Earth to Rupert: Just sell the newspapers!

James Murdoch and father Rupert Murdoch appear before Parliament to answer questions about the News of the World tabloid hacking scandal. It did not go well.

NEW YORK (CNNMoney) -- Watching Rupert Murdoch testify in front of the British Parliament Tuesday, two things became immediately obvious.

This is only going to make the phone hacking scandal worse. And it's time for Rupert to cut bait with his first love and give up on News Corp.'s profit-challenged newspaper business.

The elder Murdoch, who is chairman and CEO of News Corp (NWSA, Fortune 500)., looked uncomfortable throughout his appearance -- even before someone tried to hit him with a foam plate.

Rupert repeatedly professed to having little dealings with his U.K. tabloids and often gave monosyllabic (yes/no) answers to tough questions from British lawmakers.

Meanwhile, his son James, who is the CEO of the News International unit that oversaw the now defunct News of the World tabloid at the heart of the voicemail hacking, actually came across reasonably well. He was more contrite and had more detailed responses to direct questions.

Still, it remains to be seen whether James' performance is enough to convince shareholders that perhaps he is really more Brian Roberts of Comcast (CMCSA, Fortune 500) than James Dolan of Cablevision (CVC, Fortune 500) and could be a capable News Corp. CEO.

I personally think that barring a knight in white armor return of Peter Chernin, Rupert's long-time top general who was almost universally adored by Wall Street, News Corp. probably needs to eventually elevate current chief operating officer Chase Carey to the CEO slot.

In fact, it seems that investors may be betting on that outcome Tuesday. Despite the fact that Rupert bumbled his way through his Parliament testimony, shares of News Corp. rose about 6% Tuesday following a 4% drop Monday.

Carey, like Chernin -- who left News Corp. in 2009 and now runs his own media company -- is not a newspaper guy. He used to be the CEO of DirecTV (DTV, Fortune 500). He also benefits from the fact that his surname isn't Murdoch, which is proving to be as toxic as any subprime mortgage on Bank of America's balance sheet.

And as anyone who knows how to read a corporate income statement knows, the real growth in News Corp. lies in its broadcast, cable TV and movie assets, not the stodgy world of newspapers (or book publisher HarperCollins for that matter.)

Which brings me back to my second point. It's time for News Corp., with or without Murdoch at the helm, to abandon much of the News in its Corp.

Sure, selling the newspapers won't mean that the hacking scandal is over. This will continue to be a huge story across the pond. There's even calls for blood in the U.S., with members of Congress urging an investigation into whether News of the World also hacked into voicemails of 9/11 victims and their families.

But getting rid of the papers may allow News Corp. to move on and begin the process of putting this sordid mess behind it. It would also probably be a smart financial decision. If nothing else, it would allow the company to focus more directly on assets that actually have more value.

Yes, it would be an embarrassing about face to get rid of all his dead tree operations so soon after purchasing The Wall Street Journal publisher Dow Jones in 2007 for more than $5 billion.

You can tell that Rupert still loves the business. He even conceded in Tuesday's hearing that he spends a lot more of his time with the WSJ than his U.K. papers.

But News Corp. has already written down the value of Dow Jones by $2.8 billion in 2009, a stunning admission that Rupert paid way too much for the company.

And if you look at Murdoch's overall history at News Corp. (which I did extensively in my book Inside Rupert's Brain) you'd quickly realize that he often buys and sells assets more quickly than people flipped houses back in 2006.

The Village Voice. TV Guide. The Los Angeles Dodgers. MySpace. All assets that News Corp. bought and dumped.

As long as News Corp. is a Hollywood media company (with news limited to its Fox cable networks) then it may actually be more appreciated by investors. It would be more like fellow media giants CBS (CBS, Fortune 500), Viacom (VIAB, Fortune 500), Disney (DIS, Fortune 500) and CNNMoney owner Time Warner (TWX, Fortune 500).

The so-called Rupert discount has been a widely discussed phenomenon on Wall Street for years. News Corp. trades for less than 12 times earnings estimates for its next fiscal year. That's lower than the P/E ratios for CBS, Viacom and Disney.

But with the newspapers, even something that still is as widely respected as The Wall Street Journal, News Corp. is a 21st century misfit still paying too much attention to 19th century media.

And the supposed influence that comes from owning papers no longer is enough to outweigh the financial negatives. The papers are now both a slow-growth albatross and a public relations/political quagmire.

Wall Street knows that. Chase Carey likely knows it. And Rupert, in his heart of hearts, probably knows it as well.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks. 

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News Hub: Stocks End Higher on Bernanke Comments

Rocking with the Stones, rescuing hostages, riding bulls: Getting your ya-yas out, boomer-style.

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An ex-Googler's inside view on Google+ vs. Facebook

Dhanji R. Prasanna is a Sydney-based software engineer. He recently left Google after a nearly three-year stint working on projects like Google Wave. A version of this post first appeared on his blog, http://rethrick.com/, where you can read more about him.

There's no shortage of punditry around the future and fate of Google+, a massive social networking effort from Google. Much of it centers around competition with Facebook, and whether or not it will succeed in unseating the latter as the dominant social networking site.

I have a somewhat unique perspective on the matter, since I worked under the Google+ project umbrella for a good 6-8 months after Wave was canceled and know many of the engineers and product designers involved in this drama.

The argument is generally phrased along the lines of 'is Google+ a Facebook killer?'

This is a somewhat contrived and sensational narrative, so let me try and explain what I think the argument is really about. But before you hear my take, let me give you some background.

I don't find Google+ all that innovative. It hits all the notes that a Facebook clone merits, and adds a few points of distinctiveness that are genuinely compelling -- but I don't find it all that interesting, personally. To my mind, Twitter was a far greater innovation that continues unchallenged. But before you judge me as harsh: Broad product innovation is not exactly what they were going for, I believe.

A few years ago, before Google's CEO cared a whit about social networking or identity, a Google User Experience researcher named Paul Adams created a slide deck called the Real Life Social Network.

In a very long and well-illustrated talk, he makes the point that there is an impedance mismatch between what you share on Facebook and your interactions in real life. When you share a photo of yourself doing something crazy at a party, you don't intend for your aunt and uncle, workmates or casual acquaintances to see it. But Facebook does not do a good job of making this separation. This, in essence, is what the slide deck says, and Adams' point is made with great detail and insight.

So when Google (GOOG, Fortune 500) began its social effort in earnest, the powers-that-be seized upon Paul's research and came up with the Circles product. This was to be the core differentiator between Google+ (then codenamed Emerald Sea) and Facebook.

As part of induction into Emerald Sea, my team got the 30-minute pitch from the Circles team. I listened politely, all the while rolling my eyes in secret at their seemingly implausible naivete. By then I was also growing increasingly frustrated at Google's sluggish engineering culture. I asked the obvious question: "While I agree that Circles is a very compelling feature, this slide deck is public. Surely someone at Facebook has seen it, and it won't take them long to copy it?"

I was met with a sheepish, if honest look of resignation. They knew the danger of this, but were betting that Facebook wouldn't be able to change something so core to their product, at least not by the time Emerald Sea got to market.

I laughed, disbelieving. Facebook has a hacker culture. They're only a handful of engineers, and they develop with quick, adaptable tools like PHP -- especially when compared with the slow moving mammoths we were using at Google. By that time, 200+ engineers over three months had produced little more than ugly, bug-ridden demos, and everyone was fretting about the sure-to-fail aggressive timeline.

