July 2010

New Credit Card Tricks: Banks Have Already Dreamed Up New Ways To Trip Up Consumers

by on July 31, 2010

Just months after historic legislation banned certain billing practices, card issuers have dreamed up new ones designed to trip up consumers.

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New Credit Card Tricks: Banks Have Already Dreamed Up New Ways To Trip Up Consumers

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Quote Stuffing Manipulation By HFT: The Evidence Piles Up

by on July 31, 2010

“It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene” – Further Evidence Of Quote Stuffing Manipulation By HFT

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Quote Stuffing Manipulation By HFT: The Evidence Piles Up

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Patricia Handschiegel: The New Power Girls: How Today’s Women In Business Are Making Money And Change

July 31, 2010

Lucques is one of the chic little restaurants that dot L.A.’s Melrose Avenue towards the west end. It’s tucked next to other local classics like Taste, Comme Ca and Ago, with Cecconi’s just a half mile or so ahead. As I take a seat across an old friend and entrepreneur in the social change arena, the scene is quiet and laid back. Couples and groups mingle and socialize over candle lit tables. A fireplace crackles despite that its August in the city. A few weeks ago, President Obama and his family dined here. “So what have you been up to,” I ask, digging into the basket of crunchy fresh bread. I’m as much of a carb-skipper as anybody but Lucques includes sea salt with the butter and its almost impossible to resist. My guest shifts in his seat and gets comfortable. He’s been one of the most innovative people I know on the social entrepreneurship scene. It was just that which brought us together years ago. I had just owned my first startup, Stylediary , and was eager to use business to help drive causes and change, he had been working to do the same with his own endeavors. As he shares the details on his latest work, I’m again amazed. “Green” business seems to be everywhere. The business world is learning that it can make money and drive social change. More than ever, women entrepreneurs are also tapping in. In fact, studies show that women founders are more likely to work to benefit causes and charities in addition to the bottom line of their business. From using sustainable products and working to empower small and mid-sized farmers to creating programs that give empowerment or give back, today’s new modern women entrepreneurs and executives are very active in using business to make a difference. It comes in companies and organizations of all shapes and sizes, from the Happy Baby Food company to Women 2.0. You name it. Power Girls know there’s value in giving back. “The ratio of women owned businesses in the green industry is about 50-50,” shared Eco Bold founder Steffany Boldrini, who creates and produces a web video show that helps consumers live green. Boldrini’s a bit like a Rachel Ray or Martha Stewart of eco-friendly lifestyle. Her videos are informative, fun and entertaining, popular among the site’s ten different video channels as well as ten different social networks. “Women seem to be more and more worried about what kind of planet they’re leaving their children. In fact, quite a few women that I’ve interviewed started their green companies right after having kids,” Boldrini added. It’s a trend that’s come a long way since the early days of sustainable t-shirt lines and companies using recycled goods. Today, green products are mainstream. Consumers can find and purchase items across dozen of categories and in most of the top stores both online and offline. It ranges from food to clothing to jewelry and virtually everything in between. Women-owned companies in the arena range from media and content businesses like Eco Bold and Your Daily Thread , to biomedicine and engineering. Most of all, they’re seeing success. More colleges and universities and government organizations are also supporting green entrepreneurship. They help aspiring founders cut through red tape, find financing and grants and business training on all aspects of running the business. Even female celebrities are starting to tap in. Stars like Alicia Keys, Barbra Streisand, Alicia Silverstone and dozens of others have cause-related efforts and organizations, all in the name of giving back. They join a growing number of male counterparts like Ed Norton and Brad Pitt. The new way of doing business is with an eye on the world — in addition to revenue. As I hop to make it to a friend’s birthday party at the Roosevelt hotel following dinner, I’m reminded that in a world that seems in it for itself, there is a growing chorus of founders who want the brass ring to give back. “I forgot how innovative you are with causes,” I text my friend from the back of the taxi ride. “It’s so inspiring.” With a greater ability — and awareness — that profit and good can be done together, more than ever business is.

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U.S. Economic Recovery Hopes Fade, Too Slow To Put Americans Back To Work

July 31, 2010

The recovery is fading, and a troubling new pattern is setting in: economic growth that is too slow to put Americans back to work.

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Wall Street Marks Best Month In A Year In July

July 31, 2010

NEW YORK (Reuters) — U.S. stocks closed little changed on Friday, but Wall Street wrapped up its best month in a year after the earnings season rounded the final turn with a group of strong results that offset the impact of poor economic data.

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David Isenberg: The Latest on Contractors From SIGIR

July 31, 2010

The latest Quarterly Report to Congress from the Office of the Special Inspector General for Iraq Reconstruction has been released. The following are excerpts relevant to private military contractors. Number of contractors: Current, 119,700. Peak, 171,000 (Q4 2007) p. 2 On July 22, 2010, several rockets impacted inside the International Zone, killing three foreign-national contractors working for Triple Canopy, a U.S.-based security company.Figure1.10 [ see p. 16] lists the 15 contracting companies that have reported the largest number of deaths in Iraq since March 2003. This quarter, the Department of Labor (DoL) received reports of 12 additional deaths of contractors working on U.S.-funded programs in Iraq. DoL also received reports of 882 injuries this quarter that caused the injured contractors to miss four or more days of work. Since 2003, at least 1,487 death claims have been filed with the DoL. p. 15 DoS has also requested that it be allowed to use the Logistics Civil Augmentation Program (LOGCAP) III to support its operations in Iraq beyond December 2011. As of June 30, 2010, however, Kellogg, Brown and Root, Inc. (KBR)–the sole LOGCAP III contractor–is scheduled to remain in Iraq only until the end of 2011. According to U.S. Embassy-Baghdad, it does not have a plan to meet its support requirements if KBR pulls out. p. 43 JCC-I/A: Transitioning to CENTCOM Contracting Command On June 11, 2010, CENTCOM transitioned the Joint Contracting Command-Iraq/Afghanistan (JCC-I/A) to the CENTCOM Contracting Command (C³). The change was made to facilitate expansion of the organization’s oversight to all contingency operations in CENTCOM’s area of operations–including Kuwait and Pakistan–in accordance with joint doctrine, “which has evolved to consider complex long-term contingencies.” To that end, C³will relocate to Qatar and reassess its staffing requirements. In addition to contract oversight, C³’s responsibilities in Iraq will include liaising with the armed services’ contracting organizations, providing monthly contractor census and SPOT data, and establishing and chairing a joint contracting support board to coordinate the enforcement of contracting and payment procedures. p. 44 Contractor and Grantee Support As of June 30, 2010, there were 113,649 contractor and grantee personnel supporting U.S. efforts in Iraq. For a breakdown of contractors and grantees–by agency, purpose, and national origin–see Table2.11. Contractors provide a variety of services. According to the most recent DoD census of its contractors in Iraq, roughly 65% performed base support functions, such as maintaining the grounds, running dining facilities, and providing laundry services. Comparable data was not available from DoS or USAID. The profile of DoD contractors in Iraq has changed over time. The number of contractors providing base support has generally paralleled the number of U.S. troops in Iraq. Meanwhile, as the focus of the U.S. assistance programs shifted away from large-scale infrastructure projects, the number of construction contractors has declined and the percentage of contractors providing security has increased. Third-country nationals currently make up a larger percentage of total DoD contractors than they have at any previous time, and the percentage of Iraqi nationals has declined to its lowest point yet. For details on the types of service provided by DoD contractors, and their national origin, see Figure2.13. pp. 46-47 Tracking Contractors and Grantees in Iraq On March 23, 2010, the House Armed Services Committee’s Subcommittee on Oversight and Investigations held hearings on grants and contracts in Iraq and Afghanistan. Among the topics discussed was the ongoing development of the Synchronized Predeployment and Operational Tracker (SPOT) database, which is intended to serve as a coordination tool for U.S. government agencies, contractors, and grantees. Representatives of DoD, DoS, USAID, and GAO stated the following: •According to DoD, approximately 75% of its contractor personnel were entered into SPOT. Registering Iraqi contractors who are not operating at U.S. military bases or DoD installations is the largest remaining challenge. DoD is using SPOT to track its contractor draw down. •According to DoS, it has expanded its use of SPOT to include grantees as well as contractor personnel. Additionally, DoS uses SPOT-generated Letters of Authorization (LOAs) to grant privileges to contractors–such as meals and common access cards (CACs)–and can track contractor movements in-country using LOA reader machines. •According to USAID, the administrative and financial burden of entering individual data for all its partners (which it defines as contractors and grantees) outweighs the benefits, because many do not require LOAs. Additionally, there are concerns that registration of USAID partners working in certain communities could endanger their safety. USAID has arranged with DoD to enter personal data for partners that require LOAs and aggregate data for partners that do not. •According to GAO, its audits have revealed that inadequate information about contractors and grantees may inhibit planning, increase costs, and introduce unnecessary risk. Agencies have made some progress in implementing SPOT, but their efforts still fall short in terms of having complete and reliable data to fulfill statutory requirements and improve management and oversight. Alternatives to SPOT, including periodic surveys, are generally incomplete and unreliable, particularly for identifying trends and drawing conclusions. According to further testimony by DoD and USAID, those agencies have reached an agreement whereby USAID will provide aggregate data for grantees–broken down by the broad categories of U.S., local-national, and third-country nationals–which should be sufficient to allow them to use SPOT as a management tool. The GAO representative acknowledged that different types of data may be required for different classes of contractors and grantees, and that it was up to the agencies to determine what worked best and to coordinate among themselves. pp. 47-48 FAPIIS Launched To Help Evaluate Contractors On April 22, 2010, the General Services Administration (GSA) launched the Federal Awardee Performance and Integrity Information System (FAPIIS), which is “designed to significantly enhance the government’s ability to evaluate the business ethics and quality of prospective contractors competing for federal contracts and to protect taxpayers from doing business with contractors that are not responsible sources.” The system was designed to meet the requirements of Section 872 of the Duncan Hunter National Defense Authorization Act of 2009 (P.L.110-417), which directed GSA to establish a database to track contractor integrity and performance. Before mid-2009, the only government-wide information available to contracting officers were lists of debarment and suspension actions, which are maintained in the Excluded Parties List System (ELPS). The FAPIIS expands the scope of information available to contracting officers, including: •records of contractor performance •contracting officers’ non-responsibility determinations •contract terminations for default or cause •agency defective pricing determinations •administrative agreements used to resolve a suspension or debarment •contractor self-reporting of criminal convictions, civil liability, and adverse administrative actions p. 48 Private Security Contractor Support A June 2010 RAND study offers new details on the unprecedented use of PSC support in Iraq over the past seven years. According to the report, between 2003and 2007, the main employers of PSCs–DoD, DoS, and USAID–paid more than $5 billion directly to security contractors. During that same period, prime contractors in Iraq paid an additional $3 billion-$6 billion for PSC services. The U.S. military has called on PSCs for a wide range of services, including static security for bases, convoy security, force protection for USACE, personal security details, and coordination of military activities through the Reconstruction Operations Center. DoS employs several types of armed contractors to staff security programs in Iraq, including diplomatic security special agents, marine security guards, third-country nationals, and personal security specialists. According to DoD regulations, “PSC personnel are not authorized to participate in offensive operations and must comply with specific USCENTCOM Rules for the Use of Force,” which allow the use of deadly force only in self-defense and defense of facilities or property (as specified in their contracts) or for “prevention of life-threatening acts directed against civilians.” USF-I provides guidance on the rules of use of force and issues weapons cards to approved PSC personnel, allowing them to carry weapons. The contractor’s signature on the weapons card acknowledges an understanding of these rules. For the totals of armed PSCs serving DoD, DoS, and USAID, see Table 2.16. For more details on contractors in Iraq, see the Reconstruction Funding Management and Uses subsection of this Report. As SIGIR reported last quarter, some GOI agencies and personnel have harassed PSCs this year. The U.S. Embassy’s Regional Security Office provided additional examples of undue bureaucratic restrictions and operational challenges reported this quarter: • In mid-June, a non-Chief of Mission PSC, on an administrative move without a client, reached an entry control point and prepared to present documents. IA personnel reportedly removed PSC personnel from their vehicles and assaulted them under the threat of deadly force. PSC personnel were arrested, equipment and vehicles confiscated, and the PSC members taken to another location where, reportedly, they were once again assaulted. The reasons for the IA’s actions are unknown. • The MOI Private Security Companies Licensing and Registration Office has reportedly been issuing arbitrary orders and imposing deadlines that are difficult to meet, which strains the MOI’s capacity to manage its own workload. •Some PSCs report waiting months for the MOI to approve annual license renewal applications, requiring companies to file a renewal even before the original application has been adjudicated. The Regional Security Office (RSO) is uncertain whether this is intentional or simply the result of inaction. pp. 58-59

