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Ambercrombie wants to hang with the older crowd

Wed, 2015-08-26 10:14
20 something

That's the target age Abercrombie & Fitch is seeking now — along with college students — in a strategy to move away from teens and nab the more brand-loyal elders. The company is reinventing itself, Andy Uhler writes, hiring new designers and executives. “Teenagers are just not very loyal to brands," fashion writer Hayley Phelan says. The retailer reported losses for the second quarter Wednesday, though not as much as some analysts feared, given its stock hit a more than six-year low last week.

3.5 billion

That's the amount of federal student loans at stake in the liquidation of Corinthian College, once one of the largest for-profit higher education companies in the U.S. The company is the target of objections again, this time over its bankruptcy plan. Some agencies say the plan will shield Corinthian from lawsuits. Last year, the Consumer Financial Protection Bureau sued Corinthian, saying it charged exorbitant tuition and saddled students with high-interest loans. 

1 day

That's how long you'll have to get a McWhopper and support world peace at the same time, if Burger King's "sincere" proposal goes through. The New York Times reports that Burger King, "a perennial also-ran in the burger races" asked rival McDonald's to join hands and beef patties on Sept. 21 in honor of the International Day of Peace. The King's proposal was delivered via full-page ads in the Times and the Chicago Tribune, and promised that the fruits, uh, proceeds, of the union would go to Peace One Day, sort of the in-laws. McDonald's CEO Steve Easterbrook was coy in his Facebook reply, saying he'd "be in touch."

PODCAST: Wall Street's rusty plumbing

Wed, 2015-08-26 09:48

Stocks are rallying early in the day, but after yesterday's last-minute drop, we try and figure out what we're in for. Then: all the recent volatility is exposing some issues with the way the markets are handling exchange traded funds. Finally: we look at the winners and losers in Corinthian College's bankruptcy plan.

Abercrombie bets future earnings on a turnaround

Wed, 2015-08-26 02:00

Abercrombie & Fitch is reporting second quarter earnings just a week after its stock hit a more than six-year low, and the retailer announced it is restructuring its front office by bringing in a batch of new designers and executives to reinvent the brand.

The company is trying to get out of the teen-age market in favor of shoppers a bit older – college students and 20-year olds. Elliot Morss, of Morss Global Finance, says he thinks Abercrombie is targeting the right market. "That age group still goes to stores," Morss says. “So I think this move from the really young people to the older people, given that they aren’t really that well established online, is probably a pretty good move for Abercrombie & Fitch.”

So much of Abercrombie’s business was the cool-factor of the brand itself – shirts and hats emblazoned with its name. Hayley Phelan writes about fashion. She says kids aren’t really into that anymore. “Teenagers are just not very loyal to brands," she says. "They just want a cheap, cute top that they feel is cool and they can afford and that they can wear once and then buy something else later.”

Buy something else later at stores like H&M and Zara. And buy it cheap. 

Why singing happy birthday can come with a fee

Wed, 2015-08-26 02:00

How many times have you sung "Happy Birthday" to someone with knowing it was copyrighted? Perform it publicly, and you have to pay a fee -- to the copyright owner Warner/Chappell Music.

Of course, people sing the song at birthday parties without paying a royalty. But if you want to, say, put the song in a movie? You have to pony up. 

“Warner/Chappell  charges sometimes $100,000 or more for a major motion picture use of the song,” says Mark Rifkin, an attorney representing a filmmaker who’s suing Warner/Chappell Music, claiming the copyright is invalid. 

I asked Rifkin if he was surprised that "Happy Birthday" was copyrighted.

“I sure was," he says. "Like most other people I assumed it was in the public domain.”

Filmmakers go to great lengths to avoid the birthday song. Restaurant employees can’t sing it, either. They’ve come up with alternatives.  If you’ve ever been to a T.G.I. Friday's you know what I mean. But these unique birthday songs keep restaurants and filmmakers out of trouble.

Dan Cryan, senior director of media and content at the consulting group, IHS, says you can’t blame people for avoiding the birthday song.

“Performing it in a public space, in theory should incur a fee,” he says.

Warner/Chappell turned down my request for an interview. But I did talk to Judith Dornstein, an entertainment attorney who represents artists and production companies.  She says whatever you think of the Happy Birthday case, copyrights are an important protection for the entertainment business.

“This is somebody’s work that it took time and effort to put into," she explains. "This is their living.”

Dornstein says the "Happy Birthday" case is unique. And probably won’t set a precedent.  But, until it’s settled, you better be careful about singing it in public.  

