Is an Interest Rate lift off on Dec 16, 2015 Inevitable?

                                  Comments due by Dec. 11, 2015

November's solid jobs report gave the Fed a final piece of evidence, clearing the way for a December rate hike, but now the question is how fast can it raise rates given weakness in some other economic data.The economy added 211,000 nonfarm payrolls in November, and the unemployment rate was unchanged at 5 percent. Wage growth was up 0.2 percent, as expected, and October jobs were revised up to 298,000.

"The Fed goes in December, but the path is shallow, and you couldn't ask for anything more," said John Canally, strategist and economist at LPL Financial. The next clues on the pace of hiking will come from the Fed itself, when it releases its interest rate forecasts with the rate news, following its meeting on Dec. 16.

"The 12-month average job gain after this report is 220,000. The Fed's number for what keeps the unemployment rate steady is in the low 100,000s. They have to get going, but they probably don't have to get going as fast as they thought in September. It's not as shallow as the market thought. It's somewhere in the middle," Canally said.

The Fed is forecasting a 1.4 percent Fed funds rate for 2016. "The path is still going to be gradual and low. Most people believe 3(in 2016). They get to 1 percent and stop," said John Briggs, head of strategy at RBS.

Treasury yields initially moved higher and stocks gained after the jobs report, but news that OPEC was leaving its pricing policy unchanged sent oil sharply lower. That temporarily dampened the stock market rally, and the dollar gave back some of its early gains, while the euro crept higher. Stocks were up more than 1 percent in late morning trading.

Markets have been pricing in roughly 75 percent odds that the Fed will hike rates on Dec. 16, but the real debate has been what happens after that. "There's nothing standing in their way," said Jim Caron, fixed income portfolio manager with Morgan Stanley Investment Management. "Aside from an unforeseen geopolitical event, there's nothing standing in their way."

Caron said the Fed will be slow to hike, and that's in part because inflation at about 1.3 percent, is still well below the Fed's 2 percent target. He expects two hikes in 2016, after the initial increase in December.

"I still think it's going to be a slow pace. The Fed needs to resist the temptation to hike too soon. We're still at core PCE of 1.3 percent," he said. "When you're below target inflation, I still think you need to be very, very slow. Let's let these inflation pressures build up. We still are probably going to be off to the races on a slow start, or slow pace of hikes."

Caron said the strength in job growth and the positive internals of the report would be a good sign for wage growth — an important element for higher inflation.

"We might be at that juncture right now of people coming back to the labor force, the average hourly earnings looking solid, and the participation rate is looking up," he said. "I hate to sound overly optimistic. You can't make too much of a trend out of this. If this gets extrapolated into the future, this is a very good sign. It's a healthy sign that the labor market is starting to get back on its right foot. If that's the case, I don't think it's going to be too long before wages follow, and that's what we need to see."

One concern for the Fed has been the strong dollar, which keeps inflation low by pressuring on commodities prices. It also hurts U.S. exports. While the jobs report showed strength in the domestic economy, the U.S. trade deficit, reported at the same time Friday, unexpectedly widened to $43.9 billion in October, as exports hit a three-year low.

Economists immediately moved to cut back GDP forecasts. Barclays said the trade deficit reduced its Q3 GDP tracking estimate to 1.8 percent, from 2 percent, and it trimmed fourth quarter growth by 0.1 percent to 2 percent.

Traders globally have been waging bets on Fed rate hikes by bidding up the dollar. At the same time, they have been shorting other currencies where other central banks are easing, particularly so the euro.

That long dollar, short euro trade went very badly for some investors Thursday, when the ECB surprised with a less aggressive than expected easing package. Markets reacted sharply — the dollar swooned, the euro jumped 3 percent and bond yields rose. The euro held most of those gains Friday.

"This (jobs report) is pretty muscular. This will keep the Fed on track for December 16 liftoff," said Ward McCarthy, chief financial economist at Jefferies.

