LyrArc Article Gist
The increased availability of car loans and eased standards for auto loans has played a large part in rising auto sales in the U.S. Annual sales of cars and light trucks maintained a pace of 14.1 million vehicles in July 2012, and could reach 15 million for 2012. Lenders see the car loan market as more profitable and less risky than mortgage lending because of the shorter periods of the loans- 3 to 5 years and the low default rate. Currently only about 2.52% of auto loans are 30 days past due for second quarter 2012, according to Experian. Auto loans outstanding at the end of the 2nd quarter 2012, are $725 billion, according to the automotive division of Experian, up 5.7% from a year ago. The market for securities backed by auto loans has rebounded since the 2008 financial crisis. About $50 billion in bonds backed by auto loans were issued in the Jan-July 2012 period, according to Dealogic, compared to $53 billion in 2011. To get a picture of how this compares with mortgage securities- auto loan backed securities are up 33% above pre 2006 levels, and mortgage backed securities are about 70% below 2006 levels. A recent Fed survey of bank lending officials shows easing lending standards reported by 20% of respondents for the last 3 months for auto loans, compared to 3% for prime residential mortgages and 11% for credit cards....

LyrArc Article Gist
Administrative costs are one of the key reasons tution costs have increased to excessive proportions in the U.S., putting a heavy burden on the middle class, reducing social mobility that is an important aspect of postwar progress in Europe and the U.S. by putting college out of reach for millions of young people. This also creates a heavy debt burden for young people- U.S. student loan debt passed $1 trillion in 2012- who are less likely to buy a first home because of years needed to repay student loans. The market pressures to control costs do not exist in the same way as industries such as automobiles, because of the demand for college education in a modern globalized economy. Douglas Belkin and Scott Thurm have provided an indepth look at the University of Minnesota to show the spending surge and internal tendencies for faculty and bureaucracy to increase spending on hiring, building expansion to compete with other schools, and salaries to support their own within the college and university system, with a passive student community, and passive parent community, and lack of other outside pressures. Tution and fees for state residents doubled in the last decade at the University of Minnesota to $13,524. The figures tell the story- total debt with borrowing for building construction at U.S. 4 year public colleges tripled to $88 billion between 2002 and 2011, according to the Department of Education. Debt servicing costs doubled at the University of Minnesota to $106 million in that period. Minnesota's government provided $570 million for university operations in 2011, same as 2003-2004 school year even with inflation and 10% higher student enrollment. Yet analysis by the Department of Education and the Wall Street Journal shows in that period the spending increased disproportionately compared to inflation, student enrollment and teaching activity, with little restraint. WSJ analysis showed the University of Minnesota system added 1000 administrators between 2001-2011, with administration hires increasing 37%, double the increase in the students and double that of teachers. During that period the number of employees to manage people, programs and regulations went up 50% faster than the number of instructors, according to the Department of Education. Bureau of Labor Statistics cites this as the reason tution costs went up faster than health care costs. The 19,000 employee payroll at the University of Minnesota means one employee for three and half students. The new university president in 2011, Eric Kaler, interviewed by WSJ's Belkin and Thurm, says no one knew what it cost to run the school when he started....

LyrArc Article Gist
This WSJ editorial says president Obama's second inaugural address missed the opportunity to bind old wounds with a reference to King on Martin Luther King day. The president chose to set forth a broader liberal agenda including climate change. The editorial points to the tone of the inaugural as setting the tone for the rest of the term and the possibility of return to the rancor that characterized the first term. "We the People" from the Consititution was mentioned several times in the sense of "collective action" that defined this text as government action. The programs of Medicare Medicaid and Social Security as "committments we make to each other." And the programs "do not make us a nation of takers; they free us to take the risks that make this country great," which are seen by the Journal as not appropriate for an Inaugural address that rises above the fray of politics.

LyrArc Article Gist
The U.S. government sold its last remaining shares in auto company GM booking a loss of $10.5 billion- a recovery of $39 billion dollars of the $49.5 billon dollars given to GM. The Center for Automotive Research in Ann Arbor, Mich., points out that the cost of bailing out GM and Chrysler was about $13.7 billion. The benefits were 1.2 million jobs protected in 2009 during the depths of the financial crisis. It also preserved $39.4 billion in personal and social insurance tax collections in 2009 and 2010. The Treasury Department estimate of the cost is about $15 billon, including money invested in GM's former finance arm Ally Financial Inc. President Obama says the effort helped create 372,000 new jobs in five years. Treasury Secretary Lew summed it up by saying "it helped stabilize the auto industry and prevent another Great Depression." Other intangible but larger benefits in the long run were building up the companies anew with new pay structures the auto companies could support in a globalized economy, bringing in new management and discarding of old mindsets and culture, new relationships with unions and customers, committment to achieving fuel efficiency targets with new technologies in cooperation with the U.S. government guidelines, and renewed confidence of millions of employees in the U.S. auto sector. It is also the one area in which the Obama administration scores a clear win, and in which president Obama took the greatest interest as senator. That the public did not fully appreciate the significance of the step is more a reflecion of public frustration with how the companies were run by the old management, and a continual reminder of the importance of good management for the U.S. industry and economy....

LyrArc Article Gist
Analyst estimates show Samsung taking 43% of smartphone profits to Apple's 57%. This is up from 26% for Samsung and 74% for Apple in the 1st quarter of 2012. Samsung could soon surpass Apple because of the wide range of models and its manufacturing capabilities. Apple sees a shrinking of margins in coming years.