 

London's luxury housing mirrors NYC's upscale push

Wed, 2015-08-26 02:00

Just like New York,  London has become dotted with a new breed of apartment blocks, buildings  full of luxury flats designed for  wealthy foreigners. Low income Londoners are feeling squeezed.

Take the tenants of the Sutton estate. Located  in one of London’s wealthiest neighborhoods, the estate was  built a hundred years ago to house the city’s working poor. But some of today's impoverished residents now face eviction.

“They’re trying to move people on a lower income out of here so they can acquire more land for private luxury flats.” claims Vesna Vukovic, a single mother with two children. “I’ve lived here for twelve years and now they’re forcing me out.  It’s devastating. I have felt suicidal.”

The plan is to demolish most of the estate and to rebuild it. Some of the low income homes would be turned into luxury apartments and sold off to rich  foreign investors. Some 60 displaced households would  be moved elsewhere.  Ian Henderson, who chairs the  “Save the Sutton Estate” campaign, accuses  the British government and the local authority of putting profit before people . 

“It’s wrong, it’s just wrong.” he says.  “It’s time the government stood up for the people of Britain instead of constantly trying to attract foreign investment into the capital.”

Sutton resident Jean Keal claims that by squeezing dozens of poor Londoners off the estate and out of this wealthy neighborhood, the authorities are betraying the original purpose of the Sutton Estate. She describes the redevelopment as “social cleansing.” 

“You have the poor, the middle and the rich, here.” says Keal.  “It’s a beautiful combination. And it’s worked well for a hundred years. And now they’re going to spoil the whole thing.”

The housing association that runs the Sutton Estate says the building is decrepit and must be modernized.  Selling the luxury apartments, it says, will help pay for the redevelopment; most of the current residents will be rehoused on the new estate and most of them support the scheme.

For its part the local authority argues that it makes more financial sense to find accommodation for the 60 displaced households in less expensive parts of London.

But the displaced tenants are fighting on.  Low income Londoners caught up  in dozens of other “regeneration” projects around the city  feel  they’re the casualties of London’s luxury property boom.  And their message to the developers and their foreign clients is : we will not be moved.

 

 

Who wins, loses, in Corinthian's bankruptcy plan?

Wed, 2015-08-26 02:00

Corinthian College, once one of the largest for-profit higher education companies in the U.S., is seeking court approval of its bankruptcy plan. If approved, the plan would pay both students and general creditors out of what remains of Corinthian's assets. But some agencies and states object, saying the plan also clears Corinthian of liability from their lawsuits.

The Consumer Financial Protection Bureau sued Corinthian a year ago, saying it charged exorbitant tuition for some programs, and saddled students with unusually high interest rates on their loans. Three and a half billion dollars in federal student loans are at stake in the liquidation. Guilbert Hentschke, who studies for-profit universities at the University of Southern California, says a lot of groups stand to lose in the deal.

"We've got students, we've got governments, employees, we have the public," he says.

He says Corinthian's a canary in the coal mine, "but I think the question is, 'What's it telling us?'"

He says if the settlement forces lenders to tighten up, students anywhere could find it harder to get loans for college. Mike Reilly, executive director of the American Association of Collegiate Registrars and Admissions Officers, says having federal loans forgiven doesn't mean students emerge debt-free.

"A considerable portion of debt that those students incurred is not with the federal government, but with private lenders," he says.

Reilly says Corinthian's bankruptcy proposal could leave students and the government still stuck.

Gamestop is dropping off the leaderboard

Tue, 2015-08-25 13:59

There is a crisis in the video game universe. At least for Gamestop.

“The theory is that Gamestop over time is going to struggle because games being sold through boxes are just not going to be as popular,” says Ian Sherr, executive editor at CNet News. “I mean, if you look at the industry, selling over the internet is clearly the future."

"It’s just becoming a more and more popular way to do things, it makes a lot of sense. It’s easier for me to get my games, and it’s also easier for me to manage all my stuff – I don’t have spools of discs everywhere."

But, he says, the transition is not as fast as a simple download. The video game industry has yet to go the way of the movie industry where consumers are happy to store their collections on their hard drives, or rent, via Netflix, Amazon Prime and Itunes. Notes Evan Narcisse, a reporter with the popular video game website Kotaku, "people are still buying games in boxes."

And one way brick and mortar retailers are fighting back is by making sure what's in the box is special. Getting game publishers to create "seriously outlandish  collector’s editions," Narcisse says. These can include collectible statues,  fake foam ninja swords or even accessories for the digital characters themselves, like a skin for Batman to make him look like Adam West.

