How 3 Jewelry Companies Are Thriving During the Downturn (The Motley Fool)

Los Angeles has long been known as a place where fashion designers and stylists are born and bred, but the area outside the City of Angels has recently become a hotbed for several successful jewelry companies.

Yes, jewelry companies. Yes, in this economy.

Jewelry businesses that primarily operate online have picked up speed during the recession, thanks to low costs for overhead, with no need for storefronts or extra employees. "What's great about online is it's global ... It's an instant global platform for your product," said Sharie Ellis of Love is a Devil, a year-old jewelry company based in the San Diego area.

Skipping the traditional bricks-and-mortar digs in favor of a virtual showroom isn't the only strategy that has helped some firms thrive. Here are the frugal strategies three companies have used to amp up exposure and juice sales during this tarnished economy.

Skipping the storefront and selling door-to-door
When best friends Evelyn Bernal and Katiria Delgado decided to launch a jewelry biz, Belina, in August 2010, their business plan did not include wasting precious start-up funds on pricey retail leases. Each partner works in her home office south of Los Angeles in Torrance, and Irvine, Calif.

Instead of selling their wares behind storefronts, they get exposure by staging trunk shows in the living rooms of potential clients.

Belina brings its baubles to house parties to complement a night of bachelorette debauchery or a girls- night-in soiree. With white wine flowing alongside enviable necklaces and rings, the women start spending. Belina has been able to consistently book house parties every weekend.

The perk of selling pieces face-to-face versus selling the pieces online is that the buyers can literally smell, touch, and feel the products, rather than clicking through pieces online.

Lower price points are also attractive to shoppers. Belina keeps its prices between $10 and $40, a relatively cheap range in the jewelry industry that targets females age 13 and up.

There are other perks to in-person purchases versus online shopping, as well. "The deal is there is no shipping costs, taxes or fees and it's there to try on," said Bernal.

Free word of mouth marketing
Marketing -- whether it's hiring a full-blown public relations firm or paying big bucks to advertise in print publications -- is a luxury many up-and-coming jewelry companies can't afford.

When Noon Designs opened on a residential street a block away from a San Diego beach, it barely generated the revenue to pay for its 260-square-foot, $600-a-month space in a converted one-car garage. As a result, founders Nora Alexander and Maie Liis Webb, who studied abroad in Slovakia and Switzerland during their college years at the Rhode Island School of Design, had to rely on their reputation to drive traffic into their store.

Now, just two years later, the company sells its products to 70 shops across the U.S., has two shops in Southern California, and about a dozen other designers' pieces in its stores.

"We believe these days in this down economy people want to support friendly faces and their local community," said Jessica Madore, who joined the company in late 2009 after she quit her lucrative marketing and sales job at a Portland, Maine, textiles firm to head west and pursue the California dream.

The first day she arrived in the sunny state, she stumbled across the San Diego garage the Noon designers were working out of.

Though Noon has since graduated from its humble beginnings, the company still heavily relies on word-of-mouth advertising to grow the business. "Honestly, it's been working. People come to us for gifts for their girlfriends, mothers, and grandmothers just as much as they do to treat themselves," said Madore.

Test-drive temporary digs
If you can't afford to sign a long-term lease, there's another option: Set up a pop-up boutique -- a temporary display inside an existing store.

That's the route taken by Love is a Devil, a young jewelry company that opened up a pop-up boutique in Temecula in February.

The founders, Alana Crain and Sharie Ellis, attended the Fashion Institute of Design and Merchandising together and named their brand after a Shakespeare sonnet as an ode to Crain's eclectic and edgy style mixed with Ellis' all-American, classic taste.

The pop-up boutique's proximity to celebrities -- it's just a two-hour drive from Rodeo Drive -- helps create foot traffic. Displaying its wares in prime real estate paid off: Taylor Armstrong, star of the Bravo TV hit Real Housewives of Beverly Hills, popped into Love is a Devil's pop-up store while she was visiting the surrounding wine country. The reality TV star gave the brand national exposure by wearing her chosen piece on an episode that ran this season.

