Senate confirms Jack Lew as Treasury Secretary

The Senate confirmed Jack Lew to be the next Treasury secretary.

WASHINGTON (CNNMoney)

Lew, 57, most recently served as the White House chief-of-staff.

As a former budget director for Presidents Obama and Bill Clinton, Lew has overseen budget talks in times of deficits and also surpluses.

As the secretary of the Treasury, Lew will run U.S. domestic financial policy and is charged with collecting federal taxes and managing public debt, among other duties.

Lew was confirmed with a 71-26 vote. Compared with the bruising confirmation battle of Chuck Hagel as Defense secretary, Lew's was a breeze.

President Obama said in a statement that he was "pleased that the Senate took bipartisan action today to confirm Jack Lew as our nation's next Treasury secretary."

"His reputation as a master of fiscal issues who can work with leaders on both sides of the aisle has already helped him succeed in some of the toughest jobs in Washington," Obama said.

Republicans who voted against Lew said they were concerned about his experience at Citigroup (C, Fortune 500) during the financial crisis. Lew had served as the chief operating officer at Citi Alternative Investments in 2008, which made bets against the housing market.

Lawmakers questioned an offshore investment in the Cayman Islands and a $900,000 bonus Lew received even as the bank was being bailed out by taxpayers.

"In the past, the president has railed again the 'fat cats' on Wall Street," Sen. Charles Grassley of Iowa, who opposed the confirmation, said Wednesday. "Today, the president nominates a man who took a bonus from a bailed-out financially insolvent bank.

Lew has said he did not make investment decisions at Citigroup and that he has paid taxes on all his investments, many of which he sold for a loss.

Other Republicans and some on Wall Street have said they're concerned about Lew's lack of business and financial markets experience.

Still, Lew garnered a stronger confirmation vote than his predecessor, Tim Geithner, who took office in 2009, after a 60-34 Senate vote.

Geithner stepped down in January. He was the last holdover from President Obama's original economic team.

Related: How much is a Treasury Secretary worth?

Lew is expected to jump right in to the debate over how to address some $85 billion in forced budget cuts that are scheduled to hit Friday. He was part of the team that came up with the original idea of the cuts, as a key player in the 2011 debt ceiling talks. At the time, nobody thought the cuts would ever come to pass, as they were intended to be so horrible that they'd force a budget deal.

First Published: February 27, 2013: 6:19 PM ET

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It's official: Kuroda nominated to BoJ's top spot

Haruhiko Kuroda has been nominated to lead the Bank of Japan.

HONG KONG (CNNMoney)

Kuroda, the current president of the Asian Development Bank, has years of experience in international finance and monetary prescriptions that largely mirror those of Abe.

The former finance ministry official has been critical of the central bank in the past, saying it has been too timid in its efforts to spur growth and fight deflation.

The opposition Democratic Party of Japan signaled earlier this week it would not oppose Kuroda in the Diet, clearing the way for lawmakers to approve the nomination.

With Japan in recession, Abe based his election campaign last year on a commitment to take radical steps to end years of deflation, combining promises of looser monetary policy with pledges of fiscal stimulus. Kuroda, if confirmed, gives Abe a like-minded ally at the top of the central bank.

The Japanese yen has already weakened significantly in response to policy changes, falling 20% against the U.S. dollar since the beginning of October and driving up the stock market. It has also lost ground against the euro and some Asian peers, raising concerns that Japan may be engaged in a race to the bottom to promote exports.

Weak currency cheapens the price of a country's exports, making them more attractive to international buyers by undercutting competitors. Japan's exporters have cheered the yen's decline, and Abe's popularity has skyrocketed in recent weeks.

Related: Japan's economy contracts for third straight quarter

Kuroda appears willing to follow through on Abe's policies, telling the Wall Street Journal earlier this month that Japan has "plenty of room for monetary easing."

"If necessary and if appropriate, of course additional monetary easing this year could be justified," he said.

Masaaki Shirakawa, the current BoJ head, has announced he will stand down on March 19, several weeks before his term was due to end.

Shirakawa agreed last month to double the bank's inflation target and adopt open-ended purchases of government bonds. But he is opposed to some of the more extreme proposals considered by the bank and has been accused of doing too little, too late.

Related: Don't fight the BoJ

By way of contrast, Kuroda told the Journal that the BoJ must move aggressively to meet its 2% inflation target.

"You cannot wait for five years, 10 years or 15 years. You have to achieve the target within a reasonably short time period," he said.

The political pressure on the Bank of Japan has caused consternation in the international community, with some lobbing charges of currency manipulation in Japan's direction.

Tokyo has rejected those claims, saying its policies are aimed at the economy not the yen, but the G7 group of leading industrial nations - including Japan - felt compelled to issue a rare statement earlier this month aimed at cooling talk of a currency war.

Kuroda, for one, seems undeterred, telling the Journal that the yen's weakening is good for the global economy.

"From a global point of view, is it good for the Japanese economy to continue to suffer from deflation...and low growth?" he asked. "That is not good for Japan, not good for the world economy."

-- CNN's Junko Ogura and Yoko Wakatsuki contributed to this report.

First Published: February 27, 2013: 10:00 PM ET

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Struggling homeowners turned to short sales in 2012

NEW YORK (CNNMoney)

There were nearly three times as many short sales as there were sales of foreclosed homes in 2012, according to RealtyTrac. Foreclosures accounted for 11% of all sales, down from 13% a year before. Meanwhile, short sales rose 5% year-over-year, accounting for 32% of all home deals.

"We're seeing fewer of the most disruptive sales, the [bank-owned foreclosures], hitting the market but there are still a lot of distressed property sales," said Daren Blomquist, spokesman for RealtyTrac. "They're shifting to short sales, though."

In a short sale, homeowners sell at a price that is less than what they owe the bank, and the bank agrees to absorb the loss. Typically, a seller has to demonstrate some kind of financial hardship before the bank will approve the deal -- and forgive the unpaid debt. The bank then sells the house, typically at a better price than it would have gotten had the home gone into foreclosure.

During the fourth quarter, the average discount on a foreclosure was a whopping 39%, while the average short sale sold for 23% below market, RealtyTrac found.

Related: Million-dollar foreclosures

The biggest spike in short sales last year occurred during the second half of the year. Fueling the increase was the National Mortgage Settlement, an agreement between the government and the nation's five biggest mortgage lenders which was finalized last February.

Under the terms of the deal, the banks receive credit towards the settlement when they approve short sales for distressed homeowners. Of the $45 billion in consumer relief that lenders have reported under that agreement, $19 billion has gone toward forgiving debt in short sales, according to the latest report from the Office of Mortgage Settlement Oversight.

Related: 10 great foreclosure deals

Many underwater homeowners were also scrambling to unload their properties before the Mortgage Forgiveness Debt Relief Act was set to expire December 31. Had the act been allowed to lapse, homeowners would have had to start paying income taxes on the portion of their mortgage that is forgiven in a foreclosure, short sale or principal reduction.

The growing number of short sales helped buoy the housing market and push distressed home prices higher last year. During the fourth quarter, for example, homes that were either bank-owned or in foreclosure sold for an average of $171,704, an increase of 4% from a year earlier.

Related: Foreclosures -- hardest hit neighborhoods'

In Arizona, prices were 22% higher in the fourth quarter compared with late 2011. In Nevada, prices jumped 21%; and in California -- where short sales comprised more than a third of all sales -- they increased 14%, RealtyTrac reported.

First Published: February 28, 2013: 12:45 AM ET

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Wealth inequality between blacks and whites worsens

Whites have accumulated far more wealth than blacks, according to a new Brandeis University study.

NEW YORK (CNNMoney)

That type of inequality can be a drag on economic growth for everyone, said Thomas Shapiro, director of the university's Institute on Assets and Social Policy, which conducted the research.

The difference in wealth between typical households in each racial group ballooned to $236,500 in 2009, up from $85,000 in 1984, according to the study, released Wednesday. By 2009, the median net worth of white families was $265,000, while blacks had only $28,500.

Brandeis researchers looked at the same set of 1,700 families over the 25-year period to see how their actual work and school experiences affected their wealth accumulation.

