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Updated: 33 min 33 sec ago

US sugar policy leaves sour taste for candy makers

Wed, 2014-08-27 13:32

The U.S. Commerce Department will impose new duties on sugar from Mexico, responding to complaints from U.S. growers that Mexico was dumping sugar here for less than it sells for there. Sugar growers have a track record of getting what they want from policymakers: Government protections have kept U.S. sugar more expensive than the world market price for decades.

That doesn't sit well with bakers and gumball makers.

Make that gumball-maker. Singular. George Stege,  president of Ford Gum and Machine Co. in upstate New York, says he is the only gumball manufacturer left in the United States. His last domestic competitor, he says, moved production to Canada more than a decade ago.

"The advantages of being in Canada are that they can acquire sugar at world sugar pricing, which tends to be 40 to 50 percent lower than what I’m paying," he says. "The cost of sugar becomes an insurmountable edge."

He says the newest ruling is just more of the same: Government policy protecting sugar growers at his expense.

Iowa State University economist John Beghin recently looked at how many jobs the U.S. could save — making things like candy, baked goods and breakfast cereal — by changing policy to lower the cost of sugar. His best estimate is 15,000 to 20,000.  That's lower than some industry estimates, he says. "But still, 15,000 jobs is nothing to neglect."

Similarly, costs to U.S. consumers from high sugar prices look modest. Beghin pegs them around $3 billion dollars a year for the whole country — which breaks down to about $10 a year per person. Not enough, he says, to write your senator about.

On the other hand, the American Sugar Alliance, which lobbies for sugar growers, is a diligent bunch of letter writers. "You have to admire them for their effectiveness," says Beghin.

"Thank you for saying that the sugar industry is an effective lobby," says Sugar Alliance spokesman Phillip Hayes. "I would certainly agree with that."

He says they have to be — in order to protect their members from sugar growers in other countries, who pressure their own governments to protect their interests in much the same way.

Suzuki recalls 19,000 cars because, spiders.

Wed, 2014-08-27 13:32

Warning: this is not for the arachnophobes among you.

Suzuki has had to recall 19,000 of its mid-sized cars because of spider webs in the fuel lines.

It turns out spiders are attracted to gasoline vapors. They build webs in gas tank vent lines. Those lines get blocked. Gas tanks get damaged.

And oh,  by the way, THERE ARE SPIDERS IN YOUR GAS TANK.

Is Snapchat really worth $10 billion?

Wed, 2014-08-27 13:32

Venture capital firm Kleiner Perkins Caufield and Byers made a pretty breathtaking bet today. It agreed to invest in a deal that values Snapchat at nearly $10 billion. Snapchat is a social network where people share photos that self-destruct within 1-10 seconds. 

It seems like things go this way. One day, you're a struggling start-up, making no profit, paying people in stock options...

 and the next...

Someone is telling you’re worth almost as much as the GDP of Iceland.

James McQuivey is an analyst at Forrester Research. I asked him what exactly Snapchat’s 100 million users share with the service.

"Among my children, it's really just 'this is what my face looks like in response to something that I just read or heard or saw or a song that I’m listening to.' It’s a way of expressing emotions… think of it as a live emoticon."

But can Snapchat be a face that launches 10 billion real dollars?

"Not even... It’s about $9 billion too much," says tech analyst Rob Enderle.  Enderle says Snapchat doesn’t know how it plans to spin its 100 million users into money yet. Still, he says, in today’s overheated tech sector, the nuts and bolts of the business plan take a backseat to the buzz.

"There’s two ways you can value a company: One of them is legitimately based on how much money they’re returning to investors and the other is based on screwy math largely based on the hopes and dreams of those that think that social networks every place should be made of gold and honey."

The question now is whether Snapchat has the makings of a social media Cinderella…or will end up being an ugly stepsister.

Enderle says it’s all about where Google and Facebook drop their magic. Messaging service WhatsApp had no profit plan and only 55 employees, and Facebook snapped it up for $20 billion.

We'll just have to wait and see how the story ends for Snapchat.

Nashville tries to boost civic pride with an investment fund

Wed, 2014-08-27 12:57

CNBC called it a “wacky” idea when it launched a year ago: a fund that invests in companies solely because they’re based in a particular city — in this case, Nashville. The Nashville exchange-traded fund has beat the odds, but maybe not for long.

