Financial life in a big town

LITTLE ROCK, Ark. — Wal-Mart Stores Inc. announced a program Thursday in which its workers can receive college credit from the online American Public University and receive a tuition discount from the school.

The company also said it will commit $50 million over three years to help workers pay for books and tuition above the reduced tuition rate. After the reduction, tuition will cost $212.50 per undergraduate credit hour and $255 for graduate credits.

Wal-Mart Chief Administrative Officer Tom Mars said the program grew out of a larger commitment to cultivate talent within the company. The plan is open to domestic workers at Walmart and Sam’s Club stores.

Alicia Ledlie, Wal-Mart senior director for associate development, said nearly three-quarters of Wal-Mart workers contacted in a survey said they preferred online study to attending a local college.

Ledlie said Wal-Mart looked at 81 colleges, including brick-and-mortar schools, and found American Public University, based in Charles Town, W.Va., to be the best fit.

Wal-Mart workers receive job training in areas ranging from ethics to retail inventory management, for which they can receive credit, she said.

Sara Martinez Tucker, a former U.S. undersecretary of education who is on Wal-Mart’s external advisory council, said Wal-Mart would have had to form a tremendous coalition of schools to offer a similar program through local community colleges and universities.

Tucker said it is helpful to employees because they don’t have to apply for reimbursement from their employer.

Students won’t have to pay for credits awarded based on their training.

American Public University, with 70,000 students, offers more than 100 certificate and degree programs.

The credit for training can be applied mainly to business- and retail-related courses. Wal-Mart said the school will have evaluated for credit jobs held by 70 percent of Wal-Mart workers by 2012. That covers about 1 million workers.

Wal-Mart also offers scholarships through its foundation and offers assistance to workers seeking GEDs.

Wal-Mart executives said the link with the school will help workers attain better jobs both inside and outside the company.

Tucker noted that if 10 percent of Wal-Mart’s U.S. workers get degrees, "that would be like adding three Ohio State’s worth of graduates."

American Public University is accredited in various ways, including national accreditation by the Accrediting Commission of the Distance Education and Training Council. It is run by for-profit American Public Education Inc.

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Readers — good for them — want to make sure I have my facts right.

I’m not a tax consultant, but my understanding is that the IRS does not allow the strategy you wrote about to obtain tax-free capital gains (selling a mutual fund and buying it back the next day). You’re not allowed to buy back the same investment.

Several readers said the same thing and asked that I run a correction.

But there is nothing to correct. These readers are probably thinking about the so-called "wash-sale rule" that says you cannot claim a capital loss if you sell a security and buy the same or a "substantially identical" security within 30 days, either before or after the sale.

The rule does not apply if you sell at a gain, however. This gives investors who qualify an easy way to secure tax-free gains under a zero percent long-term capital gains rate still in effect through the end of 2010 for taxpayers in the 15 percent and under tax brackets.

My mail tells me many people still don’t know this: If your taxable income for the year, including any long-term capital gains, does not exceed the top of the 15 percent bracket ($68,000 for joint filers and $34,000 for singles in 2010), then your long-term gains are tax-free.

(For a gain to be considered long-term, you must have held the security more than a year.)

Therefore, if you are sitting on long-term paper gains on an investment you want to keep, and if realizing those gains won’t push you beyond the 15 percent tax bracket, it probably makes sense to sell and buy back.

Some caveats: Make sure you have no net capital losses that would be offset by the gains, negating any tax benefit. Consider any possible price change between the time you sell and buy back, and whether any commissions or trading restrictions apply payday loans.

On another topic, several readers wondered why I’m so insistent on wanting low fees for variable annuities that guarantee minimum lifetime withdrawals regardless of how the annuity investments perform.

Why would I care about the fees if I’m getting my guaranteed payments for as long as I live, even after principal is depleted? Aren’t the actual account balance and fees immaterial? What exactly am I missing here?

This reader — and others who made similar comments — are missing a basic understanding of how these annuities work and why anyone would consider them.

Variable annuities with guaranteed lifetime withdrawals are different from so-called immediate income annuities. With the latter, you typically hand out your principal to an insurance company and in return you get an income for life, period.