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6 Reasons Why The U.S. Economy In Better Shape Than You Think: Milken Institute (PHOTOS)

July 31, 2010

First the bad news: a growing number of economists suggest the U.S. has significant chance of falling into another recession — and today’s G DP numbers aren’t much comfort. The good news, however, is that not every prominent economist shares that view. Ross Devol, the Executive Director of Economic Research, at the Milken Institute , a non-partisan think tank based in Santa Monica, California, believes “a return to modest but sustainable growth is close at hand.” In light of Devol’s lamentations over the “volume and vitriol” that “bleeds over into the realm of economic forecasting” contained in his latest paper “From Recession to Recovery: Analyzing America’s Return to Growth” , we’ll keep this brief, and let his most recent predictions do the talking. Among Devol’s forecasts include a strong recovery in business investment in equipment, particularly in IT and software, more robust U.S. exports driven by emerging-market demand and policy, a more upbeat consumer and record low long-term interest rates. All of which, according to Devol, will induce the U.S. to add 3.1 million jobs in 2011 and another 2.6 million in 2012, translating into real GDP growth of 3.7 percent in 2011, and then 3.8 percent in 2012. Devol paints a pretty picture. Here it is, in chart-form. And because, as Robert Shiller points out , “fear of a double-dip recession could cause one,” enjoy these slides and think positive.

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BP CEO Tony Hayward’s Worst Gaffes: A Series Of PR Nightmares (PHOTOS, VIDEO)

July 31, 2010

When BP announced this week that CEO Tony Hayward would be stepping down in October , very few were surprised. While BP’s top brass were united in defending Hayward’s tenure , it’s hard to argue that BP would be better served with Hayward at the helm. Disregarding for a moment that Hawyard’s time at BP has been noted for an attention to the bottom line rather than safety , the public statements he’s made in the past few months have repeatedly enraged an already disgusted public. Whether it was because of particularly ill-timed yachting trip, a claim that the environmental damage to the Gulf would be “modest,” or any other groan-worthy gaffes, Hayward’s public image became a crisis unto itself. For a series of object lessons in how not to handle a major environmental and corporate crisis, check out Hayward’s biggest missteps below:

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TCW To Split Off 115B Unit

July 31, 2010

A group of money managers at TCW Group are splitting off their 115 billion operation form the Los Angelesbased firm

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Dodd Pushing FDIC Chair Sheila Bair To Run Consumer Financial Protection Bureau

July 30, 2010

Sen. Christopher Dodd approached Federal Deposit Insurance Corp. Chairman Sheila Bair in recent days to gauge whether she would be interested in running the new consumer-protection agency, according to people familiar with the matter. The chairman of the Senate Banking Committee’s behind-the-scenes courtship of Ms. Bair suggests he is trying to find a nominee who might win favor in the Senate. It will be Mr. Dodd’s job to move the nominee through a preliminary vote on his committee and then defend the person’s record on the Senate floor.

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Vermont Seeks Stable Value Servicer

July 30, 2010

The State of Vermont Office of the State Treasurer is looking for stable value investment management services and contract wrap services for a retirement fund

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Video: Gartenberg Discusses Outlook for a RIM Tablet Computer: Video

July 30, 2010

July 30 (Bloomberg) — Michael Gartenberg, partner at research firm Altimeter Group LLC, talks about the possibility of a tablet computer by Research In Motion Ltd., the makers of the BlackBerry handheld device, and the outlook for a Facebook Inc. initial public offering.¶ Gartenberg speaks with Pimm Fox on Bloomberg Television’s “Taking Stock”. (Source: Bloomberg)

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Oil Spill Legislation Passes House

