Marketplace - American Public Media

Ditching the single-use water bottle

Wed, 2014-05-07 02:14

Every day at a sprawling Arrowhead bottle plant in Los Angeles, a towering yellow robot nicknamed "Apollo" grabs empty 5 gallon water cooler jugs from trucks, and sends them to refill stations under the watchful eye of technicians.

Those large office water bottles get tons of re-use, but most individual plastic bottles are only used once. How do we reduce that waste? San Francisco Supervisor David Chiu wrote legislation to limit single-use bottle sales on public property. 

"People can still purchase single use plastic water bottle at their local grocery store or their corner store," Chiu says. "But what we want to do is really ask residents in our city to think about changing their consumer behavior."

A New York entrepreneur named Nan Harris hopes to change our water drinking habits with a vending machine called WaterStop Carts. After noticing the wastefulness of single-use bottles, she sold her co-op to finance a company to develop a more efficient technology.

WaterStop Carts - First Prototype from WaterStop Carts on Vimeo.

"Bottled water is just easier to find, that's all there is to it," says Harris. "So we developed the concept of accessibility through mobility."

Harris' sleek metal vending machine connects to municipal tap water, then runs it through filters like those at the giant bottled water plants. It also sells reusable bottles that collapse when not in use. Future versions will dispense another life-saving resource: wifi hotspots.

MIT students invented a similar machine called Refresh. It sells new bottles for $1.50, but refills are just 50 cents if you bring your own bottle.

Over in Los Angeles' Koreatown, Richard Chin and his fiancee opened a water store called Alkasource. In a back room that looks like a science lab, they filter regular Los Angeles tap water into a bottle of your choice: plastic, glass, or metal.

"Once we started doing research about how water is sold, how water is produced and purified, we found that there weren't that many resources for great quality water," says Chin. "And so we decided to get into this business to provide the community with a source for very clean water."

The International Bottled Water Association's Chris Hogan acknowledges that lots of new eco-friendly options have popped up lately. "We have no problem with tap water, filtered water, using a reusable water bottle," Hogan says. "The important thing is to drink water."

The end result for consumers is more choice -- from a bottling plant full of robots, to little machines that filter water right in front of you.

Making music for the movies with John Powell

Wed, 2014-05-07 01:00

Having scored over 50 films, John Powell knows what a film should sound like. With his latest project, Rio 2, creating the original soundtrack involved a lot of unique sounds; like the swoosh of bird feathers, for example.

It's all part of his meticulous process of recording isolated sound effects and instrumental lines, then putting them together in a final mix. This kind of technological control is huge for Powell.

In fact, he says he wouldn't be the composer he is now without computers. 

Starting with the Atari ST 1080 -- Yes, that Atari ST 1080 -- computers have become an integral part of Powell's composition process.

Yet, in spite of having some of the most advanced recording technology at his disposal, Powell says the most important technological advancement in his process has been having instant access to different kinds of music from around the world: 

"Ultimately it comes down to whether or not you can write a tune. And that really is just about the music you've experienced."

What do meteorologists think about climate change?

Tue, 2014-05-06 13:37

President Obama is sitting down with eight weather people today—from NBC’s Al Roker to local forecasters—to promote the National Climate Assessment. That’s the new report that shows climate change is affecting all areas of the country and economy.  

That makes sense; many Americans trust their local weathermen for all things weather. 

Ed Maibach, director of George Mason University’s Center for Climate Change Communication, says Obama is smart to use weather people to promote the National Climate Assessment. “Unlike climate scientists, they already have the eyes and ears of the American people,” he says.

According to his research, many meteorologists are climate skeptics. “While almost all of them understand that the climate is changing,” he says, “they’re not all necessarily convinced that human activity is driving the change.” 

And some don’t even go that far. Among the most prominent of the unpersuaded is Joe Bastardi. He spent much of his career at Accuweather and is now chief meteorologist at WeatherBell.com. He goes on shows like Fox’s The O’Reilly Factor often to dispute climate science.

“The weather was far worse in this country in the 30s, 40s, and 50s,” Bastardi says. “In the end, I think this is much ado about nothing. I think it will wind up on the ash heap of history.” 

