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Tell us what the economy feels like to you

5 hours 29 min ago

It’s doing better by lots of measurements — but people don’t feel it. Which is part of what Obama is out stumping for through November.

The data says the economy’s doing better — much better. But does it feel better? How’s your economy doing? 

Tell us your story above, and we might include it in the show.

When the economy gets a 20 percent discount

7 hours 13 min ago

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

7 hours 13 min ago

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

7 hours 14 min ago

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

7 hours 14 min ago

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 Saloman, 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," Saloman 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--Saloman 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.

The numbers for October 20, 2014

9 hours 13 min ago

Apple Pay launches today, and many are predicting the company - at an advantage with millions of existing iPhone users - could bring mobile payments into the mainstream. Many banks are aggressively advertising the service, the Verge reported, as part of a race to become the default card on users' lock screens.

Apple will report earnings after markets close today. In the meantime, here's what we're reading - and the numbers we're watching - Monday.

43 people

At the 21-day mark since Thomas Duncan was admitted to a Texas hospital and diagnosed with Ebola, 43 of the quarantined contacts have been released, among them Duncan's fiance and her son. Officials pleaded for compassion as their reintegrations began, the Washington Post reported. Additionally, Senegal and Nigeria were both cleared of Ebola over the weekend.

20 seconds

The length of Snapchat's very first ad, a commercial for a movie based on a board game. Snapchat, which is valued at $10 billion, hasn't made money yet, but that could change with the introduction of ads. Universal didn't actually use Snapchat's camera to make a "native" video, AdAge reported, but it did edit the trailer for "Oujia" to look like the app's "stories."

1

That's how many albums have gone platinum this year. Only the soundtrack to Disney's "Frozen," which has moved 3.2 million copies, has the distinction. Every other record has floated under 1 million in sales. By this time last year, Forbes reported, five albums had passed the 1 million mark.

10 percent

The approximate percentage of American Indian and Alaska Natives who have earned a bachelor's degree or higher, compared to about 30 percent of all U.S. adults. Natives have the lowest educational attainment rates of all ethnic and racial groups in America. The American Indian College Fund, founded 25 years ago, was created to assist the country’s more than 30 tribal colleges and universities. These are federally-funded schools located on or near native lands.

1 billion

The tech industry likes to talk about "The Next Billion." It's shorthand for the next billion people that will become online consumers and that makes them the target of tech giants like Google, Facebook and Samsung. This new, targeted market lives in emerging economies like China, India, Brazil and Africa, and have very different needs than the American smartphone user.

What scares you the most financially?

9 hours 57 min ago

It's closing in on Halloween, so we're going to get financially spooky.

We want to hear your stories of the scary side of finance. Have you ever fallen victim to a scam? What was that like for you? What did you learn?

Tell us about it by email, or on Twitter, we're @MarketplaceWKND.

Quiz: Where school never stops

10 hours 19 min ago

The number of year-round public schools is small, but growing fast, according to a report by the Congressional Research Service.

Which region of the United States has the most year-round schools?

IBM will no longer make its own chips

11 hours 14 min ago

IBM just announced that it’s no longer making its own chips, a part of its business that it was losing money on. IBM is paying $1.5 billion to GlobalFoundries Inc. — a company based in Santa Clara, California but owned by an Abu Dhabi sovereign wealth fund — to take over its the division.

GlobalFoundries has a lot to gain by acquiring IBM’s chip division. The company will get access to IBM’s engineers and intellectual property.

“GlobalFoundries will also pick up some semiconductor process technology expertise that hopefully makes the company more competitive going forward,” says Needham analyst Quinn Bolton.

Fewer and fewer tech companies make their own chips. Apple, Dell, Qualcomm all rely on outside manufacturers. It makes sense economically because chip companies have the advantage of scale, says Gartner analyst Sergis Mushell. “If you are making ten of something vs a million of something from a price point perspective it’s more attractive when you make millions.”

