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PODCAST: Turning over a new Leaf

Mon, 2014-07-28 03:00

More on the news that Dollar Tree will purchase Family Dollar for $8.5 billion, and what it means for both businesses moving forward. Plus, Nissan is hoping to turn over a new Leaf; While the company most likely loses money on its electric car, it hopes that it will see profits in the longrun. Also, the Muslim American community adds billions to the U.S. economy, especially during Eid Al Fitr, which follows Ramadan. So why haven't marketers caught on?

Mobile payments app offers a window on intimacy

Mon, 2014-07-28 02:00

Venmo is an app that allows users to exchange money easily with the click of a few buttons, which makes it particularly useful when it comes to everything from going to the movies to splitting the dinner check. The app is also a kind of social network, where both the parties involved in a transaction and the purpose of that transaction can be publicly available, sometimes in humorous ways. Freelance writer and author Chiara Atik recently published an article in Medium’s “Matter" on the topic.

One of the major issues with using more established platforms to see what people are doing is that users are pretty savvy at this point to social media — they know not to post about things they don’t want publicly consumed. However, Venmo currently exists outside of that frame of mind.

“Because Venmo has this utilitarian aspect to it, people are a little bit looser,” Chiara said. 

Even so, money has the power to be a large window into how people interact.

Said Chiara, "It’s a snippet of people’s relationships with each other."

However, as with Facebook and other social networks, this period won’t last. Once enough people are using the app — especially parents — most users will likely make their transactions private. 

Marketing remains largely untapped for Eid Al Fitr

Mon, 2014-07-28 02:00

Muslims around the world are celebrating Eid Al Fitr Monday -- It follows the month of Ramadan, a holy month in which Muslims fast from sunrise to sunset. For the last week or so, Muslims have been shopping for presents and new outfits for Eid.

Rafi-uddin Shikoh, CEO and Managing Director of consulting firm DinarStandard and lead author of State of the Islamic Economy, puts Muslim spending in the U.S. as high as $124 billion.

But you probably haven’t seen ads calling on American Muslims to spend their holiday money. Shikoh says capitalizing on that spending has not been a priority for marketers, because the American Muslim demographic is not as big as Hispanic, Asian or African American spending blocs.

The lack of attention is suprising, given that when it does happen, it’s a party. A Macy’s in Orange County, for example, put up decorations including ornate towers that stand tall with a message: “Happy Ramadan.”

https://twitter.com/amirlj_

“If you think about it, it's just these two bella tower displays in the women's store, and we had so many people coming in taking pictures with it like it's a tourist attraction,” says Jomana Siddiqui, the graphic designer hired by Macy’s to create the decorations.

Some people were so excited, they spontaneously started doing a dabke, an Arab line dance.

Siddiqui, who also founded online boutique ModernEid, says it’s not about having others validate your holiday. She says if retailers are smart, they'll pay more attention to the American Muslim demographic.

“Say you’re looking it from a retail perspective, making your customers happy and making them feel like, 'Hey, this is a store I want to stay loyal to.' -- That’s what retail is all about,” Siddiqui says. “You want customers to stay loyal to you.”

She says store managers quickly realized the opportunity they stumbled upon.

“I remember this comment stuck out in my head: ‘I'm kind of surprised nobody has done this before.’ It wasn't a question of ‘should we do this?’ It was a question of ‘why shouldn't we?’” Siddiqui says.

It’s estimated there are between 2 and 7 million Muslims in the United States. Mennah Ibrahim, with global marketing firm JWT, argues advertisers should spend more money to target Muslims, especially during Ramadan.

And many do -- just not here in the States.

“Brands like Chanel here in the Middle East provide longer variations of their outfits; brands like Hermès come in larger sizes so Muslims wear them as headscarves,” Ibrahim says.

Google launched the Ramadan hub and DKNY announced a Ramadan-inspired like called “Head Turners,” but the latter can only be found in the Middle East. The companies simply adjust their brand to the location.

Here in the U.S., though, Ibrahim says the same companies tread more cautiously because they're still getting to know the American-Muslim consumer.

We really are living in the (medical) future

Mon, 2014-07-28 02:00

We live in the future.