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Thirty companies paid no U.S. income tax 2008-2010: report (Reuters)

(Reuters) – Thirty large and profitable U.S. corporations paid no income taxes in 2008 through 2010, said a study on Thursday that arrives as Congress faces rising demands for tax reform but seems unable or unwilling to act.

Pepco Holdings Inc (POM.N), a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 percent, among the 280 Fortune 500 companies studied.

The statutory U.S. corporate income tax rate is 35 percent, one of the highest in the world; but over the 2008-2010 period, very few of the companies studied paid it, said the report.

The average effective tax rate for the companies over the period was 18.5 percent, said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both think tanks.

Their report also listed General Electric Co (GE.N), Paccar Inc (PCAR.O), PG&E Corp (PCG.N), Computer Sciences Corp (CSC.N), Boeing Co (BA.N) and NiSource Inc (NI.N) as among the 30 that paid no taxes.

Corporations will say rightly that the loopholes that let them slash their taxes were perfectly legal, the report said.

"But that does not mean that low-tax corporations bear no responsibility ... The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support," the report said.

Some of the 30 companies disputed the report's findings.

A Pepco spokesman said it "pays all its required taxes."

Boeing paid its taxes "between 2008-2010 ... Our effective income tax rate was 26.5 percent, 22.9 percent, 33.6 percent in 2010, 2009, 2008," said a spokesman for the aerospace group.

PRESSING FOR MORE

As Congress and the Obama administration struggle with a sluggish economy and high deficits, corporations are pressing Capitol Hill for more tax breaks and a lower corporate rate.

Taxes are on the agenda of the congressional "super committee" tasked with finding at least $1.2 trillion in additional budget savings by November 23, but it is so far deadlocked across a familiar divide -- Republicans refusing any tax increases, Democrats defending social programs.

On Tuesday, a panel of budget experts warned super committee members they would fail the country if they did not meet their goal. Financial markets have been waiting for many months for signs that Washington can get its financial house in order, but few have been forthcoming.

The report referred back to the 1986 tax reform pushed through by President Ronald Reagan, a Republican, who approved the largest corporate tax increase in U.S. history, largely by ending tax breaks, while cutting individual tax rates.

"Reagan solved the problem by sweeping away corporate tax loopholes," said the report, which was coauthored by Citizens for Tax Justice chief Robert McIntyre. His research 25 years ago played a key role in convincing Reagan reform was needed.

The industrial machinery business enjoyed the lowest effective tax rate during the study period, while the highest rate was paid by healthcare companies, the report said.

"Big Business is getting away with taxation murder," said Frank Knapp, vice chairman of the American Sustainable Business Council, a progressive business coalition.

"They pay little or no taxes on massive U.S. profits and then have the gall to lobby for ... a tax holiday to 'repatriate' profits they have stashed offshore."

MANY TAX BREAKS

What are some of the tax breaks that corporations enjoy? One big one is accelerated depreciation that lets them write off equipment faster than it actually wears out. Deductions on executive stock options help. So do tax breaks for research and development and for making products in the United States instead of overseas. Offshore tax shelters play a role, too.

Power group Duke Energy Corp (DUK.N) was one of the 30 companies listed as paying no income taxes in 2008-2010.

Chief Executive James Rogers told Reuters that Duke cut its taxes thanks to accelerated depreciation, which he said helped the company build new plants and hire construction workers.

Rogers is a frequent spokesman for a coalition of large multinationals seeking a tax break that would let them bring foreign profits into the United States at a reduced tax rate.

Others among the 30 companies included power producer American Electric Power Co Inc (AEP.N) (AEP), chemicals company DuPont (DD.N) and toymaker Mattel Inc (MAT.O).

Like Duke, AEP said it benefited from accelerated depreciation. A Mattel spokesperson said the report's claims were inconsistent with the company's public financial filings.

"DuPont complies with all tax laws and regulations in every jurisdiction in which it operates," said a DuPont spokeswoman.

