Marketplace - American Public Media

Subscribe to Marketplace - American Public Media feed
Updated: 39 min 13 sec ago

How do you perceive time? Jump off a building and see

Fri, 2014-10-03 11:36

David Eagleman is a scientist who asks people to jump off of buildings. 

No, he's not an evil villain (as far as we know). He's a neuroscientist at the Baylor College of Medicine who studies time. 

As a boy, Eagleman fell off his roof, and had that classic film-reel experience of time slowing down, even though the fall took less than a second. Ever since, he has been interested in how the brain perceives time. 

In the experiment, Eagleman built what he calls a "perceptual chronometer," essentially giant flashing numbers that subject saw as they fell 150 feet toward a giant net. 

"I can measure the speed at which you're seeing the world, so I could figure out if people were actually seeing in slow motion, like Neo in The Matrix, or whether it was just a trick of memory, retrospectively." 

As it turns out, it was a trick of memory. People falling, or in the midst of a car crash, lay down memory more densely than in the average moment, Eagleman concluded.

"So when you read that back out you think, 'wow, that must have taken a really long time.'" 

It's not only freak accidents that pass in milliseconds. Super-speedy automated systems have become staples of our economy, from high frequency trading to commercial airplanes to the profuse streaming video libraries online.

"It's happening at a scale we can't perceive," Eagleman said, pondering an ever-more sci-fi future. "Maybe someday we'll fight our wars that way. We'll have drones fighting. World War III will be over in a tenth of a second... and we'll see who won."

Listen to the full interview in the audio player above.

How a bank knows it has been hacked

Fri, 2014-10-03 09:43

Hackers got into JPMorgan Chase’s network over the summer, and according to the bank, that breach compromised 76 million households and seven million small businesses. The bank says there is no evidence hackers got a hold of account information, just names and addresses, e-mails and phone numbers, but those data are valuable. 

Companies often learn their systems have been breached from third parties. According to Anton Chuvakin, a vice president in Gartner’s security and risk management group, law enforcement will call if they spot stolen data on underground forums.

“Oh, by the way, we are seeing your data here," might be the message from law enforcement, he says. "What’s up with that?”

These days, big banks spend big on their own security. JPMorgan has allocated $250 million.

When a bank discovers a breach, “you’re going to have a big senior management powwow,” says Julie Conroy, research director for the Aite Group’s retail banking practice, who covers data security. Management will put into place a “security incident response plan,” “and the forensic analysis is very much like what you see at a crime scene,” she says.

It’s methodical, and according to Martin Lindner, a cybersecurity specialist at Carnegie Mellon University’s Software Engineering Institute, banks keep logs of everything that happens on their servers. “So, in theory, they can go back to all those logs, replay them, and see what happened that was the thing that appears to be nefarious,” he explains. That is a lot of information, and going through that is time consuming.

Forensics is just one part of a “security incident response plan.” There is also remediation and communication. With this breach, tens of millions of people are at risk. Lawrence Baxter, the William B. McGuire Professor of the Practice of Law at Duke University, says hackers could use what they have gathered to phish for more information using, say, an official-looking e-mail message.

“You may only get a half of one percent of the customer base fooled by it, but that’s enough,” he says, to cause more damage to customers’ bank accounts, and also to the bank’s reputation.

Why lower unemployment doesn't mean higher inflation

Fri, 2014-10-03 09:42

The September employment report from the Bureau of Labor Statistics — with 248,000 jobs created, and unemployment declining to 5.9 percent — heightened speculation that the Federal Reserve will begin raising interest rates in early 2015, rather than waiting until later in the year.

That is in part because many Fed-watchers anticipate that Fed governors will begin to see signs of accelerating wage and price inflation, as unemployment continues to fall toward the level economists call the ‘natural rate of unemployment,’ or in technical terms, the ‘non-accelerating inflation rate of unemployment’ (NAIRU). Right now, the Congressional Budget Office has pegged that level at 5.7 percent, according to Capital Economics.

