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P&G gets better looking by dumping its beauty lines

Thu, 2015-07-09 12:32

Procter & Gamble is selling most of its beauty brands to Coty for $13 billion — brands like Clairol, Covergirl Max Factor. It's a big chunk of the business. According to Moody's, P&G's beauty lines account for almost a fourth of its $78 billion in revenue. Once the deal is done, the consumer goods giant will still have 65 brands. Consumers may love their CoverGirl lipstick and how nice and easy Clairol's Nice 'n Easy hair color is. But that doesn't mean it worked for P&G.

"There's a difference between being a good brand, and being a lucrative brand," says Jonah Berger, a marketing professor and author of "Contagious: Why Things Catch On."

He says unloading most of its beauty brands is P&G's attempt to get rid of the losers.

"They're trying to say, well, look, we can't be everything to everyone. We can't manage you know, a few hundred different brands really effectively," he says.

Nancy Meadows, vice president and senior analyst at Moody's Investors Service, says this pruning of P&G's portfolio comes as no surprise.

"These are categories that everybody's known ... (have) been posting rather weak performance in recent years," she says.

Coty is a company known for smaller cosmetics and perfume brands. Not having these brands could reduce P&G's revenue by nearly one-fourth. But they were contributing so little profit that Meadows says they amounted to only 5 percent of the company's earnings.

"And moreover, we fully expect, now that they're going to be focusing on more profitable faster-growing brands that they'll be able to grow earnings," Meadows says, "more than enough to offset the loss of earnings as part of this transaction."

Meadows says a transaction representing only $5 billion in revenue is not enough to move the needle on the company's overall outlook. But for a huge company that's had trouble growing its profits, getting rid of its poor performers should make the remaining brands look more, well ... lucrative.

The Transaction: A Big Mac

Thu, 2015-07-09 12:31

In January of 1987,  a friend of Marketplace listener Allen Marin came to him with a crazy idea: he was going to try and sneak into the Super Bowl and wanted to know if Allen was willing to join him.

After a little pressure from his friend, Allen agreed to do it. But it wasn’t until he went out and purchased a Big Mac from McDonald's that he realized how.

Paramount and the movie business's shrinking window

Thu, 2015-07-09 12:26

Paramount Pictures has made a deal with movie theater chains Cineplex and AMC.  It goes something like this:  let us release a movie earlier than usual so we can sell it online, and we’ll share revenue with you.  It’s something of an attempt at a truce between warring parties, and it has engendered the same kinds of responses that war time truces do. 

“It’s brilliant,” says Michael Pachter, research analyst at Wedbush Securities.

And, “it’s as much a ploy,” says Jack Oberleitner, a movie theater consultant who’s been in the business for 50 years. 

Movie studios and movie theaters have been competing for profits since at least 1948, Oberleitner says. “When the government said motion picture production companies could not have ownership in movie theaters.”  No longer capable of being joined at the hip, the two industries would go on to sometimes be at one another’s throats, he says. 

This became the case particularly as people could watch movies in more places than movie theaters.  TV, cable, VHS, DVD, downloads and streaming. As each new technology came along, movie theaters were forced to cede some of their territory.  This took the form of a “time window” between when a movie would be released in theaters and when it could migrate to another platform. Network TV was the first threat to the movie theater, and theaters and studios were united in their fear.

Pachter says "they thought people would stop going to theaters.”  So the studios established a window between theatrical release and TV release: 14 years. 

When premium-charging cable channels came onto the scene in the '70s, a new window was negotiated.   For cable, it’s around 1.5 years.

When VHS made its debut, the window shrank to between six and nine months.  DVDs shared the same window, which eventually shrank to around 3.5 months.

Many rental companies, including Redbox, have a window of 28 days beyond the DVD release, Pachter says ,

With the windows both multiplying and shrinking, theaters have become more anxious. 

“In the 1970s many film theaters ran Star Wars for a year or more,” Oberleitner recalls.  “Today a film comes in for a week or two or three, and then moves on to second-run theaters, bargain theaters and subsequently electronic outlets.”

In 2011, theater chains threatened to boycott Universal when it tried to release one of its films in certain locations three weeks after its theater debut. Universal caved.

In 2014, all four major theater chains in the U.S. and major Canadian and European theater chains announced plans to boycott “Crouching Tiger, Hidden Dragon: The Green Legend” which is slated to be available on Netflix the same day it appears in theaters in 2015. 