Having a single share of this exchange-traded fund, or ETF, is like buying stock in all the public companies headquartered in Nashville. It’s heavy in health care, with hospital chains like HCA. There are also companies like Dollar General and Cracker Barrel in the mix. The pitch to locals was “invest in companies you know.”

“You can say you are investing in Nashville,” says financial advisor Stephen Frohsin of Woodmont Investment Counsel. “There’s a story that goes along with that, that people can understand a little bit easier.”

Frohsin attended the first annual shareholders meeting Thursday. Personally, he is trying out the ETF. He says his clients are dipping their toe in the water as well.

Shareholders range from community leaders and politicians who see it as an exercise in civic pride. One woman said she asked for a few shares for her birthday.

Analyst Paul Britt says he’s got a soft spot for the concept because it’s got a real “support-your-community” feel. He also says it probably won’t last.

“The short answer is yes, I am surprised it’s still with us,” says Britt.

Britt’s company ETF.com has a rating for funds, and by its estimate, the ticker symbol NASH may not last long on the New York Stock Exchange. A year in, the fund has fewer than $9 million in assets. Many investors won’t touch an ETF with less than $50 or $100 million.

Without more money in the fund, there’s not enough trading volume for big investors to be able to sell on a moment’s notice, which is supposed to be one of the selling points of an ETF and trading volume creates fees to operate the fund.

“We see [Nashville ETF] as a high risk for fund closure right now,” he says.

Currently, the Nashville ETF is operating at a loss, but founder Beth Courtney says that’s not unusual for any one-year-old start-up business. She says she knows there’s some proving left to do.

“You know, we’re the first in the country. I think that there were obviously people who wanted to take a closer look at it and watch it,” Courtney says. “And they might continue to watch it and see the performance and that will speak for itself and the fund will grow.”

While the fund is still tiny, investors aren’t complaining. They earned a nearly 20 percent return for year one.

A fracking story too good to be true

Wed, 2014-08-27 12:03

Producing oil and gas by hydraulic fracturing, or fracking, takes lots of water. One Houston company claims to have a new technology that requires none of it. If it sounds too good to be true, the Securities and Exchange Commission thinks so, too - they have sued the company for fraud.

What’s alleged is called "pump and dump," in a very risky investment space known as the over-the-counter market. Two years ago, Maryland retiree Darleen Allwein invested in an oil and gas company called Chimera. The firm advertised a water-free fracking innovation.

“I had a friend who gave me the tip on this stock and it was gonna do well,” Allwein says. “And I had read some other stuff about this, what is it, fracking, or something?”

Allwein invested $10,000 in Chimera, during what the SEC considers the "pump" stage: the company issued 30 press releases, loaded with key Google search terms. It advertised on the websites of Marketwatch and the Wall Street Journal.   

The problem: petroleum engineers know waterless fracking is not a proven technology.

“Companies can fracture using oil and other petroleum substances,” says law professor Hannah Wiseman of Florida State University. “But as you might expect, they’re also not necessarily environmentally popular.”  

Investment professionals were wary of Chimera’s claims as well. Still, the over-the-counter stock market attracts lots of non-experts. Enough of them bid up the Chimera stock, at which point company creators executed their “dump.”

According to the SEC, they sold shares and pocketed $4.5 million in profits. Then the stock cratered, and Darlene Allwein lost everything.

To the feds, Chimera was simply a shell, a good story in the midst of a fracking boom.

“It’s sort of like a modern-day California gold rush,” says attorney John Hanger, a former Pennsylvania environment and utility regulator. “So it’s created a tremendous psychology of money to be made, that may make some people vulnerable.”

The SEC wants a jury trial, though the firm could settle.

We tried to call Chimera, but no one answered.

Producing oil and gas by hydraulic fracturing, or fracking, takes lots of water. One Houston company claims to have a new technology that requires none of it. If it sounds too good to be true, the Securities and Exchange Commission thinks so, too. The SEC has sued the company for fraud.

What’s alleged is called pump and dump, in a very risky investment space known as the over-the-counter market.

