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PODCAST: Size does matter for FedEx

Thu, 2014-05-08 07:31

The great mover of packages known as FedEx is shifting to what it calls "dimensional weight pricing." It's about size as well as heft and more money for FedEx. A FedEx spokesman gave this quote to Bloomberg News: "We felt like we weren't receiving the correct compensation for the services we were providing." Marketplace's David Weinberg explains.

President Barack Obama's pick to lead the Department of Health and Human Services appears before the U.S. Senate on Thursday. Sylvia Burwell's nomination will be considered by the Senate Committee on Health, Education, Labor and Pensions. There will be plenty of political questions about the future of Obamacare. But what questions would healthcare executives and policy wonks want to ask? We got in touch with a few to find out.

Meanwhile: Google. Amazon. Walmart.com—These aren’t the first places that people think of when planning a funeral service. But more people are shopping online for cremation urns.

PODCAST: Size does matter for FedEx

Thu, 2014-05-08 07:31

The great mover of packages known as FedEx is shifting to what it calls "dimensional weight pricing." It's about size as well as heft and more money for FedEx. A FedEx spokesman gave this quote to Bloomberg News: "We felt like we weren't receiving the correct compensation for the services we were providing." Marketplace's David Weinberg explains.

President Barack Obama's pick to lead the Department of Health and Human Services appears before the U.S. Senate on Thursday. Sylvia Burwell's nomination will be considered by the Senate Committee on Health, Education, Labor and Pensions. There will be plenty of political questions about the future of Obamacare. But what questions would healthcare executives and policy wonks want to ask? We got in touch with a few to find out.

Meanwhile: Google. Amazon. Walmart.com—These aren’t the first places that people think of when planning a funeral service. But more people are shopping online for cremation urns.

How long will your retirement savings live?

Thu, 2014-05-08 04:39

What's scarier than dying young? Well, for some, it's living longer without having enough money saved to ensure a good quality of life during retirement. 

Marketplace economics contributor Chris Farrell joins Morning Report host David Brancaccio with tips about how to make sure your savings live as long as you do. Click on the audio player above to hear more. 

What would you ask about Obamacare?

Thu, 2014-05-08 02:54

President Barack Obama's pick to lead the Department of Health and Human Services appears before the U.S. Senate on Thursday. Sylvia Burwell's nomination will be considered by the Senate Committee on Health, Education, Labor and Pensions.

There will be plenty of political questions about the future of Obamacare. But what questions would healthcare executives and policy wonks want to ask? We got in touch with a few to find out.

Sonya Schwartz, Georgetown Center for Children and Families Research Fellow:

Q. You are known to be a management superstar, do you have ideas about how to improve HHS's work with contractors so that healthcare.gov does not inspire the film "Frozen II?"

Q. Verifying identity online continues to be a major roadblock for people applying for coverage on healthcare.gov – particularly for people with low incomes and limited credit history. How would you tackle this problem?

Q. HHS has been working on greater transparency and data sharing. Can you discuss points in your career where you made information more transparent even though you risked alienating some important stakeholders?

Q. Last year’s coverage goal was 7 million and HHS exceeded that mark, do you have a number in mind for 2014-2015?

Dr. Robert Wachter, University of California, San Francisco:

Q. Hospitals and physicians are reeling from the profusion of quality, safety, and efficiency measures they’re being asked to submit – and some experts have begun to call for a moratorium on new measures. Do you feel like we need to slow down the process of promulgating new measures until we have sorted this out?

Q. Now that HITECH has succeeded in wiring the American healthcare system — what do you see as the things that HHS can do that it couldn't before. And where do you see new potential hazards that we need to be mindful of?

Health economist Amitabh Chandra, Harvard: 

"I want to know a lot more about how she will get the exchanges to work better. The exchanges are central to reform. Right now, when we think of an exchange working, we often think of it working in the narrow IT sense. But what we really need to be thinking about, however, is whether price competition on the exchanges is able to reduce health insurance premiums. If it's not able to do this, the fact that they work in the IT sense is no good."

Q. Central to getting price competition to work in the exchanges is taking out a bunch of lard that is in the current exchange plans; a lot of what we call 'essential health benefits' aren't essential at all. As long as junk like this is being covered, the exchange plans will be expensive. What are [your] proposals to increase price competition on the exchanges and second, make the exchange plans leaner?

