Marketplace - American Public Media

3-D printing could be the future of construction

Tue, 2014-04-01 14:03

There is a 13-room house being built in the Netherlands -- with a 3-D printer.

President Obama checked out models of the house last week. So far, one corner of the house is up, just off a canal in Amsterdam.

The builders say this is the future of construction. There's no waste.  

And as a bonus: If you get tired of your house, you can chuck the whole thing in one big recycling bin.

The yacht index: How the price of pricey boats shifts

Tue, 2014-04-01 13:27

Is it possible that yachts can serve as an economic indicator? The Monaco Yacht Show, where billionaires gather to browse for boating baubles, is coming up in the fall. But event organizers say the yacht industry is beginning to bounce back from the recession.

"The yacht industry is the first thing to crash and the last thing to come back," says Lang Ryder, who runs the Marine Lending Division for Seacoast National Bank. He says there was even a boating bubble - owners needed cash so they sold and prices dropped. "The bubble was overnight, if you had a boat in 2007 that was worth $1,500,000. In 2009 it might be worth $750,000."

Claudette Bonville, an interior designer for yachts, says renovating a boat is just like redoing your house, "except it costs a lot more money. Sometimes it can be a $1 million, sometimes it can be $5 million." 

Michael Lewis calls the stock exchange 'rigged'

Tue, 2014-04-01 12:28

You know that image of the trading floor? The sweaty guy screaming, yelling, shouting "Sell! Sell! Sell!" and waving at a big screen?

Author Michael Lewis says it's all fake: "The New York Stock Exchange is really just a backdrop for TV shows."

In his new book Flash Boys: A Wall Street Revolt, Lewis tells the story of a shift to "computer time" on the markets, that "it’s all been automated in the last decade. All the meaningful stuff happens in black boxes," which has serious implications on human high-frequency traders.

He tells the story through one trader, Brad Katsuyama. One night in 2008, Katsuyama pushed a button and realized the market seemed to anticipate what he was going to do before he did it. It was as though someone was "front-running" the whole process. As he investigated, he realized that, in fact, they were. High-frequency traders had begun using tricks to make money off other people's trades, by making the same trades milliseconds earlier.

Kastsuyama called it "rigged" against individual investors. And Lewis agrees:

"Imagine a casino that wants to create a new poker game, and it wants to get people into the poker game. It goes to a handful of good poker players and it says, 'Hey if you sit at this table you can deal the cards, and you alone will know that the decks have no fours, no nines and no queens in it. Then they go to tour bus companies and say 'Bring in tourists to come play against these guys. We're not going to tell those people that there are no queens or nines or fours in the decks.

Of course, the guys who know the missing cards have this huge tactical advantage over the suckers who roll into the casino.... Basically, in this analogy the casinos are the stock exchanges, they provide this unfair edge to the high-frequency traders who are the card sharks and investors are the guys on the tour bus."

In short: The NYSE doesn't look like this anymore.

Author Michael Lewis calls stock exchange 'rigged'

Tue, 2014-04-01 12:28

You know that image of the trading floor? The sweaty guy screaming, yelling, shouting "Sell! Sell! Sell!" and waving at a big screen?

Author Michael Lewis says it's all fake: "The New York Stock Exchange is really just a backdrop for TV shows."

In his new book Flash Boys: A Wall Street Revolt, Lewis tells the story of a shift to "computer time" on the markets, that "it’s all been automated in the last decade. All the meaningful stuff happens in black boxes," which has serious implications on human high-frequency traders.

He tells the story through one trader, Brad Katsuyama. One night in 2008, Katsuyama pushed a button and realized the market seemed to anticipate what he was going to do before he did it. It was as though someone was "front-running" the whole process. As he investigated, he realized that, in fact, they were. High-frequency traders had begun using tricks to make money off other people's trades, by making the same trades milliseconds earlier.

Kastsuyama called it "rigged" against individual investors. And Lewis agrees:

"Imagine a casino that wants to create a new poker game, and it wants to get people into the poker game. It goes to a handful of good poker players and it says, 'Hey if you sit at this table you can deal the cards, and you alone will know that the decks have no fours, no nines and no queens in it. Then they go to tour bus companies and say 'Bring in tourists to come play against these guys. We're not going to tell those people that there are no queens or nines or fours in the decks.

Of course, the guys who know the missing cards have this huge tactical advantage over the suckers who roll into the casino.... Basically, in this analogy the casinos are the stock exchanges, they provide this unfair edge to the high-frequency traders who are the card sharks and investors are the guys on the tour bus."

In short: The NYSE doesn't look like this anymore.

Delayed foreclosures: Drawing out the agony?

Tue, 2014-04-01 12:00
Friday, April 4, 2014 - 05:56 Nancy Marshall-Genzer

Robert Witherspoon's townhouse is on a quiet cul-de-sac in Prince George's County, Maryland.

The townhouse where Robert Witherspoon and his eight-year-old son live is in a quiet cul-de-sac in Prince George’s County, Maryland. Witherspoon greets me as I drive up, telling me he’s lived here for 10 years. 

The brick townhouse is solidly built, like Witherspoon, a 52-year-old Navy veteran who now manages a small IT company and works from home.

This house is lived in, but it was sold in a foreclosure auction last September. Witherspoon says his bank bought the house, and that he hasn’t paid his mortgage in a couple of years. 

Witherspoon first fell behind on his mortgage payments when he was laid off in 2009. Now, he’s squatting – not so unusual in Maryland, which has the second-highest foreclosure rate in the country, the forefront of a second wave of foreclosures across the U.S.

Approximately one out of every 540 homes is in foreclosure in Maryland, says Marceline White, the executive director of the Maryland Consumer Rights Coalition. 

She says it’s not that unusual for people to keep living in foreclosed homes, since the foreclosure process takes so long. On a recent afternoon in Prince George’s County, she pointed to one example.