According to Maibach’s research, a full quarter of TV weather people said they don’t believe climate change is happening, in the most recent survey in 2010. About an equal number said they weren’t sure. 

Some may be skeptical because they see how often their computer models don’t produce accurate short-term forecasts. 

“They translate some of that into having some concerns about using the similar kinds of models to project the climate out for many, many years,” says Keith Seitter, executive director of The American Meteorological Society, which supports the President’s report.  

Obama is now trying to get more TV weather people who believe the long-range forecast to spread the word. 

Nasty Gal CEO Sophia Amoruso stopped dumpster diving

Tue, 2014-05-06 13:23

The average rags to riches story doesn’t often literally involve rags and riches. But then, most CEOs probably don’t start their careers dumpster diving and spending afternoons haggling at thrift stores. That’s how Sophia Amoruso built Nasty Gal, an online women’s clothing retailer with $100 million in revenue.

Amoruso details her company’s rapid growth in her new book, #GIRLBOSS.

“I was always looking for my way, and often bumping into things,” says Amoruso on her early years as a "freegan" and sometimes shoplifter. She was usually employed but often bouncing from one job to another.

“I thought I was destined to smash capitalism,” she says. “It didn’t work. And I’m glad it didn’t.”

Instead, in 2006, Amoruso turned an interest in fashion into an eBay business at the age of 22. She used the auction website to sell vintage clothing under the name, “Nasty Gal” vintage. She thrived at using budding social media like MySpace to direct people to her eBay store and eventually launched her own website to sell directly to her customers.

NastyGal now has customers around the world and has expanded far beyond vintage. And about her earlier life philosophy? Amoruso says “the joke was on me.”

What happens years after a foreclosure

Tue, 2014-05-06 13:15

So you’d think that after a foreclosure, your financial slate would be wiped clean. You’ve lost your house. What else can happen? 

Actually, plenty. Lenders and debt collectors can still go after you for what you owe, years after a foreclosure.

That's what happened to Miranda Cisneros Bell and her husband Ed. They bought their dream home for $535,000, in Emmitsburgh, Maryland, about two hours north of Washington.  They put 20 percent down and got a jumbo loan for the rest. Cisneros Bell says they were nervous – what if they couldn’t sell their old house?  She says the realtor said, don’t worry.

“It was a basic push to get us in the house," Cisneros Bell says. "It was the trend of the times, to push people into things that probably they couldn’t afford."

Their old house didn’t sell. In fact, that’s where they live now, with Cisneros Bell's mother. They moved back in the fall of 2008. They couldn't make payments on their dream house and lost it to foreclosure in 2009. And then the letters started coming. Not from her bank, but from a debt collector.

She recalls thinking: 'It’s impossible... I don’t know who you are. You weren’t part of the foreclosure. So basically, who are you?'”

The debt collector, Dyck O’Neal Inc., says it bought her debt. But Cisneros Bell says she’s seen no proof of that and is fighting Dyck O’Neal in court. Dyck O'Neal says it would not comment on an ongoing case.

Cisneros Bell’s story is not unique. Many homeowners don’t realize that lenders or debt collectors can pursue them if their house sold for less than they owe. So, if you borrowed $200,000, and your house sold in foreclosure for only $100,000, the bank can come looking for that $100,000 difference years later.

Some states have been shortening the time banks have to claw back what’s still owed after a foreclosure. And the states hit hardest by the housing crisis are cutting back the most.

“Florida recently changed the law for pursuing a deficiency judgment from five years to one year,” says Avy Mallik, an attorney with the advocacy group, Civil Justice.

Maryland just shortened the time its bankers have to decide to pursue a homeowner to three years from 12. But banks in these states have argued that people took out these loans promising to pay them back.

“We are depository institutions, we’re insured by the FDIC, we’re lending our depositors' money, and we have to be able to have a reasonable expectation that we’re going to be repaid,” says Kathleen Murphy, head of the Maryland Bankers Association.

“I absolutely understand where these banks are coming from," says Mallik. “All we’re doing with the deficiencies is...trying to provide some finality with the statute of limitations and ensuring that it’s a level playing field for people who are trying to rebuild their lives."

