Some retailers are issuing warnings that the Affordable Care Act could weigh on their profits.
Starting in January, most of us will either need to have health insurance, or pay a penalty. In a call with analysts last week a Walmart executive said that’s another "line item in their personal budget" that could cut into customers’ spending, according to the Wall Street Journal.
"We haven’t seen any impact, but we’re keeping an eye on it," Walmart spokesperson Randy Hargrove told Marketplace.
"Obviously there’s only so many discretionary dollars, and if there’s fewer, consumers are going to have to make harder choices," says Lynn Franco, an economist with the Conference Board.
This story has come to be known as the "Dog Ate My Homework" kind of story around Marketplace. Another tale of retailers blaming the latest weather pattern, blackout, Congressional gridlock -- the list goes on -- for their earnings woes.
"Yes, it’s probably going to be the excuse du jour, but yes, it is a true cost, and people are going to have to absorb it," says analyst Scott Mushkin with Wolfe Research.
But isn’t the Affordable Care Act supposed to save people money?
A recent study by the Rand Corporation predicted out-of-pocket medical expenses will decline for most people who are newly insured or change their health plans. Then there are the almost nine million more people who will be covered by Medicaid, says Josh Bivens with the liberal Economic Policy Institute. Others will get subsidies to buy insurance.
"In my mind this is kind of like a delayed, small stimulus program, because it’s actually providing people who are otherwise cash-constrained to give them more income in the next couple years," Bivens says.
Other economists say it’s too soon to know how the health care law will play out.
"I really don’t think we have enough information yet to have a sense of whether this is a real problem or something that will prove not to be a major issue," says economist Scott Hoyt with Moody’s Analytics.
Analyst Joe Feldman, who follows Walmart for Telsey Advisory Group, says that uncertainty itself can weigh on shoppers.
"If it’s in the consumer’s mind that they may have some pressure down the road, you may see them pull back on their spending," says Feldman.
As more retailers come out with their earnings forecasts in the next couple weeks, Feldman says we can expect to hear more about that pressure.
The Senate Committee on Homeland Security heard testimony today about the risks, threats and promises of bitcoin, the decentralized digital currency that has been tied to illegal activity like the website Silk Road, which the F.B.I shut down. But digital currency isn’t just for people making illegal transactions. Speculators love bitcoins. Chinese investors, especially, are spending millions on them. All that bitcoin love sent the price of one bitcoin to an all-time high today, topping $750. But will bitcoins ever be a part of our day to day spending?
Right now, very few businesses accept bitcoins. There’s a Subway sandwich shop in Allentown Pa., a Massachusetts company that sells socks made of Alpaca, and in some cities you can have a pizza delivered. But that pizza transaction has to go through Riley Alexander, a 25-year-old construction manager who, with a friend, founded a business called Coins for Pizza.
It basically acts as a middleman between large chains like Dominos and Papa John's, which don’t accept bitcoin, and customers who want to pay with bitcoins. Alexander says they’ve handled about 800 deliveries since February and they make a small amount on each one, “anywhere from 50 cents to, you know 3, 4 or 5 dollars.” With bitcoins valued at more than $600, that $5 profit is 0.67 percent of a bitcoin.
But then, to their surprise, Alexander and his friend watched as speculation drove up the value of their bitcoins. “That small amount of profit turned into large amounts of profit, you know, over time,” says Alexander.
But that rapid rise in value is not necessarily great news for bitcoin, the currency. Francois Velde, an economist at the Federal Reserve Bank of Chicagom says one of the prerequisites for any widely accepted currency is that it has stability. “The value of it has to become much more stable than it is now,” he says.
Velde described it as a classic chicken and egg problem for bitcoin: “as long as people speculate on it, the value will not stabilize.”
And yet much of this speculation is built on the hopes that bitcoin will become widely accepted and deliver on its promises, such as transactions that eliminate the middleman. Middlemen like Riley Alexander, who wants to see bitcoins accepted everywhere.
