MONEY Investing

How Harvard and Yale’s ‘Smart’ Money Missed the Bull Market

Some influential investors have been on the sidelines for much of this surprising bull market.

The next time you want to give up on stocks for the long run consider this: Some of the world’s biggest investors did just that and have all but missed this bull market, proving again that the smart money isn’t always so smart and that trying to time the stock market is a fool’s game.

When the things looked bleakest in March 2009, the stock market began a torrid run that has carried into this year. That’s the way the market works. Gains come when you least expect them. You have to be there through thick and thin to consistently reap the benefits. But even big investors (or should I say especially big investors?) get scared and run.

So while the typical large stock has nearly tripled from the bottom, managers of the massive endowments at Harvard, Yale, and Stanford along with legions of corporate pension managers at places like GM and Citigroup were not there to collect. They were too busy sitting in bonds and other “safe” securities, which have woefully lagged the S&P 500’s five-year gain of 187%.

The Harvard endowment, the world’s largest with assets of $33 billion, missed the mark by the widest margin of the big universities. The stock market saw its steepest climb the past three years, a period when Harvard’s fund posted an average annual total return of 10.5%—well behind the 18.5% for the S&P 500. Yale’s $21 billion endowment returned 12.8%; Stanford’s $22 billion fund returned 11.5%. Harvard Management’s CEO recently said she would step down.

How did this happen? Well, the average college endowment has just 16% of its investment portfolio in U.S. stocks—half the exposure they had a decade ago. In the years following the Internet bust and then the financial crisis, managers steadily shifted assets to alternative investments like hedge funds, venture capital investments, and private equity. Corporate pension managers have done much the same, cutting their exposure to stocks, on average, by about a third.

Alternative investments have performed fairly well over the past decade, even outperforming the S&P 500 over that long period including the devastating collapse of 2008-2009. But there is no denying that the smart money was playing it too safe when the economy started showing signs of a rebound. Pension managers missed out on the deep value that had been created in the market.

The lesson is clear enough for individuals, who have limited low-cost access to things like private equity and venture capital anyway. Staying the course over the long pull is the best way to reach your financial dreams. Just three years after one of the worst market slides in history the average 401(k) balance had been totally restored, in part owing to the market’s recovery.

And you can give pension managers an assist. Their reluctance to bet on stocks near the bottom left prices depressed longer and allowed individuals putting a few hundred dollars into their 401(k) every month more time to accumulate stocks at the lower prices. That’s not great for those counting on a pension that, like so many, remains underfunded. It’s also not great for teacher salaries and student scholarships at major universities where endowments may fund a quarter of operating expenses. But don’t worry about all that. Just stick to your investing regimen, don’t panic, and know that you are the smart money more often than not.

TIME Innovation

Ford President Says Aluminum F-150 Is All Engines Go

Ford

Ford says the truck will ship on time this year, despite analyst concerns that manufacturing plant retooling will impact availability.

Investment firm Morgan Stanley is publicly fretting the truck might be delayed, but Ford says its new lightweight aluminum Ford F-150 pickup is on track and we’ll see it later this year.

“Everything is on schedule and everything is going as planned,” Ford Americas President Joe Hinrichs told reporters, speaking at Ford’s headquarters in Dearborn, Michigan (via Automotive News), adding that he was “very confident in this vehicle.” Morgan Stanley’s analyst Ravi Shanker had said earlier that Ford’s planned factory retooling, which it has to perform in order to produce the new pickup, would result in “slow changeover, with tight supply.”

Ford has noted the planned retooling would temporarily deplete its production by over 90,000 F-Series pickups, reducing company sales and profits. Furthermore, margins are expected to be lower on the new aluminum-bodied F-150. But Ford views all of that as necessary back-stepping to be first to market with a truck that uses a combination of “military-grade aluminum and high-strength steel,” and that’ll weigh roughly 700 pounds less than the version it’s replacing.

Note that Shanker doesn’t say the launch itself is in danger of being delayed, only that supply is going to be very tight in 2014 given manufacturing constraints. If supply is at a trickle, that could mean higher demand-driven dealer pricing, of course, culminating in a scenario where the truck’s debut looks more like a paper launch, and buyers wind up having to wait to lay hands on one until supply catches up.