That rate of unemployment is generally considered the level below which wage pressures begin to build, because the labor market has tightened enough that employers have to compete for workers by outbidding each other, explains economist Michael Strain at the American Enterprise Institute.

“If there are fewer unemployed workers around, then workers are relatively more scarce, and companies have to be more competitive to attract workers,” said Strain. “And the way that they compete is by offering higher wages.”

Strain said a parallel dynamic also puts upward pressure on wages: workers who have jobs feel like they have more bargaining power with their bosses, because they know they will be more difficult and costly to replace. So they take the risk of asking for a raise, and may even be ready to jump ship and look elsewhere if they don’t get one.

Dallas Federal Reserve Bank president Richard Fisher was quoted by Reuters last month saying that “Declines in the unemployment rate below 6.1 percent exert significantly higher wage pressures than if the rate is above 6.1 percent.”

But so far, economists are hard-pressed to find any acceleration in inflation. Price pressures are muted, and average hourly wages actually fell one cent in September.

“There are currently no signs of wage inflation reemerging,” said UCLA economist Roger Farmer.

One possible reason is that there are a lot of people who have dropped out of the workforce. Labor force participation is at 62.7 percent, the lowest level since 1978. Those people aren’t counted as unemployed, but many do want jobs. Others are working part time but want full-time work, explained Douglas Holtz-Eakin at the American Action Forum.

“If, as the unemployment rate goes down, some of those people flood back in, that slack takes some of the pressure off the inflation process.”

Also, said economist Mark Kuperberg at Swarthmore College, employers could pay workers more, without raising the prices they charge for goods and services, because of productivity increases. Higher productivity has saved employers money, which they have mostly not passed on in workers’ paychecks.

“It’s like I became twice as productive, I started producing twice as much per hour, but I was only paid 50 percent more, not 100 percent more,” said Kuperberg. “I could in principle be paid that other 50 percent and there would still be no inflation pressure.”

The Phillips Curve and jobs numbers, explained

Fri, 2014-10-03 09:36

With the jobs numbers out today, we’ve been hearing a lot about this thing called the Phillips Curve.

What is the Phillips Curve?

It’s a theory, developed by an economist called A.W.H. Phillips, that says when unemployment is high, wages increase slowly; and when unemployment is low, wages rise rapidly.

Why am I hearing about it today?

Because unemployment has dropped to 5.9 percent. That is much lower than people expected, and so, if you believe the Phillips Curve, you’d expect wages to be rising fast right now.

Rising fast? I’m not seeing my wages rise at all!  

And neither are most Americans. The BLS says wages are up about two percent compared to last year. That is slightly higher than inflation, which is running about 1.6 percent. That’s the slowest rate of wage growth since the Second World War. And it’s not making anyone rich.

So the Phillips Curve is bogus?

Well, let’s just say it has been "adapted" since Phillips came up with the model in the late '50s. His theory has been tweaked by everyone from Paul Samuelson to Milton Friedman, and what we have now is a rule of thumb (ie not strictly accurate rule) that says when unemployment falls past a certain level, inflation will start to increase.

How would inflation increase?

A shrinking pool of unemployed workers means there’s more demand for labor. Theoretically, in this high demand, low supply situation, workers should be able to negotiate higher wages. Companies would pay for those wage increases by raising prices for their goods, which means inflation.

Why isn't the Philips curve doing its thing, then?

Part of the reason is because of why the pool of unemployed workers is shrinking. Some are being hired. But others are simply giving up. Labor force participation is now the lowest since 1978, at 62.7 percent. That means there is a huge pool of workers out there who have given up looking for work, but who could conceivably come back into the market as the economy improves. And then there’s the type of job that people are getting: part-time and temporary gigs.

Those jobs come without benefits. Or those unskilled service jobs that can’t support an individual, and certainly not a family. They’re not the kind of jobs that workers were competing for back in the '50s, when Phillips came up with his curve.  Or in the '80s, when Friedman came up with his tweaks to Philips’ theories.

Does anyone know what’s going on?