Especially, Mallik says, since the playing field wasn’t level for many homeowners during the housing bubble and crisis.  Remember Miranda Cisneros Bell, the homeowner we met at the beginning of this story? Both the U.S. Justice Department and the Maryland attorney general’s office say her foreclosure was defective. 

Shelf vs. Script: Why Merck's offloading allergy pills

Tue, 2014-05-06 13:08

If you think a licensed pharmacist is the only real difference between NyQuil and Ambien, think again. The two are the product of completely different business models.

"Oh they’re very different," says Les Funtleyder, author of Healthcare Investing. "One is bulk manufacturing, one is heavy-duty R&D." 

That heavy duty research and development? $5 billion. That’s how much it costs to get a single prescription drug to market these days.

Why would Merck want to focus on that business?

"The return on investment is much higher in the prescription market," says JB Silvers, a professor of health finance at Case Western Reserve University's Weatherhead School of Management. He says Merck is well positioned with a strong pipeline of cancer and diabetes drugs. "If you can do well there with patented drugs that have protection against competition, you can pretty much charge what you want."

Not so in the world of allergy pills and arch support. The consumer drug market is all about competitive pricing and catchy advertising

"It’s a volume market, it’s like most retail," says Silvers. "You have a smaller margin, but if you sell a whole lot of it, you do really well."

That’s what Bayer does best. "Bayer is going to be able to leverage their global reach to take these products to places where they haven’t been sold before," says Dan Mendelson, CEO of Avalere Health

Mendelson says when it comes to branding, marketing and selling things like sunscreen and nasal spray, Bayer simply has a better machine.

Tweets from Rakesh Agrawal, but with Getty Images

Tue, 2014-05-06 13:06

Rakesh Agrawal, a former PayPal executive who "mistakenly" (who can really say?) tweeted some ridiculous and offensive statements about some co-workers, has become the star of his own Twitter soap opera written by his own hand. After Agrawal sent the corporate hate tweets, he apologized and blamed the messages on a new phone.

PayPal then announced, on Twitter of course, that Agrawal was no longer employed by the company and also gave us some wonderful life advice about treating each other with respect, which apparently PayPal felt the need to give the world:

Rakesh Agrawal is no longer with the company. Treat everyone with respect. No excuses. PayPal has zero tolerance.

— PayPal (@PayPal) May 3, 2014

After that, Agrawal sent out a series of messages that were hard to follow, especially without pictures. We searched Getty Images and our photo libraries to see if we could help visualize what is going on behind the curtain:

My guest list builds itself.

— Rakesh Agrawal (@rakeshlobster) May 6, 2014

Scott Barbour/Getty Images

Tareq Salahi and Michaele Salahi on February 4, 2010.

How do I give equity to a three year old.

— Rakesh Agrawal (@rakeshlobster) May 6, 2014

Chip Somodevilla/Getty Images

Laura Bush Hosts Annual White House Easter Egg Roll.

I am not hiring at the moment. Got a 100x team that will change the world.

— Rakesh Agrawal (@rakeshlobster) May 6, 2014

Or things will escalate.

— Rakesh Agrawal (@rakeshlobster) May 6, 2014

PAUL J. RICHARDS/AFP/Getty Images

Your move Stan.

— Rakesh Agrawal (@rakeshlobster) May 6, 2014

Jason Merritt/Getty Images

 Executive producer Stan Lee arrives at the premiere of Marvel's 'Thor: The Dark World' at the El Capitan Theatre on November 4, 2013 in Hollywood, California.

Seriously I need no investors.

— Rakesh Agrawal (@rakeshlobster) May 6, 2014

An ex-PayPal executive airs grievances (very) publicly

Tue, 2014-05-06 12:51

Rakesh Agrawal, a former PayPal executive who mistakenly tweeted offensive statements about his co-workers, later appeared to be doubling down on Twitter by threatening to make a former colleague’s text messages public.

“If you don’t stand up for me, I will start sharing your text messages to me,” Agrawal tweeted to a colleague he referred to as “Stan.” “Do the right thing. Your move, Stan.”

If you don't stand up for me I will start sharing your text messages to me. Do the right thing.