Sure enough, I watched as TechCrunch published leak after leak of Facebook going into lockdown for a secret project. On my side of the fence, engineers were increasingly frustrated. Some leaving Emerald Sea for other projects -- and some were even leaving for Facebook. I had the impression that Paul Adams was not being heard (if you're not an engineer at Google, you often aren't). Many were visibly unhappy that his slide deck, the basis for an upcoming book, had been published for all to see. I even heard a rumor that Google was attempting to stop or delay the book's publication.

One fine day Paul Adams quit and went to Facebook. I was convinced that this was the final nail in the coffin. Engineers outside Emerald Sea -- a cynical bunch at the best of times -- were making snide comments and writing off the project as a dismal failure before it even launched.

Then it happened. Facebook finally released the product they'd been working on so secretly, their answer to Paul's thesis. The team lead at Facebook even publicly tweeted a snarky jab at Google. Their product was called Facebook Groups.

I was dumbstruck. Was I reading this correctly? I quickly logged on and played with it, to see for myself. My former colleagues had started a Google Wave alumni group, and I looked in there to see if I had misunderstood. But no -- it seemed that Facebook had completely missed the point.

There was no change to the social graph, there was no real impetus to encourage people to map their real-life social circles on to the virtual graph, and the feature itself was a under a tab sitting somewhere off to the side.

Then I remembered something the Circles team lead had said: "[We know] the danger of this, but we're counting on the fact that Facebook wouldn't be able to change something so core to their product."

I had originally assumed that he meant Facebook would lack the agility to make the necessary technical changes. I was wrong -- the real point was that they would not be willing to change direction so fundamentally. Given such a large, captivated audience, you could hardly blame them.

And now, Circles have launched as a central feature of Google+, with a generally positive reaction from the tech press and users alike. Wow.

Now, I'm not saying that Circles is the one killer feature to bring down Facebook -- not at all.

What I am saying is that these two products are not playing on an even field. Like Microsoft (MSFT, Fortune 500) and its online Office, it is incredibly difficult for Facebook to make fundamental changes to their product suite to answer competitive threats.

That's why I feel that Google+ has a genuine shot at unseating Facebook.

Of course, there are many other factors to consider. For example, the Google+ sharing console is only ever a click away in any Google property via the toolbar. This is bound to keep users deeply engaged. At the same time, it will probably attract antitrust scrutiny.

On the other hand, Facebook already has strong networks effects in its favor. Stealing away even a quarter of its 750 million users will be an arduous, multi-year campaign, and Mark Zuckerberg has time and again shown that he has the uncanny ability to make good decisions under pressure. So maybe Facebook will decide at some point that it needs to pivot fundamentally and make the necessary changes.

Both companies will compete fervently for partnerships with major Web properties to feature the "Like" or "+1" buttons. And the mobile ecosystem (with Apple (AAPL, Fortune 500) now getting in bed with Twitter) will have a large impact. There are so many variables at play that many of the things I've highlighted may make no difference at all in the outcome.

With those caveats in place, however, here's my prediction: Google+ won't usurp the throne from Facebook. It will instead grow into a strong, competitive player and much-needed alternative, much as Google's Chrome has with Microsoft's Internet Explorer. That would leave Facebook as the largest player, but one without a dominant share of the social networking market.

I predict that when this game is done playing, there will be no more thrones. 

First Published: July 19, 2011: 6:55 AM ET

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Harley-Davidson stock zooms 10% on bike sales

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NEW YORK (CNNMoney) -- Harley-Davidson pulled a wheelie on Wall Street today. Shares of the motorcycle giant shot up more than 10% Tuesday after it reported that U.S. bike sales rose on an annual basis for the first time in nearly five years.

Dealers sold more than 53,000 new motorcycles in the U.S. during the second quarter, up 7.5% from a year ago and the first year-over-year quarterly rise since the fourth quarter of 2006. Global sales climbed almost 6% during the period.

The strong sales helped the Milwaukee-based company boost its second-quarter profit nearly 40% from a year earlier to $190.6 million, or 81 cents per share, as overall revenues rose 18% to $1.34 billion.

The results blew past Wall Street's expectations. Analysts surveyed by Thomson Reuters were looking for the company to earn 71 cents per share for the quarter, on revenue of $1.26 billion.

Harley-Davidson (HOG, Fortune 500) also lifted its guidance for the year. The company expects to ship up to 235,000 new motorcycles to distributors worldwide this year, up 12% from 2010. At the end of the first quarter, Harley's most optimistic forecast called for an 8% rise in shipments for the year.  

First Published: July 19, 2011: 12:24 PM ET

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Putting Fees Into Context

Rocking with the Stones, rescuing hostages, riding bulls: Getting your ya-yas out, boomer-style.

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Stocks poised to rebound on strong housing

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NEW YORK?(CNNMoney) -- U.S. stocks were set to rebound Tuesday, as investors react to strong reports on the housing market and digest the latest batch of corporate earnings.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were higher ahead of the opening bell. Futures measure current index values against perceived future performance.

Stocks began the week sharply lower, selling off nearly 1% on Monday, as worries about Europe's debt crisis and uncertainty over the U.S. debt ceiling continued to hang over the market. Meanwhile, gold prices surged.

The failure of eight banks to pass Europe's latest round of bank stress tests, coupled with the ongoing struggle to find a solution for Greece's debt crisis, have done little to restore investor confidence overseas.

And lawmakers at home have made little progress on a deal to raise the debt ceiling. There are now only two weeks before the Aug. 2 deadline to raise the country's legal borrowing limit.

Philip Isherwood, equities strategist at Evolution Securities, said there are just enough bright spots in corporate results to distract investors -- however briefly -- from the European sovereign debt crisis and political brinkmanship in the United States.

"Some of the results have been coming out well," Isherwood said. "It's just a question of how long you can carry on thinking about that."

Economy: Before the opening bell, the Commerce Department reporting stronger-than-expected numbers of June housing starts and building permits, giving the markets an extra boost.

The government reported an annual rate of 629,000 housing starts and 624,000 housing permits for June.

Economists polled by Briefing.com had forecast that housing starts would rise to an annual rate of 570,000 units in June, while permits were expected to remain unchanged at 609,000 units.

Companies: Quarterly reports from the banking sector will take center stage Tuesday morning.

Before the opening bell, Bank of America (BAC, Fortune 500) reported a net loss of $8.8 billion, or 90 cents per diluted share, in line with analyst expectations.

The bank was not expected to report a profit after agreeing to pay an $8.5 billion settlement to investors burned by fraudulent mortgage securities.

Goldman Sachs (GS, Fortune 500) posted second-quarter earnings of $1.1 billion profit, or $1.85 a share -- missing analysts' forecasts. The investment firm reported net revenue of $7.28 billion.

Citing strong demand, Coca-Cola (KO, Fortune 500) reported earnings per share of $1.20 on revenue of $12.7 billion, beating analyst expectations. Shares of the soft-drink maker were up more than 1% in premarket trading.

Investors will also hear from Dow component Johnson & Johnson (JNJ, Fortune 500) before the market open.

Apple (AAPL, Fortune 500) is scheduled to report its earnings after the closing bell. The iPod, iPad and Mac computer maker is forecast to have earned $5.85 a share. Also out after the close on Tuesday are results from Yahoo! (YHOO, Fortune 500).

Cisco (CSCO, Fortune 500) announced plans late Monday to lay off 9% of its work force, and to transfer another 7% of its staff to another company in a sale of one of its businesses. Shares of Cisco rose about 1% in premarket trading.

