1. Start early
More than any one stock or mutual fund pick, the age you start investing will determine how much wealth you build. To illustrate: Employee A starts putting away $100 a month when she's 22. Her money grows at 8 percent a year, and after ten years she stops contributing - and lets her stake grow. Employee B waits until he's 32 to set aside $100 a month, also growing at 8 percent a year, and he keeps it up until he hits 64. When they both retire at 64, she will have $234,600, and he'll have only $177,400. Need we say more?
Thursday, December 14, 2006
American Century Equity Income
American Century Equity Income
Phil Davidson, co-manager of the American Century Equity Income fund, mentions "downside" so often that you might start to think he needs some Zoloft in his coffee. But Davidson isn't dour - he's merely obsessed with avoiding stocks that are ripe for a tumble.Davidson and his co-managers are willing to buy solid stocks of all sizes for their $6.2 billion mostly large-cap portfolio, as long as they find that margin of safety. They also mix in some convertible securities for added income and lower volatility. That kind of conservatism makes the portfolio less likely to keep up during torrid bull runs, but it also serves to limit losses, a key to long-term outperformance. The fund's worst loss in any one calendar year was a 5 percent slide in 2002, a year when the average large-value fund sank 18 percent. Over the past ten years, the fund has gained nearly 13 percent a year, with dollar-weighted returns of nearly 12 percent.Limited risk is one big reason the managers have loaded up on shares of General Electric. The bluest of blue chips has a AAA balance sheet and carries a 2.8 percent dividend yield. That's why Davidson is only too happy to hold on to GE, his top holding, for the long term. "The probability of success with this investment is so high that I don't care if it goes sideways for another year," says Davidson.
Phil Davidson, co-manager of the American Century Equity Income fund, mentions "downside" so often that you might start to think he needs some Zoloft in his coffee. But Davidson isn't dour - he's merely obsessed with avoiding stocks that are ripe for a tumble.Davidson and his co-managers are willing to buy solid stocks of all sizes for their $6.2 billion mostly large-cap portfolio, as long as they find that margin of safety. They also mix in some convertible securities for added income and lower volatility. That kind of conservatism makes the portfolio less likely to keep up during torrid bull runs, but it also serves to limit losses, a key to long-term outperformance. The fund's worst loss in any one calendar year was a 5 percent slide in 2002, a year when the average large-value fund sank 18 percent. Over the past ten years, the fund has gained nearly 13 percent a year, with dollar-weighted returns of nearly 12 percent.Limited risk is one big reason the managers have loaded up on shares of General Electric. The bluest of blue chips has a AAA balance sheet and carries a 2.8 percent dividend yield. That's why Davidson is only too happy to hold on to GE, his top holding, for the long term. "The probability of success with this investment is so high that I don't care if it goes sideways for another year," says Davidson.
Scraping by on $150,000 a year
Scraping by on $150,000 a year
The Schuetts have an enviable income. So why are they having a hard time making ends meet? Plus: How you can do better.
By Josh Hyatt, Money Magazine senior writer
December 14 2006: 11:08 AM EST
NEW YORK (Money Magazine) -- If she thought it would really fix her family's finances, Amy Schuett would make it her New Year's resolution to squeeze every bit of extra spending from the family budget.
But she's already slashed so many little luxuries - the gourmet coffee, the restaurant lunches, the weekly dates with husband Brian - that she's fresh out of ideas. Cable TV? Unplugged. Pool membership? Down the drain.
They've even considered giving up their unlisted phone number. At a cost of $3 a month, this move wouldn't save much - even over, say, 150 years - but it shows how desperate the couple feel about easing their financial strain. "We're struggling week to week to get by," says Brian, 42. "Any money that comes in gets chewed up right away."
Digesting that fact becomes harder when you consider that the Schuetts earn a comfortable living, with Amy, 39, pulling in $150,000 a year as a hospital psychiatrist. True, their income did take a big hit last summer when Brian got laid off from his job as a sales rep for a pharmaceutical firm (he'd been making a base salary of $82,000 a year, plus commissions as high as $24,000).
And they do have four daughters to raise, ages four to nine. But still.
The Schuetts don't have any child-care bills (Brian is now a stay-at-home dad). They don't have credit-card debt. They don't splurge on fancy vacations. And they live in a nice but definitely not luxurious home on a three-acre plot in Elkhorn, Neb., just west of Omaha, where the cost of living is, well, livable.