The average effective corporate tax rate, as calculated by McIntyre's group, was about 14 percent before the Reagan reforms; afterward it shot up to 26.5 percent in 1988.

As companies found their way around the reforms, the effective rate fell back to about 17 percent by 2002-2003.

Unlike in Reagan's time, taming corporate tax breaks alone will not solve the deficit problem. Such breaks cost the government about $102 billion in lost revenues in 2011, a year when the federal deficit was an estimated $1.3 trillion.

Corporate loopholes are dwarfed by tax breaks that benefit individuals, such as the mortgage interest tax deduction -- a middle class sacred cow, on its own worth $104 billion.

Still, said the report: "If we are going to get our nation's fiscal house in order, increasing corporate income taxes should play an important role."

(Additional reporting by Matt Daily, Ernest Scheyder, Dhanya Skariachan in New York; Kyle Peterson in Chicago, editing by Gerald E. McCormick)

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Thirty companies paid no U.S. income tax 2008-2010: report (Reuters)

(Reuters) – Thirty large and profitable U.S. corporations paid no income taxes in 2008 through 2010, said a study on Thursday that arrives as Congress faces rising demands for tax reform but seems unable or unwilling to act.

Pepco Holdings Inc (POM.N), a Washington, D.C.-area power company, had the lowest effective tax rate, at negative 57.6 percent, among the 280 Fortune 500 companies studied.

The statutory U.S. corporate income tax rate is 35 percent, one of the highest in the world; but over the 2008-2010 period, very few of the companies studied paid it, said the report.

The average effective tax rate for the companies over the period was 18.5 percent, said Citizens for Tax Justice and the Institute on Taxation and Economic Policy, both think tanks.

Their report also listed General Electric Co (GE.N), Paccar Inc (PCAR.O), PG&E Corp (PCG.N), Computer Sciences Corp (CSC.N), Boeing Co (BA.N) and NiSource Inc (NI.N) as among the 30 that paid no taxes.

Corporations will say rightly that the loopholes that let them slash their taxes were perfectly legal, the report said.

"But that does not mean that low-tax corporations bear no responsibility ... The laws were not enacted in a vacuum; they were adopted in response to relentless corporate lobbying, threats and campaign support," the report said.

Some of the 30 companies disputed the report's findings.

A Pepco spokesman said it "pays all its required taxes."

Boeing paid its taxes "between 2008-2010 ... Our effective income tax rate was 26.5 percent, 22.9 percent, 33.6 percent in 2010, 2009, 2008," said a spokesman for the aerospace group.

PRESSING FOR MORE

As Congress and the Obama administration struggle with a sluggish economy and high deficits, corporations are pressing Capitol Hill for more tax breaks and a lower corporate rate.

Taxes are on the agenda of the congressional "super committee" tasked with finding at least $1.2 trillion in additional budget savings by November 23, but it is so far deadlocked across a familiar divide -- Republicans refusing any tax increases, Democrats defending social programs.

On Tuesday, a panel of budget experts warned super committee members they would fail the country if they did not meet their goal. Financial markets have been waiting for many months for signs that Washington can get its financial house in order, but few have been forthcoming.

The report referred back to the 1986 tax reform pushed through by President Ronald Reagan, a Republican, who approved the largest corporate tax increase in U.S. history, largely by ending tax breaks, while cutting individual tax rates.

"Reagan solved the problem by sweeping away corporate tax loopholes," said the report, which was coauthored by Citizens for Tax Justice chief Robert McIntyre. His research 25 years ago played a key role in convincing Reagan reform was needed.

The industrial machinery business enjoyed the lowest effective tax rate during the study period, while the highest rate was paid by healthcare companies, the report said.

"Big Business is getting away with taxation murder," said Frank Knapp, vice chairman of the American Sustainable Business Council, a progressive business coalition.

"They pay little or no taxes on massive U.S. profits and then have the gall to lobby for ... a tax holiday to 'repatriate' profits they have stashed offshore."