“It’s clearly occupied,” she said, pointing out a jet ski. “There are cars in the driveway.“

At one point, while banks were negotiating a national settlement, they stopped foreclosing in some states. And still, the average foreclosure in Maryland takes almost two years. That’s because Maryland requires foreclosures to be approved by a judge. And new laws slowed things down even more by allowing things like mediation.

Opinions vary on whether that's helpful for homeowners.

“The longer process has definitely helped,” says Lisa Butler-McDougal, executive director of Sowing Empowerment and Economic Development, a group that helps homeowners avoid foreclosure.

Butler-McDougal says foreclosures in Maryland used to be rushed.

“Some people’s homes were being foreclosed in 15 days, 30 days," she says. "Where before they could even understand the notice of intent to foreclose, they were receiving notice of a sheriff’s sale.”

But there's a flip side.

“There’s so many people that come in here that have medical issues as a result of the stress of trying to hold onto a house, that isn’t worth it,” says Manny Montero, an attorney who represents homeowners in foreclosures.

Montero says many homeowners don’t realize that living rent-free in a foreclosed house could eventually cost them, because it makes it much tougher for them to file for bankruptcy and wipe out their debts. 

The pace of foreclosure proceedings in Maryland appears to be picking up, says Daren Blomquist, vice president at RealtyTrac. 

“I would guess sometime this year Maryland would turn the corner and we’d see the numbers go back down,”

Back in his townhouse, Robert Witherspoon says he doesn’t want to file for bankruptcy, and he says he’s tried to start making mortgage payments again. He couldn’t because the bank wanted a lump sum up front, which he didn’t have. Witherspoon’s bank, JP Morgan Chase, wouldn’t comment other than to say it made several attempts to reach out to him. Now, Witherspoon is afraid he’ll get an eviction notice.

Witherspoon says he plans to move after the end of the school year, but he’s hoping to avoid being evicted – something that happened to him as a teenager.

“When you’re in high school and you come home and you see your bed outside the house and not in the house – I was totally embarrassed by that,” he says.

Of course, Witherspoon says his current situation is embarrassing, too. But even after the pain of foreclosure, he still wants to – someday – buy again.

Marketplace Morning Report for Friday April 4, 2014 Nancy Marshall-Genzer

Robert Witherspoon has lived in the townhouse for about 10 years.

by Nancy Marshall-GenzerPodcast Title: Delayed foreclosures: Drawing out the agony?Story Type: FeatureSyndication: SlackerSoundcloudStitcherSwellPMPApp Respond: No

Housing's bad month, via the letter 'L'

Tue, 2014-04-01 11:55

Some pretty lackluster news from the housing market today.

Construction spending rose a measly .1% in February. Part of that was because of the wild weather we saw this winter, but economists say that only accounts for part of the lacklusterness. It seems we’re not building or buying homes like we used to. Pending home sales fell in February to their lowest level in more than 2 years. The housing market made big gains last year, but so far 2014 isn’t looking so hot. 

The reason?

Brought to you by the letter "L" (and the number "3").

L is for Labor: The lackluster labor market means people don’t want to make big investments, like buying a house, says Susan Wachter, professor of real estate and finance at Wharton.  "Jobs and affordability of mortgages are the two fundamental drivers of the housing market and they’re both weak right now."

L is for Loans: Namely, it's not easy to get a loan these days. Nicolas Retsinas teaches real estate at Harvard Business School. "The bread and butter of the housing market is first time homebuyers. They continue to have increasing difficulty getting a mortgage, accessing credit."

Those loans have to be a little larger because of the third L...

L is for Lumber: "Costs have been going up. The cost of lumber’s been going up," says Patrick Newport, an economist with IHS. He says demand from China and other elements have lifted lumber prices, making building less lucrative for builders and a lot costlier for buyers.

L is also for : Undeveloped or ripe for development real estate is getting expensive too, especially in urban areas.

And let's not forget the L for Lousy Weather: The winter freeze clamped a lid on the housing market on most of the Eastern Seaboard this year, and sales in the West and South just weren't enough to make up for it.

All of this is a big deal for the overall economy, says Newport, because it is (I know, you may be going into acute sugar shock at this moment) an economic...

L for Lynchpin: "Basically, the housing market has been sideways for the past six months and that’s very disappointing, because housing is supposed to be one of the key lynchpins that will get the economy back on track."

That's largely because it creates a lot of Lucrative construction jobs.

Housing is having a bad month, thanks to the letter "L"

Tue, 2014-04-01 11:55

Some pretty lackluster news from the housing market today.

Construction spending rose a measly .1% in February. Part of that was because of the wild weather we saw this winter, but economists say that only accounts for part of the lacklusterness. It seems we’re not building or buying homes like we used to. Pending home sales fell in February to their lowest level in more than 2 years. The housing market made big gains last year, but so far 2014 isn’t looking so hot. 

The reason?

Brought to you by the letter "L" (and the number "3").

L is for Labor: The lackluster labor market means people don’t want to make big investments, like buying a house, says Susan Wachter, professor of real estate and finance at Wharton.  "Jobs and affordability of mortgages are the two fundamental drivers of the housing market and they’re both weak right now."

L is for Loans: Namely, it's not easy to get a loan these days. Nicolas Retsinas teaches real estate at Harvard Business School. "The bread and butter of the housing market is first time homebuyers. They continue to have increasing difficulty getting a mortgage, accessing credit."

Those loans have to be a little larger because of the third L...

L is for Lumber: "Costs have been going up. The cost of lumber’s been going up," says Patrick Newport, an economist with IHS. He says demand from China and other elements have lifted lumber prices, making building less lucrative for builders and a lot costlier for buyers.

L is also for : Undeveloped or ripe for development real estate is getting expensive too, especially in urban areas.

And let's not forget the L for Lousy Weather: The winter freeze clamped a lid on the housing market on most of the Eastern Seaboard this year, and sales in the West and South just weren't enough to make up for it.

