Archive for December 4, 2012

2012 Year in Review

It’s New Years Eve ROI readers!  Before you go out to drink enough to forget the events of the past year, take time reflect on some of the biggest business news stories of the year.

 

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Boehner ‘Agrees’ to Millionaire’s Tax

We all do Boehner, we all do

This past weekend the nation was shocked when they looked out their window and saw flying pigs and heard news of hell freezing over. These strange happenings have nothing to do with 12/21, they’re a result of House Speak John Boehner’s decision to raise tax rates on millionaires. On top of his tax decision Boehner also claimed he was willing to expand the debt ceiling for one year. People from both political parties were stunned that Boehner had conceded on issues his party was so passionate about, and some even see it as a sign that the dreaded fiscal cliff will be avoided. This may be a step in the right direction, but it doesn’t by any means solve the nation’s fiscal problems.

Boehner may have expressed his willingness to raise tax rates, but that doesn’t mean that other members of his party will. Even though there have been a few republicans who have supported a tax increase, the vast majority still are against it. Both parties still have the same stance on the issues, Democrats want to raise taxes on millionaires and Republicans want to cut funding for social programs. Boehner’s new stance on taxes may also mean that Democrats may have to cut funding for Medicare in order to let the new cuts go through. Some people think that Boehner’s new stance may make it possible for both sides to reach an agreement by Sunday, but with 2 more weeks before the deadline and the strong opinions on both sides reconciliation may not be in the future.

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Old and Busted Economic Hotness: China New Economic Hotness:Malaysia

Malaysia IPO is makin’ it rain on dem otha countries

There’s an Asian country that’s on track to becoming a major economic power. People were astounded when they first heard that the amount of this nation’s initial public offerings (IPO) were growing, and some are wondering how their sudden rise to power will affect international economics.

The Asian country that’s gaining major economic clout isn’t China, Japan, or any other country people realistically thought was on their way to becoming an economic super power.  Malaysia has a population of a little over 28 million people and around 127,355 square miles of land.  Those statistics aren’t exactly impressive, which is why people were shocked when Malaysia earned the honor of becoming the world’s 4th largest market for IPOs in 2012.

Malaysia’s current IPO stance is anything but expected.  Malaysia has the 9th largest economy in Asia and hasn’t exactly been a major player in the world economics seen in the past.  Only the US, China, and Japan were about to outpace the country’s IPO gains for 2012.  Despite having an economy six times bigger than Malaysia, Canada and other economic heavyweights like the UK, Singapore, and Hong Kong were unable to outpace the small Asian nation.  Along with their IPO gain, the FTSE Bursa Malaysia KLCI Index rose by 14% (in US dollar terms) and their economy is expected to grow by 5%.

Many people believe that Malaysia’s astounding jump from 12th place to 4th place in a single year was caused by the current state of the global economy.  Despite financial scares in the US and European Union, Malaysia came out of 2012 relatively unscathed from the poor global economic situation.  It looks like 2013 is going to be a very good year economically for a certain small Asian nation (HINT: Malaysia).

 

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Sandy By the Numbers (Infographic)

It’s been about a month and a half since Hurricane Sandy and people are still trying to recover.  This infographic sums up the impact the storm had an people’s lives.

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Franchises and Afghanistan: Rebuilding a War-Torn Nation One RadioShack at a Time

Americans may not like RadioShack, but hopefully the people of Afghanistan will

Trying to rebuild a country that has been devastated by war is kind of difficult.  Massive infrastructure updates are needed but there are less people available to do physical work.  You have a hard time winning over the hearts and minds of people who blame your country’s occupying forces for destroying their way of life.  Every country has its hurdles it needs to pass, but the biggest recovery hurdle by far is the economic one.

The US is dealing with its own economic problems at home, but they have many more economic problems they have to deal with in Afghanistan.  In 2014 the US is expected to hand over the government reigns to Afghan officials, and even though the withdraw deadline is over a year away problems are already starting because of it.  Many well off Afghans are fleeing the country and taking their millions of dollars with them because they think that country will collapse after the US leaves.   The US isn’t the kind of country that will turn its tail and run at the sight of economic troubles, and in fact some businessmen already have a way to help rebuild the economic in Afghanistan.  Americans may hate Radio Shack on their home turf, but some are hoping that the Afghan people will give the franchise more love than American citizens did.

Outside of your typical fast food restaurants American franchises aren’t popular in Afghanistan.  The U.S. Department of Commerce along with the U.S. Agency for International Development, and the International Franchise Association (IFA)  got together last week to throw a franchise prom for eager investors and businesses in Kabul.  Representatives from RadioShack, Hertz Equipment Rentals, Tutor Doctor, and AlphaGraphics traveled to the country in hopes of starting a “business knowledge transfer” between the US and Afghanistan.  The knowledge transfer will ideally help export American business expertise and infrastructure building information to the Afghan people.  Officials in the US and Afghanistan are hoping that the newest generation of tech savvy Afghan’s will be the country’s main economic force.

