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Wealth gap in U.S. widens among races

Tue, 2014-12-16 02:00

As the economy recovers, the wealth gap along racial lines in the U.S. is widening.

What’s driving the divide? Recent research shows one big reason is the disparity in asset wealth. 

Click the media player above to hear more.

Wealth gap widens among races

Tue, 2014-12-16 02:00

As the economy recovers, the wealth gap along racial lines is widening.

What’s driving the divide? Recent research shows one big reason is the disparity in asset wealth. 

Click the media player above to hear more.

How will the Fed respond to plummeting oil prices?

Tue, 2014-12-16 02:00

The Federal Reserve is expected to make some big announcements this week on the heels of meetings in Washington where Janet Yellen and her colleagues will discuss the health of the U.S. economy. One subject that will undoubtedly come up: Plummeting oil prices. As of today, oil is hovering right around $60 a barrel. So how will oil’s new low, low price affect the Fed’s anticipated policy changes?

Let’s start with inflation. One of the Fed’s stated goals is to increase inflation in the U.S. from its current 1.7 percent, to a target rate of 2 percent, “and all that’s going on in the energy sector is somewhat disinflationary if not deflationary,” says  Marilyn Cohen, president of Envision capital management. She thinks falling prices in the energy sector could make the Fed cautious about raising interest rates.

But Americans spending less on fuel means consumers have more money for goods and services, “and that,” says former Fed economist Morris Davis, “should create, or at least be correlated, with new job creation.”

Money not being spent on oil would do more good for the economy than the hit that U.S. oil companies will take, and Davis thinks the Fed sees these low oil prices as a new, longer term reality. “If that’s what the Federal Reserve is thinking then they would I guess, assume an extended boom on these low oil prices.”

A continuing boom would be a signal to the Fed that says "go ahead, raise interest rates." The Fed will issue its statement on Wednesday.

 

 

 

 

 

 

Navigating health insurance for small businesses

Tue, 2014-12-16 02:00

This is Mike Brey’s busiest time of year. 

Brey owns four Hobby Works toy stores in Maryland and Virginia, and he’s got about 50 full- and part-time workers. He huddles with one at his store in Laurel, Maryland, in an aisle jam-packed with remote-control cars. They're talking inventory.

Brey is just getting over a cold. There’s no time to sleep around the holidays if you own a toy store, and no time to look over health insurance plans – one of his least favorite chores.

“Yeah, I hate it,” he says.

Still, Brey does provide insurance for his employees, even though he doesn’t have to, because he has fewer than 50 full-timers. Brey leads me to his back office and computer, where he’s been noodling around on Maryland’s SHOP website, which was set up under the Affordable Care Act to connect small businesses with health insurers.

“There we go," he says, clicking on the site and reading. "See details of SHOP plans for 2014 coverage.”

Brey says he used to have only a couple of plans to choose from. But on the SHOP exchange, “You have CareFirst offering, Coventry, Evergreen, Kaiser, United.”

But here’s the thing: Brey’s just browsing, not buying. And he’s not alone.

“It’s been, admittedly, a little slow getting out of the starting gate,” says Sabrina Corlette, a senior research fellow at Georgetown University’s Center on Health Insurance Reforms. 

She says there are a number of reasons enrollment in the SHOP exchanges isn’t taking off. They’ve had technical problems, and a tax credit small businesses get for using SHOP is hard to apply for.

“I’ve heard from some small businesses that they’d have to pay their accountant and broker more than they actually would get back in benefits,” she says.

Still, there is some evidence that businesses could get a deal on SHOP. 

“We found, in general, that plans on the SHOP cost less than those off the SHOP," says Jon Gabel, a senior fellow at NORC, a University of Chicago research center. "Could be 9 percent lower on average.”

Still, Gabel says, it’s too soon to say whether the SHOP exchanges will survive.  

But Brey hopes they stick around. He says he’ll start some serious insurance shopping after the holiday rush.

Will oil’s price affect the Fed?

Tue, 2014-12-16 02:00

The Federal Reserve is expected to make some big announcements this week, coming on the heels of meetings in Washington where Janet Yellen and her colleagues will be discussing the health of the U.S. economy. One subject that will undoubtedly come up is plummeting oil prices. As of today, oil is hovering right around $60 a barrel. So how will oil’s new low, low price affect the Fed’s anticipated policy changes?