The largest contract chip maker, Taiwan Semiconductor Manufacturing Company, quadrupled its capital spending in the last five years from $2.5 billion to $10 billion. If you are a company like IBM you have to look at those numbers and ask yourself, does it make sense to take a loss in chip making when you could just buy them from someone else?

IBM’s answer as of today is no, it doesn’t.

Social media that doesn't compromise privacy

13 hours 6 min ago

Four college students came together to create a social network that does not collect users' personal data. They wanted to build something better than Facebook or an alternative to Facebook. They did end up building that site, but it's by no means a rival to Facebook. That site is called Diaspora.

Author Jim Dwyer documents the start-up story in his latest book, "More Awesome Than Money." He says that Diaspora is supposed to be a decentralized social network focused on privacy, while giving users the sense of connection they crave.

"What they did that was important — and will continue to be worked on — is to look for ways to keep the web a democratic institution where people have authentic control over what they share and who they share it with," Dwyer says.

Diaspora's goals:

  • Not compromise people's privacy: What drove the project from the beginning was the idea that you didn't really need to compromise your privacy to have a good social experience on the web.
  • Keep it decentralized: The entire project of the web as invented was not intended to be in the hands of giant corporations. It was sort of a democratic, decentralized setup.
  • Put control into the user's  hands: You can take your data off of Diaspora. Facebook now says you can take your data off of their servers although that takes a while and they don't really want you to do that.

Why it didn't succeed, as planned:

  • It lacked organic networks: Users' real life friends weren't using it, that causes people to lose interest in using it.

Some consultants see a payday in super PACs

13 hours 50 min ago

A super PAC is sometimes born out of a strong sense of mission – maybe its founder cares about gun control or education reform. But other times, says Stefan Passantino, a partner at McKenna Long & Aldridge, “part of that mission is to create a client for their own consulting firm.”

Political consultants can create super PACs or political nonprofits to raise money, Passantino says, and then they can use that money to pay themselves.

“Yeah, I would say it is the new growth industry,” says Trevor Potter, former chair of the Federal Election Commission and general counsel to John McCain’s two presidential campaigns. “If you are a consultant who is part of the control group that forms a super PAC or one of these nonprofits, then you get to figure out how you are going to compensate yourself, and it is not always a matter of public record.”

Inside a ‘black box’

There are a few ways this can work. A super PAC can pay a fee to a consulting firm that is run by the same consultant who started the super PAC. That firm could charge fees on ads the super PAC buys. According to Potter, this happens in what he calls “a black box.”

“It’s actually pretty hard to figure out how much administrative costs many of these groups have, and then, how much of that is ending up back in the consultant’s pocket,” he notes.

A super PAC’s founder can be an employee of his own super PAC. “Under election laws, there is nothing improper about taking a salary out of your own super PAC,” says Ken Gross, who spent most of his career as an FEC attorney. That money is taxable, however. He notes there is also nothing improper under election laws about taking money you have raised and spending it on personal items.

“Right now, there are 109 super PACs in our data that reported spending money but have made no independent expenditures,” says Sheila Krumholz, who tracks political spending at the Center for Responsive Politics. All they are doing, Krumholz explains, is paying staff and consultants to help them raise more money. “They are capitalizing on political interests in order to siphon off money that would otherwise go to support candidates and parties, and instead, they are using it for their own personal enrichment.”

Krumholz worries that is weakening civic engagement and making the electorate even more cynical.

Easy to set up

Super PACs have only been around since 2010, and according to Potter, one reason they have proliferated is they are so easy to set up. “It has an incredibly simple one-page form you file with the FEC,” he says.  “You need a treasurer and a bank account, and that’s it. You’re off and running.” And creating a political nonprofit that doesn’t have to disclose donors is not much harder.

There are, according to the FEC, about 900 active independent expenditure-only committees, commonly called super PACs, and on top of that, there are hundreds of political nonprofits that have registered with the Internal Revenue Service as 501(c)4s and 501(c)6s.