All of this is a big deal for the overall economy, says Newport, because it is (I know, you may be going into acute sugar shock at this moment) an economic...

L for Lynchpin: "Basically, the housing market has been sideways for the past six months and that’s very disappointing, because housing is supposed to be one of the key lynchpins that will get the economy back on track."

That's largely because it creates a lot of Lucrative construction jobs.

PB&J tops the menu

Tue, 2014-04-01 09:54

In Washington, the Commerce Department reports on factory orders for February.

The House Small Business Committee holds a hearing on "Bitcoin: Examining the Benefits and Risks for Small Business."

The Senate Homeland Security Committee holds a hearing titled, "Data Breach on the Rise: Protecting Personal Information from Harm."

"As the World Turns" premiered on April 2nd, 1956. The sudsy drama continued until 2010.

And sandwiched between all the big news is National Peanut Butter and Jelly Day.

Michael Lewis calls the stock exchange 'rigged'

Tue, 2014-04-01 09:29
Tuesday, April 1, 2014 - 15:28 Spencer Platt/Getty Images

Traders work on the floor of the New York Stock Exchange after the ringing the Opening Bell on April 1, 2014 in New York City. 

You know that image of the trading floor? The sweaty guy screaming, yelling, shouting "Sell! Sell! Sell!" and waving at a big screen?

Author Michael Lewis says it's all fake: "The New York Stock Exchange is really just a backdrop for TV shows."

In his new book Flash Boys: A Wall Street Revolt, Lewis tells the story of a shift to "computer time" on the markets, that "it’s all been automated in the last decade. All the meaningful stuff happens in black boxes," which has serious implications on human high-frequency traders.

He tells the story through one trader, Brad Katsuyama. One night in 2008, Katsuyama pushed a button and realized the market seemed to anticipate what he was going to do before he did it. It was as though someone was "front-running" the whole process. As he investigated, he realized that, in fact, they were. High-frequency traders had begun using tricks to make money off other people's trades, by making the same trades milliseconds earlier.

Kastsuyama called it "rigged" against individual investors. And Lewis agrees:

"Imagine a casino that wants to create a new poker game, and it wants to get people into the poker game. It goes to a handful of good poker players and it says, 'Hey if you sit at this table you can deal the cards, and you alone will know that the decks have no fours, no nines and no queens in it. Then they go to tour bus companies and say 'Bring in tourists to come play against these guys. We're not going to tell those people that there are no queens or nines or fours in the decks.

Of course, the guys who know the missing cards have this huge tactical advantage over the suckers who roll into the casino.... Basically, in this analogy the casinos are the stock exchanges, they provide this unfair edge to the high-frequency traders who are the card sharks and investors are the guys on the tour bus."

In short: The NYSE doesn't look like this anymore.

Marketplace for Tuesday April 1, 2014 Tabitha Soren

Author Michael Lewis.

Flash Boys: A Wall Street Revolt Author: Michael Lewis Publisher: W. W. Norton & Company (2014) Binding: Hardcover, 288 pages Interview by Kai RyssdalPodcast Title: Author Michael Lewis calls stock exchange "rigged"Story Type: InterviewSyndication: Flipboard BusinessSlackerSoundcloudStitcherBusiness InsiderSwellPMPApp Respond: No

PODCAST: Dealing with high frequency trading

Tue, 2014-04-01 09:19
Tuesday, April 1, 2014 - 08:03 Spencer Platt/Getty Images

Many of Wall Street's biggest banks are beating profit expectations as the mortgage business comes back.

Author Michael Lewis, who explained the bond market in Liar’s Poker and the baseball draft in Moneyball,  says the stock market is a rigged game. His new book, Flash Boys: A Wall Street Revolt, describes how high-frequency traders use special tricks to make money on other people’s trades. They do it a penny at a time, by being milliseconds faster than anybody else.

And, cell phones sleep next to us at night and travel in our pockets just about everywhere we go. All those hours reading, texting and Facebooking lead to a predictable but terrifying result: low phone battery. In this age of "I'm always available on my cell," businesses hope to make a buck by offering a place to charge.

The Netflix hit show House of Cards might be about Washington, DC but many of the scenes are shot in Maryland. The show has been lobbying the state congress for tax breaks but their tactics aren't going over well.

 

Marketplace Morning Report for Tuesday, April 1, 2014by David BrancaccioPodcast Title: PODCAST: Dealing with high frequency tradingStory Type: BlogSyndication: All in onePMPApp Respond: No

The secret life of a food stamp

Tue, 2014-04-01 09:00

This story is Part I in a collaboration with Slate called “The Secret Life of a Food Stamp.” 

Last night, as the clock struck 12:01 on the first of the month, some lines of computer code triggered a series of financial transactions that have a profound effect on the American economy. In that instant, hundreds of millions of dollars—taxpayer dollars—were automatically downloaded onto debit cards tucked into wallets and purses of people across America.

Depending on what state you live in, the same thing will happen at different midnights throughout the month, until 47 million Americans living near the poverty line have received their monthly allotment of food stamp dollars—on average, about $130 per person. Once they get that money, some people will start spending it within minutes.

It was 12:30 a.m. and snowing when I met Yolanda Ballard and her 8-year-old son recently, pushing a shopping cart full of groceries toward their car in a Walmart parking lot in Dayton, Ohio. “This little dude right here needs breakfast in the morning, so you just come at night and get it over with,” she said.

Ballard is a widow in her forties, with a part-time job at the discount store Dollar General, where she tries to get as many shifts as she can. Ballard's food stamp card, officially known as an Electronic Benefits Transfer or EBT card, had been recharged with $340 that night, a moment she'd been anticipating. As frugal as she tries to be, her food stamps usually run out by the third week of the month. “Then you're kind of putting stuff together and trying to make stuff happen until your stamps come,” she said.

One in seven Americans uses food stamps today—that’s more than twice 2000’s number. The fastest-growing group of participants are people like Ballard: people with jobs, who work all year round. Many of these workers are employed by big retail chains that take in tens of billions of dollars in food stamps.

