Corporate cutbacks cause trouble

In 2014 the Affordable Care Act will cause corporations to bear the burden of new fees for covering spouses. More and more in our corporate climate, companies are questioning whether they should have to cover spouses/ families or not. Some companies have made a flat rule of simply charging 100$ monthly or 1200$ annually for the spouse. Other companies have made these fees so high that the spouse must find coverage elsewhere. In some situations, a partner is required to pay more for coverage or is simply denied altogether. "Couples then have to decide whether to stick together, even if it means losing benefits, or to split up so that at least one spouse maintains coverage." Companies will feel less obligated to cover families in 2014 when the government healthcare exchanges begin. There are several interesting issues raised with a transition like this, and for now, unfortunately it seems to be driving some families apart.

http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22?link=MW_story_popular

Biggest problems with the budget cuts

http://money.cnn.com/2013/02/21/news/economy/budget-cuts/index.html?iid=HP_MP_River

The article lists the 3 biggest problems with the $85 billion budget cuts set to take effect this coming March 1st. First, they are indiscriminate due to the fact that they are going to be applied in a uniform way across the board. That means needed projects and investments will be cut in equal measure with bloated projects that are duplicative. And people doing good work will lose jobs or pay right alongside people who do shoddy work. Second, they cut from the smallest part of budgets. Most of the cuts will come from discretionary spending - defense and nondefense - which together account for just over a third of all spending. Third, they don't really address the debt. While the cuts will reduce deficits, they won't help prevent the country's debt from growing. That's because the real drivers of the country's debt (to name a few: Medicare and Social Security) are largely exempt from the March 1 cuts.

People are obviously not happy about it and the analysis is telling us that they are not doing us much good. The question now is would lawmakers be compelled to undo at least some of the coming budget cuts before it's too late?

Wal-Mart: Small businesses are hurting, too

http://money.cnn.com/2013/02/21/smallbusiness/walmart-small-business/index.html?iid=SF_E_River

As taxes and gas prices are increasing, consumers are tightening their wallets. However, that is not the end of it. Small firms have also become more cautious about how much they're buying at Sam's Club, according to Wal-Mart. It has been reported that small businesses have been spending less freely lately because they're concerned about gas prices, taxes and the economy. When consumers tighten their wallets, small businesses often follow suit. Business owners are worried about the state of consumer spending and health-care costs. And the economy doesn't improve and business isn't picking up, business owners will no longer be able to afford supplies and other purchases.

Inflation remains subdued in January

http://money.cnn.com/2013/02/21/news/economy/cpi-inflation/index.html?iid=SF_E_River

It was said in the article that CPI (Consumer Price Index) showed prices were unchanged for the second month in a row in January, according to the Bureau of Labor Statistics.With inflation rate being under 2% a year, it's considered subdued and not a threat to the broader economy. And with rising gas prices, the inflation rate is expected to increase in the next couple of months.

Shale falls short for US energy security

I have only on occasion agreed with Bill Richardson’s politics, but he undoubtedly has had a distinguished career.  His recent Op Ed in the Financial Times, “Shale falls short for US energy security” – seems right on the money.

Richardson lauds the opportunity provided by shale.  However, he makes the point that energy independence and its allure of long-term strategic security cannot and should not be attempted only through the use of Shale Energy (both natural gas and oil). 

Today, there is a tough public policy debate about energy.  Some advocate a move away from renewable energy because of cost and reliability issues.  They argue against tax credits like the ITC and PTC.  They favor repeal of the various state portfolio standards and they oppose DOE and DOD grants for renewable projects.  This is an important debate and hopefully all sides will embrace shale but also recognize its limitations.  Long-term energy independence and its corresponding security requires more than shale.  It will take all of our existing resources and perhaps even more.

http://www.ft.com/intl/cms/s/cc529a22-7b51-11e2-8eb3-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fcc529a22-7b51-11e2-8eb3-00144feabdc0.html&_i_referer=

Death Of A Country

This article talks of the continuing disintegration of Syria as it's civil war rages on. Despite opposition from rebel soldiers, it seems that the Assad regime is entrenched and far from being toppled. America's lack of involvement is criticized by the author, who urges Barack Obama to step in and arm the rebels and create a no fly zone to ground Assad's air force. Before Syria can rebuild, the country needs to be pacified and secured, but with some of the rebel fighters being jihadists, extra steps must be taken to ensure a moderate Syria emerges. Its just a reminder of the internal stability other countries like the US take for granted.