Yet, says Amy, "We live from one paycheck to the next, we're struggling to save and we never seem to have enough money to do anything fun."
It's a statement that an awful lot of Americans can make these days. About two-thirds of families need their next paycheck to meet their living expenses, according to a recent survey by the American Payroll Association.
While many claim to be clueless about where all their money is going, it's often easy enough for an objective observer to figure out. After all, easy credit makes blowing bucks at the mall (or anywhere else) painless - at least until you find yourself mired in high-interest debt.
And once your lifestyle has been lifted, it becomes utterly unthinkable to live without satellite radio, TiVo, iTunes and Netflix. And is any suburban clan complete without a monstrous SUV in the driveway? (It can't fit in the garage.)
If, like the Schuetts, you're determined to stop living for every payday and start saving, these strategies should help.
Automatic savings: Take it off the top
There's only one thing that stands between the average person and the discipline needed to save on a regular basis: human nature. When it comes to money, "we tend to spend as much as we have," says Susan Kaplan, a financial planner in Newton, Mass.
So take self-discipline out of the equation by enrolling in automatic investing plans through your employer and financial services providers; you tell them how much to deduct from your paycheck or checking account, and the money will be shifted every month into investments of your choice without further ado from you. In effect, you make the discipline of saving your money someone else's job.
Set targets for how much you should be saving for various goals through these automatic investing plans, then slowly work your way up to the goal.
Financial planner Bonnie Hughes, for instance, suggests that you aim to have at least 10 percent of your income directed to a 401(k) or similar retirement account (15 percent would be ideal); 4 percent in a savings account or money-market fund designated for emergencies (you can stop once the account is equal to six months' worth of your living expenses); and another $100 a month going into 529 plans for each of your kids.
The important thing, though, is just to get started with a different way of thinking about money: From this day forward, you will treat saving like a bill and make it the first one you pay each month. And you will no doubt find yourself automatically adjusting your spending downward as a result.
Kaplan notes, "If you never have the money at hand, you can't spend it."
Target big expenses
Some cutbacks, of course, will be necessary to accommodate your now lofty savings goals. Most people trying to break the paycheck-to-paycheck habit focus, as the Schuetts have, on the "latte factor" - the little luxuries (like a daily dose of java at Starbucks) that add up over time.
Don't fool yourself. Small economies are just that: small. If you're really serious about getting a handle on spending, you need to identify the big-ticket drains on your cash flow - and there are always one or two - and do what you must to plug those holes.
If you're honest with yourself, you probably already know what you're spending a small fortune on.
Net Worth: How do you stack up?
Maybe it's extracurriculars for the kids (try adding up the cost of piano lessons and the private math tutor, not to mention sleepaway camp).
Or maybe it's your twiceyearly vacations (winter in the Caribbean? an Alaskan cruise last summer?).
But whether you're genuinely clueless about where your money goes or just don't want to face up to the prospect of giving up or cutting back on something that matters a lot to you, consider avoidance time officially over. Carve out an hour or two to sit down with your spouse to go through your check register and your year-end credit- and debit-card summaries to see what big, discretionary expenses leap out at you. Then talk seriously about what you both can and should do to whittle those bills down.
A closer look at the Schuetts' finances reveals, for example, that a big chunk of their income is eaten up by two rental properties. Brian purchased them thinking they'd generate extra income, but he has yet to find tenants. Even when the properties are finally occupied, the area's softening rental market probably won't allow them to make enough to cover carrying costs.
Meanwhile, the two houses are expected to appreciate only about 3 percent a year - the couple can do better than that with Treasuries (bonds, at least, will never need expensive new wiring).
But the Schuetts haven't had a heart-to-heart about selling the properties yet because Brian has been so keen on making them work. "Our strategy has been to practice 'avoidance,'" says Amy. "But you don't have to be a psychiatrist to see that."
Tackle the beast head on
Once you've identified your budget busters, you have to devise a plan to cut them down to size. Don't try to deal with every aspect of the problem at once - a prospect so overwhelming that you're doomed to fail.
Instead, St. Paul financial consultant Ruth Hayden suggests scheduling weekly meetings for, say, half an hour to talk about just one slice of the financial challenge or task at hand.
Millionaire Calculator
During the Schuetts' first meeting, for example, the couple might discuss whether they want to keep or sell their rental properties and, if they decide to stick with landlording, what specific steps they should take to improve their chances of turning a profit.