What they found is that home ownership is driving the growing gap. Price appreciation is more limited in non-white neighborhoods, making it harder for blacks to build equity. Also, because whites are more likely to have family financial assistance for down payments, they are able to buy homes an average of eight years earlier than black families and to put down larger upfront payments that lower interest rates and mortgage costs.

The home ownership rate for whites is 28% higher than that of blacks.

"How housing wealth is created in different communities is clearly what's driving this," Shapiro said.

Income gains are also a major differentiating factor, even when whites and blacks have similar wage increases. Whites are typically able to put more of their raises towards accumulating wealth because they've already built up a cash cushion. Blacks are more likely to use the money to cover emergencies.

Inheritances also make it easier for some families to build wealth. Among the families studied, whites were five times more likely to inherit money than blacks, and their typical inheritances were 10 times as big.

When it comes to education, black graduates are often more saddled with college loans, making it harder for them to start socking away savings than their white peers. Four in five black students graduate with debt, compared to 64% of whites.

The growing wealth gap has wider ramifications, Shapiro said. If the pattern continues, people could start believing the deck is stacked against them.

"Our economy cannot sustain its growth in the face of this type of extreme wealth inequality," he said.

First Published: February 27, 2013: 12:09 AM ET

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The myth of the Great Rotation

While investors have started to add money to the stock market this year, they are also still plowing into bonds. U.S. stock mutual funds have raked in nearly $20 billion in 2013, while bond funds have attracted more than $40 billion, according to ICI data.

NEW YORK (CNNMoney)

But so far it's proving to be more of a myth.

The Great Rotation came into the spotlight at the end of 2012, when Bank of America Merrill Lynch investment strategist Michael Hartnett predicted that investors who had fled the stock market for the safety of bonds would start to rotate back into stocks.

In fact, investors have added more money to bonds than stocks almost every week this year. In total, U.S. stock mutual funds have raked in nearly $20 billion in 2013, while bond funds have attracted more than $40 billion, according to data from the Investment Company Institute.

Rather than trimming their bond exposure, investors have been adding to stocks at the expense of their cash holdings, said Jeffrey Rosenberg, chief investment strategist for fixed income at BlackRock.

Related: Bonds are riskier than stocks

"In the panic following the 2008 collapse, investors initially flocked to cash," said Rosenberg, noting that assets in money market funds jumped by nearly 40% to about $3.5 trillion and peaked at $4 trillion in 2009.

Cash levels declined steadily from there until the end of last year when fiscal cliff fears sent investors back to cash. And once a deal to avoid the cliff was struck, assets in money market funds and bank deposits began to fall - that's the money that has been flowing into stocks, said Rosenberg.

Related: Individual investors still nervous about stocks

While the Great Rotation out of bonds and into stocks may still be coming, it won't be anytime soon, according to Tobias Levkovich, chief U.S. equity strategist at Citigroup.

"Unfortunately losing money in bonds may not cause a huge outflow from bond funds which would then pour into stock funds," he wrote in a recent note. Investors didn't start consistently pulling money out of stocks until two years after the tech bubble and stock market peaked in 2000, he noted, adding, "Believing in a rotation now seems fairly premature."

Still, even shifting from cash toward stocks signals a change in sentiment, according to Bill Stone, chief investment strategist at PNC Wealth Management.

"Perhaps some of the residual fear from the financial crisis that caused investors to shun stocks is starting to dissipate," he said.

First Published: February 27, 2013: 1:22 AM ET

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Americans still aren't saving enough

Of those surveyed, 38% said they were saving less than last year.

NEW YORK (CNNMoney)

Only half of respondents reported good savings habits, including having a spending and/or saving plan in place, according to the Consumer Federation of America and the American Savings Education Council which conducted the survey.

While more than half of all Baby Boomers and Gen-Xers will be able to retire with enough money to cover basic retirement needs, including health care costs, a significant number are at risk of running short, according to projections by the Employee Benefit Research Institute.

The survey also found that only 49% of non-retired respondents feel they are saving enough to achieve a "desirable standard of living" in retirement.

When it came to overall household savings, the survey found there was little improvement compared to last year.

"Clearly the great recession has had a lingering effect on many Americans," said Stephen Brobeck, executive director of the Consumer Federation of America. "Millions of families have been unable to make progress in rebuilding their finances, especially their savings."

Related: Money 101 saving basics

Of those surveyed, 38% said they were saving less than last year, compared to 30% who said they were saving more than last year. Only 41% of all respondents said that they save outside of work through automatic transfers from checking to savings or investments. About two-thirds said they had sufficient emergency savings to cover unexpected expenses like car repairs or a doctor visit.

In a separate survey released earlier Monday, Bankrate reported that just 55% of Americans have more cash stowed away for hard times than they owe on their credit cards -- up from 52% two years ago.

"We know from other research that if one does not have adequate emergency savings, it's much more difficult for people to save for other purposes, either a home or retirement," said Brobeck.

Paying down credit card debt is also a key step in developing better savings habits, he said, because it's hard to save when losing cash to high interest payments.

In the Bankrate.com survey, nearly 70% of respondents making at least $75,000 a year had more savings than credit card debt, compared to 41% of those making less than $30,000.

Related: Make your money last

Less than half of low-to-moderate-income Americans even have a savings or money market account, Brobeck said, citing a CFA analysis of Federal Reserve data. "But having an account if you have a relatively low or moderate income is the most important thing you need to do," he said.

As part of America Saves Week, more than 1,300 national, state and local financial and nonprofit organizations are encouraging Americans to boost their savings through simple steps, such as opening a savings account, setting up automatic transfers and increasing their 401(k) contributions.

First Published: February 25, 2013: 3:47 PM ET

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HP sells off the last scraps of Palm: webOS

HP bought Palm for its webOS, but it left the software for dead after HP killed off its TouchPad tablet and webOS smartphone line.

NEW YORK (CNNMoney)

LG is buying all of the assets associated with webOS: the source code, engineering talent, patents, and more. It plans to use the software in its smart TVs. Financial terms of the deal were not disclosed, though a press release said neither company expects the deal "to have a material impact" on its financials.

HP (HPQ, Fortune 500) certainly won't miss webOS, which it acquired in 2010 when it bought the ailing Palm for $1.2 billion. Palm's webOS was innovative and well-respected, but its Pre and Pixi smartphones failed to take off with buyers.

HP swore it would be "doubling down" on webOS, but that's not what happened. Instead, webOS fell prey to issues at HP during the troubled reign of Leo Apotheker. In August 2011, a few months after taking the CEO, Apotheker made massive changes that included bad news for webOS.

HP killed off its webOS-based TouchPad tablet after just 49 days on the market. The company also pulled the plug on its entire webOS smartphone line, saying none of its webOS products reached the company's internal sales targets.

That appeared to kill webOS altogether, but the LG purchase revives the platform -- though not necessarily as mobile software. In the press release announcing the deal, LG focused on using webOS only in its Internet-connected TVs. WebOS staffers will join a new "LG Silicon Valley Lab," which will focus on research and development.

First Published: February 25, 2013: 5:23 PM ET

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Italian election rattles world markets

HONG KONG (CNNMoney)

The Hang Seng in Hong Kong fell 0.9%, while the Nikkei in Tokyo dropped 2.3% and the Shanghai Composite lost 0.1%

The Japanese yen, a safe-haven currency, strengthened overnight as investors sought refuge. European markets are not yet open for trading.

Results from Sunday's election showed the center-left coalition of Pier Luigi Bersani leading in both chambers of parliament. But former Prime Minister SIlvio Berlusconi and his anti-austerity allies were not far behind in the Senate race, which is decided on a regional basis.

Related: CNN coverage of the Italian election

Investors are concerned that "gridlock" in the Italian Senate, which now seems very likely, could undermine the progress Italy has made in overhauling its troubled economy.

Investors in the U.S. succumbed to jitters in the final hour of trading Monday, with the Dow and S&P 500 suffering their biggest one-day decline of the year after a late-day sell off.

In a clear sign of unease, Wall Street's so-called fear gauge, the CBOE market volatility index, or VIX (VIX), surged 32%.

Italy's political system encourages the forming of alliances, and a shaky coalition could still emerge, although none of the parties seem willing to negotiate.