The variable annuities I wrote about do guarantee that, no matter how badly your investments perform, you’ll get a minimum income for life.

But this income is typically much less than what you would get for the same premium amount in a plain-vanilla immediate annuity.

Therefore, it makes no sense to invest in these variable annuities just for the guaranteed withdrawals — you can get more income with an immediate income annuity.

The reason to consider investing in the variable annuities is that, with the peace of mind offered by the guarantee, you can invest more aggressively and potentially achieve higher returns. You definitely want to do better than the minimum guarantee, and the more fees you pay, the more difficult — if not impossible — it becomes to do so.

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Fewer cities reported severe unemployment in February, according to a government report released Wednesday.

There were 29 metropolitan areas that reported unemployment rates at or above 15% in February, down from 35 in January, the Bureau of Labor Statistics reported.

California and Michigan continue to report the hardest hits, as they have for months. Of the cities with jobless rates of 15% or more, 13 were in California and four were in Michigan.

Among metro areas with populations of 1 million or more, Detroit reported the highest jobless rate at 15.3%, while Riverside, Calif., was second at 14.7%.

Meanwhile, New Orleans, Oklahoma City and Washington, D.C., had the lowest jobless rates among the big cities, all reporting rates below 7%.

El Centro, Calif., which is highly affected by seasonal agriculture jobs, continued to post the highest unemployment rate at 27.2%, followed by two other mid-sized agricultural areas in California: Merced at 22.1% and Yuba City at 21.6%.

The Labor Department’s Metropolitan Area Employment and Unemployment Summary breaks out unemployment rates by city and lags the nationwide jobs report by about a month.

The Labor Department’s latest national report, released on Friday, showed the U.S. economy gained 162,000 jobs in March, more than any other month in the last three years. The unemployment rate remained stubbornly high, holding steady at 9.7%. 

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Factory orders rose in February, bolstered by strong demand for industrial machinery and commercial aircraft. It was the 10th increase in 11 months as manufacturing continues to provide crucial support for the nation’s economic recovery.

Manufacturing companies, which were hit hard by the recession, are benefiting from overseas orders and increased business spending on capital equipment. Quinlan estimates factory orders fell by about 25 percent during the recession but have recovered about one-third of that amount since last spring.

The Commerce Department said Wednesday that new orders rose 0.6 percent last month, just ahead of analysts’ estimates for a 0.5 percent increase, according to Thomson Reuters.

Still, that was the lowest uptick since August 2009. January’s orders also were revised higher to show an increase of 2.5 percent.

Separately, a private company’s report on payrolls Wednesday disappointed analysts. Payroll provider ADP said employers cut 23,000 jobs in March, well below economists’ forecasts for a 40,000 gain.

In the factory orders report, economists were encouraged by a 2 percent rise in orders for capital goods such as computers and machinery following a sharp drop in January. In addition, inventories rose by 0.5 percent last month, the fourth increase in the past five months.

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After more than a year of rancorous debate, health-care reform has won passage in Congress.

The U.S. House of Representatives passed the Senate’s version of health-care reform Sunday night by a 219-212 margin, sending it to President Barack Obama for his signature. All Republicans voted against the bill, joined by 34 Democrats.

“This isn’t radical reform, but it is major reform,” Obama said shortly before midnight. “This is what change looks like.”

The president said the bill would create a health-care system “that works better for the American people.”

The legislation would enable an estimated 32 million Americans to obtain health insurance by expanding eligibility for Medicaid, as well as provide subsidies for low- and moderate-income individuals to buy private insurance.

Individuals and small businesses could purchase insurance through new state-based exchanges, which would offer plans that meet minimum federal standards. Some small businesses with low-wage workers would be eligible for temporary tax credits to help them pay for insurance.

Individuals would be required to obtain insurance, and businesses that employ more than 50 workers would have to provide coverage or pay a penalty of $2,000 per worker if any of their employees receives government-subsidized coverage on their own.

The legislation also would impose a tax on high-cost insurance plans beginning in 2018. New taxes also would be imposed on insurance plans, medical-device manufacturers and pharmaceutical companies. Individuals who make more than $200,000 would face additional Medicare payroll taxes.

