Hobby Lobby ruling won't actually impact small biz

NEW YORK (CNNMoney)

On Monday, the Supreme Court ruled that "closely-held" for-profit corporations (those that are majority owned by five or fewer people) can be granted religious exemptions from certain contraceptive coverage (such as IUDs and the morning-after pill) required under the Affordable Care Act.

Hobby Lobby is by no means a small business -- it has nearly 600 stores and some 13,000 employees. But the Supreme Court's description of "closely held" companies calls into question how far the ruling might extend.

Seventy-eight percent of small businesses are family-owned, according to LIMRA, an insurance trade research firm -- but only 2% of small businesses have 50 or more employees. This is key to the Hobby Lobby decision because any business with fewer than fifty employees is already exempted from the health insurance mandate under the Affordable Healthcare Act.

Of that 2%, businesses would have to prove a "sincere" religious belief in order to be exempt. While it's unclear how the sincerity will be tested (or how many businesses might make this claim), it's unlikely to be in most companies' best interests to go that route.

Related: Hobby Lobby does invest in birth control

The actual cost of the contraception to employers is relatively minimal. According to 2011 report from the Actuarial Research Corporation (which used data from 2010) the corporation's estimated annual cost, as part of an insurance plan, is $26 per enrolled female. This amount includes all contraception, like standard birth control pills, which was not disputed in the Hobby Lobby case.

"From a purely economic perspective, [unintended pregnancies are] going to cost me and my insurance provider a lot more than birth control costs," said Jim Houser, owner of Hawthorne Auto Clinic in Portland, Ore., and executive board member of the Main Street Alliance.

He employs eleven workers -- four of whom are women -- and provides them with complete coverage despite not being legally obligated to do so.

"But, that's not my decision to make," added Houser. "Businesses have absolutely no business being involved in the personal relationships of any employee -- especially with a woman and her doctor."

Related: Who will be affected by Hobby Lobby ruling?

Houser isn't the only one questioning the Supreme Court's decision. Laurie Sobel, senior policy analyst with the Kaiser Family Foundation, said there are still a lot of questions that need to be answered by the Department of Health & Human Services: How will the new exemption be enforced? Will companies self-certify (as nonprofits do) or will there be some sort of test to determine the sincerity of a company's religious beliefs?

There are also serious concerns about what this might mean for businesses that object to other aspects of health coverage. Justice Ruth Bader Ginsberg raised many of them in her vehement opposition.

"Would the exemption...extend to employers with religiously grounded objections to blood transfusions (Jehovah's Witnesses); antidepressants (Scientologists); medications derived from pigs, including anesthesia, intravenous fluids, and pills coated with gelatin (certain Muslims, Jews, and Hindus); and vaccinations ?" she wrote.

"The court, I fear, has ventured into a minefield," Ginsberg added.

Correction: An earlier version of this article misstated the contraceptive coverage allowed under religions exemptions.

First Published: July 1, 2014: 6:37 PM ET

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Jamie Dimon diagnosed with cancer

NEW YORK (CNNMoney)

The prognosis from doctors is "excellent" and it was caught quickly, he wrote in a memo to colleagues and shareholders.

Dimon, 58, will receive radiation and chemotherapy treatment over the next eight weeks at Memorial Sloan Kettering Hospital in New York. Although he will curtail his traveling, the bank CEO expects to be actively working during that period.

He made the announcement just before he was about to leave on a previously scheduled trip to five European countries, said spokesman Joe Evangelisti. That trip is now canceled.

"I feel very good now and will let all of you know if my health situation changes," Dimon wrote.

Related: JPMorgan earns $5.3 billion despite legal woes

Dimon previously was president of Citigroup, then chairman and CEO of Bank One Corporation. He joined JPMorgan (JPM) in 2004 through a merger and was named CEO and president in 2006. He successfully steered the bank through the economic downturn.

He was criticized for his handling of the $6 billion London Whale trading loss. The bank had to pay about $1 billion in fines to U.S. and UK regulators for not properly overseeing its traders related to that loss.

JPMorgan also reached a massive $13 billion settlement last fall over allegations it, and two banks it purchased, misrepresented mortgage-backed securities, which played a major role in triggering the crisis.

