Millennial-driven housing boom seen on the horizon

NEW YORK (CNNMoney)

According to a report released Thursday by Harvard's Joint Center for Housing Studies, as the economy shows signs of improvement, by 2025 Millennials could form 24 million new households and spur a huge comeback in the U.S. real estate market.

The report also found that, traditionally, the number of young people who buy homes increases as their incomes grow. Recently, hiring of Millennials has improved as the economy heals. If the trend continues, parents of Milennials could soon become empty-nesters.

Weak job prospects, tight lending standards and student debt, have left the 86 million members of the Millennial generation -- defined by the study as those born between 1985 and 2004 -- with few options for achieving independence. Nonetheless, like previous generations, Millennials crave it and this pent-up demand will give a big boost to the housing sector, the report's authors said.

"We really have not seen any cultural shift yet in anyone's desire to be independent," said JCHS Research Director Christopher Herbert in a panel discussion that followed the release. "When the job market recovers and their income recovers, they are going make their mark on this housing market."

Related story: Millennials 'overwhelmed' by debt

Nearly 22 million people in the U.S. age 18 to 31, lived in the home of a parent in 2012, according to Pew Research. The homeownership rate for those under age 35 was 36.2% in the first quarter of 2014, down from a historical high of 43.1% at the end of 2005, according to the Census.

Getting those rates back up will require the economy to keep improving, but if it does, those new households could mean a virtuous cycle. Booming demand for starter homes (as well as apartments) would stoke the housing sector, which accounts for about 18% of GDP, according to the National Association of Home Builders. It would also get a sluggish market moving by providing trade-up opportunities.

"If somebody wants to move up from a starter house to a larger house, they need someone to sell the starter house to," Mike Calhoun, the president of the Center for Responsible Lending, said on the panel.

Calhoun estimated U.S. building activity of about 1 million building permits issued per year could easily increase by two-thirds to meet demand without risking an unsustainable boom.

The report pointed out that some factors could restrain household formation. Despite economic news improving, Millennials face only slow economic gains. Unemployment is falling, but wage growth has been persistently stagnant. Plus, Millennials must confront increasing student debt burdens and tight lending standards.

Instead of a mass exodus from their parents' homes, the authors said Millenials' might just trickle out, mirroring what Herbert called the economy's "steady, slow recovery."

The report also pointed out that borrowers of color, who are expected to see demographic growth that could help drive household formation and building, face mortgage denials at far higher rates than white counterparts, which might well imperil a housing surge.

First Published: June 26, 2014: 6:32 PM ET

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Walmart cuts iPhone prices

Walmart will cut the price of the iPhone on Friday at 9 a.m.

NEW YORK (CNNMoney)

Walmart said it is cutting the price for both the iPhone 5s and 5c beginning 9 a.m. Friday.

With a two-year contract, a 16-gigabyte iPhone 5S will cost $99, coming down from $149. The 16-gigabyte iPhone 5c will be $29, down from $49.

The deal is only for purchases made at Walmart stores, not online.

The move may fuel speculation that Apple (AAPL, Tech30) is planning a new iPhone release before its usual fall launch. Retailers often slash prices ahead of new releases to clear out inventory.

Related: Excited for iPhone 6? Check out this stock

But a Walmart (WMT)spokeswoman said the retailer is simply sticking with its mantra, aiming to offer great prices to its customers.

Walmart rolled back the price of these smartphones in March, but only for a limited time. Now, the price cut is permanent.

First Published: June 26, 2014: 7:43 PM ET

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How much will GM victims get? We'll find out Monday

Feinberg's plan is expected to disclose details about who is eligible for compensation and how much money they could receive.

NEW YORK (CNNMoney)

The compensation plan will be unveiled by Kenneth Feinberg, a consultant who also determined payouts after the 9/11 terrorist attacks, the BP oil spill, and the Boston Marathon bombing.

Some employees at GM first learned of a problem with the ignition switch in 2004, but a recall wasn't announced until February of this year.

The faulty switch allows the car key to sometimes fall into the off position while someone is driving, shutting off the power and disabling power steering and airbags.

Related: Doing the right thing for GM victims

The compensation is being offered as an alternative to victims or their families suing GM, and is expected to be available for accidents both before and after the 2009 bankruptcy. In court, GM may not be liable for accidents that occurred before the bankruptcy.

The total amount GM is setting aside for payouts could be unveiled Monday.

In the case of BP, the energy company set aside $20 billion. Congress allocated $7 billion for 9/11 victims. The fund for those killed and injured by bombs at the Boston Marathon totaled $61 million, which came solely from donations.

We could also learn Monday about who will be eligible for compensation and how much money they might receive. One issue is whether someone who died while sitting in the backseat of a car is considered a victim. GM does not include someone in that case on its official list of 13 because the death is not tied to an unactivated airbag.