In politics and in the news, a lot of focus is put on the manyYolanda Ballards of America. Whether they deserve the food stamp money they get. What they spend it on. If they abuse the system. Those were the kinds of questions clinging to recent debates in Congress over funding for food stamps. But throughout those debates, which resulted in more than $8 billion in cuts to the program over the next decade, one subject got relatively little attention: what happens to those food stamp dollars after people like Yolanda Ballard swipe their EBT cards, and the money becomes store revenue.

Last year, a record $76 billion flowed from the U.S. Treasury to peoples' food stamp cards. That money then flowed into the revenue streams of more than 240,000 stores across the country, all of which have been approved by the federal government to accept food stamps, officially known as the Supplemental Nutrition Assistance Program, or SNAP. You can look at SNAP as a government subsidy with two lives. First, low-income people enrolled in the program get financial help to buy food. Then, when they swipe their EBT card at the check-out counter, the government pays that store for that food—which is, of course, being sold at a profit.

So it seems worthwhile to pay attention to how this "second life” of a food stamp subsidy works. There’s just one problem: A lot of the information about how stores benefit from food stamps is confidential.

The USDA has prohibited the release of information on how much individual companies make from food stamp revenue.

Even basic facts such as how many food stamp dollars go to a particular store in a particular location are not publicly available. For their part, stores don’t like to volunteer the information. “We don’t provide our market-share data on any categories like that—it’s generally proprietary in nature,” explains David Tovar, vice president of communications for Walmart, which caters to low-income customers and takes in a giant share of food stamp dollars. “I think any information that a retailer shares about how they're serving customers and how they're going to market would be interesting to lots of other retailers.”

But say you're not a retailer—you’re just someone who wants to know where $76 billion of your tax dollars are going. For you, it might be useful to know which companies profit the most off this federally funded program that Congress created to fight hunger. You might wonder: In what stores and neighborhoods are the most food stamp dollars spent? What kinds of foods do those stores promote and sell? What are the store’s business and labor practices? The answers to those questions might help you see how food stamp subsidies are serving a community—if they’re doing what they were meant to do.

It was these sorts of questions that Jonathan Ellis, a reporter at the Argus Leader in South Dakota, was pursuing when he stumbled into a legal battle with the federal government that is still unresolved. Ellis had requested information from the U.S. Department of Agriculture (USDA) about exactly how much it reimburses each store for sales from EBT cards.

“Typically, if a business participates in a government program, you can get a copy of their contract and find out how much they're being paid,” Ellis says. That’s how it works when the government pays a construction company to build a bridge, or a defense contractor to build a fighter plane. But when Ellis filed a Freedom of Information Act request to find out how much the government pays stores in the food stamp program, he was denied.

In refusing Ellis’ request, the USDA cited a provision dating back to the 1970s forbidding the government from sharing "relevant income and sales tax filing documents" that a store might submit in the course of applying to be part of the food stamp program. For many years, officials at the USDA have interpreted that to mean no information can be released on how much an individual store or company makes from food stamp revenue. Ellis and his newspaper think that is a misinterpretation of the federal statute; recently, a federal appeals judge agreed, and sent the issue back to a lower court for review.

Kevin Concannon, Under Secretary for Food, Nutrition and Consumer Services at the USDA, who oversees the food stamp program, agrees that SNAP sales information should be made available. “I think, personally, it's in the interest of the American public,” he told me. “These are public benefits that are moving through the economy.” Yet he wouldn't rule out the possibility that his agency could appeal the judge's ruling.

That means for the time being, there is a lot we don’t know about how food stamp subsidies affect stores. So what do we know?

We know that food stamps affect how and when stores manage their inventory, as sales often spike on the days of the month when benefits kick in. In Ohio, where cards are recharged between the first and the tenth of the month, stores stock up on bread, meats, milk, and cheese ahead of the rush of customers. “All the staples are usually what disappears the fastest,” says Mary Burkett, an assistant manager at a Walmart supercenter in Ohio. “If you don't have your staples, you know customers are going to be upset, you'll lose sales.”

Mary Burkett, an assistant manager at a Walmart supercenter in Ohio. 

While we don’t know exactly how much individual stores make in EBT card sales, we know that revenue really matters to stores’ bottom lines. This is something Walmart share-holders have learned firsthand. When Walmart announced disappointing profits and store sales last quarter, company executives blamed bad weather and the reduction in SNAP benefits that went into effect in November 2013, after an economic stimulus bill expired.

Then just last week, when Walmart released its annual report, it listed among the potential risks facing the company “changes in the amount of payments made under the Supplement Nutrition Assistance Plan [sic].” Namely, the $8 billion in cuts to SNAP that Congress passed earlier this year.

At a private dinner Walmart held for market analysts last fall in Bentonville, Ark., a company vice president estimated Walmart takes in 18 percent of all food stamp spending in the U.S., a number Walmart’s David Tovar confirmed when I interviewed him. That means Walmart took in more than $13 billion in revenue—or about 4 percent of Walmart’s total sales in the U.S.—from federal food stamp dollars last year.

So Walmart is likely the biggest single corporate beneficiary of SNAP, but it’s not just Walmart. A growing number of stores have baked food stamp funding into their business model since the Great Recession. The tally of stores authorized to accept food stamps has more than doubled since the year 2000, from big-box stores like Target and Costco to 7-Elevens and dollar stores. It’s a paradox that the more people are struggling to get by, the more valuable food stamps become for business.

In 2009, the CEO of Family Dollar told shareholders that expanding in to the multi-billion dollar food stamp market represented a "significant opportunity" that would help them weather the bad economy. Other stores put tables outside their doors with information about SNAP to help sign more people up.

