Posts by Aaron Task

  • "Huge uncertainties" over Greece, dollar will delay Fed rate hikes: Kotok

    Aaron Task at Yahoo Finance 7 days ago

    A funny thing happened on the way to this latest turn in the Greek bailout tragedy: fed fund futures started pricing in expectations the Fed will hold off raising rates until 2016 vs. starting in September as previously expected. "We have always thought it's one [rate hike in 2015] and it's September but this may push it back," says David Kotok, CIO of Cumberland Advisors which has $2.4 billion of assets under management. "The Fed does not know the impact that will come out of Europe - there are huge uncertainties." Chief among those uncertainties is the potential impact a 'Grexit' -- or just more EU drama -- will have on the U.S. dollar. While down from its recent peak above 100, the U.S. Dollar Index is still up more than 19% from its 52-week low of 79.74 and seems poised for further gains, especially vs. the euro, if concerns over Greece prompt further weakness in the debts of Italy, Spain and Portugal. Beginning in January, the FOMC has cited "international developments" among the factors that will determine the timing of any rate hike and as far back as the September 2014 meeting, minutes show concern "that the appreciation of the dollar might also tend to slow the gradual increase in inflation toward the FOMC’s 2% goal."

  • Stocks tumble on Greece and Puerto Rico debt woes: Dow down 350

    Aaron Task at Yahoo Finance 8 days ago

    Global stocks tumbled Monday after Greece closed its banks and limited the amount of money citizens can withdraw from them after bailout talks with its creditors broke down over the weekend. The Greek drama has been unfolding for many months (if not years) but the latest developments revived fears the country could exit the euro zone, with unpredictable consequences. The Dow fell nearly 350 points, or 1.9%, while the S&P 500 lost 2.1% and the Nasdaq tumbled 2.4%. European stocks suffered their biggest drop in eight months with Germany's DAX and France's CAC each falling about 3.5% while major bourses in Spain and Italy fell more than 4.5%. The stock market in Greece was closed but the FTSE Greece 20 ETF, a U.S.-based proxy for Greek equities, fell 19%. Meanwhile, so-called safe haven assets like U.S. Treasuries, Germany bunds and gold rallied. Whether the selling resumes Tuesday remains to be seen, of course, but investors have a few more days to think about what a 'Grexit' would mean ahead of Sunday's referendum wherein Greek citizens will decide whether or not to accept conditions for another bailout. "We’ll see if the Greek people in response to the chaos that is now taking place will vote yes on the referendum instead of having its new Marxist government take them over the cliff on the platform that the private sector should exist to finance a bloated public sector with very generous benefits," writes Peter Boockvar, chief market analyst at The Lindsey Group. "That said, a debt write down is an inevitable component of what is a needed restructuring and a no vote (if they can someone stay in the euro after) would quicken that likelihood. On the other hand, if the referendum is essentially a vote on whether to stay in the euro or not (which it seems it will be), a yes vote must take place for the sake of the Greek people. A debt restructuring will then happen eventually anyway." In addition to the Greek news, Puerto Rican Gov. Alejandro Garcia Padilla put additional pressure on stocks by telling The New York Timesthe island's debt was “not payable,” raising the specter of default across the Atlantic as well. Puerto Rico has approximately $72 billion in outstanding debt which has been popular with U.S. municipal bond investors because it's free of all federal and state taxes; top institutional holders of Puerto Rican bonds include OppenheimerFunds, Franklin Resources, Lord Abbett and Nuveen, Bloomberg reported last month. But there's no such thing as a free lunch, as the saying goes; Monday afternoon, the White House said no federal bailout of the U.S. territory will be forthcoming and Puerto Rico cannot declare bankruptcy, as Detroit and other municipalities have done, unless Congress acts to change the law. David Kotok, chief investment officer at Cumberland Advisors which has $2.4 billion of assets under management, says Governor Padilla may be borrowing a page from Greece Finance Minister Yanis Varoufakis, who is an expert in game theory. "When you play game theory...it's a game of chicken," Kotok tells me in the accompanying video. "When you play chicken you need to be the last one in the game. That means it isn't until the eleventh hour, the 59th minute and 59th second before someone turns. We'll see." Bill Witherell, Cumberland's chief global economist, agrees "the most likely outcome will be a last-minute deal, unsatisfactory for both sides, that again kicks the can down the road, avoiding 'Grexit'. That said, the possibility of a truly dire end to this Greek tragedy has significantly increased." Coincidentally, the 'eleventh hour' for both Greece and Puerto Rico occurs on Tuesday when the former has a nearly $8 billion loan payment due to the International Monetary Fund and the latter has to approve a budget for the fiscal year starting July 1 when it also faces a $655 million payment on its general obligation bonds. (Gov. Padilla was slated to discuss Puerto Rico's budget and related debt woes in a televised address Monday evening.) Kotok expects the market will become "rocky" and more volatile as these double debt issues play out this week, but remains bullish on stocks, as has been the case for some time. "As long as we still have zero interest rates, asset prices rice," he says."The upward trend [remains] intact until interest rates normalize. That hasn't happened yet and Greece says it won't happen for a while." Indeed, fed fund futures markets on Monday showed investors are now betting the Fed will hold off raising rates until 2016, based in part because of the central bank's concerns over events in Greece. That's one bright spot for stock investors and a key reason why Monday's selloff wasn't even worse.   Additional Reading