 Two years ago, Maryland retiree Darleen Allwein invested in an oil and gas company called Chimera. The firm advertised a water-free fracking innovation.

“I had a friend who gave me the tip on this stock and it was gonna do well,” Allwein says. “And I had read some other stuff about this, what is it, fracking, or something?”

Allwein invested $10,000 in Chimera, during what the SEC considers the Pump stage: the company issued 30 press releases, loaded with key Google search terms. It advertised on the websites of Marketwatch and the Wall Street Journal.   

The problem: petroleum engineers know waterless fracking was not known to be a proven technology.

“Companies can fracture using oil and other petroleum substances,” says law professor Hannah Wiseman of Florida State University. “But as you might expect, they’re also not necessarily environmentally popular.”  

Investment professions were wary of Chimera’s claims as well. Still, the over-the-counter stock market attracts lots of non-experts. Enough of them bid up the Chimera stock, at which point company creators executed their “dump.”

According to the SEC, they sold shares and pocketed $4.5 million in profits. Then the stock cratered, and Darlene Allwein lost everything.

To the feds, Chimera was simply a shell, a good story in the midst of a fracking boom.

“It’s sort of like a modern day California gold rush,” says attorney John Hanger, a former Pennsylvania environment and utility regulator. “So it’s created a tremendous psychology of money to be made, that may make some people vulnerable.”

 The SEC wants a jury trial, though the firm could settle.

We tried to call Chimera, but no one answered.

A personal shopper, via data and algorithms

Wed, 2014-08-27 11:11

There are people who enjoy shopping for clothes, and there are people who don't.

If you're in the "don't" camp, you could always just shop online. However, in the depths of the internet, you lose the assist you sometimes get from a person who knows the inventory, and who knows how to put this or that piece together with another one.

Enter a company called Stitch Fix, which takes the personal shopper model and runs it through an online algorithm or two.

We talked with Katrina Lake, founder and CEO, about the intersection of online retail and big data. Listen in the audio player above.

High inventory and low sales cut gun makers' profits

Wed, 2014-08-27 07:00

Gun maker Smith & Wesson Holding Corp. cut its revenue and profit outlook for the fiscal year. The company now expects per-share earnings to be about a third lower than previously projected. The downward revision was driven by high inventories and a slowdown in long gun sales following a previous surge in demand.

Here’s what happened. After the Newtown school shooting in December 2012, gun enthusiasts worried the government would ban or severely restrict certain types of weapons.

“A lot of consumers rushed to stores and bought every assault rifle off the shelf that they possibly could,” says Wedbush Securities equity analyst Rommel Dionisio. “That caused a near-term demand surge, but it also pulled forward a lot of future sales.”

The surge in demand lasted months. Retailers faced shortfalls, and then stocked up on inventory in response. 

But Dionisio says now, that person who’d normally be in the market for a modern sporting rifle probably already bought several of them.

“The demand for firearms returned to more normalized levels this year in 2014, and so it kind of just is catching up with manufacturers right about now,” says Andrea James, a vice president and senior research analyst with Dougherty & Company.

She says demand for long guns has plummeted, while demand for handguns is following a ten year upward trajectory. In a research note, James says she still likes Smith & Wesson long-term, but is downgrading its stock rating to neutral.

Smith & Wesson isn’t the only company weathering this return to what James calls ‘historical norms.’ She says one gun maker compared the gun-buying binge to eating a huge Thanksgiving meal: Just because you’re not hungry the next day, doesn’t mean you’ll never eat again. 

PODCAST: ACA reins in executive pay

Wed, 2014-08-27 07:00

Is America's economic recovery getting long-in-the-tooth? Does it have presbyopia and hair its ears? The S&P 500 remains above 2000 at this moment, in part because big companies have the profits to buy back their own shares, in part because investment overseas is a relatively risky bet.  We take a look at the market psychology. Plus, a new report says a little known provision in the Affordable Care Act -- Obamacare, some call it -- could help rein in pay for executives at health insurance companies. Critics charge this is wrong-headed and could push up health care costs. And now a report on the business of lesbian bars. They're a place to grab a drink or a meet a friend but they're more than that. Some lesbian bars are a kind of community center; venues for public events or political organizations. But some of these businesses are disappearing -- We take a look at why that is, and what it could mean.