Feinberg could decide that the families of those who died all get the same amount of money.

After the Boston Marathon bombing, they each got $2.2 million, while $208,000 was given to families of those who died at Virginia Tech.

The amount given to families who died on 9/11 depended on the victim's earning potential. So a stock broker's family would have received more than the family of a restaurant worker. In his book, "Who Gets What," Feinberg said this was a "critical flaw" of the 9/11 program that sometimes invoked anger among those who needed help.

Feinberg could also detail how much money goes to those who survived the crashes, but were severely injured. After the Virginia Tech massacre and the Boston Marathon bombings, these awards have been based on the severity of the injury and the amount of time spent in the hospital.

First Published: June 26, 2014: 4:22 PM ET

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GM halts sales of some Chevrolet Cruzes

GM has asked dealers to stop selling some 2013-2014 Chevy Cruzes due to an airbag issue.

NEW YORK (CNNMoney)

There may be a problem with the airbag in some of the vehicles, said GM spokesman Jim Cain. The automaker is currently working with the supplier to determine which specific vehicles may have a defective part. It expects to resume sales of those cars that are not affected by the end of this week.

The Cruze is GM's best-selling car model in the United States, selling 248,000 last year.

Related: Congress skeptical about GM changes

The stop-sale comes as the automaker is in damage-control mode for delaying the recall of 2.6 million vehicles for an ignition switch defect that's been tied to at least 13 deaths. Some GM employees knew the part was causing trouble more than a decade before the recall was issued in February.

Now, GM (GM) is facing dozens of lawsuits and a number of investigations concerning how they handled the recall.

Since February, the automaker has kept adding to its recall list -- some for issues unrelated to the ignition switch defect. So far this year, it has recalled more than 20 million vehicles worldwide.

First Published: June 25, 2014: 6:30 PM ET

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GoPro prices IPO at high end

NEW YORK (CNNMoney)

That's because GoPro is officially going public this week. The consumer electronics company's IPO raise is set to raise roughly $425 million. On Wednesday evening, it priced shares at $24 apiece, the high end of the expected range of $21 to $24.

The IPO sets the stage for GoPro to kick off its life as a public company on Thursday on the Nasdaq under the ticker symbol "GPRO."

David Menlow, president of IPOfinancial.com, said GoPro is clearly a "hot brand" that is "on fire" thanks to the popularity of its durable product.

A successful viral marketing campaign has amplified GoPro's visibility and cemented its extreme brand credentials.

One video shot on the company's HERO3 camera features incredible images from around the world and has generated 32 million views on YouTube over the past year. In 2012, Felix Baumgartner wore a GoPro camera to give the world a first-person view of his space jump from 24 miles above the earth's surface.

Related: China's Alibaba files for landmark IPO

GoPro's HERO cameras represented a 45% share of the U.S. camcorder market by dollars in 2013, up from 11% in December 2011, according to statistics from The NPD Group cited in the company's IPO filing.

However, GoPro's growth appears to be slowing.

While the company's 2013 revenue quadrupled to $986 million, its first-quarter sales dipped slightly. Profits declined year-over-year to $11 million from $23 million in the first quarter.

The biggest risk facing GoPro is the threat a deep-pocketed rival will develop technology that tops its imaging and memory capabilities. Tech giants like Google (GOOG) are increasingly moving into the wearable gadget space with products that have built-in cameras.

Still, Menlow said: "First into a market usually gets the largest market share."

GoPro is hitting the public markets at an opportune time. Volatility is extremely low and investors continue to show a strong appetite for IPOs.

According to Ernst & Young, companies raised $117.7 billion in IPOs globally during the first half of 2014, up 60% from the same period in 2013. That's the best first-half performance since 2007.

Related: Where's the drama on Wall Street?

However, first-day "pops" among U.S. IPOs dropped in the second quarter to an average of 9.8% from 12.3% during the first quarter, Ernst & Young said.

Foxconn, the Chinese company that manufactures iPhones and iPads, invested $200 million in GoPro in late 2012. That deal gave Foxconn a 9% stake and valued the gadget company at $2.25 billion.

The lead underwriters on the GoPro IPO are JPMorgan Chase (JPM), Citigroup (C) and Barclays (BCS).

First Published: June 25, 2014: 7:23 PM ET

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NY Attorney General goes after Barclays

NEW YORK (CNNMoney)

The suit claims the British bank misled investors who traded in their off-exchange venues. The bank not only failed to warn clients about the high frequency trading firms operating in its pools, but it "actively sought to attract them," according to the charges.

Related: Flash boys face off about high frequency trading in raucous clip

"The facts alleged in our complaint show that Barclays demonstrated a disturbing disregard for its investors in a systematic pattern of fraud and deceit," Attorney General Eric Schneiderman said in a statement.