Retailers’ embrace of SNAP has been encouraged by the USDA, which depends on stores to make the program work. It’s a symbiotic relationship, and the government takes every opportunity to remind retailers what’s in it for them. In a USDA training video sent to stores that take food stamps, the narrator drives the point home: “If you approach it as you do any other good business practice, accepting SNAP benefits can be a profitable part of your operation.”

Profitable for companies, and potentially for their workers, too. The USDA’s Kevin Concannon says food stamps can be a job creator. He told me about a visit he made to HEB Grocery, a supermarket chain in Texas. “The vice president of the company pointed to some of the clerks,” Concannon recalls, “and he said, ‘See these folks here? We're able to employ more of those, for more hours per month, due directly to the financial impact of food stamp benefits.’”

But there is something else that’s important to point out about the jobs you can get at stores that accept food stamps. In many cases, at many different stores, those jobs pay so little that their workers depend on food stamps, too.

In order to be authorized by the government to participate in SNAP, a store must meet certain standards and fulfill certain responsibilities. It must keep a specific amount and variety of food in stock. It must work with the federal government to monitor fraud. It must not discriminate against customers who use EBT, or force them to use certain lines. But nowhere does the government require that for a store to be part of the food stamp program, it must pay its workers enough that they don’t need to use food stamps themselves.

Additional reporting and production on this story from Jolie Myers and Martha Little.

Housing's bad month, via the letter 'L'

Tue, 2014-04-01 08:58
Tuesday, April 1, 2014 - 14:55 Justin Sullivan/Getty Images

A construction worker stands on the roof of a condo complex under construction on July 17, 2013 in Berkeley, California. According to a Commerce Department report, housing starts and permits for future home development fell 9.9 percent in June...

Some pretty lackluster news from the housing market today.

Construction spending rose a measly .1% in February. Part of that was because of the wild weather we saw this winter, but economists say that only accounts for part of the lacklusterness. It seems we’re not building or buying homes like we used to. Pending home sales fell in February to their lowest level in more than 2 years. The housing market made big gains last year, but so far 2014 isn’t looking so hot. 

The reason?

Brought to you by the letter "L" (and the number "3").

L is for Labor: The lackluster labor market means people don’t want to make big investments, like buying a house, says Susan Wachter, professor of real estate and finance at Wharton.  "Jobs and affordability of mortgages are the two fundamental drivers of the housing market and they’re both weak right now."

L is for Loans: Namely, it's not easy to get a loan these days. Nicolas Retsinas teaches real estate at Harvard Business School. "The bread and butter of the housing market is first time homebuyers. They continue to have increasing difficulty getting a mortgage, accessing credit."

Those loans have to be a little larger because of the third L...

L is for Lumber: "Costs have been going up. The cost of lumber’s been going up," says Patrick Newport, an economist with IHS. He says demand from China and other elements have lifted lumber prices, making building less lucrative for builders and a lot costlier for buyers.

L is also for : Undeveloped or ripe for development real estate is getting expensive too, especially in urban areas.

And let's not forget the L for Lousy Weather: The winter freeze clamped a lid on the housing market on most of the Eastern Seaboard this year, and sales in the West and South just weren't enough to make up for it.

All of this is a big deal for the overall economy, says Newport, because it is (I know, you may be going into acute sugar shock at this moment) an economic...

L for Lynchpin: "Basically, the housing market has been sideways for the past six months and that’s very disappointing, because housing is supposed to be one of the key lynchpins that will get the economy back on track."

That's largely because it creates a lot of Lucrative construction jobs.

Marketplace for Tuesday April 1, 2014by Stacey Vanek SmithPodcast Title: Housing is having a bad month, thanks to the letter "L"Story Type: News StorySyndication: SlackerSoundcloudStitcherSwellPMPApp Respond: No

The yacht index: How the price of pricey boats shifts

Tue, 2014-04-01 07:29
Tuesday, April 1, 2014 - 16:27 Valery Hache/AFP/Getty Images

A picture taken on September 25, 2013 shows a general view in Monaco with yachts moored at Port Hercules during the 23th edition of the International Monaco Yacht Show. The Monaco Yacht Show is considered the most prestigious pleasure boat show in the world with the exhibition of 500 major companies in the luxury yachting and a hundred super and megayachts afloat. 

Is it possible that yachts can serve as an economic indicator? The Monaco Yacht Show, where billionaires gather to browse for boating baubles, is coming up in the fall. But event organizers say the yacht industry is beginning to bounce back from the recession.

"The yacht industry is the first thing to crash and the last thing to come back," says Lang Ryder, who runs the Marine Lending Division for Seacoast National Bank. He says there was even a boating bubble - owners needed cash so they sold and prices dropped. "The bubble was overnight, if you had a boat in 2007 that was worth $1,500,000. In 2009 it might be worth $750,000."

Claudette Bonville, an interior designer for yachts, says renovating a boat is just like redoing your house, "except it costs a lot more money. Sometimes it can be a $1 million, sometimes it can be $5 million." 

Marketplace for Tuesday April 1, 2014by Sally HershipsPodcast Title: The yacht index: How the price of pricey boats shiftsStory Type: News StorySyndication: SlackerSoundcloudStitcherSwellPMPApp Respond: No

PODCAST: Dealing with high frequency trading

Tue, 2014-04-01 05:03

Author Michael Lewis, who explained the bond market in Liar’s Poker and the baseball draft in Moneyball,  says the stock market is a rigged game. His new book, Flash Boys: A Wall Street Revolt, describes how high-frequency traders use special tricks to make money on other people’s trades. They do it a penny at a time, by being milliseconds faster than anybody else.

And, cell phones sleep next to us at night and travel in our pockets just about everywhere we go. All those hours reading, texting and Facebooking lead to a predictable but terrifying result: low phone battery. In this age of "I'm always available on my cell," businesses hope to make a buck by offering a place to charge.

The Netflix hit show House of Cards might be about Washington, DC but many of the scenes are shot in Maryland. The show has been lobbying the state congress for tax breaks but their tactics aren't going over well.