“If Domino’s comes up and says, 'hey we are going to take bitcoin,' sure, our business is over, but that’s great, I would love to see that,” Alexander says. “That’s what it’s really all about is getting people to accept it.”
Record-high for the Dow! 16,000! Big, round number! Yay! (Right?)
It is a big deal, if you are an investor or trader or reporter or business pundit -- you get to jump up and down and refer to 16,000 as a "milestone," a "barrier," and a "cause for celebration."
But the millions of Americans who still unemployed, or underemployed, or earning flat wages aren’t celebrating. More than 50 percent of Americans own no corporate stock – even indirectly – so they aren’t popping the champagne either.
The Dow 16,000 party is confined to corporate America: That is, the people who run public companies and own shares in them. They’re really the only people who should pay close attention to what the Dow is doing on a day-to-day basis. For most Americans - and it is most Americans – 16,000 is just another number.
So what number should we be paying attention to?
At the time of writing, the number we should really be celebrating is 2.68. That, ladies and gentlemen, is the yield on the ten-year treasury note.
Yes, I know, bonds are a bit like the PC guy in those old Apple ads. They're boring, they’re all gray and pinstriped, buttoned-up and besuited.
Stocks are where the fun is at: They’re bouncy, colorful, exciting. You never hear about a bond "pop" when its issued, do you? Most Americans probably don't know if Twitter even has bonds. You certainly never hear about dizzying run-ups or heart-pounding freefalls in the bond market. The bond market's nickname is 'fixed income' for goodness sake!
And the ten-year T note? It’s the grayest bond of all. It's quoted by every financial news organization, including this one, every day. It's part of the furniture: Like that weird bird sculpture on the mantle that your Aunt Edie gave you as a wedding gift.
Except that number, the yield on the ten-year T note, is made of gold (you should get that sculpture valued, by the way). The ten-year yield is hugely significant because as it changes, almost every number in the financial world adjusts.
Mortgages, credit card loans, corporate interest rates: The movements in the ten-year yield govern every aspect of our individual and corporate lives.
You don’t believe me? Consider the Federal Reserve’s Quantitative Easing program.
The Fed has pumped $2.3 trillion into the economy with the aim of keeping the yield on the ten-year note low. Why?
Because it helps save the economy. It keeps our borrowing costs down. If companies find it cheaper to borrow, then they’re more likely to take the risk to expand, and people are more likely to buy more stuff. That in turn pumps more money into companies that will hopefully then go out and hire more people. Those people will hopefully then go out and buy more stuff, and so on and so on, until the economy returns to the very picture of health.
So if you want to watch the health of the economy, you’re better off watching the yield on the ten-year than you are checking out the Dow.
Why? Because if the Dow rises or falls, that’s just telling you how American public companies are doing. A movement in the ten-year note, on the other hand, gives us insight into how every American is doing. And that's the real economy, right there.
Boeing’s new 777X airplanes led the Dubai Air Show’s opening day. The company claims orders of roughly $95 billion, purported to be the largest product launch in the history of commercial aviation.
The BBC’s Simon Atkinson notes that the Dubai Air Show is host to the world’s fastest-growing carriers, and they’re looking for more aircrafts to meet high demand.
“The Middle East really has become a hub for global aviation over the past decade,” he says.
Timothy Geithner has landed a new job, after leaving his position as Secretary of the Treasury earlier this year: president of the 47-year-old New York-based private equity firm Warburg Pincus.
Geithner’s previous experience is mostly in leadership of public-sector financial institutions: at the IMF, the Federal Reserve Bank of New York, and Treasury.
But he brings plenty of assets with him to the private-sector, and in particular, to private equity, says banking consultant Bert Ely.
“Geithner certainly has an enormous number of contacts and a well-developed reputation with nations across the world,” says Ely. “And so he can be particularly effective in providing entrée to these sovereign wealth funds and the investments they make.”
That’s countries such as China, Norway, and the Gulf States, with enormous cash reserves that need to be invested around the world.
