GM offers $1,000 incentive to Toyota owners

This article is interesting because it deals with "conquest incentives"(material incentives)- which in this case means GM offering incentives to Toyota owners to buy GM vehicles. GM is attempting to capitalize on the recent Toyota recall of over 2.3 million vehicles by offering $1,000 rebates and/or current lease payments for Toyota owners, as well as 0% financing for GM 2009-10 models. Toyota had to recall their cars because of problems with the gas pedals, a similar problem that they dealt with in which they recalled 4.2 million vehicles last September. It is a good business plan for GM to take advantage of the mistakes in production that Toyota has made.

Obama: Here's $5,000. Go hire someone.

This article explains Obama's proposed tax break as an incentive for hiring new workers. During his Wednesday State of the Union Address, Obama listed jobs as his number one priority. Last month, Obama mentioned a tax break to spur job creation, and has now elaborated to explain that employers would get a $5000 tax credit for each net new employee they hire this year. Obama hopes that the recent news about an increase in GDP will increase consumer consumption and give businesses even more of an incentive to hire new employees. He went on to explain that the tax credit would be available to any size firm and would be retroactive to the beginning of 2010. The most money any one firm could receive would be $500,000. Some smaller firms are complaining because they need the money before they hire new employees, not after. But the idea is gaining some momentum in Congress because it is outlined to avoid the abuses that could have occurred with other plans (like employers hiring more employees at lower salaries or employers firing 20 people just to receive the break for hiring 20 more).

Economy soars 5.7 percent, fastest in 6 years

I don't think you have to be an econ genius to understand this article. However, I'm just posting it because I'm sick and tired of conservatives calling for Obama to do more - the economy grew by almost 6 percent in the last quarter. Now a large part of this had to do with the Christmas season, but growth is movement in the right direction and people need to stop demanding more from the government.

Jobless claims, durable goods point to weak growth

This article looks at the overall state of the economic rebound, in as generic a fashion as Yahoo! news can deliver. However, for those who watched the State of the Union last night, it shows how the administration is signing on to tackle some of the key problems that are slowing the recovery - namely, manufacturing growth, job creation, and infrastructure development. At the same time, Wall Street is anxious over administration plans to regulate banks and - as Dr. Skosples said yesterday in class - attempt to lower risk so that banks are no longer too big to fail.

If anyone else watched the speech last night, this post could be a forum to discuss whether or not Obama's proposed policies will help promote efficiency and/or equity as we emerge from the recession.

String of Disappointments, Including Apple, Lower Shares

This article summarizes the falling of shares, stating that the DOW fell 150 points yesterday.

I find this interesting, especially with the release of the new iPad on Wednesday.

“People are expecting a lot out of Apple, and they can’t disappoint,” said M. Jake Dollarhide, chief executive of Longbow Asset Management in Tulsa, Okla. “They can’t afford to get a subdued reaction to their product.”

Ford on the rise: First reported profits in 4 years.

The American auto maker is increasing market share and has been profitable in all of its regions including the challenging North American market. CEO Alan Mullaly talks about competing on a global scale and how being consistent and delivering a solid product has helped the company. Shares are now above $12 from $1.50 in February 2009. The company also won awards at the Detroit Auto Show. Exports also explain that Ford will play off of Toyota's recent missteps. This is just encouraging to read about a great American company get out of the red and establish authority in this industry. America needed this boost to our confidence.

Advocates of Climate Bill Scale down their Goals

I thought this would be an appropriate addition to our class discussion on market failure and the role of government in regulating such failures.

In this article, we see how the Obama administration is attempting to regulate the climate and energy market with the cap and trade policies that is favored by Obama administration. Despite the fact that climate change is a national security threat, we see how other competing aims such as creating jobs for the economy complicates the political decision making process. This is thus a case in point of how the government attempt to allocate resources efficiently is often politicised and complicated by interest groups.

With Sun, Oracle Aims at Giants

Oracle was recently allowed to buy Sun Microsystems after months of scrutiny by European regulators. With this acquisition, Oracle is now competing with Dell, Hewlett-Packard, I.B.M., and Cisco Systems to provide hardware and software to corporate clients. Oracle and its competitors can provide all elements, like databases and servers, that companies need and install all the elements together. Businesses would have to go to multiple vendors in order to obtain all the parts without working through one of these companies. Oracle used to only provide databases in the past. Potential clients like the idea of one-stop shopping, but fear that with only a few big companies to choose from instead of smaller companies providing a single component, price might rise.

