Rick Newman
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Get Used To a Bipolar Economy
Continue reading… 6 CommentsJust a few months ago, we were gloomy all the time. It was easier that way.
Now we’re enduring frequent mood swings as the economy teases us with recovery, then smacks down our hopes. There was a bout of euphoria when we learned that the economy grew 3.5 percent in the third quarter, the first period in more than a year when GDP didn’t shrink. Growth was greater than expected, even on par with what you’d see in a normal, healthy economy. Yay! Life is good!
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Why More Competition Won’t Fix Healthcare
Continue reading… 12 CommentsVigorous competition. It's the go-to cure for free-market ailments. When the consumer's getting the shaft, just open up the market, bring in more providers, and watch prices fall.
A lot of the time, it works. Car buyers get terrific deals and great quality because a dozen automakers compete ruthlessly to offer the best value. Electronics consistently get cheaper, while features improve, thanks to the proliferation of low-cost Chinese manufacturers. And the Internet has allowed anybody with an eBay account to compete with the biggest retailers, lowering prices on thousands of products.
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Stuff We Spend More On In A Recession
Continue reading… 0 CommentsFox Business recently invited me onto its noontime Web show to discuss my recent story on 10 products that boomed during the recession. Here's the video:
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9 Signs of America in Decline
Continue reading… 286 CommentsThe sky isn't falling, exactly. America isn't on a fast track to irrelevance. Even in a state of total neglect, we could probably shamble along as a disheveled superpower for a few more decades.
But all empires end, and the warning signs of American decline seem to be blinking more consistently. In the latest annual "prosperity index" published by the Legatum Institute, a London-based research firm, the United States ranks as the ninth most prosperous country in the world. That's five notches lower than last year, when America ranked No. 4. The drop might seem inconsequential, especially in the midst of a grueling recession—except that most of the world has endured the same recession, and other countries are bouncing back faster.
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How Gary Vaynerchuk Crushes It
Continue reading… 4 CommentsI had a lively sit-down chat recently with Gary Vaynerchuk, founder of WineLibraryTV.com and author of the new bestseller Crush It: Why Now Is The Time To Cash In On Your Passion. Vaynerchuk is one of the most energetic folks I've ever met, and he has some compelling ideas about how to use the Web to indulge your avocations. Check out this video of the interview on Hulu:
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The Last of the Wall Street Pay Cuts
Continue reading… 8 CommentsThe Obama administration is finally getting tough—on corporate invalids.
The government's "pay czar," Kenneth Feinberg, is coming down hard on the seven firms under his jurisdiction, ordering steep pay cuts for about 175 top executives. The brass at AIG, Citigroup, Bank of America, GMAC, General Motors, Chrysler, and Chrysler Financial will have to live without the nine-digit paychecks Wall Street's titans have become accustomed to. Some won't even make eight figures. And the majority of their pay will come in the form of stock that can be cashed in only after the companies have met long-term performance targets. Until that happens, the impoverished execs might have to get by on meager salaries that might not even reach $1 million.
[See 10 gaffes by doomed CEOs.]
So hyperventilate about the government meddling in the private sector, and then consider that every one of these firms would have been vaporized if not for government intervention. American taxpayers effectively own AIG and General Motors, with major stakes in the other firms. Together, all seven firms have devoured nearly $300 billion worth of bailout funds. They've gobbled up the majority of the TARP money in the government's corporate rehab program. None of these firms have said when they will pay back those bailout funds, and some may never pay it back.
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The Healthcare-Reform Hypocrisy Sweepstakes
Continue reading… 26 CommentsMost people with a stake in the U.S. healthcare system agree there are deep problems that must be fixed. As long as somebody else pays for it.
Virtually all of the problems reformers are struggling to solve—relatively poor health outcomes, medical bankruptcies, nearly 50 million uninsured—derive from one überproblem: Healthcare in America costs too much. So as Congress finally gets close to producing actual reform legislation that could become law, just about every interest group with a Washington lobbyist is fighting intensely to make sure it doesn't get stuck with the bill.
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10 Products That Boomed During the Recession
Continue reading… 26 CommentsBehold the damage the recession has wrought on the consumer economy: Retailers and automakers have gone bankrupt, restaurants have closed, and malls have become ghost towns. Most businesses dependent on consumer spending, from clothing to computers to appliances, have felt the pinch.
[Slide Show: 10 Products That Boomed During the Recession.]