That's not my phrase; it is my daughter Madeleine's invention. True, the monorails remain few and far between, but every once in a while I get a reminder that some of what was once science fiction is no longer fiction.

Recently, I got to spend a bit of time with a physicist and physician who says she is trying to do for medicine what Google did for information technology. Her idea is democratize healthcare so that the big stuff doesn't always have to go through professional gatekeepers.

Anita Goel is the chairman and scientific director of Nanobiosym, and chairman and CEO of Nanobiosym Diagnostics. Dr. Goel and her team have come up with a device about the size of an iPad that will be able to tell people if they have malaria, TB, HIV, even cancer. Stick some blood in the thing, and it will look for the genetic markers of a variety of conditions and render a verdict on the spot. The company's Gene-RADAR system is a little medical lab on a microchip, made possible by advances in nanotechnology. Her work recently won the grand prize in the Nokia Sensing X-Challenge.

The technology may end up in homes or at a clinic near you. If this sounds farfetched, remember that once upon a time you had to visit a doctor's office to get your blood pressure checked. Now you can go down to a strip mall or pharmacy, put your arm into a cuff, press the green button and see how you are doing. Or, you might buy a small digital blood pressure reader from a drugstore and use it it at home.

Imagine if this Gene-RADAR technology deployed in the developing world, where doctors, health workers, and clinics are either overburdened or hard to reach. It is likely that the existing rules guiding medical diagnostics would have to change to accommodate this technology if gene-sensing diagnostics are to become widespread. Companies with stakes in the existing ways of doing things will either adapt, or could try to thwart the adoption of something that let's consumers check their own health conditions. 

Dr. Goel and her team are among the contestants in a competition that will award $10 million to those who come up with a Tricorder, a hand-held device that'll identify a list of 15 diseases. It's the Qualcomm Tricorder XPRIZE. The award ceremony is set for a year from January.

Click on the media player above to hear Dr. Anita Goel in conversation with Marketplace Morning Report host David Brancaccio

Car companies are happy to lose money on electric cars

Mon, 2014-07-28 02:00

Nissan reports its second quarter earnings on Monday. The company has been one of the pioneers in the electric car business with its Leaf. The Leaf is one of the most critically acclaimed electric cars out there, but the business model is still up in the air.

"The cost of those batteries is still too high," says David E. Cole, founder of AutoHarvest. Estimates put the batteries between $10,000 - $16,000. They also need to be replaced every 10 years or so. Nissan is offering Leaf owners replacement batteries for $5,500, which means the company is probably losing money on those batteries.

"Everybody’s working on these batteries," says Cole. "A variety of different technologies are being explored, but the cost has just not come down the way we would like to see it."

In fact, Nissan is probably losing money on every Leaf it sells. Still, it could pay off.  

"People criticized Toyota for years for losing money on every Prius it sold," says John O’Dell, senior editor for fuel efficiency and alternative vehicles at Edmunds.com. "And now Toyota makes a ton of money on every Prius it sells, and it also dominates the hybrid market because it was willing to invest with losses into a long term strategy."

O’Dell estimates electric cars won’t catch on in a mainstream way for another five years.

 

Housing and Urban Development gets a new head

Mon, 2014-07-28 02:00

On Monday, the nation gets a new secretary for the department of Housing and Urban Development.

Julian Castro is the former mayor of San Antonio, and HUD has served as an economic backstop during the financial meltdown.

“HUD is very important for people who are in some sort of credit recovery,” says Mark Goldman, who teaches real estate at San Diego State University.

And some expect big things from Castro because he served as a mayor; a political office known for hands-on, take-charge kinds of leaders.

“So they are proactive people once they get into federal office,” says Sheila Crowley is president and CEO of the National Low Income Housing Coalition.

But she says even the best leadership can’t bypass Congress.

“When you’ve got programs that are being starved, it’s just very hard to make progress,” says Crowley.

How will Puerto Rico's poor economy affect you?

Fri, 2014-07-25 16:51

For the first time in more than a decade, lawmakers in Puerto Rico balanced their budget. And during the past ten years, the US territory has had a rough economic go: A major recession hampered state revenues, while a major crackdown on the drug trade along the U.S. border pushed much of the trafficking (and violence) into Puerto Rico. The combination of a lingering recession and an influx of drugs has led to the highest murder rate in the U.S. – almost six times higher than the national average.