IBM said Monday its profit for the quarter rose 8% from last year to $3.7 billion. Excluding one-time charges, earnings per share were $3.09. The positive news had IBM (IBM, Fortune 500) shares up almost 2% in premarket trading.

World markets: European stocks were higher in morning trading. Britain's FTSE 100 edged higher 0.5%, the DAX in Germany advanced 1.5% and France's CAC 40 added 1.3%.

Asian markets ended mixed. The Shanghai Composite was off 0.7% and Japan's Nikkei lost 0.9%, while the Hang Seng in Hong Kong ticked up 0.5%.

Currencies and commodities: The dollar weakened against the euro, the Japanese yen and British pound.

Gold futures for August delivery hit an intraday record of $1,610.70 an ounce, before retreating to $1,605.60 -- a gain of $3.20 an ounce.

Oil for August delivery gained 80 cents to $96.73 a barrel.

Bonds: The price on the benchmark 10-year U.S. Treasury dropped, pushing the yield up to 2.96% from 2.91% late Monday.  

First Published: July 19, 2011: 6:32 AM ET

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Saab story: Will it survive?

FORTUNE -- The Saab soap opera has taken more twists and turns than the fate of the heroine in a Stieg Larsson trilogy. Experienced executives have resigned, potential investors have gotten cold feet and backed out, suppliers have withheld parts, and employees have withheld their labor. The question is whether we are at the end of volume three, when Lisbeth Salander declares victory in her war of revenge -- or still buried back in volume one?

Following some 11th-hour financing maneuvers to free up parts to make cars and workers to assemble them, Saab has announced it would restart production at its plant of its 9-3 and 9-5 models in Trollhättan on August 9. The plant has been dark for two months because suppliers and workers weren't getting paid.

The final piece of the financial puzzle came when the Swedish government approved the sale and leaseback of a majority stake in the plant for $32 million dollars.

Sale and leaseback is a common-enough tactic for cash-strapped companies. A little more unusual is Saab's deal with its one of its Chinese partners, Pang Da, to buy another 1,930 cars worth $63 million and pay in advance. Delivery of the vehicles won't start until the third quarter.

"Our visit to Trollhättan has further strengthened our belief that we made the right decision in entering a partnership with Spyker and Saab Automobile," Pang Qinghua said in a statement. "This additional order is the result of my firm conviction that Saab has the right product program for the Chinese market and our large distribution network will be an important asset in unlocking the potential of the brand."

While production was stopped on Saab's two mainstream models in its ancestral Swedish home, it continued on a third model, the 9-4X, made at a plant in Mexico. That's because the 9-4X is built in a General Motors plant alongside the Cadillac SRX. Production started in May, and the first one was sold last weekend to a customer in Cleveland.

Whether Saab can emerge from its financial and operational chaos and become a functioning auto company again remains an open question. Buying a new car in Saab's price neighborhood is like investing in the company that made it. Saab's brush with liquidation has likely scared off the more cautious among its potential owners.

Longer term, there remains the very pressing issue of how a company as small as Saab can survive with an uneven product line, high-cost manufacturing base, a second- (or third-) tier brand, and scant technical resources.

Even if everything goes smoothly for the rest of the year Saab is on track to sell around 50,000 cars this year. By comparison, Ford (F, Fortune 500) makes that many F-series pickups every four weeks.

What the future holds for Saab depends largely on the energy of one man, Victor Muller, 51, a Dutch businessman who is long on charm and persuasiveness and short of capital. A lawyer by training, Muller had an opportunistic career in salvage and fashion before forming the boutique automaker, Spyker, in 2000 to make high-end exotic cars.

Spyker has apparently never turned an annual profit. As one industry observer put it, "Spyker's only real accomplishment is its continued existence." That didn't stop Muller from rounding up $74 million (and $320 million in Spyker preferred shares) to buy Saab from bankrupt GM.

The shorthand description of Muller parallels other strong-willed personalities who want to play in their own automotive sandbox. The early years of the auto industry are replete with such figures. Just going back to the 1940s, they include car salesman Preston Tucker, engineer John Z. DeLorean, and entrepreneur Malcolm Bricklin.

Their common denominator was an excess of ego and a lack of liquid assets. To make up for the shortfall, it is good to have wealthy backers.

Saab has two new models to launch this year, both designed and engineered by GM (GM, Fortune 500). The aforementioned 9-4X crossover is a variant of the SRX, while the 9-5 sedan shares its underpinnings with the Buick Regal. Although both bear Saab design cues like a clamshell hood and blackout instrument lights, they also share the GM disease of being several hundred pounds overweight. Coming in 2012 is another GM offspring, the 9-3, based on a modified version of the platform used by the Pontiac G6 and 2004 Malibu.

Farther out in the future, Saab will be partnering up with Youngman, a Chinese car manufacturer, to build three completely new vehicles that previously had not been part of the Saab portfolio. They are known as the 9-2, 9-6, and 9-7.

From Trollhättan to Detroit and now to China, it has been a long and winding road for Saab. It will be interesting to see if the Swedish automaker can maintain its identity after all these life-changing experiences and if Muller can write a happy ending to the Saab saga. 

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Investing when 'paralyzed with fear'

NEW YORK (Money) -- I've been investing my retirement accounts in a combination of stock and bond index funds, REITs and a few other investments for 10 years. But after going through the crash and watching the hard-earned equity in my home vanish, I've been investing more conservatively, putting much more in cash than I usually do.

I want to get back to my original investment mix, but I'm paralyzed with fear. I've still got 15 to 20 years before I retire, so I know this cash is really an albatross around my neck. But I don't know what to do. How do I overcome this fear? -- Cindy, California

If it's any consolation, you're not the only one with the jitters. Given the sturm und drang about raising the debt ceiling, worries about anemic job growth and questions about the strength of the European banking system, most investors are on edge.

And it's not as if this anxiety has been building just the past couple of weeks. Many of these issues have been simmering for months, which no doubt is why Morningstar figures show that investors yanked a net $18 billion out of U.S. stock funds in June, the largest outflow since the height of the credit crisis back in October 2008.

But while feeling skittish is understandable, you don't want to let your short-term emotional reactions dictate your long-term investing strategy. Granted, the issues I've mentioned above are serious.

But you're talking about retirement money. This isn't dough you're investing for the next two weeks or two months or even two years. It's money you're investing for two decades, and actually longer since you're not going to cash out the day you retire.

So you want to set an investing strategy that will work for the long-term. Otherwise, you run the risk of becoming one of those people who flee to cash or other perceived safe havens when everyone is focusing on the catastrophe du jour -- and then do the opposite, shifting their money from and into stocks when everyone's euphoric about the economy and the markets.

"In-N-Out" may be a great name for a burger chain. But it's not a good recipe for building a nest egg for retirement. All of which is to say that you need to get back to what you were doing before: investing a diversified portfolio appropriate for your age and risk tolerance and -- aside from occasional rebalancing -- sticking with it.

In light of your recent experience, it wouldn't hurt for you to re-consider just what your long-term investment strategy should be. You don't want to wimp out and limit your growth potential.

On the other hand, maybe the reason you fled to cash was that your original stocks-bonds ratio was actually a little too racy for you. So I suggest you go to Morningstar's Asset Allocator tool and adjust the sliders to see how different combos of stocks and bonds might perform over the next 10 to 20 years.

Once you've got a mix you think you'll feel comfortable with in both up and down markets, plug that portfolio, along with the value of your investments and the amount you're saving annually, into T. Rowe Price's Retirement Income Calculator.