If voters delivered one message, it is that they are largely opposed to austerity policies, exposing the country to questions about its commitment to fiscal consolidation.

Related: What's at stake in Europe's elections

Markets had hoped Italian voters would give Bersani a clear mandate to pursue the reforms started by Mario Monti, possibly including the economics professor's party in a coalition.

The scale of the challenge awaiting the next government should not be underestimated, and Bersani's coalition could face opposition from within its own ranks to more radical structural reforms.

"Elections are more problematic than market scares or sentiment shifts as they can't be undone by printing money," Steven Englander, a currency strategist at CIti, wrote in a research note.

Italy's economy has stagnated for years, and suffered the biggest contraction of any G7 nation in 2012 -- it shrank by 2.2%. Last week, the European Commission said it would contract by a further 1.0% this year, double the rate it had previously forecast.

At the same time, Italy has to service debts of two trillion euros, the eurozone's second biggest debt mountain -- relative to the size of the economy - after Greece. That costs some 5% of gross domestic product -- or about 100 billion euros --- each year and as the economy shrinks, the government has to retain an ever greater share of national income to pay for it.

Unemployment will rise to 11.6% in 2013, according to the European Commission, and then 12% next year.

First Published: February 25, 2013: 10:25 PM ET

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HP takes cautious step into Android waters with new tablet

BARCELONA (CNNMoney)

HP's bid to rejuvenate its flagging business is the Slate 7 -- which is not a premium-grade tablet, nor a remarkably cheap device.

Instead, the $169 Slate 7 packs a 7-inch screen, 1024x600 resolution, a 1.6 GHz dual-core processor, and 8 gigabytes of storage. While it's not obnoxiously cumbersome, it is bigger and heavier than many of the notable 7-inch tablets, like Google's Nexus 7.

Those specs are fine, but hardly phenomenal by 2013 standards. And the same goes for performance and build quality. It isn't the fastest, or most powerful, or most attractive tablet, but it's powerful enough to do what most people need. And it's not an eyesore by any means. It does have a pretty recent version of Android installed -- 4.1 -- which means it has most of the new features.

The Slate 7 is HP's first major tablet release since the failed Touchpad tablet -- a byproduct of its disastrous acquisition of Palm in 2010. When rumors about a possible HP Android tablet surfaced, public expectations were a bit higher.

And rightfully so. But this latest offering is a tad bit perplexing. Going for the entry-level consumer market is a fine strategy in the short term (it has kept HP's computer sales afloat for awhile now). HP will probably need to be more aggressive with pricing.

Related: HP profit falls 16%, beating super-low expectations

Unlike the computer market, where HP (HPQ, Fortune 500) typically offers products that are a few hundred dollars cheaper than the top-rated machines, the Slate 7 is only $30 cheaper than Google's Nexus 7, which is thinner and lighter, more powerful and comes with a better display. The Nexus 7 will also have a slower decline into technological obsolescence.

The Slate 7 would be a fine tablet to buy if it were significantly cheaper than any other 7 or 8-inch tablet. But in this case, lower cost likely won't equate to a better value in the long run.

First Published: February 24, 2013: 10:35 PM ET

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China's manufacturing sector stumbles

The pace of manufacturing expansion has slowed in China, according to HSBC.

HONG KONG (CNNMoney)

Global bank HSBC said its "flash" index of purchasing managers' sentiment fell to 50.4 in February from January's final reading of 52.3. Any reading above 50 signals expansion in the manufacturing sector.

The index, which had been on a winning streak, is now at a 4-month low. Still, economists are not ringing the alarm bells.

"The underlying strength of Chinese growth recovery remains intact, as indicated by the still expanding employment and the recent pick-up of credit growth," said Hongbin Qu, an economist at HSBC.

The timing of the Lunar New Year further complicates reading of the data.

Many Chinese factories shut down during the holiday as workers return to the countryside, a migration that can skew PMI readings.

Related: Scenes from China's annual migration

Not all of February's decline can be attributed to the holiday, according to economists at Nomura. Still, the government will likely wait for more data before making policy changes.

"We believe China's leaders will wait for the batch of macro data ... before making an assessment of economic conditions and deciding an appropriate policy stance," the economists wrote Monday.

The fate of manufacturing in China is considered a barometer of the global economy due to the nation's role as a powerhouse exporter.

China's economy has grown at an average of around 10% a year for the past three decades, allowing the nation to rocket past competition to become the world's second-largest economy.

While the growth slowed in 2012 to 7.8%, that figure topped government targets and analyst expectations, signaling an exit to the slowdown that had worried economists.

HSBC's final reading of February purchasing managers' sentiment is due on March 1, as is the Chinese government's reading.

First Published: February 24, 2013: 11:21 PM ET

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Spending cuts showdown may drag on

With just days before the spending cuts begin, there is little expectation President Obama and House Speaker John Boehner will make a deal.

NEW YORK (CNNMoney)

But there's no telling when.

Funding for numerous federal agencies and programs will be slashed, half from defense and half from nondefense spending.

Generally speaking, both parties say they don't want the cuts to kick in as planned.

Just how the cuts would be replaced -- if they are -- remains unclear, however.

Scenario 1 - Shutdown threat pushes Congress to act: The current measure funding the government expires on March 27. Known as a continuing resolution, that law is separate from the one that mandates the automatic cuts. It sets spending levels and authorizes the government to continue operating.

If lawmakers don't agree to new funding levels soon, the government will shut down on March 28 and remain closed until Congress reaches a deal.

A shutdown wouldn't bode well for either party. Most government offices and services would be shuttered. The only exception: services deemed "essential" -- those related to the safety of human life and protection of property. Taxpayer money would be wasted in the process because it costs money to close the government and to ramp it back up when Congress reaches a deal.

The urgency to avert a shutdown might spur lawmakers to agree on a replacement of the automatic spending cuts as part of a final deal.

Related: What you need to know about the cuts

Scenario 2 - Lawmakers keep fighting over the cuts: The pressure to avoid a shutdown may be so great that Congress takes the threat off the table before it even addresses the spending cuts.

One possibility is that House Republicans quickly pass a continuing resolution for six months until Sept. 30 at current funding levels, which would fall once the so-called sequester kicks in.

Senate Democrats, not wanting to be seen as the ones risking a government shutdown, sign on and decide to fight for a replacement to the automatic cuts later.

In that case, interest groups would step up pressure on lawmakers once the pain of the cuts really starts to set in.

"The sequester is a slow bleed that gets worse as it goes on," said Sean West, the U.S. policy director for the Eurasia Group.

Indeed, its bite won't be nearly as deep in March as it will be in April and beyond.

For instance, while more than 2 million federal workers may face unpaid furloughs for a day or two a week, those furloughs likely wouldn't start before April.

And the White House budget office may be able to instruct some agencies to hold off on implementing cuts for a short period of time.

The elephant in the room - Spending vs. taxes: Of course, there's no guarantee that lawmakers can bridge their ideological differences over spending and taxes.

Democrats have proposed replacing the automatic spending cuts with a combination of tax increases and spending cuts. Republicans want to replace the defense cuts with more non-defense cuts, and they oppose any revenue increases.

West of the Eurasia Group believes the two sides will agree on a replacement package by April. It may include mandatory spending cuts and tax increases, but the kind both parties can tolerate.

For instance, revenue increases might come from raising fees rather than tax rates, and thus be more palatable to Republicans. And mandatory spending cuts may not affect Medicare or Social Security benefits but rather reduce non-health-related spending -- for instance, by reforming federal retirement programs, he said.

Whatever ends up happening, get ready for a long and messy few weeks. Or months.

First Published: February 25, 2013: 2:15 AM ET

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Judge rules against Apple in Einhorn cash fight

NEW YORK (CNNMoney)

Einhorn's Greenlight Capital filed a lawsuit earlier this month seeking to "unbundle" a number of shareholder proposals that would have been voted on as a group, including one that would have made it difficult for the company to issue preferred stock. The vote on this, known as Proposal No. 2, was scheduled to be voted on at Apple's annual shareholder meeting on February 27.

Judge Richard Sullivan of the Southern District of New York ruled that bundling four different items in one proposal violates Securities and Exchange Commission regulations.