Let’s start with inflation. One of the Fed’s stated goals is to increase inflation in the U.S. from its current 1.7 percent, to a target rate of 2 percent, “and all that’s going on in the energy sector is somewhat disinflationary if not deflationary,” says  Marilyn Cohen, president of Envision capital management. She thinks falling prices in the energy sector could make the Fed cautious about raising interest rates.

But Americans spending less on fuel means consumers have more money for goods and services, “and that,” says former Fed economist Morris Davis, “should create, or at least be correlated, with new job creation.”

Money not being spent on oil would do more good for the economy than the hit that U.S. oil companies will take, and Davis thinks the Fed sees these low oil prices as a new, longer term reality. “If that’s what the Federal Reserve is thinking then they would I guess, assume an extended boom on these low oil prices.”

A continuing boom would be a signal to the Fed that says go ahead, raise interest rates. The Fed will issue its statement on Wednesday.

 

 

 

 

 

 

Taking the pulse of SHOP exchanges

Tue, 2014-12-16 02:00

This is Mike Brey’s busiest time of year. 

Brey owns four Hobby Works toy stores in Maryland and Virginia, and he’s got about 50 full and part-time workers. He huddles with one at his store in Laurel, Maryland, in an aisle jam-packed with remote-control cars. They're talking inventory.

Brey is just getting over a cold. There’s no time to sleep around the holidays if you own a toy store, and no time to look over health insurance plans — one of his least favorite chores.

“Yeah, I hate it,” he says.

Still, Brey does provide insurance for his employees, even though he doesn’t have to, because he has fewer than 50 full-timers. Brey leads me to his back office and computer, where he’s been noodling around on Maryland’s SHOP website, which was set up under the Affordable Care Act to connect small businesses with health insurers.

“There we go," he says, clicking on the site and reading. "See details of SHOP plans for 2014 coverage.”

Brey says he used to have only a couple of plans to choose from. But on the SHOP exchange, “You have CareFirst offering, Coventry, Evergreen, Kaiser, United.”

But here’s the thing: Brey’s just browsing, not buying. And he’s not alone.

“It’s been, admittedly, a little slow getting out of the starting gate,” says Sabrina Corlette, a senior research fellow at Georgetown University’s Center on Health Insurance Reforms. 

She says there are a number of reasons enrollment in the SHOP exchanges isn’t taking off. They’ve had technical problems, and a tax credit small businesses get for using SHOP is really hard to apply for.

“I’ve heard from some small businesses that they’d have to pay their accountant and broker more than they actually would get back in benefits,” she says.

Still, there is some evidence that businesses could get a deal on SHOP. 

“We found, in general, that plans on the SHOP cost less than those off the SHOP," says Jon Gabel, a senior fellow at NORC, a University of Chicago research center. "Could be 9 percent lower on average.”

Still, Gabel says, it’s too soon to say whether the SHOP exchanges will survive.  

But Brey hopes they stick around. He says he’ll start some serious insurance shopping after the holiday rush.

Pulling the Ruble out of the rubble

Tue, 2014-12-16 01:30
17 percent

Russia raised its interest rate in the middle of the night to 17 percent, as reported by the New York Times. The move came in response to a slip in the worth of the ruble by 10 percent on Monday. 

$5 million

That's how much money the nonprofit Invisible Children made in just 48 hours after their video "Kony 2012" redefined viral. The windfall was soon followed by a wave of criticism that cost donations and irreparably damaged the group's reputation. Two years later, Invisible Children has announced it will let most of its staff go, Buzzfeed reported, and raise $150,000 for a planned phase-out of its programs in 2015.

$60

That's about where the cost of a barrel of oil currently rests. The record low prices have some wondering how upcoming announcements (expected this week) from the Federal Reserve will be affected.

0

The number of people who lead the practices outlined in the Senate's CIA torture report who are still working in government. All of them are now retired or in the private sector. Mashable has a "where are they now?" feature.

50 full-time employees

Small businesses with fewer than 50 full-time employees are not required to provide health insurance. But in the case that they do, many are having a tough time navigating exchanges under the Affordable Care Act, specifically in what is known as a SHOP exchange.

$2.44

The cost of a half-gallon of milk, one of many items featured in the New Yorker's "gift guide for the boyfriend who has nothing."

Sony warns media against publishing leaked information

Mon, 2014-12-15 11:00

Sony Pictures Entertainment fired a warning to media outlets over the weekend saying they'd better stop posting the gory details of its computer hack.