Warburg Pincus is the fifth-biggest private-equity firm on the planet, according to Private Equity International’s 2013 list. It has $35 billion in assets under management.
The firm tends to keep a low profile, though it’s bought, and then sold, legendary brands like eyeware company Bausch & Lomb and high-end retailer Neiman Marcus.
The Treasury Department under Geithner is credited during President Obama’s first term with rescuing banks deemed "too big to fail," and for crafting the new regulatory regime under Dodd-Frank designed to prevent another financial crisis from happening.
Karen Shaw Petrou at Federal Financial Analytics says private equity firms like Warburg Pincus have a very different risk profile from the mega-banks that Timothy Geithner’s Treasury Department helped bail out.
“I think the risks there of a systemic crisis are low,” says Petrou, “because there are many private equity firms and the key to them is going their own way. If they all bet on the same companies, there wouldn’t be any significant upside. And these are guys who are all about making big money as fast as they can -- that’s what private equity is about fundamentally.
Timothy Geithner is on the record favoring increased taxes on private-equity firms and their principals. He said last year that the tax on carried interest -- the share of private equity firms’ profits from deals -- should be raised from its current 15 percent rate.
This summer, residents of Chicago’s far southeast side noticed mountains of black dust growing in one corner of the neighborhood. It’s petroleum coke -- pet coke for short. That's what gasoline refineries produce as a byproduct of refining gasoline. It’s full of carbon, sulphur and heavy metals.
On August 30, a big wind brought the coke piles to the whole neighborhood’s attention. At a baseball field a block or two away, a little league game ended in a hurry.
"Kids that were playing ball were sent scurrying away because the stuff was getting into their eyes and their face and their mouths and everything," says Tom Shepherd, a volunteer with the Southeast Environmental Task Force. "They had to just get the heck out of here."
He calls the 30th “a day that will live in infamy.” He says, "People were calling 911 and saying, ‘There’s a fire! We don’t know where the fire is, but the neighborhood’s full of smoke.’"
But it wasn’t smoke. It was dust from the piles that had been growing throughout the summer.
They’re a sneak preview of what’s ahead. At least some of the dust came from a local BP refinery. It’s across the state line in Indiana, but it can be seen from the neighborhood. And that refinery is about to triple the amount of pet-coke it turns out. BP is finishing a huge upgrade this fall, to process oil from Canada’s tar sands.
That oil is “heavier” with elements that get refined out and turned into pet-coke. Post-upgrade, the Indiana refinery will turn out 6,000 tons a day. Eventually, it gets sold as fuel, much of it to countries like Mexico and China. But meanwhile, it piles up.
"It’s the most visual part of the success of North American energy independence," says Phil Verleger, an economist who studies energy markets.
That success has both an upside and a downside: Nearby sources of oil should mean lower fuel prices in the Midwest, which has high gas prices. And more piles of pet coke.
"So the question is," Verleger says, "How do we deal with this pile of black stuff that’s bringing us this supply of fuel?"
So far, nobody’s got an answer.
In early November, Illinois Attorney General Lisa Madigan filed a complaint in state court. Her office said the dust from the piles violated environmental regulations. Madigan says she doesn’t know exactly what it would take to make pet-coke a good neighbor. "Well, you know, if it’s not safe where it is, it may have to go somewhere else," she says.
That would be a popular answer on the Southeast Side. Last week, neighbors packed a local church when Illinois EPA officials came to gather input. Again and again, the meeting got stopped by a chant: "Move the piles! Move the piles!"
So far, neighbors have blamed BP and Koch Industries, which owns the yard with Chicago's pet-coke piles. BP and Koch say there’s been a misunderstanding so far. BP says that it wasn’t actually sending more pet coke than usual to the Chicago yard this summer.
Koch has its own explanation for the taller piles: It was moving petroleum coke around in the yards to make room for new safety equipment. It installed big water cannons, which are supposed to keep the piles wet so the dust doesn’t blow around. Making room meant more activity, and some piles got taller for a while.