 

 

 

Affordable Care Act provision targets some exec pay

Wed, 2014-08-27 02:30

A little-known provision in the Affordable Care Act (ACA) could help rein in executive compensation at health insurance companies, according to The Institute for Policy Studies

Corporations can deduct the costs of doing business from their tax bills, including the compensation of a firm’s top four executives. The deductions are capped at $1 million for each of those executives.

The Affordable Care Act made the limits stricter for health insurance companies, which stood to gain business as more Americans became insured under the law.

“Members of Congress were concerned that executives could use increased profits from their new customer base to line their own pockets,” says Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies.  

Anderson says the ACA capped insurance companies' pay-related deductions at $500,000 per employee, per year. It also eliminated loopholes for performance-based pay.

She says the new rules generated $72 million in taxpayer savings from the top 10 publicly traded health insurers alone.

But critics charge the limits are arbitrary and focus unfairly on the health care industry.

“It's a bad[ly] thought out experiment that will not change compensation,” says Kevin Murphy, finance professor at the University of Southern California Marshall School of Business.

Murphy says insurers might just boost premiums to keep paying their employees' high salaries.

To prevent crime, predict it

Wed, 2014-08-27 02:00

The potential that data provides for government is, in many cases, still only just becoming apparent. For the police, data can help them respond to crime before it happens. The technology has promise, but also a dark side.   

“Predictive policing is the application of statistics and big data to the challenge of figuring out where or how to deploy police assets in advance of crime trends,” says Patrick Tucker, technology editor at Defense One.

He cites both New York and Memphis as examples of how the system has been used.

In Memphis, a researcher partnered with the police to pre-deploy resources to neighborhoods where they expected crime, and in their efforts discovered that being in public housing increased the chances of crime victimization, but not likelihood of committing crime, which to a change in strategy.

In New York, one component of predictive policing was the” stop and frisk” program, which, according to Tucker, was not a good use of the statistics because it did not substantially reduce the crime rate and was later found to be illegal. 

Why ambulance service is a tough business

Wed, 2014-08-27 02:00

Al Rapisarda buys lots of EpiPens for his company, Midwood Ambulance Service. They’re small medical devices – a bit bigger than a glue stick – and are used to help treat allergic reactions.

There’s just one problem.

“We never use them,” says Rapisarda, whose father started the company in the 1956. “So we threw out about $25,000 worth of pens about three years in a row.”

The EpiPen is a small, but striking example of why ambulances can be a tough business. The pens expire after about a year and Midwood Ambulance is required to carry them, even though they're a private company that does mostly non-emergency runs, like hospital transfers.

“It’s good medicine versus the money,” Rapisarda says, standing between a pair of brand new ambulances in his company’s Coney Island garage. Their sides are still a crisp white; they don’t even have his company decals yet. He estimates his cost to get each ambulance on the road is between $80,000 and $90,000, not including staff – his biggest expense.

Like most businesses, Rapisarda wants to keep costs down. On the other hand, he knows lives can be at stake.

“EMS is [a] cross between public service and healthcare,” says Scott Matin, northeast director of National Association of Emergency Medical Technicians, which represents EMS workers in public, private, and volunteer services. “Just like police and fire, you dial 911 and you get the service, regardless of whether you can pay for it or not pay for it.”

Unlike the police or fire departments, patients or their insurance companies are generally billed for the services they receive, regardless of whether the ambulance was provided by a local government, a hospital, or a private ambulance company. The setup can vary town by town.

Matin and Rapisarda say people are often surprised and confused when they receive bills.

“If you were here last week, the bills went out for the month, and everyone was on the phone,” Rapisarda explains.

Patients want to know why they have a $50 or a $200 co-pay, especially those who have new insurance plans.

That’s time his staff spends on the phone, chasing payments. Trying to get insurance companies to pay can also be difficult, but Rapisarda says his biggest billing headaches come from Medicaid.

“I do a Medicaid call below cost right now in New York State,” he says. “I’m subsidizing a Medicaid patient.”

Even after a slight increase in local reimbursement rates earlier this summer, Rapisarda estimates he loses money on each Medicaid run. 