But movie theaters have seen the writing on the wall for some time and in recent years have been devising strategies to make money from everything else besides the actual movies they show:  expensive concessions, sophisticated foods, alcohol, a luxury theater experience.   So many have adapted that IBISWorld predicts industry profit margins to rise dramatically this year, from 5 percent five years ago to 11.4 percent. 

Enter Paramount’s attempt to meet two of the nation’s major theater chains halfway.  The deal applies to two horror films, “Paranormal Activity: The Ghost Dimension” and “Scout’s Guide to the Zombie Apocalypse.”  Once the films' presence in movie theaters nationwide in the U.S. and Canada drops to 300 locations, Paramount will wait 17 days and then release the films for purchase online (not streaming).  The theaters would share in revenue based on their own market share. 

“There are 40,000 screens in the US,” Pachter says.  “The typical wide release film gets between 2,500 and 5,000 screens at release, so 300 is a tiny number.  It means most people have seen it and don’t care anymore — either because it’s really done well at the box office and has run its course, or because it sucks and nobody wants to see it.”  Pachter believes this will satisfy more theater chains in the near future. 

Oberleitner sees the deal as one struck between giants that leaves smaller players with little benefit to show.

“The revenue sharing is based on market share, so theaters located in large metropolitan areas will get some benefit from it,” he says, but not smaller ones.  “The small-town movie theater that was at one time a mainstay in the business, the neighborhood second-run movie theater that was as much a cultural and social center for a lot of communities as much as it was a business center, have been vanishing and that will continue.” 

Darryle Ulama, an analyst with IBISWorld, says studios may have an extra something to gain from the last stretch of window shrinkage.  

“It’s not just shortening the distribution time so it’s more flexible for consumers and studios can capture a wider audience,” he says. It also lowers studios’ marketing and advertising costs.  “Traditionally if you have a film that’s showing in movie theaters then disappears for a 90-day period, you have to remind consumers when you release it on digital, so when you have a shorter distribution time you can carry over some of your advertising costs.”

One thing that many analysts agree on is that the results of Paramount’s experiment may usher in a new era of movie viewing, where windows are even smaller or perhaps don’t exist at all.   

The race to connect old cars to the Internet

Thu, 2015-07-09 12:17

Vinli founder Mark Haidar reaches below the steering wheel of a 2007 Toyota Camry – right into the brain of the car – and plugs in a small black device that’s like an extra-large memory stick.

The device will live there, in the rectangular connector known as the OBD port. Any car built after 1996 is equipped with an OBD port, and it’s become hot real estate for tech companies trying to revolutionize the driving experience. Vinli, which starts at $99.00, turns your car into smartphone of sorts – where there’s an app store for your car, and an internet connection.

“It has a GPS, Bluetooth, Wi-Fi hotspot, with LTE connectivity, an accelerometer,” Haidar says.   

Vinli’s CEO Mark Haidar in a 2007 Camry.

Lauren Silverman/KERA News

So, if you’re on a road trip, maybe in a 1996 Honda Civic, and your kid wants to watch cartoons on a laptop, no problem.

“It makes the driver experience and backseat experience much better,” he says.

Connecting to Netflix from the backseat is nice, but it isn’t the breakthrough technology that helped Vinli raise $6.5 million from companies like Samsung and Cox Automotive this summer. That was for connecting your car to your phone, your home computer and the people around you. Through Vinli’s app store you can download apps to monitor your car’s health, improve fuel efficiency, and even track your teenager — like one app called Beagle, which lets parents watch the car in real time and even create alerts for speeding. 

The app e-Call alerts family or friends if you get into an accident. Another app, MileIQ, automatically logs your drives and calculates their value for easy reimbursement. 

Once you tap into your car’s brain and connect it to the world outside, the opportunities are endless — which is why more cars today are being built connected, no device necessary.

“Almost any new car you buy today will have some sort of telematics service that they’ll offer with it,” says Wayne Cunningham, who covers car technology for CNET. “The relevance of these devices is going to diminish over the next few years. In five years, I can imagine they’d be completely superfluous unless you have an older car that’s not connected.”

Which is why Haider is working on deals with automakers to get Vinli inside cars before they’re driven off the lot. And, he’s hoping to capitalize on interest in something called vehicle-to-vehicle communication, sometimes called V2V.

“The idea is that every car can communicate to other cars on the road,” Cunningham says. “So your car will know before you do that the car ahead of you is braking, or if you come around the corner and there’s a car stalled in the road that car will have already sent a signal to your car and give you some advance notice.”