At stake? The company's intellectual property and trade secrets.

"One of the most sensitive things out there from the standpoint of Sony corporate is what are called 'ultimates,' the studio profit and loss statements," says Jonathan Handel, an entertainment and technology attorney with the law firm TroyGould in Los Angeles.

The dissemination of Sony's hacked profit and loss statements undermines the studio when it's negotiating to pay talent, Handel says. Such documents paint a picture of the studio's costs and what it can afford.

"Once you got those for several films, it gives you background for more," Handel says. "You get a sense of what the studio overhead is and how they internally charge things."

Sony also cites the loss of intellectual property as a big concern.

For example, the screenplay for a James Bond film got released in the computer hack. That could mean fewer people showing up at the box office for the film.

But those worries might be overblown, according to Paul Dergarabedian, a media analyst with Rentrak, a box office data firm.

"The reason people, the average person, goes to the movies is they don't want to read the script, they want to see the movie," he says.

A lot of the leaked documents — screenplays, marketing plans — gets updated and changed all the time, Dergarabedian says.

How much damage will all this do to Sony? That script is still in development.

We lost $100 million making pennies and nickels

Mon, 2014-12-15 11:00

 A penny is worth 1 cent, and a nickel, 5. But how much does it cost to make the money itself?

According to the U.S. Mint's most recent report to Congress, way too much.

The good news is that the Mint says we saved $29 million this year making coins thanks to cheaper copper prices.

The bad news is that we're still losing $100 million a year on pennies and nickels because it costs 1.66 cents to make a penny and more than 8 cents to make a nickel. A nickel is made of 75 percent copper and 25 percent nickel.

Of course, I'm on the record as favoring getting rid of the penny anyway.

Treasury undersecretary wanted, must love Wall Street

Mon, 2014-12-15 11:00

Fresh off their stand against rollbacks to the Dodd-Frank act in the recently passed government spending bill, liberal Democrats are displeased with President Obama's pick for a Treasury undersecretary job – investment banker Antonio Weiss .

Speaking about Wall Street's influence on economic policy late Friday, Massachusetts Sen. Elizabeth Warren said, “Enough is enough with Wall Street insiders getting key position after key position and the kind of cronyism that we have seen in the executive branch.”

But the White House has called Weiss a “highly qualified nominee.”

So just what does this job entail?

If the U.S. Treasury were to draft a job description for the current vacancy, it might list a set of skills that included “understanding of very high level and sometimes very complex finance,” says Kevin Jacques, a professor at Baldwin Wallace University who spent 14 years at Treasury. Potential hires should also be able to translate wonky economic papers into policy and work across different government agencies, he says.

“Absolutely critical is an ability to talk [and] negotiate with Wall Street,” says Jacques, which is partially why he says so many candidates come to the job from financial institutions. It gives them credibility with the industry.

Lawyer Jerry Hawke held the post in the '90s, but has never worked on Wall Street and doesn’t think that should be a must. It does help, he says.

But “the process of treasury issuance of bonds and notes and so on, that was an area I didn’t have any real experience in,” he says. “Someone who understood bond trading and Wall Street could make a great contribution.”

But Wall Street isn’t the only source of these skills, says Daniel Carpenter, a professor of government at Harvard University. “There’s a lot of alternative sources of expertise that are used by Wall Street banks themselves,” he says, “including the legal academy, the business academy, consumer financial organizations, and state government officials.”

It might be worth sacrificing some financial acumen, Carpenter says, for the fresh perspective a Wall Street outsider would bring.

"There's too many people who think that just because somebody worked on Wall Street, they literally are a financial master of the universe and can do any finance job," says Dennis Kelleher of Better Markets, Inc., a nonprofit that seeks to promote the public interest in the financial markets. "That's just objectively false." He suggests drawing from large global corporations instead. 

Of course, in the end, the final must for this undersecretary? Confirmation by the U.S. Senate.

Private equity's PetSmart maneuver

Mon, 2014-12-15 11:00

The year’s biggest buyout deal went down today – not in cable TV or a mobile app or a Chinese brand, but in the pet business.

Private-equity firm BC Partners and investment partners purchased PetSmart for $8.7 billion. Analysts say the deal suggests brick-and-mortar PetSmart outlets have a decent financial pulse, despite the onslaught of online competition. Some items, say a hefty 30-pound pack of Iams Minichunks, sell better in stores than online.

