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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 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

"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. 

Weathering the Ebola epidemic in Liberia

Tue, 2014-08-26 11:15

BBC correspondent Jonathan Paye-Layleh has been living in Liberia's capital, Monrovia, for the last 20 years. He has been reporting on the Ebola epidemic from one of the hardest-hit areas: a slum called West Point, home to between 50,000 and 100,000 people. It's currently under quarantine, while the rest of Monrovia is under a strict curfew.

"Following the imposition of this restriction, people are stuck there," he said. "Even those who had just gone there to spend time with relatives are all stopped from leaving."

As if the fear of Ebola wasn't enough, Paye-Layleh says, this year's rainy season in Liberia has caused cholera infections and outbreaks of other diseases, and many people won't go to the hospital to get treated out of fear that they might be mistakenly diagnosed with Ebola.

"Anybody developing high fever should be presumed Ebola-positive until the contrary is proven, as opposed to saying 'if you have a fever, come to the hospital, maybe it is not Ebola,'" he said. "As a result of that–and knowing that eventually if they are tested positive for Ebola they will be taken into isolation... separated from their families–many people who are suffering from other illnesses just remain home to die."

Although commerce continues in Liberia for pure essentials like food, Paye-Layleh says the epidemic has taken a toll on Liberians' social lives as well. His job as a journalist, he says, has been made difficult because person-to-person contact is diminishing as a result of the outbreak.

"Our tradition of meeting people, greeting people has now been starved because of Ebola. We are not skeptical to get around friends, to get around other relatives, because you don't know who has come in contact with whom. It's going to make things a bit difficult."

Listen to the full conversation in the audio player above.

Amazon buys Twitch for $970 million

Tue, 2014-08-26 11:06

Watching other people play video games might not sound exciting to everyone. But for gamers, it’s a whole different point of view – and a big market. Amazon wants a slice of that, so they have decided to purchase the video game start-up Twitch for $970 million.

"So, Twitch is this website, or some would call it a platform, that streams video game content and live game play to about 55 million people every month," says Ben Johnson, host of Marketplace Tech.

Why would Amazon pay almost a billion dollars for a start-up that allows people to watch others play "Pokémon"? Johnson says the numbers explain it all.

"Twitch had 43 percent of the live video streaming traffic by volume in a given week," says Johnson. "That’s above ESPN’s website,, CNN."

Last year during a championship for the game "League of Legends", 32 million people were reportedly watching live.

"That’s more than the audience for the finales of Breaking Bad, 24 and The Sopranos combined," adds Johnson.

Watch live video from Nightblue3 on

Just one of many Twitch channels showing live footage of "League of Legends."

Why Americans are less satisfied with their cars

Tue, 2014-08-26 07:00

People’s satisfaction with their vehicles has fallen to a five year low, according to a survey out on Tuesday from the American Customer Satisfaction Index. That’s despite the fact that car sales are basically back to pre-recession levels.

The survey doesn’t pin down what caused the drop in satisfaction - though, one culprit that has been mentioned is incentives. As in: People have come to expect big ones.

Robert Passikoff is president of Brand Keys, a consultancy that looks at brand loyalty. He says he’s old enough to remember the first time Chrysler did a cash-back offer.

“Who would have thought that I could buy a car and they’d give me money back?” he says. “Now I’ll give you money if you can find a car that’s not giving you money back at some point.”

Today’s expectations, though, don’t match the current reality. Analyst Michelle Krebs with says post-recession automakers have been more careful not to overproduce vehicles. That means they don’t have to slap fat incentives on them.

This affects car buyers now entering the market, especially if it’s been years since they last shopped for a car.

They’re used to these big incentives and they just aren’t there,” says Krebs.

Still, Krebs says the number one complaint she hears isn’t incentives, but electronics.

“They’re not intuitive, they don’t operate the way people think they should,” she says. “So there’s a great amount of dissatisfaction around those.”

The survey also found car owners who’d had a vehicle recalled rated that vehicle 6 percent lower than those who hadn't.