This will give you a sense of whether you're on track to a secure retirement based on what you're saving and how you're investing.

Once you know where you want your retirement investment portfolio to be, the next question is how do you get there?

I say you should move to your target stocks-bonds mix as quickly as possible. I know that puts me at odds with people who would recommend you take a dollar-cost-averaging approach and move in gradually. But as I've noted before, that strategy doesn't really make sense financially.

After all, if your retirement accounts are currently invested, say, 30% in stocks and 70% in bonds and you know they should be the other way around, why would you want to delay getting to the right tradeoff of risk vs. return?

In effect, you would be undermining the very strategy you've just concluded is best for you. (Okay, in the case of assets in taxable accounts there may be tax-related reasons not to shift all your assets at once, but you would still want to get to the right mix sooner rather than later.)

But I recognize that some people just can't do that, whether due to fear or other reasons. And for people in that position -- and it appears you're one of them -- making the move a bit at a time is better than not doing it at all.

If you're going to take the gradual approach, though, I recommend that you at least set a schedule. You could move a pre-set percentage of your portfolio or a certain dollar amount from cash (or whatever asset class you're overweight) to stocks (or wherever else you're light) so you get to your target mix over the course of six months to a year.

This way, you'll at least be going about it systematically rather just winging it, and you'll be less apt to succumb to another case of the jitters and back out.

What you don't want to do, though, is dither or obsess about his move. Nor do you want to play the game so popular these days of trying to figure out what will hold up (Gold? German bonds? The Chinese yuan?) should the debt negotiations falter and the U.S. technically default.

That's a guessing game -- and not one worth engaging in when you're investing money you won't need for more than two decades down the road.

Besides, the whole point of owning a diversified mix of investments is that you can't consistently pick short-term winners and losers. If that were possible, you wouldn't need to diversify in the first place.

So figure out what your mix should be for the long-term and get to that blend as soon as you can. And then try to stay calm so you don't get spooked again by the next big crisis, whatever it may be. 

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Your credit score: Not always what you're told it is

WASHINGTON (CNNMoney) -- The credit score you get from an agency might be quite different from the credit score your lender gets, according to a new study released Tuesday by the Consumer Financial Protection Bureau.

The study found that credit reporting agencies use different models and choose different financial data to crunch into different credit scores for consumers than they do for banks, retailers, landlords and other creditors.

"Given this complexity, it is unlikely that a consumer will often be able to know the exact score that a particular lender will use to evaluate them," the report stated.

Although the Consumer Financial Protection Bureau is two days from officially launching, the bureau had to conduct a number of studies required by the Dodd-Frank Act, including one that compared the differences in credit scores bought and paid for by consumers and creditors.

Creditors use credit scores to decide whether to approve or reject consumers for mortgages, credit cards, auto insurance even and apartment rentals.

Given the boom in the business of charging for a peek at credit scores, lawmakers wanted the bureau to study whether credit scores can vary. A quarter of the revenue that credit rating agencies now make comes from the sale of credit reports and scores to consumers, according to the report.

The study didn't look into whether the credit rating agencies were purposefully giving creditors better or worse credit scores than those provided to consumers.

But the study concludes that consumers and creditors can get different pictures of credit-worthiness, leaving consumers in the dark about the true quality of their credit.

"When a consumer purchases a score from a (credit rating agency) it is likely that the credit score that the consumer receives will not be the same score as that purchased and used by a lender to whom the consumer applies for a loan," the report said.

Requests for comment from the credit reporting agencies were not immediately returned.

The problems are in the different models used, and in the different information provided to get a credit score, according to the report.

The most common scores are FICO scores (Fair Isaac Corporation), which comprise of 90% of the market of scores sold to creditors. But there are different types of formulas available to create different types of FICO scores, the study states.

In addition to FICO scores, each of the credit rating agencies sells their own credit scores to consumers, based on their own secret black-box formula, resulting in a score for "educational purposes," which can differ from the scores sold to creditors.

Also, different scores can be generated when a creditor calls a credit rating agency and reports incomplete information for a consumer, according to the bureau.

Consumers have the right to get one free credit report every year from each of the top three consumer reporting agencies -- Equifax, Experian, and TransUnion. But the agencies didn't have to furnish the actual credit score for free.

Starting Thursday, part of the new Dodd-Frank law will allow consumers to get their credit score for free if they've been denied a loan or given unfavorable loan terms. Lenders who don't use credit scores to make decisions won't be required to disclose a score to consumers. 

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IMF: Debt threatens to engulf Europe

The IMF, run by Christine Lagarde, urges European leaders to quickly and decisively address the debt crisis.

NEW YORK (CNNMoney) -- The debt crisis engulfing Europe poses a significant risk to the global economy and the European Union must take decisive action to stop the spread of contagion, the International Monetary Fund said Tuesday.

In a review of euro zone financial policies, the IMF said the economic recovery is "solid" in most EU nations.

But the fund warned that unresolved fiscal problems in Greece, Ireland and Portugal could "spill over" into other nations and threaten the global economy.

"There was shared concern that the sovereign tensions could spill over into the core economies via the financial system with large adverse regional and global implications," the report states.

The report comes ahead of a key meeting in Brussels on Thursday. European leaders are set to hammer out the terms of a second bailout for Greece and discuss the intensifying debt crisis as it threatens to spread to Italy and Spain.

"The crisis in the periphery is not fully addressed yet," said Luc Everaert, a division chief in the IMF's European Department. "And the directors think this should be done very urgently."

European leaders "should not delay clarifying" the various proposals being discussed to address the crisis, said Everaert. The role that private sector investors will play, he said, "is a large uncertainty that has to be resolved."

Indeed, a key sticking point in the negotiations over Greece is whether banks would be forced to take losses as part of further bailouts of the debt-saddled nation.

In addition, the European Financial Stability Fund, the sovereign rescue program set up last year, should be expanded and modified so that it can be used as a more effective "backstop" for sovereign debt and banking problems, the IMF said.

The fund -- administered by the EU, ECB and IMF -- has the authority to issue up to 440 billion euros worth of bonds backed by EU members. It uses the proceeds to fund low-cost loans to troubled euro zone nations.

To date, the bailout fund has disbursed 9.5 billion euros to Ireland and Portugal. Greece received billions more before the fund was set up.

The fund is being scaled up to 500 billion euros, which should be "sufficient to address contagion," said Everaert. But authorities should be willing to increase the size if conditions in the euro zone deteriorate, he added.

To strengthen the financial system, the IMF called for "immediate measures" to ensure that European banks are sufficiently capitalized.

The European Banking Authority said last week that eight banks will need 2.5 billion euros ($3.5 billion) to survive a serious downturn, and that 16 other lenders passed but should raise more money.

The debt crisis in Europe, which has been playing out for more than a year, has raised concern that the currency block is in danger of breaking up.

To address large structural problems, Everaert said the euro zone needs "binding rules" to ensure fiscal discipline across the 27-member group. He said the euro zone also needs to establish "backstops" for banks and governments to protect against future crisis.

But he sounded optimistic about the ability of European leaders to take needed steps to preserve the union.

"If we can contain the crisis to the periphery," he said. "Then we shouldn't have to worry about the others." 

First Published: July 19, 2011: 1:02 PM ET

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News Corp. stock rebounds

Click chart to track News Corp. shares.

NEW YORK (CNNMoney) -- News Corp. shares rebounded Tuesday even as the media empire's CEO faced questions from Parliament on the company's phone hacking scandal.