The second meeting might focus on setting up those automatic savings plans (Amy stopped contributing to her 401(k) when cash got tight; the Schuetts don't have college funds for the girls yet either).
At the third session, they can talk about other systems they can use to help them economize. One simple trick, Hayden suggests, is to earmark cash in separate envelopes at the beginning of the week for expenses like takeout food and dry-cleaning; when the envelope is empty, you can't shell out any more on that item.
"It forces you to plan how you'll spend," says Hayden.
Boost your top line
After you've reined in spending to shore up your bottom line, it's worth thinking about how to fatten the top one. Can you make a reasonable case - either to your current employer or to a prospective poacher - that you're due for a raise?
What about taking on some freelance work to make extra money? Amy Schuett, for instance, says she could agree to an occasional speaking engagement or consulting job. Brian plans to ask two friends who own a home remodeling business if they'd consider giving him some part-time work.
Budget for some fun
"The feeling that you can never get ahead can be demoralizing," says Kaplan. So make sure in your zeal to spend less and save more, you still allow yourself a few expenditures that bring your family real pleasure. You just need to figure out in advance how you'll pay for them.
Last year, for instance, Brian's parents gave the Schuetts a horse named Red for their kids to ride. They think it will cost a few hundred dollars a month to feed and care for the animal, and they're willing to give up ballet lessons and gymnastics classes for the girls to pay for it.
The trade-off is worth it, says Brian, because "the kids so love having a horse."
In fact, Amy has already got a name if they get a second horse: Buttercup. "We'll probably have to wait a while for that," says Brian. "We've got another beast to tame first."
The Schuetts have an enviable income. So why are they having a hard time making ends meet? Plus: How you can do better.
By Josh Hyatt, Money Magazine senior writer
December 14 2006: 11:08 AM EST
NEW YORK (Money Magazine) -- If she thought it would really fix her family's finances, Amy Schuett would make it her New Year's resolution to squeeze every bit of extra spending from the family budget.
But she's already slashed so many little luxuries - the gourmet coffee, the restaurant lunches, the weekly dates with husband Brian - that she's fresh out of ideas. Cable TV? Unplugged. Pool membership? Down the drain.
They've even considered giving up their unlisted phone number. At a cost of $3 a month, this move wouldn't save much - even over, say, 150 years - but it shows how desperate the couple feel about easing their financial strain. "We're struggling week to week to get by," says Brian, 42. "Any money that comes in gets chewed up right away."
Digesting that fact becomes harder when you consider that the Schuetts earn a comfortable living, with Amy, 39, pulling in $150,000 a year as a hospital psychiatrist. True, their income did take a big hit last summer when Brian got laid off from his job as a sales rep for a pharmaceutical firm (he'd been making a base salary of $82,000 a year, plus commissions as high as $24,000).
And they do have four daughters to raise, ages four to nine. But still.
The Schuetts don't have any child-care bills (Brian is now a stay-at-home dad). They don't have credit-card debt. They don't splurge on fancy vacations. And they live in a nice but definitely not luxurious home on a three-acre plot in Elkhorn, Neb., just west of Omaha, where the cost of living is, well, livable.
Yet, says Amy, "We live from one paycheck to the next, we're struggling to save and we never seem to have enough money to do anything fun."
It's a statement that an awful lot of Americans can make these days. About two-thirds of families need their next paycheck to meet their living expenses, according to a recent survey by the American Payroll Association.
While many claim to be clueless about where all their money is going, it's often easy enough for an objective observer to figure out. After all, easy credit makes blowing bucks at the mall (or anywhere else) painless - at least until you find yourself mired in high-interest debt.
And once your lifestyle has been lifted, it becomes utterly unthinkable to live without satellite radio, TiVo, iTunes and Netflix. And is any suburban clan complete without a monstrous SUV in the driveway? (It can't fit in the garage.)
If, like the Schuetts, you're determined to stop living for every payday and start saving, these strategies should help.
Automatic savings: Take it off the top
There's only one thing that stands between the average person and the discipline needed to save on a regular basis: human nature. When it comes to money, "we tend to spend as much as we have," says Susan Kaplan, a financial planner in Newton, Mass.