Insurance companies would no longer be able to deny coverage for pre-existing conditions or rescind coverage when someone gets ill. They also would be prohibited from capping the amount of benefits individuals can receive.

Democrats say the law will make insurance coverage affordable to all Americans and rein in abusive insurance practices.

Republicans, however, contend insurance will become more expensive. They also argue that businesses will be afraid to hire workers because of the financial penalties they would face if they don’t provide affordable coverage.

In the end, however, it was the issue of abortion — not what the nation’s health-insurance system should look like — that determined the bill’s fate payday loans online.

The House passed health-care reform Sunday night at 10:49, but the outcome was determined nearly seven hours earlier. That’s when Democrat Bert Stupak of Michigan announced he and a handful of other anti-abortion Democrats would vote for the bill.

At issue was whether the bill would allow public funds be used to subsidize abortions. Stupak said an executive order from President Barack Obama would ensure that wouldn’t happen.

“I’m pleased to announce that we have an agreement,” Stupak said. “I’ve always supported health-care reform.”

The abortion issue was the most serious threat to House passage of the bill, and Republicans wouldn’t let the issue go away even after Stupak’s announcement.

“If you vote for this bill, you can never call yourself pro-life again,” said Rep. Paul Broun (R-Ga.).

Republicans also said Obama’s executive order couldn’t be relied on because it could be rescinded at any time.

They also called into question the Senate’s ability to pass a separate bill fixing the House’s problems with the Senate’s health-care legislation. To avoid the need to get 60 votes in the Senate, Democrats decided to have the House vote on the Senate-passed bill, and then approve a package of fixes through a budget-related process known as reconciliation, which only requires 51 votes to clear the Senate.

The problem, according to Republicans, is the reconciliation bill would generate additional contributions to the Social Security Trust Fund, and changes to Social Security aren’t eligible for consideration in a reconciliation bill. That means the Senate bill, might not be fixed, Republicans warned Democrats.

That argument didn’t sway any members. The House passed the reconciliation bill by a 220-211 margin.

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Shares of Macy’s Inc. fell about 1 percent Monday afternoon after a Deutsche Bank analyst downgraded the stock to “hold” from “buy.”

According to a MarketWatch report, analyst Bill Dreher Jr. said the department store chain’s “My Macy’s” initiative, which consolidated merchandising and tailored it to local markets, hasn’t produced the expected results.

“Macy’s decentralization initiative is developing awkwardly and will likely need years of refinement before demonstrating significant traction," Dreher said in the MarketWatch story. He also lowered his first-quarter earnings forecast to $1.21 per share from $1.25. Analysts. on average, expect earnings per share of $1.18.

Shares of Macy’s (NYSE: M) lost about 1.5 percent, or 24 cents, to $15.69 in Monday afternoon trading.

Macy’s, with corporate offices in Cincinnati and New York, operates about 850 department stores in 49 states, the District of Columbia, Guam and Puerto Rico.

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Hoya Corp. kept its Pentax camera plant north of Tokyo open as rivals steadily moved factories overseas to cut costs, yet it couldn’t compete as the yen surged against the dollar and euro during the global recession.

The company paid suppliers and workers in yen, sold products in dollars and euros, and converted revenue into yen. Six straight quarterly losses prompted Hoya in June to close the last domestic Pentax plant, in Tochigi prefecture, as the yen rallied against the dollar.

“The rise in the yen is definitely one of the biggest triggers that convinced us to accelerate our move offshore,” said Hiroshi Hamada, Hoya’s chief operating officer. “There was no reason to keep high-cost manufacturing in Japan.”

Lens-maker Hoya is one of 13 companies — including Komatsu Inc. and Panasonic Corp. — shutting or downsizing Tochigi factories in the past year. The strengthening yen, weakening domestic demand and second-highest corporate taxes among major economies are spurring the exodus of manufacturers to Vietnam, the Philippines and China, companies and analysts say.

Hoya rose 2 percent to 2,570 yen at the close trading in Tokyo, outpacing the 1.1 percent gain on the benchmark Nikkei 225 Stock Average. Shares of the Tokyo-based company have gained 55 percent in the last 12 months.