Dimon saw a pay cut in 2012 because of that issue, but his pay was bumped up again last year. He received $18.5 million worth of restricted stock on top of his $1.5 million base salary.

--CNNMoney's Poppy Harlow contributed to this report

First Published: July 1, 2014: 7:13 PM ET

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The world's worst tax return?

HONG KONG (CNNMoney)

As they crisscross the globe, IRS rules require expat American pilots to record exactly how long they're flying over the U.S., foreign countries and international waters. Once they land, the pilots have to track exactly when they're working, and when they're off the clock.

Here's why: If they ever face an IRS audit, the pilots will have to prove -- using flight plans or other documents -- exactly how much money they've earned in each jurisdiction, on land or in the air.

For this small slice of the American population, following the IRS rules to the letter means a tax headache that lasts 365 days a year.

"It's insane," said a Hong Kong-based airline pilot, who asked to remain anonymous over fears he would lose his job. "On every flight, I have to log the time I'm over foreign countries, and the time I'm over international waters and the U.S."

In fact, anyone who works abroad on a plane or a ship -- flight attendant, merchant mariner or cruise ship dancer -- can be required to produce those records.

"The IRS wants to see how much of the pilot's time was spent over international waters and in the U.S.," said Sue Folkringa, an accountant at Wolcott & Associates, a firm that specializes in aviation taxes. "Typically, the pilot will have to go through their flight records -- not a welcome task."

Related story: U.S. expats cry foul over tax system

Unlike most countries, the U.S. requires its citizens living abroad to file and pay taxes each year. Since expats already pay local taxes, the IRS grants an exemption on the first $97,600 earned in a foreign country.

But here's the catch -- the U.S. government says money made working in or over international waters doesn't count as foreign income.

Take the example of an American expat pilot who flies a 13-hour direct route from Hong Kong to Los Angeles.

Money made during the three flying hours over Asia qualifies as foreign income, but payment earned during the remaining 10 hours over the Pacific Ocean does not. This means the pilot is liable for U.S. tax on about 77% of earnings during that flight.

"Every flight I go on, 12 months a year, I have to sit there and take notes," the Hong Kong-based pilot said. "It just doesn't make sense."

The pilot said he pays an accountant $1,300 a year to prepare his 60-page tax return, because the laws are just too complex.

Related story: 3,000 Americans ditch their passports

Folkringa said that while it's up to the pilots to keep records, many don't know they have to until they're targeted by an IRS audit.

The regulations are so obscure that some tax professionals don't even know they exist. Even for specialists, there are plenty of gray areas.

Accountants, for example, say that the U.S. definition of "international waters" is far too vague -- and even contradictory.

Lack of clarity leads some accountants to conclude that international waters begin three miles off the coast, while others say the boundary starts 200 miles offshore. The pilots, meanwhile, are expected to keep track of every entry and exit with pinpoint accuracy.

Related story: Banks lock out Americans over new tax law

The IRS did not respond to a request for comment, but the agency website does have some tips. One guide encourages individuals to obtain flight or ship plans in order "to plot the geographical points and determine the actual planned time spent flying over foreign countries."

"Who has that kind of calculation capability at their fingertips?" asked Folkringa.

Vincenzo Villamena, managing partner of Online Taxman, recalled one particularly difficult IRS audit -- his client was working on a Maersk cargo ship hijacked in 2009 by Somali pirates.

Needless to say, the kidnapping made it hard to prove when the sailor was in international waters. (The incident was later turned into a movie called Captain Phillips, starring Tom Hanks).

"It was like, 'Come on, don't you have any sympathy?'" Villamena said. "He was working, and then he wasn't working -- he was kidnapped."

First Published: July 1, 2014: 10:54 PM ET

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Chrysler recalls 696,000 minivans and SUVs

Chrysler Town & Country and the Dodge Grand Caravan minivans on the assembly line in 2007.

NEW YORK (CNNMoney)

About 525,000 of those are in the U.S., Chrysler said Monday.

In affected vehicles, the key can too easily be knocked into the "off" or "accessory" positions while the car is being driven. This deactivates the airbags, power steering and power braking.