July 30, 2010

WASHINGTON — The House approved a bill Friday to boost safety standards for offshore drilling, remove a federal cap on economic liability for oil spills and impose new fees on oil and gas production. Democratic leaders hailed the bill as a comprehensive response to the Gulf of Mexico oil spill and said it would increase drilling safety and crack down on oil companies such as BP. Companies with significant workplace safety or environmental violations over the preceding seven years would be banned from new offshore drilling permits. Republicans and some-oil state Democrats opposed the measure, calling it a federal power grab that would raise energy prices and kill thousands of American jobs because of the new fees and liability provision. Rep. Nick Rahall, D-W.Va., the bill’s main sponsor, said the legislation would be a tribute to the 11 oil rig workers who were killed when the BP well exploded in April by creating strong new safety standards for offshore drilling, ending the revolving door between government regulators and industry and holding BP and other oil companies accountable for accidents. “While we may not know the exact cause of the incident, we clearly know what contributed to it. A culture of cozy relationships that had regulators interviewing for jobs on the same rigs they were supposed to be inspecting,” said Rahall, who is chairman of the House Natural Resources Committee. The legislation, which passed 209-193, has yet to be taken up in the Senate, where partisan disagreements will likely delay final consideration of a joint House-Senate bill until after the August congressional recess. The House bill includes a provision sponsored by Rep. Charlie Melancon, D-La., that would modify a six-month moratorium on deepwater drilling, so that some drilling permits could be approved on a rig-by-rig basis if the Interior Department determines a rig meets new safety requirements. The drilling moratorium imposed by Interior Secretary Ken Salazar would remain in effect, and Salazar would retain power over whether to approve a permit. The bill also would remove the current $75 million cap on economic damages to be paid by oil companies after major spills and increases to $300 million the financial responsibility offshore operators must demonstrate in most cases. And it would create new “conservation” fees on oil and natural gas extracted from land or water controlled by the federal government. Those provisions prompted sharp criticism from Republicans. “In typical Democrat fashion, this bill overtaxes, over-regulates, and costs American jobs,” said Rep. John Mica, R-Fla. Rep. Doc Hastings of Washington state, the top Republican on the House Natural Resources Committee, said removing the liability cap could devastate small and medium-sized drillers. Hastings called the new fees on oil and gas production a “$22 billion energy tax” that would cost jobs and raise energy prices. The Congressional Budget Office estimates that the $2 per barrel fee on oil and a similar fee on natural gas could bring in $22.5 billion over the next decade. Earlier Friday, the House approved a separate bill to extend whistleblower protections to oil and gas workers who report hazardous conditions or other problems. The whistleblower bill will be added to the oil spill legislation when it is sent to the Senate. “A whistleblower may be the only thing standing between a safe workplace and a catastrophe,” said Rep. George Miller, D-Calif., the bill’s sponsor. “No worker should ever have to choose between his life and his livelihood.” Rep. Jay Inslee, D-Wash., said the bill setting new drilling standards and removing the liability cap was the least Congress could do to respond to such a major catastrophe. Rahall said the legislation would end a “trust-but-don’t-verify” attitude about safety where drilling plans were rubber stamped by federal regulators and industry often wrote its own rules. The bill would put into law actions already taken by the Obama administration to break Interior’s former Minerals Management Service into three parts, separating safety enforcement and regulation from economic activities such as issuing oil leases and collecting royalties. Since the BP spill the agency has been renamed the Bureau of Ocean Energy Management, Enforcement and Regulation, and a new director, Michael Bromwich, has been appointed. Associated Press writer Frederic J. Frommer contributed to this story.

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Dan Dorfman: Watch out for ‘Black Friday’

July 30, 2010

Common sense tells you that if you keep walking in a field riddled with land mines, you stand a good chance of getting killed. Financially, the same fate may well await investors who’ve been swallowing the party line from those economic hucksters in Wall Street and the White House. These are the folks who have been relentlessly assuring us for months that we’re in the early stages of a sustainable economic expansion. After Friday’s report of slower than expected second-quarter GDP growth of 2.4%, it should be obvious that such assurances bear no resemblance to reality. These hucksters almost remind me of the people I occasionally come across on the street who carry on vigorous conversations and arguments with themselves, schizophrenics who have no sense of reality. Unfortunately, many investors, some market watchers insist, are being suckered, Including those non-thinking daredevil typess who plowed into stocks following Friday’s early morning Dow selloff of more than 80 points in response to the glum economic tidings. As a result of this buying, the Dow staged an impressive recovery, winding up the day with a tiny decline of just over a point.. The reason for the buying, so I’m told: a general view that the disappointing GDP report was little more than a minor and temporary interruption in what still remains a growing economy. Some economic watchers, though, such as Madeline Schnapp, a crack and savvy economist, disagree, suggesting the GDP report was another confirming signal that economic growth has slowed. Equally significant in her mind is that the Bureau of Economic Analysis, which came up with the GDP figure, also revised downward GDP numbers dating back to 2007. It means, she says, the recession was much worse than we thought, that it could take a lot longer than expected for the economy to rebound and maybe, like in the past three years, the latest 2.4% growth number is overstated. “Who knows,” she says. “Maybe we’re only really growing at 2%.” What’s more, Schnapp, the economic chief at West Coast liquidity tracker TrimTabs Research, which is partly owned by Goldman Sachs, figures investors, come this Friday, will get another loud, clear and painful message about the true state of the economy.. That’s the release date for which she predicts will be a disappointing July employment report. In effect, she’s challenging the over-riding view that the month will show the creation of 50,000 to 100,000 new jobs. In contrast, her forecast calls for a flat to down month, based on her expectations of a layoff of 75,000 Census Bureau workers and the creation of 50,000 to 75,000 private sector jobs. So, as Schnapp sees it, the month could produce an overall loss of 25,000 jobs. “It should be a bad Friday for the stock market,” she says, versus, she points out, this past week when stock prices galore moved higher in reaction to the recent bevy of positive second-quarter earnings reports, 80% of which were above expectations. Hong Kong Trader Selwyn Ortz tells me if Schnapp is right in her assumption that jobs were actually lost in July, ” we could see a Black Friday with all hell breaking loose.” Making matters worse this week, Schnapp observes, will be additional signs of economic weakness, reflected in a trio of economic indicators, namely pending home sales, manufacturing activity and personal income. Schnapp reckons sustainable economic growth will remain elusive until there’s a recovery in the housing market, which she contends is presently in a depression. Unfortunately, she doesn’t see a meaningful recovery anytime soon, an outlook that is supported by some pretty depressing numbers. Among them: an unsold inventory of 4.2 million homes, or an 8.9 months supply, is sitting on the market; mortgage delinquencies, currently totaling 7.3 million, are growing at the rate of one million a quarter, and about 25% of all mortgages are under water As such, Schnapp sees home prices — which are down 25% to 40% since mid-2007– perhaps dropping another 10% to 15%. Factoring in, as well, the end of the stimulus, stalling consumption, little or no home construction, the collapse in lending, the onset of higher taxes and the expiration of the Bush tax cuts, Schnapp figures consensus expectations of GDP growth of a little above 3% in 20010 and 2011 may be too buoyant and that 2% may be closer to the mark. Schnapp says it’s clear the early phase of the recovery has stalled. “And slowing economic growth going forward,” she observes, “means no rebound in 2011.” As for the stock market, she notes you have two competing forces, with the downside case supported by slowing GDP and the bull case by higher earnings. “The bear case,” she predicts, “will win because the economy is weaker than most economists expected.” Incidentally, in a commentary to clients a number of months ago, Schnapp warned of slowing economic growth. I subsequently reported her thoughts, which prompted one angry HuffPost reader to complain that I was duped into quoting “a terrorist who was trying to destroy America.” The reader was wrong. “Mad Madeline,” as he described her, wasn’t dispensing bombs, but a good old fashioned commodity called common sense. What do you think? E-mail me at Dandordan@aol.com .

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Video: Sanford C. Bernstein’s Howard Likes Kellogg, Kraft: Video

July 30, 2010

July 30 (Bloomberg) — Alexia Howard, an analyst at Sanford C. Bernstein & Co., talks about the outlook for Kellogg Co., Kraft Foods Inc. and Sara Lee Corp. Howard speaks with Pimm Fox on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

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Video: U.S. Stocks Rise as Consumer Confidence Overshadows GDP: Video

July 30, 2010

July 30 (Bloomberg) — Bloomberg’s Gigi Stone reports on the performance of the U.S. equity market today. Most U.S. stocks rose, extending the biggest monthly gain in a year for the Standard & Poor’s 500 Index, as improving data on consumer confidence and business activity tempered concern the economic rebound is slowing. Bloomberg’s Pimm Fox also speaks. (Source: Bloomberg)

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Jerry Chautin: Uniquely Crafted Business Plans Are Needed to Raise Capital