New Math for Detroit

                                                       Comments due by Dec. 4, 2015

When union contracts were finally ratified at Ford Motor and General Motors last week, a new era began in the American auto industry. The deals, which culminated labor talks among the nation’s three big automakers, were the most generous for workers in more than a decade and represented a striking shift from years of cuts and stagnant wages. “The feeling among workers was that if you’re not going to get the money now when we are near the top of the market, you’re not going to ever get it,” said Kristin Dziczek, a labor analyst at the Center for Automotive Research in Ann Arbor, Mich. But for automakers, the pay raises will add to the pressure to maintain profits and could spur a shift of less ­profitable car production to Mexico from the United States. Ford and Fiat Chrysler, for example, are considering moving some passenger car production to lower ­wage factories in Mexico from American 11/25/2015 U.A.W. Contracts Change Math for Detroit Automakers ­ The New York Times http://www.nytimes.com/2015/11/25/business/new­uaw­contracts­land­best­terms­in­over­a­decade.html 2/5 plants. In their place, the companies would make more high­ profit trucks and sport utility vehicles in the United States. That shift could cause production issues down the road, particularly if gas prices increase and temper consumer demand for pickups and sport utility vehicles. “From the company’s point of view, the U.S. is where you have to build your premium products,” said Harley Shaiken, a University of California, Berkeley professor who studies the auto industry. “To cover the cost of labor, you have to go upscale.” It is all part of the delicate series of changes needed to solve the two­tier wage problem that has been dogging the United Automobile Workers since the system took effect in 2007. And it was the primary hurdle that had to be cleared in the recently completed talks. When automakers began final negotiations on contracts this fall, their goal was to reward union workers financially while containing costs and preserving profits. The companies were also willing to meet the U.A.W. halfway on reducing the gap in pay between entry­level and veteran workers. But the strategy collapsed on Oct. 1, when workers at Fiat Chrysler overwhelmingly rejected a proposed contract that did not eliminate the divisive two ­tier wage system. “We showed we aren’t quite as naïve as they thought,” said Scott McGinnis, an entry level worker at a Fiat Chrysler plant in Michigan. “After that first agreement, a lot of people were insulted.” It was a stunning rebuke of the company and the U.A.W. leadership, and completely altered the course of the talks — and ultimately the cost structures of G.M., Ford and Fiat Chrysler.  Since then, all three companies have agreed to contracts that provide a defined path for every worker to earn the top union wage of $29 an hour. The richer contracts also underscore how healthy the Detroit companies have become since G.M. and what was then the Chrysler Corporation slipped into bankruptcy and needed government bailouts to survive just six years ago. Sales of new vehicles in the United States are expected to hit 17 million this year, the most in a decade, and possibly exceed that in 2016. In that environment, the time was ripe for workers to cash in. Ms. Dziczek estimated that over the life of the four ­year agreements, average hourly labor costs — including health care and other benefits — will rise about 5 percent at Ford, 9 percent at G.M., and 19 percent at Fiat Chrysler. The increases are partly based on the number of entry ­level workers at each company, and the impact that progressive pay increases will have on overall costs. But even with the wage increases and a combined payout of nearly $1 billion in signing bonuses for union workers, the automakers are still well positioned for strong earnings, and able to invest in plant improvements and technology. With vehicle sales and sticker prices rising, G.M., Ford and Fiat Chrysler can probably absorb higher wages while maintaining their profit margins in North America. Executives at the car companies have refrained from publicly discussing the outcome of the labor negotiations and contentious votes by union members. Dennis Williams, the U.A.W.’s president, has also declined interview requests since Ford workers approved their contract last week by a 51 percent majority.
 But interviews with workers and union officials show that anger on the shop floor over two­ tier wages was the deciding factor in the changes in the contracts. On Sept. 15, Mr. Williams emerged from talks with Fiat Chrysler’s chief executive, Sergio Marchionne, with an initial contract proposal that would have raised lower­ tier workers’ pay to $25 an hour, from $16 to $19 an hour, over the life of the deal. “We won tremendous gains,” Mr. Williams said at a news conference, in which he hugged Mr. Marchionne for their collective effort. But a few days later, a top U.A.W. bargainer, Norwood Jewell, was heckled and booed when he presented the tentative agreement to workers at Fiat Chrysler’s big Jeep plant in Toledo, Ohio. A video of the meeting, posted on a socialist website, illustrated the clash. Mr. Jewell was shouted down as he defended terms of the agreement, with one worker yelling out, “Are you working for us or Sergio?” When the contract went to a vote, about 87 percent of the 4,800 workers in the plant voted against it. Other factories also turned it down by big margins. When the final results came in, 65 percent of Fiat Chrysler’s 37,000 workers had rejected it. “There was a lot of anger because people had an expectation that since Chrysler was in the black again, selling vehicles and making profits, it was our time,” said George Windau, a veteran worker at the Toledo plant. The head of the plant’s union local, Bruce Baumhower, said his members were upset that the proposed deal left entry ­level workers well short of the top union wage. “They wanted to see a way to eliminate that,” he said. “But what they got left them about five dollars short.”
After the defeat, the U.A.W. leadership reopened talks with Fiat Chrysler. The union also hired a public relations firm, BerlinRosen, to improve communications with workers on the U.A.W.’s website and Facebook pages. Within a week, a new deal was struck between the union and Fiat Chrysler with a crucial concession — lower­ paid workers would reach the top wage scale after eight years of service. The new agreement was then ratified by a vote of Fiat Chrysler workers, and used as a template for the contracts at G.M. and Ford. But without the lopsided defeat of the first proposal, the two­tier system would have stayed in place for another four years. Fiat Chrysler workers like Darlene Rau were gratified that new employees and veterans stood together to reject the initial contract. “I was kind of surprised it went down because I didn’t think we were so united,” said Ms. Rau, who has worked for six years at the company’s Jeep plant in Detroit. Now, her pay has jumped to $24 an hour from $19, and she will reach the top wage before the contract ends. “I can actually pay my bills,” she said. “And have a little bit left for me.”(NYT 11/25/2015)

How To Fix the American Economy.

                        

                                                           Comments due Nov. 13, 2015

In his new book, a Nobel laureate outlines how the huge disparity arose and the huge course correction needed to address it.  Stiglitz, a Nobel-prize winning economist, professor at Columbia University, and the chief economist at the Roosevelt Institute, asks the question “Can the rules of America’s economy be rewritten to benefit everyone—not just the wealthy?” The answer, he insists, is yes. Stiglitz describes the current situation as “ a stark picture of a world gone wrong” : He notes that 91 percent of all income growth between 2009 and 2012 was enjoyed by the wealthiest 1 percent of Americans. In the first half of the book, Stiglitz focuses on the practices and policies that have gotten the country to this point. It is a familiar story: The demise of labor unions, the increasing financialization of the economy, and the lack of wealth-building opportunities in minority communities have made the rich richer while leaving everyone else to flounder. He lists off a bevy of other contributors too: weak wages, ineffective regulation and federal oversight, and a focus on short-term versus long-term growth, which embodies a preference for rewarding shareholders over workers and consumers. Stiglitz also notes that despite advancements in technology, which should— in theory—increase efficiency and lower costs, consumers are paying more in fees for financial services, which enriches big banks and companies while siphoning money out of the middle class. All of these things, he says, have created a society with a gaping hole, not only in its economic makeup, but in its morality.