V2V, could be mandated by the government in the next few years. Then, there’d be even more demand for giving old cars new life, and new brains.

German finance minister offers Greece for Puerto Rico

Thu, 2015-07-09 12:08

The German finance minister Wolfgang Schäuble hasn't been the jolliest fellow since this whole Greek thing started heating up. 

But he made kind of a debt crisis "funny" this afternoon.

In a speech today, Schaeuble said, "I offered my friend (U.S. Treasury secretary) Jack Lew these days that we could take Puerto Rico into the eurozone if the U.S. were willing to take Greece into the dollar union. 

He thought that was a joke." 


Thu, 2015-07-09 07:00

This week, Actuality scratches that itch with a trip to Key West, Florida, where the only prescription for an outbreak of dengue fever may be genetically altered mosquitoes. Plus, battling giant robots from the U.S. and Japan disappoint Marketplace's Sabri Ben-Achour. 

Yahoo bets on fantasy sports

Thu, 2015-07-09 05:49

Yahoo has updated its fantasy sports mobile app to include the ability to bet real money on daily and weekly games. The new mobile app puts Yahoo squarely into an online market, which the company says grew about 40 percent last year.

In fantasy sports, people 'draft' professional athletes onto their own fantasy online teams. Winners are decided by adding up athletes' daily scores in real-life games.

The Fantasy Sports Trade Association estimates that almost 57 million players this year will spend about $4 billion.

"The market for this is insatiable. It just keeps on going up and up and up," says Economics Professor Richard McGowan of Boston college, who is an expert on the gambling industry.

There's demand for fantasy sports, because it does not face the same legal restrictions that are imposed on online gambling, such as poker or direct betting on sports.

That's because fantasy sports is said to require skill. Players must analyze athletes' statistics, and not rely solely on pure chance.

McGowan says that distinction has made it popular.

"The sports radio stations, they constantly have advertisements for sports fantasy leagues. For instance, for baseball, every day you can put a different fantasy team together now," McGowan says.

Yahoo has already been a part of this. Its audience reads fantasy-sports content on its sites and could already wager on season-long games. Now, Yahoo will allow them to do so on daily and weekly games, as well, through its mobile app.

Yahoo says the move is the first foray in trying to make money on mobile through something other than ads.

PODCAST: Glitch, don't kill my vibe

Thu, 2015-07-09 03:00

Marketplace's Stephen Beard joins us from Athens for an update on the Greek financial crisis. Plus, we'll hear more about the reported glitch that halted all trading in the New York Stock Exchange on Wednesday. And ski resorts are bucking their traditional business model and focusing on warm weather activities like rope courses and mountain biking — the industry wide move is especially heating up this summer, follow the release last spring of new federal guidelines opening up public land ski resorts use for summer activities.

Front-of-the-store sales key to Walgreens growth

Thu, 2015-07-09 02:00

There’s been a bit of an arms race going on between Walgreens and its chief competitor, CVS. CVS recently bought all of Target’s 1,600 pharmacies. It also acquired the prescription benefits manager, Caremark, back in 2006.

Walgreens' response was to expand globally. “Going global creates global buying synergies and they get better prices on drugs,” says Andy Wolf, a food and drug analyst at BB&T Capital Markets.

Walgreens recent acquired the European drugstore and healthcare products company, Alliance Boots,  which will extend access to 2,500 stores in the United Kingdom, as well as thousands more pharmacies in Europe.

It will also greatly increase Walgreens’ purchasing scale, allowing the company to get better pricing from suppliers.

In addition to reaping greater efficiencies on the pharmacy side, the merger could also help Walgreens sell more retail products such as cosmetics; something Boots has done quite well in Europe.

“Walgreens has two initiatives that it has to balance,” says George Hill, who covers the health care industry for Deutsche Bank. Getting people to come to its stores for fill their prescriptions is the first part. “And while those people are in the stores, you want to sell them more stuff in the front of the store, whether it be food, or whether it be beauty, that carries a higher margin.”

Walgreens, Hill says, also needs to continue to cut costs on the operations side, something the company’s previous management failed to do.

Does the U.S. need more immigrant workers?

Thu, 2015-07-09 02:00

Comprehensive immigration reform — the effort to create a path to legalization for millions of undocumented immigrants, boost border enforcement, and overhaul the legal immigration system — is dead in Congress, at least until after the 2016 election.

But allowing more legal immigrants to come to the U.S. to work year-round is an issue that’s very much alive for employers, who are looking to fill hard manual-labor jobs that they say they can’t find Americans to do, now that the economy’s firing on all cylinders again.