Not really! This economy is flummoxing everyone. It’s certainly not behaving in accordance with existing economic models. Much of the reason is that work in America has changed radically in the last decade. The way companies hire and pay workers has shifted the balance in employers’ favor, so that companies look very strong and healthy right now, while workers do not. Companies are earning more, while most workers are making less than or the same as before. Companies are hoarding cash, while workers are pinching pennies. And in many cases, companies are getting more protection from the state, while offering less protection and fewer benefits to workers.

So are these jobs numbers just a smokescreen for a bad economy?

No. Any time you see 248,000 people hired, that’s a good thing (assuming that number isn’t revised downward). And the economy is improving. But because of the way work has changed in the U.S., the numbers we’re getting these days aren’t the same as the numbers we got in 2005. The jobs aren’t the same, in terms of the type of jobs that there are out there, and the pool of unemployed isn’t the same, in terms of the type of workers who are looking for jobs. Things are getting better, but the fact that the Federal Reserve is nervous about rolling back stimulus when unemployment is this low is proof that the economy isn’t as healthy as it might appear.

Why are North Dakota's oilfields so dangerous?

Fri, 2014-10-03 07:05

North Dakota is the most dangerous state in the country for oil and gas workers.

But that fact hasn't gotten a lot of attention until now. Governor Jack Dalrymple announced to Inside Energy that he's planning to bring together the state’s top safety officials to look into fatalities in the industry, and to see what they can do better.

To understand why the oil and gas industry here is so dangerous, I went to the heart of the boom: Williston.

Here, the streets are crawling with trucks — semis hauling water and muddy pick-ups carrying oil field workers. DeAnn Clark watches the traffic from behind the counter at Arnie's Motorcycles, where oil and gas workers make up about a third of the business.

"They just kind of tear off out into the street," she said. "'Oh, that one will be back,' we’re thinking, all wrecked up. And sometimes they are."

This culture of risk-taking contributes to the high fatality rate in the oil and gas industry around the country. According to a recent report by the National Institute for Occupational Safety and Health, half of the oil and gas workers who died in vehicle accidents weren’t wearing seat belts. Teresa Van Deusen sees it all the time in her job as safety specialist for WPX Energy, a large oil company here.

"Workers, especially new workers, have the go-get em kind of attitude," she said. "They think, 'Oh I can do that. I can do this little shortcut.’ Well, when you’re working with the pressures and dangers that are inherent to the oil field, you can’t do shortcuts."

Learn more about how Inside Energy sorted through the data for the "Dark Side of the Boom" series.

I met Teresa at a meeting of industry safety professionals put on by the MonDaks Safety Network, an all-volunteer organization founded in Texas in 2003 by the Occupational Safety and Health Administration (OSHA)  and members of the oil and gas industry to address injuries and deaths among workers. Many people at this meeting told me inexperience played a large role in the state's high fatality rate.

"The experience level of our entry-level employee is significantly lower than the individuals or companies I visit with in Texas or Colorado," said Scott Rogers, an industrial hygienist and occupational safety consultant from Bozeman, Montana who works with oil companies in the Bakken shale formation. Rogers said the problem extends to workplace safety professionals, too.

Dennis Schmitz is the head of MonDaks, and he said another part of the problem is that most oil and gas companies are unlikely to ever have a safety inspection in North Dakota -- even though OSHA has hired more inspectors recently and created specific programs that target the oil industry.

"You probably almost have better odds of winning the lottery than getting a visit from a regulatory agency," he said.

But according to Schmitz, the root of the problem is that in onshore drilling operations, big oil companies aren’t directly responsible for workplace safety. They contract out most every dangerous jobs on an oil well to smaller companies.

When I asked Teresa Van Deusen of WPX Energy if there was there anything companies like hers could do to help smaller contractors be safer, she said she wasn't sure how to answer the question. "We do everything that we can. Obviously that is the drilling company's employee."

WPX, she said, follows all the OSHA standards and expects the contractors to do the same. But ultimately, the contractor is responsible for training its employees.