It’s also led some analysts to call Puerto Rico “the New Detroit.”

That got us wondering if the balanced budget is an indicator of brighter days ahead for the Puerto Rico. And if you’re thinking at this point, “who cares about some small, tropical island?” we’ll ask you: “Do you have mutual funds?”

Puerto Rico is one of the largest issuers of bonds in the U.S. And because of a preferred tax status granted to the commonwealth, Puerto Rico’s bonds end up in many portfolios. We wanted to find out whether Puerto Rico is, indeed, the new Detroit, so we spoke with the President of Maglan Capital,

An app that combats texting while driving accidents

Fri, 2014-07-25 16:46

Kids, you gotta start looking up. It’s never been a more dangerous time to be a pedestrian, in large part, because people are no longer looking where they’re walking. Instead, they keep their eyes fixed on their mobile phones, because a broken leg or a shattered clavicle is totally worth keeping up to the minute tabs on what your FB friends are eating, drinking, or how they’re dressing their pets.

In this installment of Tech IRL, Lizzie and Marketplace’s Tech Ben Johnson walk around Manhattan to spotlight new technology that is supposed to help mobile-phone caused pedestrian and motorist accidents.

Weekend Brunch: Health care, global income inequality, and how to dress well

Fri, 2014-07-25 16:41

Linette Lopez, Wall Street editor for Business Insider, and Ben Walsh, online editor for Reuters, discuss the week's news and what's on their plate in the upcoming week. 

Get prepped for your own brunch:

Reuters: Obamacare's circuitious path

New York Times/The Upshot: Income Inequality Is Not Rising Globally. It's Falling.

Business Insider: 18 Things Every Man Should Take Out Of His Closet And Burn

Have red light cameras reached the end of the road?

Fri, 2014-07-25 13:56

Chicago Mayor Rahm Emanuel has announced at least 9,000 drivers will get a second chance to appeal $100 tickets issued by red light cameras. The Mayor’s decision follows a Chicago Tribune report documenting periods where some cameras generated huge, sudden and completely inexplicable spikes in tickets.

For years, red light camera hatred grew almost as fast as the number of cities using them. Until around 2012, when the number of programs actually started to drop, according to data from the Insurance Institute for Highway Safety. The initial promise — safer streets and more city revenue — no longer seemed so promising.

Jeff Brandes, a Republican state senator from Florida, proposed a bill that would have put some limits on red light cameras there. Among other things, he was alarmed by media reports showing that after some local governments put in red light cameras, they also shortened the time for yellow lights

“Well, reducing yellow light timing has never been shown to be safer,” he says. “But it has been shown to generate a lot more red light camera revenue.”  

A state report he requested did show revenue going up year-by-year. His poster child was a mom who just missed a yellow light on a rainy day. He says no cop would’ve written her a ticket.

“You know, there’s a human factor to law enforcement,” says Brandes. “And we’re taking that out.”

Of course drivers hate the gotcha-every-time factor, says Joseph Schofer, a professor of civil and environmental engineering professor at Northwestern University. “From the perspective of the driver, you’ve really taken away my margin,” he says.  “I can’t push it a little bit and get away with it.”

Schofer also thinks there’s an upside, if cities want people to run fewer red lights, but he recognizes that the money creates a conflict of interest.

“If you’re doing this to make money, set up a tollbooth,” he says. “Then it becomes more transparent.  We know what you’re doing.”

There’s also a question about how well the cameras work. Some studies have shown that when red light cameras go in, rear-end crashes go up.

However, researchers who favor red light cameras have an answer for that one. Anne McCartt is Senior Vice President for Research at the Insurance Institute for Highway Safety. She cites a study by the National Highway Traffic Safety Administration:

“While rear-end crashes went up, the more serious right-angle crashes went down by a greater extent,” she says. “So there was an overall net safety benefit.”

The Florida study that Jeff Brandes requested showed the same thing. And fewer T-bone crashes generally means fewer deaths.

Amazon makes a lot of money. But it still loses more.

