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6 Ways the Recession Will Change Retirement
Tweet Share on Facebook September 29, 2009 Comment (10)The Great Recession may finally be over, but the shock waves could reverberate for years—and fundamentally change the way we plan for retirement.
After most recessions of the past 75 years, the economy quickly bounced back to prerecession levels, erasing memories of hard times. This time seems different. The twin miseries of a stock market crash and a deep housing bust have eliminated $14 trillion of Americans' net worth since 2007—about $121,000 per household. That's money that millions of people had been hoping to retire on. The recent rebound in the stock market has eased some of the pain, but the decline in home values is likely to continue into next year, to be followed by an indefinite plateau. Some analysts think it could take a decade for homes to reclaim the peak values of 2006—and 20 years in California and Florida.
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How Big Pharma Wins From Healthcare Reform
Tweet Share on Facebook September 25, 2009 Comment (12)As Congress gets closer to final healthcare-reform legislation, the central question remains murky: Who will foot the bill?
Figures contained in the $856 billion proposal by Democratic Sen. Max Baucus of Montana—which has emerged as the basis for a final compromise between the House and Senate—suggest that key parts of the healthcare industry are getting off easy. The Baucus bill would pay for itself in a number of ways, including taxes on some high-cost insurance plans, Medicare cost reductions, and cuts in federal benefits. It would also raise about $13 billion a year from fees paid by three industries: pharmaceuticals, health insurance, and medical devices.
[See why health insurers make lousy villains.]
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Why CEOs Survive Recession Better Than Others
Tweet Share on Facebook September 24, 2009 Comment (18)It's good to be CEO, even in a recession. Especially in a recession.
Hewlett-Packard's stock price fell 29 percent in 2008, and the company announced plans to lay off 25,000 workers after it acquired Electronic Data Systems. But CEO Mark Hurd didn't feel the pain. Hurd earned $43 million in 2008, a 73 percent raise from his 2007 pay. Perks included $136,000 worth of personal travel on corporate jets, paid for by shareholders, and $7,472 in travel expenses for Hurd's family, according to an analysis of HP's annual proxy filings by shareholder activist Eric Jackson. Several other top HP executives earning multimillion-dollar pay got double- or triple-digit raises.
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Why Small Businesses See a Gloomy Future
Tweet Share on Facebook September 23, 2009 Comment (12)If small businesses are the backbone of the U.S. economy—as politicians routinely claim—then we're in worse shape than a lot of people realize.
Most economists, including Federal Reserve Chairman Ben Bernanke, believe the recession is technically over and the economy is growing again. But the news apparently hasn't trickled down to the people who run delicatessens, plumbing outfits, and Web start-ups. A recent survey by the nonprofit Kauffman Foundation found that 68 percent of entrepreneurs do not believe the economy is beginning to recover, and 61 percent think the economy's on the wrong track. Only 13 percent believe a recovery is underway.
[See why we're stuck with one ugly economy.]
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How to Pay CEOs What They’re Worth
Tweet Share on Facebook September 22, 2009 Comment (8)When Stanley O'Neal stepped down as CEO of Merrill Lynch in November 2007, the company sent him out the door with $162 million, effectively doubling his earnings from nearly five years as chief executive. Over the next five quarters, Merrill lost more than $30 billion from deals that were largely brokered during O'Neal's tenure. Merrill's stock price was at $44 when O'Neal became CEO, $66 when he left in 2007, and $11 a year after he left, when a hobbled Merrill was taken over by Bank of America. O'Neal publishes his golf scores, but he's never taken responsibility for Merrill's implosion—or offered to return any of his money. And shareholders have no way of demanding it back.