Robert Restuccia, Executive Director Community Catalyst:

Q. The first open enrollment period surpassed expectations in terms of the number of people enrolled. These numbers are due in large part to in-person assisters who helped consumers navigate healthcare.gov and make the best health care enrollment choice for their needs.  Funding from HHS was critical in providing this type of assistance.  What are your plans for supporting in-person assistance?

Q. With so many new enrollees, many of whom have never had insurance or haven’t had it for a long time, consumer assistance will be very important, but federal support for Consumer Assistance Programs (CAPs) has lapsed.  What are your plans to support people so that they can make effective use of their new coverage?

Q. The ACA has moved us forward by expanding coverage, but consumers are still grappling with costs- higher copays and deductibles. There are also still many cracks in the system. Consumers aren’t sure about the quality of the care they are getting. How would you push hospitals, doctors and insurers to provide better care at lower costs?

Finally, what about you? Tell us what questions you have on Twitter, on our Facebook page or in the comments below.

Rich and looking to invest? Don't buy a mansion

Thu, 2014-05-08 02:52

The highest end of the high end real estate market is buzzing. Already this year three homes in the U.S. have sold for more than $100 million. 

Just last week, a property in the Hamptons (outside New York) sold for $147 million -- the most ever paid for a single-family house in the U.S. Still, UCLA's Eric Sussman says real estate that gets this kind of attention is full of risk.

"I don't think any economist, any real estate expert ... would say that buying a $100 million home is a safe place to put your money. Because let's face it you're talking about a very scarce asset with very few potential buyers," says Sussman.

Below is a list of the top real estates sales in the U.S.: 

Address City State Price paid Date of sale 60 Further Lane East Hampton N.Y. $147,000,000 May 2014 Blossom Estate Palm Beach Fla. $140,000,000 Dec 2012 Broken O Ranch Augusta Mont. $132,500,000 2012 Copper Beech Farm Greenwich Conn. $120,000,000 April 2014 360 Mountain Home Road San Francisco Calif. $117,500,000 January 2013 Further Lane Hamptons N.Y. $103,000,000 2007 The Fleur de Lys Los Angles Calif. $102,000,000 2014

Credit/Compiled by: Miller Samuel Real Estate Appraisers

Jonny Greenwood's radio moves

Thu, 2014-05-08 01:36

Yeah, I'll admit it. I'm a Radiohead fan

We're a devoted lot, and because of that, we're pigeon-holed, stereotyped, etc. But everybody should have that one band they love, right? And because "The Bends" came out when I was in high school, Radiohead was that band for me.

I actually liked the later stuff better -- "Hail to the Thief" is my favorite album, the peak before the band's lesser works of recent years. But even better than the recordings were the live shows. Somehow, here was a group of musicians that was doing stadium rock without the Aquanet and tights.

A Radiohead live performance was truly odd and yet still had mass appeal. But I saw guitarist Jonny Greenwood do something in the early 2000s that really blew my mind. It gave me a new understanding of both improvisation and the art of making every performance unique. 

Greenwood pulled out a radio at the beginning of the song "National Anthem" and just started madly switching channels. Static spat, voices barked, music played over his brother Colin Greenwood's driving bassline -- it was awesome. And the beauty of it was that every time he pulled the move it was different.

In Germany, it was German radio. In Japan, the voices chirped in Japanese. Here's an example. 

 

Jonny Greenwood's move was part of the inspiration for this week's Marketplace Tech series Playing With Machines. Musicians are great ambassadors and early adopters of technology. Unless you're a staunch classicalist or a virtuoso on an acoustic instrument, you're always trying to figure out ways to make new sounds or bring forth new ideas.

That can mean picking up an instrument you don't understand, or trying to push an instrument you know to the limit for a surprising result. It can mean something as simple as playing to a metrinome, or something as complex as composing music for a robot guitarist with 78 fingers.

Like most artists, good musicians are a wonderful mix of technical ability and whimsy. So the way they think about and interact with technology is a treat to witness. 

Computers are jerks: a conversation with Dan Deacon

Thu, 2014-05-08 01:00

If you're going to see a Dan Deacon show, chances are the composer and electronic musician won't ask you to put your cell phone away. In fact, he'll probably encourage you to keep it handy. That's because having a smartphone loaded with Deacon's app turns the audience into a makeshift light show.

