National / International News

When the economy gets a 20 percent discount

Marketplace - American Public Media - Mon, 2014-10-20 11:00

The impact of low oil prices is juicing American families’ pocketbooks in a way similar to a stimulus package, especially if crude stays low. Call it what you want: crude oil dividend, discount, energy quantitative easing.

Oil is 25 percent cheaper since the summer. And for drivers, the stimulus is instant.

“Every additional dollar or two you save at the pump you can use as disposable income right away,” says economist Ed Hirs of Hillhouse Resources and the University of Houston. “ Now you have more money for fast food. Or the six-pack of beer that you've been foregoing the past year or two.”

If oil prices stay low, and many bet it will, the savings will add up to a $200 billion domestic annual stimulus, estimates Citigroup. That’s about the size of the congressional stimulus in 2008. Citi figures the global economic boost is $1.1 trillion – again, annually.

Economist Stephen Brown at the University of Nevada-Las Vegas figures the typical American family saves $40 a month with today’s prices.

“Consumers in Washington D.C., New York and California, among a variety of areas in the United States will all see benefits,” Brown says.

But, he says, fortunes flip for energy producers. States like North Dakota, Wyoming and Oklahoma had benefited from high prices.

Similarly, global petro-states like Venezuela are also hurting from low prices.

“It limits the ability to be able to spend on the more expensive social programs you have within Venezuela,” says global oil analyst Jamie Webster of consultancy IHS-CERA. “It just puts additional pressure on the government there.”

When a economic driver gets a 20 percent discount

Marketplace - American Public Media - Mon, 2014-10-20 11:00

On the show Monday with Kai Ryssdal we're looking at the many potential consequences of the sustained drop in oil prices worldwide. Over the past few weeks we've examined this trend in oil prices and looked how it is effecting our domestic and global economies.

U.S. benchmark oil price dipped below $90 a barrel, earlier this month. As North America producing more than ever, some key suppliers are facing down a price war. Saudi Arabia, for example, was forced to sell at a discount rather than cut production.

But Saudi Arabia's price cuts could slow down the surging U.S. oil production. Domestic producers were in a bind, risking contributing to a downward spiral in pricing. Only "sweet spots" like North Dakota and Texas could still make money, while other operations won't be able to cover their costs. 

Oil demand growth fell to its lowest in five years last week. The International Energy Agency said demand was expected to grow by 700,000 barrels a day, 200,000 fewer than expected. Experts said that could be a sign of slow global economic recovery.

This week we'll look at the consequences in depth to try and answer the question: What happens when a major economic driver gets a 20 percent discount?

 

 

Volatility in context

Marketplace - American Public Media - Mon, 2014-10-20 11:00

So there has been all kinds of volatility on Wall Street lately — triple digit ups and downs.

Well, consider this:

27 years ago yesterday, October 19, 1987, was 'Black Monday.' The Dow was off 22 percent that day which came out to 508 points. The next day, known as 'Terrible Tuesday,' nearly caused the New York Stock Exchange to collapse. 

A similar drop today? 3607 points.

All this to say: context truly is everything.

Why IBM is paying $1.5 billion to lose a business

Marketplace - American Public Media - Mon, 2014-10-20 11:00

Monday was a dark day for IBM investors. The company's stock price fell by more than 7 percent after it released a disappointing quarterly earnings report.

But alongside that announcement came a more unconventional one: IBM is selling its chipmaking business to GlobalFoundries. But in this "sale," GlobalFoundries is collecting the check: $1.5 billion in cash over the next three years. 

"It’s the deal of a century," says Dan Hutcheson, who follows the industry for VSLI research.

The key is to look beyond the headline number. While IBM is paying GlobalFoundries in cash over the next three years, GlobalFoundries will supply chips for IBM servers for the following ten years--inputs that are key for IBM's legacy hardware.

"I know a billion and a half sounds like a lot, but it’s probably a deal for IBM, too," says Hutcheson.

"If you only look at the headline cash number, you are missing a lot of the story," says Rob Salomon, professor at the NYU Stern School of Business.

Acquisitions are complicated, and those complications can make payments to the acquirer economically sound. 