 

High-frequency trading in the spotlight

Tue, 2014-04-01 02:35

Author Michael Lewis, who explained the bond market in Liar’s Poker and the baseball draft in Moneyball,  says the stock market is a rigged game. His new book, Flash Boys: A Wall Street Revolt, describes how high-frequency traders use special tricks to make money on other people’s trades. They do it a penny at a time, by being milliseconds faster than anybody else.  

So, where does that leave individual investors? Playing a different game, says Brian Bachelier of Scottrade. Even day traders, sitting in their pajamas in front of laptops all day, are not looking for profits in the same places as the high-frequency traders.

"We do have some people who are very active traders," says Bachelier. "But they’re talking about minutes. Five minute, ten minute, fifteen minute intervals. As opposed to the milliseconds. That millisecond game is for institutional players only."

Which isn't to say that ordinary people couldn't be affected. There are two kinds of institutional players in this millisecond game:  The high frequency traders are the sharks. Our mutual funds are the minnows. They get bit every time they do a trade. 

Lawrence Glosten, a finance professor at Columbia University, explains what that means for individuals planning for their future.  "What it means," he says, "is if you want to retire someday, you should be putting your money in an index fund, in which they’re not going to bear many of these costs at all."

Meaning: Index funds do less trading than actively-managed funds, so the sharks have fewer opportunities to bite.

Netflix deploys Frank Underwood

Tue, 2014-04-01 02:31

The Netflix hit show House of Cards might be about Washington, DC but many of the scenes are shot in Maryland. The show has been lobbying the state congress for tax breaks but their tactics aren't going over well.
 
At first House of Card's lobbying efforts were all wine and roses. They hired a top rated lobbyist.

"They held a big shmoozy event with lots of  liquor flowing," says Jennifer Bevan-Dangel is with Common Cause, a legislative watchdog.

The actor Kevin Spacey was at the event glad-handing politicians. Spacey plays the house whip, Frank Underwood in the show. But when the votes for the tax break bill looked uncertain, the producers pulled a stunt. 

"They sent this letter that was very threatening, they said if you don't meet our request, we'll be pulling our production out of the state," says Brevan-Dangel.

Paul Pinsky, a Maryland state senator, says Frank Underwood would have done it a different way. "I think if Frank Underwood would advise someone, I think he'd say, if you're going to threaten the governor, whisper in his ear," Pinsky says, "You don't write a letter and put it on paper."

The letter was actually sent to lawmakers, but you get the picture. Several of them are now threatening to use eminent domain to seize the House of Cards property if it stops shooting. High-drama to be sure, though maybe not what Netflix was looking for.

The secret life of a food stamp

Mon, 2014-03-31 18:23
Tuesday, April 1, 2014 - 12:00 Krissy Clark/Marketplace

A Walmart sign in Cleveland, Ohio.

This story is Part I in a collaboration with Slate called “The Secret Life of a Food Stamp.” 

Last night, as the clock struck 12:01 on the first of the month, some lines of computer code triggered a series of financial transactions that have a profound effect on the American economy. In that instant, hundreds of millions of dollars—taxpayer dollars—were automatically downloaded onto debit cards tucked into wallets and purses of people across America.

Depending on what state you live in, the same thing will happen at different midnights throughout the month, until 47 million Americans living near the poverty line have received their monthly allotment of food stamp dollars—on average, about $130 per person. Once they get that money, some people will start spending it within minutes.

It was 12:30 a.m. and snowing when I met Yolanda Ballard and her 8-year-old son recently, pushing a shopping cart full of groceries toward their car in a Walmart parking lot in Dayton, Ohio. “This little dude right here needs breakfast in the morning, so you just come at night and get it over with,” she said.

Ballard is a widow in her forties, with a part-time job at the discount store Dollar General, where she tries to get as many shifts as she can. Ballard's food stamp card, officially known as an Electronic Benefits Transfer or EBT card, had been recharged with $340 that night, a moment she'd been anticipating. As frugal as she tries to be, her food stamps usually run out by the third week of the month. “Then you're kind of putting stuff together and trying to make stuff happen until your stamps come,” she said.

One in seven Americans uses food stamps today—that’s more than twice 2000’s number. The fastest-growing group of participants are people like Ballard: people with jobs, who work all year round. Many of these workers are employed by big retail chains that take in tens of billions of dollars in food stamps.

In politics and in the news, a lot of focus is put on the manyYolanda Ballards of America. Whether they deserve the food stamp money they get. What they spend it on. If they abuse the system. Those were the kinds of questions clinging to recent debates in Congress over funding for food stamps. But throughout those debates, which resulted in more than $8 billion in cuts to the program over the next decade, one subject got relatively little attention: what happens to those food stamp dollars after people like Yolanda Ballard swipe their EBT cards, and the money becomes store revenue.

Last year, a record $76 billion flowed from the U.S. Treasury to peoples' food stamp cards. That money then flowed into the revenue streams of more than 240,000 stores across the country, all of which have been approved by the federal government to accept food stamps, officially known as the Supplemental Nutrition Assistance Program, or SNAP. You can look at SNAP as a government subsidy with two lives. First, low-income people enrolled in the program get financial help to buy food. Then, when they swipe their EBT card at the check-out counter, the government pays that store for that food—which is, of course, being sold at a profit.

So it seems worthwhile to pay attention to how this "second life” of a food stamp subsidy works. There’s just one problem: A lot of the information about how stores benefit from food stamps is confidential.

The USDA has prohibited the release of information on how much individual companies make from food stamp revenue.

Even basic facts such as how many food stamp dollars go to a particular store in a particular location are not publicly available. For their part, stores don’t like to volunteer the information. “We don’t provide our market-share data on any categories like that—it’s generally proprietary in nature,” explains David Tovar, vice president of communications for Walmart, which caters to low-income customers and takes in a giant share of food stamp dollars. “I think any information that a retailer shares about how they're serving customers and how they're going to market would be interesting to lots of other retailers.”