This deal came about due to a confluence of several factors: an aggressive PetSmart shareholder agitating for a sale, the company’s willingness to cut expenses, and BC Partners’ ability to  borrow sufficient capital, given PetSmart’s low debt and secure cash flow.

 

 

Cartoonist Cathy Guisewite on her best gift ever

Mon, 2014-12-15 11:00

Ten years ago, we started calling up big names in business and culture and asking them, "What was the best gift you've received?"

In honor of Marketplace's 25th anniversary and the holiday season, we've pulled the "Best Gift Ever" series out of our archives. Here's the answer we got from cartoonist and "Cathy" creator Cathy Guisewite back in 2004: 

The best gift I ever received was a two-part gift I got for Christmas when I was 10 years old. 

A bride doll and an electric train. 

They were not things I'd ever told anybody I'd wanted. But they were like my secret heart desires because those exact opposites were who I was and what I loved. 

The electric train was who I appeared to be. I loved everything mechanical, I wished I was a boy.... The bride doll was my more romantic side that I think wasn't as apparent, but that became my time with mom, making doll clothes.

Those two sides of myself are, for better or for worse, the psychotic conflict inside that has fueled almost all of my creative work.

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Private equity finds PetSmart yummy

Mon, 2014-12-15 11:00

The year’s biggest buyout deal went down today — not in cable TV or a mobile app or a Chinese brand, but in the pet business.

Private-equity firm BC Partners and investment partners purchased PetSmart for $8.7 billion. Analysts say the deal suggests brick-and-mortar PetSmart outlets have a decent financial pulse, despite the onslaught of online competition. Some items, say a hefty 30-pound pack of Iams Minichunks, sell better in stores than online.

This deal came about due to a confluence of several factors: an aggressive PetSmart shareholder agitating for a sale, the company’s willingness to cut expenses, and BC Partners’ ability to  borrow sufficient capital, given PetSmart’s low debt and secure cash flow.

 

 

'Facebook users' are no longer 'Facebook users'

Mon, 2014-12-15 08:59

Turns out, the word "user" – the term the software industry uses when referring to the people who use their product – is no longer a favorable one at Facebook headquarters.

"Facebook switched to internally calling its users 'people,'" says Robinson Meyer, associate editor at The Atlantic. "So instead, on its internal dashboards talking about 'daily average users,' it talks about 'daily average people.'"

Quiz: Analyzing after-school activities

Mon, 2014-12-15 04:39

More children participate in sports than clubs or music lessons, according to the Census Bureau.

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PODCAST: Fighting drought with technology

Mon, 2014-12-15 03:00

Renewed concern in Russia with the ruble slipping yet again. More on that. Plus, we look at the biggest private equity deal of 2014: PetSmart agreeing to be purchased for $8.7 billion. And if you haven't heard, California is experiencing a serious drought. It's also the home of that cradle of innovation, We look at what the tech sector is doing to attack the drought.

Closing the gender gap

Mon, 2014-12-15 02:00

Possible 2016 presidential contender Hillary Clinton is in New York on Monday to talk about the knowns and unknowns when it comes to women's issues. A group called Data2X run by the United Nations Foundation is trying to tackle what it calls a gender data gap. We take a look at what that gap is and why it matters.

Click the media player above to hear more.

The 'one percent' lead holiday retail

Mon, 2014-12-15 02:00

The richest Americans will lead the way in holiday spending again this year.

At the beginning of the Great Recession, luxury retail fell hard – some brands and product-categories saw declines of 30 to 40 percent, says retail analyst David Schick at Stifel Nicolaus. That compared to declines under 5 percent for mass-market retail.

But after the recession, luxury retail rebounded sooner and stronger than the rest of the market. And that strength has continued through 2014. Management consultancy Bain & Company predicts the global luxury market will have grown by 5 percent in 2014; the increase will be 6 percent in the U.S. – significantly higher than mainstream U.S. retail.

“At the higher end of the income spectrum, we have seen financial assets helping the consumer in a way that isn’t helping other quintiles of income,” says Schick. “And wage growth is the same story.” That increased wealth at the top will likely help luxury brands such as Tiffany & Co.

Schick is quick to point out, though, that middle-income Americans are also doing better this year, with paychecks trending higher, unemployment down, and gas prices falling hard.