The group ImmigrationWorks USA, which advocates for small and mid-sized businesses, commissioned a poll recently and found that approximately 60 percent of respondents believe the U.S. economy needs, and would benefit from, legal immigrants being admitted via a visa program to do hard, physically-demanding, low-skilled work.

“The problem is, there’s no visa program for less-skilled people who don’t have family here,” says ImmigrationWorks president Tamar Jacoby. “If you’re a Mexican with no family living in the U.S., you have the momentous choice: hire a smuggler and walk across the desert, or hire a smuggler and walk across the desert. There’s a program for PhD scientists, and a program for agricultural workers, but no program for less-skilled people who want to work year-round.”

Ray Perryman is an economist based in Waco, Texas, who has studied the impact of immigrants on the U.S. economy.

“There is a huge demand for that type of worker, and it comes in a variety of industries: construction, hospitality, agriculture,” says Perryman. “They tend to really depend on this workforce, and not to be able to find a workforce otherwise.”

Jay Williams deals with this problem in his Houston-area landscaping business, Landscape Art. Every year, he jumps through legal hoops to hire about 30 guest-workers from Mexico and El Salvador. He has to advertise for U.S. citizens or legal permanent residents first. “Four or five will come to answer the ads,” Williams says. “Maybe one or two will actually show up for work, and generally after a couple of weeks they’ll go off somewhere else.”

He admits he’s not surprised. “It’s cold in the winter, it’s hot in the summer, it’s tiring and taxing. It’s not something I would want to do at any wage.”

The landscaping jobs pay more than $11/hour. Ray Perryman doesn’t think raising the wage would help recruit more non-immigrants. “In a market economy, if you raise wages, you might find a few more people who would do this type of work. But because of the physical demands, we’re probably going to need more of these workers than we’re going to have U.S. citizens who could reasonably fill these jobs.”

But economist Dean Baker, co-director of the progressive Center for Economic and Policy Research in Washington, D.C., sees no pressing need for more low-skilled immigrants to fill manual-labor jobs at this stage of the economic recovery. He thinks they would likely drive up competition among job-seekers, and drive down wages for millions of unemployed and underemployed Americans.

“I call this the 'It's hard to get good help' crowd," says Baker. "People would always like their employees to work for less. But is there any evidence that employers can’t find the workers that they need, that wages are going really high? Do we see this in construction, manufacturing? Really just zero.”

Tamar Jacoby of ImmigrationWorks counters that low-skilled immigrant workers don’t tend to replace low-skilled native-born workers, or compete for the same jobs. Rather, she says, the two groups fill complementary job niches: for instance, immigrants bussing tables and washing dishes at the back of a restaurant, American workers waiting tables and dealing with customers at the front; immigrants picking fruits and vegetables in the fields, American workers stocking shelves and dealing with customers in grocery stores.

“I’m not saying Americans are lazy or don’t want to do hard work,” says Jacoby. “They’re more educated than is appropriate for some of these jobs. Americans have the comparative advantage of speaking the language, knowing how things work in the U.S. And immigrants don’t. What they come with is what immigrants have always brought—their strong backs.”

Chinese tech companies hit hard in stock crash

Thu, 2015-07-09 02:00

As China's stocks fall after a market boom earlier this year, Chinese tech companies are the worse off. We spoke with Chris Low, chief economist at FTN Financial, to find out why.

Click the media player above to hear Marketplace Tech host Ben Johnson in conversation with Chris Low, chief economist at FTN Financial.

According to Low, the Chinese state fueled much of the enthusiasm around China's stock market boom because it "looked like a terrific way of paying off debt by issuing new shares. So they absolutely encouraged it." 

Low explains that the stock market boom was seen as "another part of China's transition to a consumer driven economy and a way of sharing the wealth with the Chinese people." 

The center of the euphoria, Shenzhen, has been hit the hardest. Likened to the NASDAQ, the Shenzhen market has smaller, more entrepreneurial companies. At the height of the boom, these Shenzhen tech companies were the poster-children for entrepreneurialism and getting away from state owned enterprises. However, now  "they are faring worse" says Low. And they may need some help from the Chinese government.

Low predicts that the state "may step in and start buying shares." To explain, he compares the present situation to how "the old mainstream companies, the steel makers and the car makers were government owned enterprises" and says "so too the tech companies might become government owned enterprises."

In Low's opinion, this possibility reveals "one of the fundamental differences between China and the U.S. They don't have this reverence of private markets that we have." 