Companies do have a reason to be worried. Part of the failure of markets is when there is a decrease in competition. The convenience that these large companies provide might keep future clients from looking at cheaper, single product companies. European regulators were smart to take so long to approve the merger, since consumers may get hurt. The companies must also be careful of becoming too big. When a company grows large, they need to do more planning. Too much planning leads to a company being inflexible. In a market system, being inflexible leads to a company's downfall.

Stimulus more expensive (Provision of Public Goods)

This article describes how the The American Recovery and Reinvestment Act is now expected to be $75 Billion more expensive, with the projected total to be around $862 Billion. The article relates well to class because on 1/25/10 we talked about government intervention especially in the case public or social goods like roads, where private companies usually either do not or will not produce because it has very high fixed costs associated with it, is not very profitable (especially in the short run) and is not very public-friendly, when you pay constant tolls. So, the government takes care of it, and in turn, especially in this case, is providing construction jobs that people otherwise would not have with the construction sector hit hard from the housing crisis and lack of building. On top of this, it is increasing the budget - even though we are supposedly decreasing it in 2010 to 1.35 trillion, down from 14trillion. Included in the additional $75B are food stamp and unemployment costs that were higher than expected due to the extreme amounts of unemployment.

Verizon to Cut 13,000 Jobs

With a fourth quarter loss, Verizon plans to cut 13,000 jobs in 2010. Even after cutting 17,000 jobs last year, there was still a net loss of $653 million. Sales rose from $24.6 billion to $27.1 billion, but below the analyst estimates of $27.3 billion. Verizon’s fixed-line revenue plunged 3.9% from $11.9 billion last year to $11.5 billion this year. This is not surprising news considering today’s economy and all the competition amongst cell phone companies.

US Retail Industry Sales Seen Up 2.5% for 2010

According to this article on cnbc.com, the economy is showing some glimmering signs of hope. This article reports that U.S. consumer confidence rose for the third straight month and highest since September 2008. This indeed is an encouraging sign. Another notable statistic is major retail shares tracked by the Standard & Poor's Retail Index rose 1.1 percent. This is coming off of retailers finishing up a holiday season that was forecasted to be dismal. Job losses have been slowing in numbers every month as well so hopefully employment follows this trend. There are some other important things that relate back to class and that is high income consumers are more likely and in fact, are spending more because they feel that their job is secure. Comparing this to middle income markets, retailers will struggle to break through to this segment. Forecasters also predict that the recovering housing market will continue the retail market.

Home Prices Up Slightly in November

There are mixed feelings within the community concerning the Housing Prices. According to data released Tuesday by Standard & Poor’s Case-Shiller Home Price Index the recovery in the housing market is struggling to stay alive. In November on a seasonally adjusted basis, Home prices were just able to create a 0.2 percent gain. David M. Blitzer, Chairman of the Index Committee at S.&P. declared in a statement, “There is no clear sign of a sustained, broad-based recovery.” A second index, compiled by the government using different data, showed a significantly healthier market. The Federal Housing Finance Agency said Tuesday that its index rose 0.7 percent in November from the previous month, however the October data was revised downward. On the other hand, a third national housing index, released last week by the data firm First American CoreLogic, showed a decline of 0.2 percent in November. However, the pricing data lags the sales data by one month. November home sales were unusually strong because of the rush to take advantage of the government’s tax credit. But December sales, released Monday, fell sharply. That is leading analysts to believe that the long-anticipated winter slowdown has probably begun, even if it is not yet reflected in the data.“We expect home price deflation to resume in the December or January Case-Shiller indices and continue through 2010,” Zelman & Associates wrote in a research note. However, prices in 15 of the 20-city composite cities rose in November from the previous month, while 5 fell, including Chicago, Miami and New York.

Budget Freeze is Proposed

In order to fight the US' $1.4 trillion deficit, President Obama has proposed a three-year stop in spending. This would account for 1/6Th of the federal budget. There will be limits on discretionary spending, but not on military, veterans, homeland security, social security, Medicare and international affairs. The freeze would be on 17% of the budget, $447 billion, which hopefully will save $250 billion over the decade. The cuts potentially will be in the departments of Housing and Urban development, Justice, Energy, Transportation, Agriculture, and Health and Human Services. This is just one of several proposals that will be in the State of the Union address. This is all in efforts to fix our economy and the huge amount of spending that the Democrats have done since in office. Along with the proposal to scale back the federal budget, there is talk of energy reformations and more support for middle-class families.