So take self-discipline out of the equation by enrolling in automatic investing plans through your employer and financial services providers; you tell them how much to deduct from your paycheck or checking account, and the money will be shifted every month into investments of your choice without further ado from you. In effect, you make the discipline of saving your money someone else's job.
Set targets for how much you should be saving for various goals through these automatic investing plans, then slowly work your way up to the goal.
Financial planner Bonnie Hughes, for instance, suggests that you aim to have at least 10 percent of your income directed to a 401(k) or similar retirement account (15 percent would be ideal); 4 percent in a savings account or money-market fund designated for emergencies (you can stop once the account is equal to six months' worth of your living expenses); and another $100 a month going into 529 plans for each of your kids.
The important thing, though, is just to get started with a different way of thinking about money: From this day forward, you will treat saving like a bill and make it the first one you pay each month. And you will no doubt find yourself automatically adjusting your spending downward as a result.
Kaplan notes, "If you never have the money at hand, you can't spend it."
Target big expenses
Some cutbacks, of course, will be necessary to accommodate your now lofty savings goals. Most people trying to break the paycheck-to-paycheck habit focus, as the Schuetts have, on the "latte factor" - the little luxuries (like a daily dose of java at Starbucks) that add up over time.
Don't fool yourself. Small economies are just that: small. If you're really serious about getting a handle on spending, you need to identify the big-ticket drains on your cash flow - and there are always one or two - and do what you must to plug those holes.
If you're honest with yourself, you probably already know what you're spending a small fortune on.
Net Worth: How do you stack up?
Maybe it's extracurriculars for the kids (try adding up the cost of piano lessons and the private math tutor, not to mention sleepaway camp).
Or maybe it's your twiceyearly vacations (winter in the Caribbean? an Alaskan cruise last summer?).
But whether you're genuinely clueless about where your money goes or just don't want to face up to the prospect of giving up or cutting back on something that matters a lot to you, consider avoidance time officially over. Carve out an hour or two to sit down with your spouse to go through your check register and your year-end credit- and debit-card summaries to see what big, discretionary expenses leap out at you. Then talk seriously about what you both can and should do to whittle those bills down.
A closer look at the Schuetts' finances reveals, for example, that a big chunk of their income is eaten up by two rental properties. Brian purchased them thinking they'd generate extra income, but he has yet to find tenants. Even when the properties are finally occupied, the area's softening rental market probably won't allow them to make enough to cover carrying costs.
Meanwhile, the two houses are expected to appreciate only about 3 percent a year - the couple can do better than that with Treasuries (bonds, at least, will never need expensive new wiring).
But the Schuetts haven't had a heart-to-heart about selling the properties yet because Brian has been so keen on making them work. "Our strategy has been to practice 'avoidance,'" says Amy. "But you don't have to be a psychiatrist to see that."
Tackle the beast head on
Once you've identified your budget busters, you have to devise a plan to cut them down to size. Don't try to deal with every aspect of the problem at once - a prospect so overwhelming that you're doomed to fail.
Instead, St. Paul financial consultant Ruth Hayden suggests scheduling weekly meetings for, say, half an hour to talk about just one slice of the financial challenge or task at hand.
Millionaire Calculator
During the Schuetts' first meeting, for example, the couple might discuss whether they want to keep or sell their rental properties and, if they decide to stick with landlording, what specific steps they should take to improve their chances of turning a profit.
The second meeting might focus on setting up those automatic savings plans (Amy stopped contributing to her 401(k) when cash got tight; the Schuetts don't have college funds for the girls yet either).
At the third session, they can talk about other systems they can use to help them economize. One simple trick, Hayden suggests, is to earmark cash in separate envelopes at the beginning of the week for expenses like takeout food and dry-cleaning; when the envelope is empty, you can't shell out any more on that item.
"It forces you to plan how you'll spend," says Hayden.
Boost your top line
After you've reined in spending to shore up your bottom line, it's worth thinking about how to fatten the top one. Can you make a reasonable case - either to your current employer or to a prospective poacher - that you're due for a raise?
What about taking on some freelance work to make extra money? Amy Schuett, for instance, says she could agree to an occasional speaking engagement or consulting job. Brian plans to ask two friends who own a home remodeling business if they'd consider giving him some part-time work.
Budget for some fun
"The feeling that you can never get ahead can be demoralizing," says Kaplan. So make sure in your zeal to spend less and save more, you still allow yourself a few expenditures that bring your family real pleasure. You just need to figure out in advance how you'll pay for them.