But say you're not a retailer—you’re just someone who wants to know where $76 billion of your tax dollars are going. For you, it might be useful to know which companies profit the most off this federally funded program that Congress created to fight hunger. You might wonder: In what stores and neighborhoods are the most food stamp dollars spent? What kinds of foods do those stores promote and sell? What are the store’s business and labor practices? The answers to those questions might help you see how food stamp subsidies are serving a community—if they’re doing what they were meant to do.

It was these sorts of questions that Jonathan Ellis, a reporter at the Argus Leader in South Dakota, was pursuing when he stumbled into a legal battle with the federal government that is still unresolved. Ellis had requested information from the U.S. Department of Agriculture (USDA) about exactly how much it reimburses each store for sales from EBT cards.

“Typically, if a business participates in a government program, you can get a copy of their contract and find out how much they're being paid,” Ellis says. That’s how it works when the government pays a construction company to build a bridge, or a defense contractor to build a fighter plane. But when Ellis filed a Freedom of Information Act request to find out how much the government pays stores in the food stamp program, he was denied.

In refusing Ellis’ request, the USDA cited a provision dating back to the 1970s forbidding the government from sharing "relevant income and sales tax filing documents" that a store might submit in the course of applying to be part of the food stamp program. For many years, officials at the USDA have interpreted that to mean no information can be released on how much an individual store or company makes from food stamp revenue. Ellis and his newspaper think that is a misinterpretation of the federal statute; recently, a federal appeals judge agreed, and sent the issue back to a lower court for review.

Kevin Concannon, Under Secretary for Food, Nutrition and Consumer Services at the USDA, who oversees the food stamp program, agrees that SNAP sales information should be made available. “I think, personally, it's in the interest of the American public,” he told me. “These are public benefits that are moving through the economy.” Yet he wouldn't rule out the possibility that his agency could appeal the judge's ruling.

That means for the time being, there is a lot we don’t know about how food stamp subsidies affect stores. So what do we know?

We know that food stamps affect how and when stores manage their inventory, as sales often spike on the days of the month when benefits kick in. In Ohio, where cards are recharged between the first and the tenth of the month, stores stock up on bread, meats, milk, and cheese ahead of the rush of customers. “All the staples are usually what disappears the fastest,” says Mary Burkett, an assistant manager at a Walmart supercenter in Ohio. “If you don't have your staples, you know customers are going to be upset, you'll lose sales.”

Mary Burkett, an assistant manager at a Walmart supercenter in Ohio. 

While we don’t know exactly how much individual stores make in EBT card sales, we know that revenue really matters to stores’ bottom lines. This is something Walmart share-holders have learned firsthand. When Walmart announced disappointing profits and store sales last quarter, company executives blamed bad weather and the reduction in SNAP benefits that went into effect in November 2013, after an economic stimulus bill expired.

Then just last week, when Walmart released its annual report, it listed among the potential risks facing the company “changes in the amount of payments made under the Supplement Nutrition Assistance Plan [sic].” Namely, the $8 billion in cuts to SNAP that Congress passed earlier this year.

At a private dinner Walmart held for market analysts last fall in Bentonville, Ark., a company vice president estimated Walmart takes in 18 percent of all food stamp spending in the U.S., a number Walmart’s David Tovar confirmed when I interviewed him. That means Walmart took in more than $13 billion in revenue—or about 4 percent of Walmart’s total sales in the U.S.—from federal food stamp dollars last year.

So Walmart is likely the biggest single corporate beneficiary of SNAP, but it’s not just Walmart. A growing number of stores have baked food stamp funding into their business model since the Great Recession. The tally of stores authorized to accept food stamps has more than doubled since the year 2000, from big-box stores like Target and Costco to 7-Elevens and dollar stores. It’s a paradox that the more people are struggling to get by, the more valuable food stamps become for business.

In 2009, the CEO of Family Dollar told shareholders that expanding in to the multi-billion dollar food stamp market represented a "significant opportunity" that would help them weather the bad economy. Other stores put tables outside their doors with information about SNAP to help sign more people up.

Retailers’ embrace of SNAP has been encouraged by the USDA, which depends on stores to make the program work. It’s a symbiotic relationship, and the government takes every opportunity to remind retailers what’s in it for them. In a USDA training video sent to stores that take food stamps, the narrator drives the point home: “If you approach it as you do any other good business practice, accepting SNAP benefits can be a profitable part of your operation.”

Profitable for companies, and potentially for their workers, too. The USDA’s Kevin Concannon says food stamps can be a job creator. He told me about a visit he made to HEB Grocery, a supermarket chain in Texas. “The vice president of the company pointed to some of the clerks,” Concannon recalls, “and he said, ‘See these folks here? We're able to employ more of those, for more hours per month, due directly to the financial impact of food stamp benefits.’”

But there is something else that’s important to point out about the jobs you can get at stores that accept food stamps. In many cases, at many different stores, those jobs pay so little that their workers depend on food stamps, too.

In order to be authorized by the government to participate in SNAP, a store must meet certain standards and fulfill certain responsibilities. It must keep a specific amount and variety of food in stock. It must work with the federal government to monitor fraud. It must not discriminate against customers who use EBT, or force them to use certain lines. But nowhere does the government require that for a store to be part of the food stamp program, it must pay its workers enough that they don’t need to use food stamps themselves.

Additional reporting and production on this story from Jolie Myers and Martha Little.

Marketplace for Tuesday April 1, 2014 by Krissy ClarkPodcast Title: The secret life of a food stampStory Type: FeatureSyndication: Flipboard BusinessSlackerSoundcloudStitcherBusiness InsiderSwellPMPApp Respond: No

Shop and charge: stores offer cellphone charging

Mon, 2014-03-31 14:34
Monday, March 31, 2014 - 15:24 Emma Lee/Newsworks

ChargeItSpot founder Doug Baldasare plugs a cellphone into one of his phone charging kiosks.