Far too many doctors in the U.S. prescribe brand-name drugs when generics can be dramatically cheaper. When it comes to lower-income Medicare patients, it can be the taxpayer who covers the difference in price -- up to hundreds of millions of dollars a year. ProPublica senior reporter Tracy Weber has been gathering data about the cost of prescription drugs to the taxpayer, and tells Marketplace Morning Report host David Brancaccio what she found."Medicare has a massive prescription drug program called Part D. It issues one in four prescriptions written in the country every year, and we took a look at the money involved. And we noticed that some doctors were outliers. They were prescribing way more expensively than their peers -- just a small group of these doctors, 900 doctors, were prescribing $1 billion worth of drugs a year. And when we looked closer at these doctors, they had huge percentages of brand name drugs. So while their peers were prescribing 75 percent generics, they were prescribing mostly brand name drugs. We figured out that if those doctors prescribed like their peers, Medicare, every year, could save $300 million just on those doctors."
But why would doctors purposefully prescribe a name-brand over a less expensive, but just as effective, generic?"What we found when we mapped out over the country is there's pockets of doctors who are all prescribing high levels of brand-name drugs, so we went out and talked with these doctors. And, many of them feel, first of all, that the brand-name work better. And many of them, their practices are almost entirely made up of people who are receiving the low-income subsidy. So not only do they not have an incentive, but they believe that the drugs they're prescribing are better."
Weber asked the doctors how they could "feel" a drug is better. She said it boils down to where the doctors are getting their information."We asked the doctors how they received information about the drugs. And many of the doctors said they relied on the representatives from the pharmeseutical companies. And, I must say, when we were visiting them in their offices, often times, there were one, two, three drug representatives lined up at their counters, delivering samples and trying to talk to the doctor. When those drug sales reps come around, they provide studies, but often studies that present their product in the most favorable view. Their job is to get the doctor to prescribe which is often a brand name."
Weber says patients need to be more proactive, and feel free to question their doctors' decisions."Doctors for a long time, this has been sort of the third rail. You're not allowed to ask a doctor what they prescribe. You're not allowed to question that. And, as with all kinds of medical procedures, now hospitals -- as you see -- they have to tell you what their success rates are for certain procedures and such. And you should be able to ask your doctor questions about this. 'Am I getting the drug that has the least amount of side effects? Am I getting the drug that's most cost effective? Am I getting a drug because you got money to speak on behalf of that company?'"
Versions of this story are being co-published by ProPublica, with public radio station WNYC in New York and with Digital First Media web sites and newspapers. ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.
ProPublica has built a Prescriber Checkup widget – search the prescriber data directly:
Or search online for your doctor’s Medicare prescriptions at projects.propublica.org/checkup/
Last week, the Tennessee Valley Authority announced that it plans to retire eight coal-fired generators. The TVA says more closures could come, and this announcement follows the closures of older coal-fired plants by other electric utilities. So, to what extent is coal actually fading away as an energy source?
Vlad Dorjets is an economist at the United States Energy Information Administration. When utilities retire power plants -- or make plans to -- they file a report with the agency, and he crunches the numbers. He says that of the 1,400 coal-fired generators that existed in 2008, almost 400 will be gone by 2017.
But his models that look past 2017 don’t show the trend continuing very far. Most of the generators going away now are old -- built before 1960. "Basically everything that's going to retire, will retire in the next couple years," he says. "And then you've got a pretty steady fleet."
Even so, by 2020 he estimates that generating capacity from coal will be about 15 percent lower than it was in 2008. That's about half the reduction the Sierra Club would like to see, but it's still a big chunk.
So, what’s taking the place of that coal? "Shale gas, and renewables to a lesser extent," says Marty Rosenberg editor-in-chief of Energy Biz Magazine.
He thinks shale gas looks like a reliable source for some time to come. But, he says, there's no such thing as a sure thing. "You say it’s a hundred-year supply for sure -- then, sure enough in two, three years, something will happen."
