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Thursday, September 29, 2011

Company Health Programs On The Rise - Company Insurance Costs Dropping

Story first appeared in USA TODAY.
Companies nationwide are looking to trim their health insurance costs by combating chronic diseases — such as diabetes, obesity and depression — in their employees, corporate and government officials say.
The need for such steps was amplified again Tuesday as a new survey from the Kaiser Family Foundation showed that health insurance premiums for families of four increased 9% this year.
The upward trend in health care costs can't all be blamed on growing doctors' bills. So, employers have started to provide on-site medical visits, access to gyms, chronic-care plans, smoking-cessation programs and even discounts for those who buy a banana rather than a cookie.
For an employer, costs can be as much as 40% higher in one year for someone who is overweight because of all the issues associated with obesity, including diabetes, back problems, asthma, depression and heart disease, said Kenneth Thorpe, who co-directs Emory University's Center on Health Outcomes and Quality.
Between 8% and 20% of health care costs is due to the persistent rise in obesity.
As an example, he cited a study he published in the journal Health Affairs about an evidence-based program that reduced type 2 diabetes cases by 71% in Medicare beneficiaries older than 60. It could save Medicare $2.3 billion over the next 10 years if pre-diabetic beneficiaries were enrolled, Thorpe said.
The U.S. Department of Health and Human Services announced a further incentive on Wednesday: It asked businesses to participate in a project to show what happens when private insurers coordinate with primary-care physicians to address health issues. This means personalized care plans, electronic records and preventive care, as well as partnerships with large firms that can offer incentives to their employees.
Tire-manufacturing giant Michelin North America began providing preventive care to all its employees three years ago, as well as chronic-care management for five diseases. Before the program started, only 7% of employees received basic care for diabetes. Now, nearly 100% do. That cut health care costs for those patients by about $700 a year.
Michelin now has primary-care facilities at all of its major workplaces for use by both employees and their families. Patients there can expect a 25-minute visit with a doctor instead of the national average of about seven minutes per visit.
They've seen a 30% reduction in employees classified as high-risk for chronic conditions, as well as an increase in people who work out.
At health insurer WellPoint, employees who receive comprehensive primary care from a company doctor have helped cut health care costs by 14%, said Sam Nussbaum, its executive vice president.

Tuesday, September 27, 2011

Another New CEO for HP

Story first appeared in the Traverse City Record-Eagle

Hewlett-Packard Co.’s decision to fire CEO Leo Apotheker after just 11 months and replace him with former eBay chief Meg Whitman is another dizzying turn of the executive merry-go-round at a company whose leadership issues are tearing it apart.

Swapping Apotheker, who has now been ousted from two high-profile CEO jobs in two years, with Whitman, a billionaire who is best known for the decade she spent building eBay and her run for California governor, is a decision designed to stem investor fury over a series of questionable strategy moves.

Whitman’s star-power could be an asset for a company that struggled to gain credibility under Apotheker, who was previously little-known outside of the business software world. HP is no stranger to celebrity CEOs. But Carly Fiorina’s run as leading lady, from 1999 to 2005, ended in shambles.

Despite Whitman’s success at eBay, she is untested when it comes to running a sprawling company such as HP.

One professor commented that she build up a one-trick pony, an online auction site, and she oversaw the growth of the company, but the situation now is where someone needs to come in who has a technological background, and engineering and scientific background, and that that is way outside of her skill set. He added that the decision to change CEO’s so soon points to continued disarray on HP’s board, long a target of critics for the chaos it’s caused at one of Silicon Valley’s oldest and largest companies. Infighting and ego-driven drama has long plagued the board, from revelations in 2006 that HP had spied on directors and journalist to ferret out the source of leaks, to last eyar’s dismissal of CEO Mark Hurd in an ethics scandal.

The profession finished by saying that there’s no question the board is off the rails and that they need a smaller, tighter board that’s committed to the idea of what the company does.


Story first appeared in the Traverse City Record-Eagle.

FedEx Corp. says consumers are putting off purchases of electronics and other gadgets from China, another example of the global economic slowdown that’s prompting fears of another recession

The slowdown prompted the world’s second- largest package delivery company to lower its earning expectations for the fiscal year that ends in May. But while anxiety over the economy created a rout in the stock markets, and its own shares, FedEx isn’t yet ready to predict another recession in the U.S.

They commented that while there’s been considerable speculation that the economy has or will soon enter a recession, this is not their view at present.

FedEx’s larger rival united Parcel Service Inc. said last week that it thinks another recession is unlikely, although it warned of a bumpy ride for the global economy

Investors weren’t so sanguine. They sent FedEx shares down as low as $64.55, a level not seen in more than two years. The stock closed down $5.92, or 8.2 percent, at $66.58. The share had already lost about a quarter of their value since FedEx last reported earning in June. UPS shares dropped 3.3 percent to close at $62.17.

Thursday, September 22, 2011

Threats of Europe Troubles

Story first appeared in USA Today.

For investors, the best European vacation right now might be an escape from the havoc the continent's problems have been wreaking on U.S. financial markets.

All summer, investors have been force-fed a mountain of bad economic news from the region. Staggering levels of debt held by several European nations — especially Greece — make the odds of defaults by entire nations increasingly likely. Big European banks are faced with the possibility of owning large pieces of debt, issued by European nations, that take a huge hit to their values. And the looming economic quagmire in Europe is hardly a help at a time U.S. economic activity is sluggish, at best.

The ramifications for U.S. investors are staggering. For the first time in recent memory, Europe isn't just a playground for vacationers. Instead, unfolding events there are holding U.S. markets hostage and threatening to unseat long-held investing truisms.

Europe is filling many investors with never-ending fear. It's the primary driver of why the markets are so volatile. If there's something to keep investors up at night, it's the European situation.

Investors wake up to a daily dose of news of economic wrangling in Europe. Central banks around the world are working to decrease the impact of a default by a major European nation — the most impending, Greece. Governments in Germany and Finland are offering bailout funds to help Greece keep servicing its debts, but in exchange, are demanding big cutbacks in government spending by the heavily in debt nation. There's also speculation that China might be interested in investing in European nations, providing much-needed cash.

Even casual investors who are trying to cobble together portfolios to save for retirement can't help but let the European turmoil affect their thinking. One of the most commonly held beliefs among investors is that a diversified portfolio should include European stocks. But that tenet isn't looking so good now, with European stocks down 16% this year and exerting a gravitational pull on an already weak U.S. market.

Simply put, people are so worried about Europe because they're invested in it. It's been a train wreck.

But for those mindful of the fact that the U.S., with the world's biggest economy, usually sets the tone globally — not the other way around — it might seem investors are becoming overly fixated on Europe. Some might wonder, does Europe really matter?

The answer, say economists and institutional investors, is a resounding yes.

Decades ago, Americans could easily ignore developments in the Old Country. But now, thanks to a global economy, problems in Europe are also our problems, due to some less-than-apparent linkages between the U.S. and European economies. Worldwide stock markets are taking cues from each other, which is applauded during prosperity, but festers fear and unknowns during downturns.

The increased linkage between U.S. and European stocks isn't just a topic for business journalists; it's shown statistically. European and U.S. stock markets have had a correlation of 0.9 in the past three years. That seemingly arcane statistical measure, when translated into English, means that when Europe zigs, the U.S. zigs, almost in lockstep.

Investors and traders have defined five distinct reasons why Europe's woes are a real threat to the U.S. economy and stock market:

Fear of a global bank ripple effect

U.S. banks aren't big owners of European government debt directly. It's the indirect connection that's deep and potentially troubling. Many large non-government money market funds, places where U.S. investors often park cash for safekeeping, have half their money invested in commercial paper issued by European banks, he says. And those European banks are heavily invested in debt issued by most of the European nations.

While much of the problem is centered around Greece, for now, the possibility of a ripple effect is what investors are fretting about.

If Greece defaults, as many analysts expect in some form or another as early as this year, that could greatly reduce the value of Greek bonds held by many European banks. Suddenly seeing the value of their Greek holdings evaporate, the assets of many of these European banks would not be worth as much as previously thought, and the banks could have troubles of their own as they need to raise money to meet capital requirements.

It doesn't take much imagination to see a game of European economic dominoes unfolding. All eyes are on Italy, which is one of the European nations that investors fear is in the next worse shape after Greece and Portugal. If Italy runs into trouble due to its debt load, and the value of its government debt takes a hit, that could quickly bleed into France, for instance, since many French banks own Italian debt. "It was just Greece, Portugal and Ireland. Now, we're talking Italy and Spain."

Anti-stimulus for global economy

The U.S. economy's growth is sluggish, but it's hard to make a case that conditions are bad enough for the economy to slip back into recession due to a U.S.-centric problem, says Barry Knapp, chief U.S. equity strategist at Barclays Capital. But as often has been the case in recent recessions, it's usually an outside event that spells serious economic problems for the U.S. Investors fear the European debt crisis is potentially an event that could be trouble for the U.S. economy.

Waning demand in Europe due to a recession would cut into a big export market for many top U.S. companies. Europe as a group has a gross domestic product roughly in line with that of the U.S., underscoring its importance as a global trading partner.

Brings up memories of Lehman

Investors are shaped by past crises, and the market meltdown that started following the fall of Lehman Bros. in 2008 is still a fresh wound. Investors are sorely afraid the global capital structure, which allows for the free movement of goods and money worldwide between trading partners, would slow following a European default, much as the collapse of Lehman did in the U.S. Investors are worried things go so badly in Europe … we have a Lehman-like moment.