It looks something like this (skip to :55 to see the start of the show):

The app, made in conjunction with Wham City Lights, reacts to a tone which then syncs your phone to the next song in the set. It blurs the line between audience and performer in a way that Deacon enjoys -- rather than just going to see a show, attendees contribute to the performance. The app also invites smartphones into a concert setting, an area in which it is usually strictly banned. It's part of Deacon's M.O.: to use technology in a way that enhances his vision of what a Dan Deacon show should look and sound like.

This in spite of the fact that he also refers to the computer as "the biggest jerk I've ever worked with."

It overheats, it is unreliable, and it quits unexpectedly. Deacon points out, though, that it also has a right to be as fickle as it is, seeing as its advanced capability allows him to do so much with his compositions.

He also feels that technology is putting the music world on the precipice of its next big change:

"The last 100 years saw such an insane change in music, it's almost impossible to think about the next 100 years having any less. There was a time before music, there was a time before opera, and there was a time before what we're about to enter into."

More Americans going online to find cremation urns

Wed, 2014-05-07 22:00

Google. Amazon. Walmart.com—These aren’t the first places that people think of when planning a funeral service. But more people are shopping online for cremation urns. 

David Thompson lives in Carson City, Nevada, and he buys a lot of stuff on Amazon. Recently, he bought an urn a few days before his wife passed away. He was looking for a wider selection than what the funeral home offered.

“To be honest, I was really glad to be home, near my wife, while I was going through this process of finding her cremation urn,” he says. “The one that I chose just jumped off the computer screen and told me essentially that, ‘This is the right thing. This matches your wife’s personality'."

Cremation has become commonplace. Two years ago, 43 percent of Americans were cremated. By 2017, it’s expected, there will be more cremations than burials. 

In Traverse City, Michigan, Stardust Memorials has built its entire business around selling cremation urns online. Owner Jordan Lindberg started the company four years ago, after his father got sticker shock while looking for an urn for his grandmother. 

“I wasn’t interested in selling any kind of normal product, anything that you’re likely to find when you go into Target,” he says. 

Potter Phil Wilson is molding clay into an urn on the wheel. He and Gretchen Palmer of Spinner Ceramics are creating a line of ceramic urns for Stardust Memorials. 

Palmer says the handmade aspect offers a personal touch. “These are not made by a machine. They're all made by hand by Phil, with glazes that he mixed and he designed,” she says. Neither potter said they would purchase a cremation urn online. But the new work has made family members think about their final wishes. 

“When I told my mom and her husband what I was doing, they were like, ‘Oh, I wonder what color urn I would like.’ I was like, ‘Mom, seriously?'," she says.

Stardust Memorials did $1 million in sales last year, and expects to double that this year.

Coca-Cola cancels its 'You're on. Diet Coke.' campaign

Wed, 2014-05-07 14:40

In a Diet Coke ad released recently, a series of young people face nervy challenges — giving a speech, making a presentation, doing the best man’s toast at a wedding. Each has a cool, fresh pick-me-up — a Diet Coke — at their side.

Then, singer Taylor Swift is seen backstage before a concert. The stage manager steps into her dressing room and says “You’re on.” Which then echoes the tagline of the campaign: “Diet Coke. You’re On.”

But there’s a hitch. In print ads — on billboards and bus shelters — the campaign also tells short tales of young people taking risks — like moving to New York to become a DJ. Only in some of those ads, the tagline is reversed: “You’re on. Diet Coke.” And the word “Diet” appears off-baseline, in smaller red script, superimposed over a shadow from a soda can.

 

http://www.duckandcoveronline.com/

The result? That tagline can easily be seen as “You’re on Coke.” Which is exactly what some people pointed out and roundly made fun of. Which led to a series of parody print ads and flying tweets that adapt the drug-addled tagline to any number of dark-and-twisted up-your-nose scenarios.

“Whenever a brand puts its message out there,” says advertising professor Tony Kelso at Iona College, “if it’s open to interpretation, then they’re just asking for people to have fun with it. We’re in the age where we’re not just receiving advertising. Everybody is participating.”

Jack Myers is a media ecologist and author of the book Hooked Up: A New Generation’s Surprising Take on Sex, Politics and Saving the World. He says this generation of consumers “are digital activists who see content as a creative opportunity to express themselves and to fundamentally change the nature of the intended communication."