Do you want to build a ... ropes course?

Thu, 2015-07-09 02:00

Five years ago, the owners of Snow King Ski Resort in Jackson, WY, had a problem: business was terrible.

“They were looking to give the ski resort away to anyone who could keep it going,” resort manager Ryan Stanley told me. “And they couldn’t even put together a deal to give it away for free.”

Jackson is one of the best ski towns in the world, but Snow King was just a bit smaller and a bit plainer than the other ski resorts in the area. So to save the place, resort owners decided to double down on the only thing that was actually making money: warm weather activities.

Like many ski resorts, Snow King uses public land —  In 2011, a law passed that loosened federal regulations that govern what can be built on that land. Now Snow King is building a roller coaster, a zip line, and a new restaurant.

The future site of Snow King's mountain roller coaster.

Miles Bryan

“I hope that in three to five years, we can break even on our winter business,” Stanley says. “But in the summer, I’m hoping that we are making a lot of money.”

Snow King’s a scrappy little resort but it has had something in the winter season that other places lack: decent snow. A lot of its bigger competitors in states like, say, California, have not had so much of that lately.

Michael Berry is the President of the National Ski Areas Association. He says the average number of days open at ski resorts in the pacific northwest fell by 30 percent last year from the year before for lack of snow. He says that California’s ski resorts saw their average days open fall by 12 percent.

“With the increased variability we need to guarantee we have diverse forms of revenue,” Berry says. “And summer provides us with that opportunity.”

Berry adds that summer activities are just solid business sense: it evens out a resort’s revenue stream, and helps keep quality employees who might otherwise move on after the snow melts.

That makes sense to Jackson Hole Mountain Resort. It’s got good snow the last few seasons, but it’s still upping its summer game. The resort sees the most growth potential in the warmer months: mountain biking, for example, has grown ten percent a year here for the last five years.

Twelve year old Madeline Krampy is here from out of state. She and her family have come out the last two summers, lured by activities like a new ropes course. I tried it out, but Krampy wasn’t very impressed: she gave me a “B-.”

Still, this summer ski resorts want all the visitors they can get. Even ones as uncoordinated as me.

Reporter Miles Bryan works his way through the ropes course at Jackson Hole Mountain Resort.

Aaron Schrank

Congress rewrites No Child Left Behind

Thu, 2015-07-09 02:00

The House narrowly passed a bill Wednesday rewriting the federal education law known as the No Child Left Behind Act. No Democrats voted for the measure, which would significantly reduce the role of the federal government in setting education policy and allow federal funding to “follow” low-income students to other schools. 27 Republicans voted against the bill. Meanwhile debate on a bipartisan bill in the Senate is expected to stretch into next week. 

Many blame the 14-year-old education law for ushering in the era of high-stakes standardized testing as a way to hold schools accountable. Both the House and Senate versions of the bill would maintain annual testing in reading and math, but give states more flexibility in how they use test scores and how they deal with low-performing schools.

"Right now, under existing law, the federal government dictates how they need to respond," says Lanae Erickson Hatalsky with the centrist group Third Way. "Under this law, the states would get to dictate how they’re going to intervene in those schools."

Civil rights activists worry some states won’t do enough to make sure low-income, disabled, and minority students are learning.

"Especially among our most vulnerable students, we need to make sure that we know not only how they are performing,” but that states will step in when students are falling behind, says Leticia Bustillos with the National Council of La Raza, a Hispanic civil rights group.

The Senate bill does address what many see as over-testing in schools. States and districts, which often pile on additional tests, could use federal funds to study how they assess students — and how often. The House adopted an amendment to its bill allowing parents to opt their children out of testing. 

Between two fern bars

Thu, 2015-07-09 01:59

That's how much Alan Stillman borrowed from his mother to short-lease a bar. That was in 1965, when a post-prohibition New York still lacked options for co-ed drinking — bars were mostly populated by men. Wanting to meet more single women, Stillman opened a bar with touches of home decor, and waiters dressed in red and white striped shirts. It was a huge success, and is credited with starting the trend known as "fern bars." Oh, and the name of that revolutionary establishment? TGI Fridays. The New Yorker has the story behind the growth of the franchise, and how it shaped a taste for sugary drinks.


That's how much one Greek — Christos Karantas, a freelance journalist based in Athens — budgeted for groceries this week. With bank withdrawals capped at $66 a day, Greeks like Karantas are paying a lot of attention to how much they spend on any given day. We've got the breakdown of what his weekly spending looks like while Greek banks remain closed. 