The nightmare scenario would arise if there's so much selling of European debt, it overwhelms the banking system as the value of government securities falls, Knapp says. If that happened, most European banks would see their reserves lose value, causing them to be short of the capital needed to lend. That, in turn, could spark selling of any liquid securities, which could include U.S. stocks.

Stokes lack of confidence in policymakers

Investors rely on central governments to manage an erosion of confidence in capital markets before they get out of hand. German officials have attempted to assure investors it would stem the crisis. But given how economic decision-making in Europe is so fragmented, investors have little faith that nations, with their different needs, positions and historical baggage, will be able to navigate the situation.

Conjures questions of the eurozone's future

Perhaps the biggest wild card is the idea that some nations that use the euro could stop using it, retreating to their original currencies. Such an event could have profound influences on the entire banking system that are impossible to forecast.

Nations understand the contagion would be so devastating, however, the odds of it happening are practically zero.

Yet, analysts conclude Europe's woes will be resolved. The solution might be uncomfortable for Europe and will take longer than optimists hope. Europe will ultimately reform the way that stronger nations can apply fiscal discipline to nations, such as Greece, that are living beyond their means.

European nations understand that they must stop the crisis by whatever means needed, or risk dragging the global economy down."While the house may catch fire, they're all in the same house. They have to put out the fire.

CEO Of Wal-Mart Speaks About Jobs

Story frist appeared in USA Today

The largest employer in the U.S. says short-term economic fixes could work, but sustained job creation won't happen without tax reform and new trade agreements. One week after President Obama and Congress launched new jobs plans, Wal-Mart CEO Mike Duke says there are structural issues holding back American companies. One reporter caught up with the man running the largest retailer in the world to find out what to expect for the rest of the year and how to get businesses hiring again. Her conversation below has been edited for clarity and length.

Q: September caps what has been a tough summer after the U.S. credit downgrade and a volatile stock market. For the rest of the year, what do you expect to see for the economy?

A: I'm not an economist, so I always qualify any forecast with a simple approach of how I hear customers talking in our stores. And customers today are concerned. If we could start to see improvements in unemployment or lower fuel prices, then I could see that lead to more positive consumer confidence and consumer spending.

The overall global economy is still struggling. Because we operate in 28 countries, we get a pretty good perspective. I'm out visiting stores virtually every week, and consumer confidence is not good. Probably the single biggest topic of concern is unemployment and jobs. This lengthy period of high unemployment is causing that cycle of consumer confidence to really be down. Increases in fuel costs really take from the consumer's spending ability. The U.S. consumer is under a lot of pressure. Meanwhile, we have large businesses in China and Brazil, and that's a different story. Those markets have recovered faster. There's more optimism. A strong consumer and emerging middle class is leading to faster rates of growth in the emerging markets around the world.

Q: So growth is coming from outside of the U.S.?

A: We still see a lot of opportunity in the U.S. But there will be a lot of growth in emerging markets. In the U.S., we have pockets of areas that have very, very little penetration and have millions of customers that just really don't have access to a Wal-Mart store. So we do see growth in the U.S. Outside the U.S., our investment in capital and number of stores, potential acquisitions in emerging markets will be an area of real growth opportunity. I was really pleased recently that we completed an acquisition of South Africa-based Massmart. Even entering a new continent like Africa helps us to reach millions more customers in the emerging market status. We're growing rapidly in China, Brazil and other Latin American countries. So we will be having a greater percentage of our capital invested in emerging markets.

Q: What will it take to get businesses to create jobs in the U.S.?

A: The priority on jobs that Washington is giving right now is very appropriate. There will be short-term steps that I'm sure the president and Congress should be working on. But there are also longer-term structural issues that need to be addressed. I recently testified before the Senate Finance Committee about corporate tax reform because of the uncompetitive situation we put American companies in in a global environment. We need to lower the corporate tax rate as much as we can, make the tax base as broad as we can make it, and we need to move to a territorial system as quickly as we can. Corporate tax reform is one of those real structural issues that face American companies. Another would be the trade agreements that are holding up the development and expansion of American jobs. A third one is in the area of health care. We need to find ways to bend the cost curve for both public and private sectors of health care.

Q: In that testimony, you laid out specifically how the current tax code puts Wal-Mart at a disadvantage vs. international competitors. How?

A: Wal-Mart has an effective tax rate, and pays it, of about 34%. A very large international retailer based in the U.K. would have an effective rate in the range of 20%. When we are looking at expansion in markets around the world, we would be bidding for real estate or potential acquisitions against another competitor that has a much lower effective tax rate. So this competitor could afford to outbid us and be able to grow their company when Wal-Mart would kind of have one hand tied behind our back.

Q: Here at home there are other large online retailers, such as Amazon, not paying the same tax rates as you do. What can you do about it?

A: We're trying to communicate with elected officials because we do think there is a loophole in the current system. But it's not just Wal-Mart. The very small retailers, the locally owned retailers, are affected by this, those companies that create jobs locally across small towns and cities across America. It's the same customer, the same purchase, and if they buy it in a bricks-and-mortar store, they are paying a sales tax, and if they buy it from an online-only retailer, they're not. That's probably one of those loopholes that probably needs to be closed.

Q: What would you like to see come out of the president's and Congress' jobs plans?

A: The discussions around infrastructure investment and other steps, potential payroll tax benefits that would attempt to provide for still some consumer spending ability. So these kind of short-term discussions that Congress and the president will be having and I know that businesses would support. But I think it would be a mistake to stop and not address the longer-term issues, the corporate tax reform and trade agreements.

Q: What are the priorities at Wal-Mart right now?

A: Wal-Mart U.S. is our largest segment, and the high priority on growing comp sales or existing store sales in the U.S. is the very, very top priority. The key to that is driving the productivity loop. At Wal-Mart it goes back to Sam Walton and the foundation and business model that we simply operate for less, or everyday low cost. We're known for operating in a very efficient way and then giving those savings to customers. That's why everyday low price is the second part of the productivity loop. Having low prices ends up driving traffic to our stores and increasing sales, which allows us then to lower expenses again and lower prices. A third would be global e-commerce and multichannel. Customers today are using technology to shop. Today in the world of the new technology, the way that customers are using social media is just fast changing. We are in a great position to be serving customers in this new age. And then the overriding priority that makes all of this happen is the development of people. I spend more time on the people-development priorities than I do any other single thing as CEO. The greatest responsibility rests with our people. We have about 2.2 million associates.

Someone asked me about what's it like managing 2.2 million associates, and I said, 'When they're Wal-Mart associates, it's not all that hard because of the quality and the depth of our talent.' I'm really proud of the fact that 70% of the managers in the U.S. started as hourly associates with our company. So talent development, people development, is the overriding, most important priority that enables those other priorities to take place.

Q: How do you keep fostering the Wal-Mart culture?

A: I was always intrigued when I was growing up, and then in engineering school, with the idea of a perpetual machine. I think of the Wal-Mart culture as that. It's kind of self-creating. Our day-to-day process of managing the company and the basic beliefs, the basic foundation of integrity in the company, the way that we train and develop people ends up perpetuating the culture of the company. Sam Walton, if he could come back today, would be very, very proud of the culture that he created and still exists at Wal-Mart.

Fed After Gibson Guitar For Use of Endangered Woods

Story first appeared in USA TODAY.
Justice Department officials have requested a meeting with Gibson Guitar owners this coming week while federal lawmakers continue to ask why the factories and offices of the prized Guitar Making business guitars were raided Aug. 24.
Gibson Chief Executive Henry Juszkiewicz said he will meet with federal officials Wednesday here to discuss the raids. Juszkiewicz said he is unsure where the conversation will lead.
In Congress, U.S. Fish & Wildlife officials have agreed to brief lawmakers on the House Energy and Commerce Committee in the next two weeks on the issue.
The agency oversaw the Gibson raids, with agents confiscating computer hard drives, and pallets of wood and guitars suspected of being imported illegally in violation of the Lacey Act, which bans the importing of environmentally threatened plants and animals.
Meanwhile, the raid has created uncertainty in the music, furniture and timber industries, which routinely import exotic hardwoods.
In the case of musicians, some say they fear the U.S. government may decide to confiscate instruments made long ago from woods now considered endangered when musicians travel or their gear is shipped abroad.
People are very confused, said a Nashville-based vintage guitar dealer, whose global business entails shipping instruments, some of which are made from woods that their owners might not be able to properly identify as the law now requires.
The raid on Gibson last month was the second in two years on the 117-year-old guitar building company, which was bought by Juszkiewicz and two partners in 1986.
In both instances, federal officials spelled out in search warrants that they suspect Gibson of illegally importing hardwoods barred by law.
In the first raid, in 2009, federal officials indicated they suspected Gibson was illegally importing protected ebony from Madagascar rainforests — an allegation Gibson denies. No charges have been filed in that case. Gibson and federal officials continue to fight in federal court over the fate of those confiscated materials.
In last month's raid, a government affidavit stated that ebony and rosewood imported from India and in Gibson's possession was deliberately mislabeled with incorrect tariff codes twice to hide the fact that the wood was illegal to ship here both under Indian and U.S. law. It's a contention that Gibson has denied.
U.S. Fish & Wildlife officials and the U.S. Attorney's Office declined to comment on an ongoing investigation.
Warehouse raided
New details about the August raid have emerged.
In addition to raids at Gibson factories and corporate offices in Nashville and Memphis, agents also seized $200,000 worth of Indian ebony and rosewood belonging to Windsor, Calif.-based Luthier Mercantile International, or LMI.
The wood — about 60,000 pieces cut in the shape of fingerboards used to overlay on guitar necks -- was seized from a warehouse here owned by Red Arrow Delivery Service, which contracted to store the wood that would ultimately be sold to Gibson.
It is the same cut and kind of wood the company routinely sells to other guitar manufacturers.
If Indian rosewood is now suspect and subject to seizure, they said they were not sure how their company could continue to operate.
They are just a little company, and they want to go on doing their business, but a big part of their business is Indian rosewood.
Meanwhile, environmental groups have expressed concern about Gibson's practices.
The Forest Stewardship Council conducts rigorous investigations of the point of origin of harvested wood and the condition of forestry workers before bestowing a certification on the woods that companies import.
Last week, the group said that although Gibson does import FSC certified woods, the Indian rosewood confiscated in last month's raid did not have its more rigorous stamp of approval. Instead, the wood had a less rigorous classification that signaled the point of origin had not been as thoroughly investigated.
There are plans to introduce legislation to amend the Lacey Act that would grandfather in musical instruments made before 2008 to address musicians' concerns about travel. Also, the law should be revised to make it less onerous for businesses to understand and follow.
No one wants endangered species harmed anywhere on the planet, but we have to have a better way of dealing with this issue so innocent Americans aren't hurt in the process.
Meanwhile, Indian timber exporters are lobbying their government to clarify that the woods are legal to export for Guitar Repair.