"As a matter of fact, there’s another example where this happened, which is Daimler-Chrysler’s spin-off of Chrysler. In effect, Daimler paid Cerberus to take Chrysler off its hands," Salomon says. 

In this case, there were tax benefits to be had, and the ire of the U.S. government to be avoided. Such deals are rare--Salomon doesn't believe there's been another this year--but aren't unheard of. 

"They’re almost always manufacturing-type businesses, right?" says Peter Cowen, adjunct professor at UCLA Anderson School of Management. "Ones that have heavy overhead, certain amount of infrastructure, certain amount of scale of things that need to unwind if they can’t find a buyer."

In other words, costly businesses — that would be even costlier to shut down.

CORRECTION: A previous version of this story misspelled Rob Salomon's name. The text has been corrected.

NHS workers vote to strike over pay

BBC - Mon, 2014-10-20 10:49
Thousands of NHS staff in Wales vote "overwhelmingly" to take strike action in a row over pay, Unison says.

Eye Phone? Your Next Eye Exam Might Be Done With Your Phone

NPR News - Mon, 2014-10-20 10:46

Doctors need to look at the eyes to diagnose disease, but the machines they use are big and expensive. An iPhone or tablet may do as well, scientists say, bringing eye care to the underserved.

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Busting stereotypes: 100 Women

BBC - Mon, 2014-10-20 10:36
BBC to host day of events focusing on the power of women

McFadden returns to Labour team

BBC - Mon, 2014-10-20 10:30
Ed Miliband appoints former minister Pat McFadden to his frontbench team, where he will speak on European issues.

Chile arrests former Pinochet aide

BBC - Mon, 2014-10-20 10:12
Chile arrests Col Cristian Labbe, former aide to ex-military leader Augusto Pinochet, over the killings of 13 political prisoners in the 1970s.

Podolski dismisses Spurs move rumour

BBC - Mon, 2014-10-20 10:08
Arsenal forward Lukas Podolski takes to Twitter to dismiss transfer speculation linking him with a £10m move to Tottenham.

Twin guilty of murdering brother

BBC - Mon, 2014-10-20 09:59
A man is found guilty of murdering his identical twin in a drunken argument on New Year's Eve.

The Artificial Boundary That Divides Iraq

NPR News - Mon, 2014-10-20 09:59

A checkpoint near Kirkuk marks the line between Kurdish-controlled territory and the world of Islamic State extremists. Some 5,000 civilians stream across daily, lives and families divided.

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New Banksy mural appears in Bristol

BBC - Mon, 2014-10-20 09:41
A new mural by street artist Banksy, a parody of Vermeer's Girl with a Pearl Earring, is painted on a wall in his home city of Bristol.

VIDEO: Man falls 60 feet into Alps crevasse

BBC - Mon, 2014-10-20 09:40
Matt Allum survived a fall at high speed into a 60ft crevasse in the French Alps, near Chamonix.

VIDEO: Bringing internet to India's poorest

BBC - Mon, 2014-10-20 09:37
More than a billion Indians don't use the internet - and addressing that was the focus of a summit in Delhi where Facebook's Mark Zuckerberg was the star attraction.

UKIP's alliance in Europe rescued

BBC - Mon, 2014-10-20 09:34
A Polish MEP joins the UK Independence Party's Eurosceptic grouping, restoring its status in the European Parliament.

Sweden steps up 'mystery sub' hunt

BBC - Mon, 2014-10-20 09:27
Sweden steps up its search in waters off Stockholm and tells some civilian vessels to leave the area amid suspicions of a Russian submarine.

My night in the Texas Ebola hospital

BBC - Mon, 2014-10-20 09:27
My night’s stay in the Texas Ebola hospital

VIDEO: Why US man joined Kurdish fighters

BBC - Mon, 2014-10-20 09:22
The BBC's Jim Muir speaks to an American who has come to fight Islamic State militants on the frontline in north-east Syria.

Plane Of Good Samaritans: Why Fly To (And From) West Africa

NPR News - Mon, 2014-10-20 09:03

On the plane to Monrovia, our NPR correspondent saw the best of human nature in the passengers on board. Almost all of them were headed to Liberia to lend a helping hand.

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