"These are the kinds of things that hardcore fans get all excited about," Narcisse says.

"If you’re invested in a game series, where you know, you’re pre-ordering, you're following every bit of news that comes down the pipe," he says, "chances are that you will plunk down an extra $40 on top of the $60 kind of baseline asking price to get these things."

Then there's the customer. Gamestop runs a thriving secondhand market for games bought and sold in boxes.

"The fact that that economy exists now is to enticing to resist," says Narcisse. "People are like, all right, if I beat this game in a month – I can sell it back to Gamestop."

But brick and mortar retailers know that’s not enough, says Brian Blau, a research director of the personal technology group with Gartner. They're expanding the merchandise on their shelves to include gaming accessories. 

"Keyboards and mice. You have headphones, you have speakers,” he says. 

The video game industry is worth $80 billion a year globally, Blau says, and if brick and mortar stores like Gamestop are going to remain relevant they'll need to continue to find additional ways to play the retail game.  

Investors want McDonald's out of real estate

Tue, 2015-08-25 13:00

If you think things are tough for McDonald’s now, imagine what it was like when the company was starting out.  

Banks didn’t want to loan McDonald’s money. So the Golden Arches transformed itself into a business the banks would lend to.  

Sort of a real estate company. Buying land and building restaurants, then renting them to franchisees. The sales pitch became:

“It’s not a burger company, it’s a real estate company that sells burgers,” says Sam Oches, editor of QSR, a trade magazine for the fast food industry.  

Oches says this is a unique business model that gives McDonald’s a lot of control over its franchisees.

“If they own that restaurant, they’ll be able to dictate a lot more about the upkeep of the restaurant,” he says.

For example, McDonald’s can give franchisees a break on the rent if they upgrade their stores. John Gordon, a restaurant analyst at Pacific Management Consulting Group, says rent accounted for about a fifth of McDonald’s worldwide revenue last year. But McDonald’s is coming under pressure from some of its investors who want the chain to start selling off its real estate.

“It’s some activist investors looking for ways to juice the stock higher,” Gordon says.

But others think the investors are right — McDonald’s should sell.

“It would be good for McDonald’s, because McDonald’s would have to focus on the food service business and not on real estate,” says Don Sniegowski, editor of Blue Maumau, a news site for franchise owners.

McDonald’s refused an interview request, but a spokeswoman said McDonald’s will provide an update on "financial areas of opportunity" at its November investor meeting.

 

It's a contraction, not another Great Recession

Tue, 2015-08-25 13:00

U.S. financial markets rallied through most of the Tuesday, then fell back in the final hour of trading to close with another day of solid losses.

The Dow Jones industrial average fell 204 points, 1.3 percent, to close at 15,666. The Standard & Poor's 500 index dropped 25 points, 1.3 percent, to close at 1867. The Nasdaq fell 19 points, 0.44 percent, to close at 4506. The yield on the benchmark 10-year Treasury bond rose to 2.07 percent.

The Tuesday morning rally in the market (after steep losses on the two previous trading days) came after China’s central bank lowered interest rates to stimulate the country’s economy and try to reverse recent stock market declines, and the Conference Board reported an improvement in U.S. consumer sentiment.

While investors may be experiencing a high degree of fear and uncertainty, the overall financial picture does not resemble the financial crisis of 2008. From August to October 2008, the stock market was also tanking. Plus, Lehman Brothers and Washington Mutual had failed; Fannie Mae and Freddie Mac were seized by the government as subprime borrowers defaulted, mortgage bonds went bad and home prices crashed; the Big 3 automakers and the nation's biggest banks were on their way to receiving massive government bailouts to stay afloat.

The global financial system was seizing up, says economist Paul Ashworth at Capital Economics in Toronto. “What we’ve had over the last few days is a drop-back in equity prices,” he says. “But we haven’t seen any sign of a credit crunch. Banks are still freely lending to other banks, which was a big problem in the financial crisis. And banks are pretty much willing to lend freely to most businesses and individuals.”

Ashworth says this time around, the underlying economy remains strong, and growth prospects so far haven’t suffered from the recent market turmoil. “The unemployment rate has come down substantially, a lot more people are employed,” Ashworth says. “Domestic sectors of the economy, including housing, look like they’re finally coming back.”

Boston University finance and law professor Cornelius Hurley points out that a key aspect of the 2008 crisis was the bursting of the housing bubble. That left homeowners, institutions, banks and investors holding assets — homes and mortgages and mortgage-backed securities — that couldn’t be valued because there were no buyers for them.

