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Friday, June 21, 2013

 Story Appeared in USA TODAY

A quiet innovation in aviation is expected later this month.

Bombardier Aerospace plans to test-fly a new plane with quieter engines from Pratt & Whitney. The companies say the geared turbofan engines are projected to burn 20% less fuel and reduce noise, and Bombardier could be the first to use planes with the quieter engines a year from now.

While airlines would appreciate better fuel efficiency, the promise of quieter flights for passengers and for people on the ground could also allow airlines to land more planes at airports with noise restrictions.

"They're so quiet as you come in for an approach, if you shut off the engines you can't tell the difference," said Alan Epstein, vice president for technology and environment at Pratt & Whitney, a division of United Technologies.

Neighbors of noise-restricted airports are monitoring the development of quieter engines, but they have questions about how they will actually work.

Donald MacGlashan, a board member of the group Citizens for the Abatement of Aircraft Noise, which monitors Dulles and Reagan National airports near Washington, would like a reduction in a regional jet's noise, but he's waiting to see the actual results.

"We would certainly welcome it," MacGlashan said. "But I'm skeptical."

The Pratt & Whitney engines could become the first to carry travelers on Bombardier planes next year. Pratt & Whitney's first test flight for an Airbus engine for the A320neo was May 15, but that plane isn't expected to be in service until late 2015.

A rival engine manufacturer, the CFM International partnership of General Electric and Safran of France, is also developing a quieter engine for single-aisle planes such as the A320neo and Boeing's 737 MAX. That engine is first expected in commercial service aboard the A320neo in 2016 and the 737 MAX in 2017, according to CFM spokeswoman Jamie Jewell.

The market for the quieter engines is significant, with projections for up to 25,000 aircraft over the next 20 years with as many as 50,000 engines, Jewell said. So far CFM has orders for 4,600 of the quieter engines, and Pratt & Whitney has more than 4,500 orders and options, according to the companies.

Eventually, quieter engines could be developed for wide-body planes, too.

Richard Aboulafia, an aviation analyst as vice president for the Teal Group in Virginia, called the Pratt & Whitney engine "a significant innovation." But he said it's unclear which engine will lead the market.

"It's become a huge battle, with completely different propulsion philosophies, different customers, yet effectively two engines in the same power class," Aboulafia said. "It's a nice step forward. We just don't know what kind of lead it will have over the competition."

The key to the Pratt & Whitney engine is a gear behind the engine's fan that allows it to turn slower for the same thrust, the same way a higher gear on a bicycle requires less pedaling to cover the same distance.

The new engine's fan for the A320neo is 81 inches in diameter, rather than the previous 63 inches, Epstein said. While larger, it turns slower and burns less fuel through a gear the size of a car's wheel, Epstein said.

The engines are headed to the Airbus A320neo; Bombardier CS100 and CS300; Embraer 170, 175, 190 and 195; Mitsubishi Regional Jet; and Irkut planes, Epstein said. Airbus and Embraer are retrofitting existing planes, while the others are putting the engines on new models.

The quieter engines are projected to reduce the jet's noise 3 to 5 decibels at specific points around an airport, which is projected to shrink the zones covered by noise restrictions by 75%, according to Pratt & Whitney and CFM.

"That means that aircraft noise, in most cases, will be contained within the confines of the airport," said Jewell of CFM.

Numerous airports across the country have restrictions on late-night or early-morning flights because of noise. For example in 2011, Reagan National got 505 noise complaints and Dulles got 157 noise complaints, according to the most recent report available from the Metropolitan Washington Airports Authority.

MacGlashan, the airport noise watchdog, said reducing the noise of regional jets overhead would "certainly be an improvement." But he said residents are most concerned about the loudest noises that jets make rather than the average noise that manufacturers measure.

"It depends on what kind of aircraft they're thinking of putting them on," he said.

If the new engines are successful, airlines serving city airports with noise restrictions in Toronto, London and Stockholm are eager for quieter engines to allow more flights, according to Marianella de la Barrera, a spokeswoman for Bombardier.

Pratt & Whitney and Bombardier expect the quieter engines aboard the CS100 to be the first delivered about this time next year, after the test flight expected later this month.

Announced customers include Republic Airways, Porter Airlines in Canada and Gulf Air in the Middle East.

"It's actually well suited for urban communities," de la Barrera said. "It's widely acknowledged that it's going to be a step-change for the industry."

Bank of Bob: One man's venture into microlending

Story Originally Appeared on USA TODAY

Bob Harris, former stand-up comedian, "Jeopardy" contestant, and television writer, got a plum assignment covering the world's most luxurious hotels for ForbesTraveler.com in 2008. While staying in hotels that would bankrupt most people overnight, he took an interest in the poverty that surrounds so many luxe establishments. And that, in turn, led him to invest his earnings from Forbes at Kiva.org, which allows people to make small loans — as little as $25 — to people in lesser-developed nations. "The International Bank of Bob," now in bookstores, is his story about making those loans, and visiting Kiva.org borrowers around the world. USA TODAY reporter John Waggoner interviewed Harris on his newfound role as an international lender.

Q: You have a lot of good things to say about Kiva.org in your book. Are there any caveats you'd add?
A: I don't have a lot of caveats. The thing works: You do get paid back more than 99% of the time. If you go to a major Wall Street bank, rates are virtually nothing. If you deposit $25, a year later you have the same $25, plus a small pile of pennies. Through Kiva, you'd have the same $25, minus a small pile of pennies. And for that you could be helping someone in West Africa buy a cow or repair a taxi. I'd rather have that $25 helping a Bangladeshi fisherman and know what he's doing with it, than tossing it into a big Wall Street bank.

Q: What about the interest borrowers pay? Kiva.org funnels money to lenders, who get interest, but people who contribute to Kiva.org get no interest, right? Isn't there some concern that the local lenders charge a high interest rate?

A: At Kiva, you're lending money at no interest, and you're getting a negative 1% rate. A lot of Americans, when they look at the rates borrowers are paying in the field, those rates seem comparatively high. But in India, education loans are 9%, but the inflation rate is 7.5%. So you have to put the rates into local context. I never met a client in the field who complained about the interest rates.

Q: Which borrower stands out most in your mind?

