eurozone debt crisis was raging.

But it bounced back from a weak end to last year with growth of 0.3% in the first quarter. Activity has accelerated since as rising asset prices encourage hard-pressed consumers to loosen their purse strings, despite continuing government spending cuts.

Earlier this month the International Monetary Fund raised its forecast for U.K. GDP growth to 0.9% in 2013 even as it warned the recession in the eurozone would be deeper than previously expected. Private sector economists have made similar moves.

"This growth in consumption will be underpinned by a lower saving ratio as households take comfort from a recovery in asset prices," noted UBS economist Amit Kara, as he upgraded his 2013 U.K. forecast to 1.1%.

Related: World economy stuck in neutral: IMF

Home prices are increasing at their fastest rate in more than three years, helped by ultra-low interest rates and government programs that encourage banks to lend and make it easier for riskier borrowers to buy a home.

The FTSE-100 hit an eight-week closing high last Thursday as strong retail sales data provided more evidence that recovery in the U.K. may be gaining momentum. Royal baby fever and a heat wave are helping drive spending.

The labor market is also looking healthier -- unemployment is falling at its fastest rate in three years -- but with consumer price inflation still running at about three times wage growth (excluding bonuses), and no sign of a real pickup in investment and exports, some experts say the upturn remains fragile.

"The U.K. recovery is so far unsustainable," says Rob Wood, chief UK economist at Berenberg. "[Bank of England Governor] Mark Carney needs to keep households from tightening their purse strings until the recovery is in full swing, but there is a decent chance that households wilt before the recovery can transition to a firmer footing."

Falling inflation and stronger wage growth could put the economy on a more sustainable footing next year, provided U.K. exporters can take advantage of opportunities in the U.S. and China.

"It would take a major crisis to halt this recovery, on the scale of the Euro crisis that crushed the last embryonic upturn in early 2012," said Peter Spencer, senior economic adviser to the ITEM Club.

Earlier this month, the Bank of England and European Central Bank both moved to protect their economies from a Fed-induced spike in borrowing costs by signaling that they'll continue to provide cheap money for the foreseeable future.

First Published: July 21, 2013: 10:01 PM ET

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Abenomics boosted as LDP earns sweeping victory

Prime Minister Shinzo Abe is pursuing structural economic reforms in Japan.

HONG KONG (CNNMoney)

The result should boost the so-called Abenomics platform championed by Prime Minister Shinzo Abe -- a mix of coordinated government spending, central bank stimulus and structural economic reforms designed to push up prices and end 15 years of deflation.

The fiscal and monetary aspects of the program have already helped weaken the yen and dramatically boost the profits of exporters, driving the Nikkei index through the roof in the process.

But one pillar of the Abenomics strategy -- structural reforms -- has been delayed by political barriers and the LDP's relative lack of power in the upper house.

Related story: 7 big winners in Nikkei surge

The proposed reforms include efforts to make labor markets more flexible, encourage immigration and draw more Japanese women into the workforce. Now that Abe's coalition controls 133 votes in the 242-member upper chamber, analysts said that the reforms stand a greater chance of approval.

"It's done. Abe is in full control now," HSBC economist Frederic Neumann wrote in a research note. "Yet his real test still lies ahead. He must urgently implement far-reaching reforms to make his economic revival stick."

Abe has promised to do just that -- saying that his government will now move ahead "with speed." Exit polls indicated that the vast majority of voters support Abe's economic polices.

"The economy is improving due to our brand of forward thinking politics," Abe boasted.

"Employment and wages will rise as the situation improves. Consumption will then rise and companies can invest the money they make," he said. "We want to create this cycle as soon as possible so that people can feel the effects."

Related story: Japan GDP trumps expectations under Abenomics

Yet results are not a foregone conclusion.

While Japan's economy surged in the first quarter of 2013, growing a faster-than-expected 3.5%, a stock-market skid has raised questions about whether policymakers can pull off the high-wire act in the heavily indebted country.

Related story: Even Abenomics can't ignore Japan's debt

Some in Japan remain opposed to Abe's structural reforms, and the LDP fell short of number of votes needed to wield a majority without help from coalition partner New Komeito.

Economists at Capital Economics cautioned that the road ahead could be bumpy for Abe; New Komeito may not agree to all LDP plans, especially if the government makes an attempt to ramp up military spending.

"The politicians could be forgiven for putting off difficult decisions until after the elections," the economists said. "But hard choices will have to be made soon to maintain the markets' confidence in 'Abenomics.' "

First Published: July 22, 2013: 12:51 AM ET

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China loosens grip on lending rates

Zhou Xiaochuan, governor of the People's Bank of China, at a press conference.

HONG KONG (CNNMoney)

The decision to remove a longstanding lower limit for interest rates on loans will give banks more autonomy and is widely seen as a sign of Beijing's determination to reform its financial system even if the cost is slower economic growth.