Friday, September 16, 2011

New Water Stations Help The Environment

Filling stations are no longer just for gas. In an eco-friendly push, hundreds of U.S. colleges, including those offering a Healtcare Degree, are installing water fountains known as hydration stations so students can refill water bottles rather than buy new ones. Some campuses are even banning the sale of bottled water.
The stations are also popping up in airports, parks, office buildings — and even on tours with bands, including the Black Eyed Peas— as efforts proliferate to reduce plastic waste by promoting tap water.
Adding to this push is a network of more than 800 restaurants and cafes nationwide that have agreed to give people with reusable bottles free water refills. New York-based TapIt, a non-profit group launched in 2009, has worked with city governments to sign up eateries in 22 states. Next month, Philadelphia is slated to join, TapIt's William Schwartz says.
Rod Magnuson, of Elkay, which began selling several versions of the water stations last year said it's the right product at the right time especially.
Elkay reports more than 150 colleges and universities have installed its refilling stations. About the same number have installed Brita ones, which launched in November, spokeswoman Katy Loos says.
What will this mean for bottled water? After a two-year dip, consumption rose 3.5% last year when it averaged 28.3 gallons per American, according to the International Bottled Water Association, an industry group.
It has a following that's strong, especially as recycling of plastic bottles gets easier, says the group's Tom Lauria. He doesn't expect hydration stations to hurt sales, adding that there's probably enough room for both because there are still colleges that offer online mat courses.

Government Job Training Programs Are Huge Failures

Story first appeared in the Wall Street Journal.
Last Thursday, President Obama proposed new federal jobs and job-training programs for youth and the long-term unemployed. The federal government has experimented with these programs for almost a half century. The record is one of failure and scandal.
In 1962, Congress passed the Manpower Development and Training Act (MDTA) to provide training for workers who lost their jobs due to automation or other technological developments. Two years later, the General Accounting Office (GAO) discovered that any trainee in this program who held a job for a single day was counted as "permanently employed"—a statistical charade by the Department of Labor to camouflage its lack of results. A decade after MDTA's inception, GAO reported that it was failing to teach valuable job skills or place trainees in private jobs and was marred by an overriding concern with filling available slots for a particular program, regardless of what trainees actually needed.
Congress responded in 1973 by enacting the Comprehensive Employment and Training Act (CETA). The preface to the new law noted that it has been impossible to develop rational priorities in job training. So instead of setting priorities, CETA spent vastly more money, especially on job creation. Notorious examples reported in the press in those years included paying to build an artificial rock for rock climbers, providing nude sculpture classes (where, as the Pharos-Tribune of Logansport, Ind., explained, aspiring artists pawed each others bodies to recognize that they had both male and female characteristics), and conducting door-to-door food-stamp recruiting campaigns.
Between 1961 and 1980, the feds spent tens of billions on federal job-training and employment programs. To what effect? A 1979 Washington Post investigation concluded that incredibly, the government has kept no meaningful statistics on the effectiveness of these programs—making the past 15 years' effort almost worthless in terms of learning what works. CETA hirees were often assigned to do whatever benefited the government agency or nonprofit that put them on the payroll, with no concern for the trainees' development. An Urban Institute study of the mid-1980s concluded that participation in CETA programs resulted in significant earnings losses for young men of all races and no significant effects for young women.
After CETA became a laughingstock, Congress replaced it in 1982 with the Job Training Partnership Act. JTPA spent lavishly—to expand an Indiana circus museum, teach Washington taxi drivers to smile, provide foreign junkets for state and local politicians, and bankroll business relocations. According to the Labor Department's inspector general, young trainees were twice as likely to rely on food stamps after JTPA involvement than before since the training often included instructions on applying for an array of government benefits.
For years the Labor Department scorned the mandate in the 1982 legislation to speedily and thoroughly evaluate whether the programs actually benefitted trainees. Finally, in 1993, it released a study that showed participation in JTPA actually reduced the earnings of male out-of-school youths. Young males enrolled in JTPA programs had 10% lower earnings than a control group that never participated.
The Workforce Investment Act (WIA) replaced JTPA in 1998. Congress required a thorough evaluation of the law's impact on trainees by 2005. At last report, the Labor Department is promising it will be completed by 2015.
In his speech to Congress, Mr. Obama called for funding hundreds of thousands of summer jobs for teens, which he labeled investing in low-income youth and adults. Yet such programs have been blighting work ethics for decades.
The GAO warned in 1969 that many teens in federal summer jobs programs regressed in their conception of what should reasonably be required in return for wages paid. A decade later, it reported that most urban teens were exposed to a worksite where good work habits were not learned or reinforced. And in 1985, a National Academy of Science study found that government jobs and training programs isolated disadvantaged youth, thus making it harder for them to fit into the real job market.
More recently, Mr. Obama's 2009 stimulus package expanded federally funded summer jobs. And so young men and women used puppets to greet aquarium visitors in Boston. Teens in Washington, D.C.'s Green Summer Jobs Corps maintained school-yard butterfly habitats. And summer workers in Florida, the Orlando Sentinel reported, practiced firm handshakes to ensure that employers quickly understand their serious intent to work."
Did any of this investing work? There's no evidence it did.
Mr. Obama also wants a new federal initiative to be based on Georgia Work$, which the president describes as a program in which people who collect unemployment insurance participate in temporary work as a way to build their skills while they look for a permanent job. But Georgia Work$ has produced far more headlines than jobs—fewer than 200 this year, according to a recent article in Politico.
Begun in 2003, Georgia Work$ gives people a chance to train at an employer for eight weeks. They receive no salary but continue collecting unemployment compensation and as well as a $240 weekly stipend from the state of Georgia. Last year, the stipend was increased to $600 a week and anyone who said they needed a job was allowed to participate. After costs exploded, Georgia Work$ was scaled back early this year.
Mark Butler, Georgia's current labor commissioner, stated that the program suffered from a lack of oversight before he took over in January. At last report, only 14% of trainees were hired by employers—a success rate akin to other unemployed Georgians who do not participate in the program.
Earlier this year, the Government Accountability Office reported that there were 47 different federal employment and training programs, costing taxpayers $18 billion a year. There is massive overlap and duplication, and few programs seriously evaluate their impact on trainees.
If federal job training efforts worked, Congress would not have thrown out the programs it has created every decade or so and enacted new ones. In reality, government training has always been driven by bureaucratic convenience, or politicians' re-election considerations. There is no reason to believe the latest round of proposals will be any different.

Less People Pursuing M.B.A.

Story first appeared in the Wall Street Journal.
Thinking of applying to business school? Now may be a good time.
Applications for two-year, full-time M.B.A. programs that start this fall dropped an average of 9.9% from a year earlier, according to new data from the Graduate Management Admission Council, which administers the Graduate Management Admission Test. The decline marks the third year in a row that applications have fallen.
One-third of full-time M.B.A. programs reported drops of more than 10%, according to the survey, which included 649 M.B.A. and other business programs at 331 schools world-wide. This correlates to reports from schools offering a MAT Degree.
Historically, interest in graduate school has increased when the job market soured, but the prolonged uncertainty about future growth has discouraged some prospective M.B.A. applicants. This, despite the fact that some companies that have traditionally helped students pay their way through business school haven't altered their policies. Spokespeople at Goldman Sachs Group Inc., Credit Suisse Group AG and Morgan Stanley said they aren't changing the amount they contribute to business-school tuition.
Wendy Huber, associate director of admissions at the University of Virginia's Darden School of Business said people will stay in their jobs until they see that there'll be a return on this investment, and they want to know that recruiters will be waiting in line. Applications for Darden's full-time M.B.A. program fell roughly 10%, Ms. Huber said.
Harvard Business School also wasn't immune. Applications for its full-time M.B.A. class entering this fall slid 4% to 9,134 from a year earlier, helping to boost the school's acceptance rate to 12% from 11%.
Part-time programs are struggling to attract students, too, with 46% reporting declines in application volume this year.
New York University's Stern School of Business had a 9.8% drop in applicants to its part-time program this year. Most people who apply to that program are employed, and there are fewer working professionals these days, said Isser Gallogly, assistant dean of M.B.A. admissions. He said people are not going to be applying to an M.B.A. program when they're trying to find a job.
One bright spot for business education is specialized master's programs for MBA Degrees. Courses for management, accounting and finance all reported increased volume. Applications for these programs have risen in recent years as undergraduates have sought to beef up their credentials before hitting the job market.
Additional interest in the short, specialized programs comes as professional certification boards toughen entry requirements. For example, students wishing to become certified public accountants in certain states must now have 150 hours of college credit to qualify for the CPA exam, more than most get in an undergraduate program.
Applications for the Master of Finance program at MIT Sloan School of Management rose 3% for students entering this fall. Applications had already soared to more than 940 for the class entering in fall 2010, nearly eight times when the program was first introduced in 2009.
A similar spike occurred at Temple University's Fox School of Business, which introduced a new Master of Accountancy this fall.
But even though M.B.A. application volume has slumped, most schools report the quality of candidates, based on their GMAT scores, undergraduate transcripts and work experience, is getting stronger.
The number of people taking the GMAT this year increased through the end of July, and historically test taking has been a leading indicator of higher application volume soon after.

