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Kevin O’Connor: Don’t Make the Solution Part of Your Problem

September 15, 2010

The problem I’ve always been intrigued with innovation and how it can be forced. As an entrepreneur, my job is to create new products and companies; I can’t just sit around waiting for the light to go off while playing Halo. As an executive, I have also been part of a lot of painful strategic planning processes. In one instance, we hired a consultant who took us through an eight month ordeal costing more than $1 million. In the end, we agreed on a strategy that we came up with on the first day. I’ve noticed this happen time and time again. From my experiences working with companies to solve various problems, I’ve noticed a few “truths” that almost always occur when groups try to solve problems: The answers are already in the room. If you assemble a group of smart people who know your industry, they have already assimilated the mass of information from customers, employees, market research and elsewhere. The answers are in the room and not on some manufactured spreadsheet. Most of the time spent trying to solve a problem is typically wasted discussing options that don’t really matter. There are 98 things you could , but shouldn’t, be doing, but in reality there are only two things you need to do as a business to be successful. People often waste time talking about all the things that don’t really matter. Personality trumps. Unfortunately, there isn’t much correlation between speaking skills and quality of ideas. Most people are afraid to share their ideas for fear of looking stupid. But then there are the less deserving people who through force of personality get their way. In order to actually implement the solution, you need consensus and these meetings rarely build lasting consensus. The solution As executives, our goal is to generate as many ideas as possible, identify the top ideas and make a decision while building consensus. But how can you most effectively do that? Just follow these steps: State the problem clearly. Write at the top of the white board the problem you are trying to solve. For example: “How can we improve productivity?”, “What are the biggest problems facing our customers?”, “Which Sports & Recreation topics are best for comparison?” Brainstorm. Ask people to state their ideas succinctly — usually two to three words. Do not allow any discussion or comments on the idea. You want people to play off other people’s ideas and to feel free to say crazy ideas without fear of ridicule. Keep the flow going but don’t beat a dead horse — stop when the flow of ideas has ended. Lobby. As you are numbering each proposed idea, allow people to lobby or clarify their ideas. Make sure you combine similar ideas. Vote. Take the total number of ideas and divide by three — this is the number of votes each person gets. For example, if you have 30 ideas, each person gets 10 votes (30 ideas/3 = 10 votes). The next step is to read off each idea, count the number of votes each idea receives and write the total number of votes next to each idea. Select Top Ideas. You should (hopefully) see a coalescing of votes for the top two to five ideas. Focus your attention on these top ideas and forget about the rest. Here’s a recent example of a brainstorm we just had at FindTheBest . We are constantly coming up with dozens of new Comparison App ideas, but having only limited resources, we only focus on the top ideas. We brainstormed new App ideas and came up with the following (partial) list: E-Readers (5 votes) Fast Food Nutrition (6) Colleges (5) Yogurt Nutrition (1) Venture Capital Firms (5) Planets (1) Designers (0) Empires (1) Travel by Country (3) Future Jobs and Careers Forecast (7) Pulitzer Prize Winners (5) Cosmetics Brands (1) War Statistics (4) State Facts (1) US Presidents (2) Energy Drinks (3) Dating Websites (3) Vegas Hotels (3) Golf Courses (4) Pokémon (5) After voting, we narrowed down our 60 App ideas to the seven most popular ones (the ideas that received 5 votes and higher) and focused on developing those Apps. This efficient and collaborative process provides a platform for all ideas to be heard and for the top ideas to be carried out. After trying this process out, you’ll realize that you’ve just condensed a four hour meeting into 30 minutes and actually found the best solution to your problem. But aside from finding the best solution to your problem, you’ve built consensus between everyone within the company because each person was involved in creating the solution. I’ve used this system many times to help create business and product ideas and strategies resulting in tremendous success. So go out and try this method and let me know how it works or if you need help. Please post a comment with your results.

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Chief Medicare Actuary: White House Health Savings Estimates ‘Not Meaningful,’ Give Inaccurate Picture

September 13, 2010

WASHINGTON — When a government report found that President Barack Obama’s health overhaul would modestly raise the nation’s total health care tab, the White House responded with a statistic suggesting costs would go down. It turns out that may be fuzzy math. Health reform director Nancy-Ann DeParle wrote on the White House blog last week that the same government report indicates spending per insured person will be more than $1,000 lower in 2019 because of the law – some 9 percent below previous projections. ___ EDITOR’S NOTE – An occasional look at assertions by public officials and how well they adhere to the facts ___ “The act will make health care more affordable for Americans,” DeParle said. But the head of the nonpartisan economic unit at Medicare that produced the original cost report says the White House number “does not provide a meaningful or accurate indication” of the effect of the health care law. “The amounts quoted in the White House blog are not meaningful and cannot be used to calculate the change in health expenditures per insured person,” Richard Foster, Medicare’s chief actuary, told The Associated Press. The Obama administration stands by its statistic. It’s a dispute about numbers and how they’re bandied about by powerful people in Washington. But you don’t need an economics degree to follow this one. All you have to do is remember your fractions. The health care law expands coverage, reducing the number of uninsured by more than 32 million, although about 24 million will remain without coverage. Still, the share of the population with insurance will go up by nearly 10 percentage points, to about 93 percent. And that makes a difference in the numbers. If you divide total national health care spending by a bigger number of insured people, you get a smaller per-person result. It’s an interesting statistic, but it doesn’t mean the problem of rising costs is solved. “It’s not that it’s false, it’s just that it will be a little misleading,” John Allen Paulos, a mathematics professor at Temple University in Philadelphia, said of the White House number, calling it an “apples-to-oranges miscomparison.” Consider an imaginary country with just three citizens, Peter, Paul and Mary. Peter has health coverage but Paul and Mary are uninsured. Peter spends $1,000 on health care, but Paul and Mary can only afford $500 apiece because they lack coverage. Total national spending: $2,000. National spending per insured person: $2,000. Now suppose a law gets passed to expand coverage. Paul gets insurance, but Mary remains uninsured. Now Peter and Paul are spending $1,000 apiece. Paul spends more than when he was uninsured, so total national health spending goes up to $2,500. But because more people are covered, spending per insured person goes down to $1,250. It’s a simplistic comparison, but would you call that a savings? Paulos said it would make more sense to first figure out the share of total national health care spending by people with health insurance, and then divide that result by the number of insured people – before and after the health care law. The government hasn’t run that calculation. Richard Kronick, a senior Health and Human Services official, said the Obama administration disagrees that its number is misleading. “There are a number of ways to evaluate health care spending and the new law,” said Kronick. “Examining spending on each individual with health insurance is one useful data point.” National health care spending is a kitchen-sink statistic that includes personal health costs of the insured as well as the uninsured, and such categories as research and development and medical infrastructure. In 2019, when the overhaul is fully phased in, the tab will be $4.6 trillion. Foster says it’s acceptable to divide the number by the total U.S. population. In that case, per capita spending would $13,652 as a result of the law, and $13,387 without it. The difference: just $265 per person more. Paulos, the mathematician, said that sounds like a bargain to him. “It’s a relatively small cost given that 30 million more people will be covered,” he said. “You don’t really need this kind of apples to oranges miscomparison.”

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Chief Medicare Actuary: White House Health Savings Estimates ‘Not Meaningful,’ Give Inaccurate Picture

September 13, 2010

WASHINGTON — When a government report found that President Barack Obama’s health overhaul would modestly raise the nation’s total health care tab, the White House responded with a statistic suggesting costs would go down. It turns out that may be fuzzy math. Health reform director Nancy-Ann DeParle wrote on the White House blog last week that the same government report indicates spending per insured person will be more than $1,000 lower in 2019 because of the law – some 9 percent below previous projections. ___ EDITOR’S NOTE – An occasional look at assertions by public officials and how well they adhere to the facts ___ “The act will make health care more affordable for Americans,” DeParle said. But the head of the nonpartisan economic unit at Medicare that produced the original cost report says the White House number “does not provide a meaningful or accurate indication” of the effect of the health care law. “The amounts quoted in the White House blog are not meaningful and cannot be used to calculate the change in health expenditures per insured person,” Richard Foster, Medicare’s chief actuary, told The Associated Press. The Obama administration stands by its statistic. It’s a dispute about numbers and how they’re bandied about by powerful people in Washington. But you don’t need an economics degree to follow this one. All you have to do is remember your fractions. The health care law expands coverage, reducing the number of uninsured by more than 32 million, although about 24 million will remain without coverage. Still, the share of the population with insurance will go up by nearly 10 percentage points, to about 93 percent. And that makes a difference in the numbers. If you divide total national health care spending by a bigger number of insured people, you get a smaller per-person result. It’s an interesting statistic, but it doesn’t mean the problem of rising costs is solved. “It’s not that it’s false, it’s just that it will be a little misleading,” John Allen Paulos, a mathematics professor at Temple University in Philadelphia, said of the White House number, calling it an “apples-to-oranges miscomparison.” Consider an imaginary country with just three citizens, Peter, Paul and Mary. Peter has health coverage but Paul and Mary are uninsured. Peter spends $1,000 on health care, but Paul and Mary can only afford $500 apiece because they lack coverage. Total national spending: $2,000. National spending per insured person: $2,000. Now suppose a law gets passed to expand coverage. Paul gets insurance, but Mary remains uninsured. Now Peter and Paul are spending $1,000 apiece. Paul spends more than when he was uninsured, so total national health spending goes up to $2,500. But because more people are covered, spending per insured person goes down to $1,250. It’s a simplistic comparison, but would you call that a savings? Paulos said it would make more sense to first figure out the share of total national health care spending by people with health insurance, and then divide that result by the number of insured people – before and after the health care law. The government hasn’t run that calculation. Richard Kronick, a senior Health and Human Services official, said the Obama administration disagrees that its number is misleading. “There are a number of ways to evaluate health care spending and the new law,” said Kronick. “Examining spending on each individual with health insurance is one useful data point.” National health care spending is a kitchen-sink statistic that includes personal health costs of the insured as well as the uninsured, and such categories as research and development and medical infrastructure. In 2019, when the overhaul is fully phased in, the tab will be $4.6 trillion. Foster says it’s acceptable to divide the number by the total U.S. population. In that case, per capita spending would $13,652 as a result of the law, and $13,387 without it. The difference: just $265 per person more. Paulos, the mathematician, said that sounds like a bargain to him. “It’s a relatively small cost given that 30 million more people will be covered,” he said. “You don’t really need this kind of apples to oranges miscomparison.”

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Marshall Auerback: One Small Step for Recovery, One Giant Leap Still Needed

September 8, 2010

Electoral disaster has a way of focusing the mind. Perhaps this is the best way to explain President Obama’s latest initiatives: an investment in the nation’s roads, railways and runways that would cost at least $50 billion, along with a permanent extension of the research and development tax allowance, which represents a further $200 billion in tax breaks for businesses. All well and good, although it remains to be seen whether Obama’s journey represents a genuine conversion on the road to Damascus, or another detour into a fiscal cul de sac of the kind that has long characterized his Presidency. Sure every little bit helps, but if the $787 billion package introduced in March 2009 wasn’t sufficient to bring unemployment down, is $50 billion more in infrastructure spending really going to make up the difference? As for the R&D and bonus depreciation tax credits: nice cosmetic gestures to a business community that is coming to view this President as “anti-business”, but it’s fundamentally a supply-side measure to address a weak economy characterized by lack of demand. It remains the case that firms will only borrow, produce, invest, and employ now if they feel they will be able to sell the output in the future. They’re reluctant in the absence of robust consumption, not investment. Much like his approach to the banking system, Obama continues to practice stimulus from the top down rather than bottom up. His administration needs to restore income growth among households, not businesses, to mitigate the need to for families to resort to borrowing and the continuation of negative saving trends (that is, household deficit spending). If tax cuts are to be implemented, far better to introduce them to assist non-financial institutions, whose dire financial situation is at the heart of the crisis. The US labor market remains locked into a situation where the tepid employment growth barely absorbs new entrants and the most disadvantaged workers are trapped in long-term unemployment. In this state, we get what the institutional labor economists, such as Professor Bill Mitchell , call “bumping down”. What “bumping down” means is that when there is an overall shortage of jobs, higher-skilled (more educated) workers tend to take jobs that were previously occupied by lower-skilled workers. The low-skilled are then forced out into the unemployment queue. So there are two inefficiencies: (a) the skills-based underemployment; and (b) the unemployment. Which means a bigger stimulus number is required. Politically, that’s a tough sale right now, no question. But in order to make that case, the President must first challenge the canard that last year’s stimulus package was wasted because unemployment still remains stubbornly high. On May 25th of this year, the US Congressional Budget Office released a detailed study : Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from January 2010 Through March 2010. The CBO suggests that “nearly 700,000 FTE jobs during the first quarter of 2010″ were created by the fiscal stimulus. Even with the caveats introduced in the study, they conclude that the impact of ARRA for the first quarter of 2010 were: • Raising the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.2 percent. • Lowering the unemployment rate by between 0.7 percentage points and 1.5 percentage points. • Increasing the number of people employed by between 1.2 million and 2.8 million. • Increasing the number of full-time-equivalent (FTE) jobs by 1.8 million to 4.1 million compared with what those amounts would have been otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.) By the same token, a recent study by former Federal governor Alan Blinder and economist Mark Zandi concludes that that the peak to trough decline in gross domestic product would have been close to 12 percent with no policy response last March, compared to an actual decline of just 4 percent. Similarly, the unemployment rate would have peaked at 16.5 percent, instead of the actual 10 percent. And for all of the gnashing of teeth about “wasteful government spending,” Blinder and Zandi also estimate that the resultant bigger collapse would also have meant a fiscal deficit of $2,600 billion in fiscal year 2011, which no doubt would have had the Concord Coalition and Tea Party brigade screaming from the rooftops. Even so, we still have almost double digit unemployment, which does not suggest that the first stimulus package was wasteful; rather, that it was insufficient to deal with the scale of the problem. The real economy responds to spending, and if the growth in nominal aggregate demand had not fallen, no matter what happened in the financial markets the real economy would have been okay. The key is to devote billions to the real economy, not dump good money after bad into zombie banks. To get an idea of the paucity of the new proposal’s ambition, contrast it with the tens of trillions of dollars of financial assistance that was committed to deeply insolvent financial institutions, which have used the funds mostly for their sole benefit. If we wanted to leave insolvent institutions open, all we had to do was to use regulatory forbearance. A government can always keep an insolvent bank afloat by simply guaranteeing the bank’s deposit base while getting rid of the incompetent management. The FDIC does this all of the time. And, in truth, that is the only reason why so many of the larger financial institutions are still open for business. In fact, some of the banks are clearly committed to worsening households’ financial position and have oriented their activity toward this end in order to maximize their profitability (see here ). On the other side, households and other non-financial institutions, whose financial hardship is at the heart of the crisis, have received very limited help, especially when one considers that federal spending stimulus is increasingly being offset by states’ respective fiscal crises. So what the left hand giveth, the right hand taketh away. If President Obama now truly believes that fiscal stimulus is the answer, then he has to re-educate his fellow Americans, who remain under the influence of a host of deficit hawks. The President must explain that ongoing attempts to reduce government spending in the context of a slowing economy will produce higher deficits — the very antithesis of what the so-called ” bond market vigilantes ” are allegedly demanding of the government. If the government tries to go against expanding and sustaining budget deficits, then the income adjustments that follow will eventually lower planned non-government saving and public net spending and raise levels of unemployment. Total saving will also be lower. So it is better to have “good” deficits than “bad” ones (the latter being forced on the economy by the automatic stabilizers driven by the income adjustments, as opposed to aggressive proactive expenditures that foster faster employment growth, higher incomes and ultimately lower deficits via higher economic activity). The government’s deteriorating fiscal position is fundamentally a reflection of a weak economy, not “reckless spending”. During recessions, its position loosens anyway, courtesy of the automatic stabilizers, as private spending and tax revenue collapse. But these stabilizers provide some constraint against the free fall in demand that would have otherwise occurred after the calamities of 2008. The best way to avoid unemployment becoming long-term and hence, more structural, is NOT to let it linger. Why has it taken President Obama so long to find religion? Well, the looming disaster of the midterms must figure prominently. More fundamentally, the President has remained in thrall to a neo-liberal philosophy that has persistently downplayed the effectiveness of fiscal policy and over-hyped monetary policy. But monetary policy alone cannot provide the solution. It’s not a suitable tool for controlling longer-term problems, such as price bubbles in specific asset classes, because the interest rate weapon is a very blunt one. Much like chemotherapy can kill good cells along with cancerous ones, interest rate increases can bludgeon productive parts of the economy that aren’t suffering from excess. It’s like conducting an operation with a meat cleaver instead of a scalpel. Fiscal policy is more precise. Perhaps the President is beginning to question the basis of the mainstream macroeconomics consensus that has dominated the policy debate for 30 odd years and culminated in the worst financial and economic crisis in 80 years. Good for him, but take it further. For those who remain irrationally paranoid about deficits, it is worthwhile to reiterate that full employment keeps GDP at permanently higher levels, which means that by definition the government will reduce spending on a number of unemployment-related items. It also enhances financial stability, given that a fully-employed worker is one who can best service debts and support borrowing, which also means that the lending bank is unlikely to require as many write-offs. In any event, it is becoming increasingly untenable to argue that the prevailing policy responses of the past 30 years can address serious swings in private spending. Monetary policy has been categorically proven to be ineffective in dealing with aggregate demand failures of the sort we have witnessed in the current crisis. When an economy is in this sort of state and is situated in a world that is still largely recessed, the only way to get out of the malaise is to use fiscal policy to support demand and to provide some basis for firms to keep producing and hiring. Hopefully, the President is beginning to figure that out. Better late than never. Sign up for weekly ND20 highlights, mind-blowing stats, event alerts, and reading/film/music recs. Cross-posted from New Deal 2.0.