Jarring road conditions, such as a hitting a pothole, may cause the key to move out of the "run" position.

Related: General Motors recalls 8.4 million vehicles

The new recall includes some Dodge Journey SUVs, Dodge Grand Caravans, and Chrysler Town and Country minivans that were made between Jan. 2007 and Aug. 2009. It is an expansion of a recall first issued in 2010 that included vehicles manufactured between Aug. 2009 and June 2010.

The recall comes after the National Highway Traffic Safety Administration began investigating the issue because it had received complaints of the problem.

Chrysler will notify owners about when they can take their vehicles to a dealer to be fixed. Until then, they should remove all items from their key rings, leaving only the ignition key.

A Chrysler spokesman said the automaker is unaware of any related injuries.

GM's ignition switch problem, on the other hand, is linked to at least 13 deaths and even more injuries. It led to a number of lawsuits and investigations into why the automaker did not recall the vehicles earlier.

First Published: June 30, 2014: 7:28 PM ET

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4 signs the stock market is overheating

The bull market has continued its reign, but some alarm bells are ringing.

NEW YORK (CNNMoney)

CNNMoney took a look at a slew of recent data on stock valuations and corporate sentiment, and while the prospects for global economic growth remain robust, savvy investors need to stay vigilant.

Here are the most four worrying signs for the markets right now:

1. Addiction to the Fed stimulus: Simply put, the financial markets are hooked on easy money, and that has caused them to ignore real economic and geopolitical vulnerabilities, according to an annual report released Sunday by the Bank for International Settlements (BIS), an organization of of central banks.

While the Federal Reserve and other central banks are widely credited with shoring up the financial system after the crisis by keeping interest rates low and driving investment into stocks, investors may have gotten ahead of themselves."It is hard to avoid the sense of a puzzling disconnect between the markets' buoyancy and underlying economic developments globally," the report said.

Related: America's 6 biggest public pensions

The BIS noted that investors aggressive search for yield has driven them into riskier European and emerging market bonds, as well as lower rated corporate debt. That has left them exposed to a host of problems should interest rates rise quickly or economic conditions deteriorate.

"Countries could at some point find themselves in a debt trap: seeking to stimulate the economy through low interest rates encourages even more debt, ultimately adding to the problem it is meant to solve," asserted the BIS.

2. Stocks are downright expensive: According to a popular metric of market valuation, stocks are trading at lofty levels previously experienced leading up market crashes. According to the Shiller PE Ratio, which tracks inflation-adjusted earnings over the past 10 years, the S&P 500 is currently trading at over 26 times earnings. The long-term average, going back more than 130 years, is 16.5.

The Shiller price-to-earnings ratio rose above 25 for the first time in 1901, then again in 1929. At the height of the tech stock craze in 2000, the ratio hit a record peak of 44 before the market collapsed. It was back above 25 in 2003 and stayed around that level until 2007 -- shortly before the so-called Great Recession.

Source: Data from multpl.com based on Shiller PE Ratio

According to research by Credit Suisse, once it rises above 26, U.S. stock market returns are typically negative for the next five years.

3. Markets are far outpacing actual growth: Stocks are priced in the stratosphere compared to the overall health of the U.S. economy. David R. Kotok, Chairman and Chief Investment Officer at Cumberland Advisors in Sarasota, Florida, says that the only other time the total valuation of the stock market relative to U.S. growth domestic product (GDP) was higher was at the peak of the tech bubble.

"We think the probability of a correction is rising. It is very hard to pinpoint," Kotok explained in a research note Sunday.

Still, Kotok is stripping out the first quarter's decline in GDP for his calculations, and he admits that "GDP is not a perfect trading guide."

Related: 3 reasons not to freak out about -2.9% GDP

But "it does express that, when stocks are highly priced in the aggregate relative to GDP, the probability is higher that markets are becoming fully valued."

4. Corporate leaders aren't so optimistic anymore: In a survey revealed Monday by accounting and consulting behemoth Deloitte, Chief Financial Officers in the United States have lowered their earnings expectations for the year, with CFOs in manufacturing feeling particularly pessimistic.

CFOs' expectations for capital spending also fell, the Deloitte survey found.