Some are skeptical of how exporting franchises over to Afghanistan will help rebuild the nation’s economy.  Besides the fact that we seem to only be promoting franchises that Americans think suck, there’s also the issue of Afghanistan’s consumers.  Over 1/3 of the population lives below the poverty line, and after the past decade’s bloody conflicts there aren’t too many Afghans who are eager to invest in a American business.

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Playboy’s Bizarre Insider Trading Scandal

All of these women probably have company stock stuffed in their fluffy tails

When most people search for Playboy news (because I guess that’s something people do) they’ll come across articles about parties and confusing marriages.  Unfortunately the Playboy empire isn’t all beautiful young ladies and octogenarian sex, the company has had to deal with a serious insider trading case.  The trading scandal broke in 2010 and has since been ruled and resolved, but Bloomberg released a scathing article about Playboy’s insider trading problem that has brought the issue into the spotlight again.

Like any other good media empire, Playboy Enterprises INC. started out as a family owned business.  Christine Hefner, daughter of Hugh Hefner, was made the chairman of the board and CEO of Playboy Enterprises INC in 1988.  She held on to the title for nearly 20 years and shocked people when she announced that she was stepping down in 2009 since ater the 2008 election win of Barack Obama she felt compelled to spend more time doing charity work (She may be the only CEO in American history to be inspired to be more charitable after Barack Obama became president instead of spending time throwing a tantrum).

Christine was well into her charity work when her husband William Marovitz approached her on a March evening in 2010 to tell her that he was being investigated by the SEC for insider trading.  Marovitz’s confession shocked Christine to her core, mainly because she wasn’t even aware that her husband had any shares of Playboy to begin with.  Christie is the kind of woman who liked to set boundaries between business and pleasure.  Even though the Playboy company helped Marovitz broker a casino deal Christine was very adamant on not having her husband get involved with Playboy Enterprises.  In 1998 she had her lawyers draft a brief that explained the many negative consequences Marovitz would endure if he purchased Playboy stock.  Luckily Marovitz is a good looking rebel who plays by his own rules so he promptly ignored stock rules set by his wife.

In 2004 Marovitz purchased 5,000 shares of Playboy stock before his wife was scheduled to announce that the company was going to use new stock to help pay down their debt.  Marovitz continued to illegally buy, sell, and trade Playboy stock until the SEC told him to cut it out in early 2010.  When he testified before SEC investigators he denied any wrong doing and used his Fifth Amendment right 179 times during his testimony.

Marovitz may have denied any wrong doing, but that didn’t stop the SEC from slapping him with a $168,352 fine.  After the case was settled the Christine and William separated after what was probably the most awkward few months of their lives.

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Take the Money and Run

When I did a Google image search for corporate greed this image came up, so feel free to interpret the meaning of this photo

Last week people were filling their toilets with powerful projectile rage vomit over Judge Drain’s decision to allow Hostess executives to collect their bonuses despite the fact that the company is going bankrupt.  After running the company into the ground from gross mismanagement and obscenely high CEO pay raises, the people on top of the Hostess food chain get rewarded for their incompetence while workers struggle to fend for themselves.

When the company was looking into declaring bankruptcy in July 2011 board members voted to increase the salary for Hostess’ chief executives and other higher-ups.  Five months later the company filed for Chapter 11 (their second bankruptcy in 10 years), and when union members and creditors found out they were outraged.  They claimed that Hostess CEOs deliberately ransacked company funds when they knew that they were going under to avoid a federal law that restricts retention bonuses for company insiders after a bankruptcy case is filed.

Retention bonuses are supposed to serve as motivation for employees to stick with companies during troubled times, so some people believe that they’re crucial for preventing mass employee walk-outs and trying to keep struggling companies afloat.  When they’re used properly they could help businesses during dire times.  But there is a major difference between rewarding hard working employees and snatching up corporate funds before it’s too late to do it.

It seems absurd that Hostess CEOs will be getting bonuses while their company attempts to find a way to pay the $860 million the company owes its creditors, and the $1 billion hostess owes its employees for unfunded pension liabilities.  The bonus situation at Hostess is infuriating, but it isn’t uncommon.  The Wall Street Journal did an in-depth story on the phenomena of corporate plundering and their findings have the potential to induce another rage vomit.  When Blockbuster finally kicked the bucket after spending years trying to compete with Netflix and Redbox, the company approved around $775,000 in bonuses for a dozen top executives just one week before they filed for bankruptcy.  Blockbuster isn’t alone, the WSJ found more than 1,600 executives and company insiders have received over $1.3 billion in bonuses and salary increases.