That's how many pharmacies Walgreens gained access to in the UK in its purchase of Alliance Boots, a European drugstore and healthcare products company. It's part of a larger plan to not only raise the profile of the store among people who need to get prescriptions filled, but also to increase visibility of other kinds of products — like food and cosmetics — that customers will buy while in the store.

3.8 percent

That's how much China's Shenzhen stock market rose on Thursday. The Shanghai Composite rose 5.8 percent. As the Wall Street Journal reports, it was the largest single-day gain for the Chinese stock market in six years. This followed a major tumble that forced a halt of trading by the Chinese government. Shenzhen recently became a haven for entrepreneurial tech companies looking to get away from state ownership. But with recent market activity bursting the boom, many of those same companies are now suffering the consequences.


That's how many accounts you can now prioritize in your Facebook newsfeed as part of an update for the iOS app. Mashable writes that it's one of several changes Facebook is rolling out to make the newsfeed more personalized.

Big stock market trouble in China

Wed, 2015-07-08 13:52

Ever since the Shanghai Composite index dropped back in June from a 52-week high, it’s been on a downhill spiral. The benchmark Shanghai Composite Index was off another 5.9 percent on Wednesday.

The drop encouraged the Chinese government to step in and invest money into the stock market in hopes it would fix the problem.

“It’s really kind of dumb and futile,” says Andy Rothman, investment strategist at Matthews Asia. “What’s going to worry me more is if they start intervening in the economy in addition to the stock market.”

Rothman says the Chinese government’s response to the drop was not surprising — as its responded to similar crisis like this before. But if this decline continues, could it damage China’s economy?  

“Not many Chinese are actually invested in the market,” Rothman says. “There are only about 50 million active investors [out of] a population of 1.3 billion.”

And most of those investors, Rothman says, have about 15,000 U.S. dollars in their bank accounts.

Click the media player above to hear more.

Toxic algae bloom endangers Washington livelihoods

Wed, 2015-07-08 13:05

Tokeland, Washington — Tom Petersen’s 50-foot crab boat is sitting idly in the Port of Willapa Harbor, a tiny coastal inlet 40 or so miles north of the mouth of the Columbia River. On a normal early summer day, Petersen would be selling Dungeness crab to canneries, big-city buyers and even fresh off the back of his boat to locals and tourists. And he’d be making good money doing it. With crab selling at up to $10 per pound, Petersen could be making thousands of dollars a day.

But for the past few weeks, Petersen and all the other commercial crabbers who fish this 38-mile stretch of Washington’s coast have been forced to pull up their crab pots. And they’re not alone. Commercial and recreational razor clamming has been shut down in Oregon and parts of Washington, costing local economies millions of dollars. 

Tom Petersen sits in his 50-foot boat

Ashley Ahearn/KUOW/EarthFix

The unusually warm water and sunny weather this spring contributed to a giant bloom of algae that releases a toxin known as domoic acid. It gets into the food chain via filter feeders like razor clams that can then be eaten by crabs, marine mammals, birds and humans. Too much of the toxin can induce seizures, short-term memory loss and even death.
The epicenter of the algae bloom appears to be along Washington’s southern coast just north of the mouth of the Columbia River.   

And as Peterson can attest, the impacts on the multimillion-dollar commercial Dungeness crab fishery have been severe. He was out on his boat, Gail Force, checking his pots when he heard the news that his fishing area was closed.

“It had been a really slow winter season, and it was just starting to shape up. And about noon that day I got the report that they were closing our season down,” Petersen recalls.
“I felt like throwing up. I was sick to my stomach.”

In Washington, the Dungeness crab fishery is worth more than $60 million a year. Oregon’s is roughly the same size, and California’s is even more valuable — close to $200 million annually.

“Dungeness crab is the single most valuable species fishery on the West Coast,” says Larry Thevik, vice president of the Washington Dungeness Crab Fishermen’s Association and a crabber for 45 years.

“If we have more of these episodes, it’s going to be pretty devastating,” Thevik says, adding that he does not disagree with the state’s decision to close 38 miles of the Washington coast to Dungeness crab harvest. “We wouldn’t want to err on the wrong side of the public safety issue and have someone get ill and have that translate into a market crisis.”

Commercial and recreational razor clam harvesting has been closed in Southern Washington and all of Oregon. Dan Ayres, the coastal shellfish manager for the Washington Department of Fish and Wildlife, says it was not easy to turn people away from the beaches in early May, but the risk was too high.