Teacher Evaluations Evaluated

Story first appeared in the Wall Street Journal.
Teacher evaluations for years were based on brief classroom observations by the principal. But now, prodded by President Barack Obama's $4.35 billion Race to the Top program, at least 26 states have agreed to judge teachers based, in part, on results from their students' performance on standardized tests.
So with millions of teachers back in the classroom, many are finding their careers increasingly hinge on obscure formulas.
The metric created by Value-Added Research Center, a nonprofit housed at the University of Wisconsin-Madison's School of Education, is a new kind of report card that attempts to gauge how much of students' growth on tests is attributable to the teacher.
For the first time this year, teachers in Rhode Island and Florida will see their evaluations linked to the complex metric. Louisiana and New Jersey will pilot the formulas this year and roll them out next school year. At least a dozen other states and school districts will spend the year finalizing their teacher-rating formulas.
Rob Meyer, the bowtie-wearing economist who runs the Value-Added Research Center, known as VARC, and calls his statistical model a well-crafted recipe said they have to deliver quality and speed, because schools need the data now.
VARC is one of at least eight entities developing such models.
Supporters say the new measuring sticks could improve U.S. educational performance by holding teachers accountable for students' progress. Teachers unions and other critics say the tests' measurements are narrow and that the teachers' scores jump around too much, casting doubt on the validity of the formulas.
Janice Poda, strategic-initiatives director for the Council of Chief State School Officers, said education officials are trying to make sense of the complicated models. States have to trust the vendor is designing a system that is fair and, right now, a lot of the state officials simply don't have the information they need, she said.
Bill Sanders, who developed the nation's first model to measure teachers' effect on student test scores, advises caution. People smell the money and there are lots of people rushing out with unsophisticated formulas, said Mr. Sanders, who works as a senior researcher at software firm SAS Institute Inc., which competes with VARC for contracts.
In general, the models use a student's score on, say, a fourth-grade math test to predict how she or he would perform on the fifth-grade test. Some groups, such as VARC, adjust those raw test scores to control for students' outside factors, such as income or race. The actual fifth-grade score is then compared with the expected score, which then translates into the measure of the teacher's added value.
The teacher's overall effectiveness with every student in the classroom is boiled down to one number to rate them from least effective to most effective.
For states and school districts, deciding which vendor to use is critical. The metrics differ in substantial ways and those distinctions can have a significant influence on whether a teacher is rated superior or subpar.
Teaching Moments
1982 Bill Sanders, a professor at the University of Tennessee, begins building value-added models to measure teachers' impact on student achievement. By 1992, Tennessee education officials adopt a refined version of the model to evaluate the state's schools.
2002 President George W. Bush's No Child Left Behind law goes into effect, providing data that can be used to evaluate students' growth.
2005 The University of Wisconsin's Value-Added Research Center, or VARC, is formed by Rob Meyer.
2006 The federal Teacher Incentive Fund begins issuing grants to school systems and states to develop programs to award teachers who raise test scores.
2008 The Houston Independent School District begins issuing bonuses to teachers with high value-added rankings.
2009-2010 New York City starts including value-added data in decisions about whether to grant tenure to teachers.
2010 The $4.35 billion Race to the Top grants create incentives for states to adopt new education policies, including linking test scores to teacher evaluations.
Summer 2010 The Washington, D.C., school district uses value-added data to evaluate and fire teachers.
In August, a New York State Supreme Court judge invalidated a vote by state education officials that would have let districts base 40% of teacher evaluations on state test scores, after the state teachers unions sued saying the law allowed for only 20%. The Los Angeles teachers union has sued to stop the district from launching a pilot program that would grade some teachers using a VARC formula.
Until this year, only a few districts used value-added data. Washington, D.C., used it to fire about 60 teachers; New York City employed it to deny tenure to what it considered underperforming teachers; and Houston relied on it to award bonuses.
Michelle Rhee, who instituted a tough evaluation system when she was schools chancellor in Washington, said she took over a district where many students failed achievement exams, yet virtually every teacher was rated effective.
Ms. Rhee, who now heads StudentsFirst, a nonprofit advocate for education overhauls said while it's not a perfect measure, it was a much fairer, more transparent and consistent way to evaluate teachers.
Andy Dewey, an 11th-grade history teacher in Houston, is not a fan. He saw his score bounce from a positive rating in the 2008-09 school year to a negative rating the following year, decreasing his bonus by about $2,300.
In New York City, value-added data has been used for the last two years by principals only to make teacher tenure decisions. Last year, 3% of teachers did not receive tenure protection based, in part, on that data. A new state law, passed in an effort to compete for Race the Top, requires the data become an official part of every teacher evaluation.
At Frederick Douglass Academy in Harlem, principal Gregory Hodge uses the value-added results to alter instruction, move teachers to new classroom assignments and pair weak students with the highest performing teachers. Mr. Hodge said the data for teachers generally aligns with his classroom observations. He said it's confirming what an experienced principal knows.

Current Low Incomes Are Compared To 1996 Levels

Story first appeared in the Wall Street Journal.
The income of the typical American family—long the envy of much of the world—has dropped for the third year in a row and is now roughly where it was in 1996 when adjusted for inflation.
The income of a household considered to be at the statistical middle fell 2.3% to an inflation-adjusted $49,445 in 2010, which is 7.1% below its 1999 peak, the Census Bureau said.
The poverty rate clicked up again this year. The Census Bureau's annual snapshot of living standards offered a new set of statistics to show how devastating the recession was and how disappointing the recovery has been. For a huge swath of American families, the gains of the boom of the 2000s have been wiped out.
Earnings of the typical man who works full-time year round fell, and are lower—adjusted for inflation—than in 1978. Earnings for women, meanwhile, are a relative bright spot: Median incomes have been rising in recent years and rose again last year, though women still make 77 cents for every dollar earned by comparably employed men.
The fraction of Americans living in poverty clicked up to 15.1% of the population, and 22% of children are now living below the poverty line, the biggest percentage since 1993.
To be sure, there are other measures of American financial health that are more positive. The nation's per capita net worth, for instance, hit $169,691 at the end of 2010, according to the Federal Reserve, up from $147,889 in 2007. Much of that gain is in the form of stocks, retirement accounts and other investments. The biggest asset of most American families is their homes, and those have declined in value in recent years.
And there are those who argue the Census report offers a flawed gauge of living standards. For example, the Census Bureau adjusts for inflation using government measures that attempt to reflect the improving quality as well as price of goods. But these inflation adjustments are imperfect and don't reflect advances in medicine, the wonders of the Internet or the improvements in air quality.
U.S. household incomes fell for the third straight year in 2010, driving up the poverty level to the highest level in nearly 20 years. WSJ's Conor Dougherty has details. Photo: Spencer Platt/Getty Images
Deborah Bagoy-Skinner and her husband, Chester, are among the faces behind the numbers. Four years ago, the Tucson, Ariz., couple owned their home and had a combined income of around $100,000, much of which came from Mr. Skinner's job conducting safety training classes for a heavy-equipment maker.
They lost their three-bedroom home in 2007 during a two-year spell of unemployment, and have since downgraded to a two-bedroom rental. Through 2008 and 2009, the darkest days of the recession, they sold everything from golf clubs to antique nickels to pay rent and bills. Today the couple is well above the poverty line: Mr. Skinner makes about $65,000 a year doing contract safety classes. But with their savings wiped out it will be a long road back, and likely they won't own another home or ever make as much as they once did..
The Census report, viewed as a key gauge of American prosperity, comes at a time of growing anxiety about the health of the U.S. economy and is likely to play into the political dialog this election year. With more than 14 million unemployed, many of them out of jobs for extended periods, the recovery is faltering and the administration and Congress are debating how to respond. Consumers account for some 70% of demand, so thinner pay checks are a major problem for anyone trying to boost growth and get the unemployed back into jobs.
The Census report was studded with data that underscore the economic strains across society in the aftermath of the worst recession in more than half a century. Poverty rates among people younger than 18 grew to 22%, compared with 20.7% the year before, while the percentage of Americans lacking health insurance edged up to 16.3%. Echoing a longer-term trend that is in part a reflection of an aging population, the share of people covered by private insurance fell last year, while the share of people on government programs such as Medicare and Medicaid increased.
As families struggle to make ends meet and young workers navigate the moribund labor market, many have turned to each other. According to the Census report, 5.9 million Americans between 25 and 34, or 14.2% of that group, lived with their parents in spring 2011, compared with 4.7 million before the recession, or 11.8%.
Meanwhile, the gap between the best-off and worst-off Americans remained largely unchanged. The top fifth of households accounted for 50.2% of all pre-tax income; the bottom two-fifths got 11.8%. In 1999, the top fifth claimed 49.4% and the bottom got 12.5% of the income.
The Census Bureau said 15.1% of Americans were living below the poverty line, set at $22,314 for a family of four in 2010. That's up from 14.3% last year and from 12.5% in 2007, before the recession. The official poverty rate overestimates the number of people living in poverty because it doesn't count many government anti-poverty programs, such as subsidized housing, food stamps and the Earned Income Tax Credit.