About 740,000 Japanese manufacturing jobs disappeared last year through November, the statistics bureau said. More than a third of factory capacity sits idle, trade ministry figures show.

‘Breaking Point’

Japan’s industrial output is 19.8 percent below its pre- recession peak, with the country shipping 35 percent fewer goods in November than the peak of 7.6 trillion yen ($82 billion) in March 2008.

“Corporate Japan is voting with its feet,” said Jesper Koll, now head of equity research at JPMorgan Chase & Co. in Tokyo. “They’re going overseas. The hollowing out of Japan is being turbo-charged.”

Profits from overseas operations at Japanese companies exceeded domestic earnings for the first time in fiscal 2008, said the Japan External Trade Organization, a government-funded organization focused on luring investment. Foreign operations generated 52.5 percent of earnings, according to JETRO’s analysis of 890 listed companies.

The yen surged 14 percent since Lehman Brothers Holdings Inc. filed for bankruptcy protection in September 2008, the most among 16 major currencies tracked by Bloomberg. It reached a 14- year high of 84.8 against the dollar on Nov. 27. The yen gained 20 percent against the euro since January 2008.

No Incentives

A stronger currency erodes the value of repatriated earnings and makes Japanese exports more expensive for foreign buyers.

Overseas markets are more lucrative as domestic demand slips because of declining wages — down 14 percent since a 1997 peak — and an aging, shrinking population. More than 20 percent of Japanese are over 65, and the population will decrease by 3.2 percent this decade, according to the National Institute of Population and Social Security Research.

Japan’s 39.5 percent corporate tax rate for large firms is second-highest behind the U.S.’s 40.8 percent, according to the Finance Ministry.

“There’s less incentive to keep, stay or do business in Japan, especially the factories,” said Masafumi Yamamoto, chief foreign-exchange strategist at Barclays Capital in Tokyo instant payday loans completely online. “That movement should continue.”

Last month’s 7.2 trillion yen government stimulus package didn’t promote long-term growth, said Yasukazu Shimizu, senior market economist at Mizuho Securities Co. in Tokyo.

Komatsu, Panasonic Leave

Manufacturing is 40 percent of Tochigi’s economy –twice the national average. Before the recession started in November 2007, there were three job openings for every two applicants, according to the Labor Ministry.

Now there are three applicants for every opening in the prefecture, about an hour from Tokyo on the bullet train.

Komatsu, the world’s second-biggest maker of construction equipment behind Caterpillar Inc., closed a dump-truck assembly plant there. China surpassed Japan as Komatsu’s biggest market for construction and mining machinery in the quarter ended June 30.

Komatsu forecasts full-year profits of 35 billion yen as sales decline by 6.5 percent.

Consolidating Operations

Panasonic Communications Co., subsidiary of Tokyo-based Panasonic Corp., the world’s biggest maker of plasma TVs, shut its fax-machine factory in June. The parent company says cost cuts, including 15,000 jobs, will help narrow a net loss for the current fiscal year to 140 billion yen from the earlier estimate of 195 billion yen.

“We wanted to increase efficiency,” Panasonic spokesman Akira Kadota said. “It made sense to consolidate our operations.”

Shuttered shops abound in Utsunomiya, a city of 500,000 where Tochigi’s government established an unemployment center. The converted storefront advised more than 12,000 people since April, manager Chiaki Yashiro said.

“There isn’t anything out there,” said Yuuji Takashi, 53, who lost his job at a car parts-maker early last year. “They’re sending it all to China.”

Toyota City, Japan-based Toyota Motor Corp., which makes more than half of its cars abroad, plans to suspend one domestic assembly line and add capacity in China and India, its fastest- growing markets. Domestic passenger car sales are down 25 percent since the 1990 peak of 5.1 million, according to the Japan Automobile Dealers Association.

Yen Tips Scale

The surging yen helped tip the scales, Toyota Vice President Takeshi Uchiyamada said in October.

“We’re affected by the exchange rate,” Toyota spokesman Paul Nolasco said. “We deal with that by building as much of our product as close to our customers as possible.”