Investors shook off images of Rupert Murdoch and his son James fielding questions, and the company's stock price ticked up more than 5%, increasing 84 cents to $15.81.

While the stock was not being punished Tuesday, News Corp. (NWSA, Fortune 500) is not out of the woods: Shares have lost almost 13% since the long-simmering scandal was re-ignited on July 5.

In early July, the stock was sitting near 52-week highs at $18.13, but a media firestorm erupted after allegations of widespread hacking surfaced.

It is alleged that News of the World reporters had hacked into the cell phone accounts of celebrities, a 13-year-old murder victim and the families of dead British soldiers.

News Corp. subsequently shelved plans to buy the remainder of satellite TV company British Sky Broadcasting, and announced it would devote $5 billion in cash to buyback shares.

The company's share price has since stabilized, and the stock is up 2.3% over the past five trading sessions.

One reason the fall of News Corp.'s stock has been arrested is that the publishing arm of the company is responsible for a relatively small part of the firm's business.

In the third quarter, publishing accounted for operating income of $36 million, while cable network programming brought in $735 million and the film entertainment division made $248 million.

And the crisis appears to be contained to the U.K.

American authorities have announced some preliminary investigations, but there are no indications that the tactics of News of the World reporters were practiced by any of Murdoch's American publications.

While News Corp. has lost billions in market capitalization since the scandal broke, the company's stock is still up more than 8% on the year. 

First Published: July 19, 2011: 12:33 PM ET

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Minnesota shutdown nearer to an end

State agencies could reopen soon once the Minnesota government shutdown ends.

NEW YORK (CNNMoney) -- It's almost over.

Minnesota lawmakers will take up the state budget Tuesday afternoon, the latest step in ending the nation's longest government shutdown in recent years.

Lawmakers will vote on 12 bills that were drawn up in accordance with the budget deal that Governor Mark Dayton and Republican legislative leaders reached last Thursday.

The special session to approve the budget is scheduled to end Thursday morning, but the vote should take place before then. If the bills are approved, they will be sent to the governor for his signature, at which point the shutdown should conclude.

"Minnesota will be officially lights on," Dayton said.

The shutdown, which began July 1, brought many functions of state government to a halt. The state parks and rest stops are closed. Restaurants are unable to renew their liquor licenses. And some social service agencies are not receiving their state funds. Roughly 22,000 state workers remain unemployed.

But state services and agencies that were deemed essential by a state judge remain open during the shutdown. The state troopers continue to patrol, and state universities are open. The state is funding custodial care for residents in prisons, treatment centers and nursing homes. And it continues to pay for health care for patients covered by state plans, such as Medicaid.

The budget impasse finally came to an end last Thursday when the governor agreed to plug the remaining $1.4 billion budget gap by delaying state aid to schools and issuing bonds against future tobacco settlement payments.

In turn, he demanded Republican lawmakers set aside various policy issues and drop their demand to cut 15% of the staff in all state agencies. 

First Published: July 19, 2011: 1:49 PM ET

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Housing shows glimmer of progress

NEW YORK (CNNMoney) -- New home construction ticked higher in June, the government said Tuesday, as two key measures topped expectations.

Housing starts, the number of new homes being built, rose 14.6% in June to an annual rate of 629,000 units, up from a revised 549,000 in May, the Commerce Department said.

That's the highest level since January, when 636,000 housing starts were reported. Economists had expected an annual rate 570,000 units, according to consensus estimates from Briefing.com.

The report also said there were 624,000 building permits issued in June, 2.5% above the revised May rate of 609,000. Building permits were forecast to have remained steady at an annual rate of 609,000 units.

While construction has shown some resilience recently, the market for new homes has been stifled by a glut of foreclosed properties.

In addition, the overall housing market has been hindered by high levels of unemployment, despite a modest pick up in hiring this year. Homebuilders have also had trouble financing projects, as credit remains tight.  

First Published: July 19, 2011: 8:50 AM ET

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Best investment deals - 4 expert picks

NEW YORK (Money Magazine) -- Scour equities markets today, and you won't find many obvious deals. Yes, stocks have fallen 5% since the spring, roiled by concerns over Greek debt and a potential slowdown in global growth.

But the S&P 500 still isn't cheap: By one conservative measure, the market's trading at 38% above its average based on long-term profitability. So you have to dig deep to find investments at attractive prices that don't incur undue risk.

A bright spot for bargain hunters: real estate. Many vacation-home markets are down 50% or more from their peaks, making now a compelling time to acquire a second address.

Go where there's still value. One place to look: beaten-down megacap stocks. "Some big companies are making more money than they were three years ago but have the same valuations they did then," says Robert McIver, co- portfolio manager of the Jensen Fund. Or buy a fund with a proven record of finding value over the long run.

Best tech deals -- plus 4 expert picks

Check out an alternative fund. Want downside protection? Wealthy investors and institutions opt for pricey hedge funds, which try to smooth out returns by selling some stocks short.

Be warned -- it's not an easy strategy: The manager has to pick winners and losers. Wasatch Long/Short (FMLSX) has a solid long-term track record, says Morningstar analyst Nadia Papagiannis, and a fee of just 1.34%.

Buy a closed-end bond fund. Such funds typically pay higher yields (and are riskier) than traditional fixed-income options because they (a) invest with borrowed money and (b) sell a limited number of shares.

When those shares are trading for a lot less than the value of the underlying bonds -- say, owing to talk of interest rates rising -- it's time to buy.

The group as a whole isn't cheap now, but there are a few good deals, says closed-fund specialist Cecilia Gondor of Thomas J. Herzfeld Advisors. Fort Dearborn Income Securities (FDI), for example, currently yields 5% and trades at a discount of 8.2%, compared with a one-year average discount of 7.4%, and doesn't rely on borrowed funds. Look for more closed-end deals at cefconnect.com.

Go ETF. Exchange-traded funds have always been cheap. Lately firms such as Fidelity and Schwab have cut commissions on many widely traded ETFs, making them an even better value.

Vanguard Total Stock Market ETF (VTI) , for example, charges just 0.07% yearly, vs. 0.17% for Vanguard's index-fund equivalent, with no trading fees.

Send The Help Desk questions about your portfolio.

To get the basket of stocks at the best price, set up an order with your brokerage to buy when the market dips 3% or more, says Edina, Minn., financial adviser Ross Levin.

Check out second homes. When housing heads south, the second-home market suffers most.

The median price of a vacation home has plunged from $204,100 to $150,000 since 2005, according to the National Association of Realtors. Homes that appeal to renters hold their value better, so buy in an area popular with vacationers in all seasons, advises Tom Kelly, co-author of "How a Second Home Can Be Your Best Investment."

36% OF VACATION-HOME BUYERS PAID ALL CASH LAST YEAR

What you don't know. To beat the other bidders on well-priced vacation properties these days, buyers need to flaunt their greenbacks. Aim to put down at least 30% to 40% to win, says Tahoe-Truckee broker Matt Hanson.

EXPERT PICKS

From Ryan Leggio, fund analyst at Morningstar.

10-YEAR ANNUALIZED RETURN 10%, EXP. RATIO* 1.0%, Fairholme (FAIRX):

Returns: 5-yr: 5.9%; 10-yr: 10%

Top five holdings: AIG, Bank of America, Berkshire Hathaway, Morgan Stanley, Sears

"Fairholme [a MONEY 70 fund] has had a losing streak recently due to manager Bruce Berkowitz's big bet on financials, which he believes are very undervalued. But all great managers look stupid sometimes. Unpopular bets can pay off handsomely."