It’s isn’t really surprising to learn that some businessmen have exploited laws and taken more than their fair share of company funds, but it doesn’t make it less disgusting or infuriating.  It’s time to find a way to cut the strings on the golden parachutes of CEOs.  Henry Mintzberg, another WSJ writer, wrote an excellent opinion piece on why executive bonuses need to disappear.  Letting CEOs take as much money as they want doesn’t help job growth or keep “job makers” happy.  Undeserved pay raises and bonuses just manage to rub more salt in the wounds of the people affected by CEO greed.

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Duchess of Cambridge Announces Pregnancy, Royal Baby Memorabilia Rush Begins

First child, 12897432th outrageous tabloid front page headline

The world was left in a state of shock Monday when one of the most important news stories of the year broke.  Syria may be threatening to kill rebels with sarin, the UN may have granted recognition to Palestine, but none of that compares to this news bomb shell: Kate Middleton is pregnant.

It’s official, everybody’s favorite Duchess of Cambridge is carrying the 3rd successor to the British Crown.  It’s all adding up now.  The glass of water she toasted with at a wine tasting, her face becoming slightly more round, the cookie she ate, all the disturbing and painstakingly collected information on the Duchess is pointing to a royal bundle of joy.  It’s assumed that the couple was waiting for the right time to reveal the news, but after Kate was hospitalized for hyperemesis gravidarum (a severe form of morning sickness) they decided to let the world know.

People are going crazy over the news.  The sheer amount of visitors crashed the Duchess of Cambridge’s website on Monday, and searches for “Kate Middle pregnant” rose by 18,305%.  The news did just break yesterday, but some crafty entrepreneurs have already started cashing in on the British baby crazy.  The pottery firm Emma Bridgewater has released red, white, and blue mugs with the words “a royal baby in 2013″ lovingly emblazoned on them.  The company has already announced its plans to release another mug when the baby is born.

Retailers aren’t expecting the Brits to be the only people clamoring for royal merch.  Residents in commonwealth nations were happy to buy mugs, dish sets, t-shirts and other nick-nacks that celebrated William and Kate’s wedding.  Retailers are also expecting a lot of Americans to go as crazy over the baby as they did over the royal wedding.  So far the mug is the only product being sold to commemorate the royal conception.  But if the onslaught of bizarre royal wedding products serves as an indicator, it’s certain that we’ll be seeing some questionable and disturbing royal baby products.

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The Fiscal Cliff In Layman’s Terms

2012 is the year the world will end, but it won’t be happening on December 21st.  The end will come for us at midnight on December 31st.  You don’t need Mayan calendars or terrible History Channel specials to know that we’re heading towards an unspeakable doom, just go online and read the headlines about the fiscal cliff.  We’re on the verge of an economic disaster, and it may quite possibly be given the honor of being one of the most easily avoidable economic crises ever.

Origin

Like many bizarre and popular media buzzwords (carmageddon, god particle), the term “fiscal cliff” sounds catchy and important but doesn’t really accurately describe the situation.  Federal Reserve chairman Ben Bernake brought the term to the spotlight in February when he was testifying in front of Congress.  “Fiscal cliff” sounds a lot more urgent than “a well-thought out series of tax hikes and budget reform”, so chalk the term’s popularity up to needing to attract a terrified audience.

Causes

Government spending is one of the biggest fiscal cliff issues.  The US has a major spending problem, the US brings in around $2.3 trillion, but we’ve somehow managed to spend $3.6 trillion.  The US would have to cut its spending by $1.3 trillion over a period of 10 years to alleviate some of the nation’s debt, but Democrats are very opposed to making cuts to social welfare programs.  The Budget Control Act of 2011 is the second main cause of the fiscal cliff.  The Budget Control Act of 2011 was signed into law by President Barack Obama on August 2, 2011 and it brought a wave of change to our tax rates and government spending.  If both sides don’t reach an agreement, $607 billion in reduced spending and tax cuts will automatically take place.

Yesterday House Republicans debuted their counterproposal for saving the US economy from the fiscal cliff.  The new plan would allegedly decrease the deficit by $2.2 trillion (or $1.3 trillion, or $1.9 trillion depending on who you’re asking) over the next 10 years without having to raise taxes on the wealthy.  Their plan will generate $800 billion in tax revenues by closing “special interest loopholes and deductions”.  As of yet there hasn’t been a good in-depth explanation of how the Republican plan will work.  So far it seems like their plan consists of raising the age eligibility for Medicare, while dramatically decreasing government funding to other programs, and extending tax cuts for all Americans regardless of their income.

At this point in time both sides are playing the blame game, but since each side has their own unique role in causing the crisis and refuse to compromise it seems like there’s going to be a lot more blame going around.  If you want to see more in-depth information on the fiscal cliff, visit these sites that have been following the story since it began:

http://query.nytimes.com/search/sitesearch/#/fiscal+cliff

http://www.guardian.co.uk/world/fiscal-cliff-blog/2012/nov/27/money-join-fiscal-cliff-coverage?intcmp=239

http://www.aljazeera.com/Services/Search/?q=fiscal%20cliff

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