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Future Hiring Will Mainly Benefit The High-Skilled

September 5, 2010

Whenever companies start hiring freely again, job-seekers with specialized skills and education will have plenty of good opportunities. Others will face a choice: Take a job with low pay – or none at all. Job creation will likely remain weak for months or even years. But once employers do step up hiring, some economists expect job openings to fall mainly into two categories of roughly equal numbers: _ Professional fields with higher pay. Think lawyers, research scientists and software engineers. _ Lower-skill and lower-paying jobs, like home health care aides and store clerks. And those in between? Their outlook is bleaker. Economists foresee fewer moderately paid factory supervisors, postal workers and office administrators. That’s the sobering message American workers face as they celebrate Labor Day at a time of high unemployment, scant hiring and a widespread loss of job security. Not until 2014 or later is the nation expected to have regained all, or nearly all, the 8.4 million jobs lost to the recession. Millions of lost jobs in real estate, for example, aren’t likely to be restored this decade, if ever. On Friday, the government said the August unemployment rate ticked up to 9.6 percent. Not enough jobs were created to absorb the growing number of people seeking work. The unemployment rate has exceeded 9 percent for 16 months, the longest such stretch in nearly 30 years. The crisis poses a threat to President Barack Obama and Democrats in Congress, whose hold on the House and Senate appears to be at increasing risk because of voter discontent. Even when the job market picks up, many people will be left behind. The threat stems, in part, from the economy’s continuing shift from one driven by manufacturing to one fueled by service industries. Pay for future service-sector jobs will tend to vary from very high to very low. At the same time, the number of middle-income service-sector jobs will shrink, according to government projections. Any job that can be automated or outsourced overseas is likely to continue to decline. The service sector’s growth could also magnify the nation’s income inequality, with more people either affluent or financially squeezed. The nation isn’t educating enough people for the higher-skilled service-sector jobs of the future, economists warn. “There will be jobs,” says Lawrence Katz, a Harvard economist. “The big question is what they are going to pay, and what kind of lives they will allow people to lead? This will be a big issue for how broad a middle class we are going to have.” On one point there’s broad agreement: Of 8 million-plus jobs lost to the recession – in fields like manufacturing, real estate and financial services – many, perhaps most, aren’t coming back. In their place will be jobs in health care, information technology and statistical analysis. Some of the new positions will require complex skills or higher education. Others won’t – but they won’t pay very much, either. “Our occupational structure is really becoming bifurcated,” says Richard Florida, a professor at University of Toronto. “We’re becoming more of a divided nation by the work we do.” By 2018, the government forecasts a net total of 15.3 million new jobs. If that proves true, unemployment would drop far closer to a historical norm of 5 percent. Nearly all the new jobs will be in the service sector, the Labor Department says. The nation’s 78 million baby boomers will need more health care services as they age, for example. Demand for medical jobs will rise. And innovations in high technology and alternative energy are likely to spur growth in occupations that don’t yet exist. Hiring can’t come fast enough for the 14.9 million unemployed Americans. Counting part-time employees who would prefer full-time jobs, plus out-of-work people who have stopped looking for jobs, the number of “underemployed” is 26.2 million. Manufacturing has shed 2 million jobs since the recession began. Construction has lost 1.9 million, financial services 651,000. But the biggest factor has been the bust in real estate. The vanished jobs range from construction workers and furniture makers to loan officers, appraisers and material suppliers. Moody’s Analytics estimates the total number of housing-related jobs lost at 2.4 million. When you include commercial real estate, the number is far higher. One of them is Martha Escobar, who last month lost her $13.50-an-hour job cleaning an office tower owned by JPMorgan Chase & Co. in Century City, Calif. She was one of 16 janitors, mostly single mothers, who lost jobs as part of the real estate crunch that’s squeezed landlords. Some of them traveled to New York on Thursday to try to pressure JPMorgan to get its cleaning contractor to take them back, given that the bank earned $8.1 billion during the first half of this year. “I don’t know what I am going to do if I can’t get my job back,” Escobar, 41, said. JPMorgan Chase spokesman Gary Kishner said the bank has no say over the layoffs, which he said are handled by the building’s cleaning contractor. On top of real estate-related job losses, manufacturing is likely to keep shedding jobs, sending lower-skilled work overseas. Millions who worked in those fields will need to find jobs in higher-skilled or lower-paying occupations. “The big fear is the country is simply not preparing workers for the kind of skills that the country is going to need,” says Gautam Godhwani, CEO of SimplyHired.com, which tracks job listings. Sectors likely to grow fastest, according to economists and government projections, are: _ HEALTH CARE The sector is expected to be the leading job generator, adding 4 million by 2018, according to Labor Department data. An aging population requires more doctors and nurses, physical therapists, home health aides and pharmacists. Many of these jobs will pay well. Physical therapists averaged about $76,000 last year, according to the department’s data. Others pay far less. Home health care aides earned an average of just $21,600. Home health care and personal care aides are expected to add about 900,000 jobs by 2018 – 50 percent more than in 2008. Jennifer Gamboa of Body Dynamics Inc., an Arlington, Va.-based physical therapy firm, says the drive to reduce health care costs should benefit her profession, which can treat pain less expensively than surgery. Gamboa plans to add two employees in the next year. _ INFORMATION TECHNOLOGY: Technology could be an economic elixir as computers and online networks expand ways to automate services, distribute media and communicate. Companies will need people to build and secure those networks. That should boost the number of programmers, network administrators and security specialists by 45 percent to 2.1 million by 2018, the government forecasts. Most of these jobs will provide above-average pay. Technology pay averaged $84,400 in 2008 – nearly double the average private-sector pay of $45,400, according to an analysis of the most recent full-year data by the TechAmerica Foundation, a research group. _ NEW INDUSTRIES: Deepak Advani, an IBM executive, has a title he says didn’t exist five years ago: “Vice president of predictive analytics.” Companies and government agencies have amassed data on behavior ranging from shopping habits to criminal activity. Predictive analytics is the art of determining what to do with that data. How should workers’ time be deployed? How best to target customers? Such jobs could grow 20 percent by 2018, the government predicts. Still, economists say more will be needed to boost job growth. The answer may be some technological breakthrough akin to the personal computer or the Internet. “Most big booms come from a particular sector that moves the rest of the economy,” said Richard Freeman, a Harvard labor economist. Technology spurred job growth after the 1982 and 1991 recessions. The PC became revolutionary in the early 1980s. Internet use exploded after the Mosaic Web browser was introduced in 1994. Housing eventually lifted employment after the 2001 dot-com bust. “There’s a lack of clarity on what the next big thing is going to be this time,” said David Card, an economics professor at the University of California. Until there is, many people will have to lower expectations and living standards as they enter fields with less pay and less job stability, said Dan Finnigan, CEO of online employment service Jobvite. “People who are unemployed have to embrace this future that they are going to have many jobs,” he said. “We will always be working on the next gig.”

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Obama’s Stimulus: ‘The Most Ambitious Energy Legislation In History’

September 3, 2010

For starters, the Recovery Act is the most ambitious energy legislation in history, converting the Energy Department into the world’s largest venture-capital fund. It’s pouring $90 billion into clean energy, including unprecedented investments in a smart grid; energy efficiency; electric cars; renewable power from the sun, wind and earth; cleaner coal; advanced biofuels; and factories to manufacture green stuff in the U.S. The act will also triple the number of smart electric meters in our homes, quadruple the number of hybrids in the federal auto fleet and finance far-out energy research through a new government incubator modeled after the Pentagon agency that fathered the Internet. (See TIME’s special report “After One Year, A Stimulus Report Card.”)

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Karma’s Real and So Is Caitriona Taylor: Kulae Introduces New President

August 25, 2010

NORWELL, MA–(Marketwire – August 25, 2010) –  Kulae is pleased to announce Caítríona Taylor’s promotion to President. Caítríona Taylor recently served as Chief Operating Office for Kulae’s US operations. As President, Caítríona will oversee all global operations. She will continue to increase the number of studios that carry the Kulae line, while also introducing products in regional and national sporting goods stores. In addition, Caítríona will expand Kulae’s wholesale business into the Canadian and European market. 

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Karma’s Real and So Is Caitriona Taylor: Kulae Introduces New President

August 25, 2010

NORWELL, MA–(Marketwire – August 25, 2010) –  Kulae is pleased to announce Caítríona Taylor’s promotion to President. Caítríona Taylor recently served as Chief Operating Office for Kulae’s US operations. As President, Caítríona will oversee all global operations. She will continue to increase the number of studios that carry the Kulae line, while also introducing products in regional and national sporting goods stores. In addition, Caítríona will expand Kulae’s wholesale business into the Canadian and European market. 

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Katy Welter: Want to Help Small Businesses? Move Your Money to One

August 23, 2010

Small banks are small businesses, too. And they pay it forward. When you keep your checking or savings account–yes, even those of you with what you perceive to be “small change”–with a local bank, that bank loans it to local business owners (among other borrowers). The Small Business Administration defines “small business” in a striking number of ways , but generally it is a business with fewer than 500 (in some industries 100 or 1,000) employees. According to 2004 census data, these small businesses create more jobs than mid-sized and large businesses combined . Your deposit in a small bank could mean one fewer person in the now-staggeringly long unemployment line. Small banks make significantly more small business loans than large banks, relative to the number of deposits they hold. While small banks hold only 12% of the country’s deposits, they make 20% of America’s small business loans . When it comes to loans for truly local businesses–loans under $100,000–small banks back an impressive 50% of them. And since the Small Business Administration estimates that half to two-thirds of new jobs are created by businesses with fewer than 20 employees, these small loans are critical to our growing economy. And this isn’t necessarily because big banks loan all their funds to big business: large corporations, after all, predominantly borrow in the form of bonds or commercial paper , rather than bank loans. Small banks not only loan more money to small businesses; they also help keep them in business by providing tremendously valuable advice. In the urban corporate world, big companies turn to professional consultants–large accounting, law, or investment banking firms–for advice on tax, legal, or other business strategies. Those brilliant consultants are either unavailable or unaffordable to small business owners. The community bank, instead, fills the shoes of all of the above. In advising their customers, small banks are also far more likely than big banks to meet with their business customers face-to-face, while the large banks tend to provide assistance over the phone, email, or mail. Small banks are able to advise their commercial customers because small bank lenders know their customers and they are intimately familiar with the community in which the business operates. Economists call this “soft information,” but this term undersells the value of a long-time lender-borrower relationship. Soft information is, for example, knowledge that a borrower has tremendous experience in an industry even if he may not have significant personal wealth or a long credit history. Soft information is knowledge that a borrower is the kind of person who will go to extraordinary lengths to repay a debt. Without small banks taking the time to learn this information, many small businesses simply wouldn’t obtain loans, since large banks require financial reporting and other standardized information that many entrepreneurs struggle to produce. After all, they are experts in their businesses–farming, small manufacturing, making pizza–and not necessarily finance. If small banks are making so many small, labor-intensive loans, then how can they also make a profit? One way is through long-term relationships. Customer turnover, like employee turnover, is costly. While large banks depend on high volumes of customers chasing “hot money” (ie, good, temporary deals on rates or terms), small banks try to stay out of this game by maintaining long term relationships, thereby keeping down advertising and interest rate expenses while encouraging bank officers to satisfy existing customers. These relationships promote higher repayment rates from borrowers, and also help banks make more knowledgeable, creditworthy loans. Small banks also save money while providing better service to small businesses through their simpler organizational structure. Because small banks tend to be organizationally “flat”–that is, they have fewer levels of management–small businesses can obtain loans, renewals, and extensions of credit in a more timely, less stressful way. This benefit came to mind recently as I watched a credit-worthy friend endure a refinance with Bank of America that took nearly three months! It was a pathetic display of inefficiency, ineffectiveness, and just plain bad service. And I can’t imagine how a massive organization with a byzantine structure can provide timely, consistently helpful service to small businesses. Small banks are the number one source of funding for the country’s greatest source of new jobs: small businesses. Help tip our fragile economy toward a bold recovery by moving your money to a local bank.