At the state level, North Dakota has many worker safety programs in place. Companies with good safety records enjoy lower premiums on their workers compensation insurance and there's grant money for safety training. According to Governor Jack Dalyrmple, these incentives are "a better approach to workforce safety" than stricter enforcement OSHA.

"We feel the programs we have in place are working," he said.

Still, in my interview with the Governor, Dalrymple said he would ask the directors of the state's Department of Health, Department of Transportation, Highway Patrol and Workforce Safety and Insurance (the state's workers compensation board) to study the worker fatality problem in North Dakota's oil and gas industry.

"It's certainly appropriate for a governor to bring focus to something like that," he said. "And the way we would do that is through my regular contact with my cabinet members. I would just turn to them and say, I want a report about what we’re doing about fatalities in the workforce and I want to know if there’s anyway we can do it better. And I think because of this interview, I will probably be doing that at our next meeting.

This is the second article in a series, "Dark Side of the Boom," produced by Inside Energy, a public media collaboration focused on America's energy issues.

The numbers for October 3, 2014

Fri, 2014-10-03 05:08

Bouncing back from August's disappointing numbers, the Bureau of Labor Statistics reported Friday the economy added 248,000 jobs in September, and unemployment fell to 5.9 percent, which is a six-year low. Several economists told the Wall Street Journal they were pleased with the reports, and in Forbes the Chief Strategist for TD Ameritrade said "Woo hoo." Indeed.

Now economists are mulling how these encouraging numbers — and the less encouraging average hourly wage and workforce  participation rate — will change the potential for an interest rate hike next year.

In the meantime, here are other numbers we're watching Friday.

13,054

That's the number of people who registered to organ donors online the day Facebook started letting users note their donor status on their profiles. That's 21 times more than the daily average registration, Reuters reports, and it's key to Facebook's new foray into the red-hot health tech market. Plans to formalize existing health-related communities on the site are reportedly in the works, along with new applications.

76 million

You might notice that number is somewhat higher than one million, the number of accounts JPMorgan Chase originally said were breached in a cyber attack this summer. A securities filing Thursday revealed 76 million households and seven million small businesses were affected by the hack, the New York Times reported, making it one of the largest. The Times reports the firm says no financial information was stolen, just contact info.

2

The number of times former Fed chair Ben Bernanke has refinanced his mortgage, Bloomberg reported. Bernanke tried to refinance a third time but couldn't, he told a recent conference. "The housing area is one area where regulation has not yet got it right," he said. "I think the tightness of mortgage credit, lending is still probably excessive."

PODCAST: Planes, trains, and billionaires

Fri, 2014-10-03 03:00

First up, there's news the American labor market was stronger than expected in September and payroll numbers were revised upward in July and August as well. The government said today that payrolls were 248,000 higher last month--There was a lot of hiring in retail, construction, and health care. And the unemployment rate fell from 6.1 to 5.9 percent. We'll also take a look at Brazil, where the economy's faltering, and there was civil unrest in the last year with people fed up with the quality of government services. The worst country for stocks during the month of September was Brazil, with traders selling stocks each time they saw  incumbent president Dilma Roussef, doing better ahead of the first round of elections this Sunday. The business community has generally embraced the candidacy of a rival, Marina Silva, whose fortunes have see-sawed. More on that. Plus, billionaires love trains. Warren Buffett's got the Burlington Northern, and Bill Ackman's hedge fund is the largest investor in Canadian Pacific, the second-largest railroad in Canada, which just announced a plan to double its profits in the next four years

Hedge-fund-backed Canadian railroad aims high

Fri, 2014-10-03 02:00

The humble railroad is a hot investment, thanks in part to crude oil. 

Warren Buffett's Berkshire Hathaway bought Burlington Northern Santa Fe Corporation in 2009. Bill Ackman's Pershing Square became the largest shareholder in Canadian Pacific Railroad in 2012. 

Both have profited from the rise of rail transportation of crude oil.

"Canada’s growth in ‘crude by rail’ has really been tremendous," says Sarah Emerson, managing principal at ESAI Energy. Emerson says the 300,000 barrels a day transported by Canadian rail is twice what it was in 2012. 