"Given the disparate, material nature of the items in Proposal No. 2, it is probable that Apple has improperly bundled four 'separate matters' for a single vote," the ruling states.

Apple (AAPL, Fortune 500)shares rose 1% on Friday. News of the ruling came just a few minutes before the market closed.

Einhorn has launched an activist campaign to get Apple to unlock some of its $137 billion in cash by issuing preferred stock, or iPrefs, as he calls them. He argues that allowing the cash to sit idle on Apple's balance sheet is bad for the company and its shareholders.

A spokesman for Greenlight said that the ruling "is a significant win for all Apple shareholders and for good corporate governance" and added that "we look forward to Apple's evaluation of our iPref idea and we encourage fellow shareholders to urge Apple to unlock the significant value residing on its balance sheet."

Related: Einhorn takes aim at Apple's cash hoard

But another big Apple shareholder was not pleased with the judge's ruling.

California's powerful pension fund, CalPERS, supported Apple's proposal, which it said would give shareholders more voting power over the issuance of Apple stock.

"We encourage Apple to reintroduce these measures as soon as is practical so that all investors can be heard," said Anne Simpson, a CalPERS senior portfolio manager and director of global governance. "We applaud the company's commitment to strengthening shareholder rights."

Apple has said it is reviewing Einhorn's proposal, but CEO Tim Cook has called the lawsuit a "silly sideshow."

Spokespeople for Apple could not immediately be reached for comment.

First Published: February 22, 2013: 5:01 PM ET

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Moody's downgrades United Kingdom from AAA

God save the AAA rating.

NEW YORK (CNNMoney)

The U.K. was knocked down one notch to Aa1, with its ratings outlook at stable. Moody's said the key drivers of the downgrade included the country's rising debt burden and tepid growth outlook over the next few years.

"[A]lthough the U.K.'s debt-servicing capacity remains very strong and very capable of withstanding further adverse economic and financial shocks, it does not at present possess the extraordinary resilience common to other AAA-rated issuers," Moody's said.

The U.K. had held AAA status since Moody's first began rating the country in 1978.

In December, the U.K.'s budget monitor projected that the country's economy would grow by just 1.3% this year. The government has been pushing a much-criticized austerity program, and finance minister George Osbourne said he remained committed to those efforts, even after the downgrade.

"This is a stark reminder of the debt problems that Britain faces and the clearest possible warning to anyone who thinks we can run away from dealing with those problems," he said. "Far from weakening our resolve to deal with our debts, this should redouble our resolve."

Related: U.K. risks new recession

The British government has said its belt-tightening will have to continue until 2018.

In announcing the downgrade, Moody's said it expects the U.K.'s debt to peak at 96% of GDP in 2016, up from around 90% today.

A year ago, Moody's switched the outlook on the U.K.'s AAA rating to negative, in a prelude to Friday's downgrade. At the same time, the firm cut the ratings of half a dozen European countries.

The other major rating agencies, Fitch and Standard & Poor's, still have the U.K. rated AAA, though with negative outlooks.

Elsewhere in Europe, France lost its AAA rating from Moody's in November, after a similar downgrade from S&P in January.

The United States maintains its AAA rating from Moody's and Fitch, though it was downgraded by S&P in August 2011 following the debt ceiling standoff in Washington.

Steven Englander, a foreign exchange strategist with Citigroup (C, Fortune 500), said in a research note following the downgrade that the move was unlikely to raise borrowing costs for the U.K., as bond yields in the United States, France and Japan had remained stable following similar downgrades. But it increases pressure on the country to pursue growth by weakening the pound, he added.

"[W]hile by itself the announcement merely accelerates what was expected to happen at some point, the need for weakness [in the British pound] will become more apparent to policymakers and investors," Englander said.

Among Europe's other major economies, Germany, Switzerland and the Netherlands maintain their AAA ratings from Moody's. France sits at Aa1, while Italy is down at Baa2 with Spain at Baa3.

First Published: February 22, 2013: 5:01 PM ET

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Samsung stuffs a phone in new Galaxy Note 8.0 tablet

t-ts-samsung-galaxy-note-8_00000111.jpg

NEW YORK (CNNMoney)

It runs Android 4.1, has a 1.6 GHz quad-core CPU, 2 gigabytes of RAM, and an 8-inch, 1280 x 800 display that you can control with Samsung's S-Pen stylus. But on the international version of the device, there's something quite strange lurking near the top.
Yes, it's an earpiece. Yes, it's meant for you to make calls. Yes, Samsung expects you to hold an 8-inch tablet up to your face.

Samsung expects you to hold an 8-inch tablet up to your face.

The decision to imbue an 8-inch tablet with a phone very much seems like a reaction to the success of Samsung's Galaxy Note phones, which checked in at 5.3 and 5.5-inches, opening up some of the functionality of tablets. (Ugh, phablets).

I joked before about the day when we'd see a 7-inch phone. Turns out we got an 8-inch one sooner than we thought. But it is worth mentioning that it's undecided if a phone-enabled version of the Galaxy Note 8.0 will see the light of day in the U.S.

The device itself is suitably thin and light (more or less comparable to the iPad mini, it's closest known competition), and is responsive enough for most tasks. The stylus works pretty well, introducing a new feature that lets you activate preview panes of apps such as email and Flipboard, without ever touching the the screen (instead, you hover above the area you want to preview).

Related: Samsung overtakes Apple in 'smart connected devices'

But aside from the stylus, it also has a couple of tricks the iPad Mini does not. For starters, It has an IR remote which lets you enter the codes for most television sets and control your TV with your tablet, much like you would with any other remote. But sweetening the deal is the use of the media guide software from Peel Technologies, allowing you to seek out and directly jump to specific shows and movies without resorting to the channel up/down buttons.

It also supports a dual-window mode, where you can run two apps side by side, and without the loss of functionality. For now it only works with a handful of optimized apps, but includes a calendar app, a note-taking app, Chrome, Gmail, YouTube and more (adding up to more than 20 in all).

And while it's expected to arrive sometime in the next few months, there was not so much as a whisper about price. Judging from the year-old guts inside the Galaxy Note 8.0, it's possible Samsung made the necessary moves to offer it at a mainstream price point. If it falls anywhere under the $330 price tag of Apple's iPad Mini, it might just have what it takes to steal some of Cupertino's thunder.

But why...why does it have to have a built-in phone?

First Published: February 23, 2013: 9:57 PM ET

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Fed officials: Don't worry if we lose money

NEW YORK (CNNMoney)

But that's okay, Fed officials say.

After years of record profits, the Fed is likely to be saddled with losses starting in 2017 or 2018, economists predict in a paper that was presented Friday at the U.S. Monetary Policy Forum, a New York conference organized by the University of Chicago Booth School of Business.

Here's the scenario they think will play out: As the economy improves, the Fed will eventually tighten monetary policy. The central bank will stop buying mortgage-backed securities and Treasuries by the end of this year, they believe, and start raising interest rates in 2015.

Eventually, the Fed will have to start selling off the massive collection of bonds it acquired in its stimulus efforts.

And when that time comes, even the Fed admits that it will probably incur losses.

Inside the Fed's finances

Unlike most government agencies, the Federal Reserve funds itself. Its expenses are not paid for in by U.S. federal budget.

Each year after paying its own bills, the central bank hands over all its remaining profit to the Treasury Department. Most of the money comes from interest earned on holdings like Treasury bonds and other debt.

Those payments have ballooned in recent years. The Fed is earning huge profits from the large bond portfolio it amassed (and continues to amass) during its stimulus efforts.

In the decade preceding the Great Recession, the Fed paid out an average of $25 billion a year to the Treasury. In the last three years, its remittances have averaged $81 billion.

Based on those numbers, you could call the Fed the most profitable bank in the world. It's generating more income than America's top five banks -- JPMorgan Chase (JPM, Fortune 500), Wells Fargo (WFC, Fortune 500), Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and Goldman Sachs (GS, Fortune 500) -- combined.

Once the economy improves to its liking -- which could still be years away -- the Fed will have to start shrinking its portfolio, to ward off rapid inflation.

As the economy gets better, the Fed will raise interest rates. At the same time, bond prices will probably fall as the Fed sells off massive amounts of them.