July 30, 2010

Some pundits claim that there is little President Barack Obama and Congress can do to stimulate the creation of permanent jobs. They say that it is best left to market forces. Others believe that well-placed tax credits, and pumping money into community banks, with less than $10 billion in assets, will create jobs. That’s because community banks are more dependable small-business lenders. And small businesses, at least the larger ones with over 100 employees, are more apt to expand and hire workers. But whether or not we get government help, now is the time to think about dusting off your old business plan as the economy improves — especially if you will need capital to expand. A business plan is required to obtain a loan or venture capital. It is uniquely designed as a sales tool to get financing. Because that is its goal, the emphasis is different than one written as a roadmap or a management guide to control your business. Accordingly, all financial statements should include footnotes with comprehensive narratives depicting how the income and operating-expense projections were derived. The explanations should refer back to historical data and extensive market research, contributing reasonableness to the numbers — especially projections. In that way, whoever reads the business plan will be more likely to accept its assertions. “It’s funny how people look for capital and have no idea that a business plan is what they need in order to present their concept/model and the blueprint for building their business,” Burke Franklin wrote in an e-mail to me. He is the founder and chief executive of California-based JIAN Software and developed Biz Plan Builder. “The idea was (and still is) that a good business plan won’t sell a bad idea,” he wrote. “But a bad business plan could kill an otherwise good idea.” In lenders’ parlance, the difference between a good idea and bad idea has more to do with key financial ratios , the borrower’s industry-related experience, and how promptly the applicant pays her bills. So unless she is making a substantial cash investment, has management and financial success in the same field, and an acceptable credit score, her application will likely be rejected. Additionally, the applicant may have to pledge meaningful collateral unless the company has demonstrated several years of adequate cash flow to make debt service payments. Adequate means covering the proposed loan payments with a cushion left over for an unexpected decrease in cash flow. But telling is not selling, and your business plan has to document your ability to repay the loan. And to sell anything, the first step is to know your prospect — the lender or investor. Yet even super salespeople drop into a lender’s office and start pitching their proposal without understanding what kinds of deals the bank closed in the past six months and its basic underwriting criteria. Does the lender make loans to new companies? How much of my own cash investment does it require? Does it lend without real estate collateral? Does it make loans in my industry? Must I already have a depository relationship with the lender? What are its maximum and minimum loan amounts? You have to ask the right questions and address them in your business plan. An effective business plan presentation begins with three personalized exhibits; a one-page cover letter, a two-page executive summary and a one-page balance sheet called the “sources and uses of funds.” That is sufficient to make a preliminary decision. The rest of the documents affirm what is written in these three exhibits. I don’t know if the JIAN Biz Plan Builder personalizes its business plan. But Franklin, the company’s CEO, recognizes that business plans need to be tailored toward the person who will be reading it. “I challenge people to understand their audience and to think like an investor or lender,” he says. Most software-generated business plans are too generic and prevent you from creating a personalized document reflecting the uniqueness of your business. They are difficult to design as marketing tool to sell the distinctiveness of your business to a lender or investor. In most instances you are better off with an outline and doing the heavy lifting yourself. The U.S. Small Business Administration has a business-planning guide to get you get started. You can also get free help from SBA’s business partners, SCORE , Small Business Development Centers and Women’s Business Centers in your area. Keep in mind, however, that extensive market research and personalizing your business plan is the key to landing financing. Jerry Chautin is a volunteer SCORE business counselor, business columnist and SBA’s 2006 national “Journalist of the Year” award winner. He is a former entrepreneur, commercial mortgage banker, commercial real estate dealmaker and business lender. You can follow him at www.Twitter.com/JerryChautin

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Video: Cliggott Sees `Steady, But Very Slow’ Economic Growth: Video

July 30, 2010

July 30 (Bloomberg) — Doug Cliggott, U.S. equity strategist at Credit Suisse, talks about the outlook for the U.S. economy. Cliggott and George Dowd of Newedge USA LLC talk with Matt Miller, Adam Johnson and Dominic Chu on Bloomberg Television’s “Street Smart.” (Excerpt. Source: Bloomberg)

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David Isenberg: The GAO Transcripts, Part 23: PSC, What’s That? A U.S. Military Perspective

July 30, 2010

This is the twenty third installment of the Government Accountability Office interview transcripts that were prepared pursuant to the July 2005 GAO report ” Rebuilding Iraq: Actions Needed To Improve Use of Private Security Providers .” Other than the fact that this was done with someone from the U.S. military I do not know who the interviewee is. But he makes it clear that his unit’s deployment in Iraq would have benefited from more pre-deployment training on how to deal with private security and other contractors. Any training would have been better than what was available five years ago, which was nothing, i.e., “in his experience he did not believe there was any pre-deployment training which dealt specifically with the presence of PSCs or NGOs in the battlespace.” Standard disclaimer: I have put in ( _____ ) to reflect those words of phrases which have been blacked out in the transcript. I have also put in the underlining as it appeared in the original transcript. As in the transcript, I have left out letters from various words, even when it seems obvious what the word is. Prepared by: Mattias Fenton Index: Date Prepared: May 19, 2005 DOC Number: 1330571 Reviewed by: Carole Coffey DOC Library: Type library name here Job Code: 350544 Record of Interview Title Telephone interview w ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ Purpose To determine to what degree the ____________ received guidance on what to expect/how to deal with private security contractors in the battlespace prior to deployment to Iraq. To provide answers to questions listed below. Contact Method Teleconference Contact Place Also contact ____________ ____________ ____________ Contact Date May 11, 2005 Participants ____________ ____________ Carole Coffey, GAO, DCM Mattias Fenton, GAO, DCM Comments/Remarks: Duration of this phone call was roughly 10 minutes. Q1: What, if any guidance has the ____________ received about working/coordinating with private to security contractors (PSCs) in Iraq? ____________stated that the ____________ not received any such specific guidance regarding either working and coordinating with or regarding its responsibilities towards PSCs. He referred to an MNF-I directive dated approx. late March 2005 from ____________ which specified that all units in Iraq implement a system of badging, which would help identify Coalition units as well as contractors and other non-combatants. ____________ promised to forward a link to the text of this directive per SIPRNet. According to ____________ d limited contact with PSCs while in country. In the first deployment to Iraq their battlespace included all of northern Iraq up to Mosul and the only time they dealt with PSCs was when PSC details were accompanying senior CPA officials. Q2: Does the pre-deployment syllabus include any instruction on dealing with PSCs or otter contractors working in Iraq? Page 1 Record of Interview ____________ stated that in his experience he did not believe there was any pre-deployment training which dealt specifically with the presence of PSCs or NGOs in the battlespace. Th ____________ onducted a pre-deployment training exercise in which a NGO employee was kidnapped; the mission of this particular exercise is to stage a rescue operation. While there are four simulated vehicle entry points at ____________ the training which takes place there are primarily simulated searches for VBIEDs — there is no drill relating to checkpoint or convoy procedures specific to PSCs. Q3: Is there any discussion of the Reconstruction Operations Center (ROC) or the Project and Contracting Office (PCO) in pre-deploy vent training? No. See above. Page 2 Record of Interview

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Video: Cliggott Sees `Steady, But Very Slow’ Economic Growth: V

July 30, 2010

July 30 (Bloomberg) — Doug Cliggott, U.S. equity strategist at Credit Suisse, talks about the outlook for the U.S. economy.¶ Cliggott and George Dowd of Newedge USA LLC talk with Matt Miller, Adam Johnson and Dominic Chu on Bloomberg Television’s “Street Smart.” (Excerpt. Source: Bloomberg)

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Video: Bloomberg’s Jaroslovsky Discusses E-Reader Market: Video

July 30, 2010

July 30 (Bloomberg) — Bloomberg’s Rich Jaroslovsky talks about the outlook for the e-reader market including Amazon.com’s Kindle and Apple Inc.’s iPad. Jaroslovsky speaks with Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Video: IMF’s Towe Sees `Wall’ of Maturing Debt for U.S. Banks: Video

July 30, 2010

July 30 (Bloomberg) — Christopher Towe, deputy director of monetary and capital markets at the International Monetary Fund, discusses the outlook for the U.S. financial system. The U.S. financial system remains fragile and banks subjected to additional economic stress might need as much as $76 billion in capital, according to the results of IMF stress tests. The findings, released today as part of a broader IMF report on the U.S. financial system, suggested that while the nation’s banking system is stable, it remains vulnerable. (Source: Bloomberg)

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Tax Holidays: States Gamble On Back-to-School Shopping Deals To Stimulate Consumer Spending