A: In Lebanon, a guy named Achmed, says to me that he's not political, he doesn't care about sectarianism. And after all the stuff he's been through — his restaurant blown up, livelihood destroyed — he says, "You love more, you win." That didn't come out of a Berkeley yoga class. That's the real deal, a choice you make every day.

But when you look at the other borrowers — Mohammed in Morocco who works in his bike shop six days a week, 11 hours a day, a guy in Cambodia who climbs up and down palm trees all day — they're the same. You start seeing people in terms of what matters to them, and everyone is trying to make a better life for their kids.

Q: Your previous book was Who Hates Whom, a guide to all the simmering hatreds in the world. Has this book changed your outlook at all?

A: We live in one of most diverse countries in the world. You can walk to UCLA, or to the mall, or any hotel here, and if you spend five minutes with eyes open, you'll see people from the entire world getting along. The rest of the world looks like it's on fire when you see the evening news. You see a lot of people shaking their fists, but that's not really what it looks like. In a way we're both far more insulated from the rest of the world and far less aware of it than we realize.

Q: Did you have any moments while traveling when you were scared?
A: I kept anticipating bad things. I'm from Ohio, and I don't fly into Beirut lightly. I just got on a plane, showed up in Beirut, I was not too worried. Beirut has a tourist industry; it's beautiful place. I was expecting some anti-Americanism somewhere — Lebanon, Morocco, Southeast Asia — but I never ran into anti-Americanism. People would just be curious. They find out you live in Los Angles, they start naming the name of Hollywood stars.

The most dangerous thing in most of the world is mosquitoes. Insect-borne viruses, the tropical diseases, will get you. I woke up in Rwanda on my 47th birthday with a sudden fever, and was terrified that I had malaria. I went to the hospital and the doctor took one look at me and said, "You don't have malaria, get out of here."

Dengue fever was like the worst flu I ever had. Everything hurt. You lay there felt like your bones are breaking. It just hurt, and I didn't like it. But hey, I caught up on a lot of movies; I got to lay on the couch and watch cable. I think of people on the islands, watching their kids suffer. The whole time I had dengue, I felt so grateful and lucky to be so comfortable while getting well.

Q: What was your funniest moment?

A: There was a little beautiful girl in Kenya who had never seen a white dude before. I just didn't look like people should. She just freaked out, just lost it. I don't blame her. I'm pale as heck anyway, wearing SPF 100 sunblock, white paint, really, plus mosquito repellent — glowing, essentially, like an alien in a 1950 move. She was just inconsolable.

Q: Any travel tips for people who want to go off the beaten track, as you did?

A: Just travel light. I haven't checked a bag in years. It gives you flexibility: If your hotel is overbooked and you just have a backpack, you just go to the next place. And there are discount airlines all over the world. If you want to know what budget airlines fly between any two countries — say, Estonia to Turkey — try whichbudget.com.

Tuesday, June 18, 2013

Year without helmets sees motorcycle injury claims rise

Story Originally Appeared in The Detroit Free Press

Michigan’s year-old law allowing motorcyclists to go without helmets appears to be leading to more injuries — and more severe injuries — when measured by insurance claims, according to a new study.

The Arlington-based Highway Loss Data Institute compared medical payment losses from the 2010 and 2011 riding seasons with the 2012 season. Overall, there were about 12% more claims, while the average claim — a measure of injury severity — rose from $5,410 to $7,247, according to the institute, which compiles claims data with the Insurance Institute for Highway Safety.

After adjusting for several variables, including that helmetless riders must carry an extra $20,000 in coverage, the data showed a 22% jump in “claim severity” after the law change, according to the report.

“By allowing some motorcyclists to ride without helmets, this data suggests when they crash, they are more severely injured,” said David Zuby, chief research officer at the institutes.

Claims data don’t include injury details and are limited only to claims for injuries for motorcycle operators.

In April 2012, a new law allowed motorcyclists 21 and older to ride without a helmet. That made Michigan one of 28 states with helmet laws covering only some riders, usually those under 18.

A jump in insurance claims isn’t surprising, and it reflects previous studies that have linked weakened helmet requirements to an increase in fatalities and hospital admissions, according to the study’s authors.

“The life-saving effect of helmets is well documented,” Zuby said.

By looking at neighboring states, study authors said they were able to sort out variables such as the weather and the economy, both of which could affect the number of miles by motorcyclists in a season.

As the economy picks up, it is important that researchers recognize its impact on motorcycle use.

With an upswing in the economy, Zuby said, “people are driving further and there are more crashes.”

What is not clear is whether some riders who prefer not to wear a helmet were on the road more often as a result of the law change, resulting in the increase in claims, he added.

As economy improves, businesses now working hard to retain talent

Originally Appeared in Detroit Free Press

As the economy picks up, companies are hiring again and putting a priority on keeping the workers they have, a recent survey finds.

That’s good news if you are looking for a job — or hoping to get more out of the one you have.

“The attitude has gone from telling employees, ‘Be thankful you have a job,’ to companies asking, ‘How do you hold on to the valuable talent you have?’ ” said Sal Vittolino, a spokesman for global consulting firm OI Partners-Action Management, which conducted the survey. “The name of the game is retention.”

Of the 154 companies surveyed in May, 58% reported they added or plan to add workers this year. Just 8% expect to cut staff. The state’s unemployment rate, which was 8.4% in April, has been trending down.

At the same time, a third of all employees plan to look for new jobs this year, according to a study by Harris Interactive.

To hold on to good workers — some waiting for years for the chance to change jobs — companies of all sizes are offering employees better compensation and benefits, more flexible hours, tuition reimbursement and even handwritten notes of encouragement.

One of the most popular incentives offered to retain and recruit workers is career coaching and development, which to some employees is worth even more than money.

Some companies are offering compensation increases of 10%-25%, said Anup Popat, CEO of Systems Technology Group in Troy, which is working to retain employees and recruit talent.

Companies weigh the cost of keeping a worker with losing one, which, according to a report by the Society for Human Resource Management, can be twice the employee’s salary.

At MIPRO, a Milford software consulting firm, Vice President Larry Zagata said he and other executives often thank consultants with personal notes of appreciation, and sometimes even gift cards so that they can take their spouses to dinner.

“The cost of turnover in our industry is very high,” Zagata said. “You’ve got to do the little things.”
Making a change

For workers, the improving economy and new hiring gives them the confidence and the opportunities they need to change jobs or seek a new position within a company.