Myers says there’s an irony here: companies desperately want consumers to respond to, and interact with, advertising. They want them to contribute their own words and experiences about the companies' brands. They also want consumers to share — endorsements, ‘likes,’ links to ads — with friends and family. Yet, says Myers, some of those same brands are still trying to control what happens to their messaging after it’s released into the marketplace.

But he thinks that’s misguided and ultimately futile. “Advertisers just have to be comfortable being less careful,” says Meyers, “and letting the market take their messages and hack at will, and take the response with a grain of salt.”

Animal New York

According to the New York Times, Coca-Cola has pulled its “You’re On” campaign. The company didn’t respond to Marketplace’s request for comment by our deadline.

All the buzz and attention that Diet Coke is getting — even if some of it is negative — might be a positive for the brand. Diet Coke and the carbonated soft drink category in general need more young consumers. Those consumers are grabbing bottled water, vitamin-fortified water, juice drinks and especially energy drinks, instead of soft drinks. According to Beverage Digest, Diet Coke’s volume fell nearly 7 percent in 2013 from the year before; Diet Pepsi fell about the same amount. Diet Mountain Dew and Coke Zero have also slipped.

Stanford will divest stakes in coal. Will it matter?

Wed, 2014-05-07 13:38

Stanford will be the first major university to divest itself of carbon-producing fossil-fuel investments - but only coal producers. So how easy will it be for Stanford to cancel out coal-related investments? After all, coal is used widely by utilities and still generates nearly 40 percent of U.S. electricity. 

Kristoffer Inton, an equity analyst with Morningstar, says not investing in coal is as easy as "If you don’t want it -- don't buy it... Clearly if you don't want to invest in coal, you can not invest in the coal miners,” he says.

Companies that mine coal, like Peabody and Consol Energy, are listed individually on the S&P 500 so they’re easy to target, says Inton. But avoiding the energy source gets more complicated if you try to become a coal vegan, even avoiding companies that burn it – like steel manufacturers and utilities.

Inton notes that for investors, institutional or otherwise, not buying coal investments right now is not a hardship. Prices are down.

“Any time there’s been press on potential EPA regulations or anything like that, we’ve always seen a direct impact on coal miners’ stocks,” he says.

But even if more institutions like Stanford stop investing in coal, it’s not likely to have much impact on sellers. David Beard, managing director of energy equity research at Iberia Capital Partners, says look no farther than conscience investing campaigns of the past.

“I don’t see any real economic impact just given how the stock of Coke and Pepsi and Philip Morris have performed over time," he says. "And just because you sell a stock, it really doesn’t affect how much money a company has in their bank account to invest in their business.”

Beard says the bigger risk for energy companies would be a global carbon tax, which would raise the cost of electricity. But in the meantime, he notes, for coal producers, it's business as usual.

“It’s supply and demand, if the price is higher than the cost, people will mine it.”

Stock exchanges want Alibaba, bad

Wed, 2014-05-07 13:35

Alibaba is huge. We know that. It received $5.6 billion in revenue in 2013 with $1.6 billion in income, and has a nearly unheard of profit margin of 48 percent. 

You would imagine any stock exchange would be dying for Alibaba to decide to list with it. They do want Alibaba, bad. But not necessarily for the reasons you might think.

It’s not totally about the money. Yes, the stock exchange that hosts Alibaba will receive annual fees for being listed. And an exchange will also receive fees every time a stock is traded. 

But as far as stocks go, those fees are minimal. Listing fees top out at around $500,000 a year, for the largest of companies, and trading fees are on the order of hundredths of a cent per trade.

So why do exchanges care about listing Alibaba? Prestige. The flip side of prestige is advertising. If a huge flashy tech company like Alibaba lists with a certain exchange, that might attract other huge flashy tech companies to do the same.

Alibaba & the exchange windfall

Wed, 2014-05-07 13:35

Alibaba is huge. We know that.  It received $5.6 billion in revenue in 2013 with $1.6 billion in income, and has a nearly unheard of profit margin of 48%. 

You would imagine any stock exchange would be dying for Alibaba to decide to list with it.  They do want Alibaba, bad.  But not necessarily for the reasons you might think.

It’s not totally about the money.  Yes, the stock exchange which hosts Alibaba will receive annual fees for being listed. An exchange will also receive fees every time a stock is traded. 