The Pentax factory peaked in the 1970s, with 1,500 workers making 35-millimeter, single-lens reflex cameras. Hoya’s Hamada moved all camera production offshore helping the company’s Pentax division to return to profit with operating income of 1.19 billion yen last quarter. Continuing to manufacture in Japan was “stupid,” according to Hamada.

“It was a waste,” he said.

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The largest stimulus program in the nation’s history is starting to move into a new phase: Out with the rescue, in with new spending to create jobs.

Top White House advisers said Wednesday that most of the economic stimulus spent so far has helped prop up the states, paying for food stamps, Medicaid and filling budget gaps that kept police officers, firefighters and teachers employed.

In 2010, most of the remaining recovery spending will be funneled into projects that build roads, lay high speed rail, install broadband in rural areas and fund research at health institutions.

White House economist Jared Bernstein acknowledged that most of the jobs created or saved so far have been public sector jobs. One of the largest areas of jobs saved so far included some 300,000 teachers that kept their jobs.

Private sector jobs are next

Bernstein said he is confident that new spending will create more jobs in the private sector.

"The private sector US economy will begin generating robust employment at some point in the near future," Bernstein said. "Precisely when that is no one can say. But what we can say is that point is a lot closer because of the Recovery Act."

In the past few weeks, the White House ramped up its message that it’s tackling the top economic worry on Americans’ minds: jobs.

U.S. unemployment dropped slightly to 10% in November from 10.2% the month before with 11,000 jobs lost.

The $787 billion stimulus package was passed in February, along party lines, in part to help stem job losses low interest personal loan. But it remains a political flash point on Capitol Hill, with Republicans criticizing its impact.

Slow road to growth

On Wednesday, top White House advisors briefed reporters on the progress and future of the stimulus package. They maintain that stimulus is working to curb job losses, although they acknowledge it still has a ways to go.

"Is it fully offsetting the job market impact of the deepest recession since the Great Depression? Bernstein asked. "Of course the answer is no. But the Recovery Act is helping to offset some of that pain."

As of Dec. 4, the federal government had either spent or was on the verge of spending $301.7 billion of the stimulus package, in addition to $93 billion paid in tax relief, said Edward DeSeve, a special White House adviser on the economic stimulus package. That leaves about $392 billion remaining.

When asked why President Obama was pushing for more infrastructure spending to create jobs, when the impact of the upcoming year of infrastructure spending has yet take place, Press Secretary Robert Gibbs said more spending would compliment those existing stimulus programs that have proved popular and have drawn too many applications.

He denied the call for more spending is a second stimulus proposal and called the new push for spending on infrastructure and programs to help homeowners make homes conserve less energy "targeted." 

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After a 44-year run serving one of the poorer neighborhoods in St. Louis, Gateway Bank collapsed last month under a pile of bad loans.

Now, a small bank from Kansas City thinks it can build a profitable enterprise on the wreckage of Gateway. Central Bank of Kansas City bought Gateway from the Federal Deposit Insurance Corp., which took over the bank a month ago.

So, why would Central Bank think it can make a go of it in a north St. Louis city neighborhood where another bank failed?

A cheap price is part of the equation. Central Bank paid 70 cents for each $1 in face value of Gateway’s assets. Of course, many of those assets aren’t worth face value. When it failed, 7 percent of Gateway’s loans were seriously behind in payments. Central Bank will also inherit 70 foreclosed properties, most of them houses and apartment buildings.

The FDIC will pay $9.2 million to cover Gateway’s losses.

Central’s executives didn’t have long to mull the decision. The FDIC opened Gateway’s books to prospective bidders on a Thursday in late October. Central Bank made its bid the next Monday, and took over the bank that Friday, Nov. 6.

William Dana, Central Bank CEO, says it will succeed because it knows how to serve poor neighborhoods. That’s its forte in Kansas City, he says.

Most banks want to go where the money is. They want "high net worth, low transaction, low-touch customers," says Dana. They’re people who have big bank accounts, borrow much and deal with the bank by computer.

"Our customers are the antithesis of that," says Dana. They have lower credit scores and small bank accounts. "Many people have trouble coming up with the minimum deposit, $50, to open an account," said Dana. "It’s just tougher."