— Rakesh Agrawal (@rakeshlobster) May 6, 2014

Sandra Crowe, author of "Since Strangling Isn't an Option,” a book about working with difficult people, says social media presents real pitfalls for companies.

“People who have a big need for power are going to be able to hold companies hostage,” Crowe said, adding that companies like PayPal can either ignore the tweets of an unhappy former employee like Agrawal, or fight back.

"You can make his reputation so bad in the tech world, that nobody will want to hire him, do business with him, do deals with him, and maybe not even email him,” Crowe said.

Of course, once an employee has been fired, or has resigned from a job, the former employer may hold little sway.

“The ability to extract any consequence is limited, because the individual no longer has the fear of losing their job,” said Stephanie Trudeau, a labor and employment attorney at the law firm of Ulmer and Berne.

Still, as much as this is an age of social media, it is also one of litigiousness. Trudeau says if Agrawal makes public messages that were sent to him privately, he could find himself facing an invasion of privacy lawsuit.

And the markets breathed again...

Tue, 2014-05-06 11:43

From the Marketplace Datebook, here's a look at what's coming up Wednesday, May 7, 2014:

  • In Washington, the Federal Reserve is scheduled to release its monthly consumer credit report.
  • The Senate Special Aging Committee discusses the fight against cancer.
  • Actor Michael E. Knight of "All My Children" fame turns 55.
  • On May 7, 1824, in Vienna, Beethoven's Ninth Symphony premiered.
  • And the Dow Jones closed above 15,000 for the first time just one year ago.

Brazil is not ready to host FIFA

Tue, 2014-05-06 11:31

Brazil takes the international stage in just 37 days, when the first match of the 2014 FIFA World Cup kicks off. Some experts say the country isn't ready, though a part of that isn't exactly a surprise.

"Brazil always does things at the last minute, and the fact that Brazil is so late perhaps could be predicted," says the BBC's Wyre Davis, reporting from Rio de Janeiro. "I think what couldn't be predicted was this 'perfect storm,'" referring to the crowds of unhappy Brazilians protesting in the streets.

The protests, he says, deal with the fact that $15 billion is being spent on the World Cup alone--without any sign of how surrounding communities will benefit.

"A lot of people are saying, 'Well hang on, what do we get out of this?'" he said. "'OK, Brazil might win the tournament, which is good news for us as soccer fans, but where's everything else that was promised?'"

Among the promises, Davies says, are integrated transport and increased infrastructure. This doubt of benefits has led urban planning professor Christopher Gaffney to proclaim Brazil has already lost the World Cup.

"We've concentrated on the wrong projects, we've overbuilt in all these ways. So in the end, it's going to be a big party, but Brazilians will have a hangover for the next generation."

Alibaba files to go public: Yes, it's that big

Tue, 2014-05-06 11:14

UPDATED: Chinese e-commerce conglomerate Alibaba Group filed a Form F-1 registration statement on Tuesday, saying it intended to raise $1 billion in an initial public offering. But analysts say the company will likely raise more in the end -- as much as $20 billion. That would make it the biggest since Facebook raised $16 billion in an IPO in 2012. One note: The company says it sells more stuff, and thus generates more package deliveries every year, than UPS does globally.

Analysts have predicted that all told the company could be valued upwards of $150 to $200 billion. Its high valuation is a factor of its scale, its dominance in the Chinese e-commerce market, and its highly successful monetization of its platform through ad revenue.

As a company, Alibaba is often described as a combination of eBay and Amazon, but you could throw in a little PayPal, Yahoo, and Citigroup too. Alibaba has a sizable role in mobile banking and online advertising technology.

So here is a comparison of Alibaba with those companies for some perspective on just how big it is.

Hospitals save money by doing surgery for free

Tue, 2014-05-06 10:00

Across the country, a few hospitals have come up with a counterintuitive way to save themselves money: offer minor surgery for free.

To understand how that’s possible, consider the case of 32-year-old Lammon Green, a caretaker for the developmentally disabled in Macon, Georgia. He’s a really cheerful guy, but he’s been bothered for a long time by a cyst behind his ear.

“It’s been kind of giving me problems for the last few years,” he said. “It gets to about the size of a lemon when it gets infected.”