But as far as stocks go, those fees are minimal.  Listing fees top out at around $500k a year, for the largest of companies, and trading fees are on the order of hundredths of a cent per trade.

So why do exchanges care about listing Alibaba?  Prestige.  The flip side of prestige is advertising.  If a huge flashy tech company like Alibaba lists with a certain exchange, that might attract other huge flashy tech companies to do the same.

Legalized pot use vs. employer drug testing

Wed, 2014-05-07 12:21

The lawsuit Brandon Coats filed against his former employer Dish Network stemmed from anger.

Coats was angry because Dish Network fired him in 2010 after his random drug test came back positive for traces of pot.

Coats had been upfront about his pot use. As a quadriplegic with powerful muscle spasms that make it hard to stay still while seated in his wheelchair, Coats used medical marijuana to calm his muscles and allow him to function.

“In the part of my body where I'm paralyzed, my body tries to send signals to my head, and it doesn't get through and gets sent back down, and what that causes is for my muscles to flex really hard,” Coats said.

Coats used to take other medications. But he says none worked as well as marijuana with so few side effects. He explained this his employers at Dish Network in 2010, when his random drug test came back positive. But the company decided to fire him, citing the positive drug test as the reason. They told Coats he could reapply for his job, if he could pass a drug test.

But Coats took another path. He sued Dish Network, claiming the marijuana he uses is just like any other medicine. Coats has a medical marijuana card issued by Colorado. His use of marijuana was and continues to be legal in the state.

But Coats lost in state court and at the appellate level, where a three-judge panel ruled last spring that even though Coats’ marijuana use was legal in the state, it was illegal under federal law, so Dish Network had a right to fire him.

The case did not end there. Coats appealed to the Colorado Supreme Court, which has agreed to consider the case. Legal experts in the state expect the court to hear arguments over the summer and rule by early fall.

“Employers really need to keep an eye on this decision. It’s not just Mr. Coats,” said Vance Knapp, a labor law attorney who advises Fortune 500 companies at the Denver-based firm Sherman & Howard. “If the Colorado Supreme Court were to rule in Mr. Coats’ favor, that sort of decision would help other proponents of marijuana use in other states and other jurisdictions to support their argument that employees should have protections for using marijuana,” Knapp said.

Right now, there are few if any such protections. All 50 states allow employers to restrict marijuana use, and employees are often surprised that even though marijuana use may be legalized in their state, they can still face sanctions or dismissal by their employers if they test positive for the drug, according to Knapp. 

The Coats case in Colorado could prove a test for that precedent because the state has not only legalized marijuana, but also has a law on the books that explicitly protects workers’ lawful activities outside of work.

The question then comes down to whether marijuana use is lawful. The appellate court said it is not enough for the activity to be lawful under state law, it also has to be lawful under federal law.

If the Colorado Supreme Court reverses that ruling, it would create headaches for businesses around the country, which could find themselves with employees demanding protected status for their marijuana use, Knapp said.

Meanwhile, employers in Colorado and elsewhere are not waiting for a resolution to Brandon Coats’ case. They have been ramping up their drug testing ever since the state legalized recreational marijuana in January, according to a survey by the Mountain States Employers Council, a membership organization that helps companies with human resources issues.

Employers are worried about the costs of substance abuse, says Curtis Graves, a staff attorney with the council.

“There’s a great deal of statistics out that drug use and alcohol, cost employers an enormous amount of money, in the hundreds of millions of dollars a year. So, the marketing message is that by drug testing, they can save money,” Graves said, adding that employers are also concerned about potential liability costs if there is an accident and an employee tests positive for pot use.

A government-sponsored survey conducted in the 1990s did find that drug and alcohol use was costing the U.S. economy $276 billion a year. But proponents of marijuana say the drug is being unfairly targeted. Most employers don’t test for alcohol use, for example. And there are questions as to the science and accuracy of drug tests that find inactive marijuana compounds in people’s bodies (such compounds can remain in someone’s system weeks after they last consumed marijuana).

Michael Evans, the attorney who represents Coats, says that goes to the heart of their case. Dish Network did not know when Coats had taken the marijuana before deciding to fire him. All the company knew was that he had taken it at some point in the recent past. And that is not good enough, says Evans.

“It's about giving the [drug testing] laboratory the right instructions,” Evans said. “If they want to fire somebody that is high on marijuana, they can and they should. Just like they should fire somebody that came in drunk as a skunk after lunch, after having too many margaritas.”