TIME Retail

Whole Foods Must Pay $800,000 for Overcharging Customers

A customer carries shopping bags outside of a Whole Foods in El Segundo, Calif., Nov. 5, 2013.
A customer carries shopping bags outside of a Whole Foods in El Segundo, Calif., Nov. 5, 2013. Bloomberg/Getty Images

The grocery chain was finagling prices across its California locations, according to the Los Angeles Attorney's office

A year-long investigation into Whole Foods Markets for overcharging customers in California has uncovered widespread pricing violations, officials said Tuesday, and will result in an $800,000 settlement for the grocery chain.

Inspectors found that Whole Foods was charging more than the advertised price for a variety of food items, according to the Los Angeles City Attorney Mike Feuer.

Locations often employed tactics like adding the weight of containers when charging for food at the salad bar and hot bar, or including less than the weight advertised for items sold by the pound.

“We’re taking action to assure consumers get what they pay for,” Feuer said in a statement. “No consumer should ever be overcharged by their local market.”

Whole Foods agreed to appoint two officials to oversee pricing accuracy throughout California and assign one employee in each store to oversee how much it is charging customers.

The chain’s $800,000 penalty will be divided out into $630,000 in civil penalties, $100,000 to a statewide consumer protection trust fund, and $68,394 in investigative costs, Feuer said.

Whole Foods said in a statement that its pricing was accurate 98 percent of the time, Reuters reports. “We will continue to refine and implement additional processes to minimize such errors going forward,” it said.

 

TIME Travel

British Airways Sued for Sending Traveler to Grenada Instead of Granada

From left: Grenada; Granada Getty Images

This is why you book online

A Maryland man is suing British Airways after the airline flew him to Grenada rather than his intended destination, Granada.

While the spelling difference may be subtle, the geography isn’t. Grenada is a country located in the Caribbean Sea that recalls Ronald Reagan; Granada is an Andalusian city in Spain that recalls Ernest Hemingway.

Edward Gamson, a Maryland dentist, first noticed a problem when the electronic flight monitor showed his flight from London to Spain heading west over the Atlantic toward the Americas. He asked a flight attendant, “Why are we headed west to go to Spain?” he said.

“His response was: ‘Spain?’ We’re going to West Indies,’” Gamson said.

Gamson had been in Portugal for a conference and while in Europe intended to take a quick trip to Granada to take in the city’s rich heritage, including sites like the Alhambra, he said. Gamson added that he told a British Airways agent over the phone that he wanted to go to Granada, Spain.

The airline offered him and his partner $376 each and 50,000 frequent flyer miles in compensation for the mistake, but Gamson had used 375,000 miles to book the first-class tickets and figures that, all told, including prebooked hotels, train tickets and tours, the aborted trip cost him more like $34,000. He’s suing the airline and representing himself, NBC News reported.

British Airways says the company cannot comment at this time, as the matter is in “active litigation.”

In an opinion rejecting British Airways petition to move the matter to federal court, a U.S. judge noted that the situation harkens back to Mark Twain’s comment that the “difference between the right word and the almost right word is the difference between lightning and a lightning bug.”

[NBC News]

TIME Fast Food

KFC Suggests Story of Scarred Girl Booted From Store Was a Hoax

But KFC will still donate $30,000 towards the girl's medical bills

Kentucky Fried Chicken suggested Tuesday that a family claiming their little girl was asked to leave a restaurant because the scars on her face from a pit bull attack were disturbing other customers actually made the story up.

The bizarre story concerns three-year-old Victoria Wilcher, who was reportedly mauled by pitbulls belonging to her family, leaving heavy scarring on her face. Her family said last month that she was asked to leave a Jackson, Miss., KFC restaurant because her appearance disturbed other customers. That claim, initially floated on a “Victoria’s Victories” Facebook page that appeared to have been taken offline Tuesday, ignited outrage on social media, prompting an apology from KFC on June 15 and a promise to spend $30,000 on Wilcher’s medical bills.

But KFC said Tuesday that it no longer believes the incident actually took place.

“Like the rest of America, the KFC family has been moved by the story of Victoria’s injuries and recovery,” KFC spokesman Rick Maynard said. “After the alleged incident was reported to us, two investigations took place, including one by an independent investigator. Neither revealed any evidence that the incident occurred and we consider the investigation closed. We are honoring our commitment to make a $30,000 donation to assist with Victoria’s medical bills. We hope everyone keeps Victoria in their thoughts and prayers. She will certainly be in ours.”