Ed Lucas, who sought career advancement, a better schedule and a less-stressful workplace, said he left his job as a junior underwriter at JPMorgan Chase in Troy three months ago to become an assistant underwriter at Michigan Mutual in Southfield, a much smaller, but rapidly growing, mortgage lender.

During his interview, he saw a manager taking extra time to help a subordinate, an act that helped persuade him to make the change, he said.

“I was willing to take less to be a part of the company,” said Lucas, 35, who has worked in financial services for 18 years and acknowledged the switch made him uneasy at first. “I was at a crossroads. I just wanted to be a part of a team that wanted to expand.”

At the same time, other mortgage lenders are trying to recruit from Michigan Mutual.

“Our people are getting called, and a measure of how we’re doing is: Do they leave?” said Hale Walker, Michigan Mutual’s senior vice president and co-founder. “People typically don’t quit a company, they quit a boss — or manager.”

Ari Kresch, CEO at 1-800-LAW-FIRM in Southfield, said employees “stay at places where they are happy.”

To help keep his lawyers content, he built an indoor office track. They use it to stay fit — and hold what he called walking conferences.
Competition abounds

These days, the job market is so competitive even the experts who advise executives are having to offer more to keep employees.

Charlie Fleetham, the president of the small management consulting firm Project Innovations in Farmington Hills, said he recently granted an employee tuition reimbursement of about $1,200.

It was a small price to pay, he said, considering what it might cost to replace that person later.

Steve Barone, CEO of information technology company Creative Breakthroughs in Troy, said the business tries to create a culture where workers feel valued, get along and have fun. A few days ago, the employees decided to take a break and went to Cedar Point in Sandusky, Ohio, to ride roller coasters.

Barone stressed that it’s important to hire workers at competitive pay and benefits and that helps keep them from leaving later.

“It’s deflating if you lose somebody because you thought you could save a dollar or two on them. So we don’t do that,” he said. “We treat them well when things are bad and good — and their career development is thought out and on track.”

Caterpillar announces second round of layoffs; Is Obama to blame?

Story Originally Appeared in National Monitor

Caterpillar Inc. has announced another round of layoffs that will likely impact nearly 300 workers in Decatur, Illinois.

In a statement released by the Peoria-based company, officials said they layoffs would target workers in its Decatur facility and would take place 60 days from now. The announcement brings the total number of layoffs to 760, and will reduce the number of total Caterpillar workers to just above 3,000 in Decatur. Company officials say a vast majority of the layoffs will affect workers in production and support/management roles, and the company said a large portion of layoffs comes in the form for production workers.

The announcement follows in the wake of unemployment figures released by the Department of Labor, which show the U.S. rate of unemployment falling to 7.5 percent. According to a statement released by Labor department officials, the U.S. economy added an estimated 165,000 workers to nonfarm payrolls in April. The figures represent the best numbers since December 2008, the height of the 2008 financial crisis.

The additional round of layoffs is reportedly driven by economic factors abroad. This year, Caterpillar expects a nearly 50 percent decline in mining equipment as the economy in Brazil and China remain flat. Caterpillar has already announced  a  number of programs aimed at reducing the number of workdays and briefly shutting down plants around the U.S.

The latest round of layoffs announced by Caterpillar is likely to add fuel to the fire in the debate over how to restore the nation’s economic growth. Top House Republicans and President Barack Obama remain at odds over the best way to continue to create jobs and lower the nation’s deficit. The president has repeatedly called on congressional leaders to fund programs designed to stimulate the economy, while Republicans have criticized the president’s spending programs. Speaking this week, President Obama, traveling to Mexico, called on congressional leaders to continue work to revamp the nation’s economic policies, saying economic growth is vital to both the U.S. economy and national security.

Eurozone unemployment hits another record high

Story Originally Appeared in USA TODAY

Unemployment across the 17 European Union countries that use the euro has hit another record high, the latest in a series of ignominious landmarks for the ailing single currency zone.

Eurostat, the EU's statistics office, says Friday that unemployment rose to 12.2% in April from the previous record of 12.1% the month before. Another 95,000 people joined the ranks of the unemployed, taking the total to 19.38 million.

The figures mask big disparities among countries. While over one in four people are unemployed in Greece and Spain, Germany's rate is down at 5.4%.

Eurostat also says inflation in the eurozone rose to 1.4% in the year to May from 1.2% the previous month. Still, inflation is below the European Central Bank's target.

European stocks fell in early trading. Britain's FTSE 100 fell 0.9% to 6,599.76. Germany's DAX lost 0.9% to 8,323.05. France's CAC-40 declined 1.1% to 3,952.50.

Wall Street also appeared headed for losses. Dow Jones industrial futures shed 0.5% to 15,237. S&P 500 futures dropped 0.6% to 1,643.40.

In currencies, the euro was down at $1.2996 from $1.3043. The dollar fell to 100.40.

Companies awash in cash, when will they spend it?

Story Originally Appeared in US TODAY 

You've probably had this problem before. You've woken up from your bed of freshly ironed $100 bills, and had to pick your way around dozens of bags of coins just to get to the closet. And once there, you can't find a shirt because of the stacks of fifty-dollar bills stuffed to the ceiling.

Darn it! You just have too much cash.

Well, perhaps you haven't had that problem. But a growing number of companies have an astonishing amount of cash, and they just don't seem to know what to do with it.

Sooner or later, shareholder grumbling may force them to dip into the massive amounts they have tucked away in cash or equivalents, earning very little. For investors, the question isn't whether they will spend it well, but who will benefit. And the most obvious answer is the investment banks.

Much of Corporate America is awash with cash. According to S&P Capital IQ, 202 members of the Standard and Poor's 500-stock index have $1 billion or more in cash. Incidentally, that number takes out banks, which use and keep cash on hand differently than, say, a plastics maker.

General Electric is the nation's largest corporate cash hoarder, with $77.4 billion, according to its most recent quarterly report. But GE does a lot more than make toasters, and it has a huge investment banking arm in GE Capital, so it probably should be excluded from the list as well. The next big cash companies are fairly well known and widely held:

• Chevron, $21 billion.

• Apple, $16 billion.

• Johnson & Johnson, $14.9 billion.

• Google, $14.8 billion.