But, Evans adds, employers should not fire someone who is taking marijuana in their own time and who is not intoxicated at work. 

NBC buys Olympics rights for Alibaba's treasure

Wed, 2014-05-07 11:22

NBC has bought the rights to broadcast the Olympics through 2032, on TV, over the internet and on mobile devices.

The head of Comcast, the company that owns NBC, said securing the broadcast rights for the Olympics is, in his words, an "honor" and a "privilege."

That's an honor and a privilege that will cost Comcast a reported $7.65 billion... which is about how much money Alibaba has in cash.

A comic book pioneer adjusts to the digital age

Wed, 2014-05-07 10:31

Meltdown Comics and Collectibles opened in 1993 on Sunset Boulevard, in Los Angeles, less than two miles from the intersection of Sunset and Vine, right in the heart of Hollywood.

More than 20 years later, the store is one of the largest in the country and has diversified its inventory from simply comic books and graphic novels into comedy, podcasting and pop culture.

"Digital media is killing us, just like records stores," says co-owner Gaston Dominguez-Letelier. "People started downloading music, now they are downloading books and comics. ... It's not the same as it used to be."

Dominquez-Letelier says customers are also having comic books and products shipped directly to their homes, instead of coming in and picking up comic books every week. But he says that most of his customers are 25- to 45-year-olds. Older fans who remember coming in as children are now coming in with their own kids, and "hopefully it keeps going like that."

Dominguez-Letelier says Meltdown is trying new business strategies to grow. They've opened a live comedy venue in the back of the store, and are also accepting new forms of payment, including crypto-currencies like Bitcoin to grow foot traffic.

"The key word right now is 'experience'. Experiential marketing," says Justin Sewell, the director  of new media for Meltdown. "It's not enough anymore to have a line out the store. They want the buzz, they want the cool factor on Twitter, Facebook, reddit, YouTube, Twitch. Cool stuff online, so fans in Terre Haute, Indiana, can be part of the fun here in Hollywood."

South Africans disappointed by growing inequality

Wed, 2014-05-07 10:21

The vast majority of South Africans have become fed up with growing inequality in their country, but they're convinced any action they take at the polls won't make much of a difference.

Wednesday marked the first elections since the death of Nelson Mandela. Many voters have been disappointed by current President Jacob Zuma amidst allegations of government corruption.

"It's almost as if South Africa has two economies," says the BBC's Matt Davies, reporting from Johannesburg. "The insider economy, if you're in there, is great--you've got a job, you've got a house, life is great. If you're outside of the economy, you're most likely unemployed."

Although this year marks the 20th anniversary of the end of apartheid in South Africa, Davies says that a lot of people have missed out on what he calls the "economics of freedom."

"A lot of people have actually been left behind, and their lives haven't been enriched in the last 20 years," he said. "There is an argument that says that back in 1994, political apartheid came to an end--yes, there was freedom and democracy--but economic apartheid still exists."

We've got a peek at Alibaba's books. Thoughts?

Wed, 2014-05-07 09:53

We asked Brian Hamilton, the chairman of the financial information company Sageworks, to give us his thoughts on Alibaba's planned IPO.

1. Alibaba's IPO filing says it will raise $1 billion, analysts say it will raise closer to $15 billion and reports say it could be valued at $200 billion. Can you translate that for me? 

Valuation is calculated by multiplying a company's share price by the number of total outstanding shares. For example, when Amazon went public in 1997, it had 23.8 million total outstanding shares at an IPO share price of $16; therefore it was valued at approximately $381 million (23.8 million x 16 = 381 million).

One should never look at the valuation in isolation. Instead we should look at valuation, in relation to sales and profits. The sales multiple (the company's valuation divided by the company's revenue) and the profit multiple (the company's valuation divided by the company's net profit) give a better indication of "relative value." For example, the dollar amount of Twitter's IPO valuation was much less than the dollar amount of Facebook's; however, taking the sales multiples into account, Twitter'srelative value to sales was more than twice that of Facebook, indicating a richer valuation.

At this point we do not have a confirmed IPO share price for Alibaba, so we do not have a precise valuation. Reports have Alibaba valuing itself at $109 billion as of April, but other analysts estimate that Alibaba may be seeking a valuation upwards of $200 billion when the IPO debuts. Unfortunately, until we get the confirmed number of total shares outstanding and the share price at the time of the IPO, we will not know the company's official valuation.