After 10 Years, Federal Money for Technology in Education

More than 10 years ago, the former president of NBC News and PBS, Lawrence K. Grossman and the former chairman of the Federal Communications Commission, Newton N. Minow, were both asked to research how nonprofit organizations such as schools and libraries could tune into new digital technologies. They planned to construct a multibillion dollar trust to research learning technology. Their organization could be handing out grants by this fall. Although the organization which has bipartisan support did not get as much funding as planned, they continue to expect growth after a few successful projects. This is an example of a positive externality where private costs are greater than social costs. The public is benefiting greatly by expanding their ability to use technology at the expense of private parties and government spending.

Sites to Refuel Electric Cars Gain a Big Dose of Funds

Better Place is a start-up company that has high hopes for creating a green alternative for gas-stations - they are in the process of creating "charge spots" for electric cars, which is a large step in an eco-friendly direction.

Today, Better Place is set to receive $350 million towards its electric car goals, making its total $700 million in investments. The whole business idea is an extremely costly venture, but with such huge financial backing from places like Morgan Stanley and HSBC the company is on its way to putting their goal of having electric car charging centers into reality. The first stations are expected to be built in Denmark and Israel, but Better Place hopes to extend its reach to the US, Australia, and other cities in Europe.

A major obstacle that Better Place faces is convincing the public to go green and to begin using electric cars, as well as convincing auto-makers to begin making more eco-friendly cars. Additionally, it is estimated that Better Place will need billions more in order to finance their potentially ground-breaking company.

In Unions, Government Workers Surpass Private-Sector Workers

Many people, when they hear the phrase “union worker,” probably imagine someone who works on an assembly line. But such blue-collar jobs are probably no longer representative of the typical union man or woman.

For the first time in American history, the majority of the nation’s union members are government workers, rather than private-sector workers, according to a Bureau of Labor Statistics report released today. This is despite the fact that there are five times more wage and salary workers in the private sector.

McCain says campaign finance reform is dead

This article is brief, so I will include a link to the NYT report on the Supreme Court decision so you can dissect the particulars:
http://www.nytimes.com/2010/01/22/us/politics/22scotus.html

What this essentially means is that the Supreme Court believes that the First Amendment is more inclusive than the contested legislation currently reads, and in the instance of campaign-finance legislation, rules that corporations may donate unlimited sums of money to political candidates. Currently, under McCain-Feingold, contributions are limited to a certain amount to prevent candidates from garnering huge sums of money. This is not to say corporations WILL; it merely states they can. For economics, this does mean that politicians will have more of an incentive under the current electoral system to seek donations from corporations (and thus support policies that corporations prefer). For those of you who have read Freakonomics, this does not necessarily mean we will live in a corporatist state - money plays a large but not all-consuming role in politics. However, it is an important decision and should encourage people on both sides of the aisle to try and manipulate the new system.

Cities to Rebound, but Job Growth Stunted

The "nation's economic engines", i.e. large metropolitan areas have had unemployment rate up more than 50% over the year in almost one-third of cities as of Novermber of last year. The cities make up 86% of U.S. employment and 90% of output, therefore cities were the first to feel the strong hit of job cuts and unemployment in general. The article believes the night is the darkest right before the dawn as it claims the economies of the urban areas will start improving in 2010, however, they will first witness the highest unemployment rate in the first quarter of this year.

The report from the United States Conference of Mayors showed that not all the regions were hit equally - the West, Southeast and Uppen Midwest happened to be the unfortunate ones with Michingan being in the lead (7 large cities in Michigan had highest unemployment rate) mainly due to real estate market problems and because those regions/cities are heavily dependent on the manufacturing sector.

Bailouts, Stimulus Were ‘Essential,’ White House’s Axelrod Says

White House senior advisor, David Axelrod defends the decisions made by the Obama Administration when faced with the recent economic recession. What was seen as a highly unpopular decision to provide bailout aid to so many financial institutions on Wall Street, the very same group of companies and employees that are supposed to protect and maintain our economy, Axelrod defends the policies implemented especially as the Democrats face pressure from the loss of a senate seat in Massachusetts. However the process of recovery from the recession as economic growth was at the fastest pace in nearly four years. President Obama will continue to spur employment opportunities to further boost GDP however may face opposition from Republicans wishing to continue spending and continue to accumulate debt.