Bad Economy Means People Can’t Afford Funerals

Story first appeared in USA TODAY.
As funeral costs rise and the economy continues to founder, many communities are seeing a rise in unclaimed bodies and funerals for indigent people.
The trend has been seen everywhere, and the reality is that it has gotten worse, says Jacqueline Byers, director of research and outreach for the National Association of Counties.
Many coroner's offices report increases in the number of unclaimed bodies, according to a survey of members of the National Association of Medical Examiners. A little more than half of nearly 50 respondents cited an increase, according to the association's data.
Johnnetta Moore, administrator for the indigent burial program in Jacksonville, says the economy is to blame for an upswing in cremations of indigent people this spring.
The city cremated 306 indigent people this fiscal year through July, with two months yet to go. That number is up from a total 297 and 241 in the previous two years.
Nevada's Clark County has recorded a nearly 11% increase in indigent burials and cremations over the previous fiscal year, according to public information officer Dan Kulin.
Increasingly, counties are turning to cremations as a more affordable option than burials, Byers says, as fiscal hardships continue for state and local governments.
Even families who don't qualify for indigent assistance programs are looking to spend less for burial costs.
Many families are looking for ways to reduce funeral expenses, says James Olson, a spokesman for the National Funeral Directors Association and a funeral director in Sheboygan, Wis. They have certainly seen that families don't have the funds available and more often are opting for less expensive funeral options.

Thursday, September 15, 2011

Can Best Buy Compete With The Internet?

Story first appeared in the Wall Street Journal.
Investors abandoned Best Buy Co. Tuesday amid new signs its big-box strategy is being undermined by cost-conscious shoppers shifting more of their spending to online rivals.
The world's largest electronics chain reported a 30% drop in quarterly profit and saw its stock decline after saying sales at its U.S. stores open at least 14 months dropped for the fifth-consecutive quarter.
Its shares, which reached their lowest level since December 2008 in Tuesday trading, fell 6.5% to $23.35 in 4 p.m. composite trading on the New York Stock Exchange.
While the retailer said it gained market share in smartphones and tablets—the hot growth categories in electronics retailing—those gains fell short of offsetting declines in its old cash cows, sales of televisions and computers.
Best Buy also cut its full-year earnings forecast, saying it expected tough consumer spending trends to continue through the holidays.
Some analysts said investors appear to be losing confidence with what they see as a slow response by management to a growing crisis.
Executives earlier this year set plans to cut the company's big-box square footage by 10% over the next five years as leases expire, but company critics want the retailer to close underperforming stores faster.
Best Buy Chief Executive Brian Dunn said in an interview the company's 1,100 U.S. namesake stores are still an advantage over online-only rivals such as Amazon.com Inc. Roughly 40% of online purchases from Best Buy are picked up by customers in stores, it said during a conference call with analysts.
Mr. Dunn said he understands there is sentiment in the market that they'd like to see him close more stores, but the company's mixture of online and store retailing is the winning scenario for the long haul. He added that there are still things in the physical world that are going to be important: expert advice and the ability to see and touch the latest tablets.
Best Buy became the dominant electronics retailer in America through oversized stores that carried a broad assortment of music and movie discs, televisions and computers, all under one roof. But online competitors now offer vastly greater assortments—without collecting sales taxes in most U.S. states—and movie and music sales have dwindled due to the rise of digital downloads, turning what was once an advantage into a potential liability.
Best Buy has responded by beefing up its online assortment by more than 20,000 extra items this year, and expanding a smaller new store format called Best Buy Mobile that is focused on selling smartphones inside malls. But its signature stores are still struggling to adapt to the changes in the electronics market, and analysts worry many of them have become showroom" for merchandise that consumers wind up purchasing online from competitors such as Amazon.
In addition to concerns its big-box stores may be too large for modern electronics retailing, Best Buy faces questions about its struggling venture into U.K. retailing. Best Buy said Tuesday it remains committed to opening namesake stores in the U.K. despite disappointing early results from a partnership with Carphone Warehouse Group PLC.
Best Buy established its electronics dominance largely by grabbing an outsized market share in lucrative categories such as high-definition televisions and laptop computers. But sales of those products are stagnating, as many consumers are being cautious with new purchases and delaying replacing older models.
Profit for its fiscal second quarter, ended Aug. 27, fell to $177 million, or 47 cents a share, from $254 million, or 60 cents a share, a year earlier. Revenue was up a hair at $11.35 billion.
Meanwhile, Best Buy is facing tough competition for such items as tablets and smartphones, for which the market is significantly more fragmented due to rival stores run by mobile-phone carriers, as well as the retail outlets of Apple Inc.
For example, mobile phones now make up 15% of all electronic sales but are only 5% of Best Buy's sales, says analyst Peter Keith of Piper Jaffray & Co.
Best Buy said it now expects a lower profit this year than it had previously projected. Though the company actually raised its per-share earnings outlook to a range of $3.35 to $3.65, up from $3.30 to $3.55, it was now factoring in the expected benefits of buying back $1.5 billion in stock to reduce shares outstanding.

Asia Consumers Targeted By Companies

Story first appeared in USA TODAY.
Foreign companies are going after the disposable income of Asia's consumers with jeans, shoes, even phones designed especially for this developing market.
Last year, U.S. jeans maker Levi Strauss launched its Denizen denim brand in China and Singapore. U.K.-based Burberry sells its Blue Label brand of men's and women's clothes and shoes in Japan. French designer Christian Dior markets a sapphire-encrusted cellphone in Shanghai. And Parisian fashion house Hermes has teamed with Chinese designer Jiang Qiong Er to sell the exclusive Shang Xia brand.
The growing number of foreign retailers who are launching products or even brands for Asian economies is a sign of this region's increasing buying power.
Retail sales are growing faster in Asia than in many developed economies: From 2010 to 2014, retail sales in this region will increase an average of 6% a year, significantly higher than the global growth rate, PricewaterhouseCoopers predicts. In China alone, retail sales more than doubled to $1.1 trillion from 2006 to 2010, according to Access Asia, a market research firm.
If the fashion and luxury markets are big enough, more foreign companies will want to launch their own brand for Asia, predicts Sun Yimin, an associate marketing professor at Fudan University in Shanghai.
Creating distinct brands for one region of the world is an increasingly popular, yet risky, strategy. Foreign companies spend years building their reputations in emerging markets.
So the question is whether launching a new line will detract from the parent brand, says Andrew Lam, associate director for retail and lifestyle in greater China for Synovate, a market research firm.
Companies that are already household names in Asia may also find it tough to gain traction for new brands, Lam says.
For Levi Strauss, the question of whether Asian consumers would embrace a line of lower-price jeans from a well-known brand was top-of-mind in its deliberations about whether to launch Denizen.
Aaron Boey, president of the global Denizen brand says there's always the risk that when you try to be all things to everyone, you end up being nothing to nobody.
But the success of retailers such as Zara in selling jeans made Levi Strauss realize there was an unmet need for high-quality, low-price denim in Asia, Boey says. While a pair of Levi jeans starts at $95 in China, the Denizen line starts at about $55.
A year after its launch, Denizen — which Levi claims will elongate Asian bodies and give them a perky butt — is sold in 390 stand-alone Denizen stores in seven Asian countries.
The brand has also expanded to Mexico and the U.S. Levi doesn't break out sales for the Denizen brand, but the company says it's pleased with how consumers have responded.
In general, it makes sense for foreign companies to launch brands specifically for Asian markets, says Tan Heng Hong, a research analyst at Access Asia. He says it increases your brand awareness, and you can position your product at a different price level.
As Asian economies expand, consumers in the region will tire of Western designs as they embrace their unique culture, Tan says. That's why such brands as Hermes' Shang Xia — highlighting Chinese craftsmanship in clothing, accessories and furniture — are finding a market in Asia. Shang Xia's first store opened in Shanghai last year.
Asian consumers' tastes in clothing may already be changing. Traditionally, Asians have preferred Western to local brands, but educated consumers are increasingly realizing that much of the foreign-brand apparel they buy is actually made in China, Sun says.
She says today, people don't pay so much attention to where clothing is made, but whether it's tailored to them.
With jewelry, however, Asian consumers still prefer Western to local brands, Sun says.

Village Post Offices Saves Money and Provides Essential Services

Story first appeared in USA TODAY.
The Postal Service, a government-supervised private operation running billions of dollars in the red, wants to cut costs by closing as many as 3,700 small post offices and replacing some of them with what it calls "village post offices."
The idea, being tried in Malone, Wash., is to offer the most basic mail services at lower cost by installing minimal post offices inside such places as grocery stores and drugstores.
People in Malone can find their new post office easily: It's across the street from the old one, which closed Aug. 9. The next day, Red's Hop N' Market put a new sign in the window — "Village Post Office" — and started selling stamps and flat-rate shipping along with milk and cigarettes. People get their mail in individual mailboxes outside.
The Postal Service will pay Red's $2,000 a year.
The new setup is "awesome," says 18-year-old Samuel Mason, because he can get the mail any time of the day or night. The old post office closed at 4:30 p.m.
His mother, though, worries that the locked boxes are not secure because they are outside
Phil Spence, 64, is unhappy that people won't be able to process money orders or mail irregular-size packages. They'll have to go to Elma, 5 miles away. That's tough for someone without a car, he says.
The Malone operation is a pilot project for a system the Postal Service hopes to use to replace what it considers underperforming post offices across the country.
Spokeswoman Sue Brennan says it will be a success if it increases foot traffic … and satisfies the customers' postal needs.
Downsizing to village post offices won't solve all the Postal Service's financial problems. Postmaster General Patrick Donahoe told Congress last week that he could see a $10 billion loss when the fiscal year ends Sept. 30. He is asking for permission to end Saturday mail delivery and recover part of billions of dollars prepaid into future retirees' benefits.
He will talk more about his proposals at a news conference today.
Meanwhile, some people in Malone say the change is not a big adjustment.
The village post office is nothing new, says Phil Spence's wife, Maryann Spence, 59. Back when Red's was called Busby's, it housed the Malone mail services until the post office opened across the street. They can’t believe that people think this is such a big deal; after all, it's the way it used to be 40 years ago.

