The Sporting Life

Many of us have fantasized about what it might be like to be a star athlete, and sign one of those big free-agent contracts bringing in tens of millions of dollars, especially while we're still young enough to get full enjoyment out of the money. Well, what it turns out to be like for a lot of those players is that they go broke. Last year, Sports Illustrated did some research into what happened to some of these megabucks athletes after their playing careers ended, and the results were not pretty:

* Within two years of their retirement, 78 percent of all former NFL players are bankrupt or under some kind of financial stress.

* Within five years after the end of their career, an estimated 60 percent of all NBA players are bankrupt.

* Former Nets star Kenny Anderson spent all of the $63 million he made in his basketball career and declared bankruptcy just months after his retirement.

And the list goes on and on. Clearly, it takes more than millions of dollars to be set for life. It takes a plan.

Good Retirement News

We have some good news on the retirement-planning front: According to the Employee Benefits Research Institute, 29 percent of upper-middle-class Americans will run out of money 20 years into their retirement, and even 14 percent of wealthy people will be in the same boat. Among age groups, 47 percent of older baby boomers (those now aged 56 to 62) will be in trouble 20 years after retirement, 44 percent of younger baby boomers, and 45 percent of Gen Xers.

Why is that good news? Because even though the numbers are a little scary, they're at least moving in the right direction. In 2003, the same survey showed that 55 percent of older baby boomers and 59 percent of younger baby boomers were similarly unprepared for retirement.

The EBRI credits the improvement to the growth of 401(k), which have enforced a certain amount of compulsory retirement savings on people. Another thing 401(k)s have done is force people to learn about retirement savings and take more control of their future. That's always a good thing.

Consumer Confidence Woes

Consumer confidence dipped again in July, landing at its lowest point since February. Two key factors took the hardest hit: The index of consumer attitudes fell even lower than analysts had forecast, and the number of people reporting that jobs are hard to get rose sharply. One in six Americans now expect their income to be lower six months from now.

These kinds of consumer surveys aren’t just a temperature-taking; they have a solid effect on the economy we can expect in the months ahead. Consumers who have a hard time finding work or who expect their incomes to drop aren’t going to be spending a lot of money, and consumer spending constitutes 70 percent of our economy.

Friday of this week will see the release of an even more important figure: the first estimate of GDP for the second quarter. The consensus expectation is that it will be 2.5 percent, down slightly from 2.7 percent in the first quarter. Among other reasons, this number will be important for its effect on consumer attitudes. A stronger-than-expected number can help shore up confidence; a lower one will probably bring it down even further.

Hoping for Gridlock?

Political pundits have forecast that the Republicans stand a pretty good shot at taking back the House of Representatives in this November's elections. No matter how you feel about this from a political standpoint, it could be good news for your portfolio. When a Democrat has controlled the White House and the Republicans have controlled the House, the S&P 500 has gained an average of 15 points per year, according to Bloomberg News. That's the highest rate of any combination of party control of the various branches of government.

The last time we had a Democrat in the White House and the GOP in charge of the House, it was when Bill Clinton and Newt Gingrich were facing off after the 1994 midterm elections. In 1995, the S&P 500 gained 34 percent, its largest increase in 37 years.

Of course, the high-tech stock boom probably had more to do with that then any government in-fighting did. But many investors see government gridlock as a real plus for the markets. Billionaire investor Kenneth Fisher told Bloomberg, "What the markets want to see is no change: less legislation that engages in changes in taxes, spending, regulation or property rights."

The Dow Surge

The Dow Jones average was up by more than 100 points on Friday, bringing the index all the way back to even on the year. As we've said many times, the media's reasoning as to what moved the market on any particular day is usually little more than guesswork, but it's clear what happened on Friday: earnings. Look at some of the reports we just had:

* Caterpillar's second-quarter profits came in at $1.09 a share, easily beating the analysts' estimates of 84 cents a share. Its stock gained nearly 2 percent on Friday and is up 19 percent on the year.

* 3M beat analysts' estimates by posting a second-quarter profit of $5.80 a share; its second-quarter net income was up 43 percent over last year.

* UPS posted second-quarter profits that were up a whopping 90 percent. Its per-share profits of 84 cents beat the analysts' estimate of 77 cents.

So that's strong performance from three companies that are not just Dow stocks, but macroeconomic bellwethers. Most of their business derives from the success of other businesses. If these three companies are doing well, that's a sign of strength throughout the economy.

Credit Card Reform: A Checkup

As we wait to see what the fallout from the financial-reform legislation will be, there is some good news resulting from new credit card regulations that took effect last year. According to the Pew Charitable Trusts, hair-trigger interest rate increases for minor violations have been eliminated from 100 percent of credit-card issuers, and the fear that the new regs would lead issuers to impose annual fees has proved unfounded. In fact, the percentage of cards charging an annual fee has dropped slightly since last June, from 15 percent to 14 percent.

The bad news: Interest rates continued to rise, as did the fees for cash advances and balance transfers. More than 90 percent of bank cards still impose penalty fees, and what's most troubling is that many issuers have stopped informing their customers what those fees are.

There's one provision yet to take hold - next month, the rule kicks in requiring all credit card issuers to make "any penalty fee or charge" to be "reasonabe and proportional." We'll have to wait and see what kind of effect that has.

New Mutual Fund Rules?

On the same day the president signed the landmark financial-reform legislation, the SEC also announced some proposed rules for mutual funds that might benefit the individual investor. We're all familiar with 12b-1 fees, the charges added on to some mutual funds for marketing and distribution costs. As it stands, funds must disclose what they're charging in the way of 12b-1 fees, but the new rules would force them to break down those charges - how much is spent on advertising and broker commissions as opposed to distribution costs, for example.

Now, most investors aren't going to pore through a prospectus looking for how every dollar in a fund is spent. But more disclosure is always better, and the threat of this kind of thing becoming common knowledge would probably reduce some of the more exorbitant marketing fees being charged.

The rules also call for brokers to change the way they're compensated for selling mutual funds. Now, fund companies pay brokerage firms a percentage of their assets for selling their funds - which of course come out of the investors' assets. If the new rules are implemented, brokerage firms would start directly charging investors sales fees whenever funds are sold. As with the 12b-1 rule, the result would be more transparency in how investors are charged fees. That's always a good thing.