Most people would get something like that cut off pronto, but Green doesn’t have insurance.

“I actually am looking into the Obamacare now,” he said.

Because he lives in Georgia  – where the governor has declined to expand Medicaid – there’s a good chance Green makes too much money to qualify for Medicaid, and not enough to get subsidized private insurance.

Nonetheless, Green recently found himself in an operating room, drifting off into a chemically induced sleep, while the doctors cut that cyst away with an electronic knife.

Green is one of the first people to come through Macon’s new volunteer surgery clinic. It’s called the SPIN program – Surgery for People In Need. 

The doctors work on Sundays for free, while the facilities and diagnostics are donated by the Medical Center of Central Georgia.

 “This is a way that we can support this program, with patients that we would likely see anyway, that would be in our system because they have a need that hasn’t been taken care of,” said Roz McMillan, one of the hospital’s vice presidents.

In other words, Lammon Green’s lemon-sized cyst was probably going to land him in the emergency room eventually, and since he’s uninsured, the hospital would’ve ended up eating much of the cost.

Cutting the thing off before it gets that bad is a much simpler procedure.

By donating their services instead, the hospital is saving themselves thousands of dollars in the long run, said Laura Ebert, who runs a program called “Surgery on Sunday” in Lexington, Kentucky that started in 2005.

This new free surgery program in Macon is a copy of Ebert’s – literally.

“We have something that, you know, we can provide on disk or zip drive that shows all the paperwork, how to apply for tax exempt status, how to apply for the federal malpractice program,” she said.

Using that template, free surgery clinics have also sprung up in Omaha and Dallas. Ebert predicts that list is going to grow as hospitals realize it’s in their economic interest to help out.

Low income people in many states are getting insurance through an expanded Medicaid, but their deductible for an elective surgery could be as high as $10,000.

“Hernias and gallbladders and things that we do on a regular basis are considered elective surgery, not life-threatening, so therefore they’ll have to pay their deductible,” Ebert said.

That means people are likely to put off their surgery. The problem gets worse, they end up in the E.R., and Medicaid reimbursements are low -- so again the hospital gets stuck eating some cost.

As long as a hospital has a doctor willing to donate her time, it might be cheaper to take out that gallbladder for free.

PODCAST: Sell in May?

Tue, 2014-05-06 07:44

We'll start by confronting the notion of "Sell in May, then go away." There is a saying among investors this time of year, that as we get closer to summer vacation, it's time to take money out of the stock market. To find out more, we consult the often bearish Julie Niemann, the analyst at Smith Moore and company in St. Louis.

Google is rolling out same-day delivery for online retail customers in West L.A. and Manhattan — offering products from a variety of retailers including Costco, Target, Walgreens and L'Occitane. Google has already been piloting the service in the San Francisco Bay Area. Amazon has just launched same-day delivery in parts of Los Angeles as well, along with San Francisco, Seattle and Phoenix. And the two giants aren't alone. Wal-Mart, eBay, Nordstrom and other retailers are also in the ring. But, same-day delivery is expensive and complicated.

What are the odds of an entry-level gambler getting some coaching and winning the World Series of Poker in Las Vegas? Not great, as you may imagine. Grantland writer Colson Whitehead got $10,000 from his employer to give it a try.

Turning a rookie poker chump into a champ

Tue, 2014-05-06 04:41

What are the odds of an entry-level gambler getting some coaching and winning the World Series of Poker in Las Vegas?

Not great, as you may imagine.  Grantland writer Colson Whitehead got $10,000 from his employer to give it a try.

He spoke with Marketplace Morning Report host David Brancaccio about the results of his undertaking, which are chronicled in his book, "The Noble Hustle: Poker, Beef Jerky, and Death."

Google, Amazon compete on same-day delivery

Tue, 2014-05-06 02:47

Google is rolling out same-day delivery for online retail customers in West L.A. and Manhattan — offering products from a variety of retailers including Costco, Target, Walgreens and L'Occitane. Google has already been piloting the service in the San Francisco Bay Area.

Amazon has just launched same-day delivery in parts of Los Angeles as well, along with San Francisco, Seattle and Phoenix. And the two giants aren't alone. Wal-Mart, eBay, Nordstrom and other retailers are also in the ring.