Stiglitz spends the latter portion of the book laying out how to fix things. Like his primer on how inequality came to be, the solutions cover everything from fiscal policy to corporate boardrooms to retirement savings. His overview doesn’t prioritize pragmatism: A solution that only involves overhauling the few things that everyone agrees need to be overhauled is no solution at all, he argues. Instead, he swings for the fences, suggesting a massive revision in the way the U.S. economy does business. First up is the attempt to tame what is called rent-seeking—the practice of increasing wealth by taking it from others rather than generating any actual economic activity. Lobbying, for example, allows large companies to spend money influencing laws and regulations in their favor, but lobbying itself isn’t helpful for the economy besides creating a small number of jobs in Washington; it produces nothing but helps an already rich and influential group grow more rich and more influential. Stiglitz suggests that reducing rent-seeking is critical to reining in inequality, especially when it comes to complex issues such as housing prices, patents, and the power that large corporations wield. To overhaul these behaviors and the policies that support it, Stiglitz says that America should give up what he deems the “incorrect and outdated” belief in supply-side economics, which grows from the premise that regulation and taxes dampen business opportunities and economic growth. Instead, massive changes to tax laws, regulations, and the financial sector are needed, he says, in order to curb rent-seeking. For instance, increasing tax rates, ending preferential treatment for top earners, and refining the tax code would decrease incentives to amass extreme amounts of wealth, since it would be so heavily taxed, and that tax would be difficult to shirk. Stiglitz suggests a 5 percent increase to the tax rate of the top 1 percent of earners—a move that he says would raise as much as $1.5 trillion over 10 years. He also calls for a “fair tax, ” which would eliminate preferential tax treatment for money earned from capital gains and dividends—perks enjoyed primarily by people who can afford to own a lot of stock. To further ensure that corporations, markets, and individuals aren’t pursuing profits at the expense of workers and the public, Stiglitz calls for a more active central bank. He accuses the Fed of being both too narrowly focused on macroeconomic indicators, and too deferential to the businesses and markets it has the ability to regulate. He wants the government to sponsor a homeownership agency that would dole out housing loans in a way that encourages buyers instead of developers and would closely monitor the market for fairness. Stiglitz ’s thoroughness is admirable, but his prescriptions can be overwhelming, given how much it would take to make each change. The agenda also includes emphasizing the goal of full employment rather than focusing on the sometimes reductive unemployment figures; investment in public infrastructure; better access to financial services, childcare, health care, and paid leave; and strengthened opportunities for collective bargaining. Oh, and better wages for workers, and more corporate transparency, too. Actually implementing all of these changes would require a complete shift in American policy and practice. The world that Stiglitz envisions in his book, one where all citizens can enjoy the promise of education, employment, housing, and a secure retirement seems at once like the realization of the American dream and an unattainable utopia.

Pfizer Allergen : Are low Irish Taxes the reason behind the combination?