The rule change is expected to have little impact for now, as few banks are willing to make loans below the benchmark rate. The original floor was 70% of the benchmark rate. Over time, the change should help to lower borrowing costs.

Interest rate liberalization has long been seen as a crucial step along China's path toward a more open economy and a more efficient financial sector.

The removal of the lending floor was seen by analysts as Beijing's timid first step in this process.

"Rate liberalization alone will not be able to address all the problems that China faces today," wrote economists at Credit Suisse. "The core issue today is that private investment interest weakened significantly."

A more significant move toward complete interest rate liberalization, experts said, would be a loosening or elimination of artificial deposit rate ceilings.

Those rates have been set so low that Chinese savers have for the past year been earning negative interest when adjusted for inflation. In other words, average citizens have been paying banks to hold their money.

Related story: In China, a little bit of financial chaos is just fine

The Credit Suisse economists think the elimination of deposit rate ceilings would encourage smaller banks to raise interest rates in an effort to attract more customers.

While the government has not yet provided a timetable for eliminating the deposit rate ceilings, analysts view this as the next logical step.

"This competition would increase the yield of deposit rates and shrink the margins of large banks," said the Creidt Suisse economists. "This could potentially change the dynamism of wealth management products and the corporate bond market."

Related story: 10 hardest working countries

Eliminating the deposit cap would also put the squeeze on the country's shadow banking system, which has grown rapidly as investors seek yields higher than those offered by major commercial banks.

In recent years, shadow banks have carved out a niche trade in China. They offer loans to small and medium-sized companies that are ignored by large state-run banks. Often, the loans are packaged and sold to investors looking for higher returns.

The government's concern is that lending has grown too big, too fast, and Beijing hopes to restrain that expansion. At the same time, the fear among investors is that a lending crackdown could slow the economy more than expected.

First Published: July 22, 2013: 2:53 AM ET

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

The SEC sanctioned Miami for similar conduct in 2003.

NEW YORK (CNNMoney)

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

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

Related: SEC charges hedge-fund mogul Steve Cohen

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

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

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

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

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

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Be set when the Fed's help ends

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

(Money Magazine)

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

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

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

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

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

What exactly is the Fed doing?

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

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

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

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

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

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

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

Will a Fed shift crush stock market gains?

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

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

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

Related: Stocks that can rise with rates

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

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

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

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

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

How risky are bonds now?

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

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

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

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

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

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

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

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

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Judge orders Detroit to withdraw bankruptcy filing

Detroit might have to drop its bankruptcy case if a state court judge's order Friday afternoon is upheld on appeal.

NEW YORK (CNNMoney)

But Michigan Attorney General Bill Schuette said in a statement soon after the decision that he intended an immediate appeal to the Michigan Court of Appeals and would seek to block this latest order from taking effect while the appeal is heard.

The order came in response to motions by lawyers for retirees and pension funds for city workers, who argue the state constitution prohibits cutting pension and retirement benefits, as has been proposed in the bankruptcy case.

Related: Detroit files bankruptcy

The order was from Ingham County Circuit Judge Rosemarie Aquilina, the county that includes the state capital of Lansing. Aquilina had been ready to issue an order Thursday that would have blocked the filing in federal bankruptcy court, but the hearing on the motion to do so started five minutes after the bankruptcy case was filed.

Related: Detroit bankruptcy filing came with only 5 minutes to spare

It's not clear if a state court judge legally can order a party in a federal case to drop that action.

"Obviously there are constitutional issues," said Michael Sweet, a bankruptcy attorney with the California law firm of Fox Rothschild and an expert in municipal bankruptcy cases. "Anyone who thought this case would be resolved quickly was sorely mistaken. There is too much at stake for too many people. Clearly the gloves are coming off."

Detroit became the largest municipal bankruptcy in U.S. history Thursday evening when emergency manager Kevyn Orr filed the case in federal bankruptcy court in Detroit. Orr had been appointed to oversee Detroit's finances by Gov. Rick Snyder. Snyder authorized the bankruptcy filing. Aquilina's order says that Snyder must now order Orr to withdrawal the case.

The American Federation of State, County and Municipal Employees, a union opposed to the bankruptcy filing, praised the judge's ruling.

"There is too much at stake to play political games with the hard-earned retirement security of Detroit's public workers," union president Lee Saunders said in a statement.

CNNMoney's James O'Toole contributed reporting.

First Published: July 19, 2013: 4:23 PM ET

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

The SEC sanctioned Miami for similar conduct in 2003.

NEW YORK (CNNMoney)

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

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

Related: SEC charges hedge-fund mogul Steve Cohen

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

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

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

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

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

14.44 | 0 komentar | Read More

Be set when the Fed's help ends

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

(Money Magazine)

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

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

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

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

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

What exactly is the Fed doing?

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

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

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

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

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

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

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

Will a Fed shift crush stock market gains?