After China issued its 20,000-word reform document Friday night, the media’s focus was on proposed changes to the one-child policy. But there were a slew of other ambitious economic reforms announced.
It’s easy to get lost among the sixty points of reform in a document laced with exaggerated Communist lingo, but there were a handful of proposals that encouraged economists. For example, proposals for private investors to start their own banks, farmers to sell their land, and local governments to collect property taxes so that they don’t have to confiscate residents’ land for revenue.
“There seems to be this consensus among the leadership that they need to move in the direction of a more open and a more competitive and more accountable economic and financial system, which is a good thing," says Patrick Chovanec, chief strategist at Silvercrest Assett Management. On the other hand, "There is a big difference in announcing reforms and implementing them.”
For example, China’s already attempted allowing private investors to start their own banks in the city of Wenzhou and has also started to collect property taxes in pilot programs in select cities around the country. None of these efforts have produced results.
The other concern: If China’s government actually follows through on these reforms, it’s likely slow economic growth, threatening one of the few bright spots in the global economy.
Holiday shoppers beware. That "great deal on the internet" may just be counterfeit. The amount of fake merchandise is proliferating.
For an added twist, it's not just the fake products you need to watch out for. Fake websites also try to trick consumers. As Americans have shifted to shopping online, the bad guys have adapted. Some have cut out the middlemen and are now selling counterfeit products directly to unsuspecting consumers online.
“Criminals have begun to set-up counterfeit websites that look and are designed to appear as they are the legitimate retailers’ websites, but are not," says Lev Kubiak, who directs Homeland Security’s National Intellectual Property Rights Center.
For example, a fake website for Tiffany looks just like the luxury jeweler's real website. And if you're shopping for headphones, the fake site for Beats by Dre is almost identical to the original.
And this new tactic comes as officials also see growth in the number and variety of counterfeit products.
“It’s a very serious problem," says Kubiak. "The extent of the issue has been growing significantly.”
Criminal organizations are defrauding American consumers on a more regular basis, says Kubiak.
“And we’re seeing them in larger and larger numbers throughout the United States.”
A visit to the Port of Long Beach shows just how hard counterfeits are to stop. At a customs warehouse, the contents of 44-foot cargo containers are spread across the concrete floor. In the past, criminals sent their fake goods in bulk.
“We used to see five, six, seven containers of the same merchandise," says Jaime Ruiz, a spokesman for Customs and Border Protection. "Now what we see is that they mix some of their products, some of their counterfeits, with legit products as well.”
Customs officers confiscate the knock-off brands you might expect. Like Prada, Chanel, Gucci, Hermes and Louis Vuitton.
Nationwide, in 2012, customs saw 142 percent increase in the number of fake wallets, purses and handbags.
“I’ve learned more about handbags than I ever wanted to know,” says Peter Green, section chief of trade operations with U.S. Customs and Border Protection.
But the most troubling fakes are the unexpected ones. Counterfeit electrical cord can cause a shock or start a fire under the Christmas tree.
Even brands of batteries get impersonated. Fake Duracells even incorporated the Energizer Bunny in the packaging.
“It’s possible for them to explode," says Green, "which they have in the past.”
Counterfeit toothpaste and shampoo can carry harmful bacteria.
“Criminal organizations involved in the sale of counterfeit merchandise have really expanded into literally every name-brand product out there,” says Lev Kubiak.
Surprising counterfeit items include software from the company Rosetta Stone, which teaches people to learn foreign languages.
“They estimate that they lose up to 25 percent of their total annual revenue to counterfeit versions of their product,” Kubiak says. “That, in turn, equates to fewer jobs. Fewer people they can employ.”
Auto parts are a popular target for counterfeiters, who crank out fake brake pads, fake master cylinders, fake seat-belt-actuators and fake air bags.
Officials believe about 15,000 fake air bags have been sold in the U.S.
Tests of counterfeit air bags found that many didn’t deploy. And about 20 percent of cases, Kubiak says, they “explode like a small bomb, shooting a three-and-a-half foot flame.”