                                                                 Comments due Nov. 6, 2015


Pfizer has long played an important role in United States history over its 166 years, including producing painkillers during the Civil War and penicillin in World War II. Yet the company, one of the country’s oldest drug makers, is again looking to renounce its corporate citizenship by buying a foreign rival, raising the prospect of another messy fight with lawmakers in Washington. Both Pfizer and Allergan, which makes Botox and has its tax domicile in Ireland, confirmed on Thursday that they were in friendly talks to combine, a move that would create a pharmaceutical behemoth. With the market value of the smaller Allergan at nearly $120 billion, it would be the biggest merger in a banner year for deal making and the biggest takeover ever in health care. While Pfizer is likely to wring cost savings and other efficiencies from a deal, one of the main advantages to buying Allergan is undoubtedly the chance for Pfizer to lower its own tax rate, which will be about 25 percent this year.
 Pfizer’s chief executive, Ian C. Read, has made no secret of his disdain for his company’s tax rate, which he says leaves Pfizer at a competitive disadvantage against foreign rivals. One of the chief ways that Pfizer has looked to reduce its taxes is through what is known as an inversion. In such a transaction, an American company buys a sizable company that has its headquarters abroad. If certain conditions are met, the American buyer can then move its corporate home abroad. Last year, Pfizer sought to buy the British drug maker AstraZeneca, spurring protest from lawmakers and other critics. The takeover effort failed in the face of strong opposition from AstraZeneca and eventually prompted the United States Treasury Department to tighten some of the guidelines that made inversions so attractive to corporations. The regulatory changes led to the scrapping of a number of mergers, including the planned union of the drug makers AbbVie and Shire. But Mr. Read’s interest in pursuing an inversion has not wavered: If he could make one work, he would. “If we believe the value is still there and we believe, under our interpretation of these rules, there is still value, I see no reason why we wouldn’t be able to do an inversion,” he told Bloomberg News last fall. Pfizer, which has a long history of acquisitions, spent $15 billion to buy the biopharmaceutical company Hospira this year. But now it has set its sights on a deal that could finally yield the inversion it has long desired. Though much of Allergan’s operations are in Parsippany, N.J., the company technically has its headquarters in Dublin. Being based there has bestowed tremendous advantages for the smaller drug maker: In contrast to Pfizer’s 26.5 percent tax rate last year, Allergan reported an effective tax rate of just 4.8 percent for the same period. (Its tax rate this year is about 15 percent.)
Allergan itself is the product of numerous mergers. The current version of the company was born of the merger of Allergan and Actavis, which was completed this year, while Actavis itself grew from previous acquisitions like those of Forest Laboratories and Watson Pharmaceuticals. The company’s Dublin headquarters are a product of a $5 billion deal struck by Actavis in 2013 for the Irish drug maker Warner Chilcott. Together, Pfizer and Allergan would have nearly $53 billion in annual sales, with products including Lipitor, Viagra and Botox. Both companies cautioned on Thursday that their talks were at a preliminary stage and could still fall apart. Shares of Allergan surged 6 percent in trading on Thursday, to close at $304.38, while Pfizer’s shares slipped nearly 2 percent, to $34.77. Transferring Pfizer’s corporate home abroad may not be an easy task, financially. New rules that the Treasury Department introduced last fall require a larger target for an inversion to make sense. Allergan’s shareholders would need to own 40 percent of the combined company. That could require creativity in the structure of the deal, given that Pfizer’s $219 billion market value is nearly twice the size of Allergan’s. To achieve that threshold, Pfizer would have to pay at least $340 per share of Allergan in an all­stock transaction, according to a research note by Cowen. That would be an 11 percent premium on top of the stock’s closing price on Thursday. A Nomura analyst expected a minimum of $400 a share. The potential inversion has already drawn renewed criticism from Capitol Hill. The size of the deal could encourage legislators to pass reform that limits tax­driven acquisitions, said Senator Jack Reed, Democrat of Rhode Island. “They’re trying to get the best of both worlds: All the benefits of taxpayersupported programs in the U.S., selling to Medicare, the V.A., getting our best  scientists through American universities, and being a foreign country for tax purposes,” Mr. Reed said in a phone interview. “That’s not fair.” Other lawmakers said that Congress should fix the tax system that allows inversions. Even Carl C. Icahn, the billionaire activist investor, who is known for taking stakes in public companies and urging management to find ways to extract value, publicly denounced the deal. “Today Pfizer confirmed they are planning to move out of the country,” Mr. Icahn said Thursday via Twitter. “The situation is much more dangerous than most people believe.” In addition to generating a lower tax rate, though, the transaction would help enlarge Pfizer as part of its quest to eventually split into two companies. It has been looking to separate its higher­growth, brand­name products from its more mature drugs. A combination of Pfizer and Allergan would make an eventual separation even more likely, said Richard Purkiss, an analyst with Piper Jaffray. Ultimately, the deal could be structured so that Pfizer’s generics business could take the Irish domicile and pay lower taxes on the cash it generates outside the United States, Mr. Purkiss said. Regardless of how the talks with Pfizer go, Allergan said on Thursday that it would continue with its planned $40.5 billion sale of its generic­drugs business to Teva Pharmaceutical Industries. Even if the deal with Allergan falls through, Pfizer’s record for pursuing only deals that benefit the company led Piper Jaffray to reiterate to investors on Thursday that they should buy the stock, Mr. Purkiss said. “The prospect of doing M.&A. has been clearly laid out by the  management team at Pfizer over the recent past,” he said in a phone interview. “They won’t do a deal that’s value­destructive because they have a track record of being relatively prudent.” (NYT 10/30/2015)

MBA Payoff: Are you Male or Female?

                                                       Comments due by October 30, 2015

As far as investments go, business school is an unimpeachable bet for young professionals who can muster $100,000. MBAs, who are typically in their early 30s and have already spent a few years in the workforce, saw their salaries triple within eight years of graduation. They also report consistently high levels of job satisfaction and career growth, according to a survey of thousands of alumni conducted by Bloomberg Businessweek as part of the magazine’s annual ranking of business schools. But that general contentment hides a troubling divide: Within a few years of graduation, women with MBAs earn lower salaries, manage fewer people, and are less pleased with their progress than men with the same degree.

Each year, we rank business schools by polling students on topics such as academics, career services, and campus climate. We also ask employers about skills they seek in MBA hires and which schools best prepare their graduates. This year, for the first time, we surveyed alumni who graduated six to eight years ago, asking them how well their degrees had delivered on the promise of a fulfilling, well-paid job. The 12,773 responses we collected offer a wealth of salary information and other data on MBAs working in a variety of industries.

The inclusion of the alumni responses helped propel Harvard Business School to the top of the 2015 rankings. HBS alums reported the largest gains in compensation and many attributed their success to their alma mater. Last year’s No. 1, Duke Fuqua School of Business, slipped to eighth overall, partly because of a comparatively lackluster job placement rate of 86.1 percent, which is below the 87.9 percent rate overall.

Women and men start their post-MBA careers earning almost the same money—$98,000 for women and $105,000 for men—according to our survey of those who graduated from 2007 through 2009. But the gap then widens sharply. By 2014 men hauled in a median of $175,000 and women, $140,000. That means employers pay women 80 percent of what men with the same degree take home.

The inequities are especially stark among graduates of some of the most elite programs. At Columbia Business School, ranked No. 6, women who graduated from 2007-2009 earned a median of $170,000 in 2014, or 2.7 times their pre-MBA salary, while their male peers pulled in $270,000, four times what they made before they got their degrees.