Hurley points out that was also a homegrown crisis that spread globally. “This crisis is generated through China and Greece, and other foreign venues, so it seems somewhat remote,” he says.

The U.S. economy is connected to Europe and China and other emerging markets through imports and exports and investment flows. Which means that a global economic slowdown could take a toll on domestic businesses and consumers. But that needn’t be alarming, says policy analyst Gordon Gray at the American Action Forum.

“It just so happens that the Great Recession is our most recent memory of a big economic slowdown,” Gray says. “But the law of the business cycle is that at some point, you’re going to see some contraction. And contractions don’t necessarily need to look anything like the Great Recession.”

China's struggle for a free (stock) market

Tue, 2015-08-25 13:00

China’s stock market was conceived with an entirely different purpose than stock markets of large economies elsewhere, says Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies.

“The purpose of China’s stock market is to raise capital for state-owned enterprises and other privileged companies,” he says. “It is not to act as a way for investors to find highly efficient and profitable companies to put money into and provide external oversight of these companies by allowing investors to have information and voting power.” 

It’s a fundamental difference in China’s stock market that he says has never been resolved since those markets were created.

The government has managed the stock market accordingly. For example, last year it promoted the idea of stock ownership as a way to diversify financial exposure away from the property market investment. 

“Investors thought they were going to get a free ride from the government,” says Alan Robinson, vice president at RBC Wealth Management.

When officials then said that they were going to take their hands off the markets, people lost confidence. “And that has caused the meltdown we’ve seen over the last few sessions,” Robinson says.

At that point, the degree to which the government is willing to intervene became even more apparent — the gloves came off and it started buying stocks to prop up the market.

“The parallel would be if the U.S. Treasury or Federal Reserve stepped in to purchase the stocks of IBM or of Apple,” says Matthew Slaughter, dean of the Tuck School of Business at Dartmouth.

The government prohibited selling until the market reached 4,000 points. It threatened imprisonment for people who were “maliciously” short-selling stocks.

“The broader problem the Chinese government has created with these interventions,” says Slaughter, “is setting the expectations that stock prices can go and should go only up.” It’s particularly significant because millions of Chinese households are learning what a stock market is and how to participate in it. Part of a stock market — especially at a moment of uncertainty and reform, is volatility and downward movements. 

Despite all of this, China’s stock markets have potential. Jennifer Carpenter is associate professor of finance at New York University's Stern School of Business, and along with professor Robert Whitelaw and Fangzhou Lu recently authored a paper in which “we find that against all odds, China’s stock prices are surprisingly informative about future corporate earnings,” says Carpenter. “It’s comparable to levels of price informativeness that you see in the U.S.”

Otherwise put, China’s stock market can be a real stock market if the government would just let it. 

Freakonomics and end-of-life health care

Tue, 2015-08-25 13:00

Stephen Dubner admits that he and the team behind Freakonomics Radio sometimes explore ideas most sane people would leave untouched. This time, Dubner decided to look at the economics of end-of-life health care.

It’s certainly a touchy subject, but also one that most families will have to face at some time in their lives.

Dubner poses the question: “What if someone was suffering from a terminal illness and they had the option of forgoing standard-end-of-life medical care, and instead they could get a cash medical rebate from their insurance companies?”

He’s calling the idea the Glorious Sunset Proposal, and the Freakonomics folks even made a fake commercial so you can hear how it might be pitched.

Dubner took the Glorious Sunsets Proposal and shopped it around to health care experts to see what they thought.

Health care economist Uwe Reinhardt wasn’t having it. Reinhardt says if he were an insurance company CEO, he wouldn’t offer a Glorious Sunsets option. As a health insurer, “your incentive is actually, in many ways, to increase health spending,” Reinhardt said.

When Dubner took the idea to doctor and bioethicist Zeke Emanuel, he wasn’t interested either.

“It’s so cold blooded, it’s so calculating, it’s so utilitarian that it’s not American,” Emanuel told Dubner.

Thomas Smith is an oncologist at Johns Hopkins. Dubner says Smith actually tried a Glorious Sunsets-like experiment years ago that gave cancer patients the option to forgo treatment and keep the money. But the experiment failed.

“Our patients were actually interested, but their doctor/providers weren’t,” Smith said. “It’s pretty hard to look at those two choices and decide what to do.”

It’s clear these three health care experts weren’t thrilled about the Glorious Sunsets Proposal. But Dubner says all three people — and more — that they spoke with did agree on one thing: “If anything in our health care system really needs to be revolutionized right now, it’s end-of-life treatment.”