That means the central bank is likely to lose money.

That's not necessarily a problem. A relatively new accounting rule would allow the Fed to pay for its operations and make interest payments basically on credit, deferring its losses and paying them off later in profitable years.

The situation could easily become a public relations nightmare, though -- especially in the current political environment.

"We're in a period where the attacks on the Federal Reserve system are the worst I've seen in 40 years," said Frederic Mishkin, a former Fed governor who is now a professor at Columbia University.

"In any year where the Fed is not giving remittances back to the Treasury, this is going to come up big time in Congress," he added.

St. Louis Fed President James Bullard also calls it a "recipe for political problems." During the same period that the Fed will incur losses, the government will be paying billions of dollars in interest to foreign governments.

The Fed seems to be trying to get ahead of the PR blow-up.

The central bank put out a research paper on the topic last month, and minutes released earlier this week show the issue was discussed at the Fed's January meeting.

Since then, several officials have spoken about it quite openly.

"There is a chance that we could go through a period of time in which our income falls, and we could even take losses," said Janet Yellen, vice-chair of the Federal Reserve Board, in a speech last week.

Her colleague Jerome Powell, a Fed governor, reiterated that point Friday.

Some Fed watchers expect Fed Chairman Ben Bernanke to discuss the topic when he speaks before Congress next week in his semi-annual testimony.

He's stuck in a "damned if you do, damned if you don't" position. If the economy improves, great -- but when it does, the Fed has big losses and a PR crisis to look forward to.

First Published: February 22, 2013: 2:27 PM ET

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Judge rules against Apple in Einhorn cash fight

NEW YORK (CNNMoney)

Einhorn's Greenlight Capital filed a lawsuit earlier this month seeking to "unbundle" a number of shareholder proposals that would have been voted on as a group, including one that would have made it difficult for the company to issue preferred stock. The vote on this, known as Proposal No. 2, was scheduled to be voted on at Apple's annual shareholder meeting on February 27.

Judge Richard Sullivan of the Southern District of New York ruled that bundling four different items in one proposal violates Securities and Exchange Commission regulations.

"Given the disparate, material nature of the items in Proposal No. 2, it is probable that Apple has improperly bundled four 'separate matters' for a single vote," the ruling states.

Apple (AAPL, Fortune 500)shares rose 1% on Friday. News of the ruling came just a few minutes before the market closed.

Einhorn has launched an activist campaign to get Apple to unlock some of its $137 billion in cash by issuing preferred stock, or iPrefs, as he calls them. He argues that allowing the cash to sit idle on Apple's balance sheet is bad for the company and its shareholders.

A spokesman for Greenlight said that the ruling "is a significant win for all Apple shareholders and for good corporate governance" and added that "we look forward to Apple's evaluation of our iPref idea and we encourage fellow shareholders to urge Apple to unlock the significant value residing on its balance sheet."

Related: Einhorn takes aim at Apple's cash hoard

But another big Apple shareholder was not pleased with the judge's ruling.

California's powerful pension fund, CalPERS, supported Apple's proposal, which it said would give shareholders more voting power over the issuance of Apple stock.

"We encourage Apple to reintroduce these measures as soon as is practical so that all investors can be heard," said Anne Simpson, a CalPERS senior portfolio manager and director of global governance. "We applaud the company's commitment to strengthening shareholder rights."

Apple has said it is reviewing Einhorn's proposal, but CEO Tim Cook has called the lawsuit a "silly sideshow."

Spokespeople for Apple could not immediately be reached for comment.

First Published: February 22, 2013: 5:01 PM ET

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Moody's downgrades United Kingdom from AAA

God save the AAA rating.

NEW YORK (CNNMoney)

The U.K. was knocked down one notch to Aa1, with its ratings outlook at stable. Moody's said the key drivers of the downgrade included the country's rising debt burden and tepid growth outlook over the next few years.

"[A]lthough the U.K.'s debt-servicing capacity remains very strong and very capable of withstanding further adverse economic and financial shocks, it does not at present possess the extraordinary resilience common to other AAA-rated issuers," Moody's said.

The U.K. had held AAA status since Moody's first began rating the country in 1978.

In December, the U.K.'s budget monitor projected that the country's economy would grow by just 1.3% this year. The government has been pushing a much-criticized austerity program, and finance minister George Osbourne said he remained committed to those efforts, even after the downgrade.

"This is a stark reminder of the debt problems that Britain faces and the clearest possible warning to anyone who thinks we can run away from dealing with those problems," he said. "Far from weakening our resolve to deal with our debts, this should redouble our resolve."

Related: U.K. risks new recession

The British government has said its belt-tightening will have to continue until 2018.

In announcing the downgrade, Moody's said it expects the U.K.'s debt to peak at 96% of GDP in 2016, up from around 90% today.

A year ago, Moody's switched the outlook on the U.K.'s AAA rating to negative, in a prelude to Friday's downgrade. At the same time, the firm cut the ratings of half a dozen European countries.

The other major rating agencies, Fitch and Standard & Poor's, still have the U.K. rated AAA, though with negative outlooks.

Elsewhere in Europe, France lost its AAA rating from Moody's in November, after a similar downgrade from S&P in January.

The United States maintains its AAA rating from Moody's and Fitch, though it was downgraded by S&P in August 2011 following the debt ceiling standoff in Washington.

Steven Englander, a foreign exchange strategist with Citigroup (C, Fortune 500), said in a research note following the downgrade that the move was unlikely to raise borrowing costs for the U.K., as bond yields in the United States, France and Japan had remained stable following similar downgrades. But it increases pressure on the country to pursue growth by weakening the pound, he added.

"[W]hile by itself the announcement merely accelerates what was expected to happen at some point, the need for weakness [in the British pound] will become more apparent to policymakers and investors," Englander said.

Among Europe's other major economies, Germany, Switzerland and the Netherlands maintain their AAA ratings from Moody's. France sits at Aa1, while Italy is down at Baa2 with Spain at Baa3.

First Published: February 22, 2013: 5:01 PM ET

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Tesla stock tumbles 9%

Click on chart for more stock data.

NEW YORK (CNNMoney)

But he couldn't overcome criticism from investors Thursday who drove the stock sharply lower after the company posted a bigger than expected loss.

Shares of Tesla (TSLA) ended about 9% lower, their biggest one-day drop in more than a year, after the company announced a $75 million loss.

During a conference call on Wednesday, Musk tried to balance the earnings miss with some good news, saying Tesla had increased production and decreased capital expenditures which, he said, should allow it to generate a slight profit for the current quarter.

"Due to an enormous amount of hard work by a really dedicated group of people at Tesla, we're going to be profitable, and I think that's a pretty big deal," Musk said.

But comments about profit margins spooked some investors.

Analysts said Thursday that the real problem for Tesla are growing concerns that glowing reviews for its products and heady expectations for the upscale electric car market may have lifted its stock price too high, too fast.

"Investors are now beginning to focus on what sustainable demand is beyond 2013. The question remains: how big is the addressable market?" said Adam Jonas, auto analyst for Morgan Stanley, in a note on Thursday.

Jonas has a "buy" recommendation on Tesla.

Other analysts aren't as sure, even if they say Tesla's financial report had as much good news as bad.

Ben Schuman of Pacific Crest Securities has a "hold" recommendation on the stock, with an estimated value about $5 below its current price, even after Thursday's sell-off.

"Frankly the stock had reflected a lot of optimism heading into the earnings call. Much of the value is based upon expectations for growth for the company," he said. "It's going to be more volatile than a traditional auto stock, that's for sure. It's more of a tech stock." He said the company has some of the highest short interest of any mid-cap company, meaning many investors are betting against it.

Tesla would not comment on Thursday's stock move.

Related: Test Drive: DC to Boston in a Tesla Model S

Musk and Tesla have been in the headlines recently after a negative review of the new Model S in the New York Times earlier this month sent shares sinking.

Writer John Broder said the battery in his Model S drained more quickly than expected in cold weather during a recent trip up the East Coast, stranding him in Connecticut and forcing him to get towed to the nearest charging station.

Musk fired back, alleging that Broder falsified aspects of the article. The review came at a sensitive time for Tesla, which has struggled to hit delivery targets amid continuing challenges with its technology.