But, same-day delivery is expensive and complicated. Most people shop online after work, meaning the vendor has a very short window to deliver that must-have bottle of champagne or designer scarf — possibly through rush-hour traffic.

What companies need to make it work, says management consultant Andrew Schmahl at Strategy& (formerly Booz & Company, a division of PricewaterhouseCoopers), is a densely-populated area full of well-heeled shoppers.

"People willing to pay more than free for a delivery," he says.

Which most consumers are not.

In a survey conducted by Schmahl, only 10 percent of consumers were willing to pay $10 or more for same-day delivery. And many don't even want same-day delivery at the end of the day — when they are having dinner, putting kids to bed, or possibly won't hear the delivery, leaving their package to sit on the front porch all night.

Amazon and Google are first testing the same-day delivery market in upscale neighborhoods in places like Manhattan, West Los Angeles, San Francisco and Seattle. Schmahl thinks Google might be plunging in to gather more data on online shoppers. For Amazon, he says, it's an attack on brick-and-mortar stores where you can get what you want, same-day.

"Instant gratification takes too long for most people," says Patty Edwards, managing director of investments at US Bank Wealth Management. "We don't want to have to wait, we want to have it right now. And yet we're too lazy to get it ourselves."

Edwards predicts that in time, same-day delivery will catch on in many urban and suburban areas around the country.

Where to get the best deal in the same-day melee 

by Tobin Low

With Google expanding its same-day delivery service in a growing market, it’s hard to tell who’s offering the best deal.

If you’re not in a big city, you’re mostly out of luck, as major companies like eBay, Amazon, and Google are mostly piloting their same-day services in larger metropolitan areas. That’s because the model largely depends on there being a high volume of vendors in a customer’s vicinity that sell the desired merchandise.

Still, it’s an appealing promise: order by a certain time, and have your items delivered to your doorstep that same day.

With each of the services charging about the same rate -- Google Express charges $4.99 an order, Amazon Prime members pay $3.99 an order, and eBay asks for $5 an order -- it's still too early to tell who will pull ahead in the same day ordering scheme.

For now, maybe try linking your Twitter account to Amazon, and tweet/purchase away.

I feel a climate change comin' on

Tue, 2014-05-06 02:28

The new National Climate Assessment released on Tuesday says the climate is changing, but when it comes to changing climate change, Barry Rabe, a professor of public policy at the University of Michigan, says President Obama has a tough audience.

There's the coal industry, and, some states -- like Texas.

"Attorney General Greg Abbot, perhaps the most likely person to be the next governor of Texas, routinely says, 'I wake up in the morning, I sue the federal government and then I go home,'" says Rabe, the director of the the Center for Local, State and Urban Policy at the Gerald R. Ford School of Public Policy in Ann Arbor, Mich.

Rabe notes it's unlikely the administration will push for new legislation during President Obama's second term.

"It's not uncommon," he says, "for presidents, particularly when they move into their second term, to face growing difficulty working with Congress on major domestic legislation."

Apathy from the public is also a problem, says Jason Bordoff, director of Columbia's University's Center on Global Energy Policy -- and a past special assistant to the President and senior director for energy and climate change on the staff of the National Security Council.

"Admittedly climate change does not rate very high when you ask people about what their major concerns are," he says.

But, Bordoff says, public interest in climate change may be picking up. And he says while rules for new power plants already exist, the EPA is drafting regulations for existing plants, due in out in June.

The new rules should set a standard for many kinds of energy – not just coal.

Not just another "chick with a ukulele"

Tue, 2014-05-06 01:00

Before you start reading about Merrill Garbus and her latest album as tUnE-yArDs, why don't you take a second to dance a little:

Got that out of your system? Those infections beats and catchy melodies arrive via her latest album, entitled "Nikki Nack." Fans of Garbus will notice more of a pop music feel to this new release, and that's partly due to the singer's increasing familiarity and use of drum machines.

It's a new step for Garbus, who is primarily known for looping drum beats with a pedal and microphone as a sort of low-tech/high-tech one woman band. The singer/songwriter took a disciplined approach to this album, setting aside blocks of time to focus on improving both her abilities on analog and acoustic instruments:

"To me, there’s got to be a balance between computers and everything else. So for me that’s between computers and then actually having drumsticks in my hand and improving myself as a human player of musical instruments."