PODCAST: Sharing is caring, but not insured

Tue, 2014-08-26 03:00

First up, we've been reporting on merger talks between Burger King of the US and Tim Horton's of Canada. If it happens, Burger King would move its tax headquarters to Canada to save on American taxes. Today, there's news famed investor Warren Buffett is supplying about a quarter of the financing for the Burger King deal. This implies that Buffett is helping to fund a deal some republicans and democrats would regard as a legal but highly controversial tax dodge. And some top politicians also have a stake in these so-called tax inversion maneuvers. Now, back in May the biggest of inversion deals came up short. U.S. pharma giant Pfizer tried and failed to buy the British drugs company AstraZeneca. Under UK rules, Pfizer couldn't try again for three months. That means Pfizer's free to try again starting today. More on the overseas profits Pfizer wanted to keep away from the U.S. treasury. Plus, when it comes to the so-called "sharing economy," there's controversy about whether the likes of AirBnB or Uber violate local regulations for these sorts of things. But how have these new business models changed the world of insurance

A lack of hurricanes is not all good for insurers

Tue, 2014-08-26 02:01

On this morning nine years ago, Hurricane Katrina was creeping west across the Gulf, after smashing through Florida. Since then, North America has not seen a major hurricane. Which might lead you to think all’s well with the insurance industry.

That's not exactly the case.

Katrina was the costliest disaster ever for insurance companies. They paid out more than $40 billion. Since then, it’s been pretty calm as catastrophes go.

But here’s the paradox: When the sky is clear, insurance prices can fall.

“The insurance marketplace had gone through a pretty severe soft cycle, oh, really for the last 10 years,” says David Bradford of industry consultancy Advisen.  

In general, lots of surplus money and insurance coverage is now chasing customers. It’s a buyer’s market.

As for insurers, they’re struggling with modest prices, but have plenty of reserves stocked away.

“They have built up sufficient reserves and can swallow large losses at this fairly well,” says Greg Knapic at Wells Fargo Insurance. “You just don’t want to have too many of them.”

And we have moved into this year’s big storm season. Knapic says it would take a record $50 billion or $100 billion event to shake up a crowded market.

On this morning nine years ago, Hurricane Katrina was creeping west across the Gulf, after smashing through Florida. Since then, North America has not seen a major hurricane. Which might lead you to think all’s well with the insurance industry. Not exactly.


Katrina was the costliest disaster ever for insurance companies. They paid out more than $40 billion dollars. Since then, it’s been pretty calm as catastrophes go.


But here’s the paradox: when the sky is clear, insurance prices can fall.


“The insurance marketplace had gone through a pretty severe soft cycle, oh, really for the last ten years,” says David Bradford of industry consultancy Advisen.  
In general, lots of surplus money and insurance coverage is now chasing customers. It’s a buyer’s market.


As for insurers, they’re struggling with modest prices, but have plenty of reserves stocked away.


“They have built up sufficient reserves and can swallow large losses at this fairly well,” says Greg Knapic at Wells Fargo Insurance. “You just don’t want to have too many of them.”


And we have moved into this year’s big storm season. Knapic says it would take a record $50 or 100 billion dollar event to shake up a crowded market.




Bringing accountability to police through data

Tue, 2014-08-26 02:00

Following events in Ferguson, Missouri, there has been a lot of talk of putting policing on tape. There has also been talk of how big data can help reduce abuses of power and bring more truth and reconciliation to fraught police-citizen interactions. PC Magazine columnist Ibrahim Abdul-Matin says part of the issue is putting the power of data into the hands of the public.

One of the central problems, he says, is that no one seems to be looking at hard data on this issue.

“If there are bad apple cops, how come we don’t know the data about them until they've done something deadly?" Abdul-Matin asked. 

In terms of implementing this system, Abdul-Matin advises implementation with departments that are already using body cameras to record interactions with citizens, and collecting that data for internal use before bringing in crowd sourced information from the public at large.

While this itself won’t fix police-citizen interactions, it would bring a level of confidence in communities that accountability can actually happen, Abdul-Matin said. 

Volcanic rumblings stir economic concerns

Tue, 2014-08-26 02:00

One of Iceland’s many volcanoes has “stirred."

After more than a century of quiescence, Bardarbunga – in the interior of country – has shown some ominous signs of seismic unrest. Some 300 mini earthquakes have been recorded in the vicinity, and molten lava has reached the summit and is now melting the ice cap. The Icelandic authorities have evacuated the area and warned that if there is an eruption, it could be big enough to disrupt air travel over Europe.