July 30, 2010

Today kicks off the first tax holiday for the back-to-school shopping season, but low consumer morale may end up causing a further drain on state governments instead of stimulating the retail industry. With the lure of 7-percent savings on clothing and footwear, Mississippians will head to the malls today and tomorrow to stock up on fall clothes and new shoes, but several municipalities opted out of the holiday this year due to economic concerns over lost sales tax revenue. According to Kathy Waterbury, spokesperson at the Mississippi Department of Revenue, the holiday is intended to “give a break to consumers” right before the start of the school year, but the waived tax may not be enough to rev up shopping. “I think consumers are still being very cautious,” said Lynn Franco, Director of Consumer Research Center at the Conference Board. “They will weigh those spending decisions very carefully.” The Conference Board’s Consumer Confidence Index had been increasing since a low in February, but confidence in the economy started to slip due to low job growth. The index dropped from 54.3 to 50.4 in July, which is only a slight improvement over last July’s level of consumer confidence. When asked whether the back-to-school tax break would spur shopping, Franco replied, “while it will definitely help sales, I don’t think, in of itself, it will be sufficient.” About a decade ago, states began to suspend taxes on school-related items at the end of the summer to help residents out with school expenses, and now more than ever consumers need all of the help that they can get. In fact, Maryland and Illinois have hopped on the bandwagon this year by designating tax-free days in August, and Florida is reviving their event after a two-year lapse. “Illinois has a high unemployment rate, and people have lost wages because their hours have been cut,” said Susan Hofer, Communications Manager for Governor Quinn. “We’ve seen retail stores throughout the summer really suffering with low traffic.” Governor Quinn coordinated with the Illinois Retail Merchants Association to encourage retailers to offer additional discounts during the tax break to incentivize consumers to spend even more during the holiday. Though offering discounts may lure reluctant shoppers to the mall, there is concern among state governments that the loss of tax revenue may hurt their ailing budgets. After several years of hosting a back-to-school tax break holiday, the Georgia legislature opted not to renew it. According to Bert Brantley, spokesperson for Governor Perdue, the state “loses” approximately $13 million in tax revenue during the holiday. “There is a decent argument to be made that people do all of their shopping in that one weekend,” said Brantly. “I don’t know that they really spend any more. People may even spend less to get the same.” Some analysts, however, are more optimistic about the back-to-school shopping season in the wake of last year’s massive spending cutback. The National Retail Federation’s annual Consumer Intentions and Actions Back to School survey predicts that each American household will spend on average $606.40 on back-to-school items, compared to the estimated $548.72 spent last year. “Most parents just ‘made do’ with the supplies that they had last year,” said Ellen Davis, Vice President and Spokesperson at the NRF. “Parents can’t make do with everything again this year. There is more of a pent-up demand situation.” Regardless of the level of success of the back-to-school shopping this coming month, even minimal increases in spending will be a positive sign of recovery and improvement in the retail industry; after all, “we are not looking to break any retail records this year,” added Davis.

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Tax Holidays: States Gamble On Back-to-School Shopping Deals To Stimulate Consumer Spending

July 30, 2010

Today kicks off the first tax holiday for the back-to-school shopping season, but low consumer morale may end up causing a further drain on state governments instead of stimulating the retail industry. With the lure of 7-percent savings on clothing and footwear, Mississippians will head to the malls today and tomorrow to stock up on fall clothes and new shoes, but several municipalities opted out of the holiday this year due to economic concerns over lost sales tax revenue. According to Kathy Waterbury, spokesperson at the Mississippi Department of Revenue, the holiday is intended to “give a break to consumers” right before the start of the school year, but the waived tax may not be enough to rev up shopping. “I think consumers are still being very cautious,” said Lynn Franco, Director of Consumer Research Center at the Conference Board. “They will weigh those spending decisions very carefully.” The Conference Board’s Consumer Confidence Index had been increasing since a low in February, but confidence in the economy started to slip due to low job growth. The index dropped from 54.3 to 50.4 in July, which is only a slight improvement over last July’s level of consumer confidence. When asked whether the back-to-school tax break would spur shopping, Franco replied, “while it will definitely help sales, I don’t think, in of itself, it will be sufficient.” About a decade ago, states began to suspend taxes on school-related items at the end of the summer to help residents out with school expenses, and now more than ever consumers need all of the help that they can get. In fact, Maryland and Illinois have hopped on the bandwagon this year by designating tax-free days in August, and Florida is reviving their event after a two-year lapse. “Illinois has a high unemployment rate, and people have lost wages because their hours have been cut,” said Susan Hofer, Communications Manager for Governor Quinn. “We’ve seen retail stores throughout the summer really suffering with low traffic.” Governor Quinn coordinated with the Illinois Retail Merchants Association to encourage retailers to offer additional discounts during the tax break to incentivize consumers to spend even more during the holiday. Though offering discounts may lure reluctant shoppers to the mall, there is concern among state governments that the loss of tax revenue may hurt their ailing budgets. After several years of hosting a back-to-school tax break holiday, the Georgia legislature opted not to renew it. According to Bert Brantley, spokesperson for Governor Perdue, the state “loses” approximately $13 million in tax revenue during the holiday. “There is a decent argument to be made that people do all of their shopping in that one weekend,” said Brantly. “I don’t know that they really spend any more. People may even spend less to get the same.” Some analysts, however, are more optimistic about the back-to-school shopping season in the wake of last year’s massive spending cutback. The National Retail Federation’s annual Consumer Intentions and Actions Back to School survey predicts that each American household will spend on average $606.40 on back-to-school items, compared to the estimated $548.72 spent last year. “Most parents just ‘made do’ with the supplies that they had last year,” said Ellen Davis, Vice President and Spokesperson at the NRF. “Parents can’t make do with everything again this year. There is more of a pent-up demand situation.” Regardless of the level of success of the back-to-school shopping this coming month, even minimal increases in spending will be a positive sign of recovery and improvement in the retail industry; after all, “we are not looking to break any retail records this year,” added Davis.

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Video: Anthony Sanders Discusses Regulation of Fannie, Freddie: Video

July 30, 2010

July 30 (Bloomberg) — Anthony Sanders, finance professor at George Washington University, talks with Bloomberg’s Lori Rothman about the regulation of government sponsored enterprises, including Fannie Mae and Freddie Mac. (Source: Bloomberg)

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Video: Price Says a Payroll Tax Holiday Would Boost Economy: Video

July 30, 2010

July 30 (Bloomberg) — Russell Price, a senior economist at Ameriprise Financial Inc., talks out the outlook for the U.S. economy and the potential benefits of a payroll tax credit. Price speaks with Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Zach Carter: Where Are The Prosecutions? SEC Lets Citi Execs Go Free After $40 Billion Subprime Lie

July 30, 2010

What is the penalty for bankers who tell $40 billion lies? Somewhere between nothing and a rounding-error on your bonus. The SEC just hit two Citigroup executives with fines for concealing $40 billion in subprime mortgage debt from investors back in 2007. The biggest fine is going to Citi CFO Gary Crittenden, who will pay $100,000 to settle allegations that he screwed over his own investors. The year of the alleged wrongdoing, Crittenden took home $19.4 million. That’s right. Crittenden will lose one-half of one percent of his income from the year he hid a quagmire of bailout-inducing insanity from his own investors. That’s it. No indictment. No prison time. Crittenden doesn’t even have to formally acknowledge any wrongdoing. In 2007, as financial markets were freaking out about the subprime situation, Citi repeatedly told its investors that it owned just $13 billion in subprime mortgage debt. It was true–if you didn’t count an additional $40 billion in subprime debt that the company was also holding onto. Citi’s CEO at the time, Chuck Prince, has not been charged with anything. As Yves Smith emphasizes , all of the top financial officers of every major corporation are responsible for the accuracy of their quarterly financial statements. Lying on those statements is a federal crime. This is the sort of thing that securities fraud cases are built around. The SEC’s own statements about what went on at Citi are damning. If the agency can make this kind of information public, they ought to be pursuing criminal prosecutions. The SEC says that senior Citi management had been collecting information about the company’s subprime situation as early as April 2007, but repeatedly cited the $13 billion figure to investors over the next six months, waiting to acknowledge the additional $40 billion in subprime debt until November 2007. The SEC also says that Crittenden knew the “full extent” of Citi’s subprime situation by September at the latest , but the company continued to cite $13 billion in earnings reports through October. Citi’s subprime shenanigans had consequences for taxpayers, pushing the company to the brink of total collapse and prompting one of the biggest bailouts of 2008. Phil Angelides and the Financial Crisis Inquiry Commission deserve a lot of credit for highlighting the absurdity of Citi’s actions in a hearing on April 7 of this year (the key passage starts on page 368 of this pdf transcript ). Angelides’ line of questioning revealed that even Citi’s board knew that the subprime exposure was much greater than what the company was claiming in public. Citi’s board at the time included Robert Rubin, former Treasury Secretary and architect of much of the deregulation that lead to the current crisis who took home $120 million for his work at Citi. Either the SEC or the Justice Department could be pursuing criminal cases against Citi executives. What does it take to get the Justice Department’s attention on a financial fraud case? You have to launder $380 billion in drug money, and even then, DOJ lets you off with a slap on the wrist . The DOJ caught Wachovia doing just that, and the bank is getting off with a minor fine that won’t even make a dent in it’s second-quarter profits. The Citi settlement is worse than a get-out-of-jail free card for Crittenden, Prince and their cohorts. The SEC actually fined Citi’s shareholders $75 million for the alleged wrongdoing of their executives. For some varieties of corporate misconduct, like Wachovia’s drug money laundering, hitting shareholders with the fine is appropriate. Wachovia’s money laundering operations directly enriched the company and its shareholders. This was not the case with Citi’s subprime scandal. Citi’s executives were hurting their own shareholders . Instead of meting out serious punishment to those executives, the SEC is fining Citi’s shareholders , the very people wronged in the incident. This deference to the elites who wrecked the economy just keeps playing out. When Bank of America lied to its shareholders about billions of dollars in bonus payments it was about to make, the SEC decided to fine BofA shareholders and let the firm’s executives off the hook. The decision-makers at Wachovia who allowed the firm to funnel drug money despite repeated warnings by whistleblowers have not been indicted. Nobody at Washington Mutual has been indicted despite clear evidence of rampant mortgage fraud at the firm . Lehman Brothers’ repo 105 accounting scam is going unpunished, as are similar schemes at other banks including Bank of America. After much public relations flogging, the SEC let Goldman Sachs off easy. More than 1,100 bankers went to jail in the aftermath of the savings and loan crisis. Massive financial crises simply do not occur without widespread fraud. The failure to prosecute that fraud poses systemic risks for the global economy. With too-big-to-fail behemoths dominating the financial landscape, the prospect of prison is the only serious check on executives interested in cannibalizing the economy for personal gain. If the SEC and the Department of Justice continue to let executives get away with outrageous acts without even taking the case to court, our financial system is doomed to repeat the same excesses and abuses we’ve seen over the past decade. If Crittenden did what the SEC claims he did, he screwed over his own investors and scored a huge bonus in the process. Everybody on Wall Street understands the implications: breaking the law is a great way to make a lot of money. When a class of elites can thumb its nose at the law with impunity, the result is not only a threat to the efficiency of our economy, but a threat to the basic functioning of our democracy.