Potter says that, because there are so many super PACs and nonprofits, political consultants are busier than ever. “The good ones used to just have a campaign or a party they could work for,” he points out. “Now they have all these super PACs; so, people end up bidding for their services.”

Of course, every cycle, some super PACs whither on the vine. Richard Briffault, an election law expert at Columbia Law School, says this highlights something eve the savviest consultant should keep in mind: “At some point, they do have to get donations.”

You can start your own group, hoping it will become a steady source of income, but you have to make sure there is money in the coffers.

PODCAST: The next billion

15 hours 14 min ago

Leave the chip-making to Frito Lay: International Business Machines will sell off its microchip factories. More on that. And SolarCity, the country's biggest installer of rooftop solar-power systems, has a new product: Bonds for consumers to buy into the future of solar in thousand dollar increments. SolarCity has $200 million in bonds for sale. But it already has billions in capital from banks and the stock market. So why go after retail investors? Plus, we've been hearing about Apple and what could be their record profits due out later today. Meanwhile, Google, Facebook, and Samsung are interested in what they see as a new frontier. The catch phrase is The Next Billion...the next billion customers for digital devices. Who are these people and where do they live?

What local government can learn from Hurricane Sandy

16 hours 14 min ago

Just two years ago, Hurricane Sandy knocked out power stations and shut down Wall Street.

Now, Scientists say by the middle of this century, low lying areas from Boston to Baltimore will flood frequently due to climate change, with recovery becoming increasingly expensive. A storm on the level of Hurricane Sandy could cost as much as $90 billion in 2050.

These kinds of changes in the weather will put increasing pressure on state and local governments to boost their financial resilience. 

Click the media player above to hear more.

Is inflation a problem? Look at income brackets

16 hours 14 min ago

It was a case of two people, separated by 243 statute miles, having the same thought at the same time. 

I was on the air talking to an expert about the government’s main assessment of inflation, and meanwhile, a listener near Washington, D.C. was getting annoyed. It would turn out that Gregory, from Falls Church, Virginia was thinking the same thing I was: It’s one thing to say that the Consumer Price Index  hasn’t moved up much in recent years. But be careful before you conclude that inflation is therefore not a problem. 

“Can you please get someone on your show who actually knows that there is real price inflation?” Gregory wrote in a note to us. “Every time I hear one of your guests talk about low inflation, or CPI as reported by the government, I cringe with disbelief!”

I myself wasn’t cringing with disbelief in that shared moment, but I was thinking I’d better do something soon in our ongoing Marketplace Inflation Calculator series on what has been happening to incomes over time. It is one thing to point towards low inflation (low if you leave out the cost of higher education; low if you leave out the cost of health care; low if you leave out the cost of rental apartments in America). Gregory, however, was pointing out that if what we earn is sliding, then our budgets will still be stretched – even when CPI just treads water.   

Experts often tell us that our incomes are mostly “stagnant,” but what do the official numbers show? Our inflation series looks at prices over the last 25 years. The government helpfully examines household income over time by breaking down what we earn into five categories (or brackets). These include the bottom 20 percent of earners, the next to the bottom 20 percent, the middle 20 percent and so forth. When I looked through the data and adjusted for inflation, the numbers were there for everyone to see.

The income of the bottom 20 percent of households in America, on average, did not go up in 25 years, once you adjust for inflation. Those incomes didn’t just stagnate, they went down. The next-to-poorest of the five income categories? The average household income for those Americans also fell. Let’s call the middle income category a draw; depending on which inflation assumptions you use, incomes either went up a tad or fell a tad over 25 years. You already know about the top two earning categories; those went sharply up the last quarter century, the top category by a lot. 

When hearing statistics like these, it’s common to argue that many families these days have not just one, but two or more earners to consider, and this should be taken into account before claiming that incomes are “stagnant” for many Americans. Even so, the data is already adjusts for that in the case above: It is data for average households, not average individual incomes.

The numbers showing that the bottom 40 percent of Americans make less now than they did a quarter century ago is a core notion for anyone thinking about wealth and poverty in America.