"Net optimism is holding steady, but lower earnings and capital spending growth expectations suggest U.S. CFOs are factoring in bumps that were not on their radar screens three months ago," said Deloitte's Sanford Cockrell III in a press release.

First Published: July 1, 2014: 12:10 AM ET

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Stocks: 4 things to know before the open

Click chart for in-depth premarket data.

LONDON (CNNMoney)

U.S. stock futures were pointing up and most major global indexes were rising.

Here are the four things you need to know before the opening bell rings in New York:

1. Stock market movers -- Netflix, Xerox, BNP Paribas: It's worth keeping an eye on Netflix (NFLX, Tech30). Premarket data shows the stock up by nearly 3%. The online streaming video service is shaking up its list of offerings this month, according to reports.

Xerox (XRX) was the main decliner premarket, with shares down by about 1.5%. Reports say the company is looking to auction off over 200 patents. Xerox was unable to provide immediate comment on the reports.

Shares in French bank BNP Paribas (BNPQY) were enjoying a relief rally, rising by about 3.5% in Paris. It pleaded guilty to U.S. charges of sanctions busting Monday and agreed to pay a record fine of nearly $9 billion. Some investors were bracing for even harsher punishment. The shares have lost 10% so far this year.

Related: 4 signs the stock market is overheating

2. Economic indicators to watch: The U.S. government will report on the health of the construction industry in May at 10 a.m. ET. At the same time, the Institute for Supply Management's manufacturing index for June will be posted. In the afternoon, the Commerce Department will report data on vehicle sales from June.

3. International markets looking perky: European markets were all rising in early trading. The benchmark FTSE 100 in London was leading the pack with a gain of 0.4%. Most major Asian markets ended in positive territory, after China's official survey of manufacturing activity hit its highest level since December. The Nikkei in Japan was a standout performer, closing with a 1.1% gain.

Hong Kong markets were closed Tuesday for a public holiday, the 17th anniversary of the territory's handover from British to Chinese rule. Thousands of protesters were marching to the city's main business district to protest against Beijing's moves to assert greater political control.

Prices for oil and gold were rising, though the gains were small.

Related: Fear & Greed Index

4. Monday market recap: U.S. stocks ended the day mixed Monday. The Dow Jones Industrial Average and S&P 500 lost some ground, but the Nasdaq landed safely in the green.

Despite Monday's mixed performance, U.S. stocks have enjoyed a solid first half of 2014. The S&P 500 has logged 22 record highs this year alone, ending the first half up 6%.

First Published: July 1, 2014: 5:17 AM ET

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General Motors recalls 8.4 million vehicles

NEW YORK (CNNMoney)

The automaker on Monday announced six new recalls involving more than 8.4 million vehicles worldwide, most of those for faulty ignition switches. The majority are in the U.S.

The sum of vehicles recalled Monday amount to the company's largest single day of recalls this year. In addition to the ignition switch recalls, the automaker is recalling vehicles for faulty wiring and fasteners.

The latest vehicles recalled are connected to three fatalities, seven crashes and eight injuries, GM said. It said there "is no conclusive evidence that the defect condition caused those crashes."

GM (GM)'s recalls have led the industry to recall more U.S. vehicles in the first six months of this year than any full year before. This recall brings General Motors' U.S. total in 2014 to more than 27 million, approaching the 30.8 million industry-wide record set in 2004.

Related: GM's culture blamed for current crisis

GM alone has recalled more than 10% of the nearly 253 million vehicles IHS automotive says were on the road at the beginning of this year.

Worldwide, the automaker has recalled nearly 30 million vehicles this year.

The automaker also announced it is adding $500 million to the charge against second-quarter earnings it is taking for recalls, bringing the total to $1.2 billion.