  • Credit card fraud solution coming to America...finally

    Aaron Task at Yahoo Finance 12 days ago

    The list of U.S. retailers hit by hackers in recent years is too long to list here but includes Neiman Marcus, UPS, P.F. Chang's, Michaels Stores and, most infamously, Home Depot and Target. The attacks on just those latter two retailers exposed more than 90 million credit card accounts combined and helped finally push the U.S. to adopt card-chip technology. Long used in Europe and the standard in myriad countries around the world, card-chip technology creates a unique code for each transaction. Because the codes change with each transaction, criminals can't use them to create a counterfeit card, a major improvement from magnetic strip where all the account information is permanently stored -- and thus vulnerable to theft. The U.S. reliance on magnetic strips is a key reason why roughly 50% of credit card fraud happens in America even though only about 25% of all global credit card transactions occur here, The AP reports, citing Barclays. Widespread use of card-chip technology has been shown to reduce fraud by over 70% two years after adaptation, Stephanie Ericksen, vice president of risk products at Visa, tells me in the accompanying video. The move to card-chip technology in American is accelerating because, starting in October, retailers that haven't upgraded to use them and banks that haven't issued them will be liable for any fraud that occurs as a result of theft. The American Bankers Association estimates fraud cost the industry over $1.7 billion in 2012, so the financial services industry is highly motivated to get chip-enabled cards to its customers. Ericksen estimates over 60% of American credit cards will have the embedded chips by the end of this year. (Often referred to as chip-and-PIN, the chip cards often require a PIN but can also be authorized with a signature or even just a swipe, depending on the transaction, Ericksen says.) But what of the retailers? Upgrading to card-chip machines will cost the industry between $25 billion and $30 billion, according to the National Retail Federation, and conventional wisdom holds that retailers' unwillingness to incur that cost is a big reason why America lags the rest of the world when it comes to credit card security. Ericksen offers another, more generous, explanation: The Europeans adopted chip-card technology because a lack of reliable telecomm connectivity prompted them to store transactions and send them in batches, often overnight for authorization the next day, and the chip-card terminals provided a better vehicle for that. American retailers, meanwhile, had access to better telecom and thus invested in terminals that sent each transaction individually for real-time authorization.   "Now we're seeing a convergence of the two technologies," she says. "Internet is widely available so terminals all around the world can do real-time authorization so they're investing in back-end systems in conjunction with chip. And we're adding that one-time code with the chip to better secure the infrastructure we have here." As for the cost of converting, Ericksen says small businesses can get a "plug and play" card-chip reader "relatively inexpensively" -- citing one unit at Costco that goes for $99 -- while Square has offered them free to merchants in its network. The cost will naturally be larger for big retailers but card-chip technology is "a bridge to mobile payments," she says, noting it's the same technology Visa is using for Apple Pay and other mobile transactions. And mobile payments are a bridge to an even more secure system: One based on biometrics, i.e. fingerprint of facial recognition.  Ericksen says the industry will "probably leapfrog rather quickly" to mobile payments and biometrics, which she calls "an even better way of authenticating the card holder." But the longest journey begins with a single step and, while late getting started, America is taking a big one with this year's move to card-chip technology.