Garbus particularly enjoys when mistakes, be they human or computer, create quirky music. In using an iPad to record beats, the drum machine's difficulty in keeping up with her finger tips created an imperfect beat - one that she ended up using in the first track on the album.

This aspect of the flawed human-machine interaction is what interests Garbus most, and where she prefers to exist when making music with machines.

Collateralization is not a bad word

Tue, 2014-05-06 00:05

Oh my God! That financial product has a 'c' in front of it! It's toxic!

That seems to be the way regulators (and some journalists) are behaving when confronted with financial products that begin with the letter 'C.' And yes, it's true, the collateralized debt obligation and the credit default swap did play starring roles in the financial crisis, but that's no reason to brand every instrument that starts with a 'C' as a economic biohazard.

That's especially the case when it comes to anything starting with the word "collateralized."

Okay, I agree, it all looks pretty deadly: collateralized debt obligation; collateralized bond obligation; collateralized loan obligation; collateralized mortgage obligation. But securitizations like these aren't, by definition, a threat to the economy or the financial system.

Quite the reverse, in fact: they're essential.

If you don't believe me, ask yourself this question: How important is housing to the U.S. economy? Pretty important, right?

Certainly that’s what the President thinks. The economy is dependent primarily on consumer spending, and a large part of that consumer spending comes from people buying houses and filling them with stuff. Then there's all the construction activity, and the industries based on homebuilding. And then there are all the services associated with housing, too.

So housing is a big deal. And what's the engine of the housing market? It's debt; peoples' ability to borrow money in order to buy homes.  But if it wasn't for securitization, there wouldn't be any debt – or there'd be a lot less of it, anyway. The vast majority of the loans that are made to Americans to buy homes are packaged up by Freddie Mac and Fannie Mae, many of them in a big 'C' word: collateralized mortgage obligations.

CMOs have been around since the 1980s. And securitization has been around since Fannie Mae was started in 1938. So why is it that regulators and reporters are reacting with such revulsion when it comes to another kind of securitization, and another 'C' word: the collateralized loan obligation, or CLO?

Reading some of the reports about CLOs, you would be forgiven for thinking that, like the dreaded toxic assets otherwise known as CDOs, collateralized loan obligations are brimming with poisonous dreck that threatens to infect the entire financial system and bring our economy to its knees.

And it's true that some of the corporate loans in these CLOs will fail, just as some of the mortgages in Fannie and Freddie's portfolios will fail. But then, securitizations are not risk-free investments: CLOs depend on companies being able to make their interest payments, just as Fannie Mae's securitizations depend on me being able to make my mortgage payment.

It’s also true that these corporate loans are branded "junk," because they're not investment grade – in other words, they're rated below BBB, and its equivalent, by S&P and its peers. For the most part, though, these kinds of loans look pretty safe right now. Moody's says the rate of default on these loans is low, ending the first quarter at 1.4 percent, down from 2.2 percent the prior quarter and 3 percent in the first quarter a year ago. As for the CLOs themselves, while some did melt down during the financial crisis, they did so at a hugely-reduced rate in comparison.

CLOs provide the same kind of support for the economy that the securitizations run by Fannie and Freddie provide for the housing market. Where 'Fan and Fred' buy up mortgages taken out by Americans, CLOs buy up the debt of companies that might otherwise find it hard to get a bank loan. The results are a huge boon, both to those companies and to the economy.

When I covered the loan market at S&P back in the 90s, the "junk" companies that benefited from CLOs included Tricon, which is now YUM brands; Allied Waste, which was bought by Republic Services; and United Rentals. These companies employ large numbers of people and contribute significantly to economic growth. But without CLOs, they might not even exist today. Likewise, if Fannie and Freddie didn't buy up mortgages, fewer loans would be made, fewer houses bought and the economy would take a big hit.

I'm not saying that regulators (or reporters) should give CLOs a free pass. That's what happened to CDOs in the run-up to the financial crisis, and we all know what happened there. CLOs should be scrutinized and regulated just like every other securitization, to be sure they don't run amok or turn toxic on us.