LyrArc Article Gist
Microsoft shares were up 7% after the announcement about the departure of Steve Ballmer from the CEO position. Steve Ballmer became president in 1998 to run Microsoft's operations. He was a college buddy of Microsoft founder Bill Gates at Harvard. Ballmer graduated from Harvard with a degree in mathematics and economics and worked for 2 years at P&G before Gates persuaded him to join him at Microsoft. For decades the duo of Gates and Ballmer ran the company till Ballmer was made CEO in 2000. Ballmer completes three decades at Microsoft. During most of this period Ballmer focussed on protecting the existing franchise of Windows operating systems software and the Office suite sold on all PC's except Apple Macs. Missteps include Windows Vista, which was followed by the more successful Windows 7. Windows 8 has failed to make a significant dent in the market. A poor decision in retrospect to acquire Yahoo for about $44 billion did not happen, as Yahoo did not pursue discussions. The efforts in smartphones with Nokia and the Surface tablet have failed to produce results. Under Ballmer Microsoft only gradually shifted to cloud computing. The departure of Ballmer comes as a major reorganization was underway in 2013, and the company was shifting its strategy to become a provider of devices and services in place of its main role making software sales for PC's....

LyrArc Article Gist
The failure to reach an agreement between the U.S. Justice Department and BP over liability in the Gulf Oil Spill. The Justice Department says BP was grossly negligent in the spill. BP's position is that responsibility was shared with Transocean, Halliburton and other companies, so that BP by itself was not grossly negligent. The case now goes to trial.

LyrArc Article Gist
The SEC requirement that companies disclose the ratio between median worker pay and the pay of senior executives. The SEC says it is putting out the rule as part of implementing Dodd-Frank legislation to control excessive executive pay. Companies will be allowed to survey a fraction of their workforce as appropriate for companies with global operations. Executive pay will include pension benefits and stock options under the new rule. A WSJ chart using information from the University of Southern California and the Bureau of Labor Statistics, shows the ratio between what CEO's on average make and rank and file workers make remained at about 30 times in the post war period till about 1970, a period of rapid growth in the U.S. economy. By 1980 this climbed to about 60 times and exceeded 100 times by 1990. The period of stratospheric growth for CEO pay and extreme widening of the gap then occurs between 1990 and 2000. By 2000 the dot com boom- telecom boom and the internet- creates a surge in executive pay reaching over 500 times. This drops to about 280 times in 2008 and picks up again to reach about 320 times in 2011. Many of the poor business practices, the excessive leveraging and risktaking in the financial industry, take place against this background of excessive pay for senior executives. Some of that risk was passed on to others through such methods as securitization in the period leading to the 2008 financial crisis, so that executives were compensated with higher pay for taking excessive risk that they personally or their companies did not assume. Dodd-Frank legislation following the 2008 financial crisis sought to correct this imbalance by having pay information disclosed. The excessive pay has also coincided with an increase in the frequency of boom-bust cycles in the economy. The busts prompted the needs for intervention by the U.S. central bank, the Federal Reserve, to drop interest rates more than would otherwise have happened during this decade, culminating in the huge bond purchases and monetary easing by the Bernanke Fed. The SEC under Mary Jo White is mindful of these distortions in the economy as a result of misallocation of resources based on excessive executive pay, and the need to take action before the next crisis. ...

LyrArc Article Gist
Denning points out the shift in Mexico to becoming a net oil importer from the U.S. by August 2013, that put new urgency to the passage of the oil law in Mexico for attracting foreign investment. Mexico's exports of crude oil were about 0.9 million barrels a day in August 2013. U.S. refinery products imported by Mexico including gasoline on an oil equivalent basis were 0.8 million barrels a day. Mexico became a net importer of energy in March 2013. Another negative factor in the energy trade between Mexico and the U.S. is increasing U.S. oil production and refineries in the coast of the Gulf of Mexico being full. As this U.S. production increases Mexico would have to offer competitive discounts in the future. Pemex drillled in all 25 deepwater wells in the last decade, according to Sanford Bernstein. The U.S. in the same period drilled 1500 ultra-deep water wells alone, showing the urgent need for foreign investment in the Mexican oil industry.

LyrArc Article Gist
Working America, an arm of the U.S. trade union the AFL-CIO, conducted conversations with 350,000 voters in 17 U.S. states. Here a representative of Working America, says the overwhelming response to the question "does it make a difference whether Democrats or Republicans are in power for my well being," is reflected in one of the responses- "does it even matter?"

The suggested approach here is for Democrats in particular who have represented working class voters in the past, to start with a fresh approach by creating new conversations with working class Americans.

LyrArc Article Gist
Even if optimism rules, macro-economic forces in financial markets such as the Dublin crisis will also have a significant influence on the IPO price.

LyrArc Article Gist
Moore points out that there are twice as many people working for the government in the U.S. (22.5 million) than in manufacturing (11.5 million). In 1960, the situation was quite different, there were 15 million workers in manufacturing and 8.7 million working for the government. More workers in the U.S. work for the government than in construction, farming, fishing, forestry, manufacturing, mining and utilites put together. Every state in the U.S. has more people working for the government- except for Indiana and Wisconsin- than people in manufacturing industrial goods. And California has 2.4 million government workers, which is twice the number in manufacturing in that state. New York and Florida have a 3:1 ratio, and New Jersey a 2.5:1 ratio of government workers to workers making industrial goods. Part of the reason for this is the huge increase in productivity and the advances in technology that make it possible to have higher production with fewer workers. This kind of productivity is missing in the government sector. And efforts to improve productivity tend to be blocked by the unions who favor the status quo....