• Hewlett-Packard, $13.6 billion.

Other members of the billionaire's club are probably less known. Nucor, the steelmaker, has $1.1 billion in cash and equivalents. Union Pacific, the railroad, is sitting on $1.1 billion as well. Kraft has $1.2 billion. Coca-Cola? $8.4 billion.

And, in case you're wondering, having all that cash is unusual. Companies overall in 1980 had $234.6 billion cash, adjusted for inflation, according to a paper by Amy Dittmar at the University of Michigan's Stephen M. Ross School of Business and Ran Duchin at the University of Washington's Michael G. Foster School of Business. That's about 12% of assets. Cash holdings grew to $1.5 trillion, or 22% of assets, in 2011.

Why do companies have so much cash? The easy answer is record profits. In 2012, S&P 500 companies racked up earnings never before seen in history. And tax law encourages multinational companies to keep overseas profits overseas.

But Dittmar and Duchin suggest that our captains of industry aren't terribly different than anyone else. Financial managers who have gone through a soul-searing downturn – such as what we saw during the 2007-2009 bear market – have a special reverence for cash.

"We find that CEOs who were previously employed at a firm that experienced financial difficulties have a cash-to-assets ratio that is 3.1 to 4.4 percentage points higher compared to firms whose CEOs did not experience financial difficulties," Dittmar and Duchin write. While this may have helped their companies through hard times, it may not be the correct strategy for less hard times like now.

Many companies are using their cash to increase dividends or buy back shares – two strategies that can reward investors, but do precious little to actually grow the business. You could make the argument that managements with lots of cash that only increase dividends or buy back shares are simply fearful and lazy, and more concerned with their stock price than with growing their core business.

But if the economy were to slow, it would be a particularly swell time to have lots of cash on hand. If you do, you can poach employees from competitors at a relatively reasonable price, for example, invest in equipment that will make your products more efficiently, or invest in new products that will pay off when the economy is growing faster. Plus, doing any of these during the boom times always costs more.

The technology industry has the highest cash levels – about 40%, says Howard Silverblatt, senior index analyst for Standard and Poor's, which is unusually high even for the normally cash-rich industry. "Cash levels are knee-high, if not waist-high," he says. Health-care is the next most cash-rich, with about 20% in cash.

Naturally, there's always the possibility that companies will spend cash poorly. Companies nearly always overpay for acquisitions, for example. "When there are battles over companies, it's like being in a poker game when everyone has a lot of money," says Silverblatt.

As an investor, you want to own shares of the company fought over, not the company doing the fighting. Two funds, the Arbitrage Fund (ARBCX) and Merger (MERFX) make good, if unexciting, returns by buying shares of the target company after a merger is announced. They also sell short the acquiring company (short selling is a bet on falling stock prices).

A more aggressive way to take advantage of companies' cash is to buy shares of investment banks, such as Goldman Sachs (GS) and Morgan Stanley (MS), both of which have outperformed the S&P 500 index this year. Investment bankers collect fees for mergers and other events -- and win no matter who buys who.

In the long run, corporate cash is a good thing. Should they spend wisely, more people will have jobs, more people will get raises and the economy should start humming again. The question is when will companies open up their wallets.

"It's not that they don't have the cash to spend," Silverblatt says. "It's that they are choosing not to."

Payday Lenders Evading Rules Pivot to Installment Loans

Originally Appeared in Bloomberg

For three years, payday lenders have been bracing for dedicated scrutiny from a U.S. agency for the first time. One way they’re getting ready: switching to loans designed to fall outside the regulator’s grasp.

Companies including Cash America International Inc. (CSH) and Advance America Cash Advance Centers Inc. (AEA) are increasingly selling longer-term installment loans to avoid rules the Consumer Financial Protection Bureau may impose on their shorter-term products.

While consumer groups say installment loans carry the same risks and high annual interest rates that drew regulatory attention to payday lending, companies making the switch have won kudos from shareholders. They’ve also taken encouragement from statements made by agency officials.

“You’re diversifying the revenue sources while also shedding regulatory risk,” said John Hecht, an analyst with Stephens Inc., a Little Rock, Arkansas-based investment bank.

The move by payday lenders puts them in competition with firms that have long focused on installment loans, including Citigroup Inc. (C) unit OneMain Financial; World Acceptance Corp. (WRLD) and Regional Management Corp., both based in Greenville, South Carolina; and Springleaf Financial Corp. (AGC1) of Evansville, Indiana, Hecht said.

Formed under the 2010 Dodd-Frank law, the consumer bureau consolidates and expands U.S. oversight of consumer finance. It supervises banks with assets over $10 billion, including JPMorgan Chase & Co. and Wells Fargo & Co., and regulates products from non-banks including payday lenders.

High Rates

Typical payday loans can be for as little as $100 and for terms as short as two weeks. They are meant to tide the borrower over with cash until the next paycheck. The loans are secured by a single post-dated check. Online payday loans require borrowers to authorize a direct debit from a bank account.

After factoring in fees which can be $20 per $100 borrowed, interest rates on a payday loan can reach 521 percent on an annual basis, the bureau has said.

In contrast, installment loans are paid off under a fixed schedule in periods ranging from 90 days to 18 months. Unlike payday loans, borrowers are generally subject to credit checks and income verification.

A yearlong consumer bureau study concluded that payday borrowers can get ensnared in “debt traps” as they take out new loans to cover previous ones. The study found that 48 percent of those borrowing from storefront firms had more than 10 transactions with payday lenders in a 12-month period.

Payday industry lobbyists said the study overstated the incidence of repeat loans. Still, the agency said April 24 it would consider imposing waiting periods between loans.

Dim View

Consumer advocates have taken a dim view of some installment lending as well. Annual percentage rates can also reach triple digits when fees are factored in, according to the Consumer Federation of America. Customers can fall into the same traps as they can with traditional payday loans, said Tom Feltner, the group’s director of financial services.

“Consumer-protection criteria need to apply to short-term loans whether they are 14 days or 180 days,” said Feltner, whose group has urged the consumer bureau to broaden its focus.

In states that don’t authorize the installment loans they want to make, including Washington, New Hampshire and New York, payday lenders are seeking to change the laws, said Uriah King, vice president of state policy at the Center for Responsible Lending, a Durham, North Carolina-based advocacy group.