SolarCity courts customers by selling bonds

16 hours 14 min ago

SolarCity, the country’s biggest installer of home rooftop solar-energy systems, now has a new product: bonds that let consumers invest in thousand-dollar increments. But with billions in capital from big banks as well as the stock market, what's the point of borrowing up to $200 million from consumers?

It's not the cash, says the company's CEO, Lyndon Rive. At least not primarily. "The number one reason is to create more awareness," he says. "For people to participate, get a financial return. Now they tell their friends: 'Hey, have you looked at solar bonds? Have you looked at solar?'"

And have you looked at SolarCity?  

In addition to raising money, the campaign could cut down on one of the company's biggest costs: sales. An investor is a hot lead, and a source of referrals. 

"Customer acquisition is maddeningly expensive for residential-solar," says Shayle Kann, senior vice-president at GTM Research, which tracks the green-energy sector. 

Right now, SolarCity’s business model only works in about 15 states. But the company can sell bonds — and build relationships — in all 50, for the day when, or if, other states open up.

Advocates in those states — for instance, bond-holders — can only help. "They're not exactly customers if they buy bonds," says Kann. "But they're probably advocates, or supporters."

The push to expand into new markets, and to lock up potential customers in those markets, is key to SolarCity’s overall strategy, says Severin Borenstein, an economics professor at Berkeley who studies renewable energy.  

SolarCity's competitors are trying the same thing. "Right now, a lot of solar companies have the strategy of trying to get large enough on what is basically a bet on getting out ahead and being the recognized name brand, which could potentially have huge value," says Borenstein.

He compares it to the bet Microsoft made on computer operating systems in the 1980s. SolarCity wants to be the Microsoft of solar.

But what if it’s the AOL instead? Remember all those CDs from the 1990s?

That's not the worst-case scenario, says Borenstein. "It's not just a matter of whether they're going to be the Microsoft of solar or the AOL of solar," he says, "but whether they're going to be the Microsoft of solar or the Microsoft of a product that never takes off at all."

Residential solar isn't a sure bet, says Borenstein, so neither are SolarCity's bonds. "While it's a very exciting company right now, I think it's probably in a more volatile business than most people would invest in."

You've got mail! AOL sent out zillions of these.

unknown/PandoDaily.com

Making a smartphone for just $25

16 hours 14 min ago

Here’s a market you’ll be likely to hear more of in tech: “The Next Billion.” It's shorthand for the next billion people that will become online consumers, and that makes them the target of tech giants like Google, Facebook and Samsung.

The next billion live in emerging economies like China, India, Brazil and Africa. Jenna Burrell, a professor at UC Berkeley’s School of Information, has been studying one of these markets, namely Ghana, since the early 2000s. She says even back then, it was clear that people who wanted to get online weren’t going to use desktops.

“You know it’s a small number of people who were going to Internet cafés, but almost everyone was either using, or owning or getting possession of a mobile phone,” Burrell says.

While a growing number of people in Ghana have smartphones today, the market is very different from the U.S.

Burrell shows me a phone she bought there. It has an antenna for the built-in transistor radio, and it has a flashlight for when the electricity goes out.

Burrell cracked open the back of her cellphone and points: “Underneath the battery pack where most of us don’t really look, it’s got a slot for your SIM card.”

Like most of the next billion, the majority of people in Ghana don’t have pre-paid mobile plans. Instead, they use SIM cards, which are basically phone cards or prepaid time that you insert into your phone.

“This unit is worth about two minutes of airtime, and that gives you a sense of how it’s a very precious commodity,” she says.

Burrell says that on a continent where most people make about a dollar a day, even a few minutes of airtime is a big expense. That’s where Mozilla, a non-profit organization teaming up with local carriers to make affordable phones, comes in.

Andreas Gal, Mozilla’s chief technology officer, dumps a number of handsets onto a desk in his Silicon Valley office. 

“I brought these $25 smart phones,” he says. “These are the devices that launched recently in India.”

Critics of these $25 phones say web pages take forever to load, and you can’t run more than one app at a time.  