MANY TAX BREAKS

What are some of the tax breaks that corporations enjoy? One big one is accelerated depreciation that lets them write off equipment faster than it actually wears out. Deductions on executive stock options help. So do tax breaks for research and development and for making products in the United States instead of overseas. Offshore tax shelters play a role, too.

Power group Duke Energy Corp (DUK.N) was one of the 30 companies listed as paying no income taxes in 2008-2010.

Chief Executive James Rogers told Reuters that Duke cut its taxes thanks to accelerated depreciation, which he said helped the company build new plants and hire construction workers.

Rogers is a frequent spokesman for a coalition of large multinationals seeking a tax break that would let them bring foreign profits into the United States at a reduced tax rate.

Others among the 30 companies included power producer American Electric Power Co Inc (AEP.N) (AEP), chemicals company DuPont (DD.N) and toymaker Mattel Inc (MAT.O).

Like Duke, AEP said it benefited from accelerated depreciation. A Mattel spokesperson said the report's claims were inconsistent with the company's public financial filings.

"DuPont complies with all tax laws and regulations in every jurisdiction in which it operates," said a DuPont spokeswoman.

The average effective corporate tax rate, as calculated by McIntyre's group, was about 14 percent before the Reagan reforms; afterward it shot up to 26.5 percent in 1988.

As companies found their way around the reforms, the effective rate fell back to about 17 percent by 2002-2003.

Unlike in Reagan's time, taming corporate tax breaks alone will not solve the deficit problem. Such breaks cost the government about $102 billion in lost revenues in 2011, a year when the federal deficit was an estimated $1.3 trillion.

Corporate loopholes are dwarfed by tax breaks that benefit individuals, such as the mortgage interest tax deduction -- a middle class sacred cow, on its own worth $104 billion.

Still, said the report: "If we are going to get our nation's fiscal house in order, increasing corporate income taxes should play an important role."

(Additional reporting by Matt Daily, Ernest Scheyder, Dhanya Skariachan in New York; Kyle Peterson in Chicago, editing by Gerald E. McCormick)

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S&P threatens downgrade of U.S. financial companies (Reuters)

NEW YORK (Reuters) – Standard & Poor's on Friday raised the pressure on debt negotiators in Washington, saying it could downgrade insurers, securities clearinghouses, mortgage agencies and a laundry list of other firms without a deal soon to lift the debt ceiling and cut the deficit.

While S&P had already made clear it could downgrade the United States' sovereign credit rating, the Friday move struck directly at the heart of the financial system, raising the prospect of knock-on effects should the country exhaust its ability to borrow to pay bills.

The Treasury took the last available step Friday to try and extend that borrowing capacity.

S&P on Friday put on review for possible downgrades a range of powerful financial firms -- many of them little known to the public but crucial to the country's financial infrastructure. U.S. government securities are central to the operations of most of the companies cited.

They include the Depository Trust Co, which facilitates payment transfers among major banks, as well as several Federal Home Loan Banks and Farm Credit System Banks. They also singled out Fannie Mae and Freddie Mac, the two government-sponsored enterprises that are central to the residential mortgage market.

S&P characterized its targets as "entities with direct links to, or reliance on, the federal government."

Separately, the agency said the four remaining U.S. nonfinancial companies with triple-A ratings were not affected by the downgrade threat.

'WARNING SHOT'

"S&P is firing a warning shot, saying the entire financial clearing system is in question," said Peter Niculescu, a partner at Capital Markets Risk Advisors, a risk management advisory firm in New York.

He raised the prospect of a financing squeeze for financial institutions if Treasury debt is downgraded. S&P said Friday it still sees the risk of default as "small, though increasing."

Nik Khakee, an S&P analyst who worked on the team assessing the clearinghouses, emphasized that the decline for the triple A-rated companies from "outlook negative" to "creditwatch negative" -- signaling a 50 percent chance of a downgrade within three months -- directly follows a similar change for the debt of government securities.

Earlier this week, Moody's also put its U.S. credit rating on review for a possible downgrade.

Some investors downplayed the chances of a severe market reaction if the United States is downgraded, given that the market has known this could be coming.