Much of the pay gap is the result of the heftier yearend bonuses that men win. When we examined base salaries of alumni and excluded all other forms of compensation, the disparity between men and women shrank significantly. Among Columbia alumni, men made $30,000 more than women in median base salary. Regina Resnick, associate dean of career management at Columbia, calls the disparity “disturbing” but says the divergence “probably reflects what’s going on in the job market.” Says Resnick: “I frankly don’t think there is something unusually different that’s going on with our women.”

One explanation for the gender gap may be that women are less likely to be bosses. Women in our survey say they’re responsible for a median of three employees; men manage five. Twenty seven percent of women say they had no direct or indirect reports, vs. 20 percent of men.

Could it be that women are choosing less financially rewarding fields? It’s true that male MBA grads tend to gravitate toward professions that pay more. Among the alums in our survey, 43 percent of men work in the five most lucrative industries, such as real estate and consulting, vs. 32 percent of women. But even when women went into high-paying fields, they were underpaid relative to men. In finance, women earned a median of $53,200 less than men. The gap persisted regardless of the job they held—women in marketing at a bank earned $7,000 less than men. Women investment bankers earned $115,000 less than men.

Our alumni survey, which drew responses from MBAs at more than 2,500 companies, reveals that the gap is largely consistent across businesses. Among those writing women smaller paychecks are some of the country’s top MBA employers. Google paid the 21 female alums we surveyed a median of $36,000 less than the 68 male alums. A Google spokesperson calls the sample “narrow” and says the company “constantly analyzes performance, compensation, and promotion to ensure that there is no gender pay gap.”

The 14 women we polled at Bank of America made a median of $61,000 less than the 81 men at the company. Ferris Morrison, a spokeswoman for Bank of America, says: “Men and women MBA hires for our entry level programs start at the same compensation within a given line of business, and over time various factors such as job performance, career choices, and location will affect compensation.” At McKinsey, the group of women who responded to our survey was smaller—only nine. They earned $100,000 less than the 47 men at the consulting juggernaut. McKinsey spokeswoman Rachel Grant says the sample of its employees is too small, adding: “Variance in pay could be a consequence of differences in tenure, role, geographic location or performance.”

A company that bucks the trend is Deloitte, which is known for going to extra lengths to keep mothers in the workforce. For the 33 female MBAs at Deloitte who responded to our survey, the typical salary was $169,000—$4,000 more than the 65 men at the firm.

We didn’t ask the alumni we surveyed whether they had children, so we can’t infer what impact parenthood has on earning power. It’s worth noting that 6 percent of women in our sample were unemployed, compared with just 1.4 percent of men.

Research has shown that female MBAs are more likely than men to take time off to raise kids. A 2014 HBS study found that 28 percent of recent female alumni took off more than six months to care for children; only 2 percent of men did. That decision didn’t affect their likelihood of being top managers, the study found, but experts say it could stall salary growth. “When you return, you don’t get paid at the same level as your peers,” says Alison Davis-Blake, the dean of Michigan Ross School of Business. “It’s not gender-based. It would happen to anyone who stopped out, but women stop out a lot more.”

Our alumni survey reveals that almost a decade into their professional lives, male MBAs were happier with their work. Seventy percent of male respondents said they were “very satisfied” in their current job, vs. 64 percent of women. Pay and fulfillment were closely correlated for both genders, so those reporting the highest levels of satisfaction were also the top earners.

If women MBAs feel undervalued at work, they don’t blame their alma maters. Women and men were both likely to say their MBA boosted their earning potential and offered them a valuable alumni network. One reason alums universally praise their MBA programs is that their degree offers incredible value very quickly. Our data shows that six to eight years after graduation, the typical alum makes $169,000. The typical doctor made more—$187,000 in 2012, according to the Bureau of Labor Statistics—but was in school longer and was more likely to take out larger loans.

Business school graduates with student debt owed a median of about $65,000 upon graduation, our survey shows. Borrowers at medical school, by contrast, graduate with $170,000 in debt. By those measures, an MBA may be the professional degree with the quickest return on investment in the U.S. The payoff just appears to be greater if you’re a man.

Tested by college costs? Ace your FAFSA

                                                   
                                                          Comments due by Oct. 23, 2015

College degrees may bolster future earnings potential, but they don't come cheap.

Tuition, fees and room and board averaged nearly $19,000 in 2014–2015 for a four-year public in-state university, $33,000 for a four-year public out-of-state school and $42,000 for a private non-profit four year college, according to College Board.

Few can manage the considerable cost without the help of student loans, but those who minimize the debt they incur are far better positioned to realize both their personal and professional goals later on, said Mark Kantrowitz, publisher of Edvisors.com, a college planning website.

Indeed, students who graduate with excessive loans are more likely to delay life-cycle events, such as buying a car, getting married, having children, buying a home and saving for retirement, he said. 

They may also be forced to select a career path based on salary alone.

"It affects your career choices," Kantrowitz said. "You might want to go into a public-service field, but because you have too much debt, you find yourself gravitating toward a for-profit employer."

The goal, he added, is to keep total student-loan debt at graduation below your annual starting salary, thus enabling you to pay it off in 10 years or less.

Anything higher and you'll likely struggle to repay what you owe and will need alternate repayment plans. That in turn impacts your ability to consider graduate school.

Students who graduate debt-free are twice as likely as their debt-laden peers to attend a graduate or professional school, Kantrowitz explained.

That's why students and parents need to understand how important it is to properly fill out and submit the Free Application for Federal Student Aid (FAFSA). It's the form that students complete to document their financial ability to pay for college. What's more, the U.S. Department of Education uses the FAFSA to determine your eligibility for federal student aid, including low-cost loans, grants and work study. The FAFSA may also determine your eligibility for state and school aid as well.