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Nearly 50 Percent Leave Obama Mortgage-Aid Program

August 21, 2010

WASHINGTON — Nearly half of the 1.3 million homeowners who enrolled in the Obama administration’s flagship mortgage-relief program have fallen out. The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments. Friday’s report from the Treasury Department suggests the $75 billion government effort is failing to slow the tide of foreclosures in the United States, economists say. More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. Economists expect the number of foreclosures to grow well into next year. “The government program as currently structured is petering out. It is taking in fewer homeowners, more are dropping out and fewer people are ending up in permanent modifications,” said Mark Zandi, chief economist at Moody’s Analytics. Besides forcing people from their homes, foreclosures and distressed home sales have pushed down on home values and crippled the broader housing industry. They have made it difficult for homebuilders to compete with the depressed prices and discouraged potential sellers from putting their homes on the market. Approximately 630,000 people who had tried to get their monthly mortgage payments lowered through the government program have been cut loose through July, according to the Treasury report. That’s about 48 percent of the those who had enrolled since March 2009. And it is up from more than 40 percent through June. Another 421,804, or roughly 32 percent of those who started the program, have received permanent loan modifications and are making their payments on time. RealtyTrac reported that the number of U.S. homes lost to foreclosure surged in July to 92,858 properties, up 9 percent from June. The pace of repossessions has been increasing and the nation is now on track to having more than 1 million homes lost to foreclosure by the end of the year. That would eclipse the more than 900,000 homes repossessed in 2009, the firm says. Lenders have historically taken over about 100,000 homes a year, according to RealtyTrac. Zandi said the government effort will likely end up helping only about 500,000 homeowners lower their monthly payments on a permanent basis. That’s a small percentage of the number of people who have already lost their homes to foreclosure or distressed sales like short sales – when lenders let homeowners sell for less than they owe on their mortgages. Zandi predicts another 1.5 million foreclosures or short sales in 2011. “We still have a lot more foreclosures to come and further home price declines,” Zandi said. He said home prices, which have already fallen 30 percent since the peak of the housing boom, would drop by another 5 percent by next spring. Many borrowers have complained that the government program is a bureaucratic nightmare. They say banks often lose their documents and then claim borrowers did not send back the necessary paperwork. The banking industry said borrowers weren’t sending back their paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out. Obama officials dispute that they pressured banks. They have defended the program, saying lenders are making more significant cuts to borrowers’ monthly payments than before the program was launched. And some of the largest mortgage companies in the program have offered alternative programs to those who fell out. Homeowners who qualify can receive an interest rate as low as 2 percent for five years and a longer repayment period. Those who have successfully navigated the program to reach permanent modifications have seen their monthly payments cut on average by about $500. Homeowners first receive temporary modifications and those are supposed to become permanent after borrowers make three payments on time and complete all the required paperwork. That includes proof of income and a letter explaining the reason for their troubles. But in practice, the process has taken far longer. The more than 100 participating mortgage companies get taxpayer incentives to reduce payments. As of mid-June only $490 million had been spent out of a potential $75 billion the government has made available to help stem the wave of foreclosures. ___ AP Real Estate Writer Alan Zibel in Washington and Alex Veiga in Los Angeles contributed to this report.

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Nearly 50 Percent Leave Obama Mortgage-Aid Program

August 21, 2010

WASHINGTON — Nearly half of the 1.3 million homeowners who enrolled in the Obama administration’s flagship mortgage-relief program have fallen out. The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments. Friday’s report from the Treasury Department suggests the $75 billion government effort is failing to slow the tide of foreclosures in the United States, economists say. More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. Economists expect the number of foreclosures to grow well into next year. “The government program as currently structured is petering out. It is taking in fewer homeowners, more are dropping out and fewer people are ending up in permanent modifications,” said Mark Zandi, chief economist at Moody’s Analytics. Besides forcing people from their homes, foreclosures and distressed home sales have pushed down on home values and crippled the broader housing industry. They have made it difficult for homebuilders to compete with the depressed prices and discouraged potential sellers from putting their homes on the market. Approximately 630,000 people who had tried to get their monthly mortgage payments lowered through the government program have been cut loose through July, according to the Treasury report. That’s about 48 percent of the those who had enrolled since March 2009. And it is up from more than 40 percent through June. Another 421,804, or roughly 32 percent of those who started the program, have received permanent loan modifications and are making their payments on time. RealtyTrac reported that the number of U.S. homes lost to foreclosure surged in July to 92,858 properties, up 9 percent from June. The pace of repossessions has been increasing and the nation is now on track to having more than 1 million homes lost to foreclosure by the end of the year. That would eclipse the more than 900,000 homes repossessed in 2009, the firm says. Lenders have historically taken over about 100,000 homes a year, according to RealtyTrac. Zandi said the government effort will likely end up helping only about 500,000 homeowners lower their monthly payments on a permanent basis. That’s a small percentage of the number of people who have already lost their homes to foreclosure or distressed sales like short sales – when lenders let homeowners sell for less than they owe on their mortgages. Zandi predicts another 1.5 million foreclosures or short sales in 2011. “We still have a lot more foreclosures to come and further home price declines,” Zandi said. He said home prices, which have already fallen 30 percent since the peak of the housing boom, would drop by another 5 percent by next spring. Many borrowers have complained that the government program is a bureaucratic nightmare. They say banks often lose their documents and then claim borrowers did not send back the necessary paperwork. The banking industry said borrowers weren’t sending back their paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out. Obama officials dispute that they pressured banks. They have defended the program, saying lenders are making more significant cuts to borrowers’ monthly payments than before the program was launched. And some of the largest mortgage companies in the program have offered alternative programs to those who fell out. Homeowners who qualify can receive an interest rate as low as 2 percent for five years and a longer repayment period. Those who have successfully navigated the program to reach permanent modifications have seen their monthly payments cut on average by about $500. Homeowners first receive temporary modifications and those are supposed to become permanent after borrowers make three payments on time and complete all the required paperwork. That includes proof of income and a letter explaining the reason for their troubles. But in practice, the process has taken far longer. The more than 100 participating mortgage companies get taxpayer incentives to reduce payments. As of mid-June only $490 million had been spent out of a potential $75 billion the government has made available to help stem the wave of foreclosures. ___ AP Real Estate Writer Alan Zibel in Washington and Alex Veiga in Los Angeles contributed to this report.

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Richard Gaudreau: Are Loan Modifications Causing Foreclosures?

August 20, 2010

When the economy crumbled in 2008 as real estate values plummeted, Congress was under pressure to appease the public’s demand for action to stem the tide of foreclosures. Congress considered repealing the prohibition in the law against bankruptcy judges modifying the terms of predatory mortgages, but rejected that option, inexplicably taking its marching orders from bank lobbyists, the very industry that caused the economic collapse in the first place. Instead, in February, 2009, Congress passed HAMP, a loan modification program touted as the answer for American homeowners facing foreclosure. While HAMP permits the banks to pay “lip service” to their commitment to helping the American homeowner save their homes, the banks are well aware that most loan modifications requests fail. The banks are also aware that the price of failure is often a foreclosure precipitated at least in part by the HAMP requirement that homeowners must be in default on their mortgage before applying for a loan modification. One-and-a-half years after HAMP, the foreclosure rate continues to soar. For every one of the past 17 months, foreclosures have remained above 300,000 per month, an unprecedented event in American history. According to RealtyTrac, the foreclosure numbers for the first half of 2010 increased by eight percent compared to 2009, and the 2nd quarter of 2010 set a record for the number of foreclosures in a three-month period. Not only is HAMP helping far fewer homeowners than promised, there’s some evidence that HAMP may be leaving more homeowners worse off than if they never had entered the “loan mod” program in the first place. The government pays mortgage servicers $1,000 for each “loan mod” application. Studies have shown though that mortgage servicers stand to make far more in fees from a foreclosure than they ever will from a loan modification request. ( Why Servicers Foreclose When They Should Modify , Nat. Cons. Law Center, 2010). No one has ever accused corporate America of not knowing how to put its own self-interest first. Perhaps this is why my client’s complaints sound a consistent theme about loan modifications. They describe a bureaucratic nightmare, fraught with delay, and requests for the same documents again and again. Phone calls go unanswered and messages unreturned. When clients do reach a live person, they complain that the answers they get vary depending on who happens to pick up the phone that day. When homeowners ask their bank whether they’re eligible for a “loan mod,” they are incredulous to hear that they need to be at least 60 days behind on their mortgage in order to qualify. This is a rigid requirement. It doesn’t matter if a homeowner has managed to stay up to date only by liquidating a 401k or borrowing from parents. The bank won’t even consider a HAMP “loan mod” unless the mortgage is in default for 60 days. Many homeowners, already skating on thin ice financially, don’t need to be invited twice to begin missing mortgage payments. The banks do nothing to pre-screen homeowners to ensure they are good candidates for a loan modification. Unwitting homeowners, not realizing a loan modification will take from six to 12 months, often get far more than 60 days behind with the bank’s encouragement. In fact, one couple recently told me that the bank denied them a loan modification because they were “only” 60 days behind on the mortgage. The problem with requiring these kind of defaults is that it forces homeowners to bet their home on a successful outcome despite the fact most “loan mods” fail. HAMP requires a trial period of payments before a “loan mod” receives final approval. I have had several clients stuck in “loan mod” limbo making probationary payments for more than six months. During this process, one received a call from a bank collector apparently working from a list of people behind on their mortgage. This person asked if she was interested in one of their “loan mod” programs. My client informed him that she already enrolled in one so she was not interested in applying. She later learned that her answer was misconstrued to mean she was not interested in any program, and her application was canceled. This left her several months behind on her mortgage without a solution, jeopardizing her home. The overwhelming majority of “loan mods” are either denied outright or fail, leading to a foreclosure. One of my clients faced a foreclosure on July 30th after a “loan mod” denial, even though the HAMP regulations were amended in June 2010 to prohibit foreclosures while a “loan mod” is pending. One of the many problems with HAMP is that it is toothless, not providing any private right of action to homeowners to go to court to complain that their bank failed to follow HAMP regulations. This client had paid an internet company $2500 to do a loan modification for them. He still had to file a chapter 13 bankruptcy to save his home from foreclosure. The government imposes no penalties for banks that have backlogs of hundreds of thousands of loan modification requests. Banks, overwhelmed by the number of loan mod applicants, find it easier to cut down on the number of applicants by losing paperwork and creating other unnecessary hoops for homeowners to jump through. Many homeowners are so discouraged by this kind of institutional arrogance that they just stop trying. To the banks, this is just a number’s game, and they don’t much care that there are real people facing real disasters on the other end of any “loan mod” request that slips between the cracks. As one bank told one of my clients, “we don’t need to work with you, we’ve already been bailed out.” There’s no bailout for the little guy. That being said, there’s no reason a homeowner can’t complete a “loan mod” on their own if they are cautious. Here are some tips that might help homeowners trying to negotiate the ‘loan mod’ labyrinth on their own: (1) Given that HAMP is helping far fewer homeowners than expected, do a reality check on your monthly budget before applying for a loan modification. If juggling credit card payments is the only way you are able to afford your mortgage every month, hoping to drop your mortgage payment low enough to afford all your credit card payments is probably not going to work. That’s like trying to hit the perfect golf shot in a difficult situation. I can say from long experience that this doesn’t happen very often, so you might not want to bet your house on the outcome. If you can’t pay everything, prioritize your debt based on what’s most important to you. If you’ve already applied for a “loan mod,” paying your credit cards from the extra money created by your reduced mortgage payments may lead to a foreclosure if you are denied, unless you have a rich uncle to bail you out. (2) At the risk of oversimplifying, loan modifications are designed to lower your mortgage payment down to 31% of your gross income. If your mortgage payment is already lower than 31% of your gross, you probably won’t qualify. (3) If you decide to do a “loan mod,” don’t pay an internet marketing company to do it for you. Your desperation makes you vulnerable to being scammed. Even if you get lucky, there’s nothing they will do that you can’t do for yourself. If you want help, call your local HUD office for the telephone number of a HUD loan modification counselor near you or call 1-888-995-HOPE (4673). They will help you for free. (4) You might think providing all of the required documentation in a timely fashion is enough, but that just gets your foot in the door — you and the other few hundred thousand homeowners waiting for the same answer. Assume your bank is overwhelmed, will lose your paperwork and not return your phone calls as a means of controlling the number of “loan mods” it has to actually consider. Don’t take it personally. The clients that succeed have a bulldog persistence and aren’t shy about contacting their bank on a regular basis. Keep a copy of everything you provide the bank. (5) Don’t get any more than 60 days behind on your mortgage unless you are ready to give up your home if you aren’t approved for a “loan mod.” If your bank insists that you have to be more than 60 days behind before being accepted for a loan modification, ask them to put it in writing and file a complaint. Try to bank the money saved by not paying your regular mortgage payment, or the “loan mod” process may leave you in a worse position than you were before applying. (6) Keeping in mind that most banks have several “loan mod” programs available, you should make sure you’ve exhausted all the alternatives before accepting “no” for an answer. I had one client denied under HAMP who was able to avert a foreclosure by qualifying for another “loan mod” program, something the bank had never mentioned.

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Richard Gaudreau: Are Loan Modifications Causing Foreclosures?

August 20, 2010

When the economy crumbled in 2008 as real estate values plummeted, Congress was under pressure to appease the public’s demand for action to stem the tide of foreclosures. Congress considered repealing the prohibition in the law against bankruptcy judges modifying the terms of predatory mortgages, but rejected that option, inexplicably taking its marching orders from bank lobbyists, the very industry that caused the economic collapse in the first place. Instead, in February, 2009, Congress passed HAMP, a loan modification program touted as the answer for American homeowners facing foreclosure. While HAMP permits the banks to pay “lip service” to their commitment to helping the American homeowner save their homes, the banks are well aware that most loan modifications requests fail. The banks are also aware that the price of failure is often a foreclosure precipitated at least in part by the HAMP requirement that homeowners must be in default on their mortgage before applying for a loan modification. One-and-a-half years after HAMP, the foreclosure rate continues to soar. For every one of the past 17 months, foreclosures have remained above 300,000 per month, an unprecedented event in American history. According to RealtyTrac, the foreclosure numbers for the first half of 2010 increased by eight percent compared to 2009, and the 2nd quarter of 2010 set a record for the number of foreclosures in a three-month period. Not only is HAMP helping far fewer homeowners than promised, there’s some evidence that HAMP may be leaving more homeowners worse off than if they never had entered the “loan mod” program in the first place. The government pays mortgage servicers $1,000 for each “loan mod” application. Studies have shown though that mortgage servicers stand to make far more in fees from a foreclosure than they ever will from a loan modification request. ( Why Servicers Foreclose When They Should Modify , Nat. Cons. Law Center, 2010). No one has ever accused corporate America of not knowing how to put its own self-interest first. Perhaps this is why my client’s complaints sound a consistent theme about loan modifications. They describe a bureaucratic nightmare, fraught with delay, and requests for the same documents again and again. Phone calls go unanswered and messages unreturned. When clients do reach a live person, they complain that the answers they get vary depending on who happens to pick up the phone that day. When homeowners ask their bank whether they’re eligible for a “loan mod,” they are incredulous to hear that they need to be at least 60 days behind on their mortgage in order to qualify. This is a rigid requirement. It doesn’t matter if a homeowner has managed to stay up to date only by liquidating a 401k or borrowing from parents. The bank won’t even consider a HAMP “loan mod” unless the mortgage is in default for 60 days. Many homeowners, already skating on thin ice financially, don’t need to be invited twice to begin missing mortgage payments. The banks do nothing to pre-screen homeowners to ensure they are good candidates for a loan modification. Unwitting homeowners, not realizing a loan modification will take from six to 12 months, often get far more than 60 days behind with the bank’s encouragement. In fact, one couple recently told me that the bank denied them a loan modification because they were “only” 60 days behind on the mortgage. The problem with requiring these kind of defaults is that it forces homeowners to bet their home on a successful outcome despite the fact most “loan mods” fail. HAMP requires a trial period of payments before a “loan mod” receives final approval. I have had several clients stuck in “loan mod” limbo making probationary payments for more than six months. During this process, one received a call from a bank collector apparently working from a list of people behind on their mortgage. This person asked if she was interested in one of their “loan mod” programs. My client informed him that she already enrolled in one so she was not interested in applying. She later learned that her answer was misconstrued to mean she was not interested in any program, and her application was canceled. This left her several months behind on her mortgage without a solution, jeopardizing her home. The overwhelming majority of “loan mods” are either denied outright or fail, leading to a foreclosure. One of my clients faced a foreclosure on July 30th after a “loan mod” denial, even though the HAMP regulations were amended in June 2010 to prohibit foreclosures while a “loan mod” is pending. One of the many problems with HAMP is that it is toothless, not providing any private right of action to homeowners to go to court to complain that their bank failed to follow HAMP regulations. This client had paid an internet company $2500 to do a loan modification for them. He still had to file a chapter 13 bankruptcy to save his home from foreclosure. The government imposes no penalties for banks that have backlogs of hundreds of thousands of loan modification requests. Banks, overwhelmed by the number of loan mod applicants, find it easier to cut down on the number of applicants by losing paperwork and creating other unnecessary hoops for homeowners to jump through. Many homeowners are so discouraged by this kind of institutional arrogance that they just stop trying. To the banks, this is just a number’s game, and they don’t much care that there are real people facing real disasters on the other end of any “loan mod” request that slips between the cracks. As one bank told one of my clients, “we don’t need to work with you, we’ve already been bailed out.” There’s no bailout for the little guy. That being said, there’s no reason a homeowner can’t complete a “loan mod” on their own if they are cautious. Here are some tips that might help homeowners trying to negotiate the ‘loan mod’ labyrinth on their own: (1) Given that HAMP is helping far fewer homeowners than expected, do a reality check on your monthly budget before applying for a loan modification. If juggling credit card payments is the only way you are able to afford your mortgage every month, hoping to drop your mortgage payment low enough to afford all your credit card payments is probably not going to work. That’s like trying to hit the perfect golf shot in a difficult situation. I can say from long experience that this doesn’t happen very often, so you might not want to bet your house on the outcome. If you can’t pay everything, prioritize your debt based on what’s most important to you. If you’ve already applied for a “loan mod,” paying your credit cards from the extra money created by your reduced mortgage payments may lead to a foreclosure if you are denied, unless you have a rich uncle to bail you out. (2) At the risk of oversimplifying, loan modifications are designed to lower your mortgage payment down to 31% of your gross income. If your mortgage payment is already lower than 31% of your gross, you probably won’t qualify. (3) If you decide to do a “loan mod,” don’t pay an internet marketing company to do it for you. Your desperation makes you vulnerable to being scammed. Even if you get lucky, there’s nothing they will do that you can’t do for yourself. If you want help, call your local HUD office for the telephone number of a HUD loan modification counselor near you or call 1-888-995-HOPE (4673). They will help you for free. (4) You might think providing all of the required documentation in a timely fashion is enough, but that just gets your foot in the door — you and the other few hundred thousand homeowners waiting for the same answer. Assume your bank is overwhelmed, will lose your paperwork and not return your phone calls as a means of controlling the number of “loan mods” it has to actually consider. Don’t take it personally. The clients that succeed have a bulldog persistence and aren’t shy about contacting their bank on a regular basis. Keep a copy of everything you provide the bank. (5) Don’t get any more than 60 days behind on your mortgage unless you are ready to give up your home if you aren’t approved for a “loan mod.” If your bank insists that you have to be more than 60 days behind before being accepted for a loan modification, ask them to put it in writing and file a complaint. Try to bank the money saved by not paying your regular mortgage payment, or the “loan mod” process may leave you in a worse position than you were before applying. (6) Keeping in mind that most banks have several “loan mod” programs available, you should make sure you’ve exhausted all the alternatives before accepting “no” for an answer. I had one client denied under HAMP who was able to avert a foreclosure by qualifying for another “loan mod” program, something the bank had never mentioned.