These consumers might now feel more comfortable splurging on a high-end brand—a Kate Spade handbag or Coach wallet.

“It’s not just the 1 percent that are carrying along high-end retailers,” says Kit Yarrow, professor emeritus of psychology at Golden Gate University and author of ‘Decoding the New Consumer Mind.’ “Obviously, the high-end retailers aren’t going to be doing well without them. But it’s also the huge influx of money coming from Chinese consumers that are visiting the U.S., and other nationalities. And also middle-class and upper-middle-class consumers who are stretching, because they perceive the value of those products to be worth it.”

Yarrow conducts "shop-alongs" with American consumers, including those in the six-figure income bracket. Stocks, home prices, and income have all combined to make these households even wealthier than they were before the recession.

But while they can afford to spend on luxury goods, she finds they don’t want to flaunt their money.

“They understand that there’s sort of an anti-wealth sentiment,” says Yarrow. “They don’t want to be conspicuous in their consumption. They don’t want other people to distrust them or feel separated from them. One woman I interviewed was embarrassed to say in front of other people that she’d paid full-price for a product, because she thought they might find that to be offensive.”

More retailers promise last-minute Christmas delivery

Mon, 2014-12-15 02:00

Today is expected to be the busiest shipping day in the country. But, that does not mean the next week and a half until Christmas will become slow. Companies will be shipping out packages all the way down to the wire.

Last year, the media reported a big backlash over late packages. There were storms, deliveries got backed up, and some presents spent Christmas sitting in cold, lonely warehouses.

Steve Osburn is a supply chain adviser with the management consulting firm Kurt Salmon. He says, “Coming out of last year, we estimated that people would be a little more cautious this year.” But, he says, that's not happening.

This year, Osburn says even more big retailers are promising last-minute delivery. He says companies are thinking “if my competitor is going to be able to do it, I need to be able to do it.”

To handle the surge of holiday packages, shippers like Fed Ex and UPS have hired tens of thousands of additional workers. 

Lisa Willis runs Missive, a custom letterpress company in San Francisco. She says customers have come to expect instantaneous delivery, and she wishes that weren't the case. Willis says, “As a small business we're up against all these really large companies that guarantee delivery dates.”

To try and compete, Willis gives her customers a price break if they order early.

The 1-Percent lead holiday retail

Mon, 2014-12-15 02:00

The richest Americans will lead the way in holiday spending again this year.

At the beginning of the Great Recession, luxury retail fell hard—some brands and product-categories saw declines of 30 to 40 percent, says retail analyst David Schick at Stifel Nicolaus. That compared to declines under 5 percent for mass-market retail.

But after the recession, luxury retail rebounded sooner and stronger than the rest of the market. And that strength has continued through 2014. Management consultancy Bain & Company predicts the global luxury market will have grown by 5 percent in 2014; the increase will be 6 percent in the U.S.—significantly higher than mainstream U.S. retail.

“At the higher end of the income spectrum, we have seen financial assets helping the consumer in a way that isn’t helping other quintiles of income,” says Schick. “And wage growth is the same story.” That increased wealth at the top will likely help luxury brands such as Tiffany & Co.

Schick is quick to point out, though, that middle-income Americans are also doing better this year, with paychecks trending higher, unemployment down, and gas prices falling hard.

These consumers might now feel more comfortable splurging on a high-end brand—a Kate Spade handbag or Coach wallet.

“It’s not just the 1 percent that are carrying along high-end retailers,” says Kit Yarrow, professor emeritus of psychology at Golden Gate University and author of ‘Decoding the New Consumer Mind.’ “Obviously, the high-end retailers aren’t going to be doing well without them. But it’s also the huge influx of money coming from Chinese consumers that are visiting the U.S., and other nationalities. And also middle-class and upper-middle-class consumers who are stretching, because they perceive the value of those products to be worth it.”

Yarrow conducts ‘shop-alongs’ with American consumers, including those in the six-figure income bracket. Stocks, home prices, and income have all combined to make these households even wealthier than they were before the recession.

But while they can afford to spend on luxury goods, she finds they don’t want to flaunt their money.

“They understand that there’s sort of an anti-wealth sentiment,” says Yarrow. “They don’t want to be conspicuous in their consumption. They don’t want other people to distrust them or feel separated from them. One woman I interviewed was embarrassed to say in front of other people that she’d paid full-price for a product, because she thought they might find that to be offensive.”

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