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Monthly Archives: August 2011

House Republicans Looking to Attack Labor Regs to Spur Hiring

The House Republican agenda this fall will focus on repealing environmental and labor regulations that GOP lawmakers say are driving up the cost of doing business and discouraging employers from hiring new workers.

House Majority Leader Eric Cantor, R-Va., says in a memo to his fellow Republicans that as soon as Congress returns to Washington next week he will start bringing up bills to repeal or restrict federal regulations. He also said the House would also act on a small business tax deduction.

The memo was released Monday.


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Jeff Bezos and his Amazon Tablet are Ready to Have a Go at Apple

SOURCE: Peter Kafka, AllthingsD.com

The tablet that Amazon has yet to mention but which everyone expects to arrive this fall could be a big seller, with Jeff Bezos and Co. moving three to five million units in Q4.

That’s according to the Forrester research shop, which attaches the following qualifiers to its prediction:

  1. Amazon would need to price the tablet below $300.
  2. It would need to not screw up its supply chain.

As far as number two goes: Yep, sure. Good idea. That said, we should note that Amazonhas had supply issues with its own hardware in the past, and that getting it right is hard for most companies, even those that produce hardware full time. Not a coincidence thatthe new guy running Apple has a particular knack for this stuff.

And as far as price goes — yes, cheaper things often sell better than expensive things. That’s the big lesson everyone took away from HP’s TouchPad fire sale, right? And it would make a lot of sense for Amazon to do what every other would-be iPad killer has not done, and compete with Apple by starting at a sub-iPad price.

But note that in Amazon’s lone entry into hardware to date, it has behaved like nearly every consumer electronics company does — start at a relatively high price point, then move down over time, while demand goes up. Remember that the Kindle, which now starts out at $114, was originally priced at $399 in 2007.

That doesn’t mean that Bezos won’t go low this time — just that it’s not a given. (Also, no need to listen when I crystal-ball-gaze on this stuff — I severely underestimated the Kindle’s impact four years ago.)

Speaking of advice — my favorite part of the Forrester report is when researcher Sarah Rotman Epps tells Amazon that the best way to break free of the pack of unsuccessful Android tablets is to not tell consumers that it is selling them an Android tablet. Right or wrong, it speaks volumes about Google’s struggles in the tablet war to date:

While some may view a partnership with Google as an asset, we see it as a challenge. Product strategists that we’ve spoken with at OEMs have voiced frustration about the limits of Android — its lack of polish, the terrible shopping experience in the Android Market, the rules that Google has set for Honeycomb use that limit differentiation, and the fragmentation of earlier versions of the OS. Only 9% of consumers considering buying a tablet actively prefer an Android tablet — compared with 16% who prefer iOS and 46% who prefer Windows. Barnes & Noble has chosen to emphasize its own brand and user experience on the Nook Color rather than emphasize the Google or Android brands, even though the Nook is built on Android. Amazon may not wish to go that far on the curation spectrum, but it does need to differentiate its flavor of Android from all the rest, and that may come from emphasizing the Amazon experience over the Google one.

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Bank of America to Sell China Bank Stake for $8.3 Billion



Bank of America Corp is selling about half its stake in China Construction Bank for $8.3 billion, in its latest effort to shed assets and boost capital.

A group of investors is buying 13.1 billion CCB shares from Bank of America, with the deal expected to close in the third quarter. The U.S. bank declined to name the investors but two sources said Singapore state fund Temasek was among the buyers.

Bank of America needs to boost capital by some $50 billion in the coming years to meet new global rules, according to multiple analyst estimates.

CCB is the second-largest bank by market value in the world, and Bank of America’s ties with the Chinese bank are seen as an important source of future growth. Bank of America’s willingness to sell part of its CCB investment shows how far it must go to meet new capital requirements, analysts said.

“Bank of America’s decision to sell that stake is wrong strategically in the long run, but they need money,” said Josef Schuster, founder of Chicago-based IPO research and investment house IPOX Schuster.

The bank has said it can raise the money through earnings and selling off assets, but a number of investors have expressed concern that the bank will need to issue more common shares.

Those dilution concerns helped push the bank’s shares this month to their lowest level in two-and-a-half years. Investors are also concerned about the bank’s potential losses from mortgages and related litigation. A $5 billion investment from Warren Buffett’s Berkshire Hathaway stopped that fall last week.

In the CCB, deal, Bank of America sold each share for HK$4.93, an 11 percent discount to the Chinese bank’s most recent closing price of HK$5.55.