Solar Energy Company Goes Bankrupt After $535 Million Government Loan

Story first appeared in USA TODAY.
White House officials on Wednesday defended a decision to award a now-bankrupt solar energy company a $535 million loan as House Republicans released Obama administration e-mails suggesting that the loan was rushed despite deep internal skepticism about the government investment.
Excerpts of administration e-mails released by the House Energy and Commerce Committee from late August and September 2009 show that White House officials were anxious about the Office of Management and Budget (OMB) timeline for finalizing a loan to Fremont, Calif.-based Solyndra. Vice President Biden was traveling to California when Solyndra was scheduled to hold a groundbreaking on their new facility, and the White House wanted Biden to attend to tout the project as an example of President Obama's $787 billion stimulus putting America back to work, the e-mails suggest.
Just days before the groundbreaking, the OMB staff wrote in an e-mail that the Solyndra deal should be notched down because of a lack of firm performance data on the company's solar panels and weakening world market prices for solar generally.
The groundbreaking went on as planned, with Biden, Energy Secretary Stephen Chu and California's then-governor, Republican Arnold Schwarzenegger, in attendance.
Obama later visited Solyndra and hailed it as a green energy company that would help lead America's economic recovery.
Things hardly turned out so rosy. Last month, Solyndra announced it was laying off its 1,100 workers, and it filed for bankruptcy on Sept. 6. Two days after the bankruptcy filing, FBI agents raided the company's headquarters.
The White House said that the e-mail exchange only showed urgency about a scheduling decision and that the Bush administration initially pursued loaning the money to Solyndra. The Obama administration dispatched senior OMB and Energy officials to a House hearing to defend the White House's evaluation of Solyndra.
OMB Deputy Director Jeffrey Zients said iit's a disappointing outcome but it comes with the terrain of backing innovative technology.
Rep. Cliff Stearns, R-Fla., noted that Solyndra's financial troubles became clear just six months after the loan closed when an independent auditor noted recurring losses from operations and negative cash flows. Stearns, who chairs the House subcommittee on investigations and oversight, said Energy Department correspondence indicated Solyndra was a model for companies that should get stimulus-backed loans.
If so, Stearns said, he is very concerned about where the rest of the $10 billion that the Energy Department has left to spend before the Sept. 30 deadline is going.
Committee Republicans have implied the administration failed to conduct due diligence on Solyndra because a major company investor was a foundation controlled by the family of Tulsa billionaire and Obama fundraiser George Kaiser. However, Rep. Henry Waxman, D-Calif., and others say other private investors in Solyndra included Madrone Capital Partners, a venture capital firm tied to the GOP-leaning Walton family, the founders of Wal-Mart.

How are insurance companies fairing in the wake of numerous natural catastrophes?

Story first appeared in USA TODAY.
Tsunami in Japan. Drought in Texas. Floods in Pennsylvania. Hurricane and earthquake in New York. The news has been filled with examples of extreme weather that often are accompanied with the risk of property damage.
Property damage is one of the dirtiest terms in the insurance industry. Insurance companies' earnings are powered by collecting premiums and, conversely, hurt by paying out claims. If there's an increase in natural disasters that cause property damage that exceeds estimates, that can create a drag on earnings.
Furthermore, if catastrophes are expected to be more frequent in the future, insurance companies must either increase their reserves for claims, which hit earnings, or try to increase premiums.
To your question, does the rash of natural disasters potentially hit the earnings of insurers? On a short-term basis, the answer is yes. Analysts are accessing and measuring the estimated damage from all the events during the third-quarter and will likely make adjustments.
Since the third quarter is a busy month for hurricanes, analysts will look at the total hit through September and tweak their forecasts.
Longer term, some investors might wonder if insurance companies' earnings might be hit by changes in the planet's climate. Earth is warming up. And if the earth does heat up, there are some who expect more storms and other potential events that could damage property. But so far, there are too many unknowns before estimates on how any changes in the climate could hurt insurers' earnings.
Currently, companies are more focused on the short term and the risk of more catastrophic events.

Wednesday, September 7, 2011


Story first appeared in USA TODAY.
Parents usually love watching their kids grow up. But if there's one major downside of kids getting older, it's that the financial obligation of paying for college, like a mat degree, is drawing nearer. And recently, the stock market hasn't helped much to ease the discomfort.
College costs continue to soar. Students enrolling in college in 2010 are looking at a price tag of $33,300 for four years at a public university, says SavingforCollege.com. That cost is expected to jump to $95,000 in 18 years. College tuition costs can be reasonably expected to grow by 6% per year or even higher. Clearly, starting to save for such a large cost as soon as possible is critical.
The stock market hasn't been making it much easier for parents trying to keep up. One of the best ways for investors to save for college are 529 plans. These college savings plans allow investors to sock away money, invest in stocks and other investments, and take money out tax-free as long as the money is used for qualified expenses.
But many of these plans are having trouble keeping up. Utah's popular 529 plan, for instance, offers an "Age-Based Aggressive Growth" plan. And over the past five years, the fund has returned 3.5% a year on average for students furthest from enrollment into a honors degree, through April 30, 2011, the latest data available. That's far from what parents need to keep up with tuition inflation.
This plan on paper looks great. It's 50% invested in large U.S. stocks, 20% in mid-sized U.S. stocks, 20% for small U.S. stocks and 10% in international stocks for beneficiaries furthest from enrollment. And the plan starts shifting money into bonds when the beneficiary turns 7 years old. But so far, the returns aren't enough to match up with inflation.
It's understandable that given stocks' subpar returns, parents are tempted to look for other magical assets that will generate bigger returns. Saving for college is especially stressful, since there's a set deadline in the future you must meet. It's not like saving for a car, a purchase that can be delayed, or even retirement, which can be postponed. No parent would like to put off a child's education.
Adding to the temptation is the fact that some other assets, namely gold, have been such strong performers. You might wonder if it's better to shift the college fund into something like that.
But I urge you to stick with the 529 and the appropriate allocation to stocks. First of all, the tax benefits are huge for sticking with a 529 that invests in stocks. Not having to pay taxes is an automatic 15%, or even higher, kicker for your returns.
Additionally, over time, stocks have proven to generate higher returns than most other asset classes. Enduring the short-term volatility is the price of admission. This isn't just wishful thinking. The same Utah 529 portfolio that generated disappointing returns the past five years generated a respectable 10.2% average annual return since the fund's inception on April 1, 2003.
If you're really nervous about things, most 529 plans allow you to choose more moderate or conservative investment options that may help pay for a nursing degree. These options will reduce your exposure to stocks and increase your weighing in bonds. If you do this, however, be prepared to save more money as the returns will likely be lower than what you'd get by investing in stocks.

Baby Boomer Worries

Story first appeared in USA TODAY.
Baby boomers use face serums, teeth whiteners, exercise programs and even plastic surgery to look younger for work, but it could be that the greatest change isn't happening on the outside — but what they’re going through on the inside.
Many in the baby boomer generation had planned on retiring by now. But in this poor economy, they are struggling to deal with a ton of anxiety about their financial well being, says Tamara McClintock Greenberg, associate professor of clinical psychiatry at the University of California, San Francisco.
She said she has got patients who are checking the stock market several times a day, they're so worried.
Greenberg says baby boomers also are concerned about younger workers coming in to take their places. If they're laid off, they face a daunting challenge as unemployment for those older than 55 has grown by about 2.4 million — or 9.3 percent — since the official start of the recession in December 2007. Health statistics show Americans have an average life span of 77.9 years, and boomers are realizing they may be facing decades of financial demands.
Greenberg says that some people are worried that if they live 30 years past retirement, will they be able to support themselves, or wondering if they will run out of money, and this all comes at a time when they may be also dealing with aging parents and children still at home.
Older workers can better handle the financial, personal and professional demands that are creating so much stress for them right now in a number of ways, Greenberg says. She suggests they:
• Plan realistically. While you might think you have a tidy nest egg for retirement, what happens if a spouse or family member becomes ill? Make yourself have these difficult conversations, no matter your income level, and a qualified financial adviser can help you set up a plan.
• Maximize health-insurance benefits. Some people really feel like they need concierge medical care, but she suggests people try to use the benefits they have and find doctors that will take their health insurance. Take advantage of getting your health care paid for as much as possible.
• Look for support. Baby boomers have always had a great commitment to help, so they can get caught up in intense caretaking for someone like an aging parent, but there is a price to be paid for doing that. They need to think about what they can realistically do.
Older workers must consider that becoming physically drained from caretaking duties could cost them their job. It might make more sense to get caretaking help for someone at home or look into a facility for aging parents.
• Don't self-medicate. The baby boomers are amazingly resilient, but they are really disillusioned and disheartened right now. They were in many ways a privileged generation, so there's really not a lot of sympathy for what they're going through. The temptation for them right now is to self-medicate with drugs and alcohol.
Greenberg says she hopes that employers will recognize the stress older workers may be under and support them by reminding them of the valued experience they bring to the workplace and their role in a company's success.
Greenberg believes that right now baby boomers need more of our sympathy and understanding. They tried really hard in their lives to make social change and were the most idealistic and socially conscious generation.
The struggle they face right now is more than they ever thought would happen, she says.