  • NBA Draft preview: Mo money, mo problems

    Aaron Task at Yahoo Finance 12 days ago

    Karl-Anthony Towns, Jahlil Okafor and D’Angelo Russell are widely expected to be the top picks in Thursday's NBA draft. It's a bit of a crapshoot after that and could be for the top three picks as well, at least financially speaking.

    "Be wise, NBA rookie," writes former NBA first-round draft pick Adonal Foyle. "Take it upon yourself to learn as much as you can to secure your future not only as a player, but as a man. A lot’s going to happen on the court for you. Just don’t forget about what happens away from it."

    Foyle, who played 13 NBA seasons, joins Yahoo Finance in the accompanying video to discuss the draft, the financial pitfalls pro athletes face and his new book, Winning the Money Game: Lessons Learned from the Financial Fouls of Athletes.

    Aaron Task is Editor-at-Large of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at atask@yahoo-inc.com.

  • Holacracy at Zappos: "It's not anarchy," co-founder says

    Aaron Task at Yahoo Finance 1 mth ago

    Zappos made headlines recently amid the fallout from its decision to adopt Holacracy, "a system that removes traditional managerial hierarchies allowing employees to self-organize to complete work in a way that increases productivity, fosters innovation and empowers anyone in the company with the ability to make decisions that push the company forward," according to a memo from founder Tony Hsieh. In other words, no bosses with underlings waiting for marching orders, but a decentralized system where everyone's role is defined around the work they're doing at that moment vs. their title. Zappos adopted Holacracy in 2013 and earlier this year Hsieh decided to "rip [off] the band aid" and accelerate the process toward self-management by offering at least three-months of severance to any employee who decided the system wasn't for them. About 14% of Zappos employees took the buyout as of a month ago, leading The Wall Street Journal to declarethat Holacracy had brought "confusion" to the Amazon.com subsidiary.

  • Blue Nile: Online retailer gets physical with New York store

    Aaron Task at Yahoo Finance 1 mth ago

    Blue Nile, a pioneer in the online jewelry business, is getting physical. This week, the company will open its first brick and mortar outlet in Roosevelt Field Mall on Long Island. Blue Nile is calling it a "webroom" but a store by any other name would still have four walls. The Roosevelt Field's outlet is "a test to see if conversion can grow measurably," following a successful 'shop-in-shop' effort at a Nordstrom's in the same location, says Blue Nile CEO Harvey Kanter. "We're doing a test with a belief that at some point we'll expand but...we'll see where it goes." Blue Nile isn't the first online retailer to make the leap from the Web to a physical location -- Bonobos, Warby Parker and Rent the Runway have all done it. But the jeweler has been around since 1999 and, along with Amazon, is one of the first established virtual retailers to make the shift. Just as physical retailers are rushing to improve their Web experience, the 'omnichannel' challenge is coming to traditional Web retailers too.   "It's all about carrying on tradition of what made Blue Nile really successful...which is the...

  • U.S. economy "slow, disappointing" and not about to change for the better

    Aaron Task at Yahoo Finance 1 mth ago

    The U.S. economy shrank in the first quarter, the third such decline since the expansion officially began in mid-2009. But when the data came out last week most economists chalked up the 0.7% contraction to temporary factors like weather, the strong dollar and the West Coast port strike. The calendar has turned to June and the data now coming in for April and May suggest any second-quarter rebound will be limited, at best: The Atlanta Fed's real-time GDPNow model predicts growth of just 0.8% for the April-June timeframe. "At the beginning of this year there was a hope and expectation things would pick up," recalls Kevin Logan, chief U.S. economist at HSBC. "Now it's five months in [to 2015] and we're reassessing everything. This is a slow, disappointing expansion [and] doesn't seem like it's changing now." A big reason for the econo-optimism at the start of the year was the sharp drop in gasoline prices, which many economists predicted would be a "windfall" for U.S. consumers. But Logan notes the biggest part of the decline came at the end of 2014, helping spur a 4.5% growth rate in consumption in the fourth quarter. "There was a shift upward in spending and now we're trending [flat] again," he says, as reflecting the 0% consumption growth in the personal income/spending figures released Monday. "Consumer spending has picked up a bit but not to drive the economy to the rate of growth we thought we were going to get."