The disappearance of lesbian bars may signal change

Wed, 2014-08-27 02:00

Lesbian bars have always been more than just a place to grab a beer. They’ve been community centers, dating services, political statements. But recently, these businesses seem to be disappearing.

On a recent Saturday night in Portland, Oregon, the Temporary Lesbian Bar was full. Musician Katy Davidson started organizing the evening last year, which draws anywhere from 60 to 150 people.

“The music’s not too loud, but it’s just loud enough to dance if people want to,” Davidson explains. “This is fun, it’s romantic.”

The event’s been going strong — probably because Portland’s only brick-and-mortar lesbian bar closed a few years back. And Portland’s not the only place.

Playwright and journalist Alexis Clements was trying to pull together a tour for a recent woman-centered theater piece, and noticed the list of possible lesbian venues was shrinking.

“West Hollywood does not have a lesbian bar anymore. Philadelphia doesn’t have one. Houston doesn’t have one, and I could go on and on,” Clements explains. She noted the decline of lesbian and feminist venues of all sorts. “That ranges from feminist bookstores, to bars, to arts organizations. All of these spaces are kind of going through a variety of different struggles that in some way are similar.”

In response to this decline, Clements re-adjusted her original theater tour, and will now be combining play readings with documenting some of the remaining lesbian spaces.

But Clements notes these struggles may actually reflect positive changes — people don’t need a lesbian bar as a refuge, because the culture at large is more accepting.

In Portland, some people at the Temporary Lesbian Bar, like Caryn Brooks, are pretty happy to move into the brave new world of pop-ups and Facebook groups. “I think it’s actually more vibrant now than it was when there was a lesbian bar,” Brooks notes. “It’s nimble, able to respond to geography and demographics. There’s no going back.”

But others, like Sara Renberg, feel like designated spaces are still relevant — and when they disappear, something is lost. “While I really love this event, it’s also so much harder if this one happens on the third Thursday, and this one happens on the second Tuesday. It’s really difficult to piece that all together in order to find love. And community.”

So if millennials aren't using cash, who is?

Wed, 2014-08-27 02:00

When you buy your morning latte, do you pay cash or charge it? A recent survey by creditcard.com found that if you’re a millennial, the chances are about 50-50. Moreover, mobile payment options are tilting those odds in credit’s favor.

But while millennials appear to be turning away from cash, their elders still prefer it, says Matt Schulz, an analyst at creditcard.com.

"For those who are 65-and-older, for example, about 82 percent of them prefer cash," he says. 

The survey also found a country-city divide when it comes to cash. While 80 percent of people living in rural areas prefer paying with greenbacks, only around 60 percent of city dwellers do. 

The survey didn't drill into why, but University of Washington professor David Stearns says we can get a few clues by looking at the "unbanked." 

"So you've got to remember not everybody has a bank account," Stearns says. 

And those people have to use cash. Stearns says about 8 percent of households in the U.S. fall into this category. He says cash also remains a part of our culture.

"When you’re travelling and you want to tip the person who carries your bag," Stearns says. Or when the plate comes around in a Christian church; it’s important to be able to put something tangible in that plate.

Stearns said folks have been predicting the end of cash since the 1960s, but he doesn't see it happening anytime soon.

Crowdfunding the path to college

Tue, 2014-08-26 13:50

When Salina Vang begins her studies at the University of Minnesota-Duluth next week, loans and scholarships will cover most of her expenses. To cover the rest, she launched a fundraising campaign on the website GoFundMe, which allows users to pull in donations from friends, family and strangers.

“I needed the extra money to go buy materials like school supplies, bed sheets, a laptop,” she says.

Initially, Vang figured she'd get small contributions from friends and relatives and raise a few hundred dollars. But then she boosted her goal to $3,000 in order to have more of a financial cushion. She's two-thirds of the way there.

Vang's parents, immigrants from Laos, don't make much money selling vegetables, and they have ten children to support. But, Vang says, they don't like the idea of their daughter asking for hand-outs. 

“My parents grew up in a culture where it's embarrassing to do that. But I think I have tried to tell my parents that in this generation you need to put yourself out there in order to get help,” she says.