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Video: Tice Says Double-Dip Recession `In the Cards’ for U.S.: Video

July 30, 2010

July 30 (Bloomberg) — David Tice, chief portfolio strategist for bear markets at Federated Investors Inc, talks about the outlook for the U.S. economy. Growth in the U.S. slowed to a 2.4 percent annual rate in the second quarter, less than forecast, reflecting a larger trade deficit and an easing in consumer spending. Tice, manager of the Federated Prudent Bear Fund, speaks with Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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GM’s Chevy Volt Production To Be Boosted By 50 Percent To Meet Demand

July 30, 2010

DETROIT — General Motors said Friday that it is boosting production capacity for its new Chevrolet Volt due to strong public interest in the electric car that goes on sale this year. GM will now have a production capacity of 45,000 vehicles in 2012, up from previous plans for 30,000 vehicles. The automaker made the announcement as President Barack Obama toured the Volt production facility in Detroit. The federal government sank $50 billion into GM as part of the broader rescue of the auto industry, giving taxpayers a majority stake in the nation’s largest auto company. The Volt, priced at $41,000, can go 340 miles on a single battery charge, according to GM. The vehicle is powered purely by the battery in the first 40 miles, and then uses a small tank of gasoline to create an additional charge for the remaining 300 miles. Chevrolet dealers began taking orders this week for the 2011 model. GM recently raised the number of launch markets for the Volt from three to seven.

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Dwindling Retirement Savings ‘Undiscussed Explosive Bomb’ Of Recession

July 30, 2010

After working in executive management for over ten years with a steadily increasing salary, Rick Stephens, 51, was laid off from his job in June 2008. Two years of steady unemployment later, he has sold his car, moved in with his 75-year-old father and blown through all his retirement savings to stay afloat. “I pay my bills with what is left of the savings I accumulated by being frugal all my life, but I’m going through that pretty fast,” he said. “I have tapped my IRA, and the result of that is I will be heavily taxed on it next April. I honestly believe that there will be no recovery from this. If there is a recovery, it will be too late for me, as I will have exhausted my savings and my retirement that I had socked away by not living the high life.” Stephens’ predicament is an increasingly common one. Aside from stagnant wages, soaring unemployment and plummeting home values, the major tragedy of this recession is the havoc it has wreaked on the retirement incomes of millions of Americans who have planned and saved their entire lives, only to watch that money drain out of their accounts much sooner than they anticipated. Retirement statistics are grim. The percentage of American workers who said they have less than $10,000 in savings grew to 43 percent in 2010, according to a recent survey by the Employee Benefit Research Institute. Nearly a quarter of the workforce said they have postponed their planned retirement in the past year and a CareerBuilder.com survey reports that 61 percent of workers say they are now living paycheck to paycheck, as compared to 43 percent in 2007. With rapidly dwindling savings and fewer opportunities for jobs than their younger counterparts, many older Americans are facing a very uncertain economic future. “This is the undiscussed explosive bomb in all this, is all the pension benefits, all the 401(k) money that’s been drained out by workers trying to stay afloat until they find a job,” Rep. Jim McDermott (D-Wisc.) told HuffPost. “There are a lot of people who, when this is over, are going to have nothing. They will have lost their house, they will have used all their pension money.” Many Americans seem to be losing hope. Only 16 percent of respondents to the EBRI survey expressed confidence in their ability to retire comfortably, the second lowest point in the 20-year history of the survey. Marguerite DiGaetano, 58, says she is confident that after two years of solid unemployment, despite having worked her whole life, she will never be able to retire. “I think the person who invents the cubicle where you can discreetly hang your walker where it doesn’t trip anybody, that person will be very popular with the baby boomers,” she said. “Who’s gonna be able to retire at 65? That’s only seven years away. Not me. I’ll be working until I die.” Arthur Delaney contributed to this report

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Diane Francis: Obama, Grumpy Old Men and Detroit

July 30, 2010

“Obama is the maid after Led Zeppelin’s been in the room” — comic Bill Maher This is the best description of the mess that the President inherited from the cowboy capitalists who let the banking system run amok and opted for the Iraq war instead of health care. It is the moral compass to many Americans. Witness that Obama’s approval rating of 47%, mid-term, is equivalent to Reagan’s and other popular presidents at this point in the presidency. Gallup’s running poll breaks down support demographically, and Obama’s highest percentages remain female and under 30 then drop with age. Old guys like him least. This is America’s Grumpy Old Man cohort that listens to Rush Limbaugh; likes to get Social Security, but not to pay taxes for it; likes Medicare but doesn’t want anybody else to get government health care, and that liked John McCain and his sidekick Sarah. The U.S. Congress, on the other hand, is in for a major purge. This week, Zogby Interactive found only 20% of voters approve of the job Congress is doing. And of this, 25% approve of Republican job performance and 37% approve of the Democrats. Zogby said the difference is that Republicans don’t approve of their party’s performance. With a margin of error of plus or minus 2.2% — or even 20% — this means a bloodbath in the House of Representatives where everybody’s seat is up for grabs and one third of the Senate’s. But that’s weeks away so the noise will abate. Besides, the well’s been capped, the BP CEO sent to Siberia and so TV ratings will track mindless distractions like Chelsea’s wedding and Mel Gibson’s anger. For business, the new convergence with politics will mean that the car company turnarounds will be front and center this fall. Obama has already begun the first of many tours of the automobile heartland — factories in Michigan, Indiana, Ohio and Illinois — to trumpet the fact that the 2009 rescue of the Big Three has gotten them back on the road. Some 55,000 jobs have returned in that sector along with profits. This is also good news for Ontario’s auto heartland. My guess is that the timing of General Motors’ new share issue in markets will be before the November vote and that pricing of the issue will be favorably tilted toward investors and headlines alike. There will also be more headlines, and selective buying opportunities, in the months ahead as the Republican press inaccurately compares the United States debt situation with that of moribund Japan’s where it is 2.5 times bigger. And in European, markets riots in Greece and Spain will no longer be the barometer of impending doom, but of positive resolution as budget constraints bite workers who have been paid forever to do very little.

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Broke Americans Buy iPad: The New ‘Schizophrenic Consumers’

July 30, 2010

The new abnormal has given rise to a nation of schizophrenic consumers. They splurge on high-end discretionary items and cut back on brand-name toothpaste and shampoo. Companies such as Cupertino, California-based Apple, whose net income jumped 94 percent in its last quarter, and Starbucks Corp., which saw a 61 percent increase in operating income over the same time frame, are thriving.