“Despite their claims, this has nothing to do with offering a better product for struggling families but rather thwarting state and federal policies intended to address the now well-documented debt trap of predatory payday lending,” King said in an e-mail.

‘Better Position’

Payday lenders say they are making a pragmatic change in business strategy.

Standard & Poor’s, the bond rating company, said U.S. rules could lead to lower ratings for firms that remain specialized in payday loans, meaning it would be more expensive for them to raise money.

“The companies that continue to pursue geographic and product diversification will, in our view, be in a better position to navigate regulatory channels,” Igor Koyfman, an S&P credit analyst, said in a May 20 statement.

Jeremy Rosenblum, an attorney with Ballard Spahr LLP in Philadelphia who represents payday lenders, said he advises clients to develop new products in advance of any rules.

“If you’re serving this market, you have to be considering alternative strategies if the CFPB does come up with regulations,” Rosenblum said in an interview.

Higher Earnings

Cash America said its move into installment lending came in response to customers who couldn’t get the loans at traditional banks. The Fort Worth, Texas-based firm reported earnings of $42.3 million from installment loans in the quarter ending Dec. 31, nearly double the $22.3 million it earned a year earlier.

“We do believe a substantial portion of our installment loan growth has been generated by new customers who are finding fewer and fewer affordable opportunities for consumer credit in the marketplace,” Chief Executive Officer Daniel Feehan told analysts on April 13.

Lenders also have pointed to approving statements from consumer bureau officials about installment loans.

Richard Cordray, the consumer bureau’s director, said in an April 10 speech at the American Financial Services Association in Las Vegas that installment lending is an important service for consumers who need short-term credit, according to Bill Himpler, the group’s executive vice president.

‘More Appealing’

On May 14, Rohit Dewan, a financial analyst in the consumer bureau’s Office of Installment and Liquidity Lending, said on a conference call with analysts that an installment loan “seems like a safer product” than a payday loan.

Thomas Bessant, chief financial officer of Cash America, said that’s one reason “the subprime category of installment products” has become a new focus for the firm.

“The good news, from a regulatory perspective, is there is a perception that it’s more appealing to the customer and it’s a more favorable product to the customer,” Bessant said in a Nov. 27 conference call with analysts.

Asked about the consumer bureau’s position on installment loans, spokeswoman Moira Vahey said, “If small-dollar lenders are engaged in unfair, deceptive or abusive practices, the bureau will hold those institutions accountable, no matter how their products are structured.”

New Products

Spartanburg, South Carolina-based Advance America, a unit of Grupo Elektra SAB (ELEKTRA), has also increased its offerings of installment loans in recent years, Jamie Fulmer, senior vice president for public affairs, wrote in an e-mail. It started with offerings in Illinois in 2008, Colorado in 2010, Missouri in 2012 and Delaware and Wisconsin this year, he said.

“We are always looking for ways to meet the needs of our customers with new products,” Fulmer wrote.

EZCorp Inc. (EZPW), an Austin, Texas-based company whose products include pawn and payday loans, is also transitioning toward other businesses. Two years ago, its loan balances were 85 to 90 percent payday loans, and now it is “right just under 50 percent,” Paul Rothamel, its chief executive officer, told analysts on Jan. 22.

Marcy Bowers, director of the Statewide Poverty Action Network, a Seattle-based advocacy group, said a legislative debate in the state of Washington highlights how installment loans can be just as costly to consumers as payday loans.

Eight Loans

State lawmakers are debating proposals backed by MoneyTree Inc., a Seattle-based payday lender, to authorize installment loans for as much as $2,000 at a 36 percent annual interest rate. The legislation also would permit origination fees and monthly maintenance fees that could push the effective annual rate above 200 percent, according to a calculation by the state Department of Financial Institutions.

Dennis Bassford, CEO of MoneyTree, didn’t respond to calls seeking comment.

Under a law that took effect in 2010, borrowers in Washington are limited to eight payday loans in any 12-month period, and the state maintains a database that allows lenders to track adherence to the rule.

“Washington was one of the first states to limit the number of loans, so it shouldn’t be surprising that the lenders are looking for ways around the payday law,” she said.

Rosenblum, the lawyer for payday lenders, cautions his clients that moving into installment loans may not protect them from federal rules. In its guidelines for examining payday lenders, the bureau didn’t explicitly define a payday loan, and could still decide to oversee to installment products, he said.

The switchover “isn’t a perfect solution,” Rosenblum said. “But it may be a partial solution to the problem of regulation.”

Temporary Workers Near U.S. Record Makes Kelly a Winner

Story Appeared On Bloomberg News

Temporary Workers Near U.S. Record Makes Kelly a Winner

James D. Jones III has been drafting new drawings of the piping at an Atlanta-area factory on a contract for ManpowerGroup Inc. (MAN) for the last 10 months. When this job ends, he says it will be easy to find another.

The Texas native is part of a groundswell of temporary workers at staffing companies from Manpower to Kelly Services Inc. (KELYA) The number of temps and their share of the U.S. workforce are both headed for records this year, according to forecasts by research firm Staffing Industry Analysts and others.
“There’s been this push to get things just in time,” Jeffrey Joerres, chief executive officer at Milwaukee-based Manpower, said in an interview. “Companies have gotten their hands forced on being more adept at trying to figure out their demands for talent as much as their demand for capital resources.”

Increased consumer demand, a greater need for flexibility and new health-care requirements are prompting businesses from Ford Motor Co. (F) to the PeaceHealth health-care system in Washington state to turn to staffing firms. Companies’ reluctance to hire amid concerns the economic expansion may slacken has also been a boon for Manpower (MAN), its peers, and their shareholders. Many stocks in the industry are outpacing the Standard & Poor’s 500 Index, and analysts see more gains: Almost two-thirds of ratings for eight among the largest staffing companies are buy.

‘More Nimble’
Automakers, retailers including Wal-Mart Stores Inc. and pharmaceutical companies such as AbbVie Inc. all use temporary staff. Those workers, full-time or part-time, handle everything from manning factories and warehouses to working in information technology or sales.

Ford (F), based in Dearborn, Michigan, has increased temporary workers by 11 percent over the past year amid rising sales and car redesigns, said Dan Fortunato, director of purchasing for construction and services. The positions include product design, purchasing, marketing and IT, he said.