"I think [crude is] important," says Jeff Nelson, analyst at Edward Jones & Co. But he cautions that it's not the most important factor for Canadian Pacific's bottom line. "I mean, look, it's still small," he says. 

Crude oil is 6 percent of the railroad's cargo, according to its latest investor book. In the last two years, the railroad has done well largely by becoming more efficient, as Hunter Harrison—the CEO installed after a proxy battle waged by Bill Ackman—has closed railyards and laid off nearly 1/6 of its workforce. But this was only phase one of Harrison's plan, according to Nelson. "Phase two is about revenue growth," he says.

Doubling the company's profits will require growth throughout its business, which includes transporting grain, automobiles and fertilizer. "This plan doesn't work in a recession," says Nelson.

To handle the growing traffic while maintaining efficiency will be a challenge. 

"He doesn't have many options," says Steve Ditmeyer, professor of railway management at Michigan State University. "He can run longer trains. He can run trains faster."

In other words, for Canadian Pacific, it's full steam—or fossil fuel—ahead.

CORRECTION: The original version of this story incorrectly described Pershing Square Capital Management as having bought a majority stake in Canadian Pacific Railroad in 2012. In fact, Pershing Square became the largest shareholder in Canadian Pacific Railroad in 2012, though it did not acquire a majority stake. The text has been corrected.

How substituting chicken for beef affects inflation

Fri, 2014-10-03 02:00

As Marketplace celebrates its 25th birthday this year, we are looking at the surprising, sometimes delightful and sometimes destructive ways that prices have changed during that quarter century.

This time, we're talking about the time policymakers tinkered with the government's official measure of retail inflation, the Consumer Price Index.

That's calculated by monitoring the changing prices of a pre-determined basket of goods. But what goes into that basket can change your view of inflation, as proven back in the 90s when the Boskin Commission convened to address the rising cost of COLAs (Cost-of-Living Adjustments) for social security.

Money manager and Bloomberg and Washington Post columnist Barry Ritholtz remembers what happened next.

Click the media player above to hear Barry Ritholtz in conversation with Marketplace Morning Report host David Brancaccio.

Silicon Tally: Cafe au...underwear?

Fri, 2014-10-03 02:00

It's time for Silicon Tally! How well have you kept up with the week in tech news?

This week, host Ben Johnson takes on Marketplace reporter Tracey Samuelson.

var _polldaddy = [] || _polldaddy; _polldaddy.push( { type: "iframe", auto: "1", domain: "marketplaceapm.polldaddy.com/s/", id: "silicon-tally-cafe-au-underwear", placeholder: "pd_1412343278" } ); (function(d,c,j){if(!document.getElementById(j)){var pd=d.createElement(c),s;pd.id=j;pd.src=('https:'==document.location.protocol)?'https://polldaddy.com/survey.js':'http://i0.poll.fm/survey.js';s=document.getElementsByTagName(c)[0];s.parentNode.insertBefore(pd,s);}}(document,'script','pd-embed'));

Tell us what the economy feels like to you

Thu, 2014-10-02 18:45

It’s doing better by lots of measurements — but people don’t feel it. Which is part of what Obama is out stumping for through November.

The data says the economy’s doing better — much better. But does it feel better? How’s your economy doing? 

Tell us your story above. 

America runs on Dunkin's Wi-Fi

Thu, 2014-10-02 13:01

There's been a study done by the mobile market research firm WeFi looking at wireless internet use at coffee shops across the country.

Starbucks, it turns out, has the fastest wireless connections.

But it's customers at Dunkin' Donuts, by a margin of two to one, who use the most data.

Also, on a separate but related note, there's another study out there that says 40 percent of Americans would give up coffee over Wi-Fi.

Seriously?

Quincy Jones on Clark Terry, a godfather of jazz

Thu, 2014-10-02 10:34

It’s unlikely that someone outside the jazz scene would cite Clark Terry if asked to name an influential jazz musician. That’s something legendary music producer Quincy Jones and documentary filmmaker Alan Hicks hope to change.