Cell phones sleep next to us at night and travel in our pockets just about everywhere we go. All those hours reading, texting and Facebooking lead to a predictable but terrifying result: low phone battery. In this age of "I'm always available on my cell," businesses hope to make a buck by offering a place to charge.

The strategy is playing out on a warm afternoon in an Urban Outfitters store in Center City Philadelphia. Among all those dresses and sweaters, people are stopping at a kiosk.

Doug Baldasare is the entrepreneur behind this phone charging kiosk. You can find them in businesses in half a dozen states.

"Shoppers can go open up a little locker door, charging tips in each one, charge your phone, lock the door, you can go freely shop, browse." Baldasare says the "ChargeIt Spot" kiosks are free for phone owners.

So, who's footing the bill? "Traditional brick and mortar retailers are dying to find ways to bring customers in, keep customers shopping longer, ultimately get them to buy more stuff," Baldasare explains. His business has grown rapidly in the last year, and the key to his success hinges on our fear of low phone battery.

Valicia Mack, visiting from Washington DC, says her phone is dead and that makes her feel nervous. "Like I'm missing something," she says. Mack says she's never even seen one of these kiosks before. But she's so desperate for power she admits she'd pay for it.

Meanwhile, retailers have to find any way they can to bring people into their stores and get them to linger.

"Foot traffic is down pretty much across the board," says Barbara Kahn, Marketing professor at the Wharton School. She says the one thing that isn't clear is whether people who use the kiosks will actually spend more money. "In the past, there have been studies that show different things can get people to spend more time a store," says Kahn. "That does not necessarily translate to more purchasing."

Kahn says people who stop in to charge their phones might not buy much while they're in the store. But she says their exposure to all those products may prompt them to pull out their powered up cell phone later on, and place an order online.

Marketplace Tech for Tuesday, April 1, 2014Marketplace Morning Report for Tuesday, April 1, 2014by Elizabeth FiedlerPodcast Title: Shop and charge: more stores offer cellphone chargingStory Type: FeatureSyndication: Flipboard BusinessSlackerSoundcloudStitcherBusiness InsiderSwellPMPApp Respond: No

The economics of the GM recall

Mon, 2014-03-31 14:28

General Motors CEO Mary Barra will appear before House and Senate subcommittees on Tuesday and Wednesday to answer questions related to how much the auto manufacturer knew about ignition switch problems which have been linked to at least thirteen deaths and the recall of 2.6 million vehicles.

Watch the House Energy and Commerce Committee's live video of Tuesday's hearing here at 2:00 p.m. ET. 

Recalls in and of themselves aren’t a bad thing: some analysts think they can have an economic benefit by boosting trust between car owners and automakers.

In 2013, Americans saw a bumper crop of recalls – almost 22 million of them

Here is a quotation from Barra's expected testimony on Tuesday: 

"As soon as l learned about the problem, we acted without hesitation. We told the world we had a problem that needed to be fixed. We did so because whatever mistakes were made in the past, we will not shirk from our responsibilities now and in the future. Today’s GM will do the right thing. That begins with my sincere apologies to everyone who has been affected by this recall… especially to the families and friends of those who lost their lives or were injured. I am deeply sorry.

I’ve asked former U.S. Attorney Anton Valukas to conduct a thorough and unimpeded investigation of the actions of General Motors. He has free rein to go where the facts take him, regardless of the outcome. The facts will be the facts. Once they are in, my management team and I will use his findings to help assure this does not happen again. We will hold ourselves fully accountable. However, I want to stress that I’m not waiting for his results to make changes." - General Motors CEO Mary Barra 

Rising small business sales likely to continue in 2014

Mon, 2014-03-31 14:21
Monday, March 31, 2014 - 14:23 Grace Hood

Roy Hansen, owner of the Northern Colorado Truck Driving Academy, watches a Commercial Driver's License test taker parallel park on his school grounds in Fort Collins, Colo. Hansen, who turns 69 in April, just put his school up for sale.

The business of selling businesses has long been fickle. But this year is shaping up to be a particularly active year.

Take Roy Hansen: for almost two decades, Colorado’s aspiring big rig drivers have turned to his Northern Colorado Truck Driving Academy for training.

 “This is a tractor truck and trailer now he’s parallel parking here,” says Hansen as he watches a customer back up the vehicle. “It takes some experience to do this. You can’t just wing it.”

Truck-driving jobs are in high demand because of increased construction in the region and clean up from Colorado’s floods last year. With a thriving business Hansen’s now focusing on retirement. This month he put his school up for sale with a broker.

“I turn 69 next month. And you know, it’s just time to do it,” he says.

A growing number of boomers are eyeing retirement now. Those who own small businesses and want to cash out have had to be patient since the last recession. This is where brokers who match buyers and sellers can help out.

“There’s always a three-year look back. The banks want to see three years financial statements, the buyers want to see three to five [years],” says Ben Mahrle with Mountain States Business Brokers Group.

Mahrle explains there’s often a lag between an economic recovery and the ability of business brokers to close deals. “If the most recent year -- or the most recent two years -- are in decline, you’re not going to get the loan. End of story,” he says.

That picture has changed. Last year the popular online marketplace Bizbuysell.com reported a 49 percent jump in small business sales. Scott Bushkie, a board member with the International Business Brokers Association, says this year could be even better.

“Kinda the perfect storm,” he says. “You got more buyers with a lot of cash. You’ve got more baby boomers coming out into the marketplace, and financing is getting more aggressive each and every day.”

As a broker himself, Bushkie says he’s starting to see interest from business owners who first tried to sell around the Great Recession. He says they have the feeling now is a great window of opportunity.

Marketplace Morning Report for Tuesday, April 1, 2014by Grace HoodPodcast Title: Rising small business sales likely to continue in 2014Story Type: FeatureSyndication: Flipboard BusinessSlackerSoundcloudStitcherBusiness InsiderSwellPMPApp Respond: No

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