Officials have found fake bearings that operate a mine-shaft assembly. Counterfeit parts have even found their way into the military supply chain.
Fakes could be on your medicine shelf.
Kubiak says some Americans are being sold counterfeit pharmaceuticals, “thinking that it’s the real drug, but there’s actually no active ingredient inside there, so absolutely no way for people to get better. Even in such cases like cancer medication.”
To avoid buying a fake, try to avoid visiting an imposter website. Type in the web address directly instead of clicking on a link.
And Kubiak warns to watch out for websites that redirect you to another site when it's time to pay. That’s a sign of a counterfeiter.
Also, when trying to avoid fakes, watch out for prices that are significantly lower than average. And check with the product’s maker to confirm that a particular merchant is a trusted distributor.
The Federal Communications Commission was started in 1934, long before the internet. But more and more, it's a government organization expected to play referee in the online world.
As a former high powered lobbyist, new chairman Tom Wheeler has a reputation as a Beltway insider, and critics have derided him for the perception that he is too cozy with the industry. Wheeler says his detractors should think of him now lobbying on behalf of all Americans in the way he once lobbied for the cable and wireless industries.
"I'm proud of my previous time working with two dynamic and growing industries, and I hope that I was a good advocate for them," he says. "Today, the American people are my client, and I want to be the best possible advocate for the American people."
Wheeler used to lobby for broadcasters and telecom companies. One big challenge he's facing is net neutrality -- whether internet service providers can restrict or degrade access to online services from competitors.
One of the immediate things on his list, though, is the country's shrinking spectrum for our multiplying mobile devices.
To address the issue, the FCC voted this fall to re-purpose the spectrum from TV broadcasters for wireless networks. Broadcasters will voluntarily sell their part of the spectrum back to the federal government, which in turn will auction it off to wireless broadband providers.
"That, hopefully, will be a marketplace means of determining what the highest and best use of the spectrum is, and then we will take that spectrum -- which we have bought back -- and resell it to the wireless carriers to be able to meet the climbing demand for wireless services," Wheeler says.
During his first day on the job, Wheeler got notice for a blog post about the covenant between networks and the people they connect. Writing that we are in the middle of "the fourth great network revolution" in history, Wheeler says the FCC must adapt to networks since they’re evolving more rapidly than ever before.
"I think that one of the things we have to make sure is that technology doesn't change the basic relationship between networks and those that use them," Wheeler says. "Concepts like the right of access to a network, the need for networks to interconnect, that the values that consumers always come to rely on from their networks are preserved."
How the regulatory agency will weigh in on the ongoing debate over net neutrality could be one of Wheeler’s defining legacies in the role. But if you want to know what his thoughts are, he'll give you a rather neutral answer.
"Access, indeed, is one component of the network compact, and it takes all kinds of forms. There's access to a network itself through a broadband network -- if you're out in a remote area, how do you get access to the network? It is making sure that the rights of consumers are not denied, because if theirs are denied, then their access is de facto denied."
Have trouble understanding Bitcoin? So does Congress. A Senate committee opens an exploration today of how virtual currencies work and how they could contribute to the economy and society -- or do quite the opposite.
Why use a virtual currency? George Peabody, a senior director at Glenbrook Partners, a consulting firm, gives an example: Two suppliers who know each other well could benefit from a payment system like Bitcoin, where they interact with one another directly.
“They could start could sending payments to eachother over what we call Bitcoin rails, that’s a payment rail," he says, "which could be a great deal less expensive than going to their bank and wiring funds.”
Bitcoin cuts out the middle man. That’s one of the things Congress is concerned about -- if there’s no bank, there’s a potentially greater chance of money laundering or other unsavory activity. There could be more mundane headaches for consumers, too.
“You and I can dispute a transaction and charge it back to a merchant and get it taken off of our credit card bill," Peabody says. "That won’t exist in Bitcoin.”
Still, Peabody says, Bitcoin is a worthy experiment, one that needs time to evolve before regulators clamp down.