"Do you think China is going to sell all their Treasuries when they find out the ratings are lowered? They know the situation, they've known it all along," said James Melcher, founder and president of Balestra Capital Ltd, a global-macro investment manager based in New York. "They cannot sell a significant amount of their Treasuries without running interest rates up to 20 percent or more; they would be shooting themselves in the foot."

ONUS ON WASHINGTON

Many of the firms put on review for a possible downgrade were quick to turn the focus back on President Barack Obama and the congressional leaders trying to hash out a deal to stave off a debt default.

"Whatever happens will have nothing to do with us, and everything to do with Washington. The hope on everyone's part is obviously that Washington gets its act together so that both their rating and ours can remain where they belong -- at AAA," said Patrick Korten, a spokesman for insurer Knights of Columbus, which was included on the negative watch list.

A spokesman for Goldman Sachs, parent company to Goldman Sachs Mitsui Marine Derivative Products LP, declined to comment. A spokesman for New York Life said S&P told it no financial institution can carry a higher rating or outlook than its sovereign rating, and that the insurer believes its rating to be fully justified.

Northwestern Mutual said it remained "completely confident" in its financial strength.

Other insurers on the list were not immediately available to comment.

Another broad group in S&P's sights is the clearinghouses, which guarantee contracts tied to everything from oil contracts to shares of Google Inc and are critical to U.S. financial market stability.

"It's not unexpected and we don't see this as a reflection on how OCC conducts its business," said Jim Binder, spokesman for the Options Clearing Corp, which clears U.S. options or futures for 14 exchanges. "It's all about what's going on in Washington."

The U.S.-based Depository Trust & Clearing Corporation, which provides custody and asset servicing for more than 3.6 million securities issues from the United States and 121 other countries and territories, valued at $33.9 trillion, said the S&P action was expected.

"Changing the outlook on various financial institutions is common practice for ratings agencies when the outlook on a sovereign is changed," DTCC said in a statement. DTCC runs the National Securities Clearing Corporation and the Depository Trust Company.

Freddie Mac also declined to comment. Fannie Mae did not immediately respond to requests for comment.

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NY subpoenas nine life insurance companies: source (Reuters)

NEW YORK (Reuters) – New York's top legal officer has sent subpoenas to nine leading life insurers seeking information about their practices in identifying and paying out policies for deceased customers, according to a person familiar with the matter.

New York Attorney General Eric Schneiderman last month sent subpoenas to units of AXA SA, Genworth Financial Inc, Guardian Life Insurance Co of America, Manulife Financial Corp, Massachusetts Mutual Life Insurance Co, MetLife Inc, New York Life Insurance Co, Prudential Financial Inc, and TIAA-CREF, the source said.

This person requested anonymity because the probe is not public.

The Wall Street Journal first reported the life insurance investigation.

The investigation is looking into whether insurance companies have done enough to identify beneficiaries of life insurance policies once a customer dies, the source told Reuters on Tuesday.

Schneiderman's office is also seeking information about unclaimed policy proceeds that are supposed to be turned over to the state.

A spokesman for Guardian told Reuters that it is reviewing the subpoena and intends to "cooperate fully with the Attorney general.

"We believe our processes are compliant with all relevant regulations and serve the best interests of our participants," said a spokesman for TIAA-CREF. "We're aware of this industry matter and will fully cooperate with any official requests for information."

A Genworth spokesman told the Journal that the company believes it has "compliant and robust practices to determine when claim payments are due and owing, and to adhere to state unclaimed property requirements and regulations."

AXA told the newspaper it would cooperate fully with Schneiderman as well as with other states conducting similar reviews.

None of the other companies could immediately be reached for a comment by Reuters.

Also on Tuesday, New York State Insurance Department said that all life insurers licensed to do business in the state must begin using an official government death list to identify when policyholders have died and death benefits are due to their beneficiaries.

(Additional reporting by Sakthi Prasad and Renju Jose; Editing by Tim Dobbyn)

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