10-YEAR ANNUALIZED RETURN 8.4%, EXP. RATIO 1.08%, Oakmark International (OAKIX):

Returns: 5-yr: 5.5%; 10-yr: 8.4%

Top five holdings: Daiwa Securities, Credit Suisse, Rohm, Toyota, Canon

"Manager David Herro was Morningstar's International Stock Fund Manager of the Decade in 2010. Despite losses from the Japanese tsunami, Herro argues that the market has oversold; he has 25% of OAKIX's holdings in Japan."

10-YEAR ANNUALIZED RETURN 11.9%, EXP. RATIO 0.85%, Yacktman (YACKX):

Returns: 5-yr: 10.6%; 10-yr: 11.9%

Top five holdings: News Corp., PepsiCo, Procter & Gamble, Microsoft, Coca-Cola

"Yacktman looks for stocks that are priced at a discount to their expected earnings. It's a simple process but one of the best. The fund's track record says it all: Over the past 15 years it has beaten 99% of funds with similar investment strategies."

10-YEAR ANNUALIZED RETURN 6.2%, EXP. RATIO 1.13%, Mutual Quest (TEQIX):

Returns: 5-yr: 4.7%; 10-yr: 6.2%

Top five holdings: Telefonica, GDF Suez, Royal Dutch Shell, British American Tobacco, Time Warner Cable

"This global value fund looks for firms facing short-term challenges and whose shares are therefore selling at deep discounts. The strategy has paid off: Over the last 10 years Mutual Quest has beaten 74% of its peers."  

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Gang of six rolls out debt proposal

President Obama discusses a proposal to cut $3.7 billion from the national debt amid tough negotiations to raise the federal debt limit.

(CNN) -- President Obama gave a boost Tuesday to a bipartisan Senate plan to slash the nation's debt by about $3.7 trillion over the next ten years.

"The framework that [the senators] put forward is broadly consistent with what we've been working on here in the White House and with the presentations that I've made to the leadership when they've come over here," he said.

The plan by the so-called Gang of Six got a largely positive reception when presented earlier to about 50 senators in a closed meeting in the Capitol.

However, with some final details still left to sort out on the long-sought compromise, it was not clear if the proposal would have enough support -- or time -- to play a role in separate congressional negotiations to increase the debt ceiling by Aug. 2.

"We've gone from a Gang of Six to a Mob of Fifty," said an upbeat Sen. Joe Manchin, D-West Virginia, as he left the meeting.

But Manchin stopped short of supporting the proposal, saying only that it had "great promise."

Sen. Kent Conrad, D-North Dakota, who is the Budget Committee chair and a member of the Gang of Six, praised the proposal.

"We've come up with a plan and it's comprehensive and it's balanced and it changes fundamentally the trajectory of our debt," he said.

Sen. Tom Coburn, R-Oklahoma, who was an original member of the gang but dropped out because he wanted deeper cuts to entitlement programs, said Tuesday he had rejoined the gang.

"The plan has moved significantly and it's where we need to be and it's a start," Coburn told reporters. "It doesn't solve our problems. It creates a way forward where we can solve our problems."

Conrad said Coburn agreed to rejoin after the group added $116 billion in savings to entitlement health care programs.

The complex plan -- hammered out over months of steady negotiations -- envisions deep spending cuts to discretionary spending and entitlement programs to make up about three-quarters of the savings. The remaining quarter would come from increased revenues achieved through tax reform.

"What you'll see is significant amount of revenue generated out of the tax reforms and reductions in the (marginal) rates," Coburn said.

Sen. Joe Lieberman, I-Connecticut, said senators are anxious to make a serious dent in the country's $14.3 trillion debt and many are worried an emerging debt ceiling compromise senate leaders are working on would not do enough.

"I think what happened this morning is that the Gang of Six began to turn into a bipartisan majority of senators who want to solve a national problem instead of play partisan politics. It got very emotional in there," Lieberman said. "This is the moment because everybody sees the process drifting towards a kick-the-can down the road response, which is embarrassing."

However, Sen. Rob Portman, R-Ohio, a budget director under President George W. Bush, cautioned that it might be too late for the gang's work to be included in the debt ceiling process.

"This process is moving pretty quickly and obviously the House and White House have to be brought into it. It's a challenge," he said.

Conrad said they hoped to hear back in 24 hours whether senators think there is enough Senate support to move forward with the plan. It would take 60 votes to get through the senate.

The original goal of the gang was to implement the recommendation of President Obama's fiscal commission, which called for $4 trillion in savings over ten years. In addition to Conrad and Coburn, its members include Democratic Senators Dick Durbin of Illinois and Mark Warner of Virginia and Republicans Saxby Chambliss of Georgia and Mike Crapo of Idaho. 

First Published: July 19, 2011: 3:17 PM ET

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Bank earnings in focus on StockTwits

Click the chart to view Goldman Sach's stock.

NEW YORK (CNNMoney) -- With Goldman Sachs and Bank of America trading near 52-week lows, investors are paying a lot of attention to earnings reports coming from the financial sector.

Goldman Sachs (GS, Fortune 500) missed earnings for the first time since December 2008. The stock was down 2% on the news.

Bank of America (BAC, Fortune 500) reported a net loss of $8.8 billion for the second quarter of 2011 due to $14.5 billion in mortgage related losses. The shares of the financial giant slid 2.5% in early afternoon trading, pushing the stock down nearly 30% for the year.

Not everything is cloudy in the financial industry though. Shares of Wells Fargo (WFC, Fortune 500) advanced 4% on better than expected earnings, citing an increase in deposits, lower operating costs and decreasing loan loss rate.

These are some of the topics discussed on StockTwits Tuesday:

bondtrader83: we are still a few years away from being able to take book value seriously.... $C $BAC $JPM

MOFinancial: $BAC Call: We have a portfolio in which every one percent decline in home values impacts this portfolio in a meaningful way.

ToddSullivan: EX settlement charges, $BAC didn't have all that bad of a Q, revs beat, YOY EPS beat, loss prov. down $5B...pretty good actually.

KeithMcCullough: $BAC rallying from the lows - hearing Europig crisis is over (for the next 3 hours of trading)

BryanMortenson: $GS buying back 17% of the co. with a 91M share authorization. Only the company's 5th miss since going public in 1999.

funkybrew: What a world we live in: $GS is being risk averse... wish they were when they were issuing CDS and CDOs right & left for the housing sector. 

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Muni bonds to lose tax advantage?

State and local governments rely on municipal bonds to finance projects like highway construction. But those funds are under fire as Congress considers eliminating tax exemptions on muni bonds.

NEW YORK (CNNMoney) -- As lawmakers are busy trying to reach a compromise to get the nation's fiscal house in order, bond market experts are keeping a close eye on how tax reform will play out as part of the plan to reduce the federal deficit.

That's because one idea policymakers are considering is eliminating the tax exemption on new municipal bonds -- the major draw for investors of state and local debt.

According to estimates from the Joint Committee on Taxation, the federal government will forgo more than $200 billion in revenue thanks to municipal bond tax exemptions during the five years from 2010 and 2014.

The thought of tinkering with municipal bond tax policy has crossed politicians' minds in budget debates over the years, but this time, experts say it's more than just a random musing.

In April, senators Ron Wyden, a Democrat from Oregon, and Dan Coats, a Republican from Indiana, proposed a bill that replaces the tax exemption on municipal bonds with a tax credit for investors equal to 25% of the interest earned.