The two have paired up to make “Keep on Keepin’ On,” a documentary that explains Terry’s role in shaping American jazz music and follows Terry’s work with one of his students.

Both Jones and Hicks agree Terry is one of the best trumpet players ever. He played with Duke Ellington, Ella Fitzgerald, Dizzy Gillespie, Billie Holiday and many more. He was also a member of Johnny Carson’s house band, the NBC Orchestra.

Hicks realized early on that to really illustrate Terry’s greatest legacy, they’d have to show him teaching. 

“When we were doing interviews with all these greats, they would constantly be saying, 'Yeah, he’s one of the greatest trumpet players that ever lived, but he’s also one of the greatest teachers to have ever lived,'” Hicks says.

Terry was known to be generous with his time with developing musicians. His students include Miles Davis, Herbie Hancock and Jones himself.

“I was 12, and I studied with him when I was 13,” Jones says. He remembers skipping school in Seattle to hang out with jazz musicians.

“Seattle was perfect to hang out with guys like Clark, and I begged him to give me a lesson,” he says.

Terry and a student, pianist Justin Kauflin, share a special bond. Kauflin has been blind since he was 11, and Terry went blind more recently after a lifetime of diabetes. In the documentary, the two work through the ups and downs of trying to launch Kauflin’s jazz career.

Jones says that’s harder to do now than back when he started.

“Back then, you couldn’t get away from jazz," Jones says. "It was in the air, the water. Today, they have to resist the pressure of their peers to say, ‘Let’s go see Lil Wayne, Jay Z and Kanye [West].”

The case for buying up car dealerships

Thu, 2014-10-02 09:55

Warren Buffett’s Berkshire Hathaway already owns NetJets and BNSF Railway, and now it's buying the fifth-largest car dealership in the U.S., the Van Tuyl Group. For those of you keeping score at home, that's planes, trains and automobiles.

(That's Buffett’s joke, by the way, delivered Thursday morning on CNBC.)

As a rule, Buffett and Berkshire Hathaway like to invest in things that are easy to understand: candyclothes and bricks, to name just a few.

“Automobile sales is something that I think Warren Buffett feels he can understand, and therefore forecast, and therefore evaluate,” says Meyer Shields, an analyst with Keefe, Bruyette & Woods, which does business with Berkshire Hathaway.

Buffett hasn’t said how much Berkshire paid, but he did say the Van Tuyl Group’s revenue is around $9 billion.

As Dave Sullivan, an analyst with AutoPacific, points out, “$9 billion is a lot of cars.” Since the financial crisis, Sullivan says, car dealers have been consolidating and their business model has changed. As cars have gotten more reliable, drivers are spending less on repairs.

“When you are making your money pretty much all in sales, bigger is better," he says.

The average age of a car is 12 years old, and Sullivan sees that as an indicator that there is pent-up demand. “It’s a pretty exciting time to be getting into the auto industry for Mr. Buffett," he says.

It is also exciting for the auto industry that Buffett is getting involved with. “I think it is a positive signal to investors and consumers, for that matter, that this is a very healthy, growing industry,” says David Kass, who teaches finance at the University of Maryland and closely tracks Berkshire Hathaway.

Buffett says he plans to buy more dealerships, most of which are privately owned. Something else makes the timing good for Buffett: A lot of underperforming dealerships have closed since the recession — dealerships that sold Fords, GMs and Chryslers. That means the ones that are left have gotten more profitable.

Why the world is so bullish about the dollar

Thu, 2014-10-02 09:09

The U.S. dollar is at a four-year high, rising 7 percent since July. Other currencies, by contrast, have fallen — woe unto the euro (down 1.9 percent) and the New Zealand dollar (down 5.2 percent) according to Bloomberg Correlation-Weighted Indexes.

“Over the past few months it’s been a very strong story for the dollar,” says Michael Boutros, currency strategist with Daily FX. “We’re at multiyear highs here we haven’t seen since 2010.”