“Staffing companies allow us to be more nimble, especially with project-based, time-specific positions that require specialized expertise,” Fortunato said.

Close to Record
The U.S. has added 913,200 temporary workers since the end of the recession in June 2009 -- about 19 percent of all new jobs. Their number rose to 2.66 million in April, about 11,300 shy of the April 2000 record, according to U.S. Bureau of Labor Statistics figures released May 3.

Staffing industry revenue will increase 6 percent annually the next two years to $139.4 billion in 2014, based on an April 9 estimate by Mountain View, California-based Staffing Industry Analysts.

What’s different in the current economic expansion compared with past recoveries is that companies are reticent to hire even as their business is growing and they need more staff, said Jeff Silber, an analyst at BMO Capital Markets in New York who recommends buying Manpower.

“The only other option is to either work full-time people harder or hire temps,” Silber said.
The preliminary April tally shows temporary workers represent 1.97 percent of the labor force, close to the record of 2.03 percent set in April 2000, in data that go back to 1990.

“It is going to eclipse the prior record high,” said Paul McDonald, a senior executive director at staffing company Robert Half International Inc (RHI). in Los Angeles, adding penetration of 2.5 percent to 3 percent is possible at some point. “This recovery is producing jobs on a temporary basis even faster than the last recovery.”

Stocks Rise
Investors noticed. ManpowerGroup and Kelly Services, based in Troy, Michigan, have risen 42 percent and 23 percent respectively in the past year, while the S&P 500 gained 20 percent. TrueBlue Inc. (TBI), a Tacoma, Washington, staffing firm that specializes in blue collar placement, has jumped 34 percent. On Assignment Inc. (ASGN), a Calabasas, California-based company focusing on information technology, has risen 53 percent. Robert Half’s stock is an exception with a 18 percent increase. Still, analysts are bullish about its prospects: out of 12, nine recommend to buy Robert Half and three to hold.

The demand for temporary health-care workers is poised to increase with the 2010 health-care law mandating more people obtain primary care coverage and an aging population requiring added treatment, AMN Healthcare Services Inc. (AHS) CEO Susan Salka said. They include temporary nursing staff and doctors, known as locum tenens, said Salka, whose customers include Providence Health & Services, New York-Presbyterian and Kaiser Permanente.

“As the market recovers, we’re growing faster than the market,” Salka said in an interview. The stock of San Diego-based AMN has jumped 94 percent in the past year.

Temporary Nurses
The PeaceHealth health-care system, an AMN Healthcare client, more than doubled the use of temporary nurses last year from 2011, said Theresa Mazzaro, workforce planning consultant at the 16,000-employee company with clinics, hospitals and physician groups in Alaska, Oregon and Washington. Last year PeaceHealth spent $1.88 million on temporary staffing, including for therapy and other care, compared with $883,000 in 2011, she said.

In the pharmaceutical industry, a move to more specialized products is accelerating the use of outside sales personnel, said Daryl Gaugler, senior vice president at Quintiles Transnational Holdings Inc. (Q)

“There’s a shift, particularly among top five pharma companies, to find ways to shift the staff from ratios that might be 95 percent fixed and 5 percent variable to 80 percent/20 percent,” Gaugler said.
Quintiles’s stock jumped 5.3 percent yesterday on its first day of trading, after the Durham, North Carolina-based company raised $947.4 million in an initial public offering.

Marketing Support
In one instance, a drugmaker hired Quintiles workers to handle field sales and marketing support for older drugs while its own staff focused on selling a new one, Gaugler said, declining to identify the client.

While the number of temporary workers is rebounding from declines in the recession, profits haven’t fully recovered. The industry’s profit margins will remain below the 20 percent performance of the 1990s, said Randle Reece, an analyst at Avondale Partners LLC in Nashville, Tennessee. Margins may remain at 10 percent to “low teens” on average, Reece said. The analyst has a market perform rating on Manpower and Robert Half, whose margins top its peers’.

Immigrant Workers
There’s a darker side to levels approaching record highs. Some companies rely on staffing companies to supply immigrant workers for industrial and warehousing jobs where permanent employees tend to complain about unpaid hours and transportation costs, said Tim Bell, senior organizer for the Chicago Workers’ Collaborative.

The transition started after the Sept. 11 terrorist attacks when the U.S. cracked down on undocumented workers and it’s been picking up in the economic recovery, Bell said. Since temporary companies are responsible for verifying eligibility, some businesses staff warehouse and factory operations almost entirely with employees from temporary firms, Bell said, avoiding the hassle of checking documents.
“About the last year and a half hiring has really started to ramp up again,” Bell said.

Chicago Workers’ Collaborative, a nonprofit organization promoting full employment and equality for the lowest wage-earners, primarily temp-staffing workers, is supporting lawsuits against Wal-Mart and some of its suppliers over unpaid hours and other complaints from temporary workers, Bell said.

‘Compensated Fairly’
“We’re committed to ensuring that anyone working in our stores, whether employed by Wal-Mart or in this particular case a temporary staffing agency, is treated appropriately and compensated fairly for every hour they work,” said Dan Fogelman, a spokesman at the Bentonville, Arkansas, retailer, adding a majority of employees are direct, not temps. “The expectations of all of our suppliers is that they always comply with the law.”

Most analysts covering the staffing industry are confident in its outlook. Out of 74 recommendations on eight of the sector’s largest companies, 64 percent are buy, 31 percent are hold, and 5 percent are sell, according to data compiled by Bloomberg.

The demand is so fierce right now that 39-year-old Atlanta temp Jones, who is paid $25 to $30 an hour, has standing requests from several companies offering a finder’s fee for referrals. It’s good news, because after working for staffing companies in at least half a dozen states, he’s not looking for permanent work.

“I’m the kind of guy who can leave one job on Thursday and show up on Monday in another state, ready to go,” Jones said. “There are jobs everywhere for me.” 

Local governments' woes add to economic worries

Story Appeared in USA TODAY

Amid the gains in last Friday's jobs report, one sour note stood out — state and local governments are still shrinking.

Economists had predicted that with the housing bust over, grass-roots governments would begin replacing some of the 1 million workers they've cut since 2008. Indeed, that was one reason economists thought the economy could withstand federal cuts and tax hikes this year, Moody's Analytics chief economist Mark Zandi said.