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Video: U.K. Sees Boom in Apprenticeships Amid Slow Jobs Market

August 19, 2010

Aug. 19 (Bloomberg) — Bloomberg’s Olivia Sterns reports on the increase in applications to apprenticeship programs in the U.K. amid a slow jobs market and after the government capped the number of university places available.

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Video: Lindland Says GM IPO `Huge Step in the Right Direction’: Video

August 18, 2010

Aug. 18 (Bloomberg) — Rebecca Lindland, an analyst at IHS Automotive, talks about today’s filing for an initial public offering by General Motors Co. GM, 61 percent owned by the government, didn’t disclose the number of shares that will be offered or the price range in a statement filed today with the U.S. Securities and Exchange Commission. The automaker will not sell any common shares itself while offering preferred shares alongside the IPO, the filing showed. Lindland talks with Matt Miller, Carol Massar and Dominic Chu on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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11 Best Cities To Find A Job: Juju’s Index (PHOTOS)

August 13, 2010

If you’re hunting for a new gig, and the phrase “willing to relocate” is included somewhere in your resume, keep in mind that some cities are much easier to find a job in than others. A job applicant in San Jose, for instance, competes with 8 fewer unemployed people for a job advertised online than an applicant in Miami, according to Juju, a leading online job search engine that scours thousands of employer career portals, recruiter websites, and online job boards. Juju recently calculated the number of unemployed workers in 50 major cities, as reported by the Bureau of Labor Statistics (BLS), with the number of jobs advertised in each city on Juju’s index of millions of jobs. They ranked the top 50 in their “Job Search Difficulty Index” according to this metric. In terms of sheer numbers, the following cities are, according to Juju’s index, some of the best cities to look for a job:

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Underwater Mortgages: Nearly One Quarter Of Mortgage Borrowers Owe More Than Their Home Is Worth

August 8, 2010

By the end of the first quarter of 2010, the number of mortgaged residential properties with negative equity had declined slightly to 11.2 million, down from 11.3 million at the end of 2009, according to a report issued by real estate analytics firm CoreLogic. The bad news: Those 11.2 million loans make up roughly 24% of all U.S. mortgages. Add the 2.3 million borrowers who are close to slipping underwater (those with less than 5% equity), and the numbers rise to 13.5 million — 28% of mortgages.

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Video: Citigroup’s Private Bank Triples Hedge Fund Offerings: Video

August 6, 2010

Aug. 6 (Bloomberg) — Bloomberg’s Bradley Keoun reports on Citigroup Inc.’s private bank plans to triple the number of hedge funds such as Paulson & Co. that its wealthy clients can invest in, under a push to increase money-management revenue. (Source: Bloomberg)

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Groupon Deals Flood Local Shops With New Customers — And Some Can’t Keep up

August 2, 2010

CHICAGO — Local shops nationwide are pulling in thousands of new customers with group coupons online, but the deals can sometimes work too well, turning marketing into a game of retail roulette. Some of the nail salons, restaurants and other small shops that have sold the coupons have risked both new and existing business as they struggled to handle the surge in clients. For Crystal Nail Salon in Chicago, ratings at web sites like Yelp.com tumbled as owner Phu Bui struggled to serve up the 5,100 manicure-pedicure combinations he sold in June for 65 percent off. “All of a sudden it went over the edge of my expectations, so I’m a little overwhelmed,” Bui says. Chicago-based Groupon, credited with creating the group discount concept and still the ballooning trend’s leader, typically keeps half the coupon’s selling price and charges retailers a processing fee. It e-mails deals daily to 11 million shoppers in 150 cities in 19 countries and this month started tweeting about group deals to many millions more. The messages, which cost retailers little up front, typically promote a service at a significant discount and require a minimum number of participants (the group) to take effect. Being available for only a day or two – and often to a limited number of people – gives them an added sense of urgency. Bui – who bypassed Groupon’s recommendation to limit the number of $28 coupons – says he’ll consider offering an online deal again, even though some patrons complained of long waits, inadequate treatments and feeling rushed. It may not pay off. “They have this one opportunity to enhance an experience for a customer and if they fail then you might not be coming back,” says Courtney Smolen, 29, whose appointment at Crystal was delayed 30 minutes. Scores of websites besides Groupon offer similar deals, including buywithme.com, livingsocial.com and even some newspapers. “If you’re prepared, it can be a really great thing,” says Tony Gordon, who offered coupons for half-price massages through Groupon.com in December. “If you haven’t used your foresight or you haven’t extrapolated what’s going to occur, it could kill your business.” Groupon suggested he add workers to book appointments, Gordon says, and he later hired four new therapists and expanded the Chicago salon. He says he achieved his goal of creating new long-term customers of some of the nearly 3,200 people who bought the discounts, and he would consider trying again. But the gamble was expensive: His shop received less than $20 for each massage, compared with the normal $84. At Bikram Yoga Milwaukee, owner Bron Gacki had a very un-yoga reaction last month after selling nearly 2,500 Groupon coupons, when he expected to sell 1,000. He almost panicked. “What if 2,500 people show up tomorrow? What’s going to happen?” he recalls thinking. Gacki and his employees have worked extra hours signing up new customers for five classes for $15, a steal compared with the usual $90. Classes are 20 percent to 50 percent bigger, and teachers are arriving early to make sure the studio can accommodate everyone. CEO and founder Andrew Mason of Groupon says the company explains the risk shops take when they sign on. It tells its 30,000 clients not to expect to turn a profit on the deals and suggests they limit the number of coupons they sell. The company also thinks the risk of drawing too many customers will ease as it starts drilling down to offer coupons tailored to neighborhoods and smaller cities. Most retailers don’t cap the number they sell because they see it as turning away customers, says Chris Connelly, a senior executive in Accenture’s retail practice. “You’re a retailer, and it’s in your DNA as a retailer to sell people product.” ___ AP Retail Writer Emily Fredrix reported from New York.

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Ford Vox: Top 5 Orthopedic Fields Indebted to the Device Industry

July 23, 2010

It’s true. Factors other than our patients influence the care physicians provide. In the case of American orthopedic surgery, as I write for The Atlantic , Factor X is the medical device industry. Today, most orthopedic surgeons train one or two more years extra (that’s after eight years of medical school and residency) to focus on specific surgeries that use specific equipment. This wasn’t the case a few decades ago. At the same time this trend took off, the companies developing those procedures and marketing that equipment started cutting checks to grease the orthopedic training machine everywhere from America’s top hospitals to small private practices. Despite new rules (detailed in The Medical-Industrial Complex ) the money continues to flow. Here’s my 2010 rank list of orthopedic fields as favored by the medical device industry: 1. Spine Surgery 2. Hip and Knee Surgery 3. Shoulder and Elbow Surgery 4. Trauma Surgery 5. Orthopedic Oncology The list is based on the number of training slots available in a given area versus the industry money accepted by the training programs in that area (not gross total funding). It’s approximate, given that the number of slots fluctuate, and it’s based on the records of the two industry-fed funds for which I was able to obtain records: OREF and OMeGA. Read the whole story here.

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Candy Spelling: No Burkas in the Boardroom

July 21, 2010

I’m not a big fan of quotas, so I was surprised that I initially liked the idea that France wanted to increase the number of women on corporate boards. Statistics showed that only nine-and-a-half percent of members of corporate boards were women. So, someone came up with the idea of legislating a quota, where women would make up 40 percent of corporate boards. I liked the idea of more women, but was queasy about the idea that corporations had to fulfill quotas. The boards would have to be 40 percent women in six years, or no male board members could be added. Norway had similar legislation, and the number of women on boards in Norway has increased to over 30 percent. Sounds good, but I have no idea if those companies are doing better. I lost my mixed feelings about legislating women and was stopped in my tracks by another headline of a story from France. French back burka ban as only one MP votes against move to outlaw Islamic ‘walking coffins’ Huh? One expert said the garments are seen as undermining women’s rights and a threat to France’s secular status. Others said women who covered themselves up were security threats. The proposed legislation, which is colloquially referred to as the anti-burka law, translates in English to “the bill to forbid concealing one’s face in public.” One legislator stated it affects only 2,000 women in France. That sounds close to the number of women the board quota legislation would affect. Neither of these issues should just dictate numbers to legislate what to wear or what voices should be heard. We’re not talking about banning film of Elvis shaking his hips or my classmates in school having the length of their mini-skirts measured. This isn’t a frivolous statement about wardrobe. It’s an all-out assault on religious freedom and women. It relates to the burkas and niqab worn by some of the most-religious women to conceal either all but their eyes or their identity completely. Should the French be worried about security? Of course. Everyone is, and we all should be. But, to strike out at a small religious group of Muslim women in France in case someone planning to do harm will emulate their clothing is not the way to go. No one banned shoes or underwear on airplanes after the attempts by shoe or underwear bombers. I believe corporate boards do need more women, but not through legislation. I do not believe that religious garments should be banned and a group of innocent people should be prevented from appearing as they wish and believe. I’ll try to remember this the next time our Congress tries to pass some outrageous legislation. It will probably be soon.

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Radient Pharmaceuticals Appoints Dr. Robert Beart Jr. MD to RPC’s Board of Directors

July 20, 2010

TUSTIN, CA–(Marketwire – July 20, 2010) –  Radient Pharmaceuticals Corporation ( NYSE Amex : RPC ), a US-based pharmaceutical company, announced today the appointment of Dr. Robert Beart Jr., MD as an independent member of RPC’s Board of Directors to fill the vacancy of the late Dr. Edward Arquilla. Dr. Beart is currently the medical director of the Glendale Hospital CRC Institute. Previously he had been with the University of Southern California (USC) since 1992, establishing the Division of Colorectal Surgery in the USC Department of Surgery as well as launching the USC Center for Colorectal Diseases at USC University Hospital and USC/Norris Cancer Center and Hospital. His appointment increases the number of independent directors at RPC to three.

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Why Are Americans Fleeing The Job Market?

July 6, 2010

Are we about to see a wave of Americans giving up on the labor market? The Bureau of Labor Statistics’ June jobs report saw the labor market lose 652,000 workers — a defection so large that it caused the nation’s unemployment rate to drop from 9.7% to 9.5%, not because jobs were created, but because the number of people in the workforce declined.

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David Isenberg: The Three Imperative C’s: Comprehending Contracting Culture

June 29, 2010

Remember the Human Terrain System Program? That’s the U S. Army program which embeds social scientists with combat brigades in countries like Iraq and Afghanistan to help tacticians in the field understand local cultures. Perhaps we need to bring a HTS team home to decipher and understand the military contracting culture. That, at least, is the conclusion of a written GAO testimony, released today at a congressional hearing. It suggests that what we need for better contracting is cultural change. Titled ” Cultural Change Needed to Improve How DOD Plans for and Manages Operational Contract Support ” the statement by William Solis, GAO Director, Defense Capabilities and Management, given today at a hearing of the House Subcommittee on National Security and Foreign Affairs, Committee on Oversight and Government Reform, finds that: DOD still faces challenges that stem from the department’s failure to fully integrate operational contract support within DOD, including planning for the use of contractors, training military personnel on the use of contractor support, accurately tracking contractor use, and establishing measures to ensure that contractors are accountable. A cultural change in DOD that emphasizes an awareness of operational contract support throughout all aspects of the department, including planning, training, and personnel requirements, would help the department address these challenges in ongoing and future operations. Among other things Solis’s testimony updates contractor numbers in Iraq and Afghanistan. In Iraq and Afghanistan contractor personnel now outnumber deployed troops. For example, according to DOD, as of March 2010, there were more than 95,000 DOD contractor personnel operating in Iraq and more than 112,000 DOD contractor personnel operating in Afghanistan. While the number of troops fluctuates based on the drawdown in Iraq and the troop increase in Afghanistan, as of June 2010 there were approximately 88,000 troops in Iraq and DOD estimates that the number of troops in Afghanistan will increase to 98,000 by the end of fiscal year 2010. DOD anticipates that the number of contractor personnel will grow in Afghanistan as the department increases its troop presence in that country. However, these numbers do not reflect the thousands of contractor personnel located in Kuwait and elsewhere who support operations in Iraq and Afghanistan. By way of contrast, an estimated 9,200 contractor personnel supported military operations in the 1991 Gulf War. Solis’s concludes thusly: Looking toward the future, the challenges we have discussed demonstrate the need for DOD to consider how it currently uses contractors in contingency operations, how it will use contractors to support future operations, and the impact that providing management and oversight of these contractors has on the operational effectiveness of deployed units. These considerations would also help shift the department’s culture as it relates to operational contract support. As DOD doctrine recognizes, operational contract support is more than just logistical support. Therefore, it is important that a significant culture change occur, one that emphasizes operational contract support throughout all aspects of the department, including planning, training, and personnel requirements. It is especially important that these concepts be institutionalized among those serving in leadership positions, including officers, noncommissioned officers, and civilians. Only when DOD has established its future vision for the use and role of contractors supporting deployed forces and fully institutionalizes the concepts of operational contract support can it effectively address its long-term capability to oversee and manage those contractors.