Last year, for instance, Brian's parents gave the Schuetts a horse named Red for their kids to ride. They think it will cost a few hundred dollars a month to feed and care for the animal, and they're willing to give up ballet lessons and gymnastics classes for the girls to pay for it.
The trade-off is worth it, says Brian, because "the kids so love having a horse."
In fact, Amy has already got a name if they get a second horse: Buttercup. "We'll probably have to wait a while for that," says Brian. "We've got another beast to tame first."
Lehman profit tops forecasts
Lehman profit tops forecasts
Investment bank helped by increase in mergers, offerings and trading activity.
December 14 2006: 10:30 AM EST
NEW YORK (Reuters) -- Investment bank Lehman Brothers on Thursday said fiscal fourth-quarter profit rose 22 percent with record revenue from virtually every business line, but investors expecting even better results sent its shares down in premarket trade.
Lehman (Charts), the fourth-largest U.S. securities firm by market value, said net income rose to $1 billion, or $1.72 a share, for the three months ended Nov. 30, from $823 million, or $1.38, in the year-ago period. Net revenue rose 23 percent, to $4.5 billion.
Video
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AOL reaches a consumer complaint settlement in one state. CNN's Ali Velshi is `Minding Your Business' (December 14)
Play video
The results exceeded the average analyst earnings forecast of $1.68 a share, according to Reuters Estimates, but it did so by the smallest margin in six quarters. At the market open, Lehman shares rose 25 cents, to $76.70.
"The majority of the upside was driven by higher fixed-income trading results and M&A revenue, offset slightly by higher compensation and non-comp expenses," Citigroup brokerage analyst Prashant Bhatia said in a research note.
Wall Street firms in the quarter rebounded from a sluggish summer to cap off a record year amid robust M&A and leveraged buyout activity, stock and debt offerings and trading. For the year, Lehman reported record profit of $4 billion with all-time high revenue and a return on equity of 22.3 percent.
Lehman's trading revenue rose 28 percent to $3 billion, fueled by its second-best quarter ever in fixed income markets. Results were driven by customer activity and an increase in asset-based securities, muted by weaker interest rates and currency businesses.
It was a strong performance, surprising investors who still regard Lehman as a bond trading house with a heavy reliance on mortgage markets.
The equities business also had its second-best quarter, rising 8 percent to $900 million on greater market activity and growth in prime brokerage services to hedge funds. These results include private equity gains, which aren't disclosed.
Lehman's investment banking revenue rose 5 percent to a record $858 million, driven by strong debt and stock underwriting activity. Fees from merger and acquisitions, however, fell 7 percent even as the industry wraps up a record year in M&A activity.
Money management and wealth management revenue surged 26 percent to a record $640 million, as managed assets grew to $225 billion from $207 billion in the third quarter. Lehman's book value, watched closely by investors, rose 5 percent to $33.87 a share.
Analysts said Lehman's costs were higher then expected, with compensation and benefits comprising 49 percent of revenue. Salaries and bonuses, reflecting the tremendous growth in revenue, rose 24 percent to $2.24 billion.
Other expenses rose 15 percent, reflecting the company's expansion into new businesses and markets. Headcount worldwide surged 13 percent to 25,936 employees over the past year.
These results, though impressive, paled when compared with Goldman Sachs (Charts), which on Tuesday reported a 93 percent jump in quarterly profit, record annual earnings and an ROE of 34 percent. Bear Stearns (Charts), which also reported results Thursday, said its profit rose 38 percent.
Yet investors are growing more cautious as they look ahead, concerned that Wall Street earnings may have peaked.
"We understand 2006 has been such a great year for M&A, a great deal year," said Scott Armiger, a portfolio manager at Christiana Bank & Trust in Delaware. "We do see the economy slowing and that's got to factor in the investment banks' earnings next year."
Investment bank helped by increase in mergers, offerings and trading activity.
December 14 2006: 10:30 AM EST
NEW YORK (Reuters) -- Investment bank Lehman Brothers on Thursday said fiscal fourth-quarter profit rose 22 percent with record revenue from virtually every business line, but investors expecting even better results sent its shares down in premarket trade.
Lehman (Charts), the fourth-largest U.S. securities firm by market value, said net income rose to $1 billion, or $1.72 a share, for the three months ended Nov. 30, from $823 million, or $1.38, in the year-ago period. Net revenue rose 23 percent, to $4.5 billion.