This, of course, is a familiar, if grotesque, Wall Street story. Charles Prince earned nearly $160 million for serving as CEO of Citigroup for four years, even though he left the bank crippled when he departed in 2007. The company's stock price was $47 when he took over in 2003 and $38 when he left in 2007. Today, with Citi a ward of the state thanks to disastrous moves under Prince, the stock wallows at less than $5. Martin Sullivan pulled a similar stunt during three years as CEO of AIG, signing off on derivatives deals that ultimately wrecked the company, brought the global economy down with it, and required an $85 billion taxpayer bailout. Sullivan's reward? $100 million. Nice work if you can get it.
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How Healthcare Reform Reveals Bigger U.S. Woes
Tweet Share on Facebook September 21, 2009 Comment (3)ABCNews recently invited me to appear on Good Money, one of its online news programs, to discuss an article I wrote called 4 Problems That Could Sink America. The battle over healthcare reform is probably the most pertinent example of how bogus information, selfishness and other shortcomings threaten our prosperity. Here's a video of my discussion with anchor Tanya Rivero:
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Next Obama Reform: Fewer Blue-Ribbon Panels
Tweet Share on Facebook September 17, 2009 Comment (4)In April 2009, the Milken Institute think tank published a 526-page hardcover tome called The Rise and Fall of the U.S. Mortgage and Credit Markets. In scholarly detail, it describes how the financial markets heated up for most of this decade and then melted down in 2008. Amazon lists a couple of dozen other books that explain how Wall Street wrecked America. That's on top of saturated coverage of the unfolding crisis by the Wall Street Journal, New York Times, and dozens of other news organizations, economists, and historians. And of course Ben Bernanke, Tim Geithner, and their predecessors have had their say via endless hours of congressional hearings.
[Get ready for the miraculous hollow economy!]
But apparently the financial crisis is still something of a mystery, so the government is going to get to the bottom of it all through an official report due to be published in December 2010. You might think that's a typo, and the report is really due in 2009, which at least would be the same year as every other report on the Great Recession. But we're not talking about a tweet here. We're talking about some serious research that's going to require thousands of footnotes in order to refer to all the other reports that came first.
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Coming Soon: The Miraculous Hollow Economy
Tweet Share on Facebook September 16, 2009 Comment (4)Economic commentators get excited these days if the typical indicator rises by 1 or 2 percent. What about 132 percent?
That's one credible projection for the increase in total net income for the S&P 500 in the fourth quarter of 2009. In any normal year, income growth of 5 or 6 percent would get analysts excited. But 2009 is not a normal year; it's the year after the Year Wall Street Wrecked the Economy. So compared with the fourth quarter of 2008—when the stock market crashed and the economy flirted with a full-blown depression—results in 2009 are going to look remarkable. "We're going to see some mind-boggling growth rates," says Dirk van Dijk, chief equity strategist for Zacks Investment Research, which is forecasting the 132 percent blastoff.
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4 Countries With Better Healthcare Than Ours
Tweet Share on Facebook September 15, 2009 Comment (534)If the healthcare systems in Canada and Europe are so much worse than ours, somebody ought to tell the Canadians and Europeans.
There's little dispute that the United States has the most expensive healthcare system in the world. Our nation spends about $7,300 per person on healthcare every year, nearly 2.5 times the average for developed countries, which is $2,964, according to the Organization for Economic Cooperation and Development.
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How Obama Overload Threatens the Economy
Tweet Share on Facebook September 14, 2009 Comment (52)OK, I'm convinced: President Obama has a remarkable attention span. Too bad the rest of us can't keep up.
Obama is fond of saying that the government can do several important things at once, and he seems determined to prove it. Unprecedented financial bailouts are still in the works, and $787 billion in stimulus money is just starting to filter into the economy, but that's no reason to sit back and take a breather. A new healthcare reform plan would transform one sixth of the U.S. economy. Obama's "cap-and-trade" plan would be the biggest American response to global warming to date. His financial reform plan would rewrite the rules for Wall Street and transform lending. In his spare time, Obama is recalibrating the nation's two wars, winding down our presence in Iraq while ramping it up in Afghanistan.
Got all that?
[See why we have an economy that only a mother could love.]