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Dave Johnson: Even Wall Street Agrees: Govt Should Borrow To Invest

July 30, 2010

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture . I am a Fellow with CAF. Our current economic model depends on ever-increasing consumption. This model worked during the early industrial revolution worked because it filled existing needs: Farmers depending on horses needed tractors. Kitchens needed gas stoves and refrigerators, etc. Eventually the majority of needs were filled, and we invented demand creation : marketing and advertising made us want to buy things we don’t really need. All the while population growth helped push demand along at a steady pace. When the limits of demand creation joined up with declines in population growth consumption would slow, the economies would stagnate, and governments would prime the pump. This ended up creating bigger and bigger bubbles, and bubbles pop. And never mind the whole chewing up the planet thing where we are fishing out all the seas, removing all the mountaintops, cutting all the trees, drilling and mining deeper and deeper holes, putting more and more carbon into the air. Bill Gross of PIMCO, says government stimulus plans should borrow to invest, not to push consumption. Writing about “New Normal” in Privates Eye at Real Clear Markets, worries that declining population growth is a warning flag for capitalism itself, Production depends upon people, not only in the actual process, but because of the final demand that justifies its existence. The more and more consumers, the more and more need for things to be produced. I will go so far as to say that not only growth but capitalism itself may be in part dependent on a growing population. WIth a growing population, the growth model of capitalism continues for a while, Currently, the globe is adding over 77 million people a year at a pace of 1.15% annually, but slowing. Still, that’s 77 million more mouths to feed, 77 million more pairs of shoes to make, 77 million more little economic units of demand – houses, furniture, cars, roads, oil – more, more, more. Gross speculates that this is at the root of the wobbly economies we have seen in recent decades, The lack of population growth was likely a significant factor in the leveraging of the developed world’s financial systems and the ballooning of total government and private debt … Lacking an accelerating population base, all developed countries promoted the financing of more and more consumption per capita … Finally … there was nowhere to go but down. Gross writes that continually borrowing to push consumption is not the right way to spend that money. You should borrow to invest , not to consume. Other countries are peursuing policies of investment not consumption: Far better to create and mimic other government industrial policies aimed at infrastructure, clean energy, more relevant education and less costly healthcare services. If our government “stimulus” continues to push consumption — i.e. tax cuts — instead of spending that invests in infrastructure, education and health care, things can only get worse. Sign up here for the CAF daily summary .

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America’s Best Rentals — How Far $3,000 Per Month Goes Across America (PHOTOS)

July 30, 2010

Times are tights and these rentals are bargains. Zillow, one of the web’s most trusted aggregators of real-estate information , scoured its listings and found rental properties that give tenants the biggest bang for their buck. From Boston to Seattle, you can find steals in housing markets across the nation, like one Seattle condo that not only overlooks Lake Washington, but also boasts an in-ground pool. Below, we’ve gather rentals priced around the $3,000 per month range in various large U.S. cities that offer significant bang for your buck. And for more real-estate bargains, check out Zillow .

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Video: Saleri Calls BP Spill `Wake Up Call’ for Oil Industry: Video

July 30, 2010

July 30 (Bloomberg) — Nansen Saleri, chief executive officer of Quantum Reservoir Impact, talks with Bloomberg’s Mark Crumpton about the outlook for BP Plc and the oil industry. U.S. Justice Department attorneys conducting a criminal probe of the BP Plc well explosion in the Gulf of Mexico have recommended that a grand jury be convened and BP managers subpoenaed to determine if any laws were broken, a person familiar with the investigation said. (Source: Bloomberg)

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Video: Wallace Sees ‘Robust Recovery’ in Semiconductor Industry: Video

July 30, 2010

July 30 (Bloomberg) — Rick Wallace, chief executive officer of KLA-Tencor Corp., talks about his company’s fourth-quarter earnings released yesterday and the outlook for the U.S. economy. Wallace, speaking with Bloomberg’s Mark Crumpton, also discusses KLA-Tencor’s global strategy. (Source: Bloomberg)

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Zygo Announces the Pending Departure of Walter A. Shephard, CFO

July 30, 2010

MIDDLEFIELD, CT–(Marketwire – July 30, 2010) –  Zygo Corporation ( NASDAQ : ZIGO ) today announced that Walter A. Shephard, Vice President Finance, CFO and Treasurer, has made the personal decision to step down from his positions with the company after serving for over six years. Zygo has initiated a search for Mr. Shephard’s successor. Mr. Shephard has agreed to remain in his current roles with Zygo through August to assist in an orderly transition. A conference call has been scheduled for Thursday, August 19, 2010 for Zygo to announce its financial results for the fourth quarter and full year of fiscal 2010.

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Video: Illinois’s Vaught, Sinsheimer Discuss Tax-Increase Plans

July 30, 2010

July 30 (Bloomberg) — David Vaught, Illinois Governor Pat Quinn’s budget director, and John Sinsheimer, Quinn’s director of capital markets, spoke with Bloomberg’s Darrell Preston, Flynn McRoberts and Ken Kohn on July 28 about the state’s plan to increase individual and corporate income-tax rates. (Source: Bloomberg)

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Video: Fabbri Says U.S. Mulling Over Further Stimulus Programs: Video

July 30, 2010

July 30 (Bloomberg) — Brian Fabbri, chief economist for North America at BNP Paribas, talks with Bloomberg’s Mark Crumpton about U.S. second-quarter gross domestic product, released by the Commerce Department today, and the outlook for the economy. Growth in the U.S. slowed to a 2.4 percent annual rate in the second quarter, less than forecast, reflecting a larger trade deficit and an easing in consumer spending. (Source: Bloomberg)

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Bill Singer: One Investing Idea: Issue Phony Online Press Releases and Tout Them

July 30, 2010

In a Complaint dated October 22, 2009, the United States Securities and Exchange Commission (SEC) alleged that from September 29, 2009, through October 2, 2009, Lambros D. Ballas engaged in a fraudulent scheme to manipulate the stock price of multiple publicly traded companies (including Google, Microsoft, and Walt Disney) by disseminating phony press releases and then hyping them on Internet bulletin boards such as Yahoo!. For example, on September 29, 2009, Ballas issued a phony press release announcing that Pennsylvania biotech company Discovery Laboratories had obtained approval from the U.S. Food and Drug Administration for a drug under development. Ballas then posted a message on a stock message board with a link to what he described as the company’s “official press release.” In his post, Ballas claimed to have called his “personal broker” who “says it’s been confirmed.” Discovery Laboratories’ stock price shot up nearly 50%. The next day, September 30, Ballas issued a release falsely claiming that IMAX Corporation had been acquired by Disney. Once again he followed up by posting links to the phony release on a stock message board, telling other potential investors that he had bought 10,000 IMAX shares and that his broker “just called me to tell me at the crack of dawn.” On October 1, Ballas issuing a phony press release stating that California search engine company Local.com was being acquired by Microsoft. Ballas followed this by again posting messages and links to the Local.com release on stock message boards. In one posting he stated: “Local just bought out by Microsoft, at $12.50 per share including patent ownership.” In aftermarket trading, Local.com’s stock price rose over 75%. Later that night, Local.com issued a corrective release saying that the Microsoft release had been false — there was no Microsoft acquisition. Undeterred, the next day Ballas issued another phony release, this time stating that it was Google, and not Microsoft, that was acquiring the company. It would have been bad enough if Ballas were simply another online pumper, dumper, or scammer. What makes this worse is that, Ballas, a 34-year-old resident of Huntington, New York, was a registered representative associated with an SEC registered broker-dealer. This wasn’t just another yutz trying to make a quick, dirty buck. Ballas was a stockbroker. See, SEC v. Ballas Federal Court Injunction On July 8, 2010, Lambros D. Ballas was permanently enjoined from issuing or causing to be disseminated false or misleading press releases and Internet postings, or other public statements regarding publicly traded or quoted companies where such conduct would constitute an actual or threatened violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. See , Securities and Exchange Commission v. Lambros D. Ballas , (Civil Action Number 5:09-cv-05036, United States District Court for the Northern District of California, San Jose Division). SEC Administrative Proceedings On July 28, 2010, the SEC initiated public administrative proceedings pursuant to Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”), against Ballas. In the Matter of Lambros D. Ballas ( Order Instituting Administrative Proceedings, ’34 Act Rel. # 62581, Admin. Proceeding # 3-13981, July 28, 2010 ). Note that Ballas is considered innocent and the above statements are merely allegations until and unless he is found guilty. Bill Singer’s Comment: As one who has been bedeviled by the pumpers, dumpers, and scamsters who haunt the Internet, it’s nice to see that the SEC is finally taking the complaints about such fraud seriously. While many regulators pooh-pooh the seriousness of online fraud as little more than childish shenanigans, the fact is that millions of investors (and potential investors) follow stocks on Yahoo! and other online communities. While we may wish that investors were more sophisticated and did not base investment decisions upon anonymous online postings, the fact is that many folks decide to buy, sell, or hold after reading what they believe is the “truth” on a forum or chat room. Rather than laugh at the stupidity of relying upon such nonsense, Wall Street’s regulators need to root out the fraud and impose severe penalties on the con artists behind the lies. Hopefully, this case is an indication of more to come.