But that starts with understanding exactly what they are. Regulators and reporters appear to be too quick to assume that just because CLO starts with the letter 'C,' it should be treated as toxic. And that's a poisonous attitude.

Goodbye Norton anti-virus software

Mon, 2014-05-05 14:18

According to Symantec, maker of Norton anti-virus software, anti-virus software is "dead." At least, that's what an executive at the company told the Wall Street Journal

"We at Symantec and Norton have known that the era of AV-only protection has been over for quite some time," says Fran Rosch, Senior Vice President of security products and services at Symantec. (AV, by the way, is short for "anti-virus," not, as I initially assumed, short for "Audio/Visual"... a typical COE mistake ("Child of the Eighties").

Rosch says AV is no longer enough to stop cyber-criminals. Now, you've got a whole new acronym: "ATP, as we like to call it," says Rosch. "Advanced Threat Protection. We can see a file that’s starting to do something really weird, like reaching into an address book. We can then say, “Huh, suspicious, block it right there.” 

If the old virus protection software was akin to building a wall around your computer, the new software goes a step further.

"You want to make sure that the data on your computer isn’t the soft, gooey center any longer," says Barrett Lyon, founder of Defense.net. Take the Target data breach, says Lyon. "If that information was stored in a way that was encrypted and secured better, even though the bad guys got in, they wouldn’t be able to get to the actual information."

The data security industry is expected to balloon to $80 billion in the next few years.

"It’s certainly the busiest time of my career and I’ve been doing this for close to 20 years," says Chester Wisniewski, a senior security advisor at Sophos. "Many of these criminals are making millions of dollars a month and with that kind of resource on the line, they’re not going to roll over and lie down, right?"

Which means the online security business, in one form or another, won’t be dead anytime soon.

*CORRECTION: A photo caption in an earlier version of this story incorrectly identified senior vice president of Symantec Information Security Brian Dye. The text has been corrected.

When 4 out of 5 teachers are white

Mon, 2014-05-05 13:31

Close to 50 percent of U.S. public school students are young people of color, but 4 out of 5 teachers are white, according to new research from the Center for American Progress and the National Education Association. Education researchers say a lack of diversity among educators leaves children less prepared for the increasingly diverse workplaces they'll be entering. 

Researchers say there are several reasons for the dearth of diverse teachers, among them, a changing workplace landscape that is more inclusive of African-Americans, Hispanics and others. 

LaRuth Gray, a scholar in residence at NYU's Metropolitan Center for Research on Equity and the Transformation of Schools, says a few decades ago, teaching was one of a few professions by which African-Americans could gain entry into the middle class. 

Gray said when she was growing up in Texarkana, TX, in the 1950s, "You either became a teacher (which was respected), a funeral parlor director, you worked as a railroad porter, (where you got good tips), or maybe you went to work for the post office. In terms of economics, that's where you went in order to provide a step and a ladder up for your family." 

These days, Gray says, there's simply more opportunity for African-Americans. "The next generation, my daughter, that generation, they're lawyers, doctors. Economically, in the next generation, I can do all kinds of things. I don't have to be a teacher."

Gray, who speaks warmly of the supportive and nurturing environment provided by the African-American teachers of her youth, nonetheless, says that her horizons as a child might have been broadened had she been taught by staff of different backgrounds. 

"It is important in a population of students for the 21st centrury and beyond, we're moving toward a global world, that students see teachers of all backgrounds," Gray said. 

Ulrich Boser, a Senior Fellow at the Center for American Progress, who co-authored a new report on diversity among educators, says that in many schools today, the teaching workforce "look[s] like it meandered out of the 1950s." Boser says diversity is important for two very crucial reasons. 

"Research shows students of color do much better in terms of academic outcomes with teachers of color," Boser said. "They see them as role models. Student achievement, graduation rates, test scores all go up."

And for white students, having non-white teachers is a critical part of preparing for the increasingly diverse, "real" world. 

"It's important for white students to engage with Hispanic teachers, to engage with Black teachers," Boser said, "because the world of work is a world in which we have to engage and cooperate and communicate with people who come from different backgrounds." 

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