More than 150,000 students have tried raising money on GoFundMe, up from a couple hundred students just four years ago. Other sites, like GreenNote and GiftofCollege, focus exclusively on raising money for educational expenses.  The sites charge a fee or take a cut of the donations. GoFundMe takes 5 percent.

Students are turning to these sites at a time when tuition and student loan debt levels are on the rise. Ruth Hedges, executive of the Global Crowdfunding Convention and Bootcamp,  says many students’ efforts fail.

“There's this misconception that if you build it they will come. And the truth of the matter is it's much more complicated than that,” says Hedges.

Hedges says you should launch a campaign with a few donors lined up in advance so that a quarter of the goal is met in the first week. That kind of success breeds success.

 

 

How to get the most from your crowdsourcing campaign 

 

  • Look successful. Get donors to commit funds before launching the campaign, so that you have 25 percent of your goal met in the first week. You want a rush of activity when the site goes live. 
  • Create a sense of urgency.  Limit your campaign to 30-45 days.
  • Get social.  Start hitting social media days before the launch, and keep it up throughout the campaign.
  • Sell yourself.  Make a compelling case for why strangers should donate to your campaign. Explain how you’ll use the money productively for college.
  • Smile for the camera.  Include a video with  your profile.

Source: Ruth Hedges,  Global Crowdfunding Convention and Bootcamp

 

She notes that kids entering college are actually well poised to raise money through social networks because they have a lot of them – think school orchestras or sports teams.

“They have more groups of crowds in their lives than they may have later on in life, when they get older and they're not involved in so many activities,” she says. “And that's the time to compel those groups to support you.”

There are some risks to raising money for college this way, though. Scott Weingold, managing director of College Planning Network, says successful campaigns could jeopardize financial aid. 

“It appears that some schools may treat that as outside funds and simply diminish the amount of aid that the family would've otherwise been eligible for,” he says.

In that case, the crowdfunding campaign might do more to help the college lower its costs than it would the student.

A 'knee defender' diverted a United Airlines flight

Tue, 2014-08-26 13:25

Today I learned about a device called a "knee defender," built to combat the problem of legroom on airplanes - or, rather, the lack thereof.

It's supposed to prevent the person in the seat in front of you from reclining. Some airlines have banned it, otherwise my 6-foot-1 self would be halfway through ordering one right now. This is how it works:

Anyway, a passenger used one of these on a flight from Newark to Denver - starting a fight that ended when one passenger threw water on the other.

The plane was diverted to Chicago.

The kicker?

Both of them were seated in United's Economy Plus section, which means they had up to five inches of additional legroom - something the airline considers "spacious."

CORRECTION: An earlier version of this story incorrectly stated that the FAA has banned the Knee Defender. The text has been corrected.

4 questions to ask if you're offered a late-career buyout

Tue, 2014-08-26 13:01

To cut costs, Time Warner Inc. has reportedly made a buyout offer to Turner Broadcasting employees over the age of 55, who have been with the broadcaster for 10 years. Offering buyouts in advance of other cuts is a common strategy.

Here are a few things to think about if you're an older worker — but not one who's ready to retire — considering a buyout offer. 

1. Do you really have a choice?

In other words... "The first thing you have to consider is: Why is the company doing this? And what is the probability of their asking me to leave, one way or another?" says Robin Pinkley, a business professor at Southern Methodist University.

In this case, Time Warner has already told employees that other cuts will follow the buyouts— maybe 15 to 20 percent reductions, according to one story.  So if you’ve got any worries about getting laid off, you might want to take the buyout.

In a case like Time Warner, the buyout won't be enough to retire on, at just a bit better than the standard severance package. Though, that could help fund a job search, which is likely to be no picnic.

2. Are you ready for a tough job search? 

Looking for work after a mass exodus from your workplace is especially hard, says Pinkley.

"It’s not just you who’s entering the marketplace at this time," she says. "There are a bunch of yous."

People with your same resume, who took the same buyout you did. Your company’s probably targeting well-paid older workers because they hope cheaper 28-year-olds will make good replacements.  

3. Are you ready to deal with age discrimination? 

"It’s a fact that age discrimination exists," says John Challenger, CEO of the outplacement firm Challenger Gray and Christmas. "I don’t think it’s as virulent as it was, say, a decade or more ago, but it’s still there."  