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Video: Taormina Says Budget Cuts, Higher Taxes Help Bondholders: Video

July 30, 2010

July 30 (Bloomberg) — Rick Taormina, head of municipal strategies at JPMorgan Chase & Co., talks about the municipal bond market and the impact of budget cuts and tax increases on bondholders. Taromina, speaking with Scarlet Fu on Bloomberg Television’s “InBusiness,” also discusses the outlook for California’s creditworthiness. (Source: Bloomberg)

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Anat Shenker-Osorio: One Economy That Works for All

July 30, 2010

This article first appeared in New Deal 2.0 Our leaders have finally managed to extend unemployment benefits to the long-term jobless. A look into these numbers reveals which folks are stuck in the ICU, nowhere near the economic “recovery” some pundits are ready to declare. African Americans are twice as likely to be shut out of making a living than whites, with unemployment rates of 15.5 percent when the overall rate is 9.7. As even an American school kid can tell you, before Martin Luther King Jr. died, he had a dream. The details of that dream may be hazy but most of us recall it had something to do with judging people based on content of character, not color of skin. It was a dream of integration. Not just the bus-seating, lunch-eating kind. It was the hope for something far greater and, inexcusably, still unattained. King’s dream of true integration means not just process but outcomes, not just access but results — because, let’s face it, the realities of our stratified economic system indicate there’s something about the rules in place that just aren’t equal. If we’re serious about the ability to determine your future and achieve it, we’re talking about distribution of resources. To have any real meaning, integration requires an economy that works for the majority of people. What we have now is a color-coded obstacle course of our (and our parents, and their parents, and their parents) making, granting whites a short-cut to security and prosperity while blocking African Americans from clearing the starting gate. In the good old days of 2007, median net worth for a white family was $170,400 and $27,800 for an African Americans one. We’ve heard this described many ways. A racial wealth gap, a divide, a chasm, a canyon so wide you might think it’s a national landmark. This language accurately conveys our separation. Our economy is a demarcated space that puts whites in one place and African Americans in another. But this description focuses in on effects. It doesn’t tell us why one group is stuck on the side of poverty, unable to cross to the riches on the other. This has enabled the myth that it’s lack of individual effort that explains why some get ahead while others fall hopelessly farther behind. It obscures the truth: we’ve made our economy a moving sidewalk to help propel whites along in the “right” direction while African Americans are left treading against the tide. If you refuse to see this sidewalk, your view is purely one of white faces advancing (some running ahead to outpace the rest) with black and brown ones moving disruptively in the opposite direction. Inexplicable, at best, and, more often, reason to blame the worst off for their inability to move forward. What makes up this sidewalk? It’s lack of teacher training, experience and consistency in mainly minority schools, where teachers stay through the year 57% of the time compared to 82% in mainly white schools. It’s lack of food security, twice more likely for children of color than their white peers. And it’s being born and raised in poverty, a state that black and brown children confront 300% more than whites. The notion of an economic divide has allowed the belief that we live in two separate, and therefore separable economic universes. If there’s a gap, then most whites are safely on the good side. In implying that African Americans are separate, we’ve allowed the unutterable to take hold among the privileged: phew! glad it’s not us. Advocates for bridging this divide may have done a little too well convincing the public to see economic disparities in the terminology of division. In reality, there’s only one economy. Those who do poorly, mostly people of color and others born without means, facilitate the ability of others to do well. People who work create value — a small portion of which the “working class” gets back in what’s treated as the benevolent gifts bestowed from a merciful employer. But let’s put the horse before the cart, where it belongs. Workers make enterprises possible and profitable, their pay checks are a mere share of the value they created. The truth of our economic reality is not that of a canyon. We’re all occupying a shared space and all dependent upon a shared — though by no means fixed — pool of resources. Until we recognize our economy is singular, and fix the man-made mechanisms that make navigating it easier for some and difficult or impossible for others, we won’t succeed in really integrating our country. For blacks and whites to sit at the same lunch counter, they have to be able to afford the same meal.

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Mark V. Vlasic: The Next Financial Reform Floodgate

July 30, 2010

A lot can turn on an active verb. Hamlet said, “To be or not to be–that is the question.” The same applies to the new Dodd-Frank financial reform bill’s whistleblower provisions, signed by President Obama last week, which requires that any whistleblower providing “original information” leading to a penalty over $1 million “shall” receive between 10 and 30% of that collection. For many companies, a world of hurt will soon turn on that single word, “shall,” unleashing a whirlwind of decentralized private enforcement for a public issue that’s taken even greater importance in the Obama administration and the Department of Justice’s Criminal Division–the nexus of corruption, bribery, and terrorism. The Foreign Corrupt Practices Act of 1977 (“FCPA”) was enacted to make it unlawful for certain classes of persons and entities to offer or provide money or anything of value to officials of foreign governments or foreign political parties with the intent to obtain or retain business. This criminal statute, which permits jail time for its (often white collar) offenders, applies to all U.S. persons and certain foreign issuers of securities, as well as foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States. The new bill will empower the SEC to reward FCPA whistleblowers financially. For anyone who remembers the movie Syriana with George Clooney and Matt Damon, the FCPA is often associated with shady dealings and government contracts in far-away places. With the new financial reform law, however, acts in distant countries will haunt businessmen here at home. These new whistleblower “bounty” provisions mean that well-meaning employees (or even disgruntled employees with a bone to pick), are now incentivized to do well by doing good – collecting monetary rewards from Uncle Sam, while helping put U.S. executives in prison for violations of the FCPA. This is partly about foreign policy. President Obama’s foreign policy sees the roots of bellicosity in civil society, meaning that lawlessness abroad can become lawlessness exported. With the stroke of a pen, President Obama not only democratized the global fight against corruption, he created a new weapon against the sorts of cultures that breed violent extremism, whether in Afghanistan or Pakistan, India or Russia. But foreign policy will be far from the minds of the most immediate beneficiaries of the new law. To be blunt, the word “shall” will open up a world of financial security for hundreds of potential new whistleblowers, rewarded for their candor and courage with potentially enormous payments. This is especially the case when you consider the penalties paid by companies for FCPA-related offenses. In 2010, BAE paid $400 million, and in 2008 Siemens settled a FCPA mater for a staggering $800 million. With settlements–now mandatory–likely to run the hundreds of millions, you don’t need to be a mathematician to know a 10 to 30% cut will provide a prove powerful incentive to cooperate with the government. For these new bounty-hunters, just as much turns on the word “shall,” much will also turn on how the statute is translated into practice. Two major inflexion points will be: (1) the discretion exercised by the officials at the Securities & Exchange Commission, and (2) how whistleblowers can avoid the potentially adverse consequences of disclosing corruption. Let’s take those in turn. As the Securities Docket blog reports, “It will be interesting to see how the SEC exercises its discretion here.” We’ll say. The legislation gives the SEC complete discretion to determine the amount of the award. They’ll be considering factors such as the significance of the whistleblower’s information and the degree of assistance provided. In other words, the decision to blow the whistle is only the beginning. This all means that whistleblowers will need to ensure that they are as helpful (substantively and process-wise) to the SEC as possible in order to receive the maximum award. The second question is even more pressing for the whistleblower, considering the hundreds of millions of dollars in penalties that firms have paid for FCPA violations. With these stakes, the most vulnerable actors in the new system will be–no surprise here–the whistleblowers themselves. To cite another movie, anyone who saw The Insider (where Russell Crowe plays a whistleblower employed by a tobacco company) remembers the world of fear that can envelop someone exposing corrupt practices. Experience shows that whistleblowers can be put through challenging and even dangerous experiences as a result of their actions. A recent study by professors at the University of Chicago and University of Toronto found that 82% of named whistleblowers experienced harassment or altered responsibilities. Many said, “If I had to do it again, I wouldn’t.” True, the new law requires protections against retaliation. A wrongfully discharged individual will be entitled to reinstatement, twice back pay, litigation costs, and reasonable attorneys’ fees. With these stakes, however, it’s likely that whistleblowers will decide that the greatest insurance is anonymity. The law provides that whistleblowers can submit information anonymously, as long as they are represented by counsel (and, of course, disclose their identity prior to receiving the award). In the manure of corruption, let a thousand flowers bloom. By allowing counsel to represent such whistleblowers, Obama’s financial reform bill will also empower a new generation of lawyers to do well by doing good – helping fight corruption by helping whistleblowers bring these cases to light. Michael Signer, a 2010 candidate for the Democratic nomination for Lieutenant Governor of Virginia, is managing principal of Madison Law & Policy Group PLLC, where he works on financial regulation matters. Mark Vlasic, a former prosecutor and head of operations of the World Bank’s Stolen Asset Recovery Initiative, works on international and anti-corruption matters as a partner at Ward & Ward PLLC.

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