Bank of America’s shares were up 6.1 percent at $8.23 on news of the sale on Monday afternoon.


Bank of America will record a $3.3 billion gain in the third quarter as a result of the sale, and a $3.5 billion increase to its core capital under current rules, a spokesman said.

Under proposed Basel III rules, the sale will generate an $8.3 billion gain for Bank of America. The bank will also be required to hold less capital against the CCB shares, because it will now own about 5 percent of the holdings, less than the 10 percent level that triggers higher capital requirements under Basel III.

The CCB stock sale is the latest in a series of moves by the largest U.S. bank to increase capital before Basel III takes effect.

“It really doesn’t move the needle under current rules,” said Jefferson Harralson, bank analyst with Keefe, Bruyette & Woods Inc. “But this starts to move them to where they need to be.”

Bank of America in recent weeks has agreed to sell an $8.6 billion Canadian credit card portfolio to TD Bank Group and is in talks to sell $1 billion of real estate assets to Blackstone Group.

In the last six quarters, Bank of America has generated some $30 billion of proceeds from asset sales, as it has sold a range of assets from a foreclosure insurance unit, investments in Latin and South American banks, and U.S. mortgage-servicing rights.

Fears about the bank’s ability to meet its capital requirement have cut the bank’s stock price by a third since the beginning of August, including a 20 pct plunge on August 8.

Bank of America paid $3 billion for a 9.9 percent stake in CCB, the world’s No. 2 bank by market value, before the Chinese lender’s IPO in 2005.

The U.S. bank increased its holdings in following years to 25.6 billion shares, including 23.6 billion that came out of lock-up on August 29.

It is free to sell the remaining shares in 2013.

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California Tightens the Noose on Small Businesses

California Could be First State to Ban Foam Containers

SACRAMENTO – Restaurant owner Gary Honeycutt says a push in California’s Legislature to ban the plastic foam containers he uses to serve up takeout meals could cost him thousands of dollars in an industry where profit margins are razor thin.


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Beware of Social Media Burglars

Although you may feel compelled to go online to tell your social networking buddies about your terrific new flat-screen television or your plans to leave town on vacation, remember that Internet eavesdroppers may be interested, too.

Some people make it very easy for tech-savvy burglars to plan their robberies by posting too much personal data on websites like Twitter and Facebook, warns Richard Weinblatt, a law enforcement consultant in Orlando, Fla. “Social networking has become the new intelligence gathering point for people to find out what you have in your home,” Weinblatt says.

Read more: http://www.foxbusiness.com/personal-finance/2011/08/23/dont-tweet-with-burglars/#ixzz1WRjL9Z1K

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Value Added Tax (VAT) Coming Soon?

President Obama added Alan Krueger as a top White House administration post today. Click Here

Here is Krueger’s article on a VAT from a few years back…



Any casual observer knows the United States faces enormous economic challenges in both the short and long run. These challenges — and the respective solutions that are being discussed — are somewhat in conflict, though.

On the one hand, the economy is contracting, people are cutting back on their spending and the economy faces a possible downward spiral with fear of job loss, causing consumers to spend even less, which in turn would cause more job loss — the so-called paradox of thrift. On the other hand, Americans save very little, critical infrastructure has been neglected, and the president-elect warned of government deficits in the trillion-dollar range for years to come.

Efforts to spur short-run consumption can worsen the long-run problems by increasing the government budget deficit and depleting personal savings.

Here is a suggestion to address both the short-run and long-run problems. I pose it only as a suggestion for serious discussion; I’m not sure it is the best way to go. But here goes: Why not pass a 5 percent consumption tax to take effect two years from now? There are many different ways to implement a consumption tax, but for simplicity think about a national sales tax.

In the short run, the anticipation of a consumption tax would encourage households to spend money now, rather than after the tax is in place. Along with the rest of the economic recovery package, this would help jump-start spending in the economy and thereby increase production and employment.

In the long run, a 5 percent consumption tax would raise approximately $500 billion a year, and fill a considerable hole in the budget outlook. In addition, a consumption tax would encourage more saving in the long run. Manyeconomists consider a consumption tax an efficient way of raising tax revenue, especially in a global economy. The prospect of greater revenue flowing into federal coffers would probably help lower long-term interest rates because the government would need to borrow less down the road, and further bolster the economy.

The main downside of this proposal is that taxes reduce economic activity. But the government must make critical trade-offs, and a consumption tax could be the most efficient means to raise revenue to finance essential government functions. Over time, if the budget picture improved, income taxes or corporate taxes could be reduced and the revenue replaced by the consumption tax.