But Dubner says, in the end, the economics are perhaps the least important factor. He points to what Zeke Emanuel had to say on the matter. “The health care system, instead of talking to a patient and getting it right, we sort of pound on their chest and try to resuscitate them, even when that may not be what they want,” Emanuel said. “And I think trying to get what patients want ought to be our primary focus." 

Dubner says doctors may soon pay more attention to what patients want. “The Centers for Medicare & Medicaid Services has just proposed a regulation that would actually finally pay doctors to do nothing more than have a conversation with patients about their impending death,” Dubner says.

Maybe it’s not Glorious Sunsets, but it’s “certainly a step in the right direction,” Dubner says. 

Click on the audio player above to hear the fake ad and the full interview.

In Texas, a coal mine opens to power Mexico

Tue, 2015-08-25 12:29

The coal industry is struggling as cheaper and cleaner natural gas undercuts coal, and environmental regulations push utilities to shut down their older coal-burning plants.

Yet new coal mines open and others expand. In one Texas county on the Mexican border, local officials and residents seem nearly united in their opposition to a new coal strip mine, the Eagle Pass Mine. The company that owns it, Dos Republicas Coal Partnership, says it intends to ship out the first load of coal by train next month.

The Dos Republicas Coal Partnership owns the Eagle Pass Mine. 

Ingrid Lobet

Dos Republicas is backed, through layered ownership, by a major Mexican steel and coal firm, Altos Hornos de Mexico, S.A. All the coal from the Eagle Pass Mine is bound for Mexico. It will fire the Carbon I and II power plants half an hour south of the border in Nava, in the state of Coahuila.

“The excuse is that ‘we need energy,’” says Martha Bowles Baxter, a resident of Eagle Pass who opposes the mining plans. “Well, the energy is going to Mexico.”

It appears to be the first time a coal mine has been opened in the United States to serve a power plant in Latin America.

George Baxter, her husband and a civil engineer, says the smoke from the generating station in Mexico often drifts north to Eagle Pass.  

“You see the brown line, horizontal line of pollution," he says. "It extends as far as the eye can see.”

Now, he says, those results of burning coal will be added to the insults of mining it.

“Apparently the war on coal does not extend to Maverick County,” he says.

The Baxters’ chief preoccupations are widely shared. The local school district, city council and hospital officials oppose the mine. Many concerns focus on water. The Eagle Pass Mine intends to discharge into Elm Creek, which runs through the mine just before it joins the Rio Grande. Less than a mile downstream, the city of Eagle Pass takes its drinking water.

Elm Creek neighborhood residents fear that floods, like this one in 2013, will carry mine silt and waste from the Eagle Pass mine on either side of the creek. (Permission to reprint granted by Eagle Pass Business Journal)

Events in recent months have heightened a second water concern. The Eagle Pass area has had two 100-year floods in two years, according to David Saucedo, the Maverick County flood plain administrator.

“In 2013, we had 16 inches of rain in a 24-hour period," he says. "In 2014, we had 12 inches in a 24-hour period.”

One hundred and twenty houses were damaged or destroyed.

“You have seen these people go through these things," says Saucedo, who is also the Maverick County judge. "And on top of those floods, now you have to worry what is in the water? It weighs on you.”

The chance of two 100-year floods occurring back to back is one in 10,000. Texas mining regulations require that the ponds that collect heavy rains before they carry silt into the creek be dug deep enough to withstand just a 10-year flood.

Flood maps from the Federal Emergency Management Agency indicate an official flood zone along the creek where it runs through the mine, so Saucedo opposed the mine’s flood permit. The company sued him. A lower court judge agreed he acted within his authority and that case is at the state’s 13th Court of Appeals in Corpus Christi. 

In the course of those arguments, the mine has gone from paper to reality. Sixty million dollars worth of equipment has arrived at the site, hundreds of acres have been excavated and offices and parking lots for workers carved into the mesquite.  

Yet Martha Bowles Baxter believes another flood, this time carrying mud or mine waste, is inevitable, and that many homes will be in the path of the water. The local newspaper refers to the area directly adjoining the mine as “densely populated.”

 “When FEMA comes in, they are going to render all of that land completely contaminated," she says. "And those people are going to be losing all their homesteads, what they plan to give their children. And no one cares because this area is very, very poor and Hispanic."