A lawyer for Victoria’s grandmother, who made the initial claim, said Tuesday that the family stands by its story. “Victoria’s family did not anticipate that the response to ‘Victoria’s Victories’ would be so widespread and generous,” lawyer Bill Kellum said in a statement. “A family member simply posted a comment on Victoria’s page regarding her experience at KFC that subsequently went viral. Victoria’s family certainly did not expect the publicity resulting from the post. However, Victoria and her family are very appreciative of the outpouring of sympathy, prayers, donations and love from individuals and entities all over the world.”

“I promise it’s not a hoax, I never thought any of this would blow up the way it has,” multiple news reports cited Victoria’s aunt as writing on the GoFundMe page where her family was raising money. Those comments preceded KFC’s statement and the page was also offline late Tuesday.

When reports that Victoria was asked to leave the restaurant ignited a firestorm of criticism on social media, KFC moved quickly to tamp the outrage.

“As soon as we were notified of this report on Friday, we immediately began an investigation, as this kind of hurtful and disrespectful action would not be tolerated by KFC,” the company said at the time. “Regardless of the outcome of our investigation, we have apologized to Victoria’s family and are committed to assisting them. The company is making a $30,000 donation to assist with her medical bills. The entire KFC family is behind Victoria.”

The Mississippi-based Laurel Leader-Call newspaper, citing unnamed sources familiar with the investigation, first reported the possibility of a hoax on Tuesday. The family has raised more than $135,000 in the wake of the initial claim, according to numerous reports.

“Please do not believe untrue media,” Victoria’s aunt Rials Bates wrote on the GoFundMe page that was no longer online Tuesday, ABC reports. “I have personally watched this family go without to provide for Victoria. They have not and would not do anything to hurt Victoria in any way.”

-Additional reporting by Joan E Greve

TIME

This Is Where America Loves to Get Gas

Sharp Uptick In Gas Prices Forcing Some Gas Stations To Temporarily Close
Customers gas up their car at Costco Wholesale Corp. on October 5, 2012 in Burbank, California. Kevork Djansezian—Getty Images

Drivers are turning to grocery stores and retailers to fill their gas tanks

Your favorite gas station is also likely your grocery store, according to a new study.

Consumers prefer filling their gas tanks at grocery stores and wholesale clubs, not traditional gas stations, Market Force Information found in a study. Grocery and wholesale retailers have figured out that competitive pricing can lure customers away from traditional gas pumps.

“The rise of grocery and wholesale clubs is formidable in the petro-convenience sector, with the ability to use loyalty cards and point systems driving consumers to fuel where they perceive they get better value,” said Market Force CMO Janet Eden-Harris in a statement.

Researchers asked consumers how likely they were to return to the gas station they most recently used, and found that Kroger ranked first in satisfaction with a score of 79%. Costco and QuikTrip tied for second with 78% and Sam’s Club ranked third with 76%.

While location is the biggest factor in attracting customers to the pump, over a third of drivers (37%) said they were willing to drive past a gas station to go to their favorite brand. That said, Shell is the most frequented gas station in the country, likely because the company’s gas stations are so ubiquitous.

Market Force surveyed over 5,300 respondents across the United States and Canada for the study.

TIME

Police To Question Murdoch Over Phone Hacking After Trial

The Television Academy's 23rd Hall Of Fame Induction Gala
Rupert Murdoch attends the Television Academy's 23rd Hall of Fame induction gala at Regent Beverly Wilshire Hotel on March 11, 2014 in Beverly Hills, Calif. Jason LaVeris—FilmMagic/Getty Images

After a court found a top editor at a Murdoch-owned tabloid guilty

Rupert Murdoch will reportedly face questions from Scotland Yard as investigators extend their probe into News of the World, a Murdoch-owned British tabloid embroiled in an expansive phone-hacking scandal.

The Guardian reports that investigators have officially requested an interview with Murdoch, according to sources close to the investigation. Murdoch will reportedly undergo the interview “under caution,” a legal warning that signals to the interviewee he is a suspect in the investigation and his answers can be used as evidence in court.

The news comes just after a court found former News of the World editor Andy Coulson guilty of conspiring to hack phones. Handwritten documents suggested that Coulson had attempted to target upwards of 5,500 people. The conviction of a senior editor heightens the risk that the Murdoch’s company itself, News UK, and its senior managers could be held liable for the hacking scandal under UK law.