Well, It Wasn’t a Bad Year for Everyone

Interesting break down of the major private industries and their change in sales over 2009.

"The last year will be remembered as a bad one for business. Losses, layoffs, pay cuts, furloughs, closings — the numbers and the news were largely negative. And yet, over all, some industries managed to avoid the negative vibrations. A sampling of sales figures in major industry categories makes this clear."


Despite the hardships for most industries, the health care and educational systems sales are increased.

Obama presses banks to lend more

This article is about how Obama has urged the county's biggest banks to lend money to help the economy recover from the recession. Obama said that America's banks were should help by doing their part after they have been saved by taxpayers. He also stated how banks should ease up on lending as they were saved by public bailouts. Chief executives of banks who were present stated they would try to increase lending. US banks bosses have said that lending is limited by factors over which they have no control. Businesses are reluctant to grow since banks are not lending but without lending it will be difficult for the economy to grow.

Wall Street's Latest Worry: Life Without Bernanke

In the turmoil of the current recession, China's economy growing rapidly, and the democrats losing the Mass. Senate seat, the vote to reconfirm Bernanke as the Fed's Chairman. This comes after more Senators have come out against voting to reconfirm Bernanke for another term. His current term is terminating at the end of the month. Wall Street has grown trustworthy that Bernanke will raise interest rates in time to control inflation so that we can continue our path towards economic growth. Bernanke is the reason why we didn't fall further into recession and if he is removed from office Wall Street's confidence in the government will be shaken. This comes a day after Obama announced his plans to put tighter restrictions on big banks. As the market showed towards the end of the week that removing Bernanke might send the economy into a downfall. The next question is who would take Bernanke's place as chairman. There is no sure predecessor to Bernanke, which is another scare for the economy. Keep in mind this was written by the "Fair & Balanced news," Fox.

Out of Bankruptcy, Genetics Company Drops Drug Efforts

The article discusses DeCode Genetics climb out of bankruptcy through company modifications. They have decided to continue their genetics research and gene-based diagnostics but the change is they are no longer developing drugs from their discoveries. It is expressed that DeCode Genetics could no longer make money for their marketable products so that is why they've chose to stop developing drugs. The company's other change is it will also be run by a new chief executive.

Since listening to Romer's broadcast, it appears that this article could support the purpose behind Meta-Ideas. Although DeCode Genetics original change resulted from bankruptcy, they could still look at their new objective as focusing on new technology.

Leading Economic Indicators Rise

The latest report from The Conference Board show that the economy is starting to rebound. The Leading Economic Index (LEI) shows increases in economic productivity of .3% in October, 1.0% in November and 1.1% in December. The (CEI) rose .1% in both October and November and another .1% in December. The Conference Board Lagging Economic Index (LAG) declined by .2% in October, .5% in November and .2% December. According to this article and the statistics it looks as if the economy is taking a turn upward.

Business Looking Up For Luxury Retailers

The article looks at luxury retailers such as Saks Fifth Avenue, Macy's, Nordstrom and Tiffany's are peforming in the current economic downturn. Surprisingly they are faring better than experts had thought. Saks, for instance showed a 9.9% gain in December store sales but the retailers are aware that the current upturn is nothing like the bull market that they were seeing before the recession. The article emphasizes that although the luxury sales market has taken an upward path since last year, people have changed how they shop and that it may never return to normal levels.

Sam’s Club Cuts 11,200 Jobs

Sam's Club, the No. 2 U.S. warehouse club, and division of Wal-Mart Stores Inc is outsourcing about 10 percent of their in-store product demonstrations and is eliminating its new business membership representative jobs, essentially cutting around 11,200 jobs. The warehouse club will cut 10,000 jobs primarily held by part-time workers, and instead use Shopper Events, a third-party company, to run its in-store product demonstrations. However, the current demo employees will have the opportunity to apply for new positions with Shopper Events. The Chief Executive Officer of Sam's Club, Brian Cornell defends these cutbacks by saying, "We look at this as an investment in the in-club experience. This is not a cost-cutting move for us in the short term. We really hope it will be cost neutral for our operation. It's an investment in building loyalty, enhancing the member experience and driving future growth."