 

 

 

 

 

Some residents of Eagle Pass, Texas, note that residents living near mines on the Mexican side of the border complain of soot and land settling, which causes cracks in dwellings. This banner, from Palaú, Coahuila, Mexico, accuses mine owners of assuring their own future at the expense of local children. Alonso Ancira (his last name is misspelled above) is a principal investor in the Mexican and the new Texas mines.      Rudy Rodriguez, who represents the mine owners, says not all of the mine area is in the flood plain, and engineered ponds at the mine will actually ameliorate flooding. The mine plan also complies with numerous agencies’ requirements and all state and federal law, he says.

 

 

 

 

 

Already, Rodriguez says, hard-hit Maverick County is benefiting from the tens of millions of dollars the mine has spent on equipment. At the mine, he points to a mechanic changing a tire on a truck so large it makes his Cadillac Escalade look like a Matchbox car. The tire alone cost $35,000, he says. Under the current footprint of the mine, which the owners seek to expand, it would inject more than $147 million into the local and regional economy.

By one measure, the project has been popular: It held a fair to connect with local vendors and would-be employees.

“We started at eight o’clock in the morning and went on in the evening,” Rodriguez says. “We had so many people want jobs — 680 applicants for 100 jobs.”

Saucedo says most of the town would rather see retail employment. Eight thousand people signed a petition against the coal mine, he says.

“To put that in perspective, you had 5,500 people come out to vote in the last election," he says. "Now, when you have more people signing a petition than going out to vote, that should send a message.” 

On Aug. 10, the U.S. Army Corps of Engineers held a hearing in Eagle Pass to gather public comment, following a request by Dos Republicas to add 25,000 acres of potential mine area to its existing 6,346 acres. According to the Eagle Pass Business Journal, all 28 people who testified, including Eagle Pass Mayor Ramsey English Cantú, spoke against the mine and its expansion.

 

 

The steel business is trying to stay strong

Tue, 2015-08-25 12:28

With the economy still recovering, and the chaos with the stock markets and China, business is tough in the U.S. Lisa Goldenberg, president of the Delaware Steel Company, says things “could always be better. We’re still in recovery period…. Recovery, good recovery, takes a long time, years, 10 years.”

In addition to that, Goldenberg has to keep her eye on the ups and downs happening in China.

“China is the largest steel producing market in the world, so you know I’m watching it every day,” she says. However, she says that the most recent upset with the yuan devaluation hasn’t directly hurt business.

What has hurt her business is the strong U.S. dollar. Goldenberg explains: “For my daily business, I’m a proponent of a much weaker dollar…. For my business, it rocks my world.” When the dollar is strong she has a tough time exporting anything. “I have zero business, not a little, zero when the dollar is strong.”

The strong dollar isn’t the only thing affecting business. There’s also the cost of shipping and freight.

“In the United States, there are so many other factors to shipping across this country than the cost of fuel," Goldenberg says. "We want our drivers to be insured, we want the roads to be safe, we want drivers to be certified and have proper resting times, and have weigh stations, and all the things we’re used to in a developed, sophisticated economy. And those things are very, very expensive.”

It’s hard to conduct business in this hectic economy when everyone is just trying to stay afloat. “It’s very, very stressful. It wears you down. And keeping your employees motivated, keeping their families safe and secure and confident is a full-time job. This economy is not for the faint of heart,” she says.

You have to give him a hand

Tue, 2015-08-25 11:45
2 days

That's the amount of time it takes to make parts for an award-winning robotic hand on a 3-D printer, the BBC reports. Joel Gibbard of Open Bionics says he can use a sensor on his tablet to size an amputee in minutes, print the parts in about 40 hours and fit them together in two hours. The prototype earned Gibbard the James Dyson engineering award, which carries a $3,500 prize and the chance to win the $45,000 international title.

10 percent

That's how much Netflix stock rebounded on Tuesday, the day after Black Monday — or should we call it Black Friday? Much like that busy holiday shopping day, buyers took advantage of sale-priced high-end tech stocks like Netflix, Apple, Google and Facebook, writes Molly Wood. But the bargains are fading as the global markets began the climb up again.

26

That's the number of years Carlos Valdez has spent in the same northeast Los Angeles neighborhood. "I'm Highland Park for life,” says Valdez, an entrepreneur who built a computer repair business there. But investors were buying the old brick buildings in the area, rehabbing them and raising the rent. Like so many of his neighbors, Valdez was nearly priced out of his home and business. His story is part of our York & Fig project on gentrification.

5

That's the number of times China's central bank has cut its interest rates since November. It's been the go-to strategy when the Shanghai Composite Index has dropped, as it did Tuesday by 7 percent. Rob Schmitz, Marketplace's China correspondent in Shanghai, says the central bank "would've saved everyone billions of dollars" if it had made that signature move three days ago. If lowering interest rates "had worked the first time, they wouldn't have had to keep doing it," he says. 