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Five Times As Many Homeowners Bounced From Obama Plan To Slow Foreclosures As Granted New Relief

June 21, 2010

More than five times as many homeowners were kicked out of the Obama administration’s primary foreclosure-prevention program last month than were granted new relief, new data released Monday show. Nearly 155,000 homeowners were bounced from the administration’s Home Affordable Modification Program in May versus about 30,000 who were offered new temporary trial plans of lower monthly payments. About 48,000 more homeowners were granted five-year plans of lower payments compared to April, with an undisclosed amount offered five-year plans that have yet to complete the paperwork. All told, last month about twice as many homeowners were bounced from a program that promised to help struggling families hurt by the firms at the heart of the worst financial crisis and subsequent economic downturn since the Great Depression. Those firms received hundreds of billions of dollars in taxpayer cash and guarantees. Meanwhile, 16 months after President Barack Obama told a crowd in Mesa, Ariz. of his plan to “help between seven and nine million families restructure or refinance their mortgages so they can afford — avoid foreclosure,” nearly 436,000 homeowners have been kicked kicked out of the centerpiece of the administration’s $75 billion plan to help distressed borrowers, while only about 340,000 homeowners have received permanent relief. Yet on a conference call with reporters and in news releases, top administration officials from the Treasury Department and the Department of Housing and Urban Development sounded an upbeat note. “There’s no question that today’s housing market is in significantly better shape than anyone predicted 18 months ago,” HUD Secretary Shaun Donovan told reporters before reminding them of the dire forecasts and statistics that dominated headlines when the new administration took office. “Seventeen months after President Obama took office, our housing market is stabilizing and our economy has created jobs for five straight months for the same reason: Because we did act. Because this administration immediately upon taking office took swift and comprehensive action,” Donovan said. After seven months of increases in newly-initiated five-year modification plans, the pace slipped 30 percent in May to an increase of 47,724. It’s the lowest monthly increase since December, Treasury data show. The pace of new trial modifications, which were designed to be three-month plans that would lead to a five-year, permanent reduction in monthly payments, continued its monthly slide: just over 30,000 new homeowners joined the program in May, a 19 percent drop from the previous month and a 67 percent decline from January. The number of new entrants has declined for the past five months. Over the same period, the number of new canceled modifications skyrocketed by 154,626, or 55 percent. “It would a national tragedy and shame if the hundreds of thousands of families that entered HAMP with the hope of a permanent modification now face foreclosure once more,” said Richard H. Neiman, New York’s top bank regulator and a member of the Congressional Oversight Panel, a bailout watchdog. “In many cases we are talking about people who made month after month of payments and may now be being pushed out of HAMP due to document disputes with their mortgage servicer.” Treasury allocated $50 billion for its plan to help struggling homeowners, with an additional $25 billion to assist government-controlled housing giants Fannie Mae and Freddie Mac in its efforts as part of the administration’s overall foreclosure-prevention plan, called Making Home Affordable. By comparison, the nation’s four biggest banks by assets received a combined $140 billion alone in taxpayer cash as part of a larger bailout of Wall Street. While the pace of five-year and trial mods declined 30 percent and 19 percent, respectively, in May, the pace of newly-canceled mods jumped 25 percent, Treasury data show. The pace of canceled mods has been slowing over the past three months, however. Administration officials pointed out that nearly half, or 49 percent, of homeowners bounced during the trial modification phase through April were placed in alternative modification plans, according to Treasury data based on statistics from the eight largest mortgage servicers in HAMP. Just over 9 percent either lost or are in process of losing their homes through foreclosures and short sales/deeds-in-lieu, the data show. Treasury figures, however, don’t show whether those homeowners are in sustainable modification plans, defined as those that ultimately avoid foreclosure through affordable monthly payments. “Although the report indicates that 50 percent of the families who are losing their HAMP modificiation will receive non-HAMP alternatives, the true test is in the details of these alternatives and seeing that families are truly ending up better off, and not worse,” Neiman said. Donovan and two other Treasury officials, meanwhile, tried to focus reporters on the median decline in monthly mortgage payments experienced by the 340,459 borrowers in five-year plans ($514.31, or a 36 percent decrease compared to pre-mod payments); the fact that housing prices have leveled off, and are starting to tick up; that more than six million homeowners have refinanced their mortgages thanks to historically-low interest rates, and more than 2.5 million families have purchased a home using the temporary homebuyer tax credit; that the pace of new foreclosures is slowing; and that Americans’ equity in their homes has risen by more than $1 trillion since the first quarter of 2009. Combined, this shows that the housing market has stabilized, and that more homeowners are being helped than hurt by the administration’s efforts, officials stressed during the call, citing data from another, more detailed report . But HAMP was touted as a program that “will enable as many as 3 to 4 million homeowners to modify the terms of their mortgages to avoid foreclosure,” as Obama put it Feb. 18, 2009. Housing experts are increasingly doubting the program’s eventual success. “It’s sorta hard to tell if any of this ‘makes sense’ without a boatload more data on how the loans have been performing during the trial period (and in subsequent mod programs),” wrote Thomas A. Lawler, a former top official at Fannie Mae now a consultant on housing and mortgage matters, in a note to clients. “Cynics could easily feel that the whole ‘process’ is starting to feel like a ‘kick the can down the road’ program, where if one ‘step’ doesn’t work one just adds another designed solely to keep the number of foreclosures down, even if the borrower’s case is ‘hopeless.’” Yet while the administration tries to stem the tide of foreclosures — especially in time for November’s Congressional elections — the biggest mortgage servicers aren’t making it easy. Citigroup, for instance, has placed 34,675 homeowners in five-year plans through HAMP, Treasury data through May show. But the bank, the nation’s third-largest by assets, kicked out 60,607 borrowers from trial plans through April. That number likely rose in May. Wells Fargo, the nation’s fourth-largest bank by assets, put 40,759 of its borrowers in five-year HAMP plans, data through May show. However, the bank kicked 59,910 homeowners out of trial plans through April, according to Treasury. The number of homeowners bounced from the program also likely rose in May. Put another way, the number of homeowners Citigroup and Wells Fargo have tossed from HAMP trial plans is 60 percent greater than the total number of homeowners they’ve granted permanent relief. “This scorecard isn’t only about sharing the good news about our housing recovery, but also the areas where we still need to see improvement,” Donovan said.

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Record Prescription Drug Overdoses in U.S. Match Total of Heroin, Cocaine

June 17, 2010

By Tom Randall June 17 (Bloomberg) — Emergency-room visits from abuse of prescription and over-the-counter medicines doubled in the U.S. in four years, matching for the first time the number of overdoses of illegal drugs such as cocaine and heroin. Regulator-approved treatments were implicated in a record 1 million patients who sought help at hospital emergency departments in 2008, twice the number as in 2004, according to a study released today by the Centers for Disease Control and Prevention, in Atlanta. Overdoses from illicit drugs were unchanged, at 1 million emergency visits. The most hospitalizations were caused by painkillers, with visits more than doubling, and tranquilizers, with an 89 percent increase. King Pharmaceuticals Inc. , in Bristol Tennessee, and Purdue Pharma LP, in Stamford, Connecticut, won approval in the last year for drugs to prevent misuse. A half-dozen drugmakers are developing pain pills that resist abuse methods such as crushing, dissolving in alcohol, and taking more than needed. “Additional measures are needed urgently,” researchers wrote in the CDC’s Morbidity & Mortality Weekly Report. “Recent public health and law enforcement measures intended to prevent nonmedical use of such drugs have not prevented rate increases.” The biggest increase in emergency visits was from adults in their 20s, according to the study. The researchers analyzed reports from 220 emergency departments across the U.S. to estimate the nation’s tally. To contact the reporter on this story: Tom Randall in New York at trandall6@bloomberg.net .

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Jared Bernstein: Get the Facts Straight

June 11, 2010

An opinion piece by David Brooks in today’s New York Times reminded me of the old adage, “everyone has a right to their own opinion, but not to their own facts.” Particularly in regard to the Recovery Act, Brooks gets the facts wrong and in so doing, presents a misleading picture of where we’ve been, where we are, and what the best next steps should be. Jobs Saved or Created: Brooks cites a model that “suggests the stimulus will create about a half-million jobs.” That’s demonstrably wrong based on Recovery Act recipients’ own reports, and way off the consensus of outside estimates. Each of these facts is, by the way, a mouse click away. For example, click here and learn that according the Congressional Budget Office, the nation’s premiere, independent, nonpartisan scorekeeper, as of the first quarter of this year, the Recovery Act saved or created as many as 2.8 million jobs. The CBO evaluates the jobs created by the full scope Recovery Act programs, from direct spending on road projects, to teacher-job preservation, to tax cuts, and so on. But there’s another source worth examining here: recipient reporting on Recovery.gov . Click on the link and you will see the number 681,825. These are the number of jobs reported by a subset of Recovery Act recipients, those whose jobs came through direct spending (missing, for example, jobs created by tax cuts or jobs created indirectly through spending by direct beneficiaries). Note two things about this number: first, it reflects jobs created or retained with less than a fifth of the Act’s spending, and second, even though it only covers a small part of Recovery Act spending, it’s a lot higher than “half-a-million.” Brooks may have objections to these facts, but it is misleading in the extreme to simply omit them. Brooks then incorrectly cites the work of economist Ed Glaeser to suggest that there’s no relationship between stimulus spending and job creation. Glaeser finds nothing of the sort–the raw relationship Glaeser reports is that unemployment has risen less where the stimulus was larger ( see here for a discussion of Ed’s work). I spoke to Ed this morning and he certainly believes the stimulus created jobs in states across the country. Current Conditions: The other lynchpin of Brook’s argument is the fact that in the last jobs report, of the 431,000 net jobs created in May, only 41,000 were private sector jobs. In March and April, however, the number of private sector jobs created were 158,000 and 218,000, respectively. Every economist who follows these numbers knows they bounce around, so cherry-picking one month to make your case is just bad analysis ( see here for a gaggle of economists making this important point). Presumably, Brooks wouldn’t have made this point last month, and it’s implausible that the stimulus worked in April but not in May. The average of private sector job growth over the past three months has been about 140,000 per month. One year ago, that same average was negative 575,000…per month! Over the past three months, we’ve gained over 400,000 private sector jobs. Over that same period last year, we lost 1.7 million. Economists across the spectrum widely agree that the Recovery Act played a key role in that reversal. Mark Zandi, one of the most frequently cited economists in America (and an economist who previously the McCain campaign), called the Recovery Act “the catalyst for the transition from recession to recovery.” We know we have a long way to go before working Americans once again have the economic opportunities they need and deserve, and the President is working aggressively to build off of the momentum described above. But we can’t effectively plan next steps if we fail to objectively and factually evaluate where we’ve been. This post originally appeared at WhiteHouse.gov’s Recovery Act Blog .

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Video: Global Millionaires Club Rose 14%, Singapore at Top: Video

June 11, 2010

June 11 (Bloomberg) — Singapore and Malaysia led a recovery of global wealth to pre-crisis levels as the number of millionaires grew by about 14 percent last year, the Boston Consulting Group said. Bloomberg’s Cali Carlin reports. (Source: Bloomberg)

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Jobs Crisis Persists As Dems Lose Appetite To Fight It

June 4, 2010

A dreadful unemployment report showing that the private sector barely hired anybody in May suggested Friday that the jobs crisis in America is not really subsiding. What is subsiding, however, is congressional Democrats’ appetite for helping the unemployed. Last week, conservative House Democrats rebelled against a bill to reauthorize several expiring domestic aid programs, including extended unemployment benefits, because the bill would have added $123 billion to a federal budget deficit expected to reach $1.5 trillion this year. Why do more deficit spending, they asked, if the recovery is already underway? “A year ago we were in the midst of the worst recession in 80 years and desperately trying to find ways to climb out of it,” said Rep. Gerry Connolly (D-Va.), president of the freshman class, who credited the stimulus bill with turning the economy around. “We did the right thing and it’s working. Now, a year and four months later, it’s a very different situation. We are now managing a recovery and trying to sustain it.” “We’ve had four straight months of job growth,” said Rep. Jason Altmire, a Blue Dog Democrat from Pennsylvania. “At some point you have to take a step back and look at the relative value of unemployment benefits versus people looking for jobs.” Opposition from conservative Dems delayed a vote on the bill, the American Jobs and Closing Loopholes Act, until the end of the week, and when leadership finally agreed to chop stuff out of the package, including a month of extended unemployment benefits and health insurance subsidies for laid-off workers, it was too late — the Senate had already adjourned for the Memorial Day break. Several programs, including extended unemployment benefits, lapsed Tuesday and won’t be reauthorized until sometime after June 7, when the Senate returns from its vacation. And that, if it happens, may be the final reauthorization: Though unemployment is higher now than when Congress gave the jobless an additional 18 months of benefits, Democrats are unwilling to commit to doing more when the extended benefits expire again at the end of the year. This week, according to the Department of Labor, 19,400 people prematurely exhausted their unemployment benefits because of the lapse. There’s no indication the Senate will move quickly when it returns next week, when the number of premature exhaustions will climb to 323,400. By the end of the month the number will reach 1.2 million. Friday’s jobs report from the Labor Department showed the economy added 431,000 jobs in May, but 411,000 of those came from temporary Census hiring. The unemployment rate fell from 9.9 to 9.7 percent, in part because the labor force shrank as some jobless people gave up looking for work. The number of long-term unemployed inched up by about 47,000, to 6.76 million. That’s 46 percent of the 15 million jobless Americans. It’s the programs to help them that are on the chopping block. Sixty-seven percent of the unemployed received benefits; without the extensions Congress has passed since the recession, only 35 percent of the 15 million unemployed would be receiving benefits. While Congress struggles to preserve the existing programs, no help whatsoever is forthcoming for the hundreds of thousands who have already exhausted the 99 weeks of unemployment benefits available in some states. “Today’s jobs report proves we are still in desperate straits in terms of our jobs recovery,” said Judy Conti, a lobbyist with the National Employment Law Project. “For anybody in Congress to suggest that now is the time to start pulling back our supports for people who are unemployed through no fault of their own proves that they are out of touch with reality at best and heartless at worst.” Progressive economist Dean Baker, co-director of the Center for Economic and Policy Research, said the unimpressive jobs report “actually is good news in that it should shut up the dingbats who thought the economy was recovering just fine.”