He was more subdued during Wednesday's analyst call, acknowledging that "for a long-distance trip right now, depending upon where you are in the country, a little bit of extra planning is needed."

"We have a bunch more superchargers that are going in to the East Coast and across the country," Musk said. "We really want to get to the point where you don't have to think about it, and I think we're very close to that point."

The Model S has met critical acclaim elsewhere in the media, garnering "Car of the Year" honors in 2012 from both Motor Trend and Automobile Magazine.

First Published: February 21, 2013: 3:00 PM ET

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HP profit falls 16%, beating super-low expectations

HP's first-quarter earnings were weak, but expectations are so low that the figures came in above analysts' estimates.

NEW YORK (CNNMoney)

Sales fell in every HP business unit last quarter -- save one measly 1% gain in its relatively tiny financial services division.

HP is trying hard to be about more than just PCs and printers, which are quickly becoming obsolete. But the path to reinvention has been slow.

"HP's turnaround will not be linear," CEO Meg Whitman warned on a post-earnings conference call. It's a sentiment she's repeated often.

HP hasn't been able to make major inroads in the mobile market, which is dominated by Apple (AAPL, Fortune 500) and Android developer Google (GOOG, Fortune 500). Revenue in HP's services business fell 7%, its enterprise group declined 4%, and software sales slipped 2% in the company's first quarter, which ended in January.

Whitman discussed "tectonic shifts" in the personal device market, citing those issues as a major focus for HP.

Meanwhile HP's two legacy businesses continued to suffer: Sales of consumer PCs fell by 13% over the year, and the printing unit fell by 5%.

If there's good news, it's is that the company's sales declines weren't as steep as they had been in previous quarters. Wall Street analysts were expecting worse, and shares rose 5.7% in after-hours trading.

Overall, HP's (HPQ, Fortune 500) first-quarter profit fell 16% over the same period a year ago to $1.2 billion. Sales came in at $28.4 billion, down 6% from a year ago.

For 2013, HP expects it will earn between $3.40 and $3.60 per share. That was slightly above estimates from analysts polled by Thomson Reuters, who were expecting outlook of $3.32 a share.

Despite HP beating super-low expectations, it's hardly a strong start for 2013, which is shaping up to be another tough year for Meg Whitman. She's held the CEO role for nearly 18 months, and she has continued to preach patience. She has repeatedly said that HP is on a five-year path to recovery.

Related story: HP to limit student labor in China

Whitman has faced a lot of setbacks recently. A host of issues plagued the company last year: shockingly low PC sales, big dives in sales and profit, and massive writedowns.

In the fourth quarter HP was forced to write down $8.8 billion of the value of Autonomy, the British software company it bought in 2011, after discovering that Autonomy misrepresented its finances.

First Published: February 21, 2013: 4:47 PM ET

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China's property market heats up

Prospective buyers at a property sale in Beijing.

HONG KONG (CNNMoney)

Prices jumped in 54 of the 70 cities tracked by the government in January, according to data released Friday by the National Bureau of Statistics.

The average price change was an increase of 0.6%, the first year-on-year acceleration in 11 months. Compared to the previous month, prices rose 0.5%, which is the fastest rate of growth since January 2011, according to economists at Nomura.

China has gradually eased property ownership restrictions in recent decades, and its citizens have responded by pouring money into housing.

The resulting growth was so red-hot that many analysts feared a bubble was developing. But more recently, China's real estate market had slowed amid government efforts to rein in speculators and control prices.

The measures include higher down payments, tough qualifications for mortgages, residency requirements and limits on investment purchases.

The slowdown spurred developers to offer discounts to unload their unsold inventory. Spooked by falling prices, would-be buyers stayed on the sidelines, and investors mourned declining valuations.

January's increase is likely attributable to looser monetary policies and an abundance of liquidity -- general stimulus measures taken by Beijing recently to combat a slowing economy.

Related: The Rise of China

But Beijing is still wary of rising property prices, and will likely respond with cooling measures.

"We believe the recent rise in property prices will pressure the government to tighten policies," economists at Nomura wrote Friday.

Chinese stocks: 'Not for the faint of heart'

And indeed, the government is already signaling some action.

China's State Council said Wednesday that cities where prices have "soared too fast" will be asked to "introduce timely curbing measures."

And in a bid to maintain supply, the council said it would guarantee land supplies for housing projects at no less than last year's level.

First Published: February 22, 2013: 1:38 AM ET

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New York Times looks to sell Boston Globe

Boston Globe for sale.

NEW YORK (CNNMoney)

The firm has hired Evercore Partners to lead the search for a buyer and manage the sale.

New York Times CEO Mark Thompson said the company is "proud of our association" with the Globe, as well as Worcester Telegram & Gazette and their related digital properties, but added that based on the "differences between these businesses and The New York Times, we believe that a sale is in the best long-term interests of these properties and the employees who work for them as well as in the best interests of our shareholders."

Related: Meredith will likely need help in a Time Inc. deal

The Times' search for a buyer comes less than a year after it shed About.com to IAC/Interactive Corp. for $300 million.

The Times has been looking to get rid of the Globe for years, and even threatened to close the newspaper in 2009 due to issues with labor unions. The company purchased the newspaper in 1991 for $1.1 billion.

In addition to the Globe, the company still owns the International Herald Tribune.

Shares of New York Times (NYT) spiked almost 1.5% initially on the news, but finished the day down 0.4%.

In other publishing news, the parent company of Reader's Digest magazine, RDA Holding Co., filed for bankruptcy earlier this week as part of a financial restructuring move that includes shrinking its $465 million debt.

And earlier this month, Fortune reported that Time Warner (TWX, Fortune 500), the parent company of CNNMoney.com, was in talks with Meredith Corp. (MDP) to separate itself from Time Inc., possibly selling such publications as People and InStyle to the Des Moines-based publisher of Family Circle.

First Published: February 20, 2013: 4:58 PM ET

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Americans in love-hate relationship with payday loans

Many borrowers say payday loans take advantage of them, but most would use one again, Pew found.

NEW YORK (CNNMoney)

Payday loans are advertised as short-term credit lines, typically extended for two weeks to help consumers get through to their next paycheck.

Each year, nearly 12 million borrowers take out payday loans averaging $375 each. Yet, only 14% can afford to repay the $430 in principal and fees owed after two weeks, according to a Pew Charitable Trusts report based on interviews with more than 700 borrowers.

Instead, many borrowers find the $55 fee needed to renew the loan for another two weeks to be much more affordable. For the average borrower that leads to a five-month cycle of debt where they end up owing a total of $520 in fees, plus the principal on the loan, Pew found in a separate report issued last year.

Related: Debt collection horror stories

Payday loans are often advertised as a convenient source of emergency cash, but most borrowers say they use the money for recurring expenses like rent -- with 86% of borrowers saying they have trouble covering monthly bills at least some of the time. To get out of this debt trap and repay their loans, 41% of borrowers have taken out another loan, sold or pawned possessions, used a tax refund or borrowed money from friends or family.

Because of the excessive fees and how long it takes to get out of debt, over half of borrowers say that payday loans "take advantage of borrowers." And 72% said more regulation of the industry is needed. While the government's Consumer Financial Protection Bureau now has jurisdiction over payday lenders -- meaning it can audit companies and create new rules for the industry -- the agency hasn't publicly announced any enforcement efforts yet.

Despite all the criticism, many borrowers give payday lenders high marks for customer service, and 48% of borrowers think payday loans help borrowers more than they hurt them -- compared to 41% who said payday loans mostly hurt borrowers and 8% who said they help and hurt people equally.

"Payday borrowers' experiences -- receiving credit to cover expenses but then ending up spending far more than suggested by the loan's two-week price tag -- lead to complicated and conflicted feelings," the report stated.

Related: A startup tries to fix payday lending

More than half of borrowers said payday loans relieve stress when they're in need of quick cash and three in five borrowers would likely use them again. In fact, 37% of borrowers said they are so desperate they would take out a payday loan no matter how bad the terms are, and nearly half of respondents in "fairly bad" or "very bad" financial situations would do this.

"These borrowers accept an unaffordable loan for the simple reason that it allows them to stay solvent for two more weeks, regardless of cost," the report found.