Fri, 2014-07-25 13:49

Amazon has developed a kind of parlor trick of not making a profit, despite the fact that it has gobs of revenue coming in.

The online retailing giant announced Thursday that its revenues soared to $20 billion in the second quarter. But high costs pushed it into the red. It lost $126 million.

"That in and of itself is quite a feat - to be able to crank up the spending machine to that degree," says Colin Gillis, senior technology analyst with BGC Financial.

Gillis says Amazon invests aggressively in many areas: E-commerce, its own smartphone, TV shows and web services like document sharing.

But Gillis and others wonder when Amazon, which has snubbed short-term profitability as a longer-term business strategy, is going to shift gears.

"If they shouldn't be valued based on profitability, what should they be valued based on?" asks Sucharita Mulpuru, a retail analyst at Forrester Research.

Mulpuru points out that other tech giants like Google and Facebook do turn in big profits even as they spend on innovation. Just yesterday, Facebook announced a second quarter profit of $800 million.

Mulpuru says Amazon is frittering money away with steep subsidies of shipping costs for stuff customers buy from its website.

But RJ Hottovy, an e-commerce analyst with Morningstar, says Amazon is building a lot of brand loyalty along the way.

"Really it's important to lock in those consumers and give them less of a reason to shop elsewhere," he notes.

Hottovy thinks Amazon's strategy will eventually pay off. But for now, the company is projecting up to $800 million in operating losses for the current quarter.

Want to shop like a pro? Buy generic

Fri, 2014-07-25 13:10

A new study from the University of Chicago and a university in the Netherlands asked who's more likely to spend a little extra for name brands. The conclusion? Professionals don't seem to care if what they're using is generic.

"More informed consumers are less likely to pay extra to buy national brands," the study says.

For example, pharmacists buy generic asprin 90 percent of the time.

The same's true with salt and sugar. It turns out chefs like to go generic too; they devote 12 percent less of their purchases to national brands than demographically similar non-chefs.

Who gets a healthcare rebate? 4 questions answered

Fri, 2014-07-25 13:07

This week the U.S. Department of Health and Human Services announced that nearly 7 million consumers would receive $330 million in refunds from health insurers.  

Under the Affordable Care Act, the carriers must spend 80 cents of every dollar in premiums towards medical care or steps to improve healthcare quality.

That leaves 20 cents for things like salaries, bonuses and other administrative costs.

This provision of the ACA is often called the 80/20 rule.

Q. What’s the reason for the 80/20 rule?

Kaiser Family Foundation Senior Vice President Larry Levitt was pretty succinct when he said “this is really a protection against insurers trying to gouge people.”

When Obamacare architects were designing the law, they wanted to make sure most of the money consumers spent on premiums would actually be dedicated to medical care.

While Levitt says 80/20 was a late addition to the legislation, he believes it’s actually changing the nature of the insurance industry.

“It’s in effect putting a cap on overhead and profits and that’s a pretty dramatic step that I don’t think people fully appreciate,” says Levitt.

Q. I’ve paid my premiums and haven’t visited the doctor once this year. Will I see some money in my mailbox soon?

It depends.

The only way someone qualifies for a rebate is if the particular insurance plan you’ve enrolled in falls short of the 80/20 ratio.

If you’re enrolled in an insurance policy that meets the target, you won’t be getting a check any time soon.

If you get coverage at work, your company gets the refund, or a credit towards next year’s coverage.

Q. How is this rule impacting insurance companies?

When the 80/20 rule began in 2011, insurers paid out more than $1 billion in rebates. This year it’s a third that much.

Matthew Eyles with Avalere Health says the industry has clearly figured out how to calculate their expenses and how money they’ll spend providing medical coverage.

“This is almost pixie dust really if you think about the amount of premiums that insurers collect in hundreds of billions,” he says.

Under this new system there is little incentive for insurers to inflate premium prices, particularly on the health exchanges.

If prices are too high, not only are consumers less likely to buy those plans, insures know they’ll have to return profits at the end of the year.

In that regard, Kaiser’s Larry Levitt says insurers are becoming more like public utilities.