  • Beef: It's what dads really want for Father's Day

    Aaron Task at Yahoo Finance 1 mth ago

    Summer is just around the corner and along with it, Father's Day, which happens to fall on the solstice this year. Those looking for that "perfect" gift for dear old dad should think about what he really wants: Food. Specifically, steaks. In a recent survey, 80% of dads say they would like steaks for Father's Day and 57% of them will be grilling on that "special" day. And yet, only 9% are likely to receive the gift of red meat, according to Todd Simon, senior vice president of Omaha Steaks, a family-owned company that his great-great grandfather founded in 1917. Father's Day is "our Second Christmas," Simon says and the company has launched an ad campaign this year aimed right at the hearts and stomachs of dads everywhere. You can catch some clips of the campaign in the accompanying video (or find the full thing here) and hear Simon's take on more serious issues, including: Sustainability: "We are extremely selective about where we buy our beef and have our own inspection process," Simon says. According to Omaha Steaks PR, less than five tenths of 1% of the 10 billion pounds of beef produced in America meet the company's standards. "Sustainability is important and we're looking to see that our suppliers are moving in that direction," he says, lauding Walmart's recent announcement it is asking suppliers to raise animals in more humane conditions. "We're a customer just like Walmart: We like to push for change and like it when other companies do as well," Simon says. Staying relevant: Omaha Steaks is one of the pioneers of the home food delivery business, which is now ubiquitous. One way the company has remained relevant is "by offering a wide variety of things so you can really get anything you want from Omaha Steaks," he says. While steaks are still the bulk of the business, the company also offers burgers, bacon, seafood, side dishes including fresh vegetables, as well as pies, chocolates and other desserts. Independence: The food industry is rapidly consolidating with Hormel Foods' acquisition of Applegate Farms this week just the latest in a series of deals. Simon expects Omaha Steaks to remain private and in the family's control for the foreseeable future. "Being a privately held business has been good for us," he says. "We've been able to fund growth internally and have been able to access the debt market when we've need capital." Asked about the key to the firm's long-term success, Simon cites the advice of Omaha's most famous native, Warren Buffett: 'Stick to your knitting'.

  • GameStop gives the people what they want (shareholders too)

    Aaron Task at Yahoo Finance 1 mth ago

    A lot of retailers were hit in the first quarter by a strong dollar, bad weather and the West Coast port strike -- or at least cited those factors as reasons for disappointing results. Then there are retailers like GameStop, whose shares were up 7% in recent trading after the video game retailer reported better-than-expected sales and earnings Thursday afternoon. "We had a great first quarter," CFO Rob Lloyd declares in the accompanying video. "We had the same international currency challenges that a lot of companies did and it impacted our sales and revenues but...we were able to exceed our guidance for the quarter." Indeed, GameStop's resultsbeat expectations on both the top and bottom lines with earnings of 68 cents per share and revenue of $2.06 billion, the latter up 8.1% on a constant currency basis. Same-store sales rose 8.6% in the quarter and the company upped its full-year earnings guidance to $3.63-$3.83 from $3.60-$3.80. Lloyd says the key to GameStop's Q1 success was something that seems self-evident but is often easier said than done in retail: Delivering what customers want. "As long as publishers introduce great content that drives consumers into our stores, I think we'll be alright," he says. In the first quarter, there was strong demand for titles such as NetherRealm Studios' Mortal Kombat X, Electronic Arts' Battlefield Hardline, Take-Two's Evolve and Warner Brothers Interactive's Dying Light. "Customers were lining up to get them," Lloyd said, further noting strong early demand for The Witcher 3: Wild Hunt, which was just released by Polish video game developer CD Projekt RED on May 19. "We're pleased with what we've seen on Witcher 3...we've got to make sure we've got enough product to meet demand," he says, and is optimistic about the forthcoming release of Batman: Arkham Knight, the final installment of Rocksteady Studios' Arkham Trilogy. GameStop is benefiting from the sales of the latest generation gaming consoles and in the first quarter crossed an inflection point where sales of new games for the Xbox One and PlayStation 4 exceed those of the prior versions, Lloyd said. "We're not at that point yet on preowned" games, one reason such sales slipped 3.4% in the quarter. Beyond the newest titles and consoles, gamers also increasingly want digital downloads, which skeptics (and short sellers) believe pose a major threat to GameStop's brick and mortar business. But GameStop's digital sales rose 23% in the first quarter and is on pace to hit $1 billion this year, Lloyd says. "Most [of those sales] takes place in stores, which keeps us relevant from customers' perspective." GameStop is also adding collectibles and merchandise like T-shirts and figurines to its stores which provides another incentive for customers to come to the stores. "In addition, because digital is growing, because the video game business is cyclical, we're finding ways to diversify our business overall," he says. A big part of that diversification is the company's technology brands segment, which includes Simply Mac -- 71 stores selling a full line of Apple products, Spring Mobile for AT&T post-paid services and products, and Cricket Wireless stores, an AT&T partnership for pre-paid wireless phones. GameStop plans to open 200 new tech brand stores in the next three months, and is converting several old Radio Shack outlets as part of its AT&T partnership, from which Lloyd expects continued growth.