A payday loan may seem like the only option out there for someone who is desperate for cash, but it's not, said Nick Bourke, a Pew project director. Alternatives include credit cards and home equity loans. While these options aren't always ideal, they can be more affordable than payday loans.

And for many consumers, it's just a matter of reeling in spending. About 81% of borrowers said they would cut back on their spending on items like clothing and food if they weren't able to take out a payday loan, Pew's previous report found.

First Published: February 20, 2013: 5:08 PM ET

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Crunched consumers are cutting back

NEW YORK (CNNMoney)

Nearly three-quarters of respondents said they were cutting back to cope with tax changes this year -- including dining out less, limiting travel plans and skipping everyday indulgences, according to the National Retail Federation, which sponsored the survey.

"We cannot grow the nation's economy until consumers consume," said NRF chief executive officer Matthew Shay in a statement.

Consumers are seeing smaller paychecks after a two-year payroll tax "holiday" expired this year. The rate returned to 6.2% on the first $113,700 of annual income, up from 4.2%. For workers earning $30,000 a year, that means about $50 less in their paychecks each month. For those earning $100,000 annually, it's about $167 less a month.

Americans also are facing higher prices at the pump, potentially delayed tax refunds and fears about forced federal budget cuts that could mean the loss of hundreds of thousands of jobs.

Related: Higher gas prices come at tough time

The environment has made consumers more cautious when it comes to highly discretionary purchases like clothes or eating out, said Sarah Quinlan, senior vice president for market insights at MasterCard Advisors.

"People still are acting as if we are in a recession," she said.

So what's a crunched consumer to do?

Almost half of the 5,185 people polled said they planned to spend less on overall purchases, about a third said they would reduce dining out, while about a quarter said they would reduce entertainment, vacation and travel plans.

Other popular cutting-back strategies included holding off on major purchases, like cars and furniture (24.4%), decreasing energy expenses by driving less or turning down the thermostat (23.4%), and spending less on everyday splurges like coffee-shop lattes or trips to the nail salon (24.5%).

Another tactic: savvy shopping. About a third said they plan to hunt for sales and use coupons more often, while about 25% will do more comparison shopping.

Related: Spending cuts: What you need to know

Nearly two-thirds of people surveyed are expecting a tax refund, but some may have to delay filing because the fiscal cliff deal came so late. Once they get their refunds, most respondents plan to save it (44%) or use the cash to pay down debts (37.2%).

Low-income workers will likely make the biggest spending changes, since payroll taxes impact their budgets more, said Marshal Cohen, a retail analyst with the NPD Group. For wealthier workers, the higher payroll tax likely means fewer trips to Starbucks or an extra night eating in, he said.

"The real key is while we are all feeling the pinch, very few of us are living the pinch," he said. "We are being more frugal where we can."

First Published: February 21, 2013: 12:26 AM ET

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Millions expect to outlive retirement savings

LONDON (CNNMoney)

Hard times are looming for millions of people who haven't saved enough for their retirement, according to a new global study by HSBC (HBC).

With household incomes under pressure from the recession, unemployment and tax increases, more than half of the world's working population says they are not preparing adequately for a comfortable retirement, and nearly 20% is saving nothing at all.

"People are living longer, through tougher economic times, but expectations about their standards of living in retirement remain unchanged," said HSBC Head of Wealth Management Simon Williams. "As a result, millions of people around the world are facing years of hardship after their savings run out."

On average, people across the world expect retirement to last 18 years -- but they expect savings to run out after 10.

Related: Six secrets to a dream retirement

The findings are based on a survey of 15,000 working and retired people in 15 countries. Respondents were asked for their expectations of length of retirement, and to estimate savings based on their own definition. That could mean total income after retirement, or savings excluding state and occupational pensions.

Of those who say they haven't saved for retirement, 44% blame the daily cost of living. And the vast majority of those surveyed say a major event -- losing a job, poor health, buying a home or paying for a child's education -- has significantly affected their ability to save.

The report reveals big differences between countries and regions.

The British are the most pessimistic about their financial prospects in old age. They expect savings to run out just seven years into a 19-year retirement, leaving them ill-equipped to deal with additional costs for health or long-term care.

Related: 25 Best Places to Retire

In contrast, U.S. respondents expect their savings to last 14 years out of a 21-year retirement, leaving a shortfall of 33%. That's the same proportion as in India, where workers expect to retire for only 15 years.

Western respondents tended to favor short-term savings goals like vacations, while those in Asian economies were more focused on long-term retirement, the report found.

Nearly a third of respondents expect to rely on the state for their main source of income, but with government spending being cut and the population aging -- the number of people over the age of 65 is expected to increase by one billion by 2050 -- most have only two options: Work longer or save more.

First Published: February 19, 2013: 10:27 PM ET

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Bank of America boosts pay of CEO Brian Moynihan

Bank of America is giving CEO Brian Moynihan a nice raise.

HONG KONG (CNNMoney)

The CEO was granted $11.1 million in restricted shares for 2012, according to a regulatory filing made Tuesday by the bank. Moynihan's base salary is reportedly $950,000, making for a total pay package of just more than $12 million.

The compensation package is much larger than in 2011, when Moynihan was paid $7 million.

The $12 million haul places Moynihan near the middle of the bank CEO compensation rankings. Moynihan just edged out JPMorgan's (JPM, Fortune 500) Jamie Dimon, whose bonus was slashed by 53% amid fallout from the bank's so-called London Whale trading losses.

But Moynihan isn't expected to top Lloyd Blankfein of Goldman Sachs (GS, Fortune 500) or John Stumpf of Wells Fargo (WFC, Fortune 500).

Moynihan's pay hike comes as BofA's outlook brightens, as the bank has reduced litigation risk over the past year and reported revenue growth.

Investors have rewarded the megabank, pushing its share price from less than $6 in January 2012 to $12.19 on Tuesday.

Related: Hey Wall Street, get ready for more layoffs

Bank of America (BAC, Fortune 500) isn't the only large bank to perform well. Shares of large-cap banks rallied between 25% and 50% last year.

The rally came as lending rebounded and credit quality improved, driven by a wave of mortgage refinancing last year. Profits were also bolstered by the release of funds previously used for loan loss provisions.

Analysts say bank stocks could get a boost in March, when the Federal Reserve is scheduled to release results from last year's so-called stress tests. This could pave the way for banks to repurchase shares and possibly boost dividend payments.

So far, banks have been able to offset low interest rates by managing expenses and cutting costs. Morgan Stanley (MS, Fortune 500), for example, has announced plans to cut 1,600 jobs.

Analysts say more layoffs could be in the works as banks focus on maximizing efficiency.

First Published: February 20, 2013: 12:04 AM ET

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Bonds are riskier than stocks

The 10-year Treasury yield has been falling since the early 1980s, but experts are predicting interest rates will turn higher, creating a challenging market. Click the chart for more bond market data.

NEW YORK (CNNMoney)

"Bonds are not the safe haven that they used to be," said Michael Sheldon, chief market strategist at RDM Financial Group. "Interest rates have been declining since the early 1980s but now we're heading into a period of rising rates, which means that investing in the bond market will be a lot more challenging over the next few years."

Investors with stakes in long-term Treasuries are already feeling the pain.

As the 10-year Treasury yield recently crept up to 2% from its record low of 1.4% last July, the iShares Barclays 7-10 Year Treasury ETF (IEF) and the iShares Barclays 10-20 Year Treasury ETF (TLH) declined 3%, while the iShares Barclays 20+ Year Treasury Bond ETF (TLT) dropped 10%.

Related: 10-year Treasuries: Buy today, cry tomorrow

If the 10-year yield rises back to the level it was before the financial crisis (around 5%), bond funds could plunge 25%, said Fred Dickson, chief market strategist at KDV Wealth Management.

The threat of rising yields is especially worrisome for individual investors, who have poured more than $1 trillion into bond funds in the aftermath of the financial crisis, according to the Investment Company Institute.

That trillion-dollar inflow has led to an overcrowded market.

Related: Beware the bond bubble in 2013

"Investors have way too much exposure to the bond market," said Christian Magoon, CEO of Magoon Capital. "They're invested in bonds for their perceived safety, so they'll likely be extra sensitive to the price moves. Losing 10% or 20% in the bond market feels like losing double that amount in the stock market."