“Insurers still have some flexibility in how they design these products. But an insurance policy is a much more standardized product. And the pricing is much more regimented as well,” he says.

Q. If insurers can’t make as much off of premiums, are they finding new ways to make profits?

HealthLeaders-InterStudy analyst Paula Wade says insurers can make up any lost revenue by increasing deductibles, co-pays and other out-of-pocket expenses consumers face.

“If you look at the how the major insurers are doing, they are doing very well,” she says.

“I wouldn’t lose any sleep worrying about their profits.”

Booming markets haven't translated to big profits on Wall Street

Fri, 2014-07-25 12:29

Markets have been setting records pretty much every other week for months, investors are making record money... and Wall Street?

Well, it’s looking a little lean.

"I think it’s really tough, even for people who are really good at it, to be honest," says Jesse Marrus, president of StreetID, a financial careers service. He says jobs on Wall Street have been drying up. "It’s definitely an ‘eat what you kill’ business, so there are people losing their positions in that space."

Why is there less of a killing to be made for Wall Street workers? 

"Trading volumes are way lower than they were," explains Max Wolff, chief economist at Citizen VC. Trading volumes - a.k.a. how many trades are done per day - is where Wall Street makes its money. Fewer trades mean a lot fewer commissions. Trading volume has been really low since the financial crisis. Last year, the number of trades was a third lower than it was in 2009.

A big reason for the low trading volume is the low level of investor enthusiasm. "It's no secret that this is one of the world’s most hated rallies," says Wolff. "It’s been pretty clear that the markets got well ahead of the macroeconomic health of the U.S. and they've stayed there. And everyone kept waiting for this correction that didn’t come and slowly, begrudgingly people jumped on board, because they couldn’t afford just to watch other people make money forever. But they didn’t believe in it and they definitely don’t want to catch the elevator ride down that everyone’s afraid may come."

So investors are putting their money in the markets and leaving it there: They’re not buying a hot new stock or selling it off based on a hot tip. Instead, they’re buying and holding. "For there to be trades, there have to be differences of opinion," says Lawrence White, a professor of Economics at the NYU Stern School of Business. "Somebody has to think, 'It’s a good time to buy!' and somebody else has to think, 'It’s a good time to sell!' When trading volumes are lower, it just means there’s less diversity of opinion, more consensus."

All of that consensus has had a very chilling impact on Wall Street. "It’s really alarming for the people who are in the broker/dealer seats that really rely on the trading volumes," says Marrus. "Despite the record highs, it’s still really hard for them to make the commissions that they were making and make the livings that they were making because the volume’s low and the volatilities are so low."

But even if volatility and volume come back, Wall Street workers probably won't be back to the good old days. Electronic trading has replaced brokers and traders to a large extent and the future Wall Street broker will probably look a lot more like Hal than a power player in a pin-striped suit.

Secretary of Agriculture Tom Vilsack on rural America

Fri, 2014-07-25 11:21

The Agricultural Act of 2014 – also known as the Farm Bill – was passed by Congress earlier this year. We talked with Secretary Tom Vilsack of the U.S. Department of Agriculture about what he thinks should happen next:

On agricultural business in rural America:

“I think it’s important for the folks to understand that there’s great profit opportunity and business opportunity in rural America. We’re about 75 percent of the land mass in the United States. The vast majority of America is located in rural areas. It’s where most of our food comes from, a lot of our water. So there’s an importance to this place and that’s why I think it’s worthy of attention and worthy of investment.”

Vilsack says we need to think more about agricultural products beyond food and fuel. He also said the infrastructure needs of rural America are well documented and need improvement:

“The American Society of Civil Engineers suggests that our infrastructure would rank a D+ - well, that’s not good enough for us to be competitive in a global economy.”

Rural America has had a hard time bouncing back from the recession. He says this bill will supply for jobs in that area:

“There are a lot of people looking for work that maybe have a community college education, maybe a high school education. These construction jobs, these trade jobs are great opportunities for them to rebuild the middle class.”

'Ace' Greenberg and the rise (and fall) of Bear Stearns

Fri, 2014-07-25 10:21

Alan “Ace” Greenberg, who rose from a Bear Stearns clerk in 1949 to become the firm’s CEO in 1978, died Friday at 86. The cause was complications from cancer.