“Razor clams tend to bind the toxins in their fat tissue, and they hang onto it for a long time,” Ayres says, adding that the concentrations of domoic acid found in some razor clam samples were more than 10 times above action levels. Oysters and other filter feeders can also be contaminated, though they tend to pass the toxin through their systems more quickly than razor clams.

A sign advertising crab in Tokeland 

Ashley Ahearn/KUOW/EarthFix

Ayres estimates that the lost revenue from the razor clam closure since May could total more than $9 million for Washington’s coastal communities. Commercial razor clam diggers are out roughly $250,000, he says.

“These are small business men who are living somewhat on the edge, and it’s tough for them,” Ayres says.

Petersen stands next to hundreds of his crab pots, piled high and dry on the shore near the dock. Several other boats are tied up nearby, but there’s not a soul to be seen in the marina, which would normally be bustling this time of year, Petersen says.

He’s hoping that the bloom will subside and he and his crew can get back out on the water, but if the toxin levels don’t go down, he could be looking at six months with no crabbing. Petersen’s been doing this for 40 years. He’s paid off his boat. He’ll get by, he says, but his two young crewmen are collecting unemployment.
“One of them’s trying to make house payments. The other one’s got kids they’re trying to raise, and they’re just all standing on the sidelines now,” he says, looking out over the quiet harbor.

“When I first started crabbing I got on with this old sea dog and he told me, ‘Tom,’ he says, ‘You gotta really work hard. Every day you miss is a day you’re not gonna make up.’ ”

This story came to us via EarthFix, the public media collaborative that covers science and the environment in the Pacific Northwest.

Fed minutes reveal looming interest rate hikes

Wed, 2015-07-08 12:59

Just to bring it back home with all the global news of late: the Federal Reserve released the minutes of its most recent meeting today.

I'm just going to quote them, because Fed minutes are some good reading, I'm here to tell you.

"Members thus saw economic conditions as continuing to approach those consistent with warranting a start to the normalization of the stance of monetary policy."

Or, in other words, interest rate hikes are coming before the end of the year.

Why the government keeps a helium reserve

Wed, 2015-07-08 12:58

Congress is again asking questions about the nation's federal helium reserve — yep, such a thing exists — after a critical audit in April.

Sure, helium is used in balloons, and can make your voice sound funny if you inhale it. But there are so many other uses for helium.

“Computer chips and fiber optics are some big uses now," says Tim Spisak, a senior adviser at the Bureau of Land Management, which runs the reserve. "MRI is a big use.”

The reserve was first dreamed up about a hundred years ago for the military. Today, Spisak says, private industry uses about half of the helium to cool the magnets in MRIs and purify silicon.

“It is crucial, because we have no alternative,” says Moses Chan, a professor of physics at Pennsylvania State University who uses helium in his lab. 

Chan says 20 years ago, he paid $2 for a liter of helium. Today’s price: $8. 

Martha Morton, director of research instrumentation at University of Nebraska, Lincoln, works with huge magnets and uses helium to cool them. Morton says helium production isn’t keeping up with demand. And ideally, "I would like to see at least some helium reserve just to balance out price spikes,” she says.

But Congress has told the Bureau of Land Management to get out of the helium business by 2021, selling what’s left in the reserve.

Why not to freak out about the NYSE trading halt

Wed, 2015-07-08 12:57

Try not to freak out too much about Wednesday’s New York Stock Exchange outage. First, it’s over, though many questions remain as to what happened and what NYSE is doing to make sure it doesn’t happen again. But more importantly, stocks were still bought and sold all day, even while the NYSE halted trading.

Think of it like a time when you had a broken faucet at your house. You clearly didn’t die of thirst. You went to another sink and had a drink of water. Stock markets work something like that. There are 11 exchanges (not to mention dozens more private trading venues). If one is down, orders to buy and sell can be filled at other exchanges.

And at the end of the day, Marketplace will still do the numbers. We promise.

China's stock market fall hits small investors

Wed, 2015-07-08 12:53

Shanghai's old town — with its narrow alleys, pungent street food and tiny single room homes — may be being swept away by new development, but enough of it remains to sustain a vibrant community.

And in the early part of this year, much of the gossip among the shop owners and stall holders centered on the goings on, and the money to be made, not far away on the other side of the dirty old Huangpu River, at the Shanghai Stock Exchange.

"I hadn't done any stock market investments before," Lin Jinxia tells me, "but I was influenced by all the talk."