To keep costs in check, students should maintain a 3.5 grade point average or higher to maximize scholarship opportunities and, where possible, take college-equivalent classes while still in high school, said Allan Katz, a certified financial planner and president of Comprehensive Wealth Management Group.

"Don't let the FAFSA be the last thing you do. College is about learning to ask questions, learning to negotiate, and getting comfortable with asking for what you need."-Andi Kang, president of Crown Wealth Management

"You can complete up to a year of prerequisite college classes before you even get to college — for free," he said.

Students can also save a bundle by starting off at a community college and later transferring to a larger, four-year university to complete their degree. The document on the wall looks the same, Katz said.

Perhaps the biggest way to keep college costs under control, however, is to graduate early — or at least on time.

Summer school courses at local community colleges, which cost roughly one-third the price of those at a four-year in-state school, can help students graduate ahead of schedule and shave thousands of dollars off the price of their brand-name degree.

Graduate vs. undergraduate

As they budget for college expenses, students should also consider the careers they are most likely to pursue. "If you're pursuing a field that won't pay well, make sure you don't incur too much debt," said Katz, who holds college planning seminars in New York City high schools.

Think, too, about whether you will require a graduate degree to succeed in your field.

If so and money is tight, don't select such a pricey undergraduate school that you prematurely max out on student loans, thus forcing you to attend a lesser school for graduate studies — the degree that future potential employers are more likely to focus on, Katz said.

"Think about where you're going to get the biggest bang for your buck," he said. "If you go to Columbia University for undergraduate school, you may come out with $250,000 in student loans and you might not qualify to borrow more, so you would have to go to a lower-level school for graduate school.

"Suddenly you don't really stand out in the applicant pool."

Students should also, of course, apply for any and all financial aid they can find, including scholarships, grants and student loans.

That process begins, of course, with the FAFSA, which students must submit every year to be considered for most forms of student financial aid, including non-need-based federal aid.

Kantrowitz at Edvisors.com said college-bound students should file the FAFSA as soon as possible after Jan. 1, noting those who file within the first three months of the year average twice as much grant funding as those who file later in the year.

Why? Many state and college financial aid programs, which also use the FAFSA for determining eligibility, have early application deadlines. Some close in January, others in February or March.

Still other programs operate on a first-come, first-served basis until the money runs out.

"File as soon as you can," Kantrowitz said. "Don't wait until you file your tax return, and don't wait until you've been admitted to a college.

"Get the FAFSA in so you can get priority treatment in advance," he added.

Remember, too, that the formula used to determine eligibility for need-based aid is based on assets for the prior tax year.

"The formula is heavily weighted toward income, so don't artificially increase your income the year before you enroll in college," said Kantrowitz. "If you're planning to sell stocks or bonds, make sure you realize those gains before the start of the base year." Otherwise, be sure to offset those gains with capital losses.

Parents also sometimes inadvertently inflate their annual income by taking penalty-free hardship distributions from their retirement plan to pay for their child's college tuition.

Trans Pacific Partnership

                                                        Comments due Oct. 16, 2015

DONALD TRUMP, an American presidential candidate, denounced it as “a terrible deal”. Another, Hillary Clinton, does not think it meets “the high bar” that should be applied to trade pacts. Yet proponents of the Trans-Pacific Partnership (TPP), which encompasses 12 countries in Asia and the Americas, including America and Japan, herald it as the biggest multilateral trade deal in 20 years, which will “define the rules of the road” for international commerce. Which is it?

TPP will apply to 40% of the world’s economy. For American exporters alone, 18,000 individual tariffs will be reduced to zero. Much the same will be true for firms in the other 11 members. Even agricultural barriers, usually among the most heavily defended, will start to come down. Foreigners will gain a toehold in Canada’s dairy sector and a bigger share of Japan’s beef market, for example. Some of these reductions will be phased in lamentably slowly, however: American tariffs on Japanese lorries will last another 30 years.

In spite of scaremongering on the left, the deal does not obviously exalt the interests of big business over those of lowly consumers. For instance, under pressure from Australia, Chile and Peru, America shelved its demand that certain drugs be protected from generic competition for at least 12 years, settling for five instead. In the same vein, TPP’s dispute-settlement mechanism explicitly bars tobacco firms from claiming compensation for public-health rules that harm their business.Tariffs in the region were not that high to begin with, though. More important is TPP’s effort to free trade in services. These are not usually subject to the same impediments as, say, agricultural or automotive imports; instead they get tangled up in beyond-the-border rules, such as customs, visas and licensing. TPP promises greater access to markets for more service providers, which over time should provide a boost to productivity.

To mollify unions and other likely opponents in richer countries, several of TPP’s 30 chapters are devoted to protections for workers and environmental safeguards. There are clauses that attempt to slow deforestation and overfishing. All parties will also be compelled to follow the International Labour Organisation’s basic principles on workers’ rights. They will be required to set a minimum wage and regulate working hours. Vietnam will have to allow unions independent of the Communist Party. Such commitments will be enforceable under the treaty’s dispute-settlement mechanism.

TPP also attempts to limit the extent to which governments can favour state-owned enterprises. Although there are lots of exceptions, this is quite a concession for the likes of Malaysia and Vietnam. According to Matthew Goodman of the Centre for Strategic and International Studies, a think-tank, “The White House feels this is a big one. It validates their definition of TPP as a 21st-century agreement.”