There are three primary causes for the dollar's strength.

1. Recovery

“The U.S. economy is finally getting some traction,” says Win Thin, global head of emerging markets at Brown Brothers Harriman. Thin says people are buying dollars to take advantage of the U.S. recovery.  

2. Yields

The dollar’s also being helped by a side effect of the recovery: changing Fed policy. The Federal Reserve is wrapping up the stimulus program that everyone calls Quantitative Easing (everyone except the Fed itself). That program kept the yield on government bonds and certain other securities low. As the program ends and yields are allowed to grow again, it should offer an opportunity for investors. It is, of course, an opportunity that one can take advantage of only in U.S. dollars, which is why dollars are so popular. 

3. Interest rates

The Federal Reserve is also contemplating raising interest rates. Many suspect it will do so in the first half of 2015. Higher interest rates, again, create an opportunity to make more money and offer a lure to international investors. 

By contrast, yields and rates around the world appear low and appear likely to remain low for some time. “The European Central Bank dragged its feet,” says Thin, in adopting unorthodox measures to stimulate its economy. “It’s belatedly addressing these issues now, and as a result the ECB may not raise rates until 2016 or even 2017.”

Money goes where money can grow, and economic and fiscal conditions make the U.S. the most fertile ground right now. 

The appreciating dollar could offer relief to many developing countries, whose depreciating currencies are now making their exports look more attractive to consumers in the U.S. “Emerging markets have been complaining about stronger currencies — Brazil, Korea, for example."

“In the U.S., a strengthening dollar makes goods produced in the United States more expensive abroad, and foreign goods cheaper in the United States,” says David Stockton, senior fellow at the Peterson Institute for International Economics. Cheaper imports will be welcomed by American consumers, but U.S. exporters will face difficulties.

“At the margin a stronger dollar could hurt exports, but it’s not as big a deal as [in] other economies around the world,” says Thin. “I think we could tolerate a stronger dollar in terms of economic impact much better than a country like, say, Korea or Taiwan could — exports are much more important to their economies.”

Stockton says the impact of more expensive exports and cheaper imports may be to stifle inflation just enough to make the Fed slow down any rate increases, which would in turn slow down the dollar’s rise. It would only slow it, however. All indicators suggest the dollar is in for a steady rise no matter what. 

“Even if there were some crisis,” says Daily FX’s Boutros, and people started abandoning risky assets, “that’s still beneficial to the dollar,” since the safest place even in a crisis? Still the U.S. dollar.

Saudi Arabia is losing its grip on oil

Thu, 2014-10-02 08:51

The U.S. benchmark oil price dipped below a key threshold Thursday: $90 a barrel. Global demand is soft, and on the supply side the world seems awash in petroleum.

That’s put some key supplier countries in a tough position, with some choosing a potential price war. On Wednesday, Saudi Arabia’s national oil company indicated it's still pumping — and selling at a discount to customers.

“They cut those prices across the board,” says HIS Energy analyst Jamie Webster. “And in particular they have cut them very sharply for Asia.”

It reflects a changing world. In the words of a frequently cited 2012 report from Citibank, North America may be a new Middle East.

Citi co-author Seth Kleinman says oil fields in Texas and North Dakota pump so much oil, U.S. imports have fallen by 3 million barrels per day over the past nine years.

“You used to have a big home for OPEC oil on the U.S. gulf coast,” Kleinman says. “The U.S. Gulf Coast is completely jammed. So Asia is really all you’ve got left.”

In the fight for market share, OPEC producers seem to be scrambling with everyone else.

It could all push prices down even more. That’s good for American drivers, not so good for American drillers if prices fall from $90 to the mid-$80s, according to several analysts.

“Clearly in the U.S. markets, what you would see is cutting back on investments, specifically on drilling and fracking,” says Quantum Reservoir Impact consultant Nansen Saleri, formerly of the Saudi national oil company.

Saleri notes American oil is comparatively expensive to produce. So if prices fall further, he says, some U.S. drillers would struggle and North American output would likely decline.