Related: In just six months, automakers pass recall record

Monday's ignition switch recalls include several models predominately from the late 1990s and early 2000s:

• 1997-2005 Chevrolet Malibu
• 1998-2002 Oldsmobile Intrique
• 1999-2004 Oldsmobile Alero
• 1999-2005 Pontiac Grand Am
• 2000-2005 Chevrolet Impala and Monte Carlo
• 2004-2008 Pontiac Grand Prix
• 2003-2014 Cadillac CTS
• 2004-2006 Cadillac SRX

The recall also involves:

• 2011-2014 Chevrolet Cruzes; 2012-2014 Chevrolet Sonics; and 2013-2014 Chevrolet Traxs, Buick Encores and Veranos for an issue with the engine block power heater cord.
• 2014 Chevrolet Camaro and Impala, Buick Regal, and Cadillac XTS for a fastener that may be missing.
• 2007-2011 Chevrolet Silverado HD, GMC Sierra HD equipped with an auxiliary battery because a power issue can cause a fire.
• 2005-2007 Buick Rainier, Chevrolet TrailBlazer, GMC Envoy, Isuzu Ascender and Saab 9-7x; 2006 Chevrolet TrailBlazer EXT, and GMC Envoy XL for an electrical short that can disable the power door lock and window switches.

General Motors has come under criticism for a decade-long delay in publicly revealing an ignition switch flaw that resulted in at least 13 deaths and numerous injuries. The company retained attorney Ken Feinberg to develop a victim compensation plan, which he outlined earlier Monday.

CEO Mary Barra has apologized for the delay and promised internal reforms after a review she commissioned found "a pattern of incompetence and neglect" but no evidence of a broad conspiracy to cover up the issue. Fifteen employees, including executives, were fired or left the company.

She said Monday the company has "worked aggressively to identify and address the major outstanding issues that could impact the safety of our customers."

The company is still the subject of several investigations, including a criminal probe and Congressional inquiries, and dozens of lawsuits.

Trading in GM stock was halted prior to the announcement. It resumed shortly after and ended the day down less than 1%.

First Published: June 30, 2014: 2:50 PM ET

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Chrysler recalls 696,000 minivans and SUVs

Chrysler Town & Country and the Dodge Grand Caravan minivans on the assembly line in 2007.

NEW YORK (CNNMoney)

About 525,000 of those are in the U.S., Chrysler said Monday.

In affected vehicles, the key can too easily be knocked into the "off" or "accessory" positions while the car is being driven. This deactivates the airbags, power steering and power braking.

Jarring road conditions, such as a hitting a pothole, may cause the key to move out of the "run" position.

Related: General Motors recalls 8.4 million vehicles

The new recall includes some Dodge Journey SUVs, Dodge Grand Caravans, and Chrysler Town and Country minivans that were made between Jan. 2007 and Aug. 2009. It is an expansion of a recall first issued in 2010 that included vehicles manufactured between Aug. 2009 and June 2010.

The recall comes after the National Highway Traffic Safety Administration began investigating the issue because it had received complaints of the problem.

Chrysler will notify owners about when they can take their vehicles to a dealer to be fixed. Until then, they should remove all items from their key rings, leaving only the ignition key.

A Chrysler spokesman said the automaker is unaware of any related injuries.

GM's ignition switch problem, on the other hand, is linked to at least 13 deaths and even more injuries. It led to a number of lawsuits and investigations into why the automaker did not recall the vehicles earlier.

First Published: June 30, 2014: 7:28 PM ET

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4 signs the stock market is overheating

The bull market has continued its reign, but some alarm bells are ringing.

NEW YORK (CNNMoney)

CNNMoney took a look at a slew of recent data on stock valuations and corporate sentiment, and while the prospects for global economic growth remain robust, savvy investors need to stay vigilant.

Here are the most four worrying signs for the markets right now:

1. Addiction to the Fed stimulus: Simply put, the financial markets are hooked on easy money, and that has caused them to ignore real economic and geopolitical vulnerabilities, according to an annual report released Sunday by the Bank for International Settlements (BIS), an organization of of central banks.

While the Federal Reserve and other central banks are widely credited with shoring up the financial system after the crisis by keeping interest rates low and driving investment into stocks, investors may have gotten ahead of themselves."It is hard to avoid the sense of a puzzling disconnect between the markets' buoyancy and underlying economic developments globally," the report said.

Related: America's 6 biggest public pensions

The BIS noted that investors aggressive search for yield has driven them into riskier European and emerging market bonds, as well as lower rated corporate debt. That has left them exposed to a host of problems should interest rates rise quickly or economic conditions deteriorate.