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Payrolls Probably Rose for Fifth Straight Month, Led by U.S. Census Jobs

June 3, 2010

By Shobhana Chandra June 4 (Bloomberg) — Employers added jobs in May for the fifth consecutive month, providing U.S. households with the incomes needed to maintain spending and the economic recovery, economists said before a report today. Payrolls rose by 536,000, the most since 1983, according to the median forecast of 82 economists surveyed by Bloomberg News. The gain reflects a jump in government hiring of temporary help for the census and a 180,000 rise in private employment, the survey showed. Economists also project the jobless rate fell. Improving sales are prompting companies from Lowe’s Cos. to General Electric Co. to boost staff, starting a virtuous circle of hiring and spending that will keep the economy growing after government help wanes. Federal Reserve Chairman Ben S. Bernanke said yesterday that unemployment was exacting a heavy toll, showing why economists forecast interest rates will remain low. “As sales increase, there’s just no way companies can operate without adding workers after having cut payrolls so deeply last year,” said Chris Low , chief economist at FTN Financial in New York. “It means stronger consumer spending and stronger economic growth. The economy should be able to carry on its own without the stimulus.” The Labor Department’s report is due at 8:30 a.m. Washington time. Survey estimates for the gain in payrolls ranged from 220,000 to 750,000. The projected jump in employment would be the biggest since a 1.11 million surge in September 1983, which reflected the return of about 640,000 striking workers to AT&T Inc.’s payroll. Jobless Rate Economists surveyed also forecast the jobless rate fell to 9.8 percent last month from 9.9 percent in April. Unemployment, which reached a 26-year high of 10.1 percent in October, may take time to recede as the number of jobseekers reentering the labor force exceeds the number of positions available. Federal hiring of temporary workers to conduct the decennial population count probably peaked last month, economists said. Figures from the Labor Department show there were about 417,000 more census workers on government payrolls during the employment survey week, which includes the 12th of the month, than in the same period in April. The unwinding of census employment may keep distorting the payroll figures for months as the government dismisses workers when the count is completed. For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010. Private Payrolls The projected gain in private payrolls would follow an increase of 231,000 in April. Excluding government jobs, employment climbed by 116,000 a month on average in the five years to December 2007, when the recession began. Manufacturing payrolls increased by 33,000 in May, the survey showed, a fifth straight gain. Fairfield, Connecticut-based General Electric, the world’s largest maker of jet engines, power-generation equipment and locomotives, said last month it will increase the number of jobs it plans to add in Michigan to more than 1,300. The U.S. economy right now is “very good and improving,” GE’s Chief Executive Officer Jeffrey Immelt said in a May 24 interview. Europe’s debt crisis is “solvable” and will not slow the global economic recovery, he said. Automaker Chrysler Group LLC, controlled by Fiat SpA and based in Auburn Hills, Michigan, will hire 1,100 workers at a Detroit factory that produces Jeep Grand Cherokees and add a second shift. Reviving Sales The pickup in jobs is spreading beyond factories. Lowe’s, the second-largest U.S. home improvement retailer, is adding more than 1,400 positions for employees to visit customers’ homes to sell products such as windows and doors. Mooresville, North Carolina-based Lowe’s will fill the jobs internally and hire new workers to try to revive sales. Concern that the rebound will slow because of fallout from the turmoil in Europe and cooling growth in China has caused the Standard & Poor’s 500 Index to drop 9.4 percent from a 19-month high reached on April 23. Bernanke yesterday said joblessness is among the “important concerns” for the recovery. “One particularly difficult issue is the continued high rate of unemployment,” Bernanke said at a forum at the Chicago Fed’s Detroit office. “High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole.” Some companies are still cutting back. Hewlett-Packard Co., the world’s largest personal-computer maker based in Palo Alto, California, this week said it’ll slash about 3,000 jobs over several years. Citigroup Inc. plans to close 376 branches and reduce as many as 720 jobs in the U.S. and Canada. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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Strategy of Last Resort: To Default or Not To Default?

June 2, 2010

As the volume and number of underperforming commercial real estate loans mounts, so has the number of owners who have or have considered turning to loan defaults as a strategy for forcing a refinancing or to get out from a loan that is underwater altogether…

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This Week in Retail: Toys R Us Files $800 Million IPO

June 2, 2010

Toys R Us Inc. filed a preliminary registration statement this past week with the U.S Securities and Exchange Commission for a proposed initial public offering of its common stock. The offering will consist of newly issued shares but the number and price…

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U.S. Payrolls May Have Climbed in May for Fifth Month

May 30, 2010

By Shobhana Chandra May 30 (Bloomberg) — Employment grew in May for a fifth consecutive month, pointing to gains in wages that will help U.S. households ride out the turmoil in financial markets, economists said before reports this week. Payrolls climbed by 508,000 workers last month, the biggest increase since 1997, according to the median estimate of 64 economists surveyed by Bloomberg News. The gain reflected a surge in government hiring of temporary help to conduct the census and a 180,000 rise in private employment, according to the survey. Other reports may show the economic rebound is broadening beyond manufacturing as service providers, including retailers and construction firms, see a pickup in demand. General Electric Co. is among companies hiring, saying the European debt crisis is unlikely to derail the recovery from the worst global recession in the post-World War II era. “The labor market is clearly improving,” said James O’Sullivan , global chief economist at MF Global Ltd. in New York. “At this point, there’s enough momentum in the economy to outweigh the drag from the turmoil in Europe.” The Labor Department’s jobs report is due June 4. The Census Bureau had said it would take on 970,000 temporary workers from April through June to conduct the population count that occurs every 10 years. The bulk of the hiring likely took place last month. Census Effect Census employment may keep distorting the payroll figures for months as the government dismisses workers when the population count is done. For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010. The report will probably also show the unemployment rate fell to 9.8 percent last month, according to the survey median, from 9.9 percent. The rate, which reached a 26-year high of 10.1 percent in October, will take time to recede as the number of previously discouraged jobseekers returning to the labor force exceeds the number of available jobs. Factory payrolls increased in May for the fifth straight month, according to the survey. “This is a point in time when the world needs the U.S. to be a beacon of stability, a beacon of reliability,” GE Chief Executive Officer Jeffrey Immelt said in an interview on May 6. Fairfield, Connecticut-based GE, the world’s largest maker of jet engines, power-generation equipment and locomotives, this month increased the number of jobs it plans to add in Michigan to more than 1,300. Adding a Shift Chrysler Group LLC, the automaker controlled by Fiat SpA and based in Auburn Hills, Michigan, said it will add a second shift to a Detroit factory that makes Jeep Grand Cherokees and hire 1,100 workers at the plant. On June 1, the Institute for Supply Management’s manufacturing index will show factories continued to expand this month after growing in April at the fastest pace since 2004, according to economists surveyed. Manufacturing accounts for about 11 percent of the economy. Two days later, Commerce Department figures may show orders placed with factories rose in April for the eighth consecutive month, according to the survey. The manufacturing rebound has helped underpin shares. The Standard & Poor’s Supercomposite Industrial Machinery Index of 52 companies, including Caterpillar Corp. and Deere & Co., has increased 7 percent this year compared with a 2.3 percent decline in the broader S&P 500. Shares Retreat Since reaching a 19-month high on April 23, the S&P 500 Index has lost 11 percent on mounting concern efforts to trim government deficits in Europe will slow the global recovery. The gains in manufacturing are now being accompanied by a rebound among service industries, which make up about 90 percent of the economy. The Tempe, Arizona-based ISM’s index of non- manufacturing businesses, due on June 3, rose last month to the highest level in almost four years, economists surveyed projected. Housing is getting a boost from the extension of a buyer tax credit of as much as $8,000, figures may show on June 2. The National Association of Realtors’ index of signed purchase agreements, or pending home resales, rose in April for the third straight month, according to the Bloomberg survey. Construction spending, due from the Commerce Department on June 1, rose 0.1 percent in April after a gain of 0.2 percent, economists projected. A slump in commercial building is restraining in the industry. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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Payrolls in U.S. May Have Increased for Fifth Month, Helping Boost Wages

May 29, 2010

By Shobhana Chandra May 30 (Bloomberg) — Employment probably grew in May for a fifth consecutive month, pointing to gains in wages that will help U.S. households ride out the turmoil in financial markets, economists said before reports this week. Payrolls may have climbed by 508,000 workers last month, the biggest increase since 1997, according to the median estimate of 64 economists surveyed by Bloomberg News. The gain reflected a surge in government hiring of temporary help to conduct the census and a 180,000 rise in private employment, according to the survey. Other reports may show the economic rebound is broadening beyond manufacturing as service providers, including retailers and construction firms, see a pickup in demand. General Electric Co. is among companies hiring, saying the European debt crisis is unlikely to derail the recovery from the worst global recession in the post-World War II era. “The labor market is clearly improving,” said James O’Sullivan , global chief economist at MF Global Ltd. in New York. “At this point, there’s enough momentum in the economy to outweigh the drag from the turmoil in Europe.” The Labor Department’s jobs report is due June 4. The Census Bureau had said it would take on 970,000 temporary workers from April through June to conduct the population count that occurs every 10 years. The bulk of the hiring probably took place last month. Census Effect Census employment may keep distorting the payroll figures for months as the government dismisses workers when the population count is done. For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010. The report will probably also show the unemployment rate fell to 9.8 percent last month, according to the survey median, from 9.9 percent. The rate, which reached a 26-year high of 10.1 percent in October, will take time to recede as the number of previously discouraged jobseekers returning to the labor force exceeds the number of available jobs. Factory payrolls probably increased in May for the fifth consecutive month, according to the survey. “This is a point in time when the world needs the U.S. to be a beacon of stability, a beacon of reliability,” GE Chief Executive Officer Jeffrey Immelt said in an interview on May 6. Fairfield, Connecticut-based GE, the world’s largest maker of jet engines, power-generation equipment and locomotives, this month increased the number of jobs it plans to add in Michigan to more than 1,300. Adding a Shift Chrysler Group LLC, the automaker controlled by Fiat SpA and based in Auburn Hills, Michigan, said it will add a second shift to a Detroit factory that makes Jeep Grand Cherokees and hire 1,100 workers at the plant. On June 1, the Institute for Supply Management’s manufacturing index may show factories continued to expand this month after growing in April at the fastest pace since 2004, according to economists surveyed. Manufacturing accounts for about 11 percent of the economy. Two days later, Commerce Department figures may show orders placed with factories rose in April for the eighth consecutive month, according to the survey. The manufacturing rebound has helped underpin shares. The Standard & Poor’s Supercomposite Industrial Machinery Index of 52 companies, including Caterpillar Corp. and Deere & Co., has increased 7 percent this year compared with a 2.3 percent decline in the broader S&P 500. Shares Retreat Since reaching a 19-month high on April 23, the S&P 500 Index has lost 11 percent on mounting concern efforts to trim government deficits in Europe will slow the global recovery. The gains in manufacturing are now being accompanied by a rebound among service industries, which make up about 90 percent of the economy. The Tempe, Arizona-based ISM’s index of non- manufacturing businesses, due on June 3, probably rose last month to the highest level in almost four years, economists surveyed projected. Housing is getting a boost from the extension of a buyer tax credit of as much as $8,000, figures may show on June 2. The National Association of Realtors’ index of signed purchase agreements, or pending home resales, rose in April for the third straight month, according to the Bloomberg survey. Construction spending, due from the Commerce Department on June 1, rose 0.1 percent in April after a gain of 0.2 percent, economists projected. A slump in commercial building is restraining in the industry. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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Mint.com Report: Coffee Spending On The Rise

May 27, 2010

It’s a habit that just won’t quit, and java fiends pushed away by pocketbook-unfriendly drink prices of 2009 are curbing their habit no more. As a new info-graphic from Mint.com shows based on their users’ data, those in need of a fix are back to it again at their resident caffeinated watering holes , which have mostly seen increases in sales. However, Mint.com claims one big exception: In early 2010, Starbucks hasn’t been able to keep up with its competitors, both in terms of the number of transactions and spending per user, and spend per each transaction. Perhaps coffee makers are getting more customers like this guy .

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Dr. Philip Neches: The Stock Market Spasm

May 15, 2010

Investors and the public watched in horror as the stock market had a $1 trillion spasm on May 6. Investigators now think a 70-year-old conservative mutual fund in Kansas made the trades that set it off. Whether this finding holds up or not, people want to know how such a small match can ignite such a large fire? Why is the financial system so vulnerable to these extreme shocks? Economists, analysts, regulators, and traders will continue to debate that question. But I think it can be traced to a convergence of three factors: arbitrage, leverage, and opacity. Separately, each factor can magnify profit — and loss — thus creating more volatility in a market. Together, each factor reinforces the others to create conditions for extreme volatility. It is very easy to give the formula for making money in any trading situation: buy low, sell high. Easier said than done, of course. In ordinary stock trading, the buy and sell are separated in time. In international commerce, the buy and sell occur in different countries (buy copper in Peru where it is abundant and little used; sell it in Japan where it is scarce and much needed). In arbitrage, the buy and sell occur close in time (seconds, or even microseconds), but on different exchanges. Often, the exact security bought is different from, but related to, the one sold. One may be the stock of a registered company, the other a future contract or derivative, based on that stock. Or a commodity related to the business of the company in question. Or an index fund. Or whatever. The opportunities to creatively recognize arbitrage opportunities abound, because the markets in question value the securities differently, which means that the price differential can persist for a long time. However, once a canny trader recognizes the arbitrage opportunity and begins to trade on it, the trades move both markets. When only one early trader is involved, the volume traded is small compared to all of the trades in the affected securities, so the markets don’t move much. But the nature of competition is that success breeds imitation. So more people start to trade based on the same arbitrage opportunity. The volume of arbitrage trades increases and moves the securities on both markets, usually in a way that brings the values on each exchange closer together. In trader’s parlance, it reduces the spread. And that starts a vicious cycle. To see how it works, consider an example. Suppose that on one exchange, the security sells for $10 while the corresponding security on the other exchange sells for $11. By committing $10, the trader can make $1 on each trade. But now the prices move closer together: say $10 on one exchange and $10.10 on the other. Now it takes $100 to make $1. Now let’s put the computers to work grinding out these trades at superhuman pace: now it’s $10 on one exchange and $10.01 on the other. Now it takes $1000 to make $1. Now add a bunch of competing trading houses using automated systems and the spread gets even thinner. Successful arbitrage makes the next trades harder and harder and harder: the risk goes up while the return goes down. When it takes more and more capital to make a profitable trade, the risks go up. Suppose that instead of $10 to $10.01, the trade goes at $10 to $9.99. Instead of making $1 on $1000, the trader loses $1 on $1000. Not too bad, at this point. But it does illustrate that arbitrage, like any good tool, can cut both ways. As traders start to require more and more capital to make profitable trades, the temptation is to use other people’s money for part of the deal: leverage. Suppose that the trader puts up $100 of his firm’s money and borrows $900 to make the $1000 trade that yields a $1 profit. Now the deal looks much better: the firm made 1% on each trade instead of 0.1%. But what if the trade goes the other way? Suppose there is a real glitch: $10 on one exchange and $9 on the other. The firm would see its entire position wiped out. Leverage cuts both ways: very, very sharply. Finally, consider opacity: the lack of specific knowledge of what is going on in market by the general public, or at least the broad reach of the financial community. Anyone who can operate with reasonable success in an opaque market can command premium fees for their services. Opacity makes for numerous and inviting arbitrage opportunities to those with the skill, connections, and luck to uncover them. Regulation discouraged opacity during the years the Glass-Steagall Act was in effect (1933 to 1999), more as a side-effect than a main thrust of that legislation. In the years since financial deregulation, more and more of the dollar volume of trading moved into organizations (such as hedge funds), instruments (such as derivatives), and markets (other than public exchanges) that do not have to report regularly to the SEC or the public. The finance industry prospered because of so many more opportunities for premium pricing and arbitrage. But there is a downside. Opacity conceals risk, not just from the uninformed, but from the expert. The reason is that even the most attentive expert simply cannot know everything that is going on in the market. Something unexpected is bound to occur — for example, the “country bumpkins” in Kansas selling index funds. If the unexpected occurs in an opaque market, normally little should happen. Unexpected events should go in every direction, and broadly speaking cancel out over an hour, or day, or year of trading. But what if the unexpected gets magnified by others indulging in leverage, arbitrage, or worse still, both at the same time? The minor movement gets magnified into a seismic shift. A Kansas firm’s decision to sell an index fund to hedge other trades somehow grows into a 1,000 point drop on the Dow, making $1 trillion evaporate, if only for an hour. The exact sequence of how that happens can be very complicated: the experts are still trying to unravel the story of May 6. But with opacity, arbitrage, and leverage now much, much more common, the number of opportunities for simultaneous occurrence of self-reinforcing circumstances is orders of magnitude greater than we experienced in prior decades. Between 1933 and 1999, there was only one sickening plunge. The 1987 drop was traced to program (computer-driven) arbitrage trading between the stock market and the futures market, which had grown in volume to the point where it could no longer be treated as a small incremental part of the story, but as a major force driving prices. Since 1999, we suffered several episodes of extreme volatility. If anything, they seem to be getting more frequent, and more furiously paced. It is no surprise that the public lost confidence in the financial industry as what seem like 100-year storms occur every few months. But if my thesis is correct, this will keep happening – until something is done to bring more transparency and less leverage to the financial system. Besides reducing general risk, that should reduce the number of chances for self-reinforcing catastrophic chain events, we will all sleep better at night.