4. How do you feel about temp work? 

Greg Simpson, who leads the career transition practice at Lee Hecht Harrison, offers a glass-half-full perspective. He acknowledges the chance of walking into a similar job, with comparable pay, without having to move, is low.

However, he says, companies do need people. Just not full-timers.

"They’re looking for alternatives to hiring on full-time labor," he says. "If you’re open to making alternative arrangements with an employer, there’s an enormous talent shortage."

So, if hustling for short-term contracts sounds like a fun way to spend the next few years, that could be an option.

If that sounds grim, just be thankful it’s not 2009. "People are coming into a much better job market than it's been for some time," says Challenger. "It's been getting better, consistently, slowly, over the last few years."

The credit card delinquency rate is at a 7-year low

Tue, 2014-08-26 13:01

If you skip a credit card payment — a.k.a you just don’t pay your bill for a month — you’re considered delinquent. 

Today, TransUnion reported that the 90-day delinquency rate has fallen by about half since 2007. Antoni Guitart is their director of research and consulting.

He says credit card delinquencies are trending steadily downward.

“They’re even considerably lower than they were before the recession ever hit," he explains. "So, it’s been quite an improvement.”

Of course, banks ding us with late fees if we’re delinquent. So, if more of us are paying on time, is that bad news for fee-hungry institutions? 

Not according to Curt Long, chief economist at the National Association of Federal Credit Unions: “We think this is a positive trend for credit unions.”

He says banks and credit unions still make money if we carry a balance on our credit cards. Even if we don’t, they get a swipe fee every time we charge something.  

Long says delinquencies can turn into charge-offs — loans that are never paid back.

“Thankfully we’ve seen charge-offs decline as well,"Long says. "Fewer of those loans are going bad.”

The fall in delinquencies is even leading banks to give credit cards to people with lower credit scores. 

Lawrence J. White teaches economics at the NYU Stern School of Business. He says it makes sense for banks to loosen up credit right now for the less-than-perfect consumer: “Because the economy is better, he or she is more likely to stay employed and be in a position where he or she can repay.”

And White says consumers have learned not to live beyond their means; they don’t want to slide back to where they were during the Great Recession, and are using credit more wisely.

Here's why the durable goods number is soaring

Tue, 2014-08-26 13:01

Orders for durable goods — things like washing machines or drills or escalator parts — surged 22.6 percent in July. That number got a great response from Wall Street guys today.

“A sharp increase.” - Wells Fargo Advisors’ chief macro strategist Gary Thayer

“It was stunning.” - Ben Herzon, senior economist with Macroeconomic Advisors

“Massive.” - Wrightson ICAP’s chief economist Lou Crandal

But then they said this:

“Modest.” - Thayer

“Don’t have much bearing.” - Herzon

“Pretty much irrelevant.” - Crandal

So what gives?

It turns out, most of the surge in durable goods is due to one company, Boeing. It got a bunch of new orders for expensive airplanes. Airplane orders take a long time to fill and could conceivably be canceled, so while the plane orders is great for the long term, it's not such good news for right now.

“A lot of that won’t translate into immediate production increase so you really need to factor that out,” Thayer says.

So forget airplanes — forget washing machines, even. In fact, you can forget most of the stuff in the durable goods report, Crandal says.

“Most of the durable goods report is of very little relevance because there are better measures of almost everything that forms the various components of this report,” he says.

Surveys of auto sales, for example, are more accurate and early than the auto sales data in the durables report — in particular, the advance report which is subject to significant revision.

“The one thing that’s really crucial is the performance of capital goods orders,” says Crandal. Specifically, non-defense durable capital goods.

That’s the equipment businesses buy in order to make things businesses sell.

“To put equipment in place, businesses have to be confident that they can sell the stuff that equipment is going to produce,” Herzon says.

Those numbers are up 11 percent over last year with some revisions that make June look really good too (from 1.4 percent up to 5.4 percent). It means businesses are more confident. Consumers seem to be, too.

“There’s been a sea change in the way that people respond to questions about whether jobs are plentiful or hard to get,” says Crandal.

In four months, the number of people who think jobs are plentiful jumped from 13 percent to 18 percent — more than that number rose in the past two years combined.