House Hunting in ... Canada

According to this article published by the New York Times, the housing market in Canada saw a drastic decrease in sales (30%) in 2012 although prices fell 10%. Single family homes took the biggest hit during price corrections while condominiums have maintained their prices a little better. In my eyes, I see this is an opportunity for investors to purchase single family homes in this market due to the hit they have taken relative to other housing options that have done a better job retaining value. Although the downturn in the economy has cautioned many buyers in certain parts, the article states that about 25 percent of the property buyers in Vancouver are foreign. The realtor interviewed in the article said that Canada encourages foreign buyers especially from the United States who can easily obtain a mortgage in Canada with U.S. based assets. 






http://www.nytimes.com/2013/02/21/greathomesanddestinations/real-estate-in-canada.html?_r=1&adxnnl=1&adxnnlx=1361382679-a4Ee/OAUzdaKuJMtQRcSUw&

American Airlines and US Airways joining forces

America’s third largest airline, American Airlines is merging with US Airways, which is the nation’s fourth largest airline. Their aim is to create a bigger carrier in the U.S. While this news might be great for both the airlines and those who have some sort of a financial stake in the business, it is not so great for the customers.

American Airlines filed for bankruptcy in late 2011. By this merger, the competition between the airlines is dead. This means, there are fewer flights and higher priced tickets for you and me. These airlines could have stayed in competition, continued to discount one and another into bankruptcy but they decided to join forces instead. This article tells that with each passing day, air travel is losing market share.

Unprofitable routes and flights have been reduced. The flight connections available have become less. Flying has becoming expensive and stats show that there are fewer people flying and more people choosing bus services and the Amtrak to travel between states. Overall, the flights have become fewer and generally a lot more expensive.

Who knew the plane seat will turn into a perishable good one day?

http://www.thedailybeast.com/articles/2013/02/14/airline-industry-fine-don-t-fly-with-us.html

Corruption in India masked by high rate of growth

http://www.business-standard.com/article/companies/corruption-in-india-is-masked-by-the-high-rate-of-growth-says-ratan-tata-113010900116_1.html

Ratan Tata, the former Chairman of Tata Group, feels that India is facing corruption at all levels. People are frustrated at this, however, no body is outraged. This is because India still has high GDP growth rate.

People should realize that developing countries, moving towards industrialization, do have higher growth rates than developed nations. In fact, India could grow at a much higher rate if corruption were absent from the society. 

The Myth of the Middle-Income Trap

This article argues against the idea that countries with middle range GDP per capita are destined to hit a growth slump. The "middle income trap" is based on the facts that high income economies have the best technologies and low income economies have cheap labor, while those in between lack a competitive edge. Using China as an example, it claims that as the labor force moves from agriculture to urban industrial work, productivity will decline and the country will face a difficult jump from one model to the other. What this theory ignores, however, is that productivity and change in models are continuous: they don't wait until the end of one system is complete to begin increasing productivity in the other. As the article says, as long as wage and productivity stay in line with one another, an economy can remain competitive.

http://www.economist.com/news/finance-and-economics/21571863-do-countries-get-trapped-between-poverty-and-prosperity-middle-income-claptrap

"Life is Good... If You Can Afford It": The Recession on the Gold Coast

A recent report from the US Census Bureau reveals that the southwest coastline of Connecticut (consisting of cities such as Bridgeport, Stamford, and Norwalk) has the densest concentration of wealth in America. The area is coloquially dubbed 'The Gold Coast' as about 1/5th of the households are considered "high income." 17.9% of the houses in this area earn the amount necessary to put them in the top 5% richest Americans.

It is interesting to note how even amongst the wealthy, wealth is relative. The article cites the example of Gary Felman, who, by his own admission, probably qualifies in the top 1% of Americans but feels like he is in the bottom 30% in earnings of his friends group.

The infrastructure is enviable, with banks such as UBS and the Royal Bank of Scotland having offices in downtown Stamford, while Donald Trump has also constructed the resedential 'Trump Parc' tower. Bridgewater Associates, a prominent hedge fund with about $130 billion in assets, is setting up its headquarters in Stamford as well, bringing in around a 1,000 employees who are rich enough to settle down in the area.