  • Bird flu egg-splained: The impact goes far beyond your breakfast table

    Aaron Task at Yahoo Finance 1 mth ago

    The egg. It's incredible. It's edible...and it's getting more expensive. Because of a bird flu outbreak, wholesale prices for eggs have risen to over $2.00 a dozen, up a whopping 71% since late April. Retail prices haven't risen nearly as fast -- up 17% in the past month according to The Guardian...but grocers can only hold off passing on the price increase to consumers for so long. The avian flu has forced American farmers in 16 states to kill 40 million birds so far, the vast majority of them egg-laying hens. More than 10% of the entire U.S. egg supply has already been affected by the outbreak, according to The Washington Post, with Iowa farms particularly hard hit. The impact of this bird flu outbreak goes far beyond your breakfast table. The price of liquid, dried and frozen eggs used by food manufacturers has risen nearly 30% in the past month. And a potential shortage of these so-called breaker eggs is forcing corporations like McDonald's, Unilever, Panera and General Mills to scramble to find alternative suppliers and substitute ingredients.   If the bird flu does lead to shortages, expect to pay more for all kinds of egg-rich products like mayonnaise, baked goods and ice cream in the weeks and months ahead. And this Thanksgiving could be more expensive too. Hormel Foods says its Jennie O Turkeys might be in short supply because of the avian flu outbreak, which has forced farmers to euthanize over 3.3 million turkeysin Minnesota, which produces nearly 20% of America's turkey flock. "The U.S. market -- suppliers [and] buyers -- are most certainly very nervous about the evolution of this unprecedented problem," says Andrew Rosenzweig, international sales manager at OvoMarket Espana, an egg exporting company that represents Spanish egg farms. "Given that the influenza has also affected breeding farms...the production forecast is disconcerting.  A hen does not start laying eggs until it’s [about] 20 weeks old, but the big question is how long will it take for the USA to replace the layers that have been lost?" Just how 'unprecedented' is this problem?  The Egg Industry Center, which closely follows the egg market, says "a large fluctuation such as the loss of millions of laying hens was never considered in the design of the [pricing] model that is currently in use." A 100-year flood, in other words. The U.S. only exports about 5% of the eggs produced here, The NYT reports, but the American bird flu epidemic is already having global implications. European egg processors are "in full production to take up the U.S.’s global slack," Rosenzweig says, noting his firm has received inquiries about eggs from Mexico and asked whether OvoMarket can serve clients in Hong Kong.     The good news is the current avian flu outbreak has been contained to just birds so far...but there's still a public health risk, even if it doesn't spread to humans: Eggs are also used to make vaccines for diseases such as measles, mumps and rubella. Eggs are also used to make vaccines for diseases like influenza...meaning this coming flu season could be one for the birds.