Another downside is that a consumption tax is a greater burden for the poor, who spend a relatively high share of their income. But this can be compensated by exempting essential items, like rent and nutritious, or by providing a rebate to low-income households.

This analysis only scratches the surface. As I said, I propose the idea only for discussion at this stage, but it is worth considering. What do you think?







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Is Finland About to Blow Up the Greek Bailout?

Finland has proposed that Greek state assets be transferred to a Luxembourg-based holding company and held as security for new loans to Athens, according to an internal document obtained by Reuters.

Image Source | Getty Images

The proposal, drafted in June, remains a central plank of Finnish demands for collateral in return for providing more aid to Greece.

Senior euro zone officials held another conference call on Monday to try to resolve the collateral issue.

If Finland does not get its way, it may pull out of the Greek bailout, unleashing renewed trouble in financial markets.




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More Than 100 Remain Stranded in New York Mountains After Irene

Numerous people remained stranded Monday in Greene County, New York, after torrential rains from Hurricane Irene washed out roads and bridges, flooded homes and businesses and left the town largely cut off, according to government officials and residents.

Twenty-three people stranded in one Prattsville, New York, house that was cut off when all the bridges around it crumbled were awaiting rescue Monday, while more than 100 others sheltering at a hilltop Christian center and a hotel were unsure when they might get out.

“We’re all stranded here. There’s no way out,” said Melissa Post, who was staying at the Huntersfield Christian Training Center with about 60 other people.

Authorities were preparing to go house to house in an effort to account for residents who had yet to be rescued, said County Administrator Shaun Groden.

“There could be hundreds of people stranded,” Groden said. “We don’t know.”

Emergency workers rescued 87 people from the Prattsville area on Sunday, including 25 people who were stranded at a motel for hours after 70 mph wind gusts grounded aircraft.

The area flooded when Schoharie Creek rose more than 15 feet in less than 12 hours and intense rainfall shedding off the Catskills sent a volume of water greater than that of Niagara Falls — both the American and Canadian sides — crashing through town, Groden said.

Members of seven families who had taken refuge in a vacation home that became cut off when bridges surrounding it succumbed to raging floodwaters were standing by Monday for rescue by state police who flew in a helicopter, said Dennis Michalski of the New York State Office of Emergency Management.

Crews had tried to rescue the people by airboat Sunday night, but they couldn’t reach them because of the raging waters, Michelski said.

It was unclear why authorities were holding off on evacuating the families, which include two pregnant women, seven toddlers and three infants.

Post said she didn’t have much hope for immediate evacuation.

“We’re pretty much stuck here,” she said, adding that bridges leading out of town were either washed out or damaged and that no one had suggested an air evacuation might be in the offing.

She said her home was filled with mud, fuel oil and other materials, but she was able to rescue her dog, which she had left on a second floor.

“Our town is devastated. We’ve lost all our houses. We’ve lost our jobs. We’ve lost everything,” she said.

She and other evacuees were subsisting on water pumped by a generator and food donated by the local grocery store, which flooded, she said.

Elsie Stuppert, an employee of the Hideaway Hotel in Prattsville, said the situation is dire.

“People can’t go home. They have nothing, floors all mud, car on top of the deck. They’ve lost everything,” she said.

The hotel is sheltering about 35 or 40 people, and is also serving as a makeshift command post.

The town was filled with vacationers, as well as people who headed to vacation homes in the area in an effort to heed warnings to evacuate parts of New York that forecasters had expected to bear the brunt of Irene’s impact, said George Wilson, youth leader at the Christian center.

“They had come up to escape the storm only to find its worst here,” he said.


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Republicans take aim at regulation

WASHINGTON (AP) — The House Republican agenda this fall will focus on repealing environmental and labor regulations that GOP lawmakers say are driving up the cost of doing business and discouraging employers from hiring new workers.

House Majority Leader Eric Cantor, R-Va., says in a memo to his fellow Republicans that as soon as Congress returns to Washington next week he will start bringing up bills to repeal or restrict federal regulations. He also said the House would also act on a small business tax deduction.

The memo was released Monday.

The GOP approach to job creation comes as President Barack Obama prepares to announce after Labor Day a broad jobs package expected to include tax cuts, infrastructure projects and help for the unemployed.

“By pursuing a steady repeal of job-destroying regulations, we can help lift the cloud of uncertainty hanging over small and large employers alike, empowering them to hire more workers,” Cantor said in his memo.