The Gold Coast's success stems in part from its proximity to New York, making it ideal as a commuting suburb for the truly wealthy. Rent and taxes are also lower in this region than in Manhattan and some people, like Matthew Samelson, choose to work from home. Most of the inhabitants are tied to the finance industry and despite the economic recession, growth has continued steadily. Samelson says that the recession has had a bit of an effect with some assets of people under threat of repossession and others simply having to turn over their houses to the banks. But for the large part, these citizens have remained immune.

It might be considered socialist for me to comment that it seems almost unfair that this region have such a high concentration of wealth while the poverty rate in the rest of the country is still so high. However, it does present an interesting debate of whether these people deserve the happiness they got as they worked for it or whether the country is now too capitalist.


http://www.guardian.co.uk/world/2013/feb/15/connecticut-gold-coast-life-afford

Along Coast, Hurricane Left Housing Market in Turmoil

As I finished reading this article published by the New York times it leaves me with a few questions. Many speculative real estate investors are heading to the New York and New Jersey coastlines in search of their next big deal. There are numerous properties for sale that have been damaged from the hurricane. The way I see it is that these investors are helping these communities even though they are purchasing these properties well below what they are worth. The question I pose is that are these investors taking advantage of people in bad situations? Although the prices these property owners are receiving from investors is deeply discounted, I still think the investors are helping these communities rebound. Many lending institutions will not let people take out a mortgage for homes in catastrophe areas due to the risk involved so in my opinion many of these properties that these investors are purchasing would be sitting for a very long time and no one would benefit.


http://www.nytimes.com/2012/12/28/nyregion/real-estate-market-along-coast-upended-by-hurricane.html?pagewanted=all&_r=1&

Catering the Old and the Young

People who have a pension struggle in down years but manage well in boom years. Unlike the 1% increases that public-sector and benefits of working-age people,  pensioners are "triple-locked," meaning that they increase by average earnings - inflation - which is usually around 2.5%. They also have perks, such as free bus passes and free television licenses. The elderly who are in need of long-term care for medical conditions used to sell their homes to pay off bills until the government stepped in at a certain savings amount. Now, the state will take over once they spend 75,000 pounds towards individual care.

Link: http://www.economist.com/news/leaders/21571892-government-looking-after-old-and-younger-people-are-bearing-brunt-cuts-thats

Made in China: Hacking

A United States firm believes they have found evidence that points to a secretive department in the Chinese military as the culprit and brains behind recent cyber attacks on large firms. This unit has been hacking more than one hundred firms worldwide.  There is some belief that the Chinese government played a role in the hacking but its very unlikely to know to what extent. The article reports that a Chinese military department, referred to as Unit 61398 has a hundred to thousands of workers who are highly skilled in covert communications and network security. The New York Times hired a firm to investigate China-based cyber attacks.

Link: http://www.economist.com/blogs/analects/2013/02/chinese-cyberattacks

The Postal Service's next move? A clothing line

US Postal Service announced a record loss of nearly $16 billion for the fiscal year 2012. One of the main reasons blamed for this loss was its mandatory task to spend billions of dollars for a retirement health fund. Furthermore, its effort to find new ways to make profit has been stagnant or showing no sign of reform with response to US government's policies.
This is a clear example why government's intervention may prevent key industry from being innovative and surviving itself given mandates that paralyzed its decentralized solutions.

Click here to read the article.

Construction Taking Over

This article investigates Israel's infrastructure plan and how it affects the life of Palestinians. The government has approved construction for a motor-way that is interferes with the Beit Safafa village. The Palestinians see the approved construction project as a signal to them not being accepted. A public official, who in fact is Jewish, believes that Israel would never disrupt a Jewish community with these projects. There have been protests, vandalism, and other showcases of disagreement.

Link: http://www.economist.com/news/middle-east-and-africa/21571937-arab-village-asked-bow-wishes-jewish-settlers-arab-haven

McKinsey Tries to Recruit Mothers Who Left the Fold

McKinsey & Co. wants its moms back.

The big consulting firm is quietly reaching out to female employees who left some years ago—presumably to start families—to see whether they are ready to return.

Details of the initiative, still in its early stages, are sketchy, and McKinsey offered no further information, except to say it isn't a companywide policy. But the effort is one small signal that at least some companies are re-examining some of the most basic terms of women's working lives.

The issue of lost women workers remains a delicate one for many companies, particularly in highly skilled professions, such as consulting or banking. After spending their 20s in high-intensity jobs, many women leave or switch to part-time work when they have children.

Most companies simply acknowledge the departures and move on, but some of them are starting to recruit talented women who are ready to resume work.