Lin lives at the top of seven flights of stairs, the landings of which are littered with dusty old bicycles, in a tiny apartment with her husband and her four-year-old son.

They're migrant workers who arrived from Fujian Province five years ago and, through hard graft in their shop selling buttons to a bustling garment industry, they've saved themselves a tidy fortune.

Then in May this year they plowed a large chunk of it into the stock market, investing more than  200,000 RMB ($32,000) into four stocks.

It seemed a sensible enough spread with picks from the electronics, fashion and car-sales industries. But the timing was terrible.

They all tanked, collectively standing now at just half of their original purchase price, amounting to a combined loss for Lin and her husband of 100,000 RMB.

"I've lost so much of the money that I've worked so hard for," she says. "Now I'm having to save and cut down on my spending. We don't earn much. It was all money from our hard work."

In China, unlike in the European or U.S. markets, individuals make up around 80 percent of the investors.

Many of them are new and inexperienced, often following whim and rumor to make decisions, and so the market is arguably more vulnerable to quick turnarounds in herd behavior.

Having been marching share prices up the hill for well over a year, on June 12 the crowd suddenly veered back down again, and three weeks later almost a third of the value — $3.2 trillion — had been wiped away.

'I knew there were risks'

Chen Zhihui's small tailors shop can be found down a passageway close to Lin Jinxia's home.

And like his neighbor, he too acted on the advice of all those who had, until recently, been making nice, fat paper profits, not realizing he was entering the fray at the worst possible moment.

"To me, personally, I knew there were risks," he tells me from his tiny workspace with his sewing machine whirring away beside us.

He bought stock in just one company, 10,000 RMB's worth of a Chinese steel-maker, only to find his shares suddenly trading at around half their original value.

And while his losses are relatively small, Chen is well aware that in almost every other shop and home in this district and beyond, there are others in a similar predicament, or fearing that they soon might be.

"If everyone lost 5,000 RMB, it could add up to a big amount," he says.

For many analysts, that explains why the Chinese government has been so keen to stop the market sliding any further.

Economic impact

Once it saw a buoyant stock market as a key part of its strategic shift to a consumer society with rapidly increasing share ownership having the twin benefits of both recapitalizing the country's big debt-laden firms and, at the same time, making the small punter feel richer.

Now the Communist party faces the frightening prospect of the very opposite effect; as savings vanish into thin air, millions of investors are simultaneously tightening their belts with potentially chilling impacts for the Chinese economy and beyond.

For now, it is only the late arrivals to China's stock market binge that have been burned, with the recent, sharp depreciation in value still comfortably outweighed by longer term gains going back a year and more.

But the slew of measures the authorities have unleashed in the past few days are part of an attempt — perhaps futile — to stop things getting any worse.

It has been criticized by outside observers as dangerous political meddling in the workings of the markets and their ability to put a proper price on risk.

But then, it could be argued, that exact same charge could be levelled at the attempts to pump up the markets in the first place.

Politics not economics

Some analysts dismiss the fear that a full-blown stock market collapse could precipitate a wider economic shock.

"The stock market is too small, too tiny, completely irrelevant," Chen Long, China economist at Gavekal Dragonomics tells me. "It accounts for just 5 percent of Chinese household wealth, and anyway the market is still up on where it was last year."

Much more could yet be wiped off the value of Chinese shares, it would follow, before anyone needs to panic, least of all the government. So perhaps, if this view is correct, Beijing's actions are motivated by the need to contain the political fallout, rather than the economic.

In the middle of an already tricky slowdown in GDP growth, the last thing it needs is hordes of mom and pop stock traders taking to the streets. And so far, at least, that part of the strategy might be working with little sign of any anger.

Despite her already heavy losses, Lin Jinxia's plan is to hang onto her massively devalued stock in the hope it rises again. "I believe the government will come up with the right strategies," she tells me.

Confident investor

Liu Changrong is a restaurateur, selling noodles, pork chops and sticky rice a block or so from Chen, the tailor.

He is either canny or lucky, or both. "You just need to buy at the right point," he tells me.

He did exactly that, buying 200,000 RMB worth of shares in a large Chinese conglomerate last year and then selling them all in May, just below their peak.

He made a very nice profit indeed, coming out more than 50 percent ahead. You might think that would be a good place to call it a day.

But despite the cautionary tales of his neighbors all around him, he's still confident the government will turn things around.

"When the market improves, I'll get back in again," he tells me as he puts a big pan of water on to boil.