2. Now that you've gotten a better look at Alibaba's financials, what do you think of the company?

The fundamentals are really, really strong. This is a company with positive cash flow, nearly one and half billion dollars in profits, a solid net profit margin, and solid revenue growth. This appears to be a real company with real profits and revenue.

3. Does Alibaba's valuation seem fair? / 4. How does that valuation compare to other Internet companies (such as Facebook, Twitter) when they went public?

We'll have to see what the final valuation is when the company prices it's IPO shares, but even when you look at the very "conservative" self valuation of $109 billion, it's a very rich valuation. They'd be valued at, at the very minimum, 20 times sales and 80 times profits, but most likely closer to 30 times sales and 125 times profits, if the final valuation ends up being closer to $170 billion-$200 billion. That's not quite as rich of a valuation as Twitter, which went out 40 times sales, but compares Alibaba's relative value to that of Microsoft when it went public. Microsoft was less than one-eighth of the relative value of Alibaba, even looking at the most conservative valuations of Alibaba.

We've got a peak at Alibaba's books. Thoughts?

Wed, 2014-05-07 09:53

We asked Brian Hamilton, the chairman of the financial information company Sageworks, to give us his thoughts on Alibaba's planned IPO.

1. Alibaba's IPO filing says it will raise $1 billion, analysts say it will raise closer to $15 billion and reports say it could be valued at $200 billion. Can you translate that for me? 

Valuation is calculated by multiplying a company's share price by the number of total outstanding shares. For example, when Amazon went public in 1997, it had 23.8 million total outstanding shares at an IPO share price of $16; therefore it was valued at approximately $381 million (23.8 million x 16 = 381 million).

One should never look at the valuation in isolation. Instead we should look at valuation, in relation to sales and profits. The sales multiple (the company's valuation divided by the company's revenue) and the profit multiple (the company's valuation divided by the company's net profit) give a better indication of "relative value." For example, the dollar amount of Twitter's IPO valuation was much less than the dollar amount of Facebook's; however, taking the sales multiples into account, Twitter'srelative value to sales was more than twice that of Facebook, indicating a richer valuation.

At this point we do not have a confirmed IPO share price for Alibaba, so we do not have a precise valuation. Reports have Alibaba valuing itself at $109 billion as of April, but other analysts estimate that Alibaba may be seeking a valuation upwards of $200 billion when the IPO debuts. Unfortunately, until we get the confirmed number of total shares outstanding and the share price at the time of the IPO, we will not know the company's official valuation.

2. Now that you've gotten a better look at Alibaba's financials, what do you think of the company?

The fundamentals are really, really strong. This is a company with positive cash flow, nearly one and half billion dollars in profits, a solid net profit margin, and solid revenue growth. This appears to be a real company with real profits and revenue.

3. Does Alibaba's valuation seem fair? / 4. How does that valuation compare to other Internet companies (such as Facebook, Twitter) when they went public?

We'll have to see what the final valuation is when the company prices it's IPO shares, but even when you look at the very "conservative" self valuation of $109 billion, it's a very rich valuation. They'd be valued at, at the very minimum, 20 times sales and 80 times profits, but most likely closer to 30 times sales and 125 times profits, if the final valuation ends up being closer to $170 billion-$200 billion. That's not quite as rich of a valuation as Twitter, which went out 40 times sales, but compares Alibaba's relative value to that of Microsoft when it went public. Microsoft was less than one-eighth of the relative value of Alibaba, even looking at the most conservative valuations of Alibaba.

Broken windows, busted real estate market

Wed, 2014-05-07 09:25

Building inspector Derrick McCall spends much of his day in a noisy city truck making his way through a list of 25,000 vacant properties in Philadelphia.

He’s part of a novel new program that seeks to get landlords to do something about the city’s vacant buildings, and make the city money at the same time. His goal: to make sure every vacant home in Philadelphia has working doors and windows.

“I’ll go by a property to see the condition, to see if it has boarded doors and windows, and attempt to bring it to compliance,” said McCall, a burly man who drives a gurgling city truck through some of Philadelphia’s toughest areas.

If McCall does find a home with boarded-up doors and windows, he’ll staple a bright pink poster on the door, informing the owner that the building is in violation of a law that prohibits boarded-up doors and windows. The fine: $300 per opening, per day. Owners must go to Blight Court to fight the fine.