Serving them requires a bigger staff. But Central’s customers are more willing than the well-off to keep their money in checking and savings accounts paying low interest. That low cost of deposits allows the bank to make a wider profit margin on its loans, Dana said.

Serving low-income neighborhoods qualifies the bank to dole out federal largess under the federal New Markets Tax Credit program. It can give those credits to business borrowers who qualify.

"They work in these challenged neighborhoods where access to capital is limited or difficult," said Ruben Alonso, who runs the New Markets program for the Kansas City municipal government. He cites a loan the bank made to an engineering firm that is going to anchor a redevelopment planned for an area near downtown.

"They bring a lot of expertise in how to bring capital to low-income areas," he added.

The lack of banking services in poor, minority neighborhoods has been a vexing issue for federal regulators. In a study released last week, the FDIC reported that 21.7 percent of U.S. black households have no checking or savings accounts, while 19.3 percent of Hispanic households are "unbanked." Roughly 3.5 percent of Asian and white households have no checking or savings accounts.

The same study found the disparity is even greater in St. Louis: 31 percent of the area’s black households are unbanked, while only 1.1 percent of white, non-Hispanic households have no accounts.

St. Louis’ unbanked percentage among black households was the highest among 20 most populated metro areas studied by the FDIC, though seven areas didn’t report a breakdown for black households. Detroit was the second-highest at 30 percent, followed by Chicago’s 25.5 percent.

BIG BUSINESSES HELP

In Kansas City, Central Bank gets a helping hand from big businesses. A local electric utility and Microsoft deposit money at low interest to encourage Central’s lending. "We guarantee them that we’ll make loans into the community," said Dana.

Central’s strategy seems to be working. The bank earned $1.6 million in the first nine months of the year. That gave it a return on assets — a standard measure of bank profitability — of 1.26 percent, far above the 0.17 percent of peer banks. It’s been profitable for at least the last four years.

Central has $169 million in assets, ranking it as tiny by banking standards. Gateway had a mere $30 million.

Gateway Bank’s single branch is on Union Boulevard near Natural Bridge Road. Median income in the bank’s ZIP code was 58 percent of the national average, according to 2000 census figures. That matches the income around Central Bank’s headquarters, east of downtown Kansas City.

Central Bank’s neighborhood is a Kansas City melting pot — 50 percent white, 16 percent black, 7 percent Asian and 18 percent "some other race." The Census lists 30 percent as Hispanic, who can be of any race. By contrast, Gateway’s ZIP code is 98 percent black, according to the 2000 census.

Gateway was born in the civil rights movement. It was founded in 1965 by black businesspeople and professionals who wanted a bank to serve the minority population. For its last two decades, it was the only black-owned bank in St. Louis.

Central Bank’s ownership is white, the family of Lucille Tutera. Will that affect customer loyalty?

"We have to convince our depositors that our products and services will be better than before," said Dana.

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Chi-X Europe criticized the London Stock Exchange for adopting a procedure that prevented trades being routed to rival venues when glitches halted trading for more than three hours on Thursday.

The LSE’s main rival said the exchange put its market into auction status when the system broke down and that this triggered the block on routing to other venues.

“The auction status hampered investors’ ability to trade by not enabling participants to seek a reference price on another venue,” multilateral trading facility Chi-X said in a statement.

A spokesman for the LSE denied Chi-X’s claim.

“Our decision was a result of customer feedback,” he said. “Some were experiencing connection issues while others were not, and customers requested for the market to be put into auction status so that there would be a level playing field.”

Chi-X said many firms’ trading systems treated the auction status like a normal market event such as the daily closing auction.

By contrast, on November 9 the LSE halted trading during a partial systems failure, and many member firms were able to switch to other venues to trade UK stocks, Chi-X said.

“We call for the LSE and any other market of listing to close their market outright when outages occur in order to allow market participants to continue trading,” the statement said.

Chi-X also called on the Financial Services Authority to ensure the “continuation of trading and an orderly market.”

Another LSE rival, Nasdaq OMX called for standardization of market data in Europe.

“This would enable trading to continue even if one market fails to operate,” said Charlotte Crosswell president of Nasdaq OMX. “We are supportive of the European Commission further investigation this issue.”

(Editing by Will Waterman)

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