Since the fine print of the deal has not yet been published, and since tariff reductions form so small a part of its measures, it is very difficult to estimate how big a boost TPP will provide its members. The Peterson Institute for International Economics, another think-tank, estimated that it would boost the world economy by $223 billion by 2025. The greatest impact will be felt not in America, but in the less developed members. The study estimates that Vietnamese GDP could rise by as much as an additional 10% over the same period.

In the long run, TPP’s impact will depend on whether or not its membership expands, as it in theory might once the deal is up and running. South Korea, not one of the original 12, is pressing for swift accession. The crucial question is China. Many think America only pushed TPP forward in order to bolster its influence in Asia and counter China’s. But TPP’s economic significance will be severely curtailed if it does not include the country that lies at the heart of almost all Asia’s supply chains. China may now step up its push for a broader regional free-trade deal, built in part on TPP, says Jeffrey Schott, a former American trade negotiator.

Until TPP is ratified by its 12 original members, such talk is premature. This process should be straightforward in places like Japan and Singapore, where the ruling parties have commanding majorities. But Canada faces a knife-edge election on 19th October. One of the three main parties is campaigning against the agreement, arguing that it will kill farm jobs.

Why countries are so keen to agree new trade deals

The biggest row will be in America, where Congress has 90 days to review the deal before putting it to an up-or-down vote, with no amendments. This “fast-track” procedure was narrowly approved earlier this year, despite opposition on both left and right. But Republicans like Mr Trump are already complaining that the deal grants too many concessions to America’s commercial adversaries. Democrats like Mrs Clinton, meanwhile, say they are worried it will cost America jobs. Republicans, traditionally advocates of free trade, have a majority in both houses of Congress. But trade deals are often unpopular with voters. It does not help that the presidential campaign will be in full swing when Congress votes, or that the deal is seen as part of the legacy of Barack Obama, a toxic figure for Republicans.

Any foot-dragging would be foolish. The slowing of the Chinese economy and a tepid global recovery from the financial crisis have led to a long-term slowdown in world trade. The value of goods shipped around the globe has been shrinking on and off since early 2009. In the first half of the year it slumped by 13% in dollar terms compared to the same period in 2014. In terms of volume, trade is still growing, but by a fraction of the rates that prevailed before the financial crisis. (The Economist)

The problem is not just cyclical: the ever-broader range of goods manufactured within China, among other structural changes, seems to have slowed trade growth permanently. This is worrying because trade remains the most reliable way for poor countries to become richer. TPP would undoubtedly help spur it.

Six Hour Work Day

                                                        Comments due Oct. 9, 2015

Despite research telling us it’s a really bad idea, many of us end up working 50-hour weeks or more because we think we’ll get more done and reap the benefits later. And according to a study published last month involving 600,000 people, those of us who clock up a 55-hour week will have a 33 percent greater risk of having a stroke than those who maintain a 35- to 40-hour week.

With this in mind, Sweden is moving towards a standard 6-hour work day, with businesses across the country having already implemented the change, and a retirement home embarking on a year-long experiment to compare the costs and benefits of a shorter working day.

"I think the 8-hour work day is not as effective as one would think. To stay focused on a specific work task for 8 hours is a huge challenge. In order to cope, we mix in things and pauses to make the work day more endurable. At the same time, we are having it hard to manage our private life outside of work," Linus Feldt, CEO of Stockholm-based app developer Filimundus, told Adele Peters at Fast Company. 

Filimundus switched to a 6-hour day last year, and Feldt says their staff haven't looked back. "We want to spend more time with our families, we want to learn new things or exercise more. I wanted to see if there could be a way to mix these things,"he said.

To cope with the significant cut in working hours, Feldt says staff are asked to stay off social media and other distractions while at work and meetings are kept to a minimum. "My impression now is that it is easier to focus more intensely on the work that needs to be done and you have the stamina to do it and still have energy left when leaving the office," he told Fast Company.

The thinking behind the move is that because the working day has been condensed, staff will be more motivated and have more energy to get more done in a shorter period of time. Feldt reports that not only has productivity stayed the same, there are less staff conflicts because people are happier and better rested.

No doubt Filimundus was looking at the several Toyota service centres in Gothenburg, which switched to a six-hour day 13 years ago and report happier staff, a lower turnover rate, and ease in enticing new employees to come on board. "They have a shorter travel time to work, there is more efficient use of the machines and lower capital costs - everyone is happy," the managing director Martin Banck told David Crouch at The Guardian, adding that profits have risen by 25 percent.

Back in February, a Svartedalens retirement home in Gothenburg implemented a 6-hour work day for their nurses with no changes to wage, and will be running the experiment till the end of 2016 to figure out if the high cost of hiring 14 new staff members to cover the lost hours is worth the improvements to patient care and employee morale. 

"The Svartedalens experiment is inspiring others around Sweden: at Gothenburg’s Sahlgrenska University hospital, orthopaedic surgery has moved to a 6-hour day, as have doctors and nurses in two hospital departments in Umeå to the north," The Guardian reports.

While impressions of staff being happier and full of energy aren’t exactly scientific basis for declaring 6-hour work days as 'better' than the 8.7-hour work day endured by the average American, we do have evidence that what we’re doing right now isn’t working.

A study published in The Lancet last month analysed data from 25 studies that monitored health of over 600,000 people from the US, Europe, and Australia for up to 8.5 years found that people who worked 55 hours a week had a 33 percent greater risk of having a stroke than people who worked a 35 - 40 hour week, and a 13 percent increased risk of developing coronary heart disease, while a separate study found that working 49-hour weeks was associated with lower mental health, particularly in women. 