Service Sector Still Weak

Story first appeared in USA TODAY.
U.S. service firms that employ 90% of the work force expanded at a slightly faster pace in August. But the sector remains too weak to help an economy that is barely growing and struggling to create jobs.
The Institute for Supply Management said Tuesday that its index for service companies rose to 53.3 in August, up from 52.7 in July. Any reading above 50 indicates expansion.
The service sector, which includes everything from restaurants and hotels to health care firms and financial service companies, has grown in all but one month over the past two years. The index reached a five-year high of 59.7 in February.
But overall growth among service businesses has declined in four of the past six months. High gas prices and scant wage gains have left consumers with less money to spend on services.
The private trade group said its gauge of hiring for service companies fell last month. That follows Friday's grim report that the economy added no net jobs in August.
Stocks tumbled before the report was released. The Dow Jones industrial average fell more than 250 points in the first hour of trading. The losses followed steep declines in European indexes and come as many fear that the U.S. economy could be at risk of another recession.
The U.S. economy expanded in the first six months of the year at an annual rate of just 0.7% — the slowest growth since the recession officially ended two years ago.
Last week, ISM said its manufacturing index fell in August to a reading of 50.6, barely above the 50 threshold that separates contraction from growth.
Consumer and business confidence has been sapped by the political standoff over the federal debt limit, the downgrade in the U.S. government's credit rating and a debt crisis in Europe. The stock market tumbled in late July and early August and has fluctuated wildly since then. The Dow is nearly 14 percent lower than its close on July 21.
President Obama will unveil his plan to reduce the country's unemployment during an address to a joint session of Congress on Thursday.
Still, Obama is unlikely to win support for any stimulus spending from congressional Republicans, who say the president's economic policies have failed. They want further spending cuts to restrain soaring deficits and less government regulation.
The economy needs to add roughly 250,000 jobs a month to make a major dent in the unemployment rate, which has been above 9% in all but two months since May 2009.
Many economists believe that the economy will grow only 2% growth in the second half of this year, far below the pace needed to power significant job gains.

Tuesday, September 6, 2011

A Business Continues On Despite Huge 9/11 Losses

Story first appeared in the Wall Street Journal.

Ten years after Sept. 11, 2001, the investment-banking firm Keefe, Bruyette & Woods Inc. is strong, with a firmly established niche on Wall Street specializing in banks and financial services. Under Mr. Duffy, the chief executive, the company has grown despite the stress of the financial crisis. Last year, parent company KBW Inc. posted $425 million in revenue; nearly triple its highest pre-2001 number. It has about 260 more employees in New York—and 440 more globally—than it did just after 9/11.
But it has been a challenging journey. Painful recollections remain. Awkward moments lurk. Newer traders and analysts avoid asking veteran colleagues about 9/11, worried it will stir bad memories.

Linda Orlando, a former J.P. Morgan Chase & Co. official was hired at KBW in September 2002 to run the firm's technology. She say working there is a little like walking on eggshells, because being a post-9/11 person, she didn't have that relationship with the people who were here. She says she asks prospective hires whether they understand "the mindset" they'd need to work at KBW.
Even in 2011, KBW is in many ways defined by the events of 9/11. On that day, the firm was on the 88th and 89th floors of the south tower of the World Trade Center. Mr. Duffy, then co-CEO, was driving from his Westchester County home when he heard radio reports of a plane striking the World Trade Center.
A little more than an hour later, both towers had collapsed. Mr. Duffy realized that many of his colleagues were probably dead.
It turned out that several dozen KBW employees had escaped from the office after the first plane hit the north tower. But many had stayed at their desks after building officials said to stay put.
More than one-third of the firm's 171 New York employees were gone. Among them were KBW's chairman and Mr. Duffy's co-CEO, Joseph Berry. The firm had lost well-known bank analysts, including Thomas Theurkauf, David Berry and Dean Eberling.
Also dead was Mr. Duffy's 23-year-old son, Christopher, who had started out three months earlier as an assistant stock trader.
The firm retreated into survival mode. Mr. Duffy spent two weeks at home, grieving with his wife and four remaining children. Two lieutenants who also were away from the office that morning—Andrew Senchak, who led the firm's investment bankers, and Thomas Michaud, the top salesman under Mr. Berry on the stock-trading desk—kept the firm together. Grief-stricken employees trickled into temporary space that KBW secured in BNP Paribas SA's offices and at the investment bank's midtown Manhattan law firm, Wachtell, Lipton, Rosen & Katz.
KBW's offices were gone, along with much of its records and many of its key staffers, from the chairman to its star analysts and most of its traders.
After returning to work on Sept. 24, Mr. Duffy called top employees and shareholders together at a Morton's restaurant in Stamford, Conn. The main topic was whether to proceed as an independent company.
Before the terrorist attacks, the firm, started in 1962 with eight workers and $50,000 in capital, had been entertaining an acquisition by BNP, a French bank. Mr. Duffy had believed that focusing on one sector—financial services—and having little business outside the U.S. were beginning to look like potential disadvantages. The recent repeal of Depression-era banking laws had spurred competition from commercial banks that could use their big balance sheets to elbow boutiques like KBW out of the investment-banking business.
The closely knit firm also had been shaken when plans to sell shares in an initial public offering were derailed by a market downturn and the resignation of CEO James McDermott in an insider-trading scandal. He ultimately spent five months in jail for passing a tip about a potential merger to a Canadian adult-film actress.
In early September 2001, KBW executives believed they were weeks away from a deal with BNP. The suitors had tentatively agreed on a price and were drawing up employment contracts for key employees. On Sept. 10, a BNP executive had spent the day kicking the tires at KBW's newly refurbished World Trade Center offices.
Now, everything felt different. Mr. Duffy told the group that the BNP offer was still on the table—at a reduced price. Then he asked whether it would be easier to rebuild with or without a new parent. Mr. Michaud, the stock trader, responded that they wanted to do this on their own, because it was the best way to remember those who passed away.
The firm's leaders decided to try to rebuild KBW into a larger version of what it was before. So they got to work.
Executives, accustomed to adding only a few new people a year, interviewed more than a dozen job candidates some days. Mr. Duffy and his team picked their new colleagues in a makeshift conference room that also housed computers. Within four months, the firm had hired 64 people.
One early preoccupation was finding a new home. Like other firms that lost employees in the World Trade Center, KBW didn't want to be anywhere near the site. In late 2001, it moved onto the fourth floor of a building in midtown, about four miles away—ironically, the same building that housed BNP.
A few weeks after moving in, KBW hung a picture of the American flag painted by the wife of one of its surviving employees. The 67 World Trade Center victims from KBW are listed in red and white type to form the 13 stripes on the flag.
In 2003, the firm added a stark piece of steel from the World Trade Center formed into a sculpture with the American flag and a cross. But some KBW employees complained that the sculpture brought back painful memories. So Mr. Duffy had it put in a less-conspicuous meeting room near the firm's main entrance.
When the Federal Bureau of Investigation visited KBW in preparation for the trial of Sept. 11 mastermind Khalid Sheikh Mohammed, one employee said she couldn't answer investigators' questions about their building and what survivors saw that day.
Five years after the attacks, in a booming market, the company held a $160 million IPO.
But challenges persist. The intractable market for financial stocks, set off by the crash in 2008, currently threatens the industry that KBW specializes in. The firm laid off about 7% of its employees in 2009 and is studying another round of layoffs that could be announced as soon as next month.
Mr. Duffy, now 62 years old, said they are holding their own, but as the pie has gotten smaller, it's made life more difficult. But it's a struggle to let people go. He added that they are more sensitive to the issue and understand the impact that losing a breadwinner has on a family
Ties to the old days remain. Nearly three-quarters of the 104 survivors have stayed with the firm, high in an industry that usually sees heavy turnover. KBW also maintains the charitable fund it set up to help victims' families. The firm pays health-care costs for the children and spouses of about two dozen victims, and it plans to continue that support for at least two more years.
Many of the veterans say strong memories of colleagues are laced through their days. Cliff Gallant, who was hired in 2000 to cover insurance and who made it out of the tower, says he thinks often of how former bank analyst Mr. Eberling taught him to make a forceful stock call when dealing with KBW's aggressive traders.
And Frederick Cannon, who worked at Bank of America before being hired by KBW in 2003 and who is now the firm's research director, says he can still picture analyst Mr. Theurkauf with a smile on his face and a tough question. One lesson he passes along to newer analysts: Mr. Theurkauf didn't shy away from informing companies directly when he had downgraded their stock.
Some newcomers have brought their own ties. In 2009, Kristen Ryan, whose father, John J. Ryan, was a sales trader at KBW, started working among some of the same traders that her dad worked with before he died on Sept. 11. She says part of her being drawn to KBW was trying to learn more about what he did for a living.
Some of John Ryan's former clients now deal with his younger brother, Patrick Ryan, who joined KBW in 2008.
For his part, Mr. Duffy says Sept. 11 made him act more quickly, because he now appreciates how quickly things can change. He noted that the firm's 2004 hiring of more than a dozen employees from a rival firm in London was the sort of opportunity the firm might not have acted upon before 9/11.
About five years ago, one of Mr. Duffy's two remaining sons joined KBW's bond division. In May, one of his two daughters married a KBW salesman.
Last month, Mr. Duffy traveled with two colleagues to pitch an Ohio bank to use KBW for its coming capital raise. One of the investment bankers with him was Joseph Berry Jr., the son of KBW's former co-CEO.
The 37-year old Mr. Berry originally thought about joining Merrill Lynch & Co. after he finished college in the 1990s. His dad asked him if he really wanted to work for a competitor.
Today, Mr. Berry says the firm doesn't discuss the event in its day-to-day business. The daughter of a 9/11 victim from another firm recently joined KBW without the topic even coming up in interviews.
On Sunday, Mr. Berry will be among those reading names of victims at the World Trade Center site. Later in the day, KBW officials will reread the names of their 67 colleagues at a quiet site in the Central Park Zoo.
The zoo was a favorite charity for firm co-founder Harry Keefe. It seemed fitting, executives say, to remember lost friends and family in a setting more serene than grim. Mr. Duffy says the memorial service will continue as long as his colleagues and their families want to keep coming.