Since they're not — state and local governments cut another 3,000 workers in April, even as the economy added 165,000 jobs in all — that's adding to concerns that the economy could slow at midyear as the federal sequestration cuts begin to bite. That's especially true since budget-stressed states such as Illinois expect to add few if any jobs, said Abdon Pallasch, assistant budget director for Illinois Gov. Pat Quinn.
"I am surprised that state and local government spending is still declining on a real basis,'' Zandi said.
States are reluctant to begin hiring again because inflation-adjusted revenues are still below 2008 levels — even though populations are bigger, and obligations for Medicaid and pensions are eating up more of the budgets, said Donald Boyd, executive director of the State Budget Crisis Task Force and a senior fellow at the Rockefeller Institute in Albany. Spending on those creates few government jobs, and problems managing pensions and Medicaid will be around for years, he said.

"They know they're in for tough times, so they're not going to open the floodgates,'' he said.
Illinois is a good example. Quinn's budget calls for expanding the state workforce, now about 52,250 and down from nearly 70,000 a decade ago, to just 53,172 next year. Pallasch said one major reason is that pension expenses are "gobbling up every dollar,'' with pension spending set to rise by nearly half from 2012 through 2014.

"The only new hires we're doing are in a couple of specific programs,'' Pallasch said. "Other than that, it's pretty much just filling vacancies.''

California and its local governments have also held off on new hiring despite its recent state revenue surge, which included nearly $5 billion more revenue than expected in January. Officials are moving carefully because the surprise windfall may have been exaggerated by gains in the stock market, and by taxpayers' maneuvers to claim capital gains in December, before capital-gains taxes rose in 2013, said Jason Sisney, deputy legislative analyst for the California Legislature.

Analysts in California, where state and local governments have shed 150,000 jobs, will release new budget projections in mid-May, Sisney said. They're still deciding how to project the stock market's path, a vital decision in a state where the top 1% of taxpayers pay 40% of the personal income taxes, he said.
All states still have to worry about sequestration-driven cuts in federal aid, which will tighten their fiscal situations for fiscal 2014, said Moody's Analytics economist Brian Kessler. And because local property taxes are often based on several years' worth of assessments, rising property values will take time to boost receipts, Boyd said.

But today's challenges are an improvement compared with the yawning deficits many states have had to plug since 2008, Sisney said.

"The current trends are good news for the state's finances.'' he said. "No doubt about that.''

Hackers stole $45 million in ATM card breach

Story Appeared in USA TODAY

NEW YORK — They didn't use guns, masks or even threatening notes passed to bank tellers.
But an alleged international gang of cyberthieves managed to steal $45 million from thousands of ATMs in carefully coordinated attacks conducted in a matter of hours, federal authorities charged Thursday.
A four-count indictment unsealed in Brooklyn charged that eight members of the alleged gang's New York City crew alone stole approximately $2.4 million from nearly 3,000 ATMs across the metropolitan area in secret strikes carried out on two days in February.

"In the place of guns and masks, this cybercrime organization used laptops and the Internet," said Brooklyn U.S. Attorney Loretta Lynch as federal authorities announced details of one of the largest 21st century versions of cyber-robbery yet uncovered. "Moving as swiftly as data over the Internet, the organization worked its way from the computer systems of international corporations to the streets of New York City, with the defendants fanning out across Manhattan to steal millions of dollars from hundreds of ATMS."
Federal prosecutors and investigators said the alleged attacks are known in the cyberunderworld as "Unlimited Operations" — because using sophisticated computer-hacking techniques enable those involved to gain access to virtually unlimited criminal proceeds.

The schemes involve hacking into the computer systems of credit card processors, stealing information involving prepaid debit card accounts and eliminating the withdrawal limits and balances of those accounts. The moves enable international organized crime cells that work in swift, surgically coordinated attacks to withdraw unlimited amounts of cash from ATMs before the operations are shut down.

According to the indictment, the alleged gang carried out two lucrative unlimited operations between October 2012 and last month. In the initial attack, hackers working with the gang on Dec. 22 allegedly targeted a credit card processor that handled prepaid MasterCard debit cards issued by the National Bank of Ras Al-Khaimah, a United Arab Emirates bank also known as Rakbank.

After penetrating the processor's computer network, the hackers fraudulently manipulated the balances and withdrawal limits on Rakbank prepaid debit card accounts. Then, teams of so-called cashers allegedly launched carefully timed attacks that caused more than $5 million in criminal losses from more than 4,500 ATMs in about 20 countries.

In just two hours and 25 minutes, the thieves allegedly conducted 750 fraudulent transactions that withdrew nearly $400,000 from approximately 140 New York City ATM locations, according to prosecutors and the indictment.

The alleged second unlimited operation unfolded between the afternoon of Feb. 19 and the pre-dawn hours of the following day. This time, the gang's hackers allegedly compromised computers of the processor of prepaid debit cards for the Bank of Muscat, located in Oman.

In approximately 10 hours, casher cells in 24 countries conducted approximately 36,000 ATM transactions worldwide, withdrawing an estimated $40 million, the indictment charged. The haul included $2.4 million withdrawn by the alleged New York crew.

Authorities in more than a dozen countries around the world are working with U.S. counterparts on the investigation. The allegations announced Thursday did not identify the suspected mastermind leading the cyberattacks or the suspected computer hackers.

However the indictment charged the gang's New York group was headed by Alberto Yusi Lajud-Pena, 23, who was also known as "Prime" and "Albertico." He and gang confederates Elvis Rafael Rodriguez, 24, and Emir Yasser Yeje, 24, allegedly laundered hundreds of thousands of dollars stolen from the ATMs by depositing the cash in bank accounts and using the money to buy luxury cars and expensive watches.
In a single transaction, a total of nearly $150,000 in $20 bills was deposited in a Miami account controlled by Lajud-Pena, the indictment charged. He was found murdered in the Dominican Republic last month, authorities said.

Federal authorities have so far seized hundreds of thousands of dollars in cash and bank accounts, two Rolex watches and a Mercedes SUV. They are also seeking forfeiture of a Porsche Panamera, which, like the SUV, was allegedly bought with money stolen in the cyber scheme.

In all, seven of the eight suspected members of the gang's New York crew have been arrested and indicted on charges of conspiracy to commit access device fraud, money laundering conspiracy and money laundering. If convicted, they would face a maximum 10-year prison terms on each money laundering charge, 7.5 years on the access device fraud count and up to $250,000 in fines.