When he joined the investment bank, it was a little, scrappy company. It rose to become one of the industry’s biggest, but never lost its outsider image, until it nearly collapsed in 2008. JPMorganChase acquired the company at a bargain basement price, in one of the first moves of the impending financial crisis. 

Ace Greenberg came from another era of Wall Streeters. He had no Ivy League degree. He was born in Kansas, and he grew up in Oklahoma. 

“He liked to gamble, he liked magic, he liked bridge, and, of course, the only way to legally gamble at that time was to go to Wall Street,” says William D. Cohan, author of “House of Cards, A Tale of Hubris and Wretched Excess on Wall Street,” a book that chronicles the fall of Bear Stearns.

During his career, Greenberg’s trades made a lot of money, and by 1978, he was the boss, instilling in the company a culture both of risk taking and frugality, reusing envelopes and giving new employees welcome packets with a note and some supplies. 

As former Bear Stearns trader Lee Munson remembers it, the note said, “You have 50 rubber bands and a box of paper clips, and use them wisely throughout your career at Bear Stearns because you’re not going to get any more.”

Greenberg stepped aside as CEO in 1993, making way for his successor, James Cayne. He had first met Cayne playing bridge.

“Bridgeplaying was the Facebook of their time,” says Cohan. 

As Bear Stearns was starting to unravel in 2007, Cohan says Cayne was in communicado at a bridge tournament. And, he says Greenberg developed a grudge against his former friend and successor for driving the firm into the ground.

“That, of course, ignores Ace’s role in it because Ace was part of the firm’s DNA,” Cohan says. 

Greenberg was on the executive committee when the firm was sold to JPMorganChase. Greenberg told host Kai Ryssdal on this program in 2010 that he didn’t have much influence by that point. 

“I did what I could. I tried as hard as I could. Kai, you have to understand that I was a very very small shareholder of Bear Stearns during this period,” Greenberg said. 

He told “Marketplace” that what he regretted most were all the Bear Stearns workers who lost their jobs in 2008.

CEOs get paid a ton, Mary Poppins makes almost none

Fri, 2014-07-25 10:00

As the song goes, "Just a spoonful of sugar makes the medicine go down!" That is, unless you're getting paid the federal minimum wage like Mary Poppins.

Or, rather, Kristen Bell as Mary Poppins in a Funny or Die video poking fun at how difficult it is to live on $7.25 an hour:

Mary Poppins Quits with Kristen Bell from Funny Or Die

Aside from lamenting that she has to buy her own birds (from Mexico, apparently), Poppins points out the irony of CEOs' growing paychecks, while she can't even live above the poverty line. Our own Paddy Hirsch has a video on this phenomenon. He doesn't sing:

Can't this British nanny catch a break? Or at least get a new umbrella?

PODCAST: Starbucks' big ideas

Fri, 2014-07-25 03:00

Continuing Marketplace's "Big Ideas" series, Starbucks CEO Howard Schultz stops by to talk about the principles that guide the coffee company's strategy. Hear the full interview in today's mid-day update.

Launching a reusable spacecraft

Fri, 2014-07-25 02:00

Private space transport company SpaceX announced a notable success recently: it soft-landed a Falcon 9 rocket in the Atlantic Ocean after it successfuly re-entered earth's atmosphere.

It's a significant development in that spacecrafts tend to be only good for one-time use. SpaceX president and COO Gwynne Shotwell is someone who's looking closely at space travel in the future. She says the next step in the evolution of space travel is rapid and complete reusability:

"What would air travel look like if airplanes were thrown out after each flight? No one would be flying in airplanes. We want to be able to re-use rapidly, just like an airplane."

It's a process that Shotwell thinks is inevitable, and in a lot of ways, just makes logical sense:

"From my perspective, it's really risk management, to ensure that humans have the ability to go somewhere else in case there were to be some huge disaster on earth."

Click the media player above to hear SpaceX president and COO Gwynne Shotwell in conversation with Marketplace Tech host Ben Johnson.

 

CORRECTION: An earlier version of this story incorrectly spelled Gwynne Shotwell's name. The text has been corrected.

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