The New York Attorney General's office has been actively pursuing high-frequency trading. It subpoenaed six different companies in April to get information about their trading activities, and Schneiderman penned an op-ed decrying the practice.

Barclays said in a statement that it "has been cooperating with the New York Attorney General" and federal regulators and is doing its own internal investigation.

"We take these allegations very seriously," said spokesman Mark Lane. "The integrity of the markets is a top priority of Barclays."

Related: Here's some context about those subpoenas

The latest lawsuit alleges that Barclays told investors in its marketing materials that it would keep an eye out for high frequency traders. Instead, it allowed them to operate within its dark pools relatively unchecked. Additionally, Schneiderman's office said that Barclays lied to investors about not favoring its own venue when routing client orders.

Barclays had the second-highest volume of shares traded in dark pools in the week ending June 2, according to industry group FINRA.

Schneiderman's office is seeking damages to be paid to investors.

Dark pools got their name because orders routed through them aren't listed on public exchanges until the order is done, so the public is kept in the dark about the trades.

Institutional investors such as mutual funds, hedge funds and pensions like them because it's less likely that parts of their large orders will get picked off before they're fully executed. If a high frequency trading firm sees the order ahead of time, it could potentially jump in and buy a stock before the mutual fund, raising the costs to the mutual fund.

"Barclays' dark pool was full of predators -- there at Barclays' invitation," the statement said.

First Published: June 25, 2014: 6:01 PM ET

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Danger! American Apparel, Lululemon impale

NEW YORK (CNNMoney)

Just look at the controversy swirling around the founders of American Apparel (APP) and Lululemon (LULU).

Dov Charney, the ousted chairman of American Apparel, is known for walking around his factory in his underwear and talking openly about his sex life. The company's sales have plunged in recent years and its stock now trades for 70 cents, down 96% from its high of nearly $17.

Lululemon founder Dennis "Chip" Wilson imperiled his company's brand last year by making snide remarks about overweight customers. Wilson recently stepped down as chairman after Lululemon's share price plunged in half over the past year.

"Sadly in this day and age, some CEOs still think they can act like Ari Gold and get away with it," said Jeffrey Cohn, author of Why Are We Bad at Picking Good Leaders?, referring to the fictional "Entourage" character.

Related: American Apparel CEO hits back

American Apparel is known for its edgy advertising, but even Charney's behavior has become too steamy for that company's board.

Charney, who started American Apparel in 1998, was fired as chairman last week by the board, which is also moving to remove him as CEO.

An American Apparel director told CNNMoney the decision came after the board learned of "disturbing" information that suggested "misconduct" by Charney.

Allegations of misconduct are hardly new for Charney, who has faced countless lawsuits over the years that claimed everything from sexual harassment to assault, battery and even impersonation through the Internet.

While American Apparel rapidly expanded in the early 2000s by appealing to hipsters, the apparel maker struggled to keep the cool vibe. Charney took the company public in 2005 at $8 per share and Wall Street eventually bid it up to nearly $17. In recent years American Apparel has had to fight just to stave off bankruptcy.

Investors pay the price: Research into the costs of "managerial indiscretions" found that every time an incident involving Charney was disclosed to the public between 2008 and 2011, American Apparel's stock went down, suffering abnormal negative three-day return of -0.7% to -8.8%.

"He's one of the executives we have as a serial repeat offender," said Adam Yore, a professor at Northern Illinois University who co-wrote the research paper with Ralph Walkling at Drexel University and Brandon Cline at Mississippi State University.

Related: How Adidas plans to win the World Cup

Their research found that, on average, there is an immediate 3.8% loss in shareholder value following the disclosure of a CEO indiscretion as well as abnormal declines in the longer run. There also is a higher likelihood of shareholder lawsuits, even for things unrelated to the indiscretion.

The research found that indiscretion incidents are substantially more likely to occur at companies managed by families or founders.

Founders "may not make a distinction between their personal and professional lives," said Yore. "They grew the business themselves and in many cases they are the business."

Charney, who still controls a 27% stake, has signaled he's mounting an effort to keep control of American Apparel's C-Suite.

Related: Lululemon stock does the downward drop

Lululemon's volatile founder: The situation isn't nearly as dire at Lululemon, but the yoga apparel maker is also struggling to turn itself around and in the midst of an uncomfortable fight with founder Wilson. The company's Chief Financial Officer dubbed it akin to "our parents are fighting" on a recent call with investors.

The turning point came last year when Lululemon had to recall some of its yoga pants for being too sheer. That hurt the company's reputation and cost millions of dollars. Wilson exacerbated the situation by then seemingly placing the blame on overweight customers, saying: "Some women's bodies just don't actually work" for the pants.