Building inspector Derrick McCall pauses at a home in Philadelphia after citing it for doors and windows violations and posting a pink poster on the door to inform the owners. 

Alana Semuels

The idea: force building owners to fix up their homes and make them habitable, or sell them to someone who will.

“We can make them do something now,” said Rebecca Swanson, who runs the city’s vacant property strategy. “If we can catch them now, we can get to the point where we can save it from being something that falls into disrepair.”

The city came up with the strategy after realizing it was spending millions a year on tearing down blighted properties, but that newly decrepit homes seemed to be popping up every year. And it was costing a lot to tear down the homes – around $15,000 each, a big deal in a city constantly strapped for cash.

The initial goal of the strategy was to prevent homes from falling into disrepair, but other benefits have emerged, Swanson said. After spending the money to fix the doors and windows, landlords are deciding to spend an extra bit of money so they can fix their properties enough to rent them out. All those permits for fixing their homes and renting them out make the city money.

The city points to the neighborhood of Francisville, now bustling with new development, as an example of a place where the city’s strategy has led to a makeover for an entire area.

“We found all these tangential benefits as we’ve gone along,” Swanson said.  “Increased tax collection, improved neighborhoods, getting more revenues through licensing and permits.”

A study by the Reinvestment Fund, a group that finances neighborhood revitalization, found that the strategy led to a 31 percent increase in home prices in the neighborhoods targeted by the city. Comparable neighborhoods saw home prices rise just 1 percent.

Philadelphia has many row houses, so decay in one house can affect another quickly and bring down property values.

Alana Semuels

“Essentially, if you’re smart and you’re targeted and you’re focused, and you send a very clear market signal that blighting properties are not going to be tolerated in a place,” said Ira Goldstein, who authored the study.

Before, Goldstein said, there was a perception in Philadelphia that landlords could hang onto vacant buildings for a long time, and that the city wouldn’t do anything about them. That perception has now changed because of the enforcement strategy, he said.

But there are still some owners that the city can’t reach. Though it used a database also used by the IRS, it hasn’t been able to find all of the property owners who own vacant homes in the city. That’s why the home next to James Culler is falling into disrepair, even though he’s called and complained many times.

Philadelphia has started enforcing a law that would fine the owners of buildings like this one $300 for each boarded-up door or window in an effort to get owners to fix up the buildings. 

Alana Semuels

As Derrick McCall walks up the rickety concrete steps to inspect the home, Culler sticks his head out of his door and asks if the city is finally doing something about the house that’s attached to his.  Vagrants keep breaking in and he’s worried they’ll burn the place down.

“My wife done called a couple of times, ain’t nobody respond,” Culler said to McCall.

“It is in the system, to try and get the owners to repair the doors and windows,” McCall assures him. “It’s a slow process, but it does work.”

It’s a lesson other cities, like Detroit and Buffalo that have thousands of vacant properties to deal with: cleaning up blight takes time. But it does work.  Eventually. 

Dove tops list of mothers' 10 favorite brands

Wed, 2014-05-07 08:22

Just in time for Mother's Day, research organization YouGov has found that American mothers perceive Dove as the best brand, according to their BrandIndex report. The soap and beauty product maker tops a list of mothers' favorite brands despite backlash to the company's "Real Beauty" ad campaign that went viral in the past few months.

In it's press release, YouGov even speculates that the "Real Beauty" campaign and its "highly-viral" nature is what propelled Dove into the top spot.

This is the second year YouGov has tracked brand perception among American mothers, and the first year Dove made it in to the top 10. Joining Dove on the list are brands like Johnson & Johnson, Amazon, Cheerios and Samsung.

YouGov also mentions that, while they didn't crack the top 10, brands like Facebook and Victoria's Secret saw the greatest gains in perception compared to last year. Pillsbury and Discovery Channel, on the other hand, fell out of the top brands.

YouGov on their survey methods:

YouGov BrandIndex filtered their entire 1,250+ brand universe for respondents who identified themselves as women over the age of 18 with children under 18 years old. The firm then ranked them using their flagship Index score, which measures brand health by averaging sub-scores on quality, satisfaction, impression, value, reputation and willingness to recommend. The scores reflect surveying over the past 30 days.

See the full list in the graphic below.

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