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Unemployment Claims in U.S. Decline for a Fourth Straight Week to 444,000

May 13, 2010

By Timothy R. Homan May 13 (Bloomberg) — The number of Americans filing claims for jobless benefits dropped for a fourth straight week, a sign that employers are retaining more workers as the economy expands. Initial jobless claims fell by 4,000 to 444,000 in the week ended May 8, higher than the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance increased and those getting extended payments fell. Employers seeing improved sales and profits have added workers to payrolls in each of the last four months, signaling greater confidence in the recovery. Unemployment may take time to retreat as the number of jobseekers entering the workforce exceeds available jobs. “We’re still in the early stages of the labor-market recovery,” Joseph Brusuelas, chief economist at Brusuelas Analytics in Stamford, Connecticut, said before the report. “There is some risk that the unemployment rate will remain elevated for an extended period of time.” Jobless claims were projected to drop to 440,000 from 444,000 initially reported for the prior week, according to the median forecast of 51 economists in a Bloomberg survey . Estimates ranged from 425,000 to 450,000. The level of claims is the lowest in six weeks. Stock-index futures were little changed after the report. Futures on the Standard & Poor’s 500 Index expiring in June fell 0.1 percent to 1,168.2 at 8:44 a.m. in New York. Import Prices A separate report showed import prices increased 0.9 percent in April. The Labor Department’s figures also showed the costs of imported goods other than petroleum products rose 0.3 percent. The four-week moving average of initial claims, a less volatile measure than the weekly figures, dropped to 450,500 last week from 459,500, today’s report showed. The number of people continuing to receive jobless benefits climbed by 12,000 in the week ended May 1 to 4.63 million. They were forecast to drop to 4.59 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 200,000 to 5.36 million in the week ended April 24. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.6 percent in the week ended May 1. States, Territories Thirty-six states and territories reported a decrease in claims, while 17 reported an increase. These data are reported with a one-week lag. Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates. Payrolls increased by 290,000 in April, the most in four years, according to figures from the Labor Department last week. Unemployment climbed to 9.9 percent from 9.7 percent as thousands of jobseekers entered the workforce. Some companies are adding staff as sales increase. General Electric Co. , the world’s largest maker of jet engines, power- generation equipment and locomotives, increased the number of jobs it plans to add in Michigan to more than 1,300 with the creation of 220 aerospace manufacturing positions, the Fairfield, Connecticut-based company said last week. Other companies are still eliminating workers. Dean Foods Co. , the biggest U.S. dairy processor, this week said it plans to cut 350 to 400 more jobs this year. The Dallas-based company has already fired 150 staff members this year to rein in costs. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Unemployment Claims in U.S. Decline for a Fourth Straight Week to 444,000

May 13, 2010

By Timothy R. Homan May 13 (Bloomberg) — The number of Americans filing claims for jobless benefits dropped for a fourth straight week, a sign that employers are retaining more workers as the economy expands. Initial jobless claims fell by 4,000 to 444,000 in the week ended May 8, higher than the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance increased and those getting extended payments fell. Employers seeing improved sales and profits have added workers to payrolls in each of the last four months, signaling greater confidence in the recovery. Unemployment may take time to retreat as the number of jobseekers entering the workforce exceeds available jobs. “We’re still in the early stages of the labor-market recovery,” Joseph Brusuelas, chief economist at Brusuelas Analytics in Stamford, Connecticut, said before the report. “There is some risk that the unemployment rate will remain elevated for an extended period of time.” Jobless claims were projected to drop to 440,000 from 444,000 initially reported for the prior week, according to the median forecast of 51 economists in a Bloomberg survey . Estimates ranged from 425,000 to 450,000. The level of claims is the lowest in six weeks. Stock-index futures were little changed after the report. Futures on the Standard & Poor’s 500 Index expiring in June fell 0.1 percent to 1,168.2 at 8:44 a.m. in New York. Import Prices A separate report showed import prices increased 0.9 percent in April. The Labor Department’s figures also showed the costs of imported goods other than petroleum products rose 0.3 percent. The four-week moving average of initial claims, a less volatile measure than the weekly figures, dropped to 450,500 last week from 459,500, today’s report showed. The number of people continuing to receive jobless benefits climbed by 12,000 in the week ended May 1 to 4.63 million. They were forecast to drop to 4.59 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 200,000 to 5.36 million in the week ended April 24. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.6 percent in the week ended May 1. States, Territories Thirty-six states and territories reported a decrease in claims, while 17 reported an increase. These data are reported with a one-week lag. Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates. Payrolls increased by 290,000 in April, the most in four years, according to figures from the Labor Department last week. Unemployment climbed to 9.9 percent from 9.7 percent as thousands of jobseekers entered the workforce. Some companies are adding staff as sales increase. General Electric Co. , the world’s largest maker of jet engines, power- generation equipment and locomotives, increased the number of jobs it plans to add in Michigan to more than 1,300 with the creation of 220 aerospace manufacturing positions, the Fairfield, Connecticut-based company said last week. Other companies are still eliminating workers. Dean Foods Co. , the biggest U.S. dairy processor, this week said it plans to cut 350 to 400 more jobs this year. The Dallas-based company has already fired 150 staff members this year to rein in costs. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Foreclosures Down Two Percent, First Annual Decline In Five Years

May 13, 2010

WASHINGTON — Millions of Americans are still likely to lose their homes in the coming years, but the foreclosure crisis is finally showing signs of subsiding. The number of households facing foreclosure in April fell 2 percent from a year ago, the first annual decline in five years, RealtyTrac Inc. said Thursday. But the data aren’t all sunny. While the number of new delinquencies is dropping, the number of borrowers losing their homes is still rising. Banks seized a record 92,000 homes last month. And there are millions more potential foreclosures ahead. Nearly 7.4 million borrowers, or 12 percent of all households with a mortgage, had missed at least one month of payments or were in foreclosure as of March, according to Lender Processing Services Inc., a mortgage data research firm. RealtyTrac, a foreclosure listing firm in Irvine, Calif., reported that nearly 334,000 households, or one in every 387 homes, received a foreclosure-related notice in April. That was down more than 9 percent from March. Economic woes, such as unemployment or reduced income, are the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit, but homeowners with good credit who took out conventional, fixed-rate loans are now the fastest growing group of foreclosures. As the economy turns around, “you will see an improvement in housing markets and in foreclosure activity,” said Rick Sharga, a RealtyTrac senior vice president. “The problem is that there’s such a backlog right now.” Lenders are offering a variety of programs to help homeowners modify their loans, but their success rates vary. Hundreds of thousands of homeowners can’t qualify or fall back into default. The Obama administration is managing a $75 billion program that so far has helped about 231,000 homeowners with permanent reductions to their monthly mortgage bills. That’s about 20 percent of the 1.2 million borrowers who started the program over the past year. Foreclosed homes are typically sold at steep discounts, lowering the value of surrounding properties. Cities lose property tax dollars from homes that sit empty and lower property values. Among states, Nevada posted the highest foreclosure rate in April, with one in every 69 households receiving a foreclosure notice. Foreclosures there were up 10 percent from March, but unchanged from a year earlier. Next on the list were Arizona, Florida, California and Michigan. Las Vegas continued to be the city with the nation’s highest foreclosure rate, but activity there was down 3 percent from a year earlier. And in another sign the problem is receding, nine out of the top 10 cities with the highest foreclosure rates posted annual declines. The exception was Reno, Nev., where foreclosures were up 16 percent from a year ago.

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Australian Home-Price Growth Slows Following Five Rate Increases, APM Says

April 28, 2010

By Nichola Saminather April 29 (Bloomberg) — Australian house prices grew at a slower pace in the first quarter from the last three months of 2009 as the central bank’s five rate increases since September took effect, Australian Property Monitors said. House prices rose 3.1 percent in the three months to March 31, from 5.3 percent in the previous quarter, APM said in an e- mailed statement. Unit prices added 0.2 percent, compared with 2.6 percent in the prior period. “House price growth in the March quarter slowed across the country as five interest rate rises and the expiry of the First Home Owner Boost began to impact prices,” APM Economist Matthew Bell said in the statement. “Even though quarterly growth rates are moderating, annual growth rates are still rising. This is due to a relatively strong March 2010 quarter replacing a weak March 2009 quarter in the annual figures.” Median house prices across the country surged 16.2 percent in the year to March 31, while unit prices added 10.4 percent. APM maintained its January forecast for an increase of as much as 10 percent in home prices in 2010. The widening disparity between the number of homes supplied and how many are needed is a major contributor to the climb in prices, a government report said on April 27. The gap grew by 78,900 dwellings in the year to June, and may rise further as the number of Australian households grows by 3.2 million over the next 20 years, the report said. Shortage Time consuming and expensive planning processes and restricted land supply are the reasons for the shortage of housing, the Housing Industry Association’s Chief Executive Officer Graham Wolfe said in a statement on April 27, calling for an “all-of-government approach” to solve the crunch. Sydney’s restrictions in particular could mean the loss of its place as Australia’s largest metropolis to Melbourne by 2037 if the harbor city’s home construction fails to keep pace with population growth, a report prepared by economic forecaster BIS Shrapnel said on April 27. Victoria is building new homes at double the rate of New South Wales, and has policies that are more favorable to new developments, BIS Shrapnel said. Sydney house prices rose 2.1 percent in the first quarter from the three months to Dec. 31, while Melbourne’s surged 6.8 percent, APM said in today’s report. Unit prices in Sydney added 1.2 percent, and Melbourne’s gained 0.3 percent. Price growth in more expensive suburbs across Australia has been double that of more affordable areas, APM said. “This top-end price growth has now moved well beyond a recovery of the price falls that occurred in late 2007 and throughout 2008 and is breaking new ground for most regions,” Bell said. To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

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FDIC Closes Six Banks: 48 Shut Down In 2010

April 16, 2010

WASHINGTON — Regulators on Friday shut down eight banks – three in Florida, two in California, and one each in Massachusetts, Michigan and Washington – putting the number of U.S. bank failures this year at 50. The Federal Deposit Insurance Corp. took over the three Florida banks: Riverside National Bank in Fort Pierce, with $3.4 billion in assets; First Federal Bank of North Florida in Palatka, with $393.3 million in assets; and AmericanFirst Bank in Clermont, with assets of $90.5 million. TD Bank Financial Group, a division of Canada’s TD Bank, agreed to acquire the deposits and nearly all the assets of the three Florida banks. The FDIC also seized Innovative Bank, based in Oakland, Calif., with about $269 million in assets; Tamalpais Bank of San Rafael, Calif., with about $629 million in assets; City Bank, based in Lynnwood, Wash., with about $1.1 billion in assets; Butler Bank in Lowell, Mass., with $268 million in assets; and Lakeside Community Bank in Sterling Heights, Mich., with $53 million in assets. Los Angeles-based Center Bank agreed to assume the assets and deposits of Innovative Bank. San Francisco-based Union Bank is acquiring the assets and deposits of Tamalpais Bank. Whidbey Island Bank, based in Coupeville, Wash., is assuming the deposits of City Bank and $704.1 million of its assets. People’s United Bank in Bridgeport, Conn., agreed to assume the assets and deposits of Butler Bank. The FDIC couldn’t find a buyer for Lakeside Community Bank. First Michigan Bank in Troy, Mich., will take over the failed bank’s direct deposit operations for federal payments, such as Social Security and veterans’ benefits. Depositors’ money is insured up to $250,000 per account by the FDIC, which is backed by the government. Last year, 140 banks failed in the U.S. That was the highest annual number since 1992 during the peak of the savings and loan crisis. The failures last year cost the FDIC’s insurance fund more than $30 billion. Twenty-five banks failed in 2008 and three in 2007. FDIC Chairman Sheila Bair has predicted that the number of bank failures will peak this year and be slightly more than in 2009. __ Paradis reported from New York.

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Sweethearts-In-Crime Financial Scams Are On The Rise: Reuters

April 16, 2010

While statistics are hard to come by, the number of married couples caught engaging in insider trading, stock manipulation or running a Ponzi scheme appears to be on the rise. In the past three years, at least a dozen legally joined couples have been charged with securities fraud by U.S. regulators or prosecutors.

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S&P 500 Backed by Most Momentum Since 1986: Technical Analysis

April 13, 2010

By Lu Wang April 13 (Bloomberg) — U.S. stocks almost have the most momentum since 1986. The 14-day relative strength index for the Standard & Poor’s 500 Index has exceeded 65 since March 5, the longest stretch since 1995, according to data compiled by Bloomberg. Today would mark the 27th consecutive day, the most in 24 years. RSI identifies possible turning points by measuring the degree that gains and losses outpace each other. While readings of 70 or more are considered evidence that an index may decline, the current streak suggests investors are reluctant to sell, making a collapse unlikely, said Joseph Keating . “A lot of investors missed out on the run-up and are scrambling to get in the market,” said Keating, chief investment officer of Raleigh, North Carolina-based RBC Bank, which oversees $3 billion. The RSI “may portend that the market is going to have to move sideways and consolidate a bit.” The S&P 500 has surged 77 percent since March 9, 2009, in the biggest advance since the 1930s as the economy recovered and more companies beat profit estimates than at any time since at least 1993. Alcoa Inc., the biggest U.S. aluminum producer, yesterday posted first-quarter earnings excluding some items that topped the average analyst estimate by 8.7 percent. Still, many investors missed the equity rally. Money added to U.S. bond funds has exceeded the amount stashed in stock funds by about 16-to-1, according to data compiled by the Washington-based Investment Company Institute. No Correction Robert Sluymer , a New York-based analyst at RBC Capital Markets Corp., said he doesn’t see an imminent correction, or decline of at least 10 percent, because indicators such as the ratio of rising to falling stocks show no sign of deterioration. The cumulative advance-decline line for securities listed on the New York Stock Exchange increased 0.5 percent yesterday. The index represents the number of daily gains for individual securities minus the number of declines since its August 1996 inception. “This type of overbought condition can persist for many weeks and for many months,” Sluymer said. “There is very little evidence of technical decay.” When the RSI using 14 days of trading stayed above 65 this long in 1995, the S&P 500 went on to post an annual advance of 34 percent. It then rose at least 19 percent a year from 1996 to 1999. To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net .