But some consumer-product companies have benefited from the recession, usually because they sell the kind of stuff that helps people save money. Other companies have capitalized on timely technology or latched on to powerful trends that defy the recession. To identify some of these recession winners, I analyzed data provided by financial research firm Capital IQ, a unit of Standard & Poor's, to see which consumer-products firms have gained revenue and market share since the recession began near the end of 2007. Then I researched earnings reports and other sources to see which products have fueled each company's growth.
For many of these companies, any increase in revenue over the past two years is a nifty accomplishment, since overall sales of household goods have fallen by more than 30 percent, according to Capital IQ. And sales of supposedly recessionproof "staple" items like food, beverages, and personal products have barely risen. So firms that have significantly outpaced the rest of their industry deserve special attention.
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Why Stocks Are Surging as Jobs Disappear
Continue reading… 56 CommentsStocks are up. Jobs are down. So if you're an investor you're enjoying a vibrant recovery and if you're a worker it still feels like a grinding recession.
Since bottoming out in March, the stock market has soared by about 60 percent, one of the most awesome rallies in market history. The Dow Jones Industrial Average cracking 10,000 may not be strategically significant, but it's a psychological breakthrough that's worth cheering after the demoralizing crash that preceded it.
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7 Ways to Survive the Jobless Recovery
Continue reading… 46 CommentsMaybe the pessimists are wrong. Maybe the so-called economic recovery will gather steam and turn out to be robust. Maybe prosperity is about to leap from its hiding place and shout, "Hey! I'm back!"
But planning your future around maybes leaves little margin for error, and it looks as if the Great Recession is morphing into the Great Hangover. Even though economists believe the recession is technically over, the unemployment rate is likely to hover near 10 percent or higher well into 2010. Businesses have slashed costs, but with sales still weak, they're in no mood to start hiring. The Congressional Budget Office predicts that the unemployment rate will stay above average until 2014 at least. Allen Sinai, an economist at Decision Economics, foresees a "difficult, probably crisis situation in the U.S. labor market that goes beyond the recession and any fledgling recovery."
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How to Profit From Your Passion
Continue reading… 6 CommentsWrite a blog. Cultivate Facebook friends. Tweet. You know you have to do all this. But why?
The new tools of social media are mystifying to many—and enriching to a few. One of the new social-media impresarios is Gary Vaynerchuk, founder of WineLibraryTV. Vaynerchuk used the Web to turn a sleepy New Jersey liquor store into a $60 million business, and his consulting firm, Vayner Media, advises companies on how to harness the power of social media without the hard selling that turns off customers. Vaynerchuk's new book, Crush It: Why Now Is the Time to Cash In on Your Passion, explains how individuals can build a personal "brand" and build a following while doing what they love. I've spoken with Vaynerchuk a few times recently, including this interview on Hulu. Some excerpts from those conversations:
What's the brief history of how you got started selling wine? I was a child entrepreneur. I started by selling baseball cards. My dad had a liquor store, Shoppers Discount Liquors, in New Jersey. I came home from college every weekend to work at the store. I wanted to pump it up. I was selling baseball cards and other memorabilia, making so much money from that, I figured I could do the same with my dad's store.
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The Man Who Could Salvage Wall Street
Continue reading… 14 CommentsAre all bankers evil? Maybe not. Over the past year, it's become fashionable to trash Wall Street for unbridled greed and the rapacious use of billions in taxpayer bailout funds. Much of the outrage is justified, since Wall Street firms like Bear Stearns, Lehman Brothers, Merrill Lynch, and Citigroup stoked the flames that nearly torched the entire economy. But there's been rough justice for a few of those firms, now either defunct or de facto wards of the state.
[See 10 gaffes by doomed CEOs.]
Other firms have filled the void, becoming even more prominent. One of them is JPMorgan Chase, whose chief executive, Jamie Dimon, has largely escaped the pitchforks aimed at his fellow Wall Street CEOs. Over the course of the financial crisis, JPMorgan Chase remained profitable, a pillar of relative stability in the midst of an earthquake. The bank absorbed the failed Bear Stearns and Washington Mutual, while accepting $25 billion in bailout money that it paid back with interest once the government allowed it to. Through it all, Dimon consulted frequently with officials in Washington, and news reports have even depicted him as President Barack Obama's favorite banker. A new biography of Dimon, Last Man Standing by Duff McDonald, describes Dimon as a diligent and trustworthy executive who has risen above the swill of Wall Street. I spoke recently with McDonald about the man some think will be the next treasury secretary. Excerpts:
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What GM’s Progress Report Doesn't Say
Continue reading… 21 CommentsGeneral Motors has some genuine good news. The automaker's June 1 bankruptcy filing hasn't been nearly as ruinous as GM executives once feared. New vehicles like the Chevrolet Camaro, Cadillac SRX, and Buick LaCrosse are wowing reviewers and drawing buyers. The Chevy Volt, an electric plug-in that could help move the car industry away from gas-powered engines, remains on track for launch late in 2010. Fewer dealers and a streamlined workforce are finally bringing GM's size in line with its customer base.