"Washington's influential and powerful want to overhaul the tax code, so there is more seriousness to the proposal to halt or diminish the traditional tax exemption for municipal bonds than ever before," said Howard Cure, director of municipal research at Evercore Wealth Management.

President Obama's budget request for next year gets rid of the tax exemption on municipal bonds and permanently restores the Build America Bond program, an expired Recovery Act initiative that allowed state and local governments to issue taxable bonds and receive payments from the federal government equaling 35% of their interest costs, albeit at a lower 28% subsidy rate.

At an even lower 15% subsidy rate, the Congressional Budget Office estimates the federal government would save $143 billion over the next decade -- just a drop in the bucket when you consider the president's $4 trillion reduction target.

Still, market participants are taking the proposal seriously, as it could dramatically change the dynamic of the $3 trillion municipal bond market for issuers and investors.

"Current investors would walk away okay, since any changes will likely be accompanied with a grandfather clause -- all existing municipal bond holders would still be exempt for paying taxes on their returns," said Alex Grant, portfolio manager of RS Investments' High Yield Municipal Bond Fund (RSHMX) and the RS Tax-Exempt Fund (GUTEX). "But as those bonds mature, you'll see the asset class start to shrink."

Almost 75% of municipal bond buyers are retail investors primarily because of the tax advantages, Grant said. So any changes to the exemption will ultimately weigh on investor demand for municipal bonds, which state and local governments heavily rely on to fund infrastructure projects.

State and local government bond issuers may have to pay higher interest rates to investors, as they compete with other types of credit, particularly high-yield corporate bonds.

"Municipal bond issuers are dealing with their own budget problems, so they can't really afford to increase their borrowing expenses," Grant said, adding that the challenge of attracting investors in a taxable municipal market would be especially difficult for smaller issuers.

That's because while a taxable municipal bond market will bring new buyers like foreign investors and pension funds, like the Build America Bonds program did, those new investors will likely stick to issuers they're familiar with, such as big states including California and Texas.

"Issuers like local school districts or small water districts would have to attach such a big premium to their bonds that the federal subsidy would not be enough to counter their higher expenses," said Steven Harvey, senior portfolio manager at Standish Mellon Asset Management.

State and local government officials have been lobbying to retain the current tax exemption on their bonds.

"Municipal bonds are a critical tool to investing in infrastructure," said David Parkhurst, director and legislative counsel at the National Governors Association, "If state and local governments aren't able to go to market with their bonds and can't expect additional revenue from the federal government, this would hamstring expansion and infrastructure."

Because of its severe implications, experts are hoping lawmakers will thoughtfully consider the tax policies on municipal bonds.

"I wouldn't expect any debt ceiling compromise would impact the tax exemption for municipal bonds because it's too significant of a topic to consider behind closed doors," said Derek Dorn, a partner at Davis & Harman, and former senior financial counsel to Democratic Senator Jeff Bingaman, D-N.M.

"But when Congress gets through this initial debate and shifts focus to a broad tax reform, they'll scrutinize everything under the hood of tax expenditures," he added. 

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Dow surges as Congress nears debt ceiling deal

Click the chart for more stock market data.

NEW YORK?(CNNMoney) -- U.S. stocks got an afternoon boost from President Obama Tuesday, when he indicated lawmakers are close to reaching an agreement on raising the debt ceiling.

"The good news is that today a group of senators, the 'Gang of Six,' Democrats and Republicans... put forward a proposal that is broadly consistent with the approach that I've urged," the president said in an afternoon press conference, referring to a proposal considered by the Senate earlier in the day.

The nation is fast approaching a possible default, if lawmakers fail to raise the debt ceiling by the Aug. 2 deadline.

Stocks immediately shot up after Obama's speech, with the Dow Jones industrial average (INDU) rising as much as 207 points, before falling back again slightly. At 2 p.m. ET, the Dow was up 181 points, or 1.5%, with 27 of its 30 components in the black.

"Obama came on television and it seemed like there was significant progress on the debt ceiling," said Phil Streible, senior market strategist with Lind-Waldock. "Suddenly there was a lot optimism. With the way they're running out of gold and silver, investors are running out of safety assets."

Gold -- which had breached a new intra-day high earlier in the session -- immediately plunged. Gold futures for August delivery fell $13.40 to $1,589 an ounce.

Stocks had already advanced earlier in the session, as investors welcomed a strong housing report and solid corporate earnings.

Overall, the S&P 500 (SPX) added 18 points, or 1.4%; and the Nasdaq (COMP) gained 54 points, or nearly 2%.

Before the bell, the Commerce Department reported both housing starts and building permits blew past Wall Street expectations in June.

Shares of homebuilder Lennar (LEN) and competitor DR Horton (DHI, Fortune 500) both rose more than 5%.

Companies: News Corp. (NWSA, Fortune 500) remained in the spotlight, as CEO Rupert Murdoch testified before the British Parliament about a phone-hacking scandal that has shaken the press, police and political establishments.

After plummeting to a six-month low Monday, News Corp. shares rebounded 4.7% Tuesday. (Watch the hearing LIVE).

Meanwhile, investors seemed to shrug off disappointing earnings reports from some of America's largest banks.

Bank of America (BAC, Fortune 500) shares fell 2% after the bank reported a net loss of $8.8 billion, or 90 cents per diluted share, as expected. However, the bank was not expected to report a profit after agreeing to pay an $8.5 billion settlement to investors burned by fraudulent mortgage securities.

Goldman Sachs (GS, Fortune 500) posted second-quarter earnings of $1.1 billion, or $1.85 a share, missing analysts' forecasts. The investment firm reported net revenue of $7.28 billion. Goldman Sachs shares fell 2% after the disappointing report.

Harley Davidson (HOG, Fortune 500) was the biggest gainer in the S&P 500, climbing roughly 10%. The motorcycle maker beat Wall Street forecasts on both earnings and revenue, and raised its shipment forecasts for the year overall.

IBM led the Dow's gains, after the chipmaker reported an 8% year-over-year rise in quarterly income to $3.7 billion late Monday. Excluding one-time charges, earnings per share were $3.09. The positive news bumped IBM (IBM, Fortune 500) shares up 5%.

Citing strong demand, Coca-Cola (KO, Fortune 500) -- another Dow component -- reported earnings per share of $1.20 on revenue of $12.7 billion, beating analyst expectations. Shares of the soft-drink maker were up 3.8%.

Johnson & Johnson (JNJ, Fortune 500) fell 0.7%, after the health products company said its second-quarter income dropped 20% to $2.8 billion -- mostly due to drug recalls. But profit and revenue still beat Wall Street forecasts.

Apple (AAPL, Fortune 500) is scheduled to report its earnings after the closing bell. The iPod, iPad and Mac computer maker is forecast to have earned $5.85 a share. Yahoo! (YHOO, Fortune 500) will also report quarterly results after the close.

Currencies and commodities: The dollar weakened against the euro, the Japanese yen and British pound.

Oil for August delivery gained $1.86 to $97.79 a barrel.

Bonds: The price on the benchmark 10-year U.S. Treasury dropped, pushing the yield up to 2.92% from 2.91% late Monday.

World markets: European stocks closed higher. Britain's FTSE 100 edged higher 0.7%, the DAX in Germany advanced 1.2% and France's CAC 40 added 1.2%.

Asian markets ended mixed. The Shanghai Composite was off 0.7% and Japan's Nikkei lost 0.9%, while the Hang Seng in Hong Kong ticked up 0.5%. 

First Published: July 19, 2011: 9:42 AM ET

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Need jobs? Bring in the foreign entrepreneurs!