The warning has raised some painful memories. The Eyjafjallajokull eruption in April 2010 caused the largest and longest closure of European airspace since World War II; grounding thousands of flights, stranding millions of passengers and costing the airlines more than $2 billion dollars.

But there are good reasons for believing that history isn’t about to repeat itself.

For one thing, there’s been a change in the civil aviation flight rules. In 2010, if there was any ash in the sky, you were forbidden to fly.

But today that’s considered far too restrictive. The rule has been relaxed because weather forecasters with advanced radar are now much better at tracking ash clouds and steering planes away from them. And it is understood that planes can fly safely through lower densities of ash.

“The restrictive flight rules have gone,” says Dave McGarvie, a volcanologist at the Open University in Edinburgh. “With the knowledge and experience we gained from 2010, we now have a much better idea of how to deal with airborne ash. If Bandarbunga does erupt, it will not cause anything like the scale of disruption as Eyjafjallajokull. Absolutely nothing like it.”

That does not mean volcanoes no longer pose a threat to aviation.

“Because a jet sucks in huge amounts of air, if that air contains a lot of ash it will – over a period – accumulate and damage the engine,” explains Colin Brown of the Institution of Mechanical Engineers in London. “If all the engines are affected in that way, the aircraft is going to come down."

Under the current rules, aircraft must not fly if there is more than 4 milligrams of ash in a cubic meter of air in its flight path; the equivalent of a teaspoonful of material in an Olympic size swimming pool. Not as trifling an amount of ash as it seems, says Colin Brown.

“Aircraft engines suck in an Olympic size swimming pool of air every second, so if you’re in that kind of ash cloud, you could end up with about a kilogram coming into the engine once every four minutes. Fly for four or eight minutes and you suddenly have one or two kilos of rock inside your engine. That’s not something any of us would want to contemplate," he says.

Nevertheless, to reassure nervous flyers, it’s worth pointing out that volcanic ash has never, in the entire history of aviation, actually caused a fatal aircraft crash.


CORRECTION: An earlier version of this story misspelled Bardarbunga. The text has been corrected.

U.S. corporations park billions overseas

Tue, 2014-08-26 02:00

In the spring of 2014, U.S. pharmaceutical giant Pfizer tried to buy British pharmaceutical giant AstraZeneca for $116 billion. In May, the bid was rejected. U.K. politicos objected on economic nationalism grounds, while some AstraZeneca investors considered the offer too low. Under U.K. takeover rules, Pfizer can make another run at AstraZeneca starting on August 26.

Even if Pfizer doesn’t succeed in acquiring AstraZeneca, Pfizer CEO Ian Read has said he is "aggressively" seeking other acquisitions — Ireland-based Actavis is said to be a possible target. If Pfizer were able to become a foreign-based company, and shift its domicile to the U.K. or Ireland, it would be able to bring home as much as $30 billion in international profits without being subject to the 35 percent U.S. corporate tax rate on that money, says Martin Sullivan, chief economist at (Sullivan points out that Pfizer would likely pay a lower tax rate in actuality.)

“Part of the allure is to get into lower-tax countries,” says Sullivan. "Like the U.K., with 21 percent, and Ireland, with 12.5 percent.”

Major American companies — including GE, Johnson & Johnson, Merck, Pfizer, Google, Cisco, Microsoft and Apple — are estimated to have nearly $2 trillion parked outside the U.S.; profits from international operations and investments. They use the money to buy foreign companies and factories.

Or, it just sits in the bank, says Brad McMillan, chief investment officer at Commonwealth Financial.

“You can make an argument that shareholders would be better off if the money was brought home, taxes were paid, and it was distributed, or put to use in the business," says McMillan.

McMillan says companies could pay higher dividends to shareholders, or build new factories in the U.S. But he says that’s unlikely, until U.S. corporate tax rates come down. And he thinks that is a political long-shot, at least until the 2016 presidential election.

How too much corn spells trouble far beyond the fields

Tue, 2014-08-26 01:00

We are awash in corn.


Last year was a record corn production year and this year is shaping up to be just as good. Let's explain why this acreage of corn crops can be problematic. 

What do we do with all the corn we produce in general? And what about the surplus?