[See what GM can learn from Toyota's humility.]
But unlike its rival Toyota, GM has a long history of exaggerating its virtues and denying its liabilities. Since GM is now a privately owned company, CEO Fritz Henderson's recent briefing on GM's progress offered useful insight into the company now 60 percent-owned by American taxpayers. But there's more to the story. Here are a few important things Henderson didn't mention:
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Corporate America’s Identity Crisis
Continue reading… 4 CommentsThe Man is confused. So I guess it's OK if the rest of us are too.
We tend to think of corporate America as a monolithic bloc of mostly middle-aged men with a prescribed set of views. Politically, they're moderate to conservative (though not necessarily represented these days by the angry mob the Republican Party has become). They believe in low taxes, law and order, and whatever else is good for business. The less government the better.
[See 10 gaffes by doomed CEOs.]
But suddenly, it's not easy being corporate. The most prominent rupture in big business's united front is the exodus of firms from the U.S. Chamber of Commerce, a stalwart old-establishment trade group and one of the most powerful business lobbies in Washington. The chamber opposes legislation to reduce greenhouse-gas emissions and has even suggested that global warming, now regarded as a significant problem by most scientists who have studied it, doesn't exist. The chamber probably feels it is fulfilling its historic mission to keep government out of business's way, using whatever hardball tactics are necessary.
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10 Retailers Gaining Strength From the Recession
Continue reading… 23 CommentsA trip through the mall tells the story: The recession of the past two years has devastated the retail industry, as overspent consumers have put away their credit cards, started paying off years of debt, and put the kibosh on shopping.
[Slide Show: 10 Retailers Gaining Strength From the Recession.]
So far, the victims include bankrupt chains like Dial-a-Mattress, Filene's Basement, KB Toys, Circuit City, Mervyn's, Steve & Barry's, and Linens 'n Things, plus hundreds of smaller retail outlets. Vacancy rates at shopping malls have been shooting up, and 10 percent of malls might even close, by some estimates. The pain could continue for another year or longer, as unemployment keeps rising and shoppers scrimp.
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What GM Can Learn From Toyota's Humility
Continue reading… 17 CommentsAndy Grove, one of the founders of Intel, is famous for saying that "only the paranoid survive." The long-term success of his company suggests he's right.
These days, Toyota is looking like one of the most paranoid companies on the planet. It's the world's biggest carmaker but certainly isn't coasting. The global recession has hammered sales and profitability, with Toyota losing $8.4 billion in the fiscal year that ended in March. Sales are likely to be down 18 percent more this year, with a turnaround next year looking modest at best.
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5 Myths About the Economic 'Recovery'
Continue reading… 67 CommentsSurprise. That economic recovery we keep hearing about seems to be playing hide-and-seek.
Federal Reserve Chairman Ben Bernanke and others have said that, technically speaking, the recession is over. The stock market has been charging forward, with a 58 percent gain between the lows of March and a September peak. But companies keep cutting jobs, with the unemployment rate creeping up to 9.8 percent in September. It would already have hit 10 percent if not for discouraged workers who lost their jobs months ago and have stopped looking for work. Meanwhile, a lot of things could still go wrong, even if we pretend otherwise. Here are some of the misconceptions about the economic recovery:
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6 New Rules of Retirement Planning
Continue reading… 0 CommentsFox Business recently invited me on air to discuss my story on 6 ways the recession will change retirement. Here's the video:
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So Much For Thrift
Continue reading… 3 CommentsThe A-list economic indicators are GDP growth and the unemployment rate, which tell us at a glance if the recession is over, and if it feels like it's over. (It is over, but it doesn't feel like it.) But I'm more interested in another monthly number: The personal savings rate. This is the figure that tells us if American consumers have changed their profligate ways, or if we're truly addicted to spending and debt.
At the moment, we seem to be in rehab, struggling mightily to break our spending habit. After drifting upward earlier this year, the personal savings rate has dipped from a high of 5.9 percent in May to 3 percent in August. History tells us that a healthy savings rate is somewhere between 6 and 10 percent of income, which is what it was for most of the 1950s, '60s, and '70s. In 1985 the savings rate started a long drift downward, and in 2005 it actually became negative: As a nation, we literally spent more than we earned.