PODCAST: Looking for a rebound

Tue, 2015-08-25 11:09

China tries to take control of its economy, looking for a rebound after Black Monday, and how Chicago's "zombie homes" got that way. 

Tech stocks were on sale yesterday — and people bought

Tue, 2015-08-25 08:15

If all of a sudden there were a huge sale on what are normally out-of-reach, expensive goods, you'd probably go shopping, right? 

Well, that sale happened yesterday, when Black Monday became a two-fer: A massive selloff on Wall Street, and also an opportunity for bargain shopping, Black Friday style. Tech stocks had huge and high-profile markdowns, and today they're leading the rebound. That's because, in some ways, Netflix, Apple and Google are like the Chanel, Hermes and Prada of Wall Street: They never go on sale, so when they do? You get in line. 

By midday, Netflix was up nearly 10 percent, Apple over 5 percent, Google 4 percent and Facebook nearly 5 percent. Tesla, Amazon and Twitter were also big movers. Tech stocks had been among the hardest hit in Monday's selloff, especially Netflix, which has been on an absolute tear in recent months. The tech-heavy Nasdaq suffered its first 10 percent drop since November 2012.

But why were these stocks hit so hard in the first place? Jan Dawson of Jackdaw Research says tech stocks probably got caught up in the overall frenzy, and because they're the big names in many big indices, they suffered hardest.

"It’s kind of baffling, in some ways," he says. 

And Dawson says the tech buyback has as little to do with reality as the selloff.

"So much of it seems to be reaction to what other people are doing," Dawson says. "It's not as if there's some underlying concern about these businesses versus some other view just discovered today."

Netflix specifically, he says, has no reason to be a volatile stock.

"Its underlying financials are fantastic, it's growing rapidly, its DVD business covers the cost of expansion internationally," Dawson says. "There's no new reason in the last couple weeks to think Netflix is going to have a hard time."

So, tech stocks are really just the big-name representatives of whatever mysterious forces are driving Wall Street's sudden plunge and delirious rebound: a combination of emotion, swarm behavior and fear of missing out. But if you were planning to stock up on Apple stock while it was on sale, it looks like you've missed your chance until the next Black Monday. 

Market Update: our coverage of this week's stock chaos

Tue, 2015-08-25 05:36

Here's another way the markets are not like the real world: in the markets, the B word is worse than the C word. So much worse!

C is for Correction, a sharp drop in prices, with a defined ending and a recovery.

B, on the other hand, is for bear market, a long-term drop, with no obvious end.

Here's a short video explaining the difference: 

Right now it looks as though we are in correction territory. We've had a sharp drop — a very sharp drop — but it doesn't feel like that relentless, long-term slide that we were on back in 2008, where day after day it just got worse and worse. In fact, today the market is up, prices appear to have stabilized in most markets (China is a notable exception), and most commentators are cautiously optimistic. Few are using the B word. Instead, they're pointing to health of the U.S. economy, and the upward growth trajectories of the large economies in Europe.

But that doesn't mean we're out of the woods. The situation in China is unstable, and China is one of the biggest economies in the world. If things go really bad there, it will have enormous ripple effects, and it will definitely affect the U.S. economy. But even with the Chinese government's inept futzing with its currency and its banks, and even with the meltdown in the Chinese stock market, the country is still projected to grow at around 6.7 percent this year. That's not as good as the 7 percent China would prefer, but it's hardly a bearish forecast.

So for now, call it a correction. But keep your weapon clean and your bear ammo close. Just in case.

For more analysis, check out Paddy's live blog:

Market Update: our live blog of this week's stock chaos

Tue, 2015-08-25 05:36

Here's another way the markets are not like the real world: in the markets, the B word is worse than the C word. So much worse!

C is for Correction, a sharp drop in prices, with a defined ending and a recovery.

B, on the other hand, is for bear market, a long-term drop, with no obvious end.

 

 

 

 

Here's a short video explaining the difference: 

Right now it looks as though we are in correction territory. We've had a sharp drop — a very sharp drop — but it doesn't feel like that relentless, long-term slide that we were on back in 2008, where day after day it just got worse and worse. In fact, today the market is up, prices appear to have stabilized in most markets (China is a notable exception), and most commentators are cautiously optimistic. Few are using the B word. Instead, they're pointing to health of the U.S. economy, and the upward growth trajectories of the large economies in Europe.