Most of it is being used as always: to make corn-based products, to make animal feed and to make ethanol. But the surplus that isn't being used for those things is being piled up in grain elevators, or stored in long tubes on the ground. Farmers and buyers are having problems finding enough trucks and freight cars to get the grain around the country. All this corn is literally clogging up the system, and prices are plummeting. Corn prices have fallen by more than 20 percent over the last year, to a four-year low.

Isn't it a good thing when cereal prices fall?

In some ways, this is great news. It will be cheaper to feed chickens, pigs and cows, and of course the price of any corn-based products will fall all as well. We'll be able to stockpile corn for the future, in case 2015 is a bad production year. We may even be able to help other, needier, countries with our surplus.

I can feel a "but" coming...

Yep: cheap corn is good news for buyers, but bad news for sellers. Farmers who hadn't pre-sold their grain are now finding they can't get much money for their product. And many were already suffering because corn prices were already depressed by last year's bumper crop.

Add in the fact that land is getting more expensive, China is buying less, there are fewer animals in the U.S. to feed, there's a cap on ethanol production, and the cost of seed and fertilizer are holding steady, and you can see that farmers are being squeezed.

It's not just farmers, right?

Right. There are all sorts of businesses associated with farmers that are affected. Heavy equipment manufacturers are in a particular pickle. Between 2010 and 2013, grain was scarce, so farmers were able to charge a lot for their crop. They made a lot of money and spent a lot of it on farming equipment. Which means that a) they've got pretty new gear and don't need to buy replacement stuff and b) with times tight, they're not going to want to splash out on a new tractor or whatever.

What are the equipment manufacturers doing?

They're cutting back operations and laying people off. John Deere reckons it will have to let as many as 1,000 workers go. It is seeing weakness in Europe and South America, as well as in the U.S.

How bad is this going to be for the economy?

For the economy overall, not too bad.

Farmers have had a good few years, so the pressure on them this year won't kill them. Some farms may go out of business, but not many. Equipment manufacturers are used to the cyclical nature of the farming business, so they won't go under either.

But people are going to lose their jobs, and whether they work on farms or in equipment firms, those jobs tend to be in places where other work is scarce. So, a lot of individuals will likely be suffering this coming winter.

Forget the Whopper. How about doughnuts and coffee?

Mon, 2014-08-25 13:51

The fast food industry is not the easiest place to be right now, even for a [Burger] King. The chain is talking about a merger with Tim Hortons, a coffee and doughnut staple in Canada. So, how does it help one fast-food chain to acquire... another one?

“The market is incredibly competitive,” says Darren Tristano, Executive Vice President with Technomic, a food industry research and consultancy based in Chicago. He says growth is very low – just about 3 to 3.5 percent. Inflation for the industry is also expected to be about 3.5 percent, thanks to rising costs of commodities like beef. So, it’s almost a wash.

“We don’t see any real growth for the restaurant industry as a whole,” Tristano says.

Low-income customers haven’t seen much if any wage growth, so they’re holding onto their cash. Higher income customers have been wooed by higher-end places like Chipotle and Panera – “fast casuals” as Morningstar’s senior restaurant analyst RJ Hottovy calls them. “That’s the sweet spot in the industry,” and it is not a spot occupied by Burger King.

But if Burger King can’t immediately control its customers’ spending, it can control its own, and that has been one area of focus ever since the fast food chain was bought and taken by Brazilian private equity firm 3g in 2010.

“They have been cutting costs to free up resources. And they’ve been running the business less like a restaurant, and more like a financial company,” says Tristano.

Whereas at one point 10 percent of Burger King’s restaurants were actually owned and operated by Burger King, the company washed its hands of all of them, and now leaves the operation of its locations (and the exposure that comes with direct ownership from labor costs to maintenance budgets) to franchisees, says Charles Pinson-Rose, director at Standard and Poor's. “It’s all royalty revenue, and it allows the company to improve cash flows.”

The chain has aggressively tried to keep up with McDonalds on menu items, revamping its menu several times. It has expanded successfully in Brazil, China, and Russia. Pinson-Rose echoes an oft-heard sentiment in summing up the King’s reign of late: “Overall they’ve largely been successful, but the reality is it’s a very difficult environment for food service in the United States.”

Ironically, that’s exactly where acquiring Canadian firm Tim Hortons could help Burger King. Tim Hortons is successful in one of the few arenas that seem to be looking up for fast food: coffee.