[The Guardian]

 

 

TIME World Cup

It’s Official: Soccer is Bigger than Basketball, Baseball

Fans gather in Grant Park to watch the U.S. play Portugal in a Group G World Cup soccer match on June 22, 2014 in Chicago. Fans were turned away from the free event after a 10,000-person capacity was reached.
Fans gather in Grant Park to watch the U.S. play Portugal in a Group G World Cup soccer match on June 22, 2014 in Chicago. Fans were turned away from the free event after a 10,000-person capacity was reached. Scott Olson—Getty Images

But it doesn't hold a candle to football ratings

World Cup viewership continued to break records on Sunday, drawing millions more viewers than the most recent big match-ups in basketball and baseball.

A total of 24.7 million viewers tuned in as the U.S. squared off against Portugal on Sunday, according to figures released by Nielsen company. The ratings surpassed last week’s World Cup match between the U.S. and Ghana, indicating that interest in the tournament is steadily rising — at least, for as long as the U.S. team is involved.

Sunday’s game also surpassed ratings for the NBA finals, which drew 18 million viewers, and trounced the ratings for the 2013 World Series, which drew 14.9 million viewers. So is America’s favorite past time officially soccer, or, dare we say it, “futbol?”

Not by a long shot. The 2014 Super Bowl drew an average 111.5 million viewers, more than quadruple the audience of the most watched soccer match of all time. Football it is.

TIME Companies

Amazon and Warner Bros. May Have Buried the Hatchet

Movie Stills Database/Warner Bros.

The dispute between Amazon and Warner Bros. seems to be coming to a close. The Wall Street Journal reports that the option to pre-order upcoming Warner Bros. DVDs and Blu-Rays like Transcendence and 300: Rise of an Empire has been restored on the online retailer’s website after disappearing last month. Amazon had reportedly been trying to negotiate more favorable pricing terms for Warner Bros. films.

The conflict echoed the much more public spat between Amazon and book publisher Hachette, which has been protracted over several months as the two sides negotiate pricing terms. In addition to removing the option to pre-order certain Hachette titles, Amazon has also slowed shipping of the publisher’s books to customers and recommended people buy books from competing publishers instead.

Amazon says it is using these tactics on behalf of its own customers. “Negotiating for acceptable terms is an essential business practice that is critical to keeping service and value high for customers in the medium and long term,” the company said in its only public statement on the dispute back in May.

Unlike the Warner Bros. conflict, Amazon said it does not expect its issues with Hachette to be resolved in the near future.

TIME Advertising

Like My Facebook Page, Buy My Product? Well, No

A view of Facebook's "Like" button May 1
Brendan Smialowski—AFP/Getty Images

Social media doesn't drive sales, research says

People go on Facebook and Twitter mostly to learn about companies or products. True or false?

Answer: Are you kidding me? I don’t do it. You don’t do it. Nobody you know does it. We use social media to brag about our accomplishments, post vacation photos, see what our friends and family (and maybe a few celebrities) are doing and talking about.

This seems almost too obvious to mention—but companies are desperate to reach consumers, and with hundreds off millions of them visiting social media sites every day, marketers feel like they simply have to be there too, so they are—to the tune of more than $5 billion last year in the U.S. alone, according to social media consultants BIA/Kelsey. By 2018, that figure could rise to $15 billion.

Evidently, they’re wasting their money. A new report from the Gallup Organization titled State of the American Consumer has now quantified the obvious: 62% of consumers say that social media have “no influence at all” on purchasing decisions, while only 5% say the sites have “a great deal of influence.”

That’s not to say that social media isn’t a great place to get advice about stuff to buy—it’s just that we tend to look or advice from people we know and trust. And those people aren’t usually named “L’Oreal” or “Coca-Cola.”

Like much of the research that gets published, the results of this survey seem pretty obvious. Still, a study like might be useful for advertisers and marketers who aren’t always at the forefront of understanding how society is changing (think of Don Draper confronting the ’60s on Mad Men). What they should do, writes Gallup’s Ed O’Boyle in a blog post for the Harvard Business Review, is to come across as more authentic, be more interactive, and make their content more compelling. “Gallup research has consistently shown,” he writes, “that customers base purchasing decisions on their emotional connections with a brand. Social media are great for making those connections—but only when a brand shifts its focus from communication to conversation.”

Good advice. Now let’s see if anyone is paying attention.

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