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

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

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

Related: Stocks that can rise with rates

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

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

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

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

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

How risky are bonds now?

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

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

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

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

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

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

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

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

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Judge orders Detroit to withdraw bankruptcy filing

Detroit might have to drop its bankruptcy case if a state court judge's order Friday afternoon is upheld on appeal.

NEW YORK (CNNMoney)

But Michigan Attorney General Bill Schuette said in a statement soon after the decision that he intended an immediate appeal to the Michigan Court of Appeals and would seek to block this latest order from taking effect while the appeal is heard.

The order came in response to motions by lawyers for retirees and pension funds for city workers, who argue the state constitution prohibits cutting pension and retirement benefits, as has been proposed in the bankruptcy case.

Related: Detroit files bankruptcy

The order was from Ingham County Circuit Judge Rosemarie Aquilina, the county that includes the state capital of Lansing. Aquilina had been ready to issue an order Thursday that would have blocked the filing in federal bankruptcy court, but the hearing on the motion to do so started five minutes after the bankruptcy case was filed.

Related: Detroit bankruptcy filing came with only 5 minutes to spare

It's not clear if a state court judge legally can order a party in a federal case to drop that action.

"Obviously there are constitutional issues," said Michael Sweet, a bankruptcy attorney with the California law firm of Fox Rothschild and an expert in municipal bankruptcy cases. "Anyone who thought this case would be resolved quickly was sorely mistaken. There is too much at stake for too many people. Clearly the gloves are coming off."

Detroit became the largest municipal bankruptcy in U.S. history Thursday evening when emergency manager Kevyn Orr filed the case in federal bankruptcy court in Detroit. Orr had been appointed to oversee Detroit's finances by Gov. Rick Snyder. Snyder authorized the bankruptcy filing. Aquilina's order says that Snyder must now order Orr to withdrawal the case.

The American Federation of State, County and Municipal Employees, a union opposed to the bankruptcy filing, praised the judge's ruling.

"There is too much at stake to play political games with the hard-earned retirement security of Detroit's public workers," union president Lee Saunders said in a statement.

CNNMoney's James O'Toole contributed reporting.

First Published: July 19, 2013: 4:23 PM ET

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Fed dissenter argues for tapering QE3

Kansas City Federal Reserve President Esther George believes the U.S. economy is on a stable path.

NEW YORK (CNNMoney)

"In my view, we are on a steady and sustainable growth path," said Kansas City Fed President Esther George at a conference on Tuesday. George pointed to improvement in the job market and housing sector as reasons why the U.S. economy requires no further bond-buying from the Fed.

George hasn't been afraid to disagree with her colleagues on the Federal Open Market Committee, who set Fed policy. She has dissented at every central bank meeting this year, urging her colleagues to slowly back away from their current bond-buying policy.

"I would like to see the FOMC systematically reduce the pace of purchases, in a manner that would bring the program to an end in the first half of next year," she said.

The Fed is currently engaged in a policy known as quantitative easing, or QE3, in which it buys $85 billion a month in Treasuries and mortgage-backed securities. Buying these bonds is intended to lower long-term interest rates, and thereby stimulate the economy above-and-beyond the low short-term interest rates set by the Fed in December 2008.

Related: 'About half' of Fed officials want QE3 to end this year

To back up her view, George cited her colleagues' own forecasts, which have recently become more optimistic. Last September, Fed officials projected the unemployment rate would fall to 7.75% by the end of 2013.

But as of the June meeting, they now believe it will fall to around 7.25% by that time. (It was 7.6% as of June.)

"Projections of FOMC members suggest that there's more confidence, on average, about improvement for the labor market," George said, adding that throughout history, the Fed has often been overly pessimistic about the unemployment rate.

George nodded to increased volatility in interest rates as an inevitable consequence, as the Fed starts tapering QE3, but also said she believes the "economy is positioned to benefit from higher long-term interest rates."

Related: Ben Bernanke's power over your money

She pointed to retirees and savers as an example. Over time, they will "begin to realize improved returns," she said.

In addition to QE3, the Fed has said it plans to keep short-term rates exceptionally low until the unemployment rate falls below 6.5%, or annual inflation exceeds 2.5% -- a scenario that it predicts is unlikely to occur until at least 2015.

Fed Chairman Ben Bernanke and others have stressed that those numbers are more like guidelines than set-in-stone rules, but George clearly disagrees once again with her colleagues. She would prefer the Fed to commit to a specific economic number as a trigger for monetary policy.

"Thresholds should act like triggers," she said. Thresholds have the "potential to perpetuate uncertainty," whereas a "trigger provides more certainty to the public," she said.

George also repeated her concern that low interest rates could lead investors to take "destabilizing" risks, but fell short of calling an actual bubble.

"Are there bubbles? I don't know," she said. "I don't know how to call a bubble."

First Published: July 16, 2013: 3:45 PM ET

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