Legislation making visas more accessible to immigrant entrepreneurs has met stiff opposition. But a nonpartisan organization brings the topic back up against a backdrop of high unemployment.

NEW YORK (CNNMoney) -- Giving more foreign entrepreneurs visas could help lower unemployment and jumpstart the economy, a nonpartisan research organization said.

The politically charged recommendation comes out of the Startup Act, a sweeping proposal released by the Kauffman Foundation Tuesday.

The Act proposes giving foreign entrepreneurs more access to visas and extending green cards to foreign students that graduate from U.S. universities with STEM degrees (science, technology, engineering, and mathematics).

"The startup engine is sputtering," said Robert Litan, vice president of research and policy at the Kauffman Foundation and one of the authors of The Startup Act. The number of startups that employ people has been declining as has the number of jobs that new firms are generating, he said.

Opponents to immigration reform argue that letting foreigners into the country would mean fewer jobs for Americans. But proponents counter that the United States needs foreign entrepreneurs who start companies and create jobs.

Immigrant entrepreneurs founded 25.3% of engineering and technology companies between 1995 and 2005, according to research by the Duke University Master of Engineering Management program. And over half -- 52.4% -- of Silicon Valley startups had at least one immigrant key founder.

The idea of extending visas is not new. In March, bills from the House and the Senate proposed that immigrant entrepreneurs should have easier access to visas. The bills, however, haven't gone anywhere yet.

But the high unemployment rate could breathe new life into the issue -- even as the nation's immigration policy meets with stiff opposition.

"I am a little bit more optimistic about entrepreneur visas than I may have been two or three months ago," said Litan. "If the unemployment numbers stay high, there will be growing interest in this kind of reform as a way to bring the unemployment rate down."

Others agree. "This is exactly the type of legislation that would strengthen the economy and create jobs in the long run," said Darrell West, vice president of governance studies at the Brookings Institution. "So it is crazy that we don't move ahead."

"Fight like hell": Sen. John Kerry, a Democrat from Massachusetts, Sen. Richard Luger, a Republican from Indiana, and Sen. Mark Udall, a Democrat from Colorado, introduced the Startup Visa Act of 2011 in March.

At the same time, Congresswoman Carolyn Maloney, a Democrat from New York, released a matching bill in the House of Representatives.

The bills call for a new temporary visa, known as the StartUp Visa, or the EB-6, which is more accessible to entrepreneurs. The requirements for the current Visa -- the EB-5 -- are high: Entrepreneurs must invest $1 million in a U.S. business that creates at least 10 jobs.

Many of those visas go unused each year. Less than half of the 9,940 EB-5 visas allowed yearly are allocated, according to the Kauffman Foundation.

Not passing this bill could mean America "losing out on these competitive, job creating businesses," said Senator John Kerry in an email. "And I for one am going to fight like hell to make sure that doesn't happen."

One reason the legislation has gotten stuck is because of opposition to immigration reform. Immigration reform advocates are also at fault. They refuse to support it unless it is part of a more comprehensive immigration package.

"Visas for entrepreneurs would pass both houses were it not for the highly polarized political environment and the interest of some individuals holding the popular elements hostage to the less popular ones," said West of the Brookings Institution and author of Brain Gain: Rethinking U.S. Immigration Policy.

The proposed legislation in the House and Senate softens the restrictions, but still maintains the cap on the number of visas. The Kauffman Foundation's proposal suggests a higher limit or no limit at all.

"Look, if anyone can meet that criteria, why kick 'em out? Why have a limit? Let's bring 'em in," said Litan. "There is no downside to it. None. Zero." 

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Murdoch won't leave News Corp.

James Murdoch, left, and his father, Rupert, the leadership of News Corp., testified before the British Parliament on Tuesday.

NEW YORK (CNNMoney) -- News Corp. CEO Rupert Murdoch told members of the British Parliament on Tuesday that he will not step down from his place at the helm.

"No," said Murdoch, when asked during testimony if he would relinquish control of his company in the wake of a phone hacking scandal. "I'm the best person to clean this up."

Murdoch blamed the wrongdoing on others. "They let down the company, me, and it's for them to pay," he said.

Earlier on Tuesday, News Corp. denied reports that Chief Operating Officer Chase Carey is set to replace Rupert Murdoch as CEO of the media conglomerate troubled by a phone hacking scandal.

"As you would expect, the Board [of Directors] has had a plan in place for some time and it regularly re-evaluates those plans," a senior News Corp. official told CNN. "Suggestions that a plan is currently being accelerated or implemented are inaccurate."

The leadership of News Corp. (NWSA, Fortune 500) is in question after the ruling Murdoch family came under scrutiny in the scandal involving the company's now-defunct British tabloid, News of the World.

Rupert Murdoch and his son James, who control about 40% of the voting shares of News Corp., testified Tuesday before members of Britain's Parliament regarding their role in the scandal.

Also during the testimony, the Murdochs denied reports that people affiliated with News Corp. had hacked into phone voice mails of victims and family members of victims of the Sept. 11, 2001 terrorist attacks in the United States.

"We have no evidence of that at all," said Rupert.

"That sort of activity would have absolutely no place," said James, the company's deputy chief operating officer. "It would just be appalling."

After more than two hours of testimony, the hearing was halted by a disturbance in the room, as someone tried to hit Rupert Murdoch with what appeared to be shaving cream, according to CNN. A police officer responded, as Rupert's wife Wendi Deng took a swing at the imposter.

The performance of the Murdochs before Parliament could be instrumental to the future with the company, which has already experienced a stock price plunge of 15% so far this month, after the hacking activity was unveiled. The stock rebounded about 5% in Tuesday trading.

It is unclear whether Rupert Murdoch, who told Parliament during testimony that this is "the most humble day of my life," would be forced out. He said he was not responsible for the problems that have plagued his company in the past few weeks.

James S. O'Rourke, professor of management at the University of Notre Dame, said he does not believe the leadership position of the Murdochs is in jeopardy.

"It's unlikely that there's a mechanism, short of felony conviction, that would force them from office," he said. "I think they're reviled ... but I don't see there's anything on the horizon that would jeopardize their control."

News of the World is accused of hacking into the voice mails of thousands of people, including a missing teenager who was later found murdered and a family member of a victim of the terrorist attacks in London on July 7, 2005. There are also allegations of bribing police officers from Scotland Yard.

In addition, the FBI is investigating News Corp. over the hacking allegations related to the Sept. 11 terrorist attacks.

The scandal has resulted in the arrest of ten people, including Rebekah Brooks, a former News of the World editor who resigned last week as head of the company's News Corp. International unit. It has also led to the resignation of Les Hinton as CEO of News Corp.'s Dow Jones unit, which publishes The Wall Street Journal.

James Murdoch told British lawmakers in his testimony that he has "no knowledge" that Brooks and Hinton knew of the extent of phone hacking at the News of the World tabloid, and has "no evidence" they did anything wrong. He apologized to hacking victims.

In addition to Dow Jones, the News Corp. empire includes Fox News and the New York Post in the United States, and Britain's The Sun and The Times.

The scandal led News Corp. to withdraw its $12.5 billion bid to purchase all of British Sky Broadcasting last week.

In testimony before Parliament, Rupert Murdoch reiterated that News of the World represented "less than 1%" of the company.

"We had broken our trust with our readers," said Rupert to lawmakers, explaining why he had shut down the 168-year-old paper.

CNN's Katy Byron contributed to this report. 

First Published: July 19, 2011: 10:47 AM ET

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