But forget the quality of the phone, said Rakesh Agrawal, the CEO of reDesign Mobile, which develops products for the next billion. He says in most emerging economies, it's data that's the problem—data plans are prohibitively expensive.

“You have to think about how much people can afford and what kind of services they can use over their smaller data pipes,” said Agrawal.

He says the next billion aren’t going to run apps mindlessly like we do. Which means, in part, tech companies can’t rely on advertising to make money off them.

“If you’re living on a dollar a day, Proctor and Gamble can’t afford to advertise to you, because you can’t afford their products,” Agrawal said.  

Despite these odds, tech companies will continue to pursue the next billion. Smart phone ownership — and sales of apps — will inevitably slow in the developed world over the next decades. Tech companies need the next billion to keep growing. So, they're getting ready.

The American Indian College Fund turns 25

16 hours 14 min ago

The American Indian College Fund celebrates its 25th anniversary with a fundraiser in New York on Monday. The nonprofit was created to assist the country’s more than 30 tribal colleges and universities. These are federally-funded schools located on or near native lands.

Only about 10 percent of American Indians and Alaska Natives have a bachelor’s degree or higher, compared to about 30 percent of all adults, according to the group.

The big reason is poverty, says president Cheryl Crazy Bull. Tribal colleges cost on average $15,000 a year to attend, she says. The maximum federal Pell grant for low-income students covers only $5,730. 

“It’s a very affordable education,” Crazy Bull says. But for students living on reservations with a 60 to 80 percent unemployment rate, “it’s a huge gap.”

The College Fund tries to bridge that gap with scholarships. It’s aiming to raise an extra $25 million this year.

The group recently got a boost from Comcast and NBC Universal: $5 million in ad time for a new public service campaign.

Here are a few numbers from the American Indian College Fund:

Up to 95 percent

The unemployment rate on some American Indian reservations. In total, almost 29 percent of American Indians on reservations live below the federal poverty level. 

$16,777

The per capita income of American Indians and Alaska Natives, according the American Community Survey in 2013. Meanwhile, the average cost of attendance at a tribal college or university is $14,566.

10 percent

That's approximate percentage of American Indian and Alaska Natives who have earned a bachelor's degree or higher, compared to about 30 percent of all adults. Natives have the lowest educational attainment rates of all ethnic and racial groups in America.

Quiz: Where student spending hasn’t bounced back

Fri, 2014-10-17 14:17

Per-student funding is still below pre-recession levels in 30 states, according to a report by the Center on Budget and Policy Priorities.

Which state cut per-student funding by the greatest percentage between fiscal 2008 and 2015?

See the report here for information on all the states.

My Money Story: Eustace Conway, off the grid

Fri, 2014-10-17 13:14

Eustace Conway is a Naturalist who lives in the mountains of Boone, North Carolina. He's been living in the forest there for nearly 40 years.

When Conway was 17 years old, he left the suburbs to live outdoors. He has hiked the entire Appalachian Trail, and has crossed the United States on horseback from the Atlantic to the Pacific.

When it comes to money, Conway says he has little use for it. He is the subject of the book, The Last American Man, by Elizabeth Gilbert.

Tech IRL: What meerkats have to do with the future of the internet

Fri, 2014-10-17 12:01

Thanks to white broadcast spaces, you can stream meerkats at the London Zoo:



Or, otters:



Or, even Galapagos tortoises:



White spaces basically consist of the channels not being used by traditional TV, and, like the partnership between Google and the London Zoo illustrates, can be used to transmit other types of information.

What's interesting about white space waves is that they travel extremely far; the wi-fi in your office starts to slow down when you're too far from an internet router, but white space waves can travel 6 miles without suffering. It could be used to deliver Internet broadband on the open ocean, or for networks of sensors that can protect cities from natural disasters.

But, the future of white space depends on what the FCC and other regulators decide to do, and whether some of these tests, like the meerkat cameras, prove we can use white spaces without interfering with channels that are already being used. 
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