And as we reported earlier this month, we probably shouldn’t even be forced to clock on at 9am anyway, with expert Paul Kelley from Oxford University’s Sleep and Circadian Neuroscience Institute saying that society is in the midst of a sleep-deprivation crisis, because our 9-5 working hours are at odds with our internal body clocks. "Staff should start at 10am… Staff are usually sleep-deprived," Kelley said. "Everybody is suffering and they don’t have to. We cannot change out 24-hour rhythms."

Hear that? Everybody is suffering and we don't have to. I guess until the rest of the world catches up with Sweden - which btw is also making moves to become the world's first fossil fuel-free nation - we'll all just have to move there. 

Generic Drug Price Increases and Medicaid

                                                           Comments due by Oct 2, 2015

Following prodding from Congressional lawmakers, the Office of the Inspector General of the U.S. Department of Health & Human Services says it will conduct a new review of generic drug price increases on the Medicaid drug rebate program.
The agency plans to review price increases between 2005 and 2014 in order to determine the extent to which generic drug prices exceeded the inflation rate, according to a letter the OIG sent to U.S. Sen. Bernie Sanders (I-Vt.) and U.S. Rep. Elijah Cummings (D-Md.).
The move comes amid growing debate over the cost of prescription drugs, and the budgetary strain placed on payers, both private and public. Generally, the issue had been confined to brand-name medicines, but last year, there were reports that prices for some generic drugs were also rising. This came as a surprise, given that generics are traditionally seen as a low-cost alternative for patients.
Last November, the lawmakers held hearings to examine soaring prices for some generic drugs. At the time, they cited data showing prices for generics sold through retail pharmacies increased 37% from the previous quarter and that prices for certain generic drugs had risen over the past year by as much as 1,000% or more. In February, Sanders and Cummings asked OIG to run a review.
“It is unacceptable that Americans pay, by far, the highest prices in the world for prescription drugs. Generic drugs were meant to help make medications affordable for millions of Americans who rely on prescriptions to manage their health needs. We’ve got to get to the bottom of these enormous price increases,” Sanders says in a statement. “It is outrageous that skyrocketing prices of generic drugs are preventing patients from getting the medications they need,” says Cummings in the statement.
As part of their investigation, Sanders and Cummings had asked 14 generic drug makers to provide pricing data, but the companies did not do so. As a result, the lawmakers turned to the OIG, since federal law requires drug makers to provide price data to HHS. A congressional aide says the investigation is still under way.
The lawmakers, meanwhile, have also introduced identical bills in the House and Senate that would require generic drug makers to pay additional rebates to state Medicaid programs for any medicine that increases in price faster than the inflation rate. Under current law, brand-name drug makers are required to pay an additional rebate to Medicaid, but generic drug makers are not required to do so.
The lawmakers want that same rebate provision to cover generic drugs as well. They cite an estimate from the Congressional Budget Office that such a change would save taxpayers $500 million over 10 years. In its letter, the OIG says it will examine the extent to which Medicaid would have received additional rebates for any drug prices that exceeded inflation rates.
Several reasons have been cited for price increases for generic drugs. These include manufacturing problems that prompted some companies to discontinue production, making it possible for rivals to boost prices. We asked the trade group for generic drug makers for a response and will update you accordingly.
At the time of the hearings last fall, the Generic Pharmaceutical Association argued that the lawmakers relied, in part, on numbers with “limited usefulness in drawing conclusions about the costs to government purchasers.” That’s because the lawmakers cited retail pharmacy costs, which the trade group maintained did not reflect costs negotiated by government health care programs.
It is not clear when the OIG review will be completed, though. An OIG spokeswoman writes us that a start date has not yet been set.

Uber Pricing

                                      Comments due by Sept. 25, 2015

I do not have the deepest understanding of economics. I have an A-level—rather like a US AP—in the subject, but I haven’t opened an economics textbook in a decade. But I do remember something: The price of a good is determined by how many of them are available, and how many people want them. When the supply is low and demand is high, the price is going to be higher.

Uber today (Sept. 17) published a University of Chicago study it commissioned in which two economics doctorates explain that this is, amazingly, how Uber’s surge pricing structure works. The study shows, in intricate detail, that surge pricing allows for Uber to function, as suppliers (drivers) are enticed by the potential for higher fares, and demanders (riders) will decide if they really want to pay higher prices right that minute. When prices drop back down—as supply increases, or demand falls—the surge ends.

Or, as Uber explained:

When demand for rides outstrips the supply of cars, surge pricing kicks in, increasing the price. You’ll automatically see a “surge” icon next to the products (uberX, UberBLACK, etc.) that are surging. If you still want a ride, Uber shows the surge multiplier and then asks for your consent to that higher price.

Surge pricing has two effects: people who can wait for a ride often decide to wait until the price falls; and drivers who are nearby go to that neighborhood to get the higher fares. As a result, the number of people wanting a ride and the number of available drivers come closer together, bringing wait times back down.

The economists made some great charts to illustrate this point, like this one:

(The Effects of Uber’s Surge Pricing: A Case Study/Hall, et al.)

But in reality, this one probably would’ve done the job too:

I commissioned no one to make this chart.

In 2014, Uber commissioned a study that showed, as Slate put it, that “Driving for Uber is great,” although that didn’t turn out to be quite so accurate. In this case, however, the study does seem to accurately confirm that Uber’s business does, in fact, marry up with the laws of economics.

(Quartz)