“I don’t think it’s a sign the economy’s about to start booming, however it is reassuring that we may have some momentum going into next year,” says Crandal.

A lot of businesses and consumers seem to think so too.

Families search for affordable water in Detroit

Tue, 2014-08-26 11:52

Starting Tuesday, Detroit will resume shutting off people's water if they’re behind on their bills.

For the last month, the city has put a moratorium on those shut-offs, which have been internationally criticized as inhumane. That pause gave people a chance to get on payment plans with the water department. On Saturday, thousands of Detroiters lugged their kids, strollers and grandparents out to a sign-up fair at the Cobo Center downtown. 

Michigan Radio’s Kate Wells went down to check it out:

Want to pay your bill? Get in line, buddy.

The line is huge. You can walk 30, maybe 40, seconds and not even get halfway to the front.

There are kids sprawled out on the floor, people shifting sleeping babies from arm to arm – but no seniors, impressively. They’re allowed to cut the outside line, where they’re brought inside the fair…to wait some more.

At least there are chairs inside. Lots and lots of chairs, filled with hundreds of people waiting for their number to be called by an official-looking women with a bullhorn.  

Luna Simpson, 42, says she’s been waiting here for five hours with her grandsons, CJ and Joshua. If there was a cute kid contest at some point during this event, CJ, age 4, and Joshua, age 6, would sweep. You can’t beat matching "Iron Man 3" T-shirts.

“I told them we were going to come here, get on the budget plan so we could save some money," Simpson says. “So we could do some extra stuff with the extra money.”

Extra money for fun stuff? Not really.

“More bills!” laughs Simpson. “School clothes, gas."

The Simpson family would ideally like to let Josh play basketball this year, which, of course, costs more money.

“I wish I could go to basketball!” CJ opines.

Is it possible when he's older, maybe?

“Yes,” he says. “I’m only 4, and Joshua is only 6.”

The magic number to keep your water on: 10 percent

After their number is finally called up, the Simpson family is sent to one of the dozens of tables where water department reps are helping people work out payment plans.

“And you’re showing a balance of $399.74,” the attendant tells Simpson. “So, you would be able to go onto a payment arrangement for $39.97. You want to go onto a payment arrangement today?”

“Yes!” says Simpson.

That’s a 10 percent down payment on what she owes. It's what the water department is now requiring you pay up front, within the next two weeks, before you can get on a payment plan.

Once you’re on a plan, your water won’t be turned off — so long as you stay current on your bill.

You also have 24 months to pay off the rest of what you owe, on top of your monthly bill.

Don’t have the down payment? Uh oh.

If this all sounds more flexible than what the department used to offer, that’s because it is.  

After all the protests and UN criticism against the city turning off people’s water, city officials are bending over backwards to assure residents that they are on their side.

What if you can’t get your hands on that 10 percent payment in the next couple of weeks?

That's Vivian Logan's story. She came here because she owes $3,000 on her water bill, and she says she doesn't have the $300 she needs to get on a payment plan.

"That’s the problem," Logan says. "And even if I could get it in 14 days, I’m not going to be able to pay $300 possibly a month, on top of my other bills after that."

Now, there are nonprofits and aid groups who want to help people like Logan.

The Detroit Water Fund, for example, has at least half a dozen booths at the fair. To qualify for their help, you need to:

  1. Make that first 10 percent down payment, and
  2. Fall within 150 percent of the poverty line, which calculates to about $35,775 for a family of four.

There’s also help from the United Way, but their income restrictions are a little lower: You need to make under 120 percent of the federal poverty line.

Logan says she’s just a little higher than that cut off, and that she doesn't have money for the down payment required to get aid from the Detroit Water Fund. She has no idea what to do now.

“Who knows? You tell me,” Logan says. “You tell me who I can refer to, so I can get some help.”

For many, the day ends in relief.

"What we’ve found is that people have been able to find that assistance," says Alexis Wiley, Mayor Mike Duggan’s chief of staff. "They’ve been able to go to their friends, to their church, family members."

Simpson is one of those fortunate people.

She looks hugely relieved as she makes that first down payment, smiling while she tells the boys what they can afford now that they don’t have to worry about losing their water: gas, clothes and, maybe, even some basketball. 

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