Underemployed Edge Out Unemployed When Looking For Jobs

Story first appeared in the Associated Press.
The job market is even worse than the 9.1 percent unemployment rate suggests.
America's 14 million unemployed aren't competing just with each other. They must also contend with 8.8 million other people not counted as unemployed - part-timers who want full-time work.
When consumer demand picks up, companies will likely boost the hours of their part-timers before they add jobs, economists say. It means they have room to expand without hiring.
And the unemployed will face another source of competition once the economy improves: Roughly 2.6 million people who aren't counted as unemployed because they've stopped looking for work. Once they start looking again, they'll be classified as unemployed. And the unemployment rate could rise.
Intensified competition for jobs means unemployment could exceed its historic norm of 5 percent to 6 percent for several more years. The nonpartisan Congressional Budget Office expects the rate to exceed 8 percent until 2014. The White House predicts it will average 9 percent next year, when President Barack Obama runs for re-election.
The jobs crisis has led Obama to schedule a major speech Thursday night to propose steps to stimulate hiring. Republican presidential candidates will likely confront the issue in a debate the night before.
The back-to-back events will come days after the government said employers added zero net jobs in August. The monthly jobs report, arriving three days before Labor Day, was the weakest since September 2010.
Combined, the 14 million officially unemployed; the "underemployed" part-timers who want full-time work; and "discouraged" people who have stopped looking make up 16.2 percent of working-age Americans.
The Labor Department compiles the figure to assess how many people want full-time work and can't find it - a number the unemployment rate alone doesn't capture.
In a healthy economy, this broader measure of unemployment stays below 10 percent. Since the Great Recession officially ended more than two years ago, the rate has been 15 percent or more.
The proportion of the work force made up of the frustrated part-timers has risen faster than unemployment has since the recession began in December 2007.
That's because many companies slashed workers' hours after the recession hit. If they restored all those lost hours to their existing staff, they'd add enough hours to equal about 950,000 full-time jobs, according to calculations by Heidi Shierholz, an economist at the Economic Policy Institute.
That's without having to hire a single employee.
No one expects every company to delay hiring until every part-timer is working full time. But economists expect job growth to stay weak for two or three more years in part because of how many frustrated part-timers want to work full time.
And because employers are still reluctant to increase hours for part-timers, hiring is really a long way off, says Christine Riordan, a policy analyst at the National Employment Law Project. In August, employees of private companies worked fewer hours than in July.
Some groups are disproportionately represented among the broader category of unemployment that includes underemployed and discouraged workers. More than 26 percent of African Americans, for example, and nearly 22 percent of Hispanics are in this category. The figure for whites is less than 15 percent. Women are more likely than men to be in this group.
Among the Americans frustrated with part-time work is Ryan McGrath, 26. In October, he returned from managing a hotel project in Uruguay. He's been unable to find full-time work. So he's been freelancing as a website designer for small businesses in the Chicago area.
Some weeks he's busy and making money. Other times he struggles. He's living at home, and sometimes he has to borrow $50 from his father to pay bills. He's applied for a million jobs.
Nationally, 4.5 unemployed people, on average, are competing for each job opening. In a healthy economy, the average is about two per opening.
Facing rejection, millions give up and stop looking for jobs.
Norman Spaulding, 54, quit his job as a truck driver two years ago because he needed work that would let him care for his disabled 13-year-old daughter.
But after repeated rejections, Spaulding concluded a few weeks ago that the cost of driving to visit potential employers wasn't worth the expense. He suspended his job hunt.
He and his family are getting by on his daughter's disability check from Social Security. They're living in a trailer park on Texas' Gulf Coast.
Eventually, lots of Americans like Spaulding will start looking for jobs again. If those work-force dropouts had been counted as unemployed, August's unemployment rate would have been 10.6 percent instead of 9.1 percent.
Emma Draper, 23, lost her public relations job this summer. To pay the rent on her Washington apartment, she's working part time at the retailer South Moon Under. She's selling $120 Ralph Lauren swimsuits and other trendy clothes.
Her search for full-time work has been discouraging. Employers don't call back for months, if ever.
Retailers, in particular, favor part-timers. They value the flexibility of being able to tap extra workers during peak sales times without being overstaffed during lulls. Some use software to precisely match their staffing levels with customer traffic. It holds down their expenses.
Draper appreciates her part-time retail job, and not just because it helps pay the bills. It takes her mind off the frustration of searching for full-time work.


Story first appeared in the Bloomberg News.
Cammie Allie and Ann Costlow are small-scale entrepreneurs who have battled back from unemployment to create successful businesses. Allie manages apartment buildings in Portland, Ore.; Costlow owns four crêperies in Maryland. To get started, each drew on business coaching and income support from an unusual state-funded jobless initiative. These self-employment assistance programs provide 26 weeks of income support, typically about $10,000. Participants try to start enterprises, rather than being required to look full-time for traditional jobs.
Founding a business isn’t for everyone. Hours are long, initial earnings puny, and the failure rate high even in boom times. A weak economy makes everything harder. For some displaced workers, however, self-employment may be their best hope. In Oregon, those opting for self-employment get business pointers and detailed reviews of their startup plans. Examiners look for clear ideas about pricing, supplies, customers, and competition. Only candidates judged to have at least a moderate chance of success can proceed.
Oregon recently surveyed 369 people who have participated in its program since 2000. Seventy percent had started a business; nearly half of those were hiring workers. The small survey’s responses might be skewed toward recipients who thrived. Even so, Oregon’s successful entrepreneurs each created an average of 2.63 jobs.
Self-employment aid closely matches the cost of regular unemployment benefits, which can run $400 a person per week. Britain, France, and Sweden have operated similar entrepreneurial assistance programs since the 1980s, with good results. In the U.S., though, only about a dozen states have followed suit, and most programs are tiny.
Bureaucracy is partly to blame. Current state and federal rules don’t allow unemployed workers to pursue self-employment aid right away; instead they must qualify for regular jobless benefits first, which takes weeks. States also worry that some startup dreams might fizzle quickly, wasting taxpayer money.
Making the entrepreneur’s path risk-free is impossible. Still, that shouldn’t stymie such aid. Three of the biggest states—California, Texas, and Florida—are home to 30 percent of America’s unemployed. These states don’t offer entrepreneurial assistance to the jobless; setting up such programs would be a big help.
Two other changes could help make entrepreneurship a likelier path back to work. First, states should tell the newly jobless about the self-employment option right away, rather than making them wait a month or two before becoming eligible. Second, minor income from a side business—capped at a reasonable level of, say, $750 a month—shouldn’t be automatically counted against jobless benefits. In some cases, this year’s hobby can be built into next year’s business. When 4.7 people are out of work for every job opening, unemployed Americans deserve better odds of becoming their own bosses.

David Cameron, the U.K. Prime Minister, had a bright idea: Hire the best person for the job. In the wake of the News Corp. (NWSA) phone-hacking scandal, he reportedly floated the idea of naming William Bratton, the former New York and Los Angeles police chief, to head Scotland Yard.
The suggestion was hit with a flash mob of criticism and was quashed by Theresa May, the Home Secretary, who cited national security and reminded Cameron that only British citizens should be eligible for the post. Her move was seconded by, well, lots of other people, including, not surprisingly, the police unions.
The Prime Minister, who lacks the authority to appoint the Metropolitan Police commissioner, took Bratton on as an unpaid adviser. He had crashed into globalization’s last taboo: the idea that a country could import a talented foreigner to lead a government entity.
What would be so odd about having Bratton, now head of Kroll, an international security firm, run the London police with an American accent, especially given the London riots?
Goods and ideas cross more borders with greater speed and frequency than ever before. Talent travels, too, whether it’s an Indian engineer at Google (GOOG), a Brazilian-Lebanese chairman of Nissan-Renault, a Japanese-French automobile confection, or a Chinese center in the NBA. Sensitive public jobs increasingly are entrusted to foreigners, even if they’re only “consultants.” David Kilcullen, an Australian, helped forge American counterinsurgency strategy in Iraq and Afghanistan. The former head of security at Ben-Gurion Airport in Tel Aviv, Rafi Ron, was brought in to shore up Boston’s Logan Airport. Jay Walder, an American, was the planning and finance chief of London’s transportation authority, then was hired to manage New York’s, and is on the way to do the same job in Hong Kong. When it comes to cities, it’s hard to think of a more sensitive job.
Skill and intellect are exportable commodities, and right now the public sector is largely a closed market. For governments at all levels and in all parts of the world, the most effective route to reform may be to import strong, innovative managers. Politically, perhaps, it remains a difficult sell. Questions of divided loyalties and hurt national pride will have to be addressed, as will citizenship regulations in many places. And yet breaking the Bratton Barrier would be a good thing, especially in the context of security, a transnational threat if ever there was one.