Video
More video
AOL reaches a consumer complaint settlement in one state. CNN's Ali Velshi is `Minding Your Business' (December 14)
Play video
The results exceeded the average analyst earnings forecast of $1.68 a share, according to Reuters Estimates, but it did so by the smallest margin in six quarters. At the market open, Lehman shares rose 25 cents, to $76.70.
"The majority of the upside was driven by higher fixed-income trading results and M&A revenue, offset slightly by higher compensation and non-comp expenses," Citigroup brokerage analyst Prashant Bhatia said in a research note.
Wall Street firms in the quarter rebounded from a sluggish summer to cap off a record year amid robust M&A and leveraged buyout activity, stock and debt offerings and trading. For the year, Lehman reported record profit of $4 billion with all-time high revenue and a return on equity of 22.3 percent.
Lehman's trading revenue rose 28 percent to $3 billion, fueled by its second-best quarter ever in fixed income markets. Results were driven by customer activity and an increase in asset-based securities, muted by weaker interest rates and currency businesses.
It was a strong performance, surprising investors who still regard Lehman as a bond trading house with a heavy reliance on mortgage markets.
The equities business also had its second-best quarter, rising 8 percent to $900 million on greater market activity and growth in prime brokerage services to hedge funds. These results include private equity gains, which aren't disclosed.
Lehman's investment banking revenue rose 5 percent to a record $858 million, driven by strong debt and stock underwriting activity. Fees from merger and acquisitions, however, fell 7 percent even as the industry wraps up a record year in M&A activity.
Money management and wealth management revenue surged 26 percent to a record $640 million, as managed assets grew to $225 billion from $207 billion in the third quarter. Lehman's book value, watched closely by investors, rose 5 percent to $33.87 a share.
Analysts said Lehman's costs were higher then expected, with compensation and benefits comprising 49 percent of revenue. Salaries and bonuses, reflecting the tremendous growth in revenue, rose 24 percent to $2.24 billion.
Other expenses rose 15 percent, reflecting the company's expansion into new businesses and markets. Headcount worldwide surged 13 percent to 25,936 employees over the past year.
These results, though impressive, paled when compared with Goldman Sachs (Charts), which on Tuesday reported a 93 percent jump in quarterly profit, record annual earnings and an ROE of 34 percent. Bear Stearns (Charts), which also reported results Thursday, said its profit rose 38 percent.
Yet investors are growing more cautious as they look ahead, concerned that Wall Street earnings may have peaked.
"We understand 2006 has been such a great year for M&A, a great deal year," said Scott Armiger, a portfolio manager at Christiana Bank & Trust in Delaware. "We do see the economy slowing and that's got to factor in the investment banks' earnings next year."
Costco pulls plug on $4 drug plan
Discount warehouse says it was losing money on the program; will instead offer 100 pills for $10.
December 14 2006: 1:53 PM EST
CHICAGO (Reuters) -- Costco said Thursday it has stopped filling prescriptions at $4 for a 30-day supply, citing the costs, but instead is offering 100 pills for $10.
The warehouse club operator had initially matched Wal-Mart's (Charts) plan to sell certain generic drugs for $4 per 30-day prescription. Wal-Mart began its drug discount program in early September, which was matched by rival Target (Charts), among others.
Video
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CNN's Maggie Lake profiles Xerox's Anne Mulcahy. (December 11)
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But at that price, Costco (Charts) was losing money, Chief Financial Officer Richard Galanti said during a conference call with analysts, noting that just the cost of the pharmacist, the bottle and regulatory record keeping was more than $4.
Galanti conceded Costco could lose customers who insist on paying $4 per prescription. Still, under Costco's new program those customers with chronic ailments will ultimately pay 10 cents per pill, compared with about 13 cents per pill under the monthly $4 plan.
"We will certainly share with them what they are paying per pill for $10 by comparison," Galanti said, adding that "sometimes you have to deal with an intelligent loss of sales."
Galanti said customers could still buy 30-day prescriptions, but the price would be higher than $4.
December 14 2006: 1:53 PM EST
CHICAGO (Reuters) -- Costco said Thursday it has stopped filling prescriptions at $4 for a 30-day supply, citing the costs, but instead is offering 100 pills for $10.