“Starbucks continues to do very well with strong profit margins, you see McDonalds make coffee a key priority, and I think this partnership strengthens Burger King’s coffee offering as well,” Hottovy says.

“The push out of Starbucks is to push its own packaged coffee, and Tim Hortons has the same kind of aspirations,” says Hottovy. Partnering with Burger King could help Hortons and Burger King both on that front.

Of course, the tax benefits and easier access to cash abroad that Burger King would get by reincorporating in Canada... well, that can’t hurt.

High school will keep starting too early. Here's why.

Mon, 2014-08-25 13:51

The American Academy of Pediatrics has joined a chorus that’s been growing louder for years: The school day should start later for teenagers because they aren’t wired to go to bed early — and they need their sleep.

The AAP says this is a public-health issue: Sleep-deprived teenagers are more likely to crash cars, get depressed, and become obese. Also, they may not do as well in school. 

However, early start times aren't going away quickly, and probably won't, because of the costs.

That's surprising because, from the outside, the economics of a later start-time seem pretty good. A 2011 study from the Brookings Institution looked at three ways school districts could improve just by getting better organized. Starting school later for teens was number one.    

"Among all the things schools could do to increase student performance, this is one of the less expensive ones," says Brian Jacob, an economics and public-policy professor at the University of Michigan, one of the study's co-authors. "This is not like hiring extra teachers to reduce class size, or building a big new expensive building."

School boards often hear objections about disruptions at the other end of the school day: Kids getting home really late from sports practice or chess club. Or not being able to work after-school jobs.

The big issue — the expensive issue — is transportation, says Kristen Amundson, executive director of the National Association of State Boards of Education. Amundson is a former member of the school board in Fairfax County Virginia, which is ground zero for debates on school start times.

The debate started there when Amundson was serving, back in the 1990s; buses were the sticking point.

"How school districts make school buses pay is, you basically use the equipment as much as you can," Amundson says.

Meaning, the district runs each bus multiple times every morning. High school students typically get picked up on the first run, which can happen before sunrise for part of the year. 

Asked why little kids, who tend to be early risers, couldn't start early, Amundson laughs. "Oh, no, that was a non-starter," she says. "There were exactly zero of us who were prepared to have five year-olds on the street in the dark."

She says later start times probably work better for smaller districts, with fewer buses to run.  Fairfax County’s School Board is scheduled to vote on a later-start proposal in October.

What happens when Miley Cyrus blesses your cause

Mon, 2014-08-25 13:51

Heather Carmichael, executive director of My Friend’s Place,  a nonprofit that supports homeless youth in Hollywood, says thanks to Miley Cyrus' promotion at MTV's Video Music Awards Sunday,  $70,000 in donations had come in as of Monday morning.

“Today’s been a little bit of a whirlwind – it actually started last night,” she said.

Carmichael notes that My Friend’s Place is privately funded. "So coming into this opportunity is really out of the ordinary... ever so extraordinary," she says. "It’s a rare day that we will be able to raise that amount of money in that short period of time."

The money, says Carmichael,  could go to anything from providing more food to longer hours to adding more staff. But Jeff Shuck, CEO of Plenty, a consulting firm that helps nonprofits raise money through peer-to-peer fundraising, says a nonprofit should take a moment to stop and think about the money.

“It’s an aberration, it’s a windfall, it’s not something that can be easily replicated,” he says.

One trap, says Shuck, is for nonprofits is to make long-term decisions like hiring new staff based on a one-time shot of income that isn't sustainable. Instead, he says, organizations should think about saving and improving infrastructure.

"Annoying purchases that you would not otherwise want to spend money on," he says. “We can’t change the world unless we can turn the lights on. We can’t make a difference to other people in our lives unless we have desks and paper and computers.”

As for the strategy of using a celebrity to raise money, says Trevor Neilson, president of G2 Investment Group and co-founder ofGlobal Philanthropy Group, a consultancy for nonprofits - and a friend who advised Cyrus on how to promote My Friend’s Place - “really, it comes down to a combination of both raising awareness, but also raising funds."

"Any celebrity-oriented philanthropic campaign that doesn’t actually raise money to create real change in the world, isn’t really a success," he says. "It’s fine to raise awareness but if you don’t raise awareness and don’t create real world change, you’re not really helping these kids."

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