McKinsey has publicly grappled with the issue of recruiting and retaining women. In a 2011 interview with The Wall Street Journal, McKinsey managing director Dominic Barton acknowledged that women accounted for just 25% of the firm's "intake," adding that "if you look at the numbers, we're not where we need to be, so we're losing on the talent side."

According to its website, McKinsey has 8,000 active consultants in the field and 24,000 members in its alumni network.

The other Big Three consulting firms have their own programs targeted at current and former female employees. At Bain & Co., a group of partners oversees women's initiatives, staying in touch with female alumni and promoting flexible work options.

February 19, 2013, 7:36 p.m. ET

Source: http://online.wsj.com/article/SB10001424127887323764804578314450063914388.html?mod=WSJ_business_whatsNews

Business Loans Flood the Market

February 19, 2013, 6:44 p.m. ET

Banks Put Their Liquidity to Work, but Added Competition Puts Pressure on Rates and Elevates Risk

Carl DelPrete, chief executive of suburban New York supermarket chain Uncle Giuseppe's Inc., couldn't be happier with the current lending environment. To fund a recent expansion, he got bids from three banks and calls the terms on the $14 million loan "the best we're ever going to see in our lifetime."

The episode reflects a renewed willingness by some banks to lend cheaply and on flexible terms.

But with banks not far removed from persistent criticism that they were slow to make business loans that would kick-start an economic recovery, a new concern is emerging: Is the pendulum swinging too far the other way?

The surge in loans to businesses is raising worries that lenders are competing so aggressively that some will pay for their largess down the road.

So-called commercial and industrial loans were up 4.4% in the fourth quarter and 16% for all of 2012, according to data compiled by research firm SNL Financial of Charlottesville, Va.

The push comes at a time when many banks have been flooded with deposits as slow economic growth and low interest rates crimp investment. Domestic deposits since mid-2008 have surged 29% to $9.06 trillion, according to Federal Deposit Insurance Corp. data.

source:http://online.wsj.com/article/SB10001424127887324449104578314140876408204.html?mod=WSJ_hps_LEFTTopStories

Trouble with Carbon markets in Europe

The article talks about the possibility of a vote on February 19th on whether to delay the sale of 900m tonnes of carbon allowances from around 2013-2016 to 2019-2020. If the European Commission's proposal is rejected, the emissions-trading system- the only EU-wide environmental instrument which trades allowances to produce carbon equal to half the EU's total emissions- will collapse. The price of allowances has fell to 5 euros per tonne of carbon, much lower than the expected price of 20 euros. The low prices were because of a chronic oversupply of carbon allowances (1.5 billion- 2 billion tonnes of emissions a year). The demand has crashed. If the proposal is rejected, the price can fall to zero, which means the trading market is gone. Also, temporary slide in the price could do permanent damage. Coal is cheap relative to cleaner forms of energy such as gas. As a result, power suppliers build more coal-fired plants and Europe emits more carbon. Rejection of the proposal would affect both Australia's and California's carbon market, as well as China and Korea, which are putting together theirs. A low carbon price would slow down Germany's plans to boost renewable energy. A collapse of EU's flagship policy would also throw into disarray European plans for future environmental reforms. But more than that, the oversupply of allowances would still continue unless the auctions for 900m tonnes of carbon allowances are cancelled, not just delayed.

Source: http://www.economist.com/news/finance-and-economics/21571940-crunch-time-worlds-most-important-carbon-market-extremely-troubled-scheme

Obama: Sequester 'meat cleaver' will hurt economy

link

  Obama has warned Congress that the sequester that is scheduled to kick in will be very harmful to the U.S. economy. This comes after a State of the Union address where the President in triumphant fashion proposed numerous government initiatives to improve inequality, education, climate, and numerous other factors of American life. The interesting comment in this article is Bohener's comment that increased tax revenue will not reduce the deficit, but go into more government programs. This would lead one to assume that when tax revenue is increased, President Obama will have free reign to do what he wants with the money. However, the fact of the matter is, unlike the triumphant tone of President Obama in his recommendation, the President has no control over what legislation will be passed as long as the Republicans own a majority in the House.
  I personally believe the State of the Union Address, the comments by political pundits, and John Boehner all distract from what the people need to know. I personally believe that although the interest rates are low, the increasing deficits as percentage of GDP will eventually catch up with the U.S. if not taken care of. I remember reading a paper issued by the European Union that found correlation between negative macroeconomic impacts and debt as percentage of GDP. The real concern of President Obama should not be to introduce revolutionary programs with his name on them and the real concern of the Speaker should not be to oppose increase in tax revenue at all costs. As the President, I hope President Obama (while completely understandable) stops antagonizing the Republicans for the sake of compromise and show the Democrat willingness to make significant cuts on the condition that Republicans agree to raise tax revenue.