The warehouse club operator had initially matched Wal-Mart's (Charts) plan to sell certain generic drugs for $4 per 30-day prescription. Wal-Mart began its drug discount program in early September, which was matched by rival Target (Charts), among others.
Video
More video
CNN's Maggie Lake profiles Xerox's Anne Mulcahy. (December 11)
Play video
But at that price, Costco (Charts) was losing money, Chief Financial Officer Richard Galanti said during a conference call with analysts, noting that just the cost of the pharmacist, the bottle and regulatory record keeping was more than $4.
Galanti conceded Costco could lose customers who insist on paying $4 per prescription. Still, under Costco's new program those customers with chronic ailments will ultimately pay 10 cents per pill, compared with about 13 cents per pill under the monthly $4 plan.
"We will certainly share with them what they are paying per pill for $10 by comparison," Galanti said, adding that "sometimes you have to deal with an intelligent loss of sales."
Galanti said customers could still buy 30-day prescriptions, but the price would be higher than $4.
Social Networks In For a Big 2007?
Remember when everyone still thought MySpace, Facebook and the whole social network scene was a nothing but a fad?
Marketers were reluctant to display their products over the new- fangled media and everyone kept waiting for the sites to fail.
They're still waiting, eMarkerter senior analyst Debra Williamson wrote in a report released today.
According to the report, advertising on social networks has become the top priority for online marketers.
The research firm is predicting that 2007 ad spending on US social networking sites will jump to $865 million from $350 million in 2006 a close to three-fold jump. By 2010, the report estimates, spending will reach $2.15 billion.
But Williamson said the growth could slide before then if social networks do not develop adequate measures of return on investment for their advertisers.
"The longer existing social networks take to develop adequate ROI metrics, the bigger the opening for a next generation of networks that are built from the ground up to accommodate advertising," Williamson said in the report.
The report said MySpace will lead the market and account for 60 percent of U.S. online social network ad spending in 2007, earning $525 million compared to $180 million in 2006.
The eMarketer report also contents that international expansion will play a key role in that growth.
Emarketer is not alone in its rosy view of social networking's money-making prospects. In September, RBC Capital markets analyst Jordan Rohan said MySpace might be worth $15 billion in three years.
It's numbers like those that helped spur Google to sign a $900 million deal with Fox Interactive to provide search and sell advertising for MySpace late last summer.
Marketers were reluctant to display their products over the new- fangled media and everyone kept waiting for the sites to fail.
They're still waiting, eMarkerter senior analyst Debra Williamson wrote in a report released today.
According to the report, advertising on social networks has become the top priority for online marketers.
The research firm is predicting that 2007 ad spending on US social networking sites will jump to $865 million from $350 million in 2006 a close to three-fold jump. By 2010, the report estimates, spending will reach $2.15 billion.
But Williamson said the growth could slide before then if social networks do not develop adequate measures of return on investment for their advertisers.
"The longer existing social networks take to develop adequate ROI metrics, the bigger the opening for a next generation of networks that are built from the ground up to accommodate advertising," Williamson said in the report.
The report said MySpace will lead the market and account for 60 percent of U.S. online social network ad spending in 2007, earning $525 million compared to $180 million in 2006.
The eMarketer report also contents that international expansion will play a key role in that growth.
Emarketer is not alone in its rosy view of social networking's money-making prospects. In September, RBC Capital markets analyst Jordan Rohan said MySpace might be worth $15 billion in three years.
It's numbers like those that helped spur Google to sign a $900 million deal with Fox Interactive to provide search and sell advertising for MySpace late last summer.
Technical Analysis: Stocks Stall Out
With the Nasdaq underperforming and the market turning choppy here, stocks may be set up to sell the news on the Fed meeting tomorrow, which would certainly be surprising, since there's little doubt about the outcome: no change in rates and the Fed remains on guard against inflation. The market appears to be a little disappointed that there's no rate cut coming in the near future, which may be the reason for the choppiness here. The Nasdaq (first chart below) is stuck in a very narrow range here: about 2452 to the upside, and 2430 to the downside. A break of either level should be worth a good move. The S&P (second chart) faces major resistance at 1421, and support is 1412, 1403-1404, 1400 and 1396. The Dow (third chart) remains stuck at 12,355-12,361 resistance, and support is 12,270, 12,240 and 12,200. Bond yields (fourth chart) are trying to recover from Friday's damage; tough talk on inflation could be good for bonds tomorrow.
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