Age discrimination: Boomers are guilty, too

Story Appeared on Market Watch.

 It’d be nice to think that as the 76-milllion-strong baby-boom generation marches into older age it will trample age discrimination into the dust.

Don’t hold your breath.

While some say there are signs of incremental improvement—the bias may be a little less blatant than in decades past—it’s also true that mature folks probably are as likely as anyone to demonstrate a bias against people their own age.

“Older employers discriminate on the basis of age all the time,” said Donna Ballman, a Fort Lauderdale, Fla.-based lawyer, employment-law expert, and author of “Stand Up For Yourself Without Getting Fired.”

 She said that tendency isn’t limited to mature people. “I’ve seen women who gave preferential treatment to men [and] people of one race or national origin preferring employees of a different race or national origin,” Ballman said, via email.

“I don’t think baby boomers are any less likely to discriminate against their peers than other generations of older employees,” Ballman said. “Boomers were the decision makers in many of the layoffs over the past few years, and older employees were targeted in those layoffs more than any other workers.”

Others agreed. “When I talked to people, I found that some of the most age-discriminatory people out there are older people,” said Joanna Lahey, an associate professor at Texas A&M University who studies age discrimination.

In her research, Lahey found that younger workers are 40% likelier to be called in for an interview than workers age 50 or older. She conducted her labor-market research in 2002—also a period of economic stagnation, though not as severe as the Great Recession—in Boston, Mass., and St. Petersburg, Fla.

“If anything, there was more labor-market discrimination in St. Petersburg than in Boston, despite Boston’s younger population,” Lahey said. Her educated guess? “Having more mature adults around will not end age discrimination.”

Age bias in the workplace

Older workers certainly agree that age bias exists: 64% of workers aged 45 to 74 said they’ve seen or experienced age discrimination in the workplace, according to an AARP survey in November and December of about 1,500 adults in that age range.

Of that group who said they’ve seen or experienced it, fully 93% said that age bias is very or somewhat common

Just ask Dan Holgate. The 60-year-old has worked in the ceramic-tile industry his entire life. But that industry—primarily focused on new-home installations—crashed right along with the Phoenix housing market. After working continuously from age 20 through 56, Holgate was laid off in 2008.

“That was definitely a kick in the gut, that’s for sure,” said Holgate, who’s worked the occasional odd job, even a stint back at the same company, but hasn’t held a steady job since 2008.

He said he’s experienced age discrimination in layoffs—he and another older worker let go when two younger workers doing the same work were retained—as well as in hiring.

“You can see it in their eyes and hear it in their voices,” Holgate said. “Once they get down to your age, they’re not even interested.”

And, he notes, it’s often an older person making that decision. Still, he’s not sure whether it’s outright age bias or simply a focus on short-term cost-cutting. Employers, Holgate said, are thinking: “What kind of longevity can I get out of this person, what’s the minimum amount of pay I can give them, and what’s the fewest benefits I can pay this person to help make my company be profitable?

 She said that tendency isn’t limited to mature people. “I’ve seen women who gave preferential treatment to men [and] people of one race or national origin preferring employees of a different race or national origin,” Ballman said, via email. Read: 9 tips to help job seekers beat age bias.

“I don’t think baby boomers are any less likely to discriminate against their peers than other generations of older employees,” Ballman said. “Boomers were the decision makers in many of the layoffs over the past few years, and older employees were targeted in those layoffs more than any other workers.”

Others agreed. “When I talked to people, I found that some of the most age-discriminatory people out there are older people,” said Joanna Lahey, an associate professor at Texas A&M University who studies age discrimination.

In her research, Lahey found that younger workers are 40% likelier to be called in for an interview than workers age 50 or older. She conducted her labor-market research in 2002—also a period of economic stagnation, though not as severe as the Great Recession—in Boston, Mass., and St. Petersburg, Fla.

“If anything, there was more labor-market discrimination in St. Petersburg than in Boston, despite Boston’s younger population,” Lahey said. Her educated guess? “Having more mature adults around will not end age discrimination.”

When it comes to long-term unemployment, Holgate is not alone. The data support the idea that older workers face a much tougher climb getting back into paid employment.

 Job seekers age 55 and up experienced an average of 50.2 weeks of unemployment, versus 36.9 weeks for people under age 55, according to AARP, citing U.S. Labor Department data for April.

“Hard work and experience used to be of value to an employer, and that’s what older people bring to the job—they bring experience,” Holgate said. “When I was hiring people, I liked to hire experienced people because then I didn’t have to spend my valuable time training them to do their job.” But that attitude has changed, he said.

At this point, Holgate faces another problem: Being unemployed for a long time can severely limit the number of job opportunities.

He said that in recent months he’s seen a growing number of job postings that specifically prohibit unemployed people from applying.

“If you’re not working, they don’t even want you to apply. That one really threw me for a loop. I see that three or four times a week,” Holgate said. “Only applicants that are currently employed will be considered.”

Holgate said the best decision he and his wife made: Investing in her master’s degree. She’s now a nurse anesthesiologist, and the household’s sole breadwinner.

Plus, when he was working, Holgate and his wife both stashed away 10% or more of their income, padding their savings for just such a situation. And, they know how to be frugal. No more landline, down to basic cable, driving old cars and not buying new clothes.

If not for those smart money decisions, “we’d have ended up losing our house or having only one car,” Holgate said.

Economic reality

So, what’s the key to ending age bias? The economy. “If we had a stronger labor market where there is a greater demand for all workers, I think that’s the only thing that will actually change the tide,” said Jean Setzfand, vice president of financial security at AARP.

Lahey agreed. “All discrimination is less of a problem in a booming economy.” But she also pointed to education.

“If we want these things to change, we’re going to have to put a concerted effort into education, into training, into things to actually change the culture. Aging on its own is not going to cause the culture to change,” she said.

Until then, older job seekers are left battling age bias, or perhaps focusing their efforts on employers that actively reach out an older demographic.

Health-care companies, the education sector, customer-service companies such as call centers, even some old-school technology companies: All are heavily represented on AARP’s list of best employers for mature workers, Setzfand said.

And, there’s one surefire way to avoid age bias in hiring: Start your own business.