Private Bailout - Government helping the Public Sector

The Federal Reserve Bank of New York and Bank of America struck a private deal in July, however, only became public news last week. The filings that were disclosed last week reveal that the Fed may have given away billions of dollars in potential legal claims. Furthermore, the filings show that the Fed was helping protect the institution from another fraud case. The article provides insight into the legal claims and compensation that the Fed are missing out on for letting BoA off the hook.

Article: http://www.nytimes.com/2013/02/17/business/dont-blink-or-youll-miss-another-bank-bailout.html

Just another barrier for the unemployed

This article outlines how many unemployed workers are facing another barrier: employers seeking new workers are looking for people who have been unemployed due to the bad economy. Many workers who are without a job fear that employers see their unemployment as them being lazy or unmotivated. Some applications or job descriptions describe that they are looking for people who are already working. The article states that some public officials are looking for ways to help the unemployed and not allowing an employer to see current unemployment as a disadvantage.

Article: http://www.nytimes.com/2013/02/18/nyregion/for-many-being-out-of-work-is-chief-obstacle-to-finding-it.html?_r=0

Protesting About Power Prices

http://www.economist.com/blogs/easternapproaches/2013/02/bulgarias-electricity-prices


This article describes certain aspects of life in Bulgaria, a nation that had operated a command economy while living under the Soviet Union. Since becoming its own independent country, Bulgaria has experimented with its newly adopted forms of capitalism, much like all other former Soviet states. The article outlines 'skyrocketing electricity and heating bills' as a particular problem that has provoked significant public outrage. Currently, the market for power is dominated by three foreign-owned companies. As a relatively poor country, high utility prices considerably affect the population. Some Bulgarians propose nationalizing the power companies, which would effectively be going back to more outdated economic ideas. Others have considered further liberalizing the market and decreasing the amount of power and leverage of the three-company oligopoly. Regardless of the outcome, this problem is surely indicative of similar struggles endured by other nations only recently transition from a command economy to market economy.

Quiet Before the Storm

This article talks about the low volatility of the market over the course of the past 14 months. In 2012, the DOW Jones Average only experienced 29 trading days with 200+ point swings. This hasn't happened since 2006. Bob Doll is quoted saying that the high volatility of the market from 2007-2011 as being "abnormal" versus the more quiet levels we have seen. The real question is whether or not a higher level of volatility is predicted to ensue. Regardless, this is prime time for investors to take action on inexpensive hedge options. The Fed's zero-interest rate policy has allowed the world's healing economy to grow in a synchronized way, but it would naive to think that investors could rely on the Federal Reserve to protect them from losses in the future. Is a storm brewing as we continue upwards from the recession, or has the DOW stabilized for now?

http://www.usatoday.com/story/money/markets/2013/02/13/dow-nears-new-peak-amid-eerie-calm/1912509/

Online farmville just got interesting

http://www.nytimes.com/2013/02/18/technology/tech-industry-sets-its-sights-on-gambling.html?pagewanted=2&_r=0&ref=business

This article is about the new innovation in gambling that has swept the world so far but has ye to hit america. Many games such as farmville and many of peoples other favorite games have suddenly become gambling havens for many people overseas, where this industry has been first introduced due to the lack of gambling regulations that are overseas. Although they are looking to come to america very shortly and wreck havoc on the people here as well, estimating a 300 billion dollar profit to come from the United States, just as large as the casino share in the country.

Demand for some rare-earth elements could rapidly outstrip supply

http://www.economist.com/node/21550243

With things like climate change and pollution being talked about a lot more frequently, people are looking to cleaner technologies. Things like electric cars and wind turbines are on the rise currently as people look for clean alternatives for transportation and energy. These clean technologies require some rare earth metals to make magnets for generators. If these technologies are to have the desired impact that some people want they would have to make dramatic increases in supplies. These supplies aren't easy to come by, especially  more recently since China has closed off their some of their exports of rare earth metals. Essentially, the demand of these metals in the next 25 years may far outpace the supply if more suppliers aren't found.