But that doesn't mean we're out of the woods. The situation in China is unstable, and China is one of the biggest economies in the world. If things go really bad there, it will have enormous ripple effects, and it will definitely affect the U.S. economy. But even with the Chinese government's inept futzing with its currency and its banks, and even with the meltdown in the Chinese stock market, the country is still projected to grow at around 6.7 percent this year. That's not as good as the 7 percent China would prefer, but it's hardly a bearish forecast.

So for now, call it a correction. But keep your weapon clean and your bear ammo close. Just in case.

Market Update: Is it a correction?

Tue, 2015-08-25 05:36

Here's another way the markets are not like the real world: in the markets, the B word is worse than the C word. So much worse!

C is for Correction, a sharp drop in prices, with a defined ending and a recovery.

B, on the other hand, is for bear market, a long-term drop, with no obvious end.

 

 

 

 

Here's a short video explaining the difference: 

Right now it looks as though we are in correction territory. We've had a sharp drop — a very sharp drop — but it doesn't feel like that relentless, long-term slide that we were on back in 2008, where day after day it just got worse and worse. In fact, today the market is up, prices appear to have stabilized in most markets (China is a notable exception), and most commentators are cautiously optimistic. Few are using the B word. Instead, they're pointing to health of the U.S. economy, and the upward growth trajectories of the large economies in Europe.

But that doesn't mean we're out of the woods. The situation in China is unstable, and China is one of the biggest economies in the world. If things go really bad there, it will have enormous ripple effects, and it will definitely affect the U.S. economy. But even with the Chinese government's inept futzing with its currency and its banks, and even with the meltdown in the Chinese stock market, the country is still projected to grow at around 6.7 percent this year. That's not as good as the 7 percent China would prefer, but it's hardly a bearish forecast.

So for now, call it a correction. But keep your weapon clean and your bear ammo close. Just in case.

Here's one reason bank-owned homes sit vacant

Tue, 2015-08-25 03:00

This summer, a group of Chicago men were arrested for taking over 14 vacant, foreclosed homes in prosperous neighborhoods — living in some and renting out the rest. How do foreclosed houses stay vacant so long?

One of the houses, a brick three-bedroom on the corner of 98th and Damen, went into foreclosure in five years ago.

The foreclosed homeowner didn't move out until early 2014. Ruben Nodal, who lives across the street, remembers when a new family arrived a few months later. "I went across the street and said, 'Welcome, neighbors!'" he recalls with a laugh. "I didn’t know. I was this close to having my wife bake them cookies."

He didn’t know until later that the new family was illegally; they were squatting. But he does know local real estate. He flips houses for a living.

With this house empty again, back on the market, he thinks the owner. Fannie Mae, set the $514,900 price too high.

"That’s crazy for a foreclosed home that needs a lot of work," he says. "I know. I've been in that house. It’ll sell at 450, if we’re lucky, when somebody puts a hundred grand into it."

Seven years after the financial crisis, Nodal thinks financial institutions still don’t have their act together.

"It’s bureaucracy," he says. "They don’t care! I'm dealing with a closing right now...."

He says he's trying to pay cash for a foreclosure, but the bank that owns the house just won’t schedule the closing.

Another local expert shares Nodal's opinion. Maurice Hampton, who lives in the neighborhood and works there as a broker, also thinks the house on 98th is overpriced. "The banks are not realistic," he says. "They’ve never been realistic throughout this process."

He does appreciate the logistical challenge institutions faced after the crash, dealing with bad loans and big real estate portfolios.

"These banks went from lending money — their sole job every day, and all their employees, was to give money away —  and then it turned around to, 'We have to absorb massive losses, and we have to pay staff who are completely untrained in finance, short sales, real estate?' So you open up brand new departments, and these people just push paper from one end to the other with very little direction, very little guidance."  

He’s speaking from experience. He and his wife missed a mortgage payment in 2009 and ended up in foreclosure. He says the bank wound up settling last December after his attorney documented the many times an ever-changing lineup of bank representatives had dropped the ball.

"The reps would turn over every month, twice a month, three times a month at times," he recalls.

About the house on 98th, he thinks $330,000 is more like it.

Fannie Mae executive P.J. McCarthy, a vice president in the company's real estate division, says Fannie's pricing savvy is worth defending. "It is not beneficial to anybody to overlist a property," he says. "But we believe we’re very good at valuing properties, and we believe we are very good at selling those properties quickly. The vast majority of our homes sell within the first two months."

A few days after McCarthy spoke to Marketplace, Fannie dropped the price on the house by $35,000.

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