"Countries could at some point find themselves in a debt trap: seeking to stimulate the economy through low interest rates encourages even more debt, ultimately adding to the problem it is meant to solve," asserted the BIS.

2. Stocks are downright expensive: According to a popular metric of market valuation, stocks are trading at lofty levels previously experienced leading up market crashes. According to the Shiller PE Ratio, which tracks inflation-adjusted earnings over the past 10 years, the S&P 500 is currently trading at over 26 times earnings. The long-term average, going back more than 130 years, is 16.5.

The Shiller price-to-earnings ratio rose above 25 for the first time in 1901, then again in 1929. At the height of the tech stock craze in 2000, the ratio hit a record peak of 44 before the market collapsed. It was back above 25 in 2003 and stayed around that level until 2007 -- shortly before the so-called Great Recession.

Source: Data from multpl.com based on Shiller PE Ratio

According to research by Credit Suisse, once it rises above 26, U.S. stock market returns are typically negative for the next five years.

3. Markets are far outpacing actual growth: Stocks are priced in the stratosphere compared to the overall health of the U.S. economy. David R. Kotok, Chairman and Chief Investment Officer at Cumberland Advisors in Sarasota, Florida, says that the only other time the total valuation of the stock market relative to U.S. growth domestic product (GDP) was higher was at the peak of the tech bubble.

"We think the probability of a correction is rising. It is very hard to pinpoint," Kotok explained in a research note Sunday.

Still, Kotok is stripping out the first quarter's decline in GDP for his calculations, and he admits that "GDP is not a perfect trading guide."

Related: 3 reasons not to freak out about -2.9% GDP

But "it does express that, when stocks are highly priced in the aggregate relative to GDP, the probability is higher that markets are becoming fully valued."

4. Corporate leaders aren't so optimistic anymore: In a survey revealed Monday by accounting and consulting behemoth Deloitte, Chief Financial Officers in the United States have lowered their earnings expectations for the year, with CFOs in manufacturing feeling particularly pessimistic.

CFOs' expectations for capital spending also fell, the Deloitte survey found.

"Net optimism is holding steady, but lower earnings and capital spending growth expectations suggest U.S. CFOs are factoring in bumps that were not on their radar screens three months ago," said Deloitte's Sanford Cockrell III in a press release.

First Published: July 1, 2014: 12:10 AM ET

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BNP Paribas braces for $9 billion fine: reports

BNP Paribas CEO Jean-Laurent Bonnafe.

LONDON (CNNMoney)

The punishment for helping clients dodge sanctions on Iran, Sudan and Cuba will also include a temporary ban on BNP Paribas (BNPQF) clearing payments in dollars, starting in January, the Financial Times reported Monday.

"I want to say it clearly here: we will receive a heavy penalty," BNP Chief Executive Officer Jean-Laurent Bonnafe was quoted as saying by Reuters in an internal email to staff.

BNP Paribas declined to comment.

U.S. authorities are expected to reveal details of the settlement later Monday, concluding a long-running criminal investigation.

The settlement between the bank and prosecutors had been expected for months. Shares in the bank edged about 0.5% higher in Paris, having fallen more than 12% so far this year in anticipation.

BNP Paribas had previously set aside $1.1 billion to cover the costs of any penalties arising from the U.S. investigation, but warned in late April that the fines could far exceed that amount.

The Wall Street Journal said the bank would have to slash its dividend and raise billions of euros by issuing bonds.

The fine dwarfs HSBC (HSBC)'s $1.9 billion penalty in 2012 for similar offenses, and the $2.6 billion Credit Suisse (CS) paid in May to settle tax evasion claims.

The settlement comes at a sensitive time for European banks, which are under pressure to increase lending to get the economy moving, while shoring up their finances ahead of region-wide stress tests due later this year.

Earlier this month, Jean Claude Trichet, former president of the European Central Bank, told CNN that a penalty in the range of $10 billion could carry risks for the global banking system. He said this kind of fine was neither fair, just, nor proportionate.

Standard and Poor's has warned it could cut the bank's long term credit rating once it reviewed the size of the fine and the nature of any additional penalties.

First Published: June 30, 2014: 5:58 AM ET

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