The numbers for October 2, 2014

Thu, 2014-10-02 07:25

Amid pressure from the U.S. and a flood of refugees from ISIS-held border towns, Turkey will vote Thursday on whether to join the 40-state coalition against the extremist group. Turkey's president has been critical of the airstrikes playing out over the past week in Syria and Iraq, and hesitant to enter the conflict, citing hostages that were held by ISIS until last month.

But with that consideration gone and a vulnerable border, the Turkish parliament is expected to back a motion that would draw them squarely into the fight, the BBC reported. Just how many military resources the country is willing to commit is unclear.

Here's what we're reading — and some numbers we're watching — Thursday:

$20.6 billion

The value of all subprime auto loans made in the second quarter of this year, which is double the number from the same period in 2010. At the same time, the New York Times reported, banks saw the biggest year-over-year increase in seriously delinquent loans since 2009. Contributing to this subprime auto loan boom are fraudulent used car loans, now subject to a broad state and federal investigation. The Times reviewed several documents indicating dealers lied about an applicant's income or employment status so they would qualify.

$76.3 million

That's how much Bank of America has made since 2000 through its exclusive deal with the Bureau of Prisons to serve 121 institutions and 214,635 inmates nationwide. JPMorgan also has a deal allowing them to distribute debit cards with high fees once prisoners are released. As part of their investigation into banking in the prison system, the Center for Public Integrity found the Treasury Department awarded these contracts without asking banks to bid on them. In turn, B of A has been allowed to subcontract a wide range of services at its discretion.

$275,000

The starting bid for "ElectHillary.com" on the domain name auction site GoDaddy, according to The Hill. Domain name speculation can lead to big payoffs, and some stake out domains long before anyone announces their candidacy. One man told The Hill he's scooped up domains with running mates attached — "ClintonNapolitano.com," "ClintonWarner.com" and even "ClintonBiden.com" — in hopes of selling one back to the campaign at a premium.

Bank of America gets back to normal... with a twist

Thu, 2014-10-02 05:00

Bank of America CEO Brian Moynihan is getting another title: chairman of the board. 

This is Bank of America’s way of saying, "Hey, we’re back to business as usual." It’s unusual for a bank’s CEO to not also be its chairman. 

During the financial crisis, CEOs of the biggest banks were stripped of the chairman title when shareholders didn’t like the way they handled the crisis. 

In 2009, Bank of America shareholders voted to take the chairman role away from then-CEO Ken Lewis. They were punishing him for his decision to acquire Merrill Lynch at the height of the crisis, and then give bank executives huge bonuses. 

But there’s going to be somebody looking over Moynihan’s shoulder. 

Jack Bovender will become the bank’s lead independent director. The bank’s press release announcing Moynihan’s promotion describes Bovender’s role in great detail. He’ll approve information sent to the board, and he will plan the board’s agenda with Moynihan. 

So, it’s back to normal, with a few checks and balances.

 

 

 

 

CEO tries to reset General Motors' brand

Thu, 2014-10-02 02:00

General Motors CEO Mary Barra is trying to change the conversation. This year’s ignition switch recall, and the hearings and lawsuits that followed, have weighed heavily on the automaker. Barra is now focusing on a new strategy, pledging to boost profit margins, cut costs and grow the company. She’s aiming to achieve pretax profit margins of 10 percent in North America by 2016.

GM’s plan includes new factories in China and streamlining global production. It also focuses on what customers want: new, quieter vehicles, broadband and even a hands-free driving option called "Super Cruise."

Jeremy Acevedo, an analyst at the car-shopping site Edmunds.com, says the strategy is an opportunity for Barra to reinvent the GM brand. “She’s allowed to repaint GM as a new, customer-focused brand, whereas before, it just kind of looked like the old GM that was so interested in driving profits.”

Of course, strong profits are exactly what Barra ultimately wants to achieve. “Our strategic plan,” says Barra,“ is a pathway to earn customers for life and create significant shareholder value in the process.”

 

Pages