He said that in the first week after Congress returns from its August recess the House will vote on a bill preventing the National Labor Relations Board from restricting where an employer can locate in the United States.

The bill is in response to an NLRB lawsuit against Boeing Co. claiming that the manufacturer violated labor law in opening up a new airplane production line in South Carolina. The agency alleged that Boeing was punishing workers in Washington state for past strikes and wants the company to return the work to Washington. Boeing denies the claims.

The next week the House will consider a bill to delay implementation of new Environmental Protection Agency emission and air pollution rules for utility plants until the full impact of the Obama administration’s regulatory agenda has been studied. Cantor said the new rules could drive up electricity bills in many parts of the country by 12 to 24 percent.

Also on the agenda are new EPA emission rules for boilers that Cantor said could put 200,000 jobs at risk and similar regulations for cement and coal ash.

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IMF Perverts Slash U.S. GDP Forecast

The International Monetary Fund has slashed its growth forecasts for the United States and says the Federal Reserve and the European Central Bank must be ready to ease policy, Italian news agency ANSA reported on Monday.

The IMF chopped its forecast for U.S. 2011 growth to 1.6% from a 2.5% forecast made just two months ago. It lowered the outlook for 2012 to 2.0% from 2.7%, ANSA said, citing a draft of the IMF’s World Economic Outlook to be issued next month.

In view of growing risks to U.S. growth the Federal Reserve “should stand ready to adopt new non-conventional measures to sustain the economy,” ANSA quoted the report as saying.

The Fund trimmed its euro zone 2011 growth forecast to 1.9% from 2.0% and cut the 2012 forecast to 1.4% from 1.7% it said.

With growth faltering and inflation risks also diminishing in the euro zone, the ECB should avoid raising interest rates and has room to ease monetary policy if downside growth risks persist, the IMF said, according to ANSA.

The ECB should also “continue to intervene strongly on sovereign debt markets to avoid excess liquidity.”

The bank this month began buying Italian and Spanish government bonds to stave off a market attack which had sent yields rising to unsustainable levels.

The IMF marginally lowered its forecast for global growth this year to 4.2% from a 4.3% forecast in June, and lowered its 2012 projection to 4.3% from 4.5%.

The outlook for the euro zone’s largest economy, Germany, was left unchanged for 2011 at 3.2% but the 2012 forecast was cut to 1.6% from 2.0%.

The report cut French 2011 growth by 0.3 percentage points to 1.8% and lowered the 2012 forecast by the same amount to 1.6%.

Italy’s outlook was lowered to 0.8% this year from 1.0% and the forecast for 2012 was cut to 0.7% from 1.3%, leaving Italy in its customary position as the most sluggish among the world’s large economies.

Spain’s growth forecasts were cut to 0.7% from 0.8% for this year and to 1.3% from 1.6% for 2012, ANSA reported.

Read more: http://www.foxbusiness.com/2011/08/29/imf-slashes-us-gdp-forecast-report/#ixzz1WRA7fRxY


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DEMAND SIDE: Copper Thieves Leave Part of I-95 in Dark

WEST PALM BEACH (CBS4) – Copper wire thieves have left a 33 mile stretch of I-95 in Palm Beach County in the dark. More than 175,000 feet of copper wiring needed for the overhead lighting has been stolen from 18 sites in the last four to six months. Last week, West Palm Beach police last week urged motorists to call them or the Florida Highway Patrol if they see vehiclestopped near light poles.


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News Will be Slow Until Cronkite Returns

My good friend and iBC partner, Cronkite, is missing following Hurricane Irene. He lives up in the Catskills region, which is underwater, following the storm. I’ve tried reaching out to him, but have been unlucky thus far.

My thoughts are with him and his wife and look forward to his speedy return.

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Argentina judge overules tax agency on Bunge

Bunge Ltd. (BG), Argentina’s second- biggest corn exporter, must be returned to the Argentine tax agency’s grain exporters’ registry, an appeals court said.

The tax agency, known as AFIP, must “refrain from suspending or excluding,” White Plains, New York-based Bunge from its registry, federal judges Ignacio Velez Funes, Luis Martinez and Roque Rebak said in a ruling dated yesterday. AFIP didn’t give Bunge enough time to defend itself against its exclusion from the registry in May, the judges said.

Exclusion from the registry means the company lost certain sales tax breaks within Argentina and had limited access to permits required to transport grain. AFIP has said Bunge underpaid about $252 million in taxes between 2007 and 2009.

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