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Silicon Valley Companies Gear Up for Acquisitions Amid Improving Economy

April 3, 2010

By Ryan Flinn, Serena Saitto and Tim Mullaney April 4 (Bloomberg) — Silicon Valley companies looking to put their cash to work may drive a wave of mergers this year, bankers and venture capitalists say. Companies are eager to make acquisitions because many of them have cut research budgets, says Robert Ackerman , founder and managing director of Allegis Capital in Palo Alto, California. That means they’re not as able to fall back on their own ingenuity to fuel growth. More businesses are relying on acquisitions to find their next new product or service, he says. “The product cabinet is bare, but the market continues to move forward,” Ackerman said. “Wherever you see innovation sprint ahead, companies will have a product deficit, and will look to fill it.” Google Inc. , based in Mountain View, is currently one of California’s most acquisitive companies, buying at least five businesses in 2010. It agreed to buy Picnik Inc. last month, acquiring online photo-editing tools. Its purchase of DocVerse provided it with software that lets people share documents over the Internet. The value of the deals wasn’t disclosed. The state’s largest single deal this year was Shiseido Co.’s purchase of San Francisco-based Bare Escentuals Inc. for about $1.7 billion. California deal-making plummeted after 2007, when more than 2,670 transactions totaled almost $254 billion. So far this year, there have been about 530, worth $16.7 billion. That’s a higher number than in the first three months of 2009, although the value was greater in that year-ago period, at about $30 billion. McAfee, Tibco Local acquisition targets include Santa Clara’s McAfee Inc., Tibco Software Inc. in Palo Alto and Cupertino-based ArcSight Inc., according to Brent Thill , an analyst at UBS AG in San Francisco. McAfee and ArcSight both make programs that protect data, which could be more valuable as cyber threats mount. Tibco’s software helps programs of all kinds share information. Goldman Sachs Group Inc. also cited San Francisco’s Salesforce.com Inc. and Palo Alto-based VMware Inc. as possibilities — though those companies aren’t the most likely targets, the firm says. Salesforce.com makes online customer- relationship software, while VMware sells so-called virtualization programs, which help computers run more than one operating system. Representatives from all the targets declined to comment or didn’t respond to messages. Deal Volume In Northern California, there were 45 deals involving venture-backed startups during the first three months of 2010, according to the National Venture Capital Association. That was the highest number in any quarter in at least five years. More than 50 companies in California have at least $1 billion in cash and equivalents, which they could use for acquisitions. They’re led by a Bay area trio: San Francisco’s Wells Fargo & Co. , with $68 billion; Cisco Systems Inc. in San Jose, with $39.6 billion; and Cupertino-based Apple Inc. , with $24.8 billion, according to Bloomberg data. “There’s a lot of cash on people’s balance sheets, so I think it’s a great time for startups,” said Kate Mitchell , managing director at Scale Venture Partners in Foster City, California. “They see that the faster, better, cheaper venture- backed companies are still growing, and they’re not spending on R&D, so they can be accretive.” The value of deals in California topped out at $378.1 billion in 2000 during the Internet bubble, when there were more than 2,200 transactions. It took five years for the number of deals to surpass that earlier peak, and the dollar amount has never come close to recapturing the dot-com era’s glory. Internet Bust While the latest recession was the worst economic slump since the Great Depression, it actually wasn’t as devastating to California deal-making as the dot-com collapse. After having easy access to venture money and initial public offerings in the late-1990s and 2000, money dried up. The M&A industry hit bottom in 2002, when just 1,505 transactions accounted for $95.3 billion. The deals crept back up over the next four years, peaking again in 2006 and early 2007. There were 665 in the first quarter of 2007, valued at $59.8 billion. That’s more than three times the number reported last quarter. Tor Braham , head of technology mergers and acquisitions for Deutsche Bank AG in San Francisco, says mergers are ready to surge again for two reasons. Pressure’s On? “Private-equity funds have raised a lot of money before the financial crisis and there’s pressure on them to spend it before those commitments expire,” he said. Also: “Sellers want to get their deals done this year, before the expected increase in capital gains tax rate.” Private-equity firms raised $538 billion in 2006 and $587 billion in 2007, just before the recession, according to the Private Equity Council in Washington. Capital-gains taxes, meanwhile, could rise above 20 percent for people earning more than $250,000 under budget proposals before Congress. In the first quarter, Deutsche Bank advised Techwell Inc. in its $370 million takeover by Intersil Corp. The bank also worked with Nimsoft Inc. in its $350 million acquisition by CA Inc., and Francisco Partners on its sale of Numonyx BV to Micron Technology Inc. for about $1.3 billion. Even as mergers pick up, it may take until next year to get back to 2007 levels, Braham says. “Mergers-and-acquisition activity in the technology industry was very quiet in the first quarter,” he said. Matt Murphy , a partner at Kleiner Perkins Caufield & Byers in Menlo Park, is more bullish. The number of acquisitions this year will be close to the 2007 level, he says. “It feels like there is pent-up demand.” Mobile technology is one area where the big companies want to bulk up, leading to more acquisitions, Murphy says. “M&A is definitely picking up,” he said. “This is going to be a big year.” To contact the reporters on this story: Ryan Flinn in San Francisco at rflinn@bloomberg.net ; Serena Saitto in New York at ssaitto@bloomberg.net ; Tim Mullaney in New York at tmullaney1@bloomberg.net

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Garnished Wages For Working Poor: Banks And Debt Collectors Often Go After Borrowers, Win

April 2, 2010

One of the worst economic downturns of modern history has produced a big increase in the number of delinquent borrowers, and creditors are suing them by the millions. Concern is mounting in government and among consumer advocates that the debtors are not always getting a fair shake in these cases. Most consumers never offer a defense, and creditors win their lawsuits without having to offer proof of the debts, much less justify to a judge the huge interest charges and penalties they often tack on.

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Jose Ferreira: Is Your Company Venture-backable?

April 1, 2010

So, you want to be an entrepreneur. Well, it’s a great time to start a business. We’re in a jobless recovery, so the talent is out there for the picking. Sure, some VCs are a little gun-shy, but the smart ones are investing. How do you get them to invest in you? There are lots of articles about this kind of thing. But I haven’t seen one that reduces all the noise out there to the following five fundamental elements. In my experience as a former VC and a current entrepreneur, all the factors surrounding a start-up investment reduce to exactly five factors. You can find no shortage of chatter and opinion about other things that also matter. Trust me: If you have these five, nothing else matters. Each one that you don’t have is a serious, perhaps fatal, flaw in your plan. 1. Huge value-add idea . You need more than just a great idea. Your product or service must add an enormous amount of value to some industry. If the idea isn’t completely new, it has to be better, cheaper, or more efficient than what we already have. Meaning, your solar-powered mousetrap better be a big improvement over today’s pest control. For B2B plays, you want to cure pain. The best way to land corporate customers is to save them lots of money or make their pain go away. For consumer plays, the ideal is a naturally viral product; that way your customers become your salespeople. 2. Big market . No one cares how valuable your product is if its addressable market is small. The key isn’t so much the number of users as it is the dollar size of the market. VCs won’t get out of bed in the morning for less than $1B in market size. $5B is better. Don’t be fooled that companies like Facebook and Twitter are aggressively adding users rather than revenues. User bases that explosive and that sticky can be monetized at any time. A VC is like a supermodel hanging out at a bar. They hear bullshit all day long. So: NEVER try to bullshit a VC. Your market must be authentically available. Selling new self-sterilizing toothbrushes to hospitals doesn’t mean you’ll have access to the entire $7 trillion global health care industry–only a magic cure-all pill could give you that. Your market size is the number of dollars available to you if you had 100% market share with your product, not the larger industry your product plays in. 3. Favorable marketplace dynamics . It’s not enough to have a value-adding product in a big market. You also need the right conditions. Will you be able to scale revenues within a 5-10 year time frame? Is the timing right? YouTube wouldn’t have worked pre-broadband. Facebook wouldn’t have worked if MySpace hadn’t sucked. Ask yourself: Is the competitive landscape favorable? There will doubtless be competition–but it needs to be doing something demonstrably wrong. If you tell a VC there’s no competition s/he assumes it’s not an interesting market or you’re such a bullshit artist that you’ll be too difficult to work with (see lie #5 on Kawasaki’s list ). 4. The right things wrong with it . “Risk is our business,” Captain Kirk once told his management team on the Enterprise. So it is with VCs. If your business had no risk, you could go get a bank loan and call it a day. VCs like risks–without them venture capital wouldn’t exist. But they need to be risks that VCs are good at assessing and managing. You’re a product wiz but hopeless at marketing? You need a lot of guidance on patents? You need to fill out your management team? VCs love these kinds of risks. Not having a clearly large addressable market? That’s a deal breaker of a risk. 5. The A Team . So let’s say you’ve convinced me that your idea is a huge value-add, the market size is massive, your position will be defensible, and the risks are manageable. The venture will still fail without the right team building it. No matter how excited you’ve gotten them about all of the above, VCs won’t fund you if you’re Elmer Fudd. And they may take your awesome idea and fund Bugs Bunny to start it instead. Brutal for you, but you should have gone to see them with a real team, not you and your stoner college roommate. If you don’t have the best people for the job (even if that means replacing yourself as CEO), no good VC will invest. The scrupulous ones won’t fund competitors, but they won’t fund you either. Hope this was helpful. Now get out there and start brainstorming your idea. Just one caveat: If you’re thinking about building a revolutionary adaptive learning engine that will customize each person’s daily homework down to the concept level–you’re too late! Knewton is already doing that. :)

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`Pink Slip Party’ Host Has $2.2 Million Payday as Tokyo Bankers Find Jobs

March 17, 2010

By Takahiko Hyuga March 17 (Bloomberg) — Soichiro “Swimmy” Minami parlayed a get-together for laid-off bankers into a $2.2 million paycheck in less than a year. In April 2009, Minami threw what he called Japan’s first “pink slip party” at the Heartland bar in Tokyo’s Roppongi district. About 300 finance professionals, made jobless by the worst recession since World War II, mingled with recruiters and sipped $5.50 beers they paid for themselves. The cost to Minami: Zero. Last week, the former Morgan Stanley banker raised 200 million yen ($2.2 million) for his career consulting company, BizReach Inc. , from a Nomura Holdings Inc. affiliate. Minami plans to use the money to triple the number of subscribers to his job-search Web site as banks and brokers rebuild after shedding 330,000 jobs worldwide during the financial crisis. “When we started last year, most clients were just beginning to eat into their severance packages after getting downsized,” Minami, 33, said in an interview. “Now, overseas banks have resumed hiring, and bankers who are still employed are using us as a kind of check-up service for future career opportunities.” When Minami organized his first pink slip party, the Topix index was just starting to recover from a 26-year low and overseas financial firms were firing bankers in Japan. Similar events were springing up in New York and London. ‘Patchy Pattern’ Goldman Sachs Group Inc., JPMorgan Chase & Co., Bank of America Corp., Credit Suisse Group AG, Citigroup Inc. , BNP Paribas SA, Morgan Stanley and Deutsche Bank AG cut their combined workforce in the world’s second-largest economy 12 percent to 7,846 in the year to March 31, 2009, according to data compiled by Bloomberg. Rebounding stock markets and a surge in share and bond sales last year sparked renewed demand for everything from equity analysts to bankers who advise on mergers. The Topix has gained 34 percent from a March 12, 2009, low. “U.S. and European investment banks have resumed hiring M&A and coverage bankers, especially for junior positions,” said Rikako Onishi , chief executive officer of Kotora Co., a Tokyo-based headhunting firm. “It’s still a patchy pattern. It may be just a correction after eliminating too many jobs.” BizReach operates a paid-membership job vacancy site for bankers in the market for positions paying at least $111,000 a year. The average Japanese worker earned 4,296,000 yen, or $47,594, in 2008, according to the National Tax Agency. No More Parties Minami, who founded BizReach in 2007 after leaving the Rakuten Eagles baseball team he helped start in 2004, said he’ll use the funds he raised from Jafco Co. to boost advertising and hire more sales staff. He plans to increase the number of paying members to the job-search service to 50,000 by year-end from 16,000 now. The pace of new monthly registrations doubled to 2,500 in January from December, and BizReach expects to sign up about 3,500 people this month, said Minami. Bankers flush with end-of-year bonus cash are joined by professionals including flight attendants in scouting for finance-industry jobs, Minami said. Japan Airlines Corp. is offering 9,000 employees early retirement as part of its bankruptcy restructuring. Jafco, which set up a 150 billion yen fund in 2007, was drawn to BizReach’s model of focusing on high-paying financial jobs, said Atsushi Fujii, deputy manager of Jafco’s investment management group. The private equity firm is part owned by Nomura. “Targeting high-class jobs is a new and epoch-making strategy,” Fujii said in an interview. Pink slip parties, meanwhile, are out. BizReach hosted a second gathering in July, drawing some 160 people, and Minami said he’s not planning any more. The reason: lack of demand. To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

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Canon Says China to Be Top Camera Market in 2015, Will Double Stores There

March 10, 2010

By Mariko Yasu and Maki Shiraki March 10 (Bloomberg) — Canon Inc. expects China’s camera market to become the world’s largest as early as 2015, overtaking the U.S., its head of the business said. Canon, the world’s biggest camera maker, is doubling the number of outlets and boosting its marketing workforce in the Asian nation to tap the company’s fastest-growing major market, Masaya Maeda , said in an interview yesterday in Tokyo. “The China market is very vibrant and will likely drive worldwide growth in the coming years,” he said. The maker of the EOS and PowerShot models forecasts sales volume will rise 10 percent in China this year, while growth in developed nations will likely remain small, Maeda said without elaborating. Canon’s global camera sales will increase 6.6 percent to 25.7 million units in the 12 months ending Dec. 31, the company projected in January. China accounted for about 15 percent of Canon’s camera sales in 2009, he said. “China is going to be a big opportunity for Canon as affluent people there favor Japanese products as status symbols,” said Tetsuya Wadaki , a Tokyo-based analyst at Nomura Holdings Inc. Suppliers including Nikon Corp. and Samsung Electronics Co. are also looking to expand there and competition will likely intensify, he said. The U.S. is projected to be the largest camera market this year with 34.6 million units estimated to ship, according to researcher IDC . That’s 27 percent higher than the 27.3 million sets forecast to be delivered to countries in the Asia Pacific region including China, India, Hong Kong and Australia, IDC said in September. Shipments in Western Europe will probably be 28.5 million units in 2010, according to the researcher. Asia Camera Shipments The value of digital camera exports in Asia excluding Japan more than doubled to 30.1 billion yen ($334 million) in January from a year earlier, overtaking Europe and North America to become the world’s biggest market, according to the Camera & Imaging Products Association , which tracks data for 14 camera makers. Worldwide shipments rose 59 percent, the Tokyo-based industry group said. Canon rose 0.9 percent to 4,000 yen as of 1:07 p.m. in Tokyo trading, extending its gain this year to 2.2 percent. The benchmark Nikkei 225 Stock Average declined 0.1 percent. Canon was the market leader in China with a 28 percent share in 2008, while Sony Corp. ranked second and Samsung Electronics third, Beijing-based researcher CCID Consulting Co. said March 19 last year. Camera shipments to China will probably increase to about 12 million units in 2011 from 9.2 million in 2008, CCID said at the time. Canon boosted the number of employees at its Beijing-based marketing unit by 10 percent to 1,421 last year, Maeda said. The company plans to almost double the number of its servicing outlets in the country to 25 by the end of this year, he said. “China will probably match the size of the U.S. and Europe in five to six years” after maintaining an annual growth rate of about 10 percent, Maeda said. The average selling price of cameras will likely drop further this year by “several percentage points,” Maeda said. “We still have room to cut our expenses” to cope with the declining prices, he said. The company, which posted its lowest profit in a decade last year, is forecasting net income will rise 52 percent to 200 billion yen in 2010 as the global economic recovery revives demand for cameras and office equipment. To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net .

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