The risk is even more alarming when you consider valuations, added Dickson. The bond market "looks eerily similar" to the overvaluation of the stock market at the height of the Dotcom bubble, he said.

By comparison, the S&P 500, which is near a new record high, is trading at less than 14 times 2013 earnings estimates. Even at its all-time high in October 2007, the S&P 500's valuation was just above 17.

"There are certainly also risks in the stock market, and there's always a possibility of a correction," said Magoon. "But relative to bonds, stocks look much safer over the long term. And without more exposure to stocks, most investors won't be able to get the kinds of investment growth and the ability to fight inflation that they need to meet their retirement goals."

That's because stocks offer better returns that bonds. On a historical basis, stocks deliver an average annual return between 6% and 7% after inflation, according to Jeremy Siegel, professor of finance at the University of Pennsylvania's Wharton School. At best, bonds have historically returned up to 1%, after inflation.

Of course not all bonds are created equal. Experts like Magoon are investing in debt issued by emerging markets like Mexico, where the fiscal and debt outlooks are brighter than those of developed countries, including the United States.

First Published: February 20, 2013: 12:24 AM ET

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A $160,000 jewelry heist at the Four Seasons

Bling, like these pieces from designer Jacob & Company, was taken from the midtown Manhattan Four Season Hotel early Saturday.

NEW YORK (CNNMoney)

The men walked out of the hotel with two high-end wrist watches, a diamond chain and a pendant -- together worth more than $160,000 -- according to the New York Police Department. No one stopped them.

New York City hotels appear to be an easy target for criminals looking for a quick, and valuable, steal. Last year, a New Jersey man was sentenced to one-to-three years in prison for walking out of the Chambers Hotel in June 2011 with five paintings, each valued at $1,800, stuffed in a canvas tote bag. Two weeks later, the same man pilfered a $350,000 sketch by the highly regarded modern artist Fernand Leger from the Carlyle Hotel.

This is the first time a theft like this has occurred at The Four Seasons in its 20 years, according to Tiffani Cailor, a hotel spokeswoman.

"This is an unusual incident," she said. "We are very concerned and upset over the theft."

The upscale Four Seasons hotel lobby has 18 display cases, according to Cailor. The suspects chose to smash the one filled with jewels from Jacob & Company, a designer favored by celebrities from Jay-Z to Jennifer Lopez to former New York Mayor Rudy Giuliani.

Related: Swatch buys luxury jeweler Harry Winston

Cailor said that the hotel is working with the police as well as Jacob & Co. to resolve the case. She said its security levels will remain high.

"Guests and employees can rest assured [that security measures] are rigorous," Cailor said.

The NYPD released images of the suspects from a surveillance camera late Sunday night, and confirmed that police are still looking for them. The men were last seen heading east on 57 Street after the heist.

First Published: February 18, 2013: 12:29 PM ET

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Burger King Twitter gets McHacked

Burger King's Twitter account was hacked by an apparent fan of McDonald's.

NEW YORK (CNNMoney)

Two weeks after traces of horse meat were found in beef patties at a European Burger King (BKW) supplier, the burger chain's Twitter account was hacked. Making matters worse, the yet-to-be-identified hackers made it appear as though Burger King was bought by McDonald's (MCD, Fortune 500).

"We just got sold to McDonalds! Look for McDonalds in a hood near you," the company tweeted at noon ET Monday.

Burger King's Twitter profile photo was changed to a McDonald's logo, and its profile information said, "Just got sold to McDonalds because the whopper flopped." It also included the misspelled line "FREDOM IS FAILURE" and a dead link to a press release.

Over the course of an hour after it had been hacked, the account's attacker tweeted out a slew of increasingly ridiculous or obscene items. Twitter suspended the account around 1 p.m. ET.

"The Twitter account of the Burger King brand has been hacked," said Bryson Thornton, spokesman for Burger King, who apologized for the incident. "We have worked directly with administrators to suspend the account until we are able to reestablish our legitimate site and authentic postings."

A spokesman for Twitter said the company doesn't comment on individual accounts for privacy and security reasons, but he "urged users to use good password hygiene on Twitter."

McDonald's on Monday tweeted, "We empathize with our @BurgerKing counterparts. Rest assured, we had nothing to do with the hacking."

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"Somebody needs to tell Burgerking that 'whopper123' isn't a secure password," tweeted @flibblesan. The hacker, using the @BurgerKing twitter account, denied the password was related to the Whopper, Burger King's iconic burger.

The company's account included a mention of @DFNCTSC in its first message after it was hacked. It's unclear if that is the account's attacker, since no one has tweeted from that account yet. But the attacker appears to be a fan of hacktivist group Anonymous, using Burger King's account to ask the group to follow it.

"We're guessing the @BurgerKing social media team is having a bad day..." tweeted @YourAnonNews, one of Anonymous' most active Twitter accounts.

The hacked account did not mention anything about the horse meat scandal, though it did tweet out a gross-looking photo of a burger, saying "This is why we were sold to @McDonalds."

On Jan 31, Burger King announced that it had terminated its relationship with supplier Silvercrest Foods after finding traces of horse meat in beef patties at a Silvercrest facility.

Silvercrest provided beef for Burger King restaurants in the United Kingdom, Ireland and Denmark. Burger King said that while samples of beef from restaurants in these countries showed no evidence of contamination, four samples from a Silvercrest plant in Ireland showed "very small trace levels of equine DNA."

Burger King said the tainted product was never sold in restaurants, and appeared to have originated from a sub-contracted supplier in Poland.

First Published: February 18, 2013: 1:21 PM ET

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Report: Chinese military engaged in 'extensive cyber espionage campaign'

A cybersecurity firm has linked one of the world's most prolific groups of computer hackers to the Chinese military.

HONG KONG (CNNMoney)

The security firm, Mandiant, detailed the allegations in a 60-page report published Tuesday that describes the group's tactics and history over a six-year period.

The Virginia-based Mandiant, which helps companies detect and respond to cyber threats, said it has observed the group of hackers -- called the "comment crew" -- systematically steal hundreds of terabytes of data from at least 141 organizations across 20 industries worldwide since 2006.

Mandiant claims the activity can be traced to four networks near Shanghai -- with some operations taking place in a location that is also the headquarters of Unit 61398, a secret division of China's military.

"The sheer scale and duration of sustained attacks against such a wide set of industries from a singularly identified group based in China leaves little doubt about the organization behind [the group]," Mandiant said. "We believe the totality of the evidence we provide in this document bolsters the claim that [the group] is Unit 61398."

The Chinese government did not immediately offer a reaction to the report Tuesday. In the past, China has vociferously denied allegations that it tolerates, sponsors or directs cyberattacks.

Last month, the Chinese defense ministry said the country's military "has never supported any hacker activities."

Related: Burger King Twitter gets McHacked

Mandiant estimates that hundreds, and perhaps thousands, of people work within Unit 61398, which is housed in a 12-story, 130,663-square-foot facility.

Organizations in English-speaking countries are the primary victims of the comment crew -- making up 87% of the 141 attacks observed by Mandiant. One hundred and fifteen attacks targeted organizations in the United States.

The hackers have a "well-defined attack methodology," and Mandiant said the group has stolen large volumes of intellectual property, including technology blueprints, proprietary manufacturing processes and business plans.

Related: Watching porn is bad for your smartphone

Government and intelligence officials in the United States are increasingly concerned about the threats posed by cybercrime, especially from government actors.

Outgoing Defense Secretary Leon Panetta said last year that a cyberattack could be crippling, citing risks to the power grid, Wall Street and the financial system.

"We are literally getting hundreds of thousands of attacks everyday that try to exploit information in various agencies and departments and frankly throughout this country," Panetta said.

Earlier this month, President Obama signed an executive order designed to address the country's most basic cybersecurity needs -- and highlighted the effort in his State of the Union address.

The order will make it easier for private companies in control of the nation's critical infrastructure to share information about cyberattacks with the government. The order also directs the government to work with the private sector on standards that will help protect companies from cybercrime.

First Published: February 19, 2013: 1:16 AM ET

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