Lululemon traded north of $82 last June before the controversy, but recently dipped below $37. Of course, even with the recent tumble Lululemon shares have surged over 560% over the past five years, creating enormous value for shareholders.

Can Wilson find a dance partner? After stepping down as chairman last month, Wilson has reportedly hired Goldman Sachs to help him weigh his options, including possibly teaming up with a private equity firm to acquire the rest of Lululemon.

"Based on his comments from last November, which we contend damaged the LULU brand, we believe potential partners may be warded off by Mr. Wilson's volatility," Sterne Agee analysts Sam Poser and Ben Shamsian wrote in a note this week.

Cowen & Co. analyst Faye Landes is less sold on the negative impact to Lululemon's brand, pointing to strong Black Friday sales after Wilson's comments.

"There is still a lot of cachet around the brand," she said.

Ironically, Wilson's chances of finding a dance partner to acquire Lululemon with may have been hurt by the American Apparel drama.

"Funders tend to be conservative individuals working at conservative firms, and, especially after the recent experience of some investment firms with retail founders (cf. American Apparel), we think that funders are likely to shy away from voluble founders," Landes wrote in a note to clients this week.

First Published: June 24, 2014: 3:43 PM ET

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In just six months, automakers pass recall record

NEW YORK (CNNMoney)

The total number of recalled vehicles crossed the previous record when several automakers announced recalls of 2.8 million cars for faulty airbags.

That brought the 2014 running total above 32 million.

The previous record of 30.8 million cars was set in 2004, according to federal records.

Related: Five most notorious auto recalls

With more than 17.7 million U.S. recalls, General Motors (GM) is responsible for around half of this year's total. It has recalled nearly 20 million cars worldwide for a variety of issues including an ignition switch defect it did not disclose for a decade.

First Published: June 24, 2014: 3:06 PM ET

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Madoff's accountant pleads guilty

Paul Konigsberg, Bernie Madoff's former accountant, faces up to 30 years in prison.

NEW YORK (CNNMoney)

Paul Konigsberg, a tax lawyer and accountant, provided services to Madoff and a number of Madoff's clients. Now, he faces up to 30 years in prison.

Beginning at least in the early 1990s, Madoff steered several of his investors to Konigsberg, including long-time clients in whose accounts Madoff "executed the most glaringly fraudulent transactions," said a press release issued by the Manhattan U.S. Attorney Preet Bharara.

Related: 5 ex-Madoff employees found guilty

Konigsberg, 78, has agreed to cooperate with the government in its ongoing investigation of the fraud that occurred at Madoff Securities. The firm collapsed after Madoff was arrested in 2008 and pleaded guilty for running a Ponzi scheme that netted billions of dollars from thousands of victims.

Five of Madoff's former employees were found guilty in March of participating in the Ponzi scheme. Dan Bonventre, Annette Bongiorno, Joann Crupi, Jerome O'Hara and George Perez were hit with a litany of federal criminal charges, including conspiracy to commit securities fraud, after a six-month-long trial.

Konigsberg will also pay at least $4.4 million, which will be used to compensate victims of the fraud, and could be hit with additional fines. He will be sentenced on Sept. 19.

Konigsberg is the second accountant to plead guilty in connection to the Madoff case. David Friehling, another long-time accountant of Madoff, pleaded guilty in 2009.

First Published: June 24, 2014: 5:41 PM ET

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Airbag problems result in millions of recalls

Honda, Nissan, Mazda and Toyota are recalling millions of cars because of faulty inflators for Takata air bags.

NEW YORK (CNNMoney)

The National Highway Traffic Safety Administration says Honda (HMC), Nissan (NSANF), Toyota (TM), Mazda (MZDAF), Chrysler, Ford (F) and BMW are recalling the vehicles equipped with the airbags made by the Japanese company Takata. The recall follows a NHTSA investigation into six reports of airbag inflator ruptures, all of which occurred in Florida and Puerto Rico.

In a statement last week, the company said it believes high levels of humidity are factors in the inflator problem.

Honda said it is recalling more than 2 million vehicles in the United States. There's a nationwide recall of several models, including Civic, Accord and Odyssey, from 2002 and 2003, as well as recalls limited to certain warm-weather states, as well as Puerto Rico and the Virgin Islands.

Honda said it knows of one report of injury related to the problem.

Related: Toyota adds 650,000 cars to airbag recall

Nissan (NSANF) said it is recalling 755,000 vehicles, including 228,000 in North America.

Earlier this month, Toyota (TM) also expanded a recall because of the Takata airbags to nearly 2.8 million vehicles.

Chrysler spokesman Nick Cappa said the investigation is ongoing so his company doesn't know how many cars it's going to recall, but it would probably involve the 2006 Dodge Charger.

First Published: June 23, 2014: 1:59 PM ET

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