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Rate rigging in London affects U.S. consumers

Wed, 2015-05-20 13:00

The Justice Department says five big banks have agreed to plead guilty to manipulating foreign exchange markets: Barclays, Citibgroup, JPMorgan Chase, Royal Bank of Scotland and UBS. UBS also pleaded guilty to skewing a benchmark rate called LIBOR.

LIBOR, the London Interbank Offered Rate, is what big banks charge each other for loans. Lots of consumer loans with variable interest rates are based on it, such as adjustable-rate mortgages, private student loans and car loans.

“There are important amounts of borrowing for car loans and for credit cards that are absolutely tied to a variable rate, and that variable rate is often LIBOR,” says Simon Johnson, a professor of global economics and management at MIT’s Sloan School of Management.

Adjustable-rate mortgages are also tied to the LIBOR, and its manipulation has unsettled the mortgage market. 

“It undermined the whole credibility of an index for mortgages that supposedly was above board in terms of how it adjusted – either lowered or raised your payment,” says Guy Cecala, publisher of Inside Mortgage Finance.

Consumers were also affected by the currency manipulation, although more indirectly. U.S.  companies with business aboard might have lost out because of the skewed currency market.

“And when that happens, they have to pass on the costs somewhere, and they may well pass them onto consumers,” says Hillary Sale, a professor of law and management at Washington University in Saint Louis.

So the next time you yawn at someone manipulating a market far away that you’ve never heard of, just remember, you could be the one who pays.




The job application for Al-Qaeda

Wed, 2015-05-20 13:00

On Wednesday, the U.S. government declassified a whole bunch of documents it found in Osama bin Laden's compound in Pakistan.

Lots of fascinating stuff — among them a job application to join Al-Qaeda, which will sound familiar to anyone who's ever filled out any job application.

These are all quotes:

  • "Please write clearly and legibly."
  • "Have you ever been in jail or prison?"
  • "List your previous occupations."
  • "Do you wish to execute a suicide operation?"
  • "Who should we contact in case you became a martyr?"

Northwestern professor is a real 'Survivor'

Wed, 2015-05-20 13:00

Max Dawson has always been a fan of the long-running reality television "Survivor," so much so that in 2012 he taught a class about it at Northwestern University. “The class was called “The Tribe Has Spoken,” says Dawson, now a Los Angeles-based media consultant. “I wanted to teach these students … about the industry they were going into. And what better way than using a case study of a show that really defined reality TV and redefined what American television is all about?”

Dawson’s class soon caught the eye of recruiters for "Survivor" and he was offered a spot on the show. “First, I thought I was being pranked by a friend or a student, but when the idea was planted in my head, it suddenly seemed really logical,” he says.

After getting the invitation, Dawson spent nearly two years preparing for the show. He did everything from putting in time at the gym to reading books about psychology in order to get ready. When it finally came time to make his debut, he felt ready. But he quickly realized that he may have been a bit too prepared.

“I was voted off in the second week,” Dawson says. “I came to the harsh realization that not everyone loves a know-it-all.”

This season of "Survivor" also had contestants broken into one of three groups: The white collars, the blue collars and the no collars. Dawson was put into the white collars, which he doesn’t think did him any favors. “White collar is synonymous with the 1 percent, the oppressor, the man,” he says. “To me that was putting a target on our backs.”

Even though some would say that reality television represents a degradation of entertainment TV, Dawson says that the genre goes beyond that.

“I see it more as a great sociological experiment that not only allows us to be entertained, but forces us to think about really tough issues, to confront things that we might not otherwise want to confront or that our entertainment might otherwise allow us to avoid.”

How many jobs does $100 million get you?

Wed, 2015-05-20 13:00

Like many cities, Baltimore is dotted with the ghosts of industry: businesses, large and small, that have moved elsewhere or closed altogether.

There's the old FMC Corp. campus in Fairfield, its the lawn still neatly trimmed, but the parking lot is empty, and the property is ringed by fences and "No Trespassing" signs. FMC left Baltimore in 2008, part of a cost-cutting move.

The Globe Screen Printing building is on Hollins Street, right across from St. Peter's church, where Babe Ruth was baptized. Globe Screen, a family business, closed about 12 years ago.

A Bank One check-remittance center on East Fayette Street has been turned into Baltimore City Health Department building. It closed several years ago, primarily because people stopped writing so many checks.

What these businesses have in common is that each of them was located within one of Baltimore's poorer neighborhoods, which, in the '90s, were part of a citywide and federal effort to turn disinvested neighborhoods into "neighborhoods of choice."

In December 1994, Andrew Cuomo, then an assistant secretary with the Department of Housing and Urban Development, stood at a podium to announce the names of six cities that had been chosen to take part in an ambitious federal push to alleviate inner-city poverty. The Empowerment Zone program awarded a $100 million block grant and a package of tax credits for businesses and employers to the six. Seventy four cities applied, but Baltimore put on a show, dispatching a caravan of school buses and a marching band to Washington to deliver Charm City's application.

The winning cities, New York, Chicago, Atlanta, Baltimore, Detroit and Philadelphia-Camden, had some leeway in how they'd use the funds, which were to be spread out over a decade. For Baltimore, job creation and job training in the poorest neighborhoods (called Empowerment Zones) were priorities. Twenty years later (and 11 years after the program ended) Baltimore's effort offers both successes and failures.

The money was dispersed with an eye to getting people to work. Thirty-five million went to workforce development, including career centers and job training. About $27 million went to job creation efforts, including small business loans. Another $13 million focused on quality of life rather than jobs, financing home improvements and cleaning up lead paint.

Baltimore kept detailed records of how the money was spent, and in 2005, researchers at the University of Baltimore's Jacob France Institute tallied up the number of jobs created within the Empowerment Zones. In total, the report says 5,777 jobs were created. Over time though, many of those jobs have left Baltimore. Small businesses, listed as the recipients of tax credits or loans in HUD reports, have shut down. Some larger industries have moved their operations overseas.

Some areas of the city, though, have been transformed. In 1997, Sylvan Learning Systems relocated its headquarters to the Harbor East neighborhood, which at the time was industrial and largely empty. Today, Harbor East is a vibrant area of retail and restaurants. Sylvan, now Laureate Education, is still there.

But in the poorest neighborhoods, job creation has remained elusive. Unemployment and poverty rates remain high.

Sandtown-Winchester drew attention earlier this month as the blight-ravaged home of Freddie Gray, a young man who died in police custody, sparking protests that grew violent in some places.

A Marketplace analysis of census data shows that during the decade of Empowerment Zone funding, the unemployment rate in Sandtown-Winchester was 18 percent. In 2013, data, which includes the recession years, shows an unemployment rate of 22 percent.

Diane Bell-McKoy, the CEO of Associated Black Charities, was chair of the Empower Baltimore Management Corporation, the nonprofit entity set up to distribute the federal money. She sees some successes, but the failures haunt her.

"I can tell you factually, by looking at wage record data, that people benefited," Bell-McKoy says. "I can tell you factually that people that got loans [from] us for homeownership, that they still own their homes. I can tell you factually that there are some businesses that survived. I can tell you all that factually. But I can tell you that wasn't enough."

The boarded up homes and lack of stores in Sandtown-Winchester would seem to attest to that. Still, the Empowerment Zone money did lead to a personal transformation for one Baltimore individual. 

Antoine Bennett, a 44-year-old lifelong Sandtown-Winchester resident, had just finished up a three-and-a-half year stint in prison when the Empowerment Zone funds were made available.  The zone joined with other community development efforts. Bennett took advantage of them, finding a job at a youth center, taking college courses, feeling the pride of being called Mr. Bennett instead of a prison number. He hasn't missed a paycheck since. He considers neighborhood transformation a full-time job — his.

Bennett is now an outreach minister at New Song Community Church in Sandtown-Winchester.

"Our goal is to build up strong men of character in this community," Bennett says. "That the world can look and say, 'In that community, it is easy for them to go from ex-con to icon in a very unique way. It's the evidence that the ill-fated are truly illuminated in that community.' "

Technology meets advertising, with you as the target

Wed, 2015-05-20 13:00

Advertising used to look like this: People went out to lunch, drank a lot, had some great ideas and put them on television. But these days, advertising is all about mobile, all about digital and all about machines.  

Doug Fleming heads up programmatic ad sales at Hulu, the TV streaming service. Along with thousands of other advertising and marketing executives, Fleming has decamped to San Francisco this week for the Adtech conference. It’s two days of, well, everything thats means anything when it comes to advertising and technology.

Fleming is giving a talk at the conference about the way things work now. Here’s a preview:

“It is absolutely imperative that a publisher has their technology stack in order. Their content management system is talking to their database, their consumer marketing team is tied in with their advertising team, who are tied in with all facets of the inner-workings of the machine.”

Translation: Digital advertising is on a tear. It's expected to hit $50 billion this year, and a lot of that is thanks to automation. Buying, selling, targeting and placing ads is all being done by computers, and it needs to be a well-oiled machine to work properly.

Here’s what that looks like: Say you load a YouTube video on your smartphone. An ad often pops up first. But before it does, there’s a tiny pause. And during that pause, “in nine-one thousandths of a second, there’s a mini bidding war that takes place to see who’s going to win that impression,” says Kenny Day, who runs political ad sales for Yahoo! and is a veteran of the ad tech business. Day is describing what’s known as real-time bidding. It was introduced by Google back in 2009, when it bought the ad-tech company Doubleclick and invented computerized ad auctions.

But ad tech really took off when the power of buying and selling in a fraction of a second was combined with the mounds of data companies collect on consumers. That combination has fueled a spate of acquisitions in the past two years. And it’s what is behind Verizon’s $4.4 billion offer for AOL, which has a solid ad tech business.

“There are all these data companies that are dropping pixels on you. They're cookie-ing you. They know that you are female, between the ages of 30 and 54,” says Day, adding that they know where you live, your political leanings and the products you buy.

And when you log into Facebook or Google or surf on your phone, those little trackers follow you everywhere.

Everyone's sort of tagged with these IDs that we carry with us. It's called a long tail, Day says.

The data is anonymous, but computer algorithms compare your activities to millions of people doing the same things you are doing online and determine what types of ads people similar to you might like. And the more data that gets fed into the mix, the more precise the targeting and the bigger the potential payoff for advertisers.

So when that ad pops up on the video you’re about to watch, and it’s for a product that you may actually be interested in buying, there you have it: the cross-device, behaviorally targeted, real-time bidding, technology stack in action.

And who said ad tech was hard to understand?  

PODCAST: Skin in the game

Wed, 2015-05-20 03:00

How the head of the fed is keeping Wall Street workers chained to their desks ahead of the long holiday weekend. Plus, the Senate Education Committee meets Wednesday. Senator Lamar Alexander, who chairs the committee and is a former secretary of education, has proposed that colleges share in the risk of lending to student. He says this would lead to reduced student borrowing. How would it work if colleges had “skin in the game” and how realistic is the proposal? We'll also talk to Allan Sloan of the Washington Post about the costs of investing in a hedge fund.

If students default, should colleges pay up?

Wed, 2015-05-20 02:00

In the Senate, a committee hearing on Wednesday is scheduled to look at the idea of having colleges pay part of the cost of student loan defaults, which totaled $99 billion in 2014.

Some seven million Americans have defaulted on their student loans, and 70 percent of them are college drop-outs. They average about $14,000 in student debt.

"You want people to care about the debt beyond the day after they issue it, and to make colleges somewhat financially responsible," says Ben Miller, who studies education policy at the Center for American Progress.

To do that, the Senate Committee on Health, Education, Labor & Pensions is considering whether colleges should pay back the federal government a portion of any defaulted debt. It's also considering what that payback should look like: whether it should be a set fee, or a percentage of the loan amount, for example.

Pauline Abernathy, vice president of The Institute for College Access and Success, supports the idea of college debt default accountability. Her organization has provided feedback to the Senate committee on what form that should take. But, she says there are also risks to consider in crafting any future legislation.

"We don't want to provide any disincentive for schools to enroll low- income students, who may in some cases have a higher risk of default," Abernathy says.

While a potential bill could be a couple of years away, Abernathy says there does seem to be increasing bipartisan support for the concept of having colleges share in the risks of student loans.

In the 2015 fiscal year, the U.S. government's college grants and loans will total about $138 billion.

Even with insurance, people avoid the doctor

Wed, 2015-05-20 02:00

Among people 65 and under, almost two-thirds are covered by private health insurance plans, according to the CDC. But that doesn’t mean health care is affordable. A report released today by the Commonwealth Fund shows that rising deductibles and other out-of-pocket expenses are a serious problem for more than 30 million underinsured working-age adults.

Knee replacements, hysterectomies, even getting prescriptions filled, are all things people with insurance are opting not to do, simply to cut down on out-of-pocket costs, says Jeffrey Rice, CEO of Healthcare Bluebook. “As deductibles have gone up, patients’ expenses have gone up,” he says.

A mid-range health insurance deductible can be $1,200. What’s more, Rice says, over the past 20 years, the cost of healthcare has shot way up.

“What used to be $150 visit to the ER to get a few stitches now turns into a $2,000 or $3,000 bill,” Rice says.

So a lot of people are thinking long and hard before going to the doctor. Dylan Roby, of the UCLA Center for Health Policy Research, says many health plans try to steer people toward preventive care. But here’s the catch: “If there’s not enough education and awareness about it, people still are going to see the deductible upfront as a big cost barrier,” he says.

Roby says if people take time to learn what’s free under their health plans, they might avoid bigger problems later.



The perfect writing surface

Wed, 2015-05-20 02:00

We're launching a series called Pro Tool: Tools of the Professional. What we're looking for is that must-have device in the possession of anyone in the workforc, be they hair dresser, welder or writer.

The second item in our series? A notebook.

Professional: J. Robert Lennon, writing professor at Cornell University and author of seven novels and two story collections, including most recently "See You in Paradise."



Courtesy of the author 



Pro Tool: A Seven Seas journal, bound by Nanami Paper of Irvine, California.




Lennon stamps the front of his notebook with his chop to signify which side is the front.




Why it's a Pro Tool: "It's made with this amazing Japanese paper called Tomoe River paper. It's very thin and glassy. If you like to write with a fountain pen ... it's the perfect surface." - J. Robert Lennon

Cost: $19 and up.



Apple says the best things in life aren't freemium

Wed, 2015-05-20 01:56
13 percent

That's how much iTunes music sales dropped last year, and that means Apple is using its remaining pull in the music industry to set up its next big move, Harvard Business Review reported. The tech giant wants labels to pressure Spotify and other streaming services to drop their "freemium" model ahead of its rumored relaunch of Beats Music.

12 percent

The share price for auto supplier Takata fell as much as 12 percent on Wednesday, following Tuesday's announcement that many of its airbags — about 34 million — are faulty and require a recall. The problem has to do with the airbags rupturing when deployed, causing several deaths and many more injuries. As the New York Times reports, it's the largest recall related to automobiles ever. 

$99 billion

That's the total amount of defaulted student loans in 2014. With such high figures, the Senate Committee on Health, Education, Labor & Pensions is considering legislation that would force colleges to pay back some of that defaulted debt. But some experts worry that such a requirement might discourage universities from accepting low-income students who may be a statistically higher risk for default.


That's how much a Seven Seas journal costs. Made with Japanese Tomoe River paper, it's a little pricier than your average pad or notebook. But writer J. Robert Lennon says it helps him do his job well. Find out more over at "Pro Tool: Tools of the Professional," our series on the must-have devices in the hands of working professionals.

30 million

That's the number of underinsured, working-age adults in the U.S. And according to a new report, many of these people are opting not to seek out expensive treatments in spite of being insured. The reason? Rising deductibles and out-of-pocket costs force people to second guess when is the right time to call the doctor.

$19.35 per hour

That's how much, on average, a household would have to earn at a full-time job to afford a two-bedroom apartment in the U.S. That's according to a new report by the National Low Income Housing Coalition, as reported by the Wall Street Journal. The report lays out required household pay by state, some of them many times the minimum wage there.

America's infrastructure isn't sexy

Tue, 2015-05-19 13:00

America's infrastructure has fallen behind other nations. Highways are congested. Bridges are crumbling. Flights are delayed. Clearly, we need a solution. Harvard Business School Professor Rosabeth Moss Kanter identifies the hallmarks of successful transportation systems and explains the work being done to address these issues in her new book "Move: Putting America's Infrastructure Back in the Lead." 

What’s the solution? 

We need a new vision that puts mobility at the center of so many things. I think that if we can rally the public and rally leaders, state and local, who do press on Washington to say this is a critical national priority for our future, this is the only way to grow the economy, this is the only way to end poverty. I mean, poor people are living in areas where they don’t have access to cars or public transportation. This is important to health, traffic fatalities, the air we breathe. State and local (governments) get it. Mayors and governors get it and we need their voices. 

On federal vs. local leadership: 

Federal, it’s so partisan, it’s so hard to get anything to happen. But mayors, for example, are very pragmatic. They have to run their city and often it’s all about operations and transportation. Governors often have a vision about what will build their economy. 

On the word “infrastructure” not being appealing: 

I thought when I started talking about the fact that I was writing this book, that I would say “infrastructure” and people would go to sleep. Instead, they want to tell me their story…they want to talk about their traffic jam, their late flight, their potholes, their awful neighborhood construction problems.  

Interesting facts about infrastructure in the United States:

  • The average American commuter wastes a total of 38 hours in traffic each year. That’s 5.5 billion hours in lost US productivity annually and 2.9 billion gallons of wasted fuel. Traffic congestion alone costs about $70 billion per year in time wasted.
  • Nearly 20 million Americans work in transportation, transportation infrastructure, and related industries.
  • The average household spends between 11-19 percent of its budget on getting around.
  • Between 1989-2013, the US had nearly 600 bridge failures. Some of those collapses have led to deaths and hundreds of injuries.
  • In 2012, a quarter of all US bridges were deemed by the Federal Highway Administration to be structurally deficient. By 2023, a quarter of US bridges will be over 65 years old (and structurally deficient).
  • Delayed or canceled flights cost the economy about $30-40 billion a year.
  • The cost of traffic accidents is about $871 billion per year.

Tic Tac to release mint flavor geared toward millennials

Tue, 2015-05-19 13:00

This whole "Ooh-milliennials! Gotta-cater-to-the-millennials!" thing pretty much jumps the shark. 

Bloomberg reports today that Tic Tac is coming out with a new product: varieties that change flavor as you suck on them.

The company has apparently spent 18 months studying—yes, Tic Tacs—to make sure that Tic Tacs are "appealing to those younger consumers." 

There are, it seems, three reasons people buy Tic Tacs.

To freshen their breath. Fine.

To have a "sweet fruity moment." Fine.

But also, the company says, for emotional rescue.

The global influence of hip hop and breakdancing

Tue, 2015-05-19 13:00

Although hip hop culture has made its way through much of the world, there are still some places where you wouldn't expect hip hop music to flourish, and countries like Colombia, Yemen, Cambodia and Uganda, might not come to mind when discussing the art of breakdance. 

But those places are where journalist-turned-filmmaker Adam Sjöberg found some very talented young dancers. He made a documentary called Shake the Dust that chronicles the influence of hip hop music and breakdancing in slums and ghettos all around the world.

A dancer from "Shake the Dust" in Yemen. (Courtesy of Bond/360)

“It’s interesting because hip hop, as a genre, as a culture, I found often really connected with people in these poor communities,” says Sjöberg. “Not necessarily in urban communities, but really all over the globe and even in some very remote rural areas that I went to. Hip hop connected with these people because I think it (especially breakdancing) gave them a feeling that they can transcend their circumstances, that they had a language to talk about what they had been through.”

The documentary is executive produced by rapper Nasir “Nas” Jones.

 A dancer from "Shake the Dust" in Uganda. (Courtesy of Bond/360)

“He got on board a couple of years into this project because we were able to get a trailer in front of him and he saw that we were trying to tell a side of this history, to continue telling the oral tradition history of this genre which is unfolding before our eyes,” says Sjöberg.

Shake the Dust is currently available to rent or buy on Vimeo on Demand and iTunes

How calculating GDP is like making a gravy

Tue, 2015-05-19 13:00

The Federal Reserve Bank of San Francisco says our rough winter weather skewed the data on gross domestic product (GDP) growth for the first quarter. GDP grew at just two-tenths of a percent at the beginning of the year.  

Was it really that bad? Or were the numbers just not crunched enough?

“Of course, it’s always hard to separate the wheat from the chaff,” says Glenn Rudebusch, director of research at the San Francisco Fed.

The Bureau of Economic Analysis (BEA) calculates GDP growth, and Rudebusch says the BEA makes seasonal adjustments as it gathers each piece of data. But he thinks there should be another seasonal adjustment at the end of that process.

Rudebusch compares it to making gravy.

“There’s a lot of things in there that maybe you don’t want in your final dish, so you want to reduce it down and get the real essence of flavor,” he says.

In economics, you’re trying to get rid of all the extraneous noise, so you can see underlying economic trends.

“I think they’re onto something,” says Ken Kuttner, a former Fed economist who now teaches economics at Williams College. “And what the San Francisco Fed has uncovered is, well, maybe there’s a slightly better way to do it.”

How much do these GDP numbers matter? Well, the Fed uses them to decide whether it’s time to raise interest rates. But it also looks at other things.

“The most important data is the unemployment rate. It’s the single best indicator of labor market conditions," says Chris Rupkey, chief economist at MUFG Union Bank.

But, lately the unemployment rate and GDP numbers haven’t jived.  The unemployment rate is getting steadily better, as GDP fluctuates. The San Francisco Fed says its number crunching formula could smooth out those differences, too.

St. Louis Federal Reserve

David Letterman wears the pants at Worldwide Pants

Tue, 2015-05-19 13:00

NBC gave "The Tonight Show" to Jay Leno in the '90s, and Dave Letterman left for CBS. That’s when things got bitter, says Marisa Guthrie, TV editor for the Hollywood Reporter.

"He couldn’t take a lot of the bits he created for late night at NBC. Because NBC owned the show," she says.

At the time, one of Letterman’s popular bits was a segment called "Viewer Mail." But because NBC owned the rights, Letterman had to rename it "CBS Mailbag."  And that, Guthrie says, is why Letterman created his own production company — so he could call the shots.


“Worldwide Pants is David Letterman.” 

The company has had some big hits like "Everybody Loves Raymond," but some other projects that never made it out of development, like a comedy with Harry Connick Jr.and a kid's show intended for Nickelodeon.

But Letterman is the company’s single most valuable asset, notes James Dix, a senior media analyst with Wedbush Securities.

“Now a lot of it comes down to David Letterman himself," he says.

As well as the library of shows Letterman has created over the years, Worldwide Pants may be thinking multi-platform for future opportunities in streaming and online video, says  The Wrap executive editor Joseph Kapsch. Worldwide Pants says we'll have to stay tuned for future plans; any new developments will be announced after the Letterman's "Late Show" run ends Wednesday..

But one thing seems clear: whatever happens, Letterman will definitely be wearing the pants.

Ethics in finance: stuck at mediocre

Tue, 2015-05-19 13:00

Ethics on Wall Street continues to be a struggle, according to a survey of more than 1,200 financial professionals conducted by the University of Notre Dame and law firm Labaton Sucharow. 

John Boatright, professor of business ethics at the Quinlan School of Business at Loyola University Chicago, used a previous version of the survey in his class on ethics in finance.

"People recognize that there is a problem," he says. 

One reason for the problem may simply be the finance industry's necessary emphasis on money. Paul Piff,  assistant professor of psychology and social behavior at UC Irvine, says research shows merely being exposed to money can make people act unethically, and in their own interest.

Changing that requires a counter-incentive, says Bill Black, white collar criminologist and professor of law and economics at University of Missouri-Kansas City — like putting law-breaking bankers in prison. 

Cattle ranchers lock horns with almond investors

Tue, 2015-05-19 13:00

Kathy Smith actually heard the almonds coming before she saw them.

“It’s 11:30 at night, we are trying to sleep, and those tractors are ripping the land right outside our bedroom,” she recalls.

She woke up to find giant patches carved out of the grassy foothills above her house, making way for new almond trees.

Smith is rolling along in a golf cart, calling her 35 cows to dinner. “Come boss! Come boss!” she brays.

“That’s how my father did it. That’s how I do it,” she says. “And my mother used to do it by coming out and playing on her trumpet.”

Smith’s family has grazed cattle on this ranch near Oakdale, in California’s Central Valley since 1943.

Mural in Kathy Smith's kitchen that visitors to the ranch have been signing since the 1940s. Her mother sketched the foothills around the ranch; today many of them are planted with almond trees.

Sasha Khokha/KQED

But now she’s worried that an explosion in investor-backed almond orchards might threaten that livelihood.

Caifornia almonds have come under fire lately as a particularly water-intensive crop. But they seem to be weathering the drought very well. And some of the latest “farmers" to cash in on California’s almond boom are investors who are locking horns with cattle ranchers.

 “I can’t tell you how upset I am to have to look over there every single day and see what’s happening to those beautiful foothills. It’s sickening,” says Smith, who had to drill a new well after her household well went dry four years ago. She blames almond growers for sucking down the groundwater.

“It was a shock to the whole neighborhood,” says Smith’s neighbor, Gail Altieri. “It’s almost like the Confederate army is coming towards the east, and we didn’t see their bushy little heads until they were there. ”

Altieri raises mules and cattle, and lives in a log cabin decorated with cowhides and saddles. Oakdale bills itself the “Cowboy Capital of the World.” But Altieri worries that almonds may threaten that way of life.

Gail Altieri and her horses and mules in Oakdale—the ''cowboy capital of the world.''

Sasha Khokha/KQED

“The water’s disappearing,” Altieri says. “There will be no grazing land for the cattle. And if the cowboys don’t have cattle, how can this be the cowboy capital of the world?”

Altieri points to a well drilling rig high up on a hill above her house. She says it makes a loud booming noise and flashes bright lights into neighbors’ homes at night. She says investment companies growing almonds here have no concern for neighbors.

“They’re not farmers. They are investors. They are out for the almighty buck and for greed, bottom line,” she says. “Their product is an export. And also, it is a snack. It’s not a food.”

Paul Wenger, president of the California Farm Bureau Federation, is a local almond grower himself, and he doesn’t like the almond-bashing he’s been hearing recently. But he calls the current almond investment rush “bizarre.”

“We are seeing investors come from all over the world trying to get in on it. It’s kind of like the Gold Rush,” Wenger says.

The latest federal statistics, from 2012, classify 90 percent of almond growers as “family farms,” even though some of the operations are quite large. But investors are increasingly seeing almonds as a better bet than the stock market.

View of almond orchards planted on former cattle rangeland in California's Central Valley. 

Sasha Khokha/KQED

“As a grower, I think they’re making foolish investments,” says Wenger. “They look at what the prices of almonds are today. They weren’t there 10 years ago, and they won’t be there 10 years from now.”

So just exactly who are these almond investors? Some are banks or investment funds like TIAA-CREF. Even the Michigan Municipal Employees’ Retirement System is getting into the almond game (albeit in Australia).

Near Kathy Smith’s house, the target of frustration is Trinitas Partners, a private equity investment company based in Silicon Valley that’s planted more than 10 square miles in almonds here.

Ryon Paton’s one of the company’s three principals. He says they have been unfairly painted as the bad guys for an operation they started eight years ago, before the current drought began.

Dan Kaiser, Dave Germano, and Ryon Paton of Trinitas. Kaiser and Germano are local farmers who help manage day-to-day operations. Paton's background is in real estate investment. His company has bought up about 10 square miles in almonds near the California town of Oakdale. 

Sasha Khokha/KQED

“We understand real estate, we understand how to finance. We did not understand how to grow almonds,” Paton admits.

“But we did enough of our supply-and-demand studies to understand that supply was growing more slowly than demand worldwide, and if that imbalance continued, there would be not an outrageous Silicon Valley profit in almonds, but a reasonable, responsible profit in growing almonds.”

Paton takes me through the gates of his ranch to the top of a steep hill where you can see the peaks of Yosemite — and acres of almond trees planted in neat rows across the rolling terrain.

“Not all of what we produce goes overseas, by any stretch of the imagination, but we have customers all over the world because of our sustainable, responsible farming practices,” Paton says.

Typically, California farmers put more than 3.5 feet of water onto every acre of almonds they grow. Paton says his operation uses about three feet an acre because its scale allows it to use advanced water-saving technology.

“We irrigate at night during off-peak hours, so there’s less evaporation,” explains Paton, pointing to the lines of drip systems running through the orchard. “But we also have a technique for making sure there’s no runoff, that every drop goes into the root systems.”

Spring almonds ripening on the trees on the Trinitas ranch.

Sasha Khokha/KQED

Trinitas also says they’ve stopped planting new trees in this area because of the drought. And they’re carefully checking their wells, and those of neighboring farmers, to make sure there’s no overdraft.

“Our hydrology folks are always measuring the situation,” Paton says. “Because I’m always asked this question, ‘Are you affecting your neighbors adversely?’ And to this point, I can honestly say, we are not.”

In fact, Paton says he hopes to wean the farm from groundwater entirely by getting river water from the local irrigation district instead. Problem is, the Oakdale Irrigation District is imposing first-time cutbacks on its customers this year, and farmers with more senior water rights want to make sure they get their allotment before newer customers like Trinitas.

So Paton feels like he’s getting conflicting messages: some neighbors don’t want them to drill wells for groundwater; others don’t want them using surface water.

“We have a history of listening and responding in a pretty conciliatory way when there’s an acute problem with the neighborhood,” says Paton. “On the other hand, they need to respect that this is an ag community and we have the right to farm.”

An almond harvester on the Trinitas ranch.

Sasha Khokha/KQED

The guys who are actually managing this ranch day to day are fourth-generation farmers, who use the local pronunciation — “AM-mundz” instead of “ALL-mundz.”

And by the way, no matter what you call the nuts - there’s going to be a lot of them this year.  Despite the drought, the USDA predicts just a one percent dip in this year’s lucrative almond harvest over last year.  That’s about 1.85 billion pounds. 

Supreme Court: employers must monitor 401(k) plans

Tue, 2015-05-19 03:00

In a unanimous decision, the Supreme Court has ruled that employers have an ongoing obligation to monitor the 401(k) plans they offer their workers. The court also established a more flexible reading of the statute of limitations on when employees can sue should they believe their employer failed to uphold its responsibilities. 

The case, Tibble v. Edison, originated as a dispute between current and former workers for Edison, a public utility company in California. The workers argued that the retirement plan included several retail-class mutual funds with high fees when the company, as an institutional investor, could have invested in nearly identical plans with lower fees. 

“The reason fees matter is that over time the power of compounding is very significant. That can make the difference between a retirement that is comfortable and one that is not,” says Marcia Wagner, principal at The Wagner Law Group.

The Supreme Court didn’t pick a winner between the workers and the employer, sending the case back to a lower court instead. But it did say that employers can’t just set up a 401(k) plan and forget about it. They must pay attention to it over time, and that obligation doesn’t ever go away. Wagner says it’s a significant ruling that could impact where pension plans invest their money and what fees retirees pay.

“When the Supreme Court rules unanimously, people listen. Now there are many various factors leading to fee compression in the 401(k) industry. This will be one more factor.” 

PODCAST: American cars in Russia

Tue, 2015-05-19 03:00

First up, we'll talk about the Supreme Court's ruling on 401(k)s, and what it means for workers. Plus, we look at the job ahead of Keith Hall, the new head of the Congressional Budget Office. His role is meant to be a non-partisan scorekeeper, but we look at the difficulties of remaining independent in a charged political atmosphere. And America's car makers are struggling to keep their businesses in Russia on the road as the country's economy stalls. However as we find out, car factories in Detroit are not the only ones feeling the cold winds of Russia's troubled economy.

The Congressional Budget Office: staying above the fray

Tue, 2015-05-19 02:00

Keith Hall, director of the Congressional Budget Office, will offer his first Senate testimony Tuesday since taking the helm of the nonpartisan agency in early April. It’s also the first oversight hearings for CBO in over three decades, according to the Senate Budget Committee.

The primary focus will be the agency’s 2016 budget, drafted under Hall’s predecessor.

While Congress often uses a director’s testimony to question the assumptions and findings of CBO reports, the agency refrains from offering policy recommendations, says Phil Joyce, a professor of public policy at the University of Maryland.

“I heard someone at CBO say once, 'If you ask us how much something costs, we’ll tell you how much it costs. If you ask us whether it’s a good idea, we’ll tell you how much it costs,'” he says.

In fact, Joyce says it’s often members of the director’s own party who are most disappointed with the agency’s reports.

“It’s very much like being the referee in a college basketball game,” agrees Douglas Holtz-Eakin , who led the CBO from 2003 to 2005 and is now president of the conservative think tank American Action Forum. “There’s always a coach standing on the sidelines screaming at the referee, and it’s not usually over